**EXHIBIT 10.14****EMPLOYMENT AGREEMENT**     THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into as of January 5, 2006(the “**Effective Date**”), by and between Smith International, Inc. (hereafter “**Company**”) and RichardWerner (hereafter “**Executive**”). The Company and Executive may sometimes hereafter be referred tosingularly as a “**Party**” or collectively as the “**Parties**.”**W****I****T****N****E****S****S****E****T****H****:**     WHEREAS, the Company desires to continue to secure the employment services of Executivesubject to the terms and conditions hereafter set forth; and     WHEREAS, the Executive is willing to enter into this Agreement upon the terms and conditionshereafter set forth;     NOW, THEREFORE, in consideration of Executive’s employment with the Company, and the premisesand mutual covenants contained herein, the Parties hereto agree as follows:     1. **Employment**. During the Employment Period (as defined in Section 4 hereof),the Company shall employ Executive, and Executive shall serve as, staff Vice President of theCompany. Executive’s principal place of employment shall be at the main offices of the Company inthe Houston, Texas metropolitan area.     2. **Compensation**. The Company shall pay to Executive during the Employment Period abase salary of $150,000.00 per year, as may be adjusted (the “**Base Salary**”). The Base Salary shallbe payable in accordance with the Company’s normal payroll schedule and procedures for itsexecutives. Nothing contained herein shall preclude the payment of any other compensation toExecutive.     3. **Duties and Responsibilities of Executive**. During the Employment Period, Executiveshall devote his services to the business of the Company and perform the duties andresponsibilities assigned to him by the Chief Executive Officer of the Company, to the best of hisability and with reasonable diligence. This Section 3 shall not be construed as preventingExecutive from (a) engaging in reasonable volunteer services for charitable, educational or civicorganizations, or (b) investing his assets in such a manner that will not require a material amountof his time or services in the operations of the businesses in which such investments are made;provided, however, no such other activity shall conflict with Executive’s loyalties and duties tothe Company. Executive shall at all times use his best efforts to, in good faith, comply withUnited States laws applicable to Executive’s actions on behalf of the Company and its Affiliates(as defined in Section 6(d)). Executive understands and agrees that he may be required totravel from time to time for purposes of the Company’s business.     4. **Term of Employment**. Executive’s initial term of employment with the Company underthis Agreement shall be for the period of one year commencing upon the termination of theExecutive’s existing Employment Agreement, January 1, 2007 through December 31, 2007 (the “**InitialTerm of Employment**”). Thereafter, the Employment Period hereunder may be extended on amonth-to-month basis or for such other period as mutually agreed by the Parties. The Initial Termof Employment, and any extension of employment hereunder, shall each be referred to herein as a"**Term of Employment**.” The period from the Effective Date through the date of Executive’stermination of employment for whatever reason shall be referred to herein as the “**EmploymentPeriod**.”     Executive may terminate his employment with the Company and all Affiliates at any time byproviding 30 days Notice of Termination to the CEO pursuant to Section 7. Company mayterminate the employment of Executive with the Company and all Affiliates at any time by providing30 days Notice of Termination to Executive pursuant to Section 7; provided, however, noadvance Notice of Termination shall be required if Executive is being terminated for Cause (asdefined in Section 6(c)). If the Executive is terminated by the Company without Causeprior to December 31, 2007, the Executive will be eligible to receive the Benefits described intermination benefits described in Section 6 as if he terminated on December 31, 2007. Inaddition, the Stock Options and Performance Restricted Stock Units allocated to him wouldcontinue to vest through December 31, 2007 and the Executive will have the right to exercise allvested shares as of December 31, 2007.     5. **Benefits**. Subject to the terms and conditions of this Agreement, during theEmployment Period, Executive shall be entitled to the following:
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          (a) ***Reimbursement of Business Expenses***. The Company shall pay or reimburse Executive for allreasonable travel, entertainment and other business expenses paid or incurred by Executive in theperformance of his duties hereunder. The Company shall also provide Executive with suitable officespace, including staff support, and paid parking.          (b) ***Other Employee Benefits***. Executive shall be entitled to participate in any pension,retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company tothe same extent as available to any other officers of the Company under the terms and conditions ofsuch plans or programs. Executive shall also be entitled to participate in any group insurance,hospitalization, medical, dental, health, life, accident, disability and other employee benefitsplans or programs of the Company to the extent available to any other officers of the Company underthe terms and conditions of such plans or programs.          (c) ***Vacation***. Executive shall be entitled to the number of vacation days in each calendaryear determined in accordance with the Company’s Vacation policy for its executives as in effectfrom time to time.          (d) *Perk Payments.*Executive shall be entitled to receive PerkPayments of $1,558 per month.     6. **Rights and Payments upon Termination**. The Executive’s right to compensation andbenefits for periods after the date on which his employment with the Company terminates (the"**Termination Date**”), shall be determined in accordance with this Section 6, as follows:          (a) ***Minimum Payments***. Executive shall be entitled to the following minimum payments underthis Section 6(a), in addition to any other benefits to which he may be entitled to receivein accordance with the terms and conditions of any employee benefit plan or program under which heis covered as of his Termination Date:     (1) his unpaid salary through his Termination Date;     (2) his unpaid Vacation days for that year which have earned through hisTermination Date; and     (3) reimbursement of his reasonable business expenses that were incurred butunpaid as of his Termination Date; and     (4) a lump sum representing eighteen (18) months of COBRA payments, lessapplicable taxes and withholding.     Such salary, accrued Vacation days and COBRA payments shall be paid to Executive withinfive (5) business days following the Termination Date in a cash lump sum less applicablewithholdings. Business expenses shall be reimbursed in accordance with the Company’s normalprocedures.          (b) ***Other Severance Benefits***. Executive shall be entitled to any other severance benefitsonly to the extent so provided under the terms and conditions of any plans or programs maintainedby the Company under which he is covered as of his Termination Date; provided, however, Executiveshall not be entitled to any such other severance benefits if he is terminated for Cause.          (c) ***Definitions***.     (1) “**Affiliate**” has the same meaning ascribed to such term in Rule 12b-2 underthe Securities Exchange Act of 1934, as amended from time to time.     (2) “**Cause**” means any of the following: (A) the Executive’s conviction by acourt of competent jurisdiction as to which no further appeal can be taken of a crimeinvolving moral turpitude or a felony or entering the plea of *nolo contendere*to suchcrime by the Executive; (B) the commission by the Executive of a material anddemonstrable act of fraud, or a material and demonstrable misappropriation of fundsor property, of or upon the Company or any Affiliate; (C) the knowing engagement bythe Executive, without the written approval of the Board or Compensation Committee,in any material activity which directly competes with the business of the Company orany Affiliate, or which would directly result in a material injury to the business orreputation of the Company or any Affiliate
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     (3) “**Designated Beneficiary**” means the Executive’s surviving spouse, if any. Ifthere is no such surviving spouse at the time of Executive’s death, then theDesignated Beneficiary hereunder shall be Executive’s estate.     (4) “**Dispute**” means any dispute, disagreement, claim, or controversy arising inconnection with or relating to the Agreement or the validity, interpretation,performance, breach, or termination of the Agreement.     (5) “**Subsidiary**” means a corporation or other entity, whether incorporated orunincorporated, of which at least a majority of the voting securities is owned,directly or indirectly, by the Company including, without limitation, M-I L.L.C.     7. **Notice of Termination**. Any termination of Executive’s employment with the Companyand all Affiliates, either by the Company or by the Executive, shall be communicated by Notice ofTermination to the other Party hereto. The term “**Notice of Termination**” means a written noticewhich sets forth in reasonable detail the basis for termination of the Executive’s employment.     8. **Nondisclosure and Noncompetition****.**As an inducement to the Company to enter intothis Agreement, Executive represents to and covenants with or in favor of the Company hiscompliance with the restrictive covenants in Sections 9 through 19, as a condition to theCompany’s obligation to provide employment to Executive under this Agreement.     9. **Trade Secrets**.          (a) ***Access to Trade Secrets***. As of the Effective Date and on an ongoing basis, the Companyagrees to give Executive access to Trade Secrets which the Executive did not have access to, orknowledge of, before the Effective Date.          (b) ***Agreement Not to Use or Disclose Trade Secrets***. In exchange for the Company’s promises toprovide Executive with access to Trade Secrets and Specialized Training and other benefits,Executive agrees that he will not during the Employment Period, or at any time thereafter, discloseto anyone, including, without limitation, any person, firm, corporation or other entity, or publishor use for any purpose, any Trade Secrets and Specialized Training, except as required in theordinary course of the Company’s business or as authorized by the Board, Compensation Committee orCEO.          (c) ***Agreement to Refrain from Defamatory Statements.***Executive shall refrain, both during theEmployment Period and thereafter, from publishing any oral or written statements about anydirectors, officers, employees, agents, investors or representatives of the Company or anyAffiliate that are slanderous, libelous, or defamatory; or that disclose private or confidentialinformation about the business affairs, directors, officers, employees, agents, investors orrepresentatives of the Company or any Affiliate; or that constitute an intrusion into the seclusionor private lives of any of such directors, officers, employees, agents, investors orrepresentatives; or that give rise to unreasonable publicity about the private lives of suchpersons; or that place any such person in a false light before the public; or that constitute amisappropriation of the name or likeness of any such person. A violation or threatened violationof these restrictive covenants may be enjoined by a court of law notwithstanding the arbitrationprovisions of Section 30.          (d) ***Definitions***. The following terms, when used in this Agreement, are defined below:          (1) “**Trade Secrets**” means any and all information and materials (in any form or medium)that are proprietary to the Company or a Subsidiary, or are treated as confidential by theCompany or Subsidiary as part of, or relating to, all or any portion of its or theirbusiness, including information and materials about the products and services offered, orthe needs of customers served, by the Company or Subsidiary; compilations of information,records and specifications, processes, programs, and systems of the Company or Subsidiary;research of or for the Company or Subsidiary; and methods of doing business of the Companyor Subsidiary. Trade Secrets include, without limitation, all of the Company’s orSubsidiary’s technical and business information, whether patentable or not, which is of aconfidential, trade secret or proprietary character, and which is either developed by theExecutive alone, with others or by others; lists of customers; identity of customers;identity of prospective customers; contract
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terms; bidding information and strategies;pricing methods or information; computer software; computer software methods anddocumentation; hardware; the Company’s or Subsidiary’s methods of operation; the procedures,forms and techniques used in servicing accounts or properties; and other documents,information or data that the Company or Subsidiary requires to be maintained in confidencefor the business success of Company or Subsidiary.     10. **Duty to Return Company Documents and Property**. Upon termination of the EmploymentPeriod, Executive shall immediately return and deliver to the Company any and all papers, books,records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data,including all copies thereof, belonging to the Company or Subsidiary or relating to its business,in Executive’s possession, whether prepared by Executive or others. If at any time after theEmployment Period, Executive determines that he has any Trade Secrets in his possession or control,Executive shall immediately return them to the Company, including all copies thereof.     11. **Best Efforts and Disclosure**. Executive agrees that, while he is employed with theCompany, he shall devote business time and attention to the Company’s business and shall use hisbest efforts to promote its success. Further, Executive shall promptly disclose to the Company allideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable,which he may conceive or make, alone or with others, during the Employment Period, whether or notduring working hours, and which directly or indirectly: (a) relate to a matter within the scope, field, duties or responsibility ofExecutive’s employment with the Company; or  (b) are based on any knowledge of the actual or anticipated business or interestsof the Company; or  (c) are aided by the use of time, materials, facilities or information of theCompany.     Executive assigns to the Company, without further compensation, any and all rights, titles andinterest in all such ideas, inventions, computer programs and discoveries in all countries of theworld that pertain to the current products and services of the Company. Executive recognizes thatall ideas, inventions, computer programs and discoveries of the type described above, conceived ormade by Executive alone or with others within 12 months after the Termination Date (voluntary orotherwise), are likely to have been conceived in significant part either while employed by theCompany or as a direct result of knowledge Executive had of proprietary information or TradeSecrets. Accordingly, Executive agrees that such ideas, inventions or discoveries shall bepresumed to have been conceived during his Employment Period, unless and until the contrary isclearly established by the Executive.     12. **Inventions and Other Works**. Any and all writings, computer software, inventions,improvements, processes, procedures and/or techniques which Executive may make, conceive, discover,or develop, either solely or jointly with any other person or persons, at any time during theEmployment Period, whether at the request or upon the suggestion of the Company or otherwise, whichrelate to or are useful in connection with any of the current products and services of the Companyshall be the sole and exclusive property of the Company. Executive agrees to take any and allactions necessary or appropriate so that the Company can prepare and present applications forcopyright or Letters Patent therefor, and secure such copyright or Letters Patent whereverpossible, as well as reissue renewals, and extensions thereof, and obtain the record title to suchcopyright or patents. Executive shall not be entitled to any additional or special compensation orreimbursement regarding any such writings, computer software, inventions, improvements, processes,procedures and techniques. Executive acknowledges that the Company from time to time may haveagreements with other persons orentities which impose obligations or restrictions on the Company regarding inventions madeduring the course of work thereunder or regarding the confidential nature of such work. Executiveagrees to be bound by all such obligations and restrictions, and to take all action necessary todischarge the obligations of the Company.     13. **Non-Solicitation Restriction****.**To protect Trade Secrets following the EmploymentPeriod, it is necessary to enter into the following restrictive covenants which are ancillary tothe enforceable promises between the Company and Executive in Sections 9 through 12 andother provisions of this Agreement. Executive hereby covenants and agrees that he will not,directly or indirectly, either individually or as a principal, partner, agent, consultant,contractor, employee, or as a director or officer of any entity, or in any other manner or capacitywhatsoever, except on behalf of the Company, solicit business, or attempt to solicit business, inproducts or services competitive with any products or services offered or performed by the Companyor any Subsidiary from the Company’s or Subsidiary’s customers as of the Termination Date, or thoseindividuals or entities with whom the Company or Subsidiary conducted business during the two-yearperiod ending on the Termination Date. The prohibitions set forth in this Section 13 shallremain in effect for a period of one (1) year following the Termination Date.
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     14. **Non-Competition Restriction**. Executive hereby agrees that in order to protectTrade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillaryto the enforceable promises between the Company and Executive in Sections 9 through 13 andother provisions of this Agreement. Executive hereby covenants and agrees that during theEmployment Period, and for a period of one (1) year following the Termination Date, Executive willnot, without the prior written consent of the Board or the Compensation Committee, becomeinterested in any capacity in which Executive would perform any duties, directly or indirectly(whether as proprietor, stockholder, director, partner, employee, agent, independent contractor,consultant, trustee, or in any other capacity), with respect to any entity which competes with thecurrent products and services of the Company or any of its Affiliates including, but not limitedto, Halliburton Company, Weatherford International Ltd., BJ Services Company, RockbitInternational, Varel International, Baker Hughes, Inc. and Tuboscope Vetco International, Inc. orany of their subsidiaries or other affiliates, except M-I L.L.C., as determined by the Company (a“Competing Enterprise”); provided, however, Executive shall not be deemed to be participating orengaging in a Competing Enterprise solely by virtue of his ownership of not more than one percent(1%) of any class of stock or other securities which are publicly traded on a national securitiesexchange or in a recognized over-the-counter market.     15. **No-Recruitment Restriction**. Executive agrees that during the Employment Period,and for a period of one (1) year following the Termination Date, Executive will not, eitherdirectly or indirectly, or by acting in concert with others, solicit or influence, or seek tosolicit or influence, any employee or independent contractor performing services for the Company orany Subsidiary to terminate, reduce or otherwise adversely affect his or her employment or otherrelationship with the Company or any Subsidiary.     16. **Tolling**. If Executive violates any of the restrictions contained in Sections13, 14 or 15, then notwithstanding any provision hereof to the contrary, the restrictive periodwill be suspended and will not run in favor of Executive from the time of the commencement of anysuch violation until the time when the Executive cures the violation to the reasonable satisfactionof the Compensation Committee.     17. **Reformation**. If a court or arbitrator rules that any time period or thegeographic area specified in any restrictive covenant in Sections 9 through 16 isunenforceable, then the time period will be reduced by the number of months, or the geographic areawill be reduced by the elimination of such unenforceable portion, or both, so that the restrictionsmay be enforced in the geographic area and for the time to the full extent permitted by law.     18. **Conflicts of Interest**. In keeping with his fiduciary duties to Company, Executivehereby agrees that he shall not become involved in a conflict of interest, or upon discoverythereof, allow such a conflict to continue at any time during the Employment Period. In thisrespect, Executive agrees to fully comply with the conflict of interest agreement entered into byExecutive in his capacity as of an officer or director of the Company or any Subsidiary. In theinstance of a violation of the conflict of interest agreement to which Executive is a party, it maybe necessary for Board to terminate Executive’s employment for Cause.     19. **Remedies**. Executive acknowledges that the restrictions contained in Sections9 through 18 of this Agreement, in view of the nature of the Company’s business, are reasonableand necessary to protect the Company’s or Subsidiary’s legitimate business interests, and that anyviolation would result in irreparable injury to the Company orSubsidiary. Notwithstanding the arbitration provisions in Section 26, in the event of abreach or a threatened breach by Executive of any provision of Sections 9 through 18, theCompany shall be entitled to a temporary restraining order and injunctive relief restrainingExecutive from the commission of any breach, and to recover the Company’s attorneys’ fees, costsand expenses related to the breach or threatened breach. Nothing contained in this Agreement shallbe construed as prohibiting the Company from pursuing any other remedies available to it for anysuch breach or threatened breach, including, without limitation, the recovery of money damages,attorneys’ fees, and costs. These covenants and agreements shall each be construed as independentof any other provisions in this Agreement, and the existence of any claim or cause of action byExecutive against the Company, whether predicated on this Agreement or otherwise, shall notconstitute a defense to the enforcement by the Company of such covenants and agreements. Moreover,the restrictive covenants in Sections 9 through 18 shall supplement, and be in addition to,any other restrictive covenants to which Executive is a party, or otherwise subject to, under anyother agreement or policy.     20. **Withholdings; Right of Offset**. The Company may withhold and deduct from anybenefits and payments made or to be made pursuant to this Agreement (a) all federal, state, localand other taxes as may be required pursuant to any law or governmental regulation or ruling, (b)all other normal employee deductions made with respect to Company’s employees generally, and (c)any advances made to Executive and owed to Company.
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     21. **Nonalienation**. The right to receive payments under this Agreement shall not besubject in any manner to anticipation, alienation, sale, transfer, assignment, pledge orencumbrance by Executive, his dependents or beneficiaries, or to any other person who is or maybecome entitled to receive such payments hereunder. The right to receive payments hereunder shallnot be subject to or liable for the debts, contracts, liabilities, engagements or torts of anyperson who is or may become entitled to receive such payments, nor may the same be subject toattachment or seizure by any creditor of such person under any circumstances, and any suchattempted attachment or seizure shall be void and of no force and effect.     22. **Incompetent or Minor Payees**. Should the Board or the Compensation Committeedetermine, in its discretion, that Executive or any other person to whom any payment is payableunder this Agreement has been determined to be legally incompetent or is a minor, any payment duehereunder, notwithstanding any other provision of this Agreement to the contrary, may be made inany one or more of the following ways: (a) directly to such minor or person; (b) to the legalguardian or other duly appointed personal representative of the person or estate of such minor orperson; or (c) to such adult or adults as have, in the good faith knowledge of the Board or theCompensation Committee, assumed custody and support of such minor or person; and any payment somade shall constitute full and complete discharge of any liability under this Agreement in respectto the amount paid.     23. **Severability**. It is the desire of the parties hereto that this Agreement beenforced to the maximum extent permitted by law, and should any provision contained herein be heldunenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 26),the parties hereby agree and consent that such provision shall be reformed to create a valid andenforceable provision to the maximum extent permitted by law; provided, however, if such provisioncannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any otherprovision of this Agreement. This Agreement should be construed by limiting and reducing it onlyto the minimum extent necessary to be enforceable under then applicable law.     24. **Title and Headings; Construction**. Titles and headings to Sections hereof are forthe purpose of reference only and shall in no way limit, define or otherwise affect the provisionshereof. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shallrefer to the entire Agreement and not to any particular provision.     25. **Governing Law; Jurisdiction**. All matters or issues relating to theinterpretation, construction, validity, and enforcement of this Agreement shall be governed by thelaws of the State of Texas, without giving effect to any choice-of-law principle that would causethe application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of anyaction or proceeding relating to this Agreement or any Dispute (to the extent arbitration is notrequired under Section 30) shall be exclusively in Harris County, Texas.     26. **Mandatory Arbitration**. Except as provided in subsection (h) of this Section26, any Dispute (as defined in Section 6(c)) must be resolved by binding arbitration inaccordance with the following:          (a) Party may begin arbitration by filing a demand for arbitration in accordance with theArbitration Rules and concurrently Notifying the other Party of that demand. If the Parties areunable to agree upon a panel of three arbitrators within ten days after the demand for arbitrationwas filed (and do not agree to an extension of that ten-day period), either Party may request theHouston, Texas office of the American Arbitration Association (“AAA”) to appoint the arbitrator orarbitrators necessary to complete the panel in accordance with the Arbitration Rules. Eacharbitrator so appointed shall be deemed accepted by the Parties as part of the panel.          (b) The arbitration shall be conducted in the Houston metropolitan area at a place and timeagreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by thepanel. The panel may, however, call and conduct hearings and meetings at such other places as theParties may agree or as the panel may, on the motion of one Party, determine to be necessary toobtain significant testimony or evidence.          (c) The panel may authorize any and all forms of discovery upon a Party’s showing of need thatthe requested discovery is likely to lead to material evidence needed to resolve the Dispute and isnot excessive in scope, timing, or cost.          (d) The arbitration shall be subject to the Federal Arbitration Act and conducted inaccordance with the Arbitration Rules to the extent that they do not conflict with this Section26. The Parties and the panel may, however, agree to vary to provisions of this Section26 or the matters otherwise governed by the Arbitration Rules.
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          (e) The arbitration hearing shall be held within 60 days after the appointment of the panel.The panel’s final decision or award shall be made within 30 days after the hearing. That finaldecision or award shall be made by unanimous or majority vote or consent of the arbitratorsconstituting the panel, and shall be deemed issued at the place of arbitration. The panel’s finaldecision or award shall be based on this Agreement and applicable law.          (f) The panel’s final decision or award may include injunctive relief in response to anyactual or impending breach of this Agreement or any other actual or impending action or omission ofa Party under or in connection with this Agreement.          (g) The panel’s final decision or award shall be final and binding upon the Parties, andjudgment upon that decision or award may be entered in any court having jurisdiction. The Partieswaive any right to apply or appeal to any court for relief from the preceding sentence or from anydecision of the panel made before the final decision or award.          (h) Nothing in this Section 26 limits the right of either Party to apply to a courthaving jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section26, (ii) seek provisional or temporary injunctive relief, in response to an actual or impendingbreach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the statusquo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved,or (iii) challenge or vacate any final arbitration decision or award that does not comply with thisSection 26. In addition, nothing in this Section 26 prohibits the Parties fromresolving any Dispute (in whole or in part) by agreement.     The panel may proceed to an award notwithstanding the failure of any Party to participatein such proceedings. The prevailing Party in the arbitration proceeding may be entitled to anaward of reasonable attorneys’ fees incurred in connection with the arbitration in such amount,if any, as determined by the panel in its discretion. The costs of the arbitration shall beborne equally by the Parties unless otherwise determined by the panel in its award.     The panel shall be empowered to impose sanctions and to take such other actions as it deemsnecessary to the same extent a judge could impose sanctions or take such other actions pursuantto the Federal Rules of Civil Procedure and applicable law. Each party agrees to keep allDisputes and arbitration proceedings strictly confidential except for disclosure of informationrequired by applicable law which cannot be waived.     This Section 26 shall not preclude the Parties at any time from mutually agreeing topursue non-binding mediation of the Dispute.     27. **Binding Effect: Third Party Beneficiaries**. This Agreement shall be binding uponand inure to the benefit of the Parties hereto, and to their respective heirs, executors,beneficiaries, personal representatives, successors and permitted assigns hereunder, but otherwisethis Agreement shall not be for the benefit of any third parties.     28. **Entire Agreement; Amendment and Termination**. This Agreement contains the entireagreement of the Parties hereto with respect to the matters covered herein; moreover, thisAgreement supersedes all prior and contemporaneous agreements and understandings, oral or written,between the Parties concerning the subject matter hereof. This Agreement may be amended, waived orterminated only by a written instrument that is identified as an amendment, waiver or terminationhereto and that is executed on behalf of both Parties.     29. **Survival of Certain Provisions**. Wherever appropriate to the intention of theParties, the respective rights and obligations of the Parties hereunder shall survive anytermination or expiration of this Agreement.     30. **Waiver of Breach**. No waiver by either Party hereto of a breach of any provisionof this Agreement by any other Party, or of compliance with any condition or provision of thisAgreement to be performed by such other Party, will operate or be construed as a waiver of anysubsequent breach by such other Party or any similar or dissimilar provision or condition at thesame or any subsequent time. The failure of either Party hereto to take any action by reason ofany breach will not deprive such Party of the right to take action at any time while such breachcontinues.     31. **Successors and Assigns**. This Agreement shall be binding upon and inure to thebenefit of the Company and its Subsidiaries (and its and their successors), as well as upon anyperson or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution orotherwise, all or substantially all of the capital stock, business and/or assets of the Company (orits successor) regardless of whether the Company is the surviving or resulting corporation. TheCompany shall require any successor (whether direct or indirect, by purchase, merger,consolidation, dissolution or otherwise) to all or substantially all of the capital stock, businessor assets of the Company to expressly assume and agree to perform this Agreement in the same mannerand to the same extent that the Company would be required to perform it if no such succession
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hadoccurred; provided, however, no such assumption shall relieve the Company of any of its duties orobligations hereunder unless otherwise agreed, in writing, by Executive.     This Agreement shall inure to the benefit of and be enforceable by Executive’s personal orlegal representative, executors, administrators, successors, and heirs. In the event of the deathof Executive while any amount is payable hereunder, all such amounts shall be paid to theDesignated Beneficiary (as defined in Section 6(c)).     32. **Notice**. Each notice or other communication required or permitted under thisAgreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaidcourier or messenger service (whether overnight or same-day), prepaid telecopy or facsimile, orprepaid certified United States mail (with return receipt requested), addressed (in any case) tothe other Party at the address for that Party set forth below that Party’s signature on thisAgreement, or at such other address as the recipient has designated by Notice to the other Party.     Each notice or communication so transmitted, delivered, or sent (a) in person, by courier ormessenger service, or by certified United States mail shall be deemed given, received, andeffective on the date delivered to or refused by the intended recipient (with the return receipt,or the equivalent record of the courier or messenger, being deemed conclusive evidence of deliveryor refusal), or (b) by telecopy or facsimile shall be deemed given, received, and effective on thedate of actual receipt (with the confirmation of transmission being deemed conclusive evidence ofreceipt, except where the intended recipient has promptly Notified the other Party that thetransmission is illegible). Nevertheless, if the date of delivery or transmission is not a businessday, or if the delivery or transmission is after 5:00 p.m. (CST) on a business day, the notice orother communication shall be deemed given, received, and effective on the next business day.     33. **Executive Acknowledgment****.**Executive acknowledges that (a) he is knowledgeable andsophisticated as to business matters, including the subject matter of this Agreement, (b) he hasread this Agreement and understands its terms and conditions, (c) he has had ample opportunity todiscuss this Agreement with his own legal counsel prior to execution, and (d) no strict rules ofconstruction shall apply for or against the drafter or any other Party. Executive represents thathe is free to enter into this Agreement including, without limitation, that he is not subject toany covenant not to compete that would conflict with his duties under this Agreement.     34. **Counterparts**. This Agreement may be executed in any number of counterparts, eachof which when so executed and delivered shall be an original, but all such counterparts shalltogether constitute one and the same instrument.     IN WITNESS WHEREOF, Executive has hereunto set his hand and Company has caused this Agreementto be executed in its name and on its behalf by its duly authorized officer, to be effective as ofthe Effective Date.         **EXECUTIVE**:         Signature:             /s/ RICHARD A. WERNER              Name:             Richard A. Werner              Date:             January 5, 2006              **SMITH INTERNATIONAL, INC.**         By:             /s/ MALCOLM W. ANDERSON              Its:             VP Human Resources              Name:             Malcolm W. Anderson              Date:             January 5, 2006     
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