exv10w13



 





EXHIBIT 10.13




SMITH INTERNATIONAL, INC.




AMENDED AND RESTATED

POST-2004 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN




(Effective as of January 1, 2006)




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TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE ONE
	 	ESTABLISHMENT, PURPOSE AND STATUS OF THE PLAN 	 	 	84	 
	     1.1
	 	Establishment of Plan 	 	 	84	 
	     1.2
	 	Purpose of Plan 	 	 	84	 
	     1.3
	 	Status of Plan 	 	 	84	 
	 
	 	 	 	 	 	 
	ARTICLE TWO
	 	DEFINITIONS 	 	 	84	 
	     2.1
	 	Account 	 	 	84	 
	     2.4
	 	Active Participant 	 	 	84	 
	     2.2
	 	Administrative Committee 	 	 	84	 
	     2.3
	 	Advance Distribution Election 	 	 	84	 
	     2.5
	 	Affiliated Entity 	 	 	84	 
	     2.6
	 	Beneficiary 	 	 	85	 
	     2.7
	 	Board 	 	 	85	 
	     2.8
	 	Bonus 	 	 	85	 
	     2.9
	 	Change of Control 	 	 	85	 
	     2.10
	 	Code 	 	 	85	 
	     2.11
	 	Company 	 	 	85	 
	     2.12
	 	Compensation 	 	 	85	 
	     2.13
	 	Compensation Committee 	 	 	85	 
	     2.14
	 	Deferral Agreement 	 	 	85	 
	     2.15
	 	Deferred Compensation Ledger 	 	 	85	 
	     2.16
	 	Determination Date 	 	 	86	 
	     2.17
	 	Elective Deferral Contribution 	 	 	86	 
	     2.18
	 	Employee 	 	 	86	 
	     2.19
	 	Employment 	 	 	86	 
	     2.20
	 	Employer 	 	 	86	 
	     2.21
	 	ERISA 	 	 	86	 
	     2.22
	 	Executive Staff Participant 	 	 	86	 
	     2.23
	 	Financial Emergency 	 	 	86	 
	     2.24
	 	Funds 	 	 	86	 
	     2.25
	 	401(k) Plan 	 	 	87	 
	     2.26
	 	Insolvent 	 	 	87	 
	     2.27
	 	Interest Equivalents 	 	 	87	 
	     2.28
	 	Investment Experience 	 	 	87	 
	     2.29
	 	Key Employee 	 	 	87	 
	     2.30
	 	Participant 	 	 	87	 
	     2.31
	 	Plan 	 	 	87	 
	     2.32
	 	Plan Year 	 	 	87	 
	     2.33
	 	Separation from Service 	 	 	87	 
	     2.34
	 	Subsidiary 	 	 	87	 
	     2.35
	 	Total and Permanent Disability 	 	 	88	 
	     2.36
	 	Trust 	 	 	88	 
	     2.37
	 	Trust Agreement 	 	 	88	 
	     2.38
	 	Trustee 	 	 	88	 
	     2.39
	 	Valuation Date 	 	 	88	 
	 
	 	 	 	 	 	 
	ARTICLE THREE
	 	ADMINISTRATION 	 	 	88	 
	     3.1
	 	Composition of Administrative Committee 	 	 	88	 
	     3.2
	 	Administration of Plan 	 	 	88	 
	     3.3
	 	Action by Committee 	 	 	88	 






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	 	 	 	 	Page	 
	     3.4
	 	Delegation 	 	 	89	 
	     3.5
	 	Reliance Upon Information 	 	 	89	 
	     3.6
	 	Responsibility and Indemnity 	 	 	89	 
	 
	 	 	 	 	 	 
	ARTICLE FOUR
	 	PARTICIPATION 	 	 	90	 
	     4.1
	 	Eligibility of Employees 	 	 	90	 
	     4.2
	 	Notification of Eligible Employees 	 	 	90	 
	     4.3
	 	Compensation and Bonus Deferral Agreement 	 	 	90	 
	     4.4
	 	Leave of Absence 	 	 	91	 
	     4.5
	 	Employer Contributions 	 	 	91	 
	     4.6
	 	Vesting 	 	 	94	 
	     4.7
	 	Election of Time and Manner of Payment 	 	 	94	 
	 
	 	 	 	 	 	 
	ARTICLE FIVE
	 	DEFERRAL OF COMPENSATION AND ALLOCATION OF INTEREST EQUIVALENTS	 	 	95	 
	     5.1
	 	Deferral of Compensation and/or Bonus 	 	 	95	 
	     5.2
	 	Allocation of Investment Experience to Accounts 	 	 	95	 
	     5.3
	 	Investment of Accounts 	 	 	95	 
	     5.4
	 	Interest Equivalents 	 	 	95	 
	     5.5
	 	Participants’ Rights Under the Trust 	 	 	96	 
	     5.6
	 	Determination of Account 	 	 	96	 
	 
	 	 	 	 	 	 
	ARTICLE SIX
	 	DISTRIBUTIONS 	 	 	96	 
	     6.1
	 	Amount of Deferred Compensation Subject to Distribution 	 	 	96	 
	     6.2
	 	Forms of Distribution Following Determination Date Except for Death 	 	 	96	 
	     6.3
	 	Form of Death Distribution 	 	 	97	 
	     6.4
	 	Timing of Distributions 	 	 	97	 
	     6.5
	 	Advance Distribution Election Required 	 	 	98	 
	     6.6
	 	Withdrawal due to Financial Emergency 	 	 	98	 
	     6.7
	 	Trust and Payor of Deferred Compensation 	 	 	98	 
	     6.9
	 	Reimbursement of Participant 	 	 	99	 
	     6.10
	 	Facility of Payments 	 	 	99	 
	     6.11
	 	Beneficiary Designations 	 	 	99	 
	     6.12
	 	Withholding of Taxes 	 	 	100	 
	 
	 	 	 	 	 	 
	ARTICLE SEVEN
	 	RIGHTS OF PARTICIPANTS 	 	 	100	 
	     7.1
	 	Annual Statement to Participants 	 	 	100	 
	     7.2
	 	Limitation of Rights 	 	 	100	 
	     7.3
	 	Nonalienation of Benefits 	 	 	101	 
	     7.4
	 	Claims Procedures 	 	 	101	 
	 
	 	 	 	 	 	 
	ARTICLE EIGHT
	 	MISCELLANEOUS 	 	 	102	 
	     8.1
	 	Amendment or Termination of the Plan 	 	 	102	 
	     8.2
	 	Powers of the Company 	 	 	103	 
	     8.3
	 	Adoption of Plan by Affiliated Entity 	 	 	103	 
	     8.4
	 	Waiver 	 	 	103	 
	     8.5
	 	Notice 	 	 	103	 
	     8.6
	 	Severability 	 	 	103	 
	     8.7
	 	Gender, Tense and Headings 	 	 	103	 
	     8.8
	 	Governing Law 	 	 	103	 
	     8.9
	 	Effective Date 	 	 	103	 






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SMITH INTERNATIONAL, INC.

POST-2004 SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

(Effective as of December 31, 2004)




ARTICLE ONE




ESTABLISHMENT, PURPOSE AND STATUS OF THE PLAN




     1.1 Establishment of Plan. Smith International, Inc. (the
“Company”) hereby establishes an unfunded nonqualified deferred compensation plan to be known as
the “Smith International, Inc. Post-2004 Supplemental Executive Retirement Plan” (the “Plan”).



     1.2 Purpose of Plan. The Plan is maintained for the purpose of
advancing the interests of the Company and its stockholders by enhancing the Company’s ability to
attract and retain highly qualified executives. The Company anticipates that accomplishment of
those objectives will be facilitated by providing Participants with a mechanism through which they
may provide for their retirement (or other deferred compensation needs) by electing to defer all or
a portion of their Compensation and/or Bonuses.



     1.3 Status of Plan. The Plan is intended as an unfunded
plan to be maintained primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), and as such it is intended that the Plan be exempt from the participation and vesting,
funding, and fiduciary responsibility requirements of Title I of ERISA. The Plan is also intended
to qualify for simplified reporting under U.S. Department of Labor Regulation Section 2530.104-23,
which provides for an alternative method of compliance for plans described in such regulation. The
Plan is not intended to satisfy the qualification requirements of Section 401 of the Internal
Revenue Code of 1986, as amended (the “Code”). The Plan is intended to comply in good faith with
the requirements of Code Section 409A for deferred compensation plans and is to be construed in
accordance with Code Section 409A and the authority issued thereunder.



ARTICLE TWO




DEFINITIONS




     In addition to the terms defined in the text hereof, each term below shall have the meaning
assigned thereto for all purposes of the Plan unless the context reasonably requires a broader,
narrower or different meaning.



     2.1 Account. “Account” means, with respect to each Participant,
the Account reflecting his interest under the Plan under the Deferred Compensation Ledger, as
established and maintained pursuant to Article Five hereof. The Administrative Committee
may establish subaccounts for Participants under their Accounts as it may deem appropriate from
time to time.



     2.2 Active Participant. “Active Participant” means a
Participant who is currently eligible to authorize a Deferral Agreement and to receive an
allocation of Employer contributions to his Account.



     2.3 Administrative Committee. “Administrative Committee”
means the committee described in Article Three of the Plan.



     2.4 Advance Distribution Election. “Advance
Distribution Election” means a separate written agreement entered into by and between the Employer
and a Participant which specifies the Participant’s election as to the method that the deferred
amount is to be paid, such as lump sum or installment payments.



     2.5 Affiliated Entity. “Affiliated Entity” means an
entity which is affiliated by common ownership or control with the Company as determined and
designated by the Compensation Committee, CEO or the Administrative Committee in its discretion.



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     2.6 Beneficiary. “Beneficiary” means the beneficiary or
beneficiaries designated by the Participant to receive any amounts distributable under the Plan
upon his death.



     2.7 Board. “Board” means the Board of Directors of the Company.



     2.8 Bonus. “Bonus” means any amount payable to the Participant during a Plan
Year as an award granted under the Smith International, Inc. Annual Incentive Plan (or any
successor thereto) or under any other bonus program maintained by the Company or an Adopting
Employer.



     2.9 Change of Control. “Change of Control” means the
occurrence of any of the following:




	 	(a)	 	any person (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange
Act) being or becoming the “beneficial owner” as defined in Rule 13d-3 of the Exchange
Act) directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the combined voting power of the then outstanding securities of such
Employer;
	 
	 	(b)	 	the first purchase of the Company’s common stock pursuant to a tender or
exchange offer (other than a tender or exchange offer made by the Company);
	 
	 	(c)	 	the approval by the Company’s stockholders of a merger or consolidation, a sale
or disposition of all or substantially all of the Company’s assets or a plan of
liquidation or dissolution of the Company; or
	 
	 	(d)	 	during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company ceasing for any reason to
constitute at least a majority thereof, unless the election or nomination for the
election by the Company’s stockholders of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were directors at the
beginning of the period.





     Notwithstanding the above provisions of this Section 2.9, Change of Control shall have
the meaning set forth in Code Section 409A(a)(2)(A)(v) and any regulations issued thereunder, which
are incorporated herein by this reference, but only to the extent inconsistent with the above
provisions as determined by the Compensation Committee.



     2.10 Code. “Code” means the Internal Revenue Code of 1986, as amended, and
the regulations and other authority issued thereunder by the appropriate governmental authority.
References herein to any Section of the Code shall include references to any successor Section or
provision of the Code.



     2.11 Company. “Company” means Smith International, Inc. or any
successor in interest thereto.



     2.12 Compensation. “Compensation” means the salary and other cash
remuneration that is payable by the Employer to the Employee during a Plan Year for compensatory
services rendered, excluding any Bonuses and reimbursements of business and other expenses.



     2.13 Compensation Committee. “Compensation
Committee” means the Compensation and Benefits Committee of the Board.



     2.14 Deferral Agreement. “Deferral Agreement” means a
separate written agreement entered into by and between the Employer and an Active Participant prior
to the commencement of a Plan Year, which agreement describes the terms and conditions of such
Active Participant’s
deferred compensation arrangement hereunder for the Plan Year. The Deferral Agreement shall
be executed and dated by the Active Participant and shall specify the amount of Compensation and/or
Bonus related to services to be performed during the Plan Year, by percentage or dollar amount, to
be deferred.



     2.15 Deferred Compensation Ledger. “Deferred
Compensation Ledger” means the appropriate accounting records maintained by the Administrative
Committee which set forth the name of each Participant and his Account transactions reflecting (a)
the amount of Compensation and Bonus deferred pursuant to Article Four, (b) the amount of
Employer contributions made on behalf of the Participant pursuant to Article Four, (c) the
amount of Investment Experience credited or charged to the Participant’s Account pursuant to
Article Five, and (d) the amount of any distributions or withdrawals pursuant to
Article Six. The Deferred Compensation Ledger shall be utilized solely as a device for the



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measurement and determination of the contingent amounts to be paid to Participants under the Plan.
The Deferred Compensation Ledger shall not constitute or be treated as an escrow, trust fund, or
any other type of funded account of whatever kind for Code or ERISA purposes and, moreover,
contingent amounts credited thereto shall not be considered “plan assets” for ERISA purposes. In
addition, no economic benefit or constructive receipt of income shall be provided to any
Participant for purposes of the Code unless and until cash payments under the Plan are actually
made to the Participant. The Deferred Compensation Ledger merely provides a record of the
bookkeeping entries relating to the contingent benefits that the Employer intends to provide to
Participants and thus reflects a mere unsecured promise to pay such amounts in the future.




     2.16 Determination Date. “Determination Date” means, with
respect to a Participant, the date of his termination of Employment due to his death, Disability or
other Separation from Service.



     2.17 Elective Deferral Contribution. “Elective Deferral Contribution” means any
amount of a Participant’s Compensation and/or Bonus which he elects to defer hereunder and to have
such deferred amount credited to his Account.



     2.18 Employee. “Employee” means a member of a select group of management
or highly compensated employees of the Employer, as determined by the Compensation Committee for
each Plan Year.



     2.19 Employment. “Employment” means employment as an Employee. In
this regard, neither the transfer of a Participant from employment by the Company to employment by
an Affiliated Entity nor the transfer of a Participant from employment by an Affiliated Entity to
employment by the Company shall be deemed to be a Separation from Service by the Participant.
Moreover, a Participant shall not be deemed to have incurred a Separation from Service because of
his approved temporary absence from active employment on account of illness or authorized vacation,
or during another approved and temporary leave of absence granted by the Employer.



     2.20 Employer. “Employer” means the Company and each Affiliated
Entity which has adopted the Plan with the consent of the Compensation Committee or the
Administrative Committee.



     2.21 ERISA. “ERISA” means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and other authority issued thereunder by the appropriate
governmental authority. References herein to any section of ERISA shall include references to any
successor section or provision of ERISA.



     2.22 Executive Staff Participant. “Executive Staff
Participant” means a Participant who is designated by the Compensation Committee, in its
discretion, as an Executive Staff Participant. An Executive Staff Participant will generally be a
senior officer of the Employer who is a member of the Employer’s Executive Staff; provided,
however, only Participants so designated by the Compensation Committee shall be deemed Executive
Staff Participants for purposes of this Plan. Executive Staff Participants shall be designated by
name in resolutions adopted by the Compensation Committee from time to time, and any Participant
may be added or deleted from the list of Executive Staff Participants by the Compensation Committee
in its absolute discretion at any time. Executive Staff Participants are eligible to receive
additional Employer contributions in accordance with Section 4.6.



     2.23 Financial Emergency. “Financial Emergency” means an
unforeseeable emergency and severe financial hardship to the Participant resulting from an illness
or accident of the Participant, the Participant’s spouse, or of a dependent (as defined in Code
Section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Participant.



     Withdrawals of amounts from the Participant’s Account due to a Financial Emergency, pursuant
to Section 6.6, shall only be permitted to the extent reasonably necessary to satisfy the
emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not itself cause severe
financial hardship). The Administrative Committee, in its discretion, shall determine whether a
Financial Emergency has occurred and the amount needed to satisfy the emergency need, and each such
determination shall be made in accordance with the requirements of Code Section 409A. The
Participant must provide the Administrative Committee with the information that it requests to make
these determinations.



     2.24 Funds. “Funds” means the investment funds designated from time to time
for the deemed investment of Accounts pursuant to Article Five.



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     2.25 401(k) Plan. “401(k) Plan” means the Smith International, Inc.
401(k) Retirement Plan, as it may be amended from time to time, or any successor defined
contribution plan maintained by the Company which is intended to qualify under Sections 401(a) and
401(k) of the Code.



     2.26 Insolvent. “Insolvent” means either (a) the Employer is unable to
pay its debts as they become due, or (b) the Employer is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.



     2.27 Interest Equivalents. “Interest Equivalents”
means the hypothetical amounts credited as interest to the Participant’s Account, as a component of
Investment Experience, pursuant to Section 5.4.



     2.28 Investment Experience. “Investment Experience”
means the hypothetical amounts credited (as income, gains or appreciation on any hypothetical
investments in Funds or other investments permitted by the Trustee) or charged (as losses or
depreciation on any such hypothetical investments) to the balances in the Participant’s Account
pursuant to Article Five, including, without limitation, Interest Equivalents.



     2.29 Key Employee. “Key Employee” means any person employed or
formerly employed by the Company or any corporation that is an Affiliated Entity, the stock of
which is publicly traded on an established securities market (or as otherwise prescribed by Code
Section 409A), who is, at any time during the Plan Year, any one or more of the following:




	 	(a)	 	an officer of the Company or Affiliated Entity having
compensation (as defined in Code Section 415(c)(3)) for the applicable
Plan Year greater than One Hundred Thirty Thousand Dollars ($130,000),
as adjusted under Section 416(i)(1) of the Code;
	 
	 	(b)	 	any person owning (or considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the
outstanding stock of the Company or Affiliated Entity or stock
possessing more than five percent (5%) of the total combined voting
power of such stock, or if the Company or Affiliated Employer is not a
corporation, any person owning more than five percent (5%) of the
capital or profits interest of the Company or Affiliated Entity; or
	 
	 	(c)	 	a person who would be described in clause (b) above if
“one percent (1%)” were substituted for “five percent (5%)” each place
it appears in such clause (b), and whose aggregate annual compensation
(as defined in Code Section 415(c)(3)) from the
Company and any Affiliated Entity is more than One Hundred Fifty
Thousand Dollars ($150,000).





     For purposes of determining ownership under this Section 2.29, the aggregation rules
of Code Sections 414(b), (c) and (m) shall not apply. For purposes of clause (a) above, no more
than fifty (50) Employees (or, if lesser, the greater of three (3) or ten percent (10%) of the
Employees) shall be treated as officers.



     Notwithstanding the provisions of this Section 2.29, the term Key Employee shall have
the meaning set forth in Code Section 409A(a)(2)(B)(i) and any regulations issued thereunder, which
are incorporated herein by this reference, but only to the extent inconsistent with the above
provisions as determined by the Compensation Committee.



     2.30 Participant. “Participant” means an Employee who has
been selected by the Compensation Committee to participate in the Plan. An Employee or former
Employee (or a Beneficiary thereof in the event of death) who still has an Account balance shall be
deemed a Participant hereunder regardless of whether he is an Active Participant.



     2.31 Plan. “Plan” means the Smith International, Inc. Post-2004
Supplemental Executive Retirement Plan as set forth herein, and as it may be amended from time to
time. This Plan is a separate and distinct plan from the Smith International, Inc. Supplemental
Executive Retirement Plan which was “frozen” by the Compensation Committee effective as of December
31, 2004.



     2.32 Plan Year. “Plan Year” means the calendar year commencing
on January 1 and ending on December 31, with the first Plan Year ending December 31, 2005.



87









 





     2.33 Separation from Service. “Separation from
Service” means the Participant’s termination from Employment with the Employer, and shall have the
same meaning as set forth in Code Section 409A(a)(2)(A)(i).



     2.34 Subsidiary. “Subsidiary” means any subsidiary of the Company as
defined under Code Section 424(f).



     2.35 Total and Permanent Disability. “Total and
Permanent Disability” means the Participant is (a) 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) is, 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 months under
an accident and health plan covering Employees of the Employer. Any determination of Total and
Permanent Disability shall be made in accordance with the requirements of Code Section 409A.



     2.36 Trust. “Trust” means a grantor trust, as described in Code
Sections 671-677, of the type commonly referred to as a “rabbi trust” which has been created under
the Trust Agreement and pursuant to which the Employer may place assets to “informally fund”
contingent benefits payable under the Plan.



     2.37 Trust Agreement. “Trust Agreement” means the Smith
International, Inc. Post-2004 Supplemental Executive Retirement Plan Trust Agreement, as it may be
amended from time to time, which embodies the terms and conditions of the Trust.



     2.38 Trustee. “Trustee” means the duly appointed and acting
trustee of the Trust, and any successor thereto.



     2.39 Valuation Date. “Valuation Date” means the last day
of each calendar quarter and any other interim date, as determined by the Administrative Committee,
for the valuation of Participants’ Accounts.



ARTICLE THREE




ADMINISTRATION




     3.1 Composition of Administrative Committee. The Administrative Committee shall be comprised of such officers of the Employer as
chosen by the Compensation Committee to constitute the Administrative Committee. Each member of
the Administrative Committee shall serve at the pleasure of the Compensation Committee and the
Compensation Committee may remove or replace a member of the Administrative Committee pursuant to
procedures established by the Compensation Committee.



     A member of the Administrative Committee may also be a Participant. A member of the
Administrative Committee who is also a Participant shall not vote or otherwise act on any matter
relating solely to himself.



     The members of the Administrative Committee shall not receive any special compensation for
serving in their capacities as members of the Administrative Committee but shall be reimbursed by
the Company for any reasonable expenses incurred in connection therewith. No bond or other
security need be required of the Administrative Committee or any member thereof.



     3.2 Administration of Plan. The Administrative Committee
shall operate, administer, interpret, construe and construct the Plan, including correcting any
defect, supplying any omission or reconciling any inconsistency. The Administrative Committee
shall have all powers necessary or appropriate to implement and administer the terms and provisions
of the Plan, including the power to make findings of fact. The determination of the Administrative
Committee as to the proper interpretation, construction, or application of any term or provision of
the Plan shall be final, binding, and conclusive with respect to all interested persons.



     In addition, the Trustee may take investment directions from the Administrative Committee, in
which case the Administrative Committee shall implement the provisions of Section 5.3
regarding investment of Account balances. The Administrative Committee shall have the authority to
select any Fund or other prudent investment vehicles that are available for hypothetical investment
by Participants of their Account balances in assets held by the Trust. Furthermore, the
Administrative Committee shall direct the Trustee in matters relating to the distribution to
Participants of amounts credited to their Accounts in accordance with the terms of the Plan.



88









 





     3.3 Action by Committee. A majority of the members of
the Administrative Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting at which a quorum is present shall
decide any question brought before the meeting and shall be the act of the Administrative
Committee. In addition, the Administrative Committee may take any other action otherwise proper
under the Plan by an affirmative vote, taken without a meeting, of a majority of its members.



     3.4 Delegation. The Administrative Committee may, in its
discretion, delegate one or more of its duties to its designated agents or to employees of an
Employer, but may not delegate its authority to make the determinations specified in the first
paragraph of Section 3.2.



     3.5 Reliance Upon Information. No member of the
Administrative Committee shall be liable for any decision, action, omission, or mistake in
judgment, provided that he acted in good faith in connection with the administration of the Plan.
Without limiting the generality of the foregoing, any decision or action taken by the
Administrative Committee in reasonable reliance upon any information supplied to it by the Board,
the Compensation Committee, any employee of an Employer, the Employer’s legal counsel, or the
Employer’s independent accountants shall be deemed to have been taken in good faith.



     The Administrative Committee may consult with legal counsel, who may be counsel for the
Employer or other counsel, with respect to its obligations or duties hereunder, or with respect to
any action, proceeding or question at law, and shall not be liable with respect to any action
taken, or omitted, in good faith pursuant to the advice of such counsel.



     3.6 Responsibility and Indemnity. To the full
extent permitted by law, Smith International, Inc. and each other adopting Employer (collectively,
the “Employer") jointly and severally shall defend, indemnify and hold harmless each past,
present and future member of the Administrative Committee and each other employee who acts in the
capacity of an agent, delegate or representative of the Administrative Committee under the Plan
(hereafter, all such indemnified persons shall be jointly and severally referred to as “Plan
Administration Employee”) against, and each Plan Administration Employee shall be entitled without
further act on his part to indemnity from the Employer for, any and all losses, claims, damages,
judgments, settlements, liabilities, expenses and costs (and all actions in respect thereof and any
legal or other costs and expenses in giving testimony or furnishing documents in response to a
subpoena or otherwise), including the cost of investigating, preparing or defending any pending,
threatened or anticipated action, claim, suit or other proceeding, whether or not in connection
with litigation in which the Plan Administration Employee is a party (collectively, the “Losses”),
as and when incurred, directly or indirectly, relating to, based upon, arising out of, or resulting
from his being or having been a Plan Administration Employee; provided, however, that such
indemnity shall not include any Losses incurred by such Plan Administration Employee (i) with
respect to any matters as to which he is finally adjudged in any such action, suit or proceeding to
have been guilty of gross negligence, bad faith or intentional misconduct in the performance of his
duties as a Plan Administration Employee, or (ii) with respect to any matter to the extent that a
settlement thereof is effected in an amount in excess of the amount approved by the Company (which
approval shall not be unreasonably withheld). The foregoing right of indemnification shall be in
addition to any liability that the Employer may otherwise have to the Plan Administration Employee.



     The Employer’s obligation hereunder to indemnify the Plan Administration Employee shall exist
without regard to the cause or causes of the matters for which indemnity is owed and expressly
includes (but is not limited to) the Losses, directly or indirectly, relating to, based upon,
arising out of, or resulting from any one or more of the following:




	 	(a)	 	the sole negligence or fault of any Plan Administration Employee
or combination of Plan Administration Employees;
	 
	 	(b)	 	the sole negligence or fault of the Employer;
	 
	 	(c)	 	the sole negligence or fault of third parties;
	 
	 	(d)	 	the concurrent negligence of fault or any combination of the Plan
Administration Employee and/or the Employer and/or any third party; and
	 
	 	(e)	 	Any other conceivable or possible combination of fault or
negligence, it being the specific intent of the Employer to provide the maximum
possible indemnification protection hereunder, but excluding any such Losses
that are found by a court of competent jurisdiction to have resulted




89









 






	 	 	 	from the
gross negligence, bad faith or intentional misconduct of the Plan Administration
Employee.





     The Plan Administration Employee shall have the right to retain counsel of its own choice to
represent it provided that such counsel is acceptable to the Employer, which acceptance shall not
be unreasonably withheld. The Employer shall pay the fees and expenses of such counsel, and such
counsel shall to the full extent consistent with its professional responsibilities cooperate with
the Employer and any counsel designated by it. The Employer shall be liable for any settlement of
any claim against the Plan Administration Employee made with the written consent of the Employer
which consent shall not be unreasonably withheld.



     The foregoing right of indemnification shall inure to the benefit of the successors and
assigns, and the heirs, executors, administrators and personal representatives of each Plan
Administration Employee, and shall be in addition to all other rights to which the Plan
Administration Employee may be entitled as a matter of law, contract, or otherwise.



ARTICLE FOUR




PARTICIPATION




     4.1 Eligibility of Employees. The Compensation Committee
shall have the sole and exclusive authority and discretion to designate Employees who are eligible
to participate in the Plan as Active Participants. Only Employees who are members of a select
group of management or highly compensated Employees for purposes of ERISA shall be eligible
for selection by the Compensation Committee.



     The Compensation Committee shall also have the authority and discretion to deem any Employee
as no longer an Active Participant effective as of any designated date; provided, however, such
action shall not be effective before the date that the Participant receives written notice of same.
Any Participant whose Employment is terminated, for whatever reason, shall not be an Active
Participant effective as of his Separation from Service date. A person who is no longer an Active
Participant shall still be considered a Participant for other purposes hereunder until he has
received a total distribution of his Account balance.



     4.2 Notification of Eligible Employees. Within
thirty (30) days prior to the beginning of each Plan Year, the Administrative Committee, as
directed by the Compensation Committee, shall notify in writing each of the Employees who are
eligible to elect to defer Compensation under the Plan. The Compensation Committee shall also
have the right to designate Employees as Active Participants at any time during a Plan Year. Each
Employee who has been designated as an Active Participant by the Compensation Committee in any
Plan Year shall remain eligible to defer Compensation and/or Bonuses hereunder unless and until the
Compensation Committee determines that he is no longer eligible to authorize such deferrals and
notifies Employee of same. An Employee (or in the event of his death, his Beneficiary) shall be a
Participant hereunder as long as he has any balance credited to his Account, regardless of whether
he is eligible to authorize Compensation and/or Bonus deferrals hereunder as an Active Participant.
Only Employees who are designated as Active Participants for a Plan Year may authorize deferrals
or have Employer contributions made on their behalf.



     4.3 Compensation and Bonus Deferral Agreement. After an Employee has been notified by the Administrative Committee that he is eligible
to participate in the Plan for the relevant Plan Year as an Active Participant, he must, in order
to defer Compensation and/or Bonus with respect to services to be performed during such Plan Year,
notify the Administrative Committee of his deferral election by completing and executing a Deferral
Agreement prior to the end of the Plan Year which precedes the Plan Year to which such Deferral
Agreement relates. The Employee may elect to defer up to one hundred percent (100%) of his
Compensation and/or Bonus for a Plan Year or the portion thereof that he is an Active Participant.
Any Deferral Agreement that is not completed and signed by the Employee, and received and accepted
by the Administrative Committee (or its delegate), on or prior to the last day of the Plan Year
immediately preceding the Plan Year for which the Employee is notified that he may make a deferral
election, shall be treated as the Employee’s election not to defer Compensation or Bonus for that
Plan Year.



     If, after the commencement of a Plan Year, an Employee is designated by the Compensation
Committee as an Active Participant for the first time, the newly eligible Active Participant, in
order to defer Compensation hereunder, must complete and execute a Deferral Agreement and return it
to the Administrative Committee (or its delegate) within thirty (30) days of the effective date on
which the Employee first became an Active Participant. Such Deferral Agreement shall only apply to
defer Compensation and/or Bonus for services to be performed for the remainder of the Plan Year by
the Active



90









 




Participant, provided that such services are to be performed subsequent to receipt and
approval of his Deferral Agreement by the Administrative Committee.




     The amount of Compensation elected to be deferred pursuant to a Deferral Agreement shall be
withheld on a pro rata basis from the Active Participant’s regular payments of Compensation for
each pay period during the Plan Year or portion thereof during which such Deferral Agreement is in
effect, unless otherwise designated by the Active Participant in his Deferral Agreement. In the
event that a Trust is maintained, Compensation deferrals shall promptly be delivered to the Trustee
by the Employer.



     Regardless of any services performed during a year on behalf of the Company, no Participant
will accrue any right to receive any Bonus until it is actually awarded to him. An Active
Participant’s election to defer all or any portion of his Bonus that may be awarded with respect to
any Plan Year must be made prior to the first day of the Plan Year in which services will be
performed for which such Bonus amount is to be paid.



     The dollar amount or percentage of a Bonus elected to be deferred under this Section
4.3 shall be deferred in one lump sum and shall be deemed to have been deferred on the date the
deferred portion of the Bonus would otherwise have been paid to the Active Participant in the
absence of his deferral election. Any Bonus deferral election made hereunder
shall be void and ineffective to the extent that no Bonus is awarded to the Active Participant
with respect to services performed during the Plan Year.



     To the extent required under payroll tax law or regulation, the deferred amount of any
Compensation or Bonus elected hereunder may be reduced by the Administrative Committee in order to
provide taxable, non-deferred wages sufficient to cover required withholding taxes.



     4.4 Leave of Absence. If an Active Participant is
authorized by his Employer for any reason to take a paid leave of absence from Employment, the
Participant shall continue to be considered in Employment and his Elective Deferral Contributions
shall continue to be withheld during such paid leave of absence. If an Active Participant is
authorized by his Employer for any reason to take an unpaid leave of absence from Employment, the
Participant shall continue to be considered in Employment and the Participant shall be excused from
making Elective Deferral Contributions from his Compensation until the Participant returns to a
paid Employment status. Upon his return from the unpaid leave, Elective Deferral Contributions
shall resume for the remaining portion of the Plan Year in which the expiration or return occurs,
based on the Participant’s Deferral Agreement, if any, as in effect for that Plan Year, i.e., the
same percentage or dollar amount that was being withheld prior to the unpaid leave of absence shall
resume after return to active service, but no make-up contributions shall be made for the unpaid
leave period. A leave of absence shall not affect any previously elected Bonus deferral.



     4.5 Employer Contributions.




     (1) Age-Weighted Contributions. Subject to the following provisions of this
subsection that apply to Executive Staff Participants, effective as of the last day of each
3-month quarter during a Plan Year, an Age-Weighted Contribution shall be allocated and
credited by the Administrative Committee to the Account of each Active Participant who has
entered into a Deferral Agreement covering that quarter. The Age-Weighted Contribution
shall be based on the Active Participant’s Age-Weighted Contribution Percentage (“AWCP”) as
determined based on the schedule set forth below:



	 	 	 	 	 
	  Age as of Anniversary of	 	 
	Participant’s Date of Birth	 	AWCP
	Under Age 40
	 	 	2.00	%
	40-44
	 	 	2.50	%
	45-49
	 	 	3.00	%
	50-54
	 	 	4.00	%
	55-59
	 	 	5.00	%
	60 or older
	 	 	6.00	%







     An Active Participant’s AWCP shall change as of the first payroll period beginning in
the month following the month in which the anniversary of the Active Participant’s date of
birth occurs. To compute an Active



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Participant’s Age-Weighted Contribution for a Plan Year,
his AWCP shall be multiplied by the difference between, for the Plan Year, the Active
Participant’s (i) “Total 401(k) Compensation” (defined below) and his (ii) “Net 401(k)
Compensation” (defined below).




     “Total 401(k) Compensation” means the total of all cash amounts payable by the Employer
to or for the benefit of an Active Participant for services rendered or labor performed
while an Active Participant during the Plan Year (including overtime pay, Bonuses, “perq
pay,” and incentive or other supplemental pay and amounts that he could have received in
cash (i) in lieu of an Elective Deferral Contribution to this Plan or a 401(k) salary
deferral contribution made under the 401(k) Plan and (ii) had he not entered into a salary
reduction agreement pursuant to a cafeteria plan under Section 125 of the Code), excluding,
however, (i) severance pay, (ii) any amount attributable to the grant, vesting or payout of
any equity-based incentive award to the Active Participant; and (iii) the proceeds from the
Active Participant’s exercise of any stock options. The Total 401(k) Compensation of any
Active Participant taken into account for purposes of the Plan shall be prorated for (i) a
Plan Year of less than twelve months (other than the first Plan Year) or (ii) in the case of
an Active Participant who is either an Active
Participant for less than the entire Plan Year or receives Compensation for less than
the entire Plan Year. Total 401(k) Compensation shall not be reduced or otherwise affected
by any limits that apply under the 401(k) Plan.




     “Net 401(k) Compensation” means the total of all cash amounts payable by the Employer
to or for the benefit of an Active Participant for services rendered or labor performed
while an Active Participant during a Plan Year (including overtime pay, Bonuses, “perq pay,”
and incentive or other supplemental pay and amounts which he could have received in cash (i)
in lieu of a 401(k) salary deferral contribution made under the 401(k) Plan and (ii) had he
not entered into a salary reduction agreement pursuant to a cafeteria plan under Section 125
of the Code), excluding, however, (i) severance pay, (ii) any amount attributable to the
grant, vesting or payout of any equity-based incentive award to the Active Participant;
(iii) the proceeds from the Active Participant’s exercise of any stock options, and (iv) the
Active Participant’s Elective Deferral Contributions to this Plan or to another deferred
compensation program other than 401(k) salary deferral contributions made under the 401(k)
Plan. The “Net 401(k) Compensation” of any Active Participant taken into account for
purposes of the Plan shall be limited to $210,000 for the Plan Year with such amount to be
(i) adjusted automatically to reflect any cost-of-living increases authorized by Section
401(a)(17) of the Code and (ii) prorated for (a) a Plan Year of less than twelve months or
(b) in the case of an Active Participant who is either an Active Participant for less than
the entire Plan Year or receives Compensation for less than the entire Plan Year.




     Notwithstanding the preceding provisions of this subsection, the Employer’s
Age-Weighted Contribution (“AWC”) with respect to each Executive Staff Participant shall be
determined by the Administrative Committee or its delegate for each 3-month quarter during
each Plan Year in accordance with the provisions of this paragraph. The Age-Weighted
Contribution Percentage (“AWCP”) shall be six percent (6%) for each Executive Staff
Participant. The AWC of each Executive Staff Participant shall be computed in accordance
with the following formula: (6% x A) -B = AWC. For purposes of this formula, A equals the
Executive Staff Participant’s Total 401(k) Compensation, and B equals the dollar amount of
the age-weighted, profit sharing contribution, if any, for the applicable 3-month quarter
that has been or will be contributed by the Employer on behalf of the Executive Staff
Participant under the terms of the 401(k) Plan. Effective as of the last day of each
3-month quarter during a Plan Year, the AWC for each Executive Staff Participant shall be
allocated and credited by the Administrative Committee to his account under the Deferred
Compensation Ledger.




     (2) Make-up Matching Contributions. The provisions of this subsection
4.5(2) shall apply only to those Active Participants who (i) have authorized elective
deferral contributions under the 401(k) Plan during the Plan Year and (ii) have entered into
a Deferral Agreement hereunder for the Plan Year. To the extent that an Active Participant
authorized elective deferral contributions under the 401(k) Plan during a Plan Year but his
account thereunder is precluded from receiving an allocation of any matching contributions
under the 401(k) Plan that it otherwise would have been eligible to receive, as the result
of non-discrimination limits imposed by the average deferral percentage (“ADP”) test or the
actual contribution percentage (“ACP”) test under the Code, then such Active Participant
shall be eligible to receive a “Make-up Matching Contribution” under this Plan for that Plan
Year. The Make-up Matching Contribution shall be equal to the difference between (i) the
total matching contributions that the Active Participant’s account under the 401(k) Plan
would have been allocated for the Plan Year without regard to the ADP and ACP tests, and
(ii) the amount of matching contributions actually allocated to his account under the 401(k)
Plan for the Plan Year. The Make-up Matching Contributions shall be allocated and credited
by the Administrative Committee to the affected Active Participant’s Account, effective as
of the last day of the Plan Year. Notwithstanding the preceding provisions of this
subsection, no Make-up Matching Contribution



92









 






shall be credited by the Administrative
Committee on behalf of any Active Participant who is not in Employment on the last day of
such Plan Year for any reason.




     (3) Matching Contributions.




     (a) Non-Executive Staff Participants. The provisions of this
subsection 4.5 (3)(a) shall apply only (i) to those Active Participants who
(a) have entered into a Deferral Agreement for the Plan Year and (b) are not
Executive Staff Participants and (ii) to Plan Years in which a matching contribution
is made to eligible participants under the 401(k) Plan. The Matching Contribution
(“MC”) of such an eligible Participant for a Plan Year shall be computed as follows:



MC = The lesser of: [.015A + (.985A x B)] or [(6% x C) – (D + E)]





For purposes of this formula: A equals the aggregate dollar amount of elective
deferral contributions that the Active Participant made to this Plan for the Plan
Year, pursuant to his Deferral Agreement, that were credited to his account under the
Deferred Compensation Ledger; B equals the matching contribution percentage
designated under section 3.03(b) (or its successor) of the 401(k) Plan for the Plan
Year; C equals the Active Participant’s Total 401(k) Compensation (as defined in
Section 4.5(1)) but excluding therefrom any (i) Bonus paid during the Plan
Year and (ii) retention or similar payments paid during the Plan Year; D equals the
matching contributions, if any, that were credited to the Active Participant’s
account under the 401(k) Plan for the Plan Year; and E equals the Make-up Matching
Contributions, if any, that were credited to the Active Participant’s Account for the
Plan Year pursuant to subsection 4.5(2) above. For example, assume that for
a Plan Year (i) the Active Participant’s Account was credited with elective deferral
contributions of $8,000 under this Plan, (ii) the matching contribution percentage
under Section 3.03(b) (or its successor) of the 401(k) Plan for such Plan Year was
50%, (iii) the Active Participant’s Total 401(k) Compensation (excluding his Annual
Incentive Plan Bonus, if any) was $125,000, (iv) his account was credited with a
$2,000 matching contribution under the 401(k) Plan, and (v) his Account under this
Plan was credited with a $1,000 Make-up Matching Contribution.




     MC = The lesser of: [$120 + ($7880 x 50%)] or [(6% x 125,000) -
($2,000 + $1,000)]




     MC = The lesser of: $4,060 or $4,500 (i.e., $7,500 – $3,000)




     MC = $4,060




     The MC shall be computed, allocated and credited by the Administrative Committee
to the Active Participant’s Account effective as of the last day of the Plan Year.
Notwithstanding the preceding provisions of this subsection, no Matching Contribution
shall be credited for a Plan Year on behalf of any Active Participant who is not in
Employment on the last day of such Plan Year for any reason.




     (b) Executive Staff Participants. The Company’s Matching Contribution
(“MC”) with respect to each Executive Staff Participant shall be determined in
accordance with the provisions of this subsection 4.6(3)(b) which shall apply
regardless of whether or not (i) the Executive Staff Participant is also a member of
the 401(k) Plan or has entered into a Deferral Agreement under this Plan, or (ii) any
matching contributions were credited to his 401(k) Plan account during the Plan Year.
The MC of an Executive Staff Participant for a Plan Year shall be computed as
follows:




     X = The lesser of: (A + B) or (6% x C).




     MC
= X – (D + E).




For purposes of this formula: A equals the aggregate dollar amount of elective
deferral contributions that the Executive Staff Participant made to this Plan for the
Plan Year, pursuant to his Deferral Agreement, that were credited to his account
under the Deferred Compensation Ledger; B equals the aggregate dollar amount of
elective deferral contributions that were credited to the Executive Staff
Participant’s Account under the 401(k) Plan for the Plan Year; C equals the Executive
Staff Participant’s Total 401(k) Compensation (as defined in Section 4.5(1))
for the Plan Year; D equals the matching contributions, if any, that were credited to
the Executive Staff Participant’s Account under the 401(k) Plan for the Plan Year;
and



93









 






E equals the Make-up Matching Contributions, if any, that were credited to the
Executive Staff Participant’s Account for the Plan Year pursuant to subsection
4.5(2) above. For example, assume that for a Plan Year an Executive Staff
Participant (i) earned Total 401(k) Compensation of $300,000, (ii) authorized and was
credited with elective deferral contributions of $9,000 under the 401(k) Plan and
$11,000 under this Plan, (iii) his account was credited with a $4,500 matching
contribution under the 401(k) Plan, and (iv) his Account under this Plan was not
credited with any Make-up Matching Contributions for the Plan Year.




     X = the lesser of: ($9,000 + $11,000) or (6% x
$300,000)




     X = $18,000




     MC
= $18,000 – ($4,500 + 0)




     MC = $13,500.




     The MC shall be computed, allocated and credited by the Administrative Committee
to the Executive Staff Participant’s Account effective as of the last day of the Plan
Year. Notwithstanding the previous provisions of this subsection, no MC shall be
credited by the Administrative Committee for a Plan Year on behalf of any Executive
Staff Participant who is not in Employment on the last day of such Plan Year for any
reason.




     The Compensation Committee may, in its discretion, determine that the matching
contribution percentage for purposes of the preceding provisions of this
subsection 4.5(3)(b) shall not be 100% as described above (i.e., a
dollar-for-dollar match but not in excess of 6% of the Executive Staff Participant’s
Total 401(k) Compensation); for example, the Compensation Committee may determine
that the matching contribution percentage under the 401(k) Plan for the Plan Year
shall also apply under this subsection 4.5(3)(b) for Executive Staff
Participants. In such event, the formula at subsection 4.5(3)(a) which
incorporates a 100% match of the first 1.50% of elective deferral contributions shall
apply for the Plan Year for Executive Staff Participants. Any such determination
made by the Compensation Committee shall be recorded in a duly adopted resolution and
communicated in writing to the Executive Staff Participants prior to the beginning of
each applicable Plan Year.




     (4) Discretionary Profit Sharing Contributions. The Compensation Committee
may, in its discretion, determine the amount, if any, of the Employer’s profit sharing
contribution for a Plan Year and how such amount is to be allocated and credited between and
among the Participants’ Accounts. A Participant shall not be entitled to share in the
allocation of any such Employer profit sharing contribution for a Plan Year if he is not in
Employment on the last day of the Plan Year for any reason. The Compensation Committee
shall have no obligation to authorize any such profit sharing contributions hereunder for
any Plan Year.



     4.6 Vesting. All contributions made by Participants and the
Employer hereunder shall be fully vested and nonforfeitable at all times. All Investment
Experience credited on all contributions shall also be fully vested and nonforfeitable at all
times.



     4.7 Election of Manner of Payment. At the
time that a Participant makes a deferral election under Section 4.3, the Participant shall
also elect (on an Advance Distribution Election form) the manner in which his distribution shall be
paid following his Determination Date after Separation from Service from among the following
options:




	 	(a)	 	Lump sum payment; or
	 
	 	(b)	 	If the distributable portion of the Account balance is at least
$25,000 on the Determination Date, annual installments to be paid during a
period specified by the Participant of not less than two (2) nor more than
twenty (20) years. If the distributable amount is less than $25,000, it shall
automatically be paid in a lump sum distribution without regard to any
installment option that may have been elected by the Participant.




94









 











ARTICLE FIVE




DEFERRAL OF COMPENSATION AND ALLOCATION

OF INTEREST EQUIVALENTS




     5.1 Deferral of Compensation and/or Bonus.
If an Active Participant has elected to defer Compensation and/or a Bonus hereunder for a Plan
Year, the deferred amounts shall not be paid when they otherwise would have been paid in the
absence of such election. A bookkeeping entry to reflect the deferred amounts shall be credited by
the Administrative Committee to the Active Participant’s Account under the Deferred Compensation
Ledger. With respect to Compensation and Bonuses deferred hereunder for a Plan Year, each such
deferred amount shall be credited to the Active Participant’s Account under the Deferred
Compensation Ledger as of the date it otherwise would have been paid to the Active Participant and
shall reflect a mere unsecured promise by the Employer to pay such amount in the future.



     5.2 Allocation of Investment Experience to Accounts. As of each Valuation Date, the Administrative Committee or its delegate
shall determine the Investment Experience for the applicable accounting period and, as soon as
practicable after such period, shall post and credit the amount of Investment Experience to each
Participant’s Account effective as of the end of such period. Each Account for which there was a
positive balance at any time during the applicable valuation period shall be entitled to an
allocation and crediting of Investment Experience for that valuation period regardless of whether
the Participant is still an Active Participant.



     5.3 Investment of Accounts. The Administrative
Committee shall permit each Participant to request that the amounts credited to his Account under
the Deferred Compensation Ledger be invested in any one or a combination of Funds (or other
investment vehicles) which have been designated by the Administrative Committee as available for
hypothetical investment under the Plan. However, except as provided in the next sentence, the
Trustee shall make the final investment decision, which may or may not correspond to the
Participant’s request. In the event that a Participant is serving as Trustee, the Administrative
Committee, and not the Trustee, shall make the final decision with respect to the hypothetical
investment of such Participant’s Account. Subject to Section 5.4 for Interest Equivalents,
the Investment Experience posted and credited to each Participant’s Account shall be based upon the
Investment Experience of the actual investments made by the Trustee in which the Participant’s
Account balance is hypothetically invested. Notwithstanding any contrary provision of the Plan or
Trust Agreement, no direct investment in securities issued by the Company or its Affiliated
Entities shall be permitted under the Plan or Trust.



     Except as otherwise provided below, each Participant shall advise the Administrative
Committee, or any agent appointed by such Committee, of his request with respect to the
hypothetical investment of the amounts credited to his Account. Each Participant’s investment
request shall be in a form and manner, and in the minimum increments, as prescribed by the
Administrative Committee. Each Participant may, on any business day on which the applicable
financial markets are open, communicate directly with any appointed mutual fund company, financial
consultant, or other appropriate agent or delegate of the Administrative Committee to request a
change in the combination of Funds (or other investment vehicle) in which his Account is
hypothetically invested. The Administrative Committee may direct the Trustee concerning the Funds
in which the Participant’s Account shall be hypothetically invested in the absence of an investment
request from such Participant, or in the event that any such request is not followed by the
Administrative Committee or Trustee for whatever reason.



     In addition, notwithstanding any contrary provision of the Plan or Trust Agreement, neither
the Administrative Committee nor Trustee shall be bound to follow the investment request of any
Participant. Subject to Section 5.4, the Investment Experience posted to each
Participant’s Account shall be based solely on the Investment Experience of the actual Funds or
other investments authorized by the Administrative Committee or Trustee, as applicable, in which
the Participant’s Account balance was hypothetically invested. Investment Experience shall be
allocated to the Participant’s Account as directed by the Administrative Committee.



     5.4 Interest Equivalents. To the extent that all or
any portion of a Participant’s Account is deemed to have been hypothetically invested in a Fund
that is a money
market mutual fund, the Participant’s Account will be credited with the Interest Equivalent
described below in this Section 5.4 instead of the actual investment return generated by
the deemed investment in the money market mutual fund. In addition, if a Trust is maintained, all
deferrals of Compensation and Bonus authorized by Participants shall be credited with Interest
Equivalents by the Employer from the date otherwise payable by the Employer to the Participants
until the date that such amounts are paid to the Trustee for investment in Funds or other
investment vehicles. Compensation and Bonuses being deferred during a calendar quarter shall be
considered to be invested on the mid-point day of the calendar quarter during which such amounts
would otherwise have been payable to the



95









 




Participant and shall be credited with Interest
Equivalents accordingly for that calendar quarter. Interest Equivalents shall be computed by the
Administrative Committee pursuant to non-discriminatory procedures maintained by the Administrative
Committee from time to time, and such amounts shall be posted and credited to each affected
Participant’s Account by the Administrative Committee.




     Crediting of Interest Equivalents hereunder shall be made only to the Accounts of those
affected Participants who are current Employees. Therefore, for example, if a Participant has
terminated Employment but has not yet received a distribution of the entire amount credited to his
Account by the end of the month in which he is terminated, the Investment Experience that is deemed
to be credited to such Participant’s Account (to the extent of the portion of the Account that is
hypothetically invested in the money market mutual fund) after the last day of such month shall
only be the actual investment return realized by the deemed investment in the money market mutual
fund, and not the greater Interest Equivalent.



     All amounts credited to a Participant’s Account, to the extent such amounts are either (i)
deemed to have been invested in a Fund that is a money market mutual fund or (ii) withheld by the
Employer from a Participant’s Compensation or Bonus but not yet paid to the Trustee for investment
in any Fund (or other investment vehicle), shall be credited quarterly with Interest Equivalents.
The rate of Interest Equivalents shall be equal to 120% of the long-term, applicable federal rate
(AFR) for quarterly compounding for the last month of the calendar quarter immediately preceding
the calendar quarter in which the Interest Equivalents are to be credited. For example, for
purposes of crediting Interest Equivalents for the 3-month quarter ending December 31 of a given
Plan Year, 120% of the AFR rate for September of that Plan Year will be used.



     Allocations of Interest Equivalents shall be computed and credited by the Administrative
Committee based on the balances credited to the Participant’s Account as of the last day of each
calendar quarter during a Plan Year, i.e., March 31, June 30, September 30 and December 31. In the
event of a distribution following a Determination Date, the applicable portion of the Participant’s
Account balance deemed to be invested in a Fund that is a money market fund shall be credited with
Interest Equivalents based on such applicable portion as of the last day of the month which
includes the Determination Date.



     Interest Equivalents credited to the Participant’s Account shall be compounded quarterly and
shall increase the contingent benefits receivable by the Participant in the future.



     5.5 Participants’ Rights Under the Trust. The
assets of the Trust shall be held for the benefit of the Participants in accordance with the terms
of the Plan and the Trust Agreement. In accordance with applicable provisions of the Trust
Agreement, the assets of the Trust shall remain subject to the claims of the general creditors of
the Employer, and the rights of the Participants to the amounts in the Trust shall be limited as
provided in the Plan and Trust Agreement in the event that the Employer becomes Insolvent.



     5.6 Determination of Account. The aggregate
amount credited to a Participant’s Account under the Deferred Compensation Ledger shall consist of
(i) the aggregate amount of deferred Compensation and/or Bonuses and Employer Contributions made
pursuant to Article Four, plus (or minus) (ii) the aggregate amount of Investment
Experience credited or charged to such Account pursuant to Article Five, minus (iii) the
aggregate amount of any distributions or withdrawals made from such Account pursuant to Article
Six.



ARTICLE SIX




DISTRIBUTIONS




     6.1 Amount of Deferred Compensation Subject to Distribution. As of the Participant’s Determination Date, the aggregate
amount credited to his Account maintained under the Deferred Compensation Ledger shall become
distributable in accordance with the provisions of Section 6.2.



     6.2 Forms of Distribution Following Determination Date Except for Death. Upon the occurrence of a Determination
Date (except due to the Participant’s death) and prior to a Change of Control, the Participant’s
Account balance shall become distributable in the form of payment prescribed in Section
4.7. All distributions shall be paid in cash.



     If there is no form of distribution election for the Participant pursuant to Section
4.7, the form of distribution following a Determination Date shall automatically be a lump sum
payment. A Participant cannot elect to retain his



96









 




distributable Account balance in the Plan
following his Determination Date except for any remaining unpaid installments during the
installment period.




     Notwithstanding any provision hereof to the contrary, with respect to any Determination Date
resulting from a Separation from Service within the 12-month period following a Change of Control,
all distributions under the Plan shall automatically be paid in lump sum payments, and no
installment payments may be elected and no prior installment election shall be honored. Following
a Change of Control, a lump sum payment shall be made to each Participant who incurs a Separation
from Service within 12 months from the Change of Control date. In such event, the lump sum
distribution shall be paid within thirty (30) days from the Participant’s Separation from Service
date.



     Notwithstanding any previous installment payment election that may have been made by the
Participant, the aggregate of any remaining installment payments due to a Participant who had
incurred a Separation from Service at any time prior to the Change of Control shall be paid to such
Participant in a lump sum within thirty (30) days from the Change of Control date.



     6.3 Form of Death Distribution. If the
Determination Date results from the death of the Participant, or if he dies before receiving all
elected installment payments, his designated Beneficiary (pursuant to Section 6.10) shall
automatically be entitled to receive a lump sum cash distribution of the Participant’s remaining
Account balance within sixty (60) days following the date that the Administrative Committee is
notified of Participant’s death and, therefore, installment payments, or continued installment
payments, shall not be available as a distribution option following the Participant’s death, even
if previously elected by the Participant or Beneficiary.



     Notwithstanding the preceding paragraph of this Section 6.3, if (a) the Participant’s
Account balance at the time of his death is at least one million dollars ($1,000,000) and (b) the
Participant had an installment distribution election in effect at the time of his death, then the
Participant’s installment election shall be honored and his designated Beneficiary shall receive
installment payments over the installment period, or remaining installment period, that had been
elected by the Participant prior to his death; provided, however, if the elected installment period
or remaining installment period, as applicable, is longer than five (5) years from the date of
Participant’s death, the installment payments shall be made over an installment period that ends on
the last day of the year that is five years from the end of the year in which the Participant’s
death occurred. In this event, the installment payment period shall be automatically shortened
pursuant to this provision and the maximum installment period shall thus not exceed the 5-year
period specified in the immediately preceding sentence. All installment payments shall be made in
substantially equal annual payments over the installment period.



     6.4 Timing of Distributions.




	 	(a)	 	Lump Sum Distribution. Lump sum distributions shall be
made as soon as administratively feasible following the end of the calendar
quarter in which the Participant’s Determination Date occurs.
	 
	 	 	 	Notwithstanding the above, any distribution payable to a Key Employee due to
the Key Employee’s Separation from Service (for any reason except due to his
death) shall not be made before the earlier of the date which is six (6)
months after the date of his Separation from Service.
	 
	 	(b)	 	Installment Payments. Annual installment payments shall
commence as soon as administratively feasible following the end of the calendar
quarter in which the Participant’s Determination Date occurs. Thereafter, the
remaining installment payments shall be made as of the annual anniversary of the
first installment date.
	 
	 	 	 	Notwithstanding the above, any distribution payable to a Key Employee due to
the Key Employee’s Separation from Service (for any reason except due to his
death) shall not commence earlier than the date which is six (6) months after
the date of his Separation from Service.
	 
	 	(c)	 	Changes in Time and Form of Distribution. If a
Participant has not commenced receiving payments under this Section 6.4,
the Participant may petition the Administrative Committee in writing to request
that the form of distribution be changed from a lump sum distribution to an
installment payment option; provided, however, any such election to delay his
distribution or change the form of payment:




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	 	(1)	 	will not be effective until at least 12 months
after the date on which the election is made; and
	 
	 	(2)	 	in the case of an election related to a payment
other than a payment made due to the Participant’s death, Total and
Permanent Disability, or Financial Emergency, the first payment with
respect to which such election is made is deferred for a period of not
less than five (5) years from the date such payment would otherwise have
been made.





     6.5 Advance Distribution Election Required.
The Participant’s election as to the form of his distribution hereunder with respect to any Plan
Year must be made prior to the first day of the Plan Year in which the services will be performed
for which the Compensation or Bonus relates. If the Participant or Beneficiary, as applicable,
validly elects annual installment payments, then Investment Experience shall continue to be
credited by the Administrative Committee to undistributed amounts allocated to the Participant’s
Account. Pending receipt of any distribution from the Plan, the Participant or Beneficiary shall
remain subject to Section 7.2 and other applicable provisions of the Plan.



     6.6 Withdrawal due to Financial Emergency. A
Participant who believes he has suffered a Financial Emergency may in writing request a
distribution of the portion of his Account balance needed to satisfy the emergency need. The
Administrative Committee will review the Participant’s request to determine whether, in its
discretion, a Financial Emergency has occurred and, if so, the amount reasonably needed to satisfy
the emergency need.



     If the Administrative Committee, in its discretion, determines that a Participant has suffered
a Financial Emergency, the Administrative Committee may direct payment to the Participant of only
that portion, if any, of his Account balance which is attributable to his Compensation and Bonus
deferral contributions and is necessary to satisfy the emergency need.



     A Participant requesting a withdrawal for Financial Emergency must petition the Administrative
Committee in writing and provide such information as the Administrative Committee may request to
support the withdrawal request. The Administrative Committee, in its discretion, shall determine
whether a Financial Emergency under the Plan has occurred and the minimum amount needed to satisfy
the emergency need, plus amounts necessary to pay taxes reasonably anticipated as a result of the
distribution, after taking into account the extent to which such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise or by liquidation of the
Participant’s assets (to the extent the liquidation of such assets would not itself cause severe
financial hardship).



     Only one withdrawal for a Financial Emergency may be made by Participant in any 24-month
period. If, subject to the sole discretion of the Administrative Committee, the petition for
payout is approved, the payout shall be made within 60 days of the date of approval. A request for
a withdrawal under this Section 6.6 must be accompanied by (a) a letter signed by the
Participant describing all the circumstances and the resources he has available to meet the need
and a certification that the resources listed in the definition of Financial Emergency and all
others are unavailable/insufficient/non-existent to meet the need, (b) copies of the appropriate
official documentation (e.g., bills, eviction or foreclosure notices or documents showing that such
are impending), and (c) statement of monthly household income and expenses (with explanations for
unusual items).



     If the withdrawal is approved in its discretion, the Administrative Committee shall authorize
a distribution to the Participant in the amount reasonably necessary to satisfy the Financial
Emergency. No Interest Equivalents shall be credited to the Participant’s Account during a
calendar quarter with respect to the amount distributed to satisfy the Financial Emergency.



     6.7 Trust and Payor of Deferred Compensation. Benefits payable under the Plan with respect to a Participant’s Account shall be the
obligation of, and payable by, the Company; provided, however, the Company may, in its complete
discretion, obtain reimbursement from any adopting Employer which employed the Participant.
Adoption and maintenance of the Plan by the Employer shall not, for that reason, create a joint
venture or partnership relationship between or among such entities for purposes of payment of
benefits under the Plan or for any other purpose.



     In order to meet its contingent obligations under the Plan, the Employer shall not set aside
any assets or otherwise create any type of fund in which any Participant, or any person claiming
under such Participant, has an interest other than that of an unsecured general creditor of the
Employer or which would provide any Participant, or any person claiming under such Participant,
with a legally enforceable right to priority over any general creditor of the Employer in the event
that the Employer becomes Insolvent.



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     The Employer intends for the Plan to recognize the value to the Employer of the past and
present services of Participants and to encourage and assure their continued service with the
Employer by making more adequate provision for their future retirement security. The maintenance
of the Plan is, in part, made necessary by certain benefit limitations which are imposed on the
401(k) Plan by the Code. The Plan is intended to constitute an unfunded, unsecured plan of
deferred compensation for a select group of management or highly compensated employees of the
Employer. Plan benefits herein provided are to be paid out of the Employer’s general assets.
Nevertheless, subject to the terms hereof and of the Trust Agreement, the Employer may transfer
money or other property to the Trustee and the Trustee shall pay Plan benefits to Participants and
their beneficiaries out of the Trust fund. To the extent the Employer transfers assets to the
Trustee, the Administrative Committee may, but need not, establish procedures for the Trustee to
invest the Trust assets in Funds or otherwise in accordance with each Participant’s designated
deemed investments pursuant to Article Five, but only with respect to the portion of the
Trust assets equal to such Participant’s Account balance.



     The Compensation Committee or Board may establish the Trust and direct the Company to enter
into the Trust Agreement. In such event, the Company shall remain the owner of all assets in the
Trust Fund and the assets shall be subject to the claims of the Employer’s creditors if the
Employer ever becomes Insolvent. The Chief Executive Officer of the Company and the Board shall
each have the duty to inform the Trustee in writing if the Employer becomes Insolvent. Such notice
given under the preceding sentence by any party shall satisfy all of the parties’ duty to give
notice. When so informed, the Trustee shall suspend payments to the Participants and hold the
assets for the benefit of the Employer’s general creditors. If the Trustee receives a written
allegation that the Employer is Insolvent, the Trustee shall suspend payments to the Participants
and hold the Trust fund for the benefit of the Employer’s general creditors, and shall determine
within the period specified in the Trust Agreement whether the Employer is Insolvent. If the
Trustee determines that the Employer is not Insolvent, the Trustee shall resume payments to the
Participants. No Participant or Beneficiary shall have any preferred claim to, or any beneficial
ownership interest in, any assets of the Trust Fund.



     During any period in which a Trust is in existence, benefits payable under the Plan shall be
payable by the Trustee in accordance with the terms, provisions, conditions and limitations of the
Plan and Trust Agreement. To the extent that any distribution described in the immediately
preceding sentence does not fully satisfy the obligation for any benefit due under the Plan, the
Employer shall remain fully liable and obligated for full payment of any unpaid benefit due and
payable under the Plan.



     6.8 Reimbursement of Participant. The Company
agrees to pay as incurred, to the full extent permitted by law, all legal fees and other expenses
which the Participant (or any Beneficiary thereof) may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Employer, the Participant or others concerning the
validity or enforceability of, or liability under, any provision of this Plan or any guarantee of
performance thereof (including, without limitation, as a result of any contest by the Participant
about the amount of any benefits due pursuant to the Plan), plus in each case interest on any
delayed payment at the applicable interest rate specified in Section 5.4 for Interest
Equivalents. To the extent that the Employer is found under a final decree of a court of competent
jurisdiction to have engaged in an intentional breach of contract without good cause, bad faith or
fraudulent conduct hereunder in delaying or failing to make any payment due under this Plan, then
the amount found due to any Participant shall be doubled and fully paid to the Participant within
thirty (30) days of such determination. The Company authorizes Participant to engage counsel of
his choice to represent him in any such dispute. This Section 6.8 shall not be construed
to limit or foreclose any court or arbitrator from imposing any other awards or remedies.



     6.9 Facility of Payments. If the Administrative
Committee determines that any person entitled to payments under the Plan is physically or mentally
incompetent to receive or properly receipt for such payments, the Company shall make such payments
or, if applicable, the Administrative Committee shall direct the Trustee to make the payments, to
the legal guardian or other personal representative of such person for the use and benefit of such
person. If the Administrative Committee for any reason is unable to determine with reasonable
certainty the proper person to pay pursuant to the immediately preceding sentence, the Company
shall pay or, if applicable, the Administrative Committee shall direct the Trustee to pay, any
amounts due hereunder into a court of competent jurisdiction in an interpleader proceeding for
purposes of being directed by such court as to the proper disposition of such amounts. Any such
payments so made by the Company or the Trustee, to the extent of the amounts thereof, shall be a
full and complete discharge of any liability or obligation of the Plan, Trust, Employer,
Administrative Committee, Compensation Committee, Board and other interested parties, therefor.



     6.10 Beneficiary Designations. Each Employee,
upon becoming a Participant, shall file with the Administrative Committee (or its delegate) a
designation of one or more Beneficiaries to whom benefits otherwise payable to the Participant
shall be made in the event of his death prior to the complete distribution of his Account balance.
A Beneficiary designation shall be on the form prescribed by the Administrative Committee and shall
be effective when



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received and accepted by the Administrative Committee. A Participant may, from
time to time, revoke or change his Beneficiary designation by filing a new designation form with
the Administrative Committee. The last valid designation received by the Administrative Committee
shall be controlling; provided, however, that no Beneficiary designation, or change or revocation
thereof, shall be effective unless received prior to the Participant’s death, and shall not be
effective as of a date prior to its receipt by the Administrative Committee




     If no valid and effective Beneficiary designation exists at the time of the Participant’s
death, or if no designated Beneficiary survives the Participant, or if such designation conflicts
with applicable law, the payment of the Participant’s Account balance shall be made to the
Participant’s surviving lawful spouse, if any. If there is no surviving spouse, then payment of
the Account balance shall be made to the executor or administrator of the Participant’s estate, or
if there is no administration on Participant’s estate, in accordance with the laws of descent and
distribution as determined by the Company. If the Administrative Committee is in doubt as to the
right of any person to receive such amount, it may direct that the amount be paid into any court of
competent jurisdiction in an interpleader action, and such payment shall be a full and complete
discharge of any liability or obligation under the Plan or Trust Agreement to the full extent of
such payment.



     6.11 Withholding of Taxes. The Administrative
Committee shall direct the Employer or, if appropriate, the Trustee, to withhold from the amount
of benefits payable under the Plan all federal, state and local taxes required to be withheld under
any applicable law or governmental regulation or ruling.



     For each payroll period in which an Elective Deferral Contribution is being withheld, the
Employer shall ratably withhold from that portion of the Active Participant’s Compensation or Bonus
that is not being deferred, the Active Participant’s share of FICA, FUTA other applicable
employment taxes that are required to be withheld with respect to such Elective Deferral
Contributions.



     With respect to Employer contributions pursuant to Section 4.5, the Employer shall
withhold the Active Participant’s required share of FICA, FUTA or and other applicable employment
taxes from the Active Participant’s Compensation or Bonus that is not being deferred. Such taxes
shall be withheld at the same time that the Employer contributions are credited to the Deferred
Compensation Ledger.



ARTICLE SEVEN




RIGHTS OF PARTICIPANTS




     7.1 Annual Statement to Participants. As
soon as practicable after the end of each Plan Year, or at such other time as the Administrative
Committee determines to be appropriate, the Administrative Committee shall cause to be prepared and
delivered to each Participant a written statement showing the following information and such other
information that the Administrative Committee decides is appropriate:




	 	(a)	 	The beginning balances in the Participant’s Account under the
Deferred Compensation Ledger as of the first day of the Plan Year;
	 
	 	(b)	 	The amount of Compensation and Bonuses deferred for the Plan Year
and credited to the Participant’s Account for the Plan Year;
	 
	 	(c)	 	The amount of Employer contributions for the Plan Year that were
credited to the Participant’s Account for the Plan Year;
	 
	 	(d)	 	The adjustments to the Participant’s Account to reflect the
crediting of Investment Experience and any distributions or withdrawals made
during the Plan Year; and
	 
	 	(e)	 	the ending balances in the Participant’s Account as of the last day of the Plan Year.





     7.2 Limitation of Rights. Nothing in this Plan shall be construed to:




	 	(a)	 	Give any individual who is employed by an Employer any right to
be a Participant unless and until such person is selected by the Compensation
Committee.




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	 	(b)	 	Give any Participant any rights, other than as an unsecured
general creditor of the Employer, with respect to the Compensation, Bonuses,
Employer contributions and Investment Experience credited to his Account under
the Deferred Compensation Ledger until such amounts are actually distributed to
him;
	 
	 	(c)	 	Limit in any way the right of the Employer to terminate a
Participant’s Employment with the Employer;
	 
	 	(d)	 	Give a Participant or any other person any interest in any fund
or in any specific asset of the Employer;
	 
	 	(e)	 	Give a Participant or any other person any interests or rights
other than those of an unsecured general creditor of the Employer;
	 
	 	(f)	 	Be evidence of any agreement or understanding, express or
implied, that the Employer will employ a Participant in any particular position,
at any particular rate of remuneration, or for any particular time period; or
	 
	 	(g)	 	Create a fiduciary relationship between the Participant and the
Employer, Compensation Committee, and/or Administrative Committee.





     7.3 Nonalienation of Benefits. No right or
benefit under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or
charge the same will be void and without effect. No right or benefit hereunder shall in any manner
be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to
such benefits. If any Participant or Beneficiary hereunder shall become bankrupt or attempt to
anticipate, alienate, assign, sell, pledge, encumber, or charge any right or benefit hereunder, or
if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution,
sequestration, or any other form of process or involuntary lien or seizure, then such right or
benefit shall be held by the Company for the sole benefit of the Participant or Beneficiary, his
spouse, children, or other dependents, or any of them, in such manner as the Administrative
Committee shall deem proper, free and clear of the claims of any party.



     The withholding of taxes from benefit payments hereunder; the recovery under the Plan of
overpayments of benefits previously made to a Participant; the transfer of benefit rights from the
Plan to another plan; the direct deposit of benefit payments to an account in a banking institution
(if not actually part of an arrangement constituting an assignment or alienation); or an in-service
distribution under Section 6.6, shall not be construed as an assignment or alienation for
purposes of the first paragraph of this Section.



     The first paragraph of this Section shall not preclude (a) the Participant from designating a
Beneficiary to receive any benefit payable hereunder upon his death, or (b) the executors,
administrators, or other legal representatives of the Participant or his estate from assigning any
rights hereunder to the person or persons entitled thereto.



     In the event that any Participant’s or Beneficiary’s benefits hereunder are garnished or
attached by order of any court, the Company or Trustee may bring an action or a declaratory
judgment in a court of competent jurisdiction to determine the proper recipient of the benefits to
be paid under the Plan. During the pendency of said action, any benefits that become payable shall
be held as credits to the Participant’s Account or, if the Company prefers, paid into the court as
they become payable, to be distributed by the court to the recipient as the court deems proper at
the close of said action.



     7.4 Claims Procedures. When a benefit is due and payable
under the Plan, a claim should be submitted to the Administrative Committee or Trustee, as
applicable, by the Participant or by his Beneficiary in the event of Participant’s death (referred
to as the “Claimant” for purposes of this Section 7.4). A decision on a Claimant’s claim
for benefits shall be made by the Compensation Committee within twenty (20) days after receipt of
the claim. In the event there is a disagreement concerning the amount payable to the Claimant, the
Claimant shall receive written notification of the amount in dispute and shall be entitled to a
full and fair review of his claim. A Claimant desiring a review must submit a written request to
the Compensation Committee requesting such a review, which request should include whatever comments
or arguments that the Claimant wishes to make. Incident to the review, the Claimant may represent
himself or appoint a representative to do so, and he shall have the right to inspect all documents
pertaining to the issue. The Compensation Committee, in its discretion, may schedule any meeting
with the Claimant and/or the Claimant’s representative that it deems to be necessary or appropriate
to facilitate or expedite its review of the amount in dispute.



101









 





     A request for a review must be filed with the Compensation Committee within sixty (60) days
after notice of the disputed amount is received by the Claimant. If no request is received within
the 60-day time limit, the determination of the amount due by the Administrative Committee or
Trustee, as applicable, will be final. However, if a request for review of a disputed amount is
timely filed, the Compensation Committee must render its decision under normal circumstances within
thirty (30) days of its receipt of the request for review. In special circumstances the decision
may be delayed if, prior to expiration of the initial 30-day period, the Claimant is notified of
the extension, but must in any event be rendered no later than sixty (60) days after receipt of the
Claimant’s request. All decisions of the Compensation Committee shall be in writing and shall
include specific reasons for whatever action has been taken, as well as the pertinent Plan
provisions on which its decision is based.



ARTICLE EIGHT




MISCELLANEOUS




     8.1 Amendment or Termination of the Plan. The
Compensation Committee or the Administrative Committee may
amend or terminate the Plan at any time effective as of the date specified by said Committee,
including amendments with a retroactive effective date; provided, however, the provisions of
Section 8.2 may not be amended without the consent of at least two-thirds (2/3) of all
affected Participants and no amendment may be made which affects the rights or duties of the
Compensation Committee hereunder without its consent. In addition, unless the particular
Participant (or his Beneficiary in the event of death) consents in writing, no such amendment or
termination shall adversely affect any rights of such Participant or Beneficiary to any amounts
which are required to be allocated and credited hereunder to his Account at such time.



     Notwithstanding the immediately preceding paragraph, the Plan may be amended by the
Compensation Committee or the Administrative Committee at any time prior to a Change of Control if
required to ensure that the Plan is characterized as a “top-hat plan” of deferred compensation
maintained for a select group of management or highly compensated employees as described under
ERISA Sections 201(2), 301(a)(3), and 401(a)(1), or to conform the Plan to the requirements of
ERISA, for “top-hat plans” or “supplemental executive retirement plans” or the requirements of the
Code for deferred compensation plans including Code Section 409A. No such amendment for this
exclusive purpose shall be considered prejudicial to the interest of a Participant or a Beneficiary
hereunder.



     Following a Change of Control, any amendment or termination of the Plan (which is proposed by
the Compensation Committee or Administrative Committee pursuant to the immediately preceding
paragraph) shall require the written consent of a majority of the then Participants. For purposes
of this Plan, when the consent of a majority of the Participants is required, the determination of
majority consent shall be based upon receiving the consent of any combination of Participants whose
sum of Account balances under the Plan as of the time of determination is greater than fifty
percent (50%) of the sum of all Account balances for all Participants at such time, rather than
upon receiving the consent of a majority of the number of Participants. For purposes of this
determination, Beneficiaries of deceased Participants shall be considered Participants.



     If the consent of a majority of the Participants is required for the amendment or termination
of the Plan, then the Administrative Committee shall be responsible for securing such Participant
consents in a timely and confidential fashion and, unless ordered by a court of competent
jurisdiction, shall not reveal to the Company, the Board, Compensation Committee or any other
interested party any information concerning such consents, except whether the required majority has
been achieved. The decision whether or not to consent is the responsibility of the Participant in
the exercise of his judgment, and notice of such consent or failure to consent shall be
administered in a confidential manner to protect the identity of the Participant. Any consent of a
Participant required under this Section 8.1 shall be deemed given if no written objection
from such Participant is received by the person soliciting such consents on behalf of the
Participants within fifteen (15) days after a written notice requesting such consent and indicating
such 15-day response period has been sent postpaid by United States registered or certified mail
with return receipt requested, and such return receipt has been returned indicating receipt of such
notice by the Participant.



     In the event of termination of the Plan, there shall be no Active Participants, and the
Account balance of each Participant shall not be distributable except in accordance with
Article Six. In accordance with Code Section 409A, termination of the Plan shall not, by
itself, create a distribution event for Participants.



     8.2 Powers of the Company. The existence of
outstanding and unpaid benefits under the Plan shall not affect in any way the right or power of
the Employer to make or authorize any adjustments, recapitalization, reorganization or other



102









 




changes in the Employer’s capital structure or in its business, or any merger or consolidation of
the Employer, or any issue of bonds, debentures, common or preferred stock, or the dissolution or
liquidation of the Employer, or any sale or transfer of all or any part of their assets or
business, or any other act or corporate proceeding, whether of a similar character or otherwise.




     Should the Employer (or any successor thereto) elect to dissolve, enter into a sale of its
assets, or enter into any reorganization incident to which it is not the surviving entity, unless
the surviving or successor entity shall formally agree to assume and continue the Plan, and Trust
if applicable, the Plan shall terminate with respect to the Employer (or any successor thereto) on
the earlier of the date of closing or the effective date of such transaction. In such event, there
shall be no Active Participants of that Employer, and the Account balance of each affected
Participant shall not be distributable except in accordance with Article Six.



     Should any successor to the Company assume and continue the Plan, and Trust if applicable,
incident to a transaction described in the immediately preceding paragraph, the affected
Participants’ Account balances shall not be distributable except in accordance with Article
Six.



     8.3 Adoption of Plan by Affiliated Entity.
Any Affiliated Entity may adopt the Plan with the consent of the Compensation Committee or the
Administrative Committee, effective as of the date specified by the respective Committee. Any
Affiliated Entity which has adopted the Plan shall not be responsible for the administration of the
Plan, and its Employees who are eligible to participate herein shall be selected as provided
herein.



     8.4 Waiver. No term or condition of this Plan shall be deemed to have been
waived, nor shall there be an estoppel against the enforcement of any provision of this Plan,
except by written instrument of the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that specifically waived. Any
waiver by either party hereto of a breach of any provision of the Plan by the other party shall not
operate or be construed as a waiver by such party of any subsequent breach thereof.



     8.5 Notice. Except as provided in Section 8.1, any notice required or
permitted to be given under this Plan shall be sufficient if in writing and delivered via
telecopier, messenger, or overnight courier with appropriate proof of receipt, or sent by U.S.
registered or certified or registered mail, return receipt requested, to the appropriate person or
entity at the address last furnished by such person or entity. Such notice shall be deemed given
as of the date of delivery to the recipient or, if delivery is made by mail, as of the date shown
on the receipt for registration or certification.



     8.6 Severability. In the event that any provision of the Plan
is declared invalid and not binding on the parties hereto in a final decree or order issued by a
court of competent jurisdiction, such declaration shall not affect the validity of the other
provisions of the Plan to which such declaration of invalidity does not relate and such other
provisions shall remain in full force and effect.



     8.7 Gender, Tense and Headings. Whenever the
context requires, words of the masculine gender used herein shall include the feminine and neuter,
and words used in the singular shall include the plural. The words “hereof,” “hereunder,”
“herein,” and similar compounds of the word “here” shall refer to the entire Plan and not to any
particular term or provision of the Plan. Headings of Articles and Sections, as used herein, are
inserted solely for convenience and reference and shall not affect the meaning, interpretation or
scope of the Plan.



     8.8 Governing Law. The Plan shall be subject to and governed
by the laws of the State of Texas (other than such laws relating to choice of laws), except to the
extent preempted by ERISA, the Code or other controlling federal law.



     8.9 Effective Date. The effective date of the Plan is
December 31, 2004, and therefore the Plan is in existence, and shall be construed as being in
existence, on or before December 31, 2004 for all purposes including, without limitation, Code
Section 409A. The Plan shall be applicable only with respect to:




     (a) Compensation and Bonuses deferred by Participants to the extent related to (i)
services performed on or after January 1, 2005, or (ii) services performed prior to January
1, 2005, for which the Compensation or Bonus attributable thereto was not earned and vested
until after 2004; and



103









 






     (b) Employer contributions to the extent related (i) services performed on or after
January 1, 2005, or (ii) services performed prior to January 1, 2005, for which Employer
contributions attributable thereto were not earned and vested until after 2004.


IN WITNESS WHEREOF, this Plan is approved and executed by a duly authorized officer of the Company,
on this ___ day of ___, 2006, to be effective as of January 1, 2006.




	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	SMITH INTERNATIONAL, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	Pamela L. Kunkemoeller
	 	 	 	Name:
	 	Richard E. Chandler, Jr.
	Title:

	 	Assistant Secretary
	 	 	 	Title:
	 	Senior Vice President and
	 

	 	 	 	 	 	 	 	General Counsel and Secretary
	 
	 	 	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 





104