Document:

<PAGE>   1

                                                                    EXHIBIT 10.2

                            SMITH INTERNATIONAL, INC.
                   1989 LONG-TERM INCENTIVE COMPENSATION PLAN
                (As Amended and Restated as of February 2, 2000)

1.       PURPOSE OF THE PLAN

         The purpose of the 1989 Long-Term Incentive Compensation Plan (the
"Plan") is to advance the interests of Smith International, Inc. (the "Company")
and its shareholders by strengthening the ability of the Company to attract and
retain in its employ persons of training, experience and ability, and to furnish
additional incentives to officers and valued employees of the Company upon whose
judgment, initiative and efforts the successful conduct and development of the
business of the Company largely depends.

2.       DEFINITIONS

         Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.

          "Board of Directors" shall mean the Board of Directors of the Company.

          "Cash Award" shall mean a cash award granted pursuant to Section 1 of
the Plan.

         "Committee" shall mean the Compensation and Benefits Committee of the
Board of Directors, unless the Board of Directors appoints another committee to
administer the Plan.

         "Common Stock" shall mean the common shares, $1.00 par value of the
Company and any class of common shares into which such common shares may
hereafter be converted.

          "Company" shall mean Smith International, Inc.

          "Director" shall mean a member of the Board of Directors.

         "Disinterested Person" shall have the meaning assigned to that term
under the rules and regulations of the Securities and Exchange Commission under
the Securities Exchange Act of 1934.

          "Eligible Person" shall mean a person eligible to receive an Incentive
Award.

         "Employee" shall mean any employee of the Company, or of any of its
present or future parent or subsidiary corporations, or a corporation (or a
parent or subsidiary corporation of such corporation) issuing or assuming an
Option in a transaction to which Section 425(a) of the Internal

                                       1
<PAGE>   2

Revenue Code applies, whether such Employee is so employed at the time this Plan
is adopted or becomes so employed subsequent to adoption of this Plan.

     "Fair Market Value" shall mean the average of the high and low prices of a
share of Common Stock on the New York Stock Exchange on the date as of which
fair market value is to be determined, or if no such sales were made on such
date, the closing price of such shares on the New York Stock Exchange on the
next preceding date on which there were such sales; provided, however, that the
Committee may utilize such other listing or reporting services that in its
judgment provide an accurate index of the fair market value of the Common Stock.

          "Holder" shall mean a person holding an Incentive Award.

          "Incentive Award" shall mean an Option, Stock Appreciation Right,
Restricted Stock, Stock Award or Cash Award granted under the Plan.

          "Nonstatutory Stock Option" shall mean an option granted pursuant to
Section 7 of the Plan.

          "Option" shall mean a Nonstatutory Stock Option.

          "Optionee" shall mean any person holding an Option granted under the
Plan.

          "Parent corporation" and "subsidiary corporation" shall have the
meanings assigned to them in Sections 425(e) and 425(f) of the Internal Revenue
Code.

          "Plan" shall mean the Smith International, Inc. 1989 Long-Term
Incentive Compensation Plan as set forth herein, as the same may be amended from
time to time.

          "Stock Appreciation Right" shall mean a right granted pursuant to
Section 8 or Section 9 of the Plan to receive a number of shares of Common Stock
or, in the discretion of the Committee, an amount of cash or a combination of
shares and cash, based on the increase in the Fair Market Value of the shares
subject to the right.

          "Stock Award" shall mean a stock award granted pursuant to Section 10
of the Plan.

3.        SHARES OF COMMON STOCK SUBJECT TO THE PLAN

          (a) Subject to the provisions of Section 3(c) and Section 12 of the
Plan, the aggregate number of shares of Common Stock that may be issued or
transferred or as to which Stock Appreciation rights may be exercised pursuant
to Incentive Awards under the Plan shall not exceed 4,900,000.

          (b) The shares to be delivered under the Plan shall be made available,
at the discretion of the Board of Directors or the Committee, either from
authorized but unissued shares of Common

                                       2
<PAGE>   3

Stock or from previously issued shares of Common Stock reacquired by the
Company, including shares purchased on the open market. Common Stock issued
under the Plan in connection with restricted stock or stock awards shall be
issued shares held as treasury shares.

         (c) If any shares of Common Stock subject to an Option are not issued
or transferred and cease to be issuable or transferable for any reason, the
shares not so issued or transferred shall no longer be charged against the
limitation provided for in Section 3(a) and may again be made subject to
Incentive Awards. However, shares as to which an Option has been surrendered in
connection with the exercise of a related Stock Appreciation Right shall not
again be available for the grant of any further Incentive Awards. If a Stock
Appreciation Right not related to an Option expires or terminates without having
been exercised, then the number of shares of Common Stock with respect to which
the unexercised portion of such Stock Appreciation Right was granted shall no
longer be charged against the limitation provided for in Section 3(a) and may
again be made subject to Incentive Awards.

         (d) The Committee may, in its discretion, determine to cancel, and
agree to the cancellation of, Options in order to make a participant eligible
for the grant of an Option at a lower price than the option cancelled.

         (e) In the event that shares of Common Stock are issued as restricted
stock or pursuant to a stock award and thereafter are forfeited or reacquired by
the Company pursuant to rights reserved upon issuance thereof, such forfeited
and reacquired shares may again be issued under the Plan, either as restricted
stock, pursuant to stock awards or otherwise.

4.        ADMINISTRATION OF THE PLAN

         (a) The Plan shall be administered by the Committee, which shall
consist of three or more persons (i) who are not eligible to receive Incentive
Awards under the Plan, (ii) who have not been eligible, at any time within one
year prior to appointment to the Committee, for selection as persons to whom
Incentive Awards may be granted pursuant to the Plan or to whom shares may be
allocated or stock options or stock appreciation rights may be granted pursuant
to any other plan of the Company or any of its affiliates entitling the
participants therein to acquire stock, stock appreciation rights or options of
the Company or any of its affiliates and (iii) who are Disinterested Persons.
All members of the Committee shall be Disinterested Persons. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled only by
the Board of Directors. The Board of Directors may take any action permitted to
be taken by the Committee if a majority of the Directors are Disinterested
Persons.

         (b) The Committee shall have and may exercise such powers and authority
of the Board of Directors as may be necessary or appropriate for the Committee
to carry out its functions as described in the Plan, and any references in the
Plan to any specific power or authority of the Committee shall not derogate from
the foregoing. The Committee shall have authority in its discretion to determine
the Eligible Persons to whom, and the time or times at which, Incentive

                                       3
<PAGE>   4

Awards may be granted and the number of shares subject to each Incentive Award.
Subject to the express provisions of the Plan, the Committee shall also have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
respective Incentive Award agreements (which need not be identical) and to make
all other determinations necessary or advisable for the administration of the
Plan. All interpretations, determinations and actions by the Committee shall be
final, conclusive and binding upon all parties.

         (c) No member of the Board of Directors or the Committee shall be
liable for any action or determination made in good faith by the Board of
Directors or the Committee with respect to the Plan or any Incentive Award
thereunder.

5.        ELIGIBILITY

         (a) All full-time salaried Employees (including officers and directors,
but excluding directors of the Company who are not also full-time employees of
the Company) who are engaged in performing management, supervisory, sales,
scientific or engineering services or who have been determined by the Committee
to be key Employees are eligible to receive Incentive Awards under the Plan.
Eligible employees may be designated individually or by groups or categories
(for example, by pay grade) as the Committee deems appropriate. Participation by
officers of the Company and any performance objectives relating to such officers
must be approved by the Committee. Participation by persons other than officers
and any performance objectives relating thereto may be approved by groups or
categories (for example, by pay grade) and authority to designate participants
who are not officers and to set or modify such targets may be delegated. The
Committee shall have authority, in its sole discretion, to determine and
designate from time to time those Eligible Persons who are to be granted
Incentive Awards, the type of Incentive Award to be granted, and the number of
shares of Common Stock or the amount of cash subject to each Incentive Award. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Eligible Persons, their present and
potential contributions to the Company's success and such other factors as the
Committee in its sole discretion shall deem relevant.

         (b) An Eligible Person who has been granted an Incentive Award may, if
he is otherwise eligible, be granted an additional Incentive Award.

6.        FORMS OF INCENTIVE AWARDS

          Incentive Awards may be granted in the following forms:

                   (a)      Nonstatutory Stock Option in accordance with Section
7 of the Plan;

                   (b)      Stock Appreciation Right, related to an Option in
accordance with Section 8 of the Plan;

                   (c)      Stock Appreciation Right not related to an Option in
accordance with Section 9 of the Plan;

                                       4
<PAGE>   5

                   (d)      Stock Award in accordance with Section 10 of the
Plan;

                   (e)      Restricted Stock in accordance with Section 10 of
the Plan;

                   (f)      Cash Award in accordance with Section 1 of the Plan;
or

                   (g)      Any combination of the foregoing.

7.        NONSTATUTORY STOCK OPTIONS

         The Committee may at any time and from time to time approve the grant
by the Company of Nonstatutory Stock Options to Eligible Persons to purchase
shares of Common Stock of the Company, and determine the specific Eligible
Persons to whom such Options may be granted, the number of shares subject to
each Option, the terms and provisions of the Option agreement, and the time or
times at which such Options may be exercised, subject to the following terms and
conditions:

         (a) The date of grant shall be the date the Committee takes the
necessary action to approve the grant; provided, however, that if the minutes or
appropriate resolutions of the Committee provide that an Option is to be granted
as of a date in the future, the date of grant shall be such future date. In any
event, the intended Optionee must be an Eligible Person on the date of grant.

         (b) The purchase price of Common Stock under each Nonstatutory Stock
Option shall be determined by the Committee, and will have an exercise price of
not less than the Fair Market Value of the Common Stock on the date the Option
is granted, subject to adjustment as provided in section 12 below. Options
cannot be cancelled and regranted at a lower price.

         (c) Each Nonstatutory Stock Option shall become exercisable at such
time or times during its term as shall be determined by the Committee at the
time of grant. The Committee may accelerate the exercisability of any stock
option. Subject to the foregoing and with the approval of the Committee, all or
any part of the shares of Common Stock with respect to which the right to
purchase has accrued may be purchased by the Company at the time of such accrual
or at any time or times thereafter during the term of the Option.

         (d) No Nonstatutory Stock Option may be exercised after ten years from
the date the Option is granted.

         (e) Upon the exercise of a Nonstatutory Stock Option, the purchase
price shall be payable in full in cash or its equivalent acceptable to the
Company. In the discretion of the Committee, the purchase price may be paid by
the assignment and delivery to the Company of shares of Common Stock or a
combination of cash and such shares equal in value to the Option exercise price.
Any shares so assigned and delivered to the Company in payment or partial
payment of the purchase price shall be valued at their Fair Market Value on the
exercise date.

                                       5
<PAGE>   6

         (f) No fractional shares shall be issued pursuant to the exercise of a
Nonstatutory Stock Option, nor shall any cash payment be made in lieu thereof.

         (g) A Nonstatutory Stock Option shall not be assignable or transferable
by the Optionee to whom granted otherwise than by will or the laws of descent
and distribution, and may be exercised during the lifetime of the Optionee only
by the Optionee; provided, however, that the Optionee may transfer an Option for
estate planning purposes for no consideration to (i) any member of his immediate
family, (ii) any trust or entity created solely for the benefit of the Optionee
or the members of the Optionee's immediate family or (iii) any custodian under
the Uniform Transfers to Minors Act or any similar act in effect in any state
solely for the benefit of a member of the Optionee's immediate family, and the
trustee or the transferee may exercise the transferred Option during or after
the lifetime of the Optionee, provided that the trustee or the transferee will
remain subject to all the terms and conditions applicable to the Option set
forth in the Plan or the Option agreement. For purposes of this Section 7(g),
"immediate family" means the Optionee's spouse, children and grandchildren. The
provisions of this Section 7(g) shall apply to all past and future Options
granted under the Plan regardless of the date of grant.

         (h) No person shall have the rights and privileges of a shareholder
with respect to shares subject to or purchased under a Nonstatutory Stock Option
until the date appearing on the stock certificate issued upon the exercise of
the Option.

         (i) To the extent that a Nonstatutory Stock Option is exercised, any
related Stock Appreciation Right shall be proportionately reduced by a number of
shares equal to the number of shares with respect to which the Option is
exercised.

         (j) Upon approval of the Committee, the Company may repurchase a
previously granted stock option from an Optionee by mutual agreement before such
option has been exercised by payment to the Optionee of the amount per share by
which: (i) the Fair Market Value of the Common Stock subject to the option on
the date of purchase exceeds (ii) the option price.

         (k) Each Nonstatutory Stock Option shall be evidenced by a written
agreement and may, but need not, include any other terms and conditions not
inconsistent with the Plan as the Committee may approve.

8.        STOCK APPRECIATION RIGHTS RELATED TO OPTIONS

          The Committee may at any time and from time to time approve the grant
by the Company of Stock Appreciation Rights to Eligible Persons that are related
to Nonstatutory Stock Options, and determine the specific Eligible Persons to
whom Stock Appreciation Rights may be granted, the terms and provisions of the
Stock Appreciation Rights agreements, and the time or times at which such Stock
Appreciation Rights may be exercised, subject to the following terms and
conditions:

                                       6
<PAGE>   7

         (a) The date of grant shall be the date the Committee takes the
necessary action to approve the grant; provided, however, that, if the minutes
of appropriate resolutions of the Committee provide that a Stock Appreciation
Right is to be granted as of a date in the future, the date of grant shall be
such future date. In any event, the intended Optionee must be an Eligible Person
on the date of grant.

         (b) A Stock Appreciation Right may be granted in connection with a
Nonstatutory Stock Option, either at the time of the grant of such Option or at
any time thereafter during the term of the Option.

         (c) A Stock Appreciation Right shall entitle the Holder of the related
Option, upon exercise of the Stock Appreciation Right, to surrender such Option,
or any portion thereof to the extent unexercised (subject to a limitation of 50%
of the shares of Common Stock subject to the Option), with respect to the number
of shares as to which Stock Appreciation Right is exercised, and to receive
payment of an amount computed pursuant to Section 8(e). Such Option shall, to
the extent so surrendered, thereupon cease to be exercisable.

         (d) Subject to Section 8(g), a Stock Appreciation Right granted
hereunder shall be exercisable at such time or times, and only to the extent,
that a related Option is exercisable and shall not be transferable except to the
extent that such related Option may be transferable. The Stock Appreciation
Right shall be exercisable only by the Holder thereof or by such other person or
entity entitled to exercise the related Option in the event of the death of the
Holder.

         (e) Subject to the right of the Committee to deliver cash in lieu of
shares of Common Stock, the number of shares of Common Stock which shall be
issuable upon the exercise of a Stock Appreciation Right shall be determined by
dividing:

                  (i)   the number of shares of Common Stock as to which the
         Stock Appreciation Right is exercised multiplied by the amount of the
         appreciation in such shares (for this purposes the "appreciation" shall
         be the amount by which the Fair Market Value of the shares of Common
         Stock subject to the Stock Appreciation Right on the exercise date
         exceeds an amount which shall be determined by the Committee at the
         time of grant; by

                  (ii)  the Fair Market Value of a share of Common Stock on the
         exercise date.

         (f) In lieu of issuing shares of Common Stock upon the exercise of a
Stock Appreciation Right, the Committee may elect to pay the holder of the Stock
Appreciation Right cash equal to the Fair Market Value on the exercise date of
any or all of the shares which would otherwise be issuable. No fractional shares
of Common Stock shall be issued upon the exercise of a Stock Appreciation Right;
instead, the holder of the Stock Appreciation Right shall be entitled to receive
a cash adjustment equal to the same fraction of the Fair Market Value of a share
of Common Stock on the exercise date or to purchase the portion necessary to
make a whole share at its Fair Market Value on the date of exercise.

                                       7
<PAGE>   8

         (g) The Committee may impose such conditions on the exercise of a Stock
Appreciation Right as may be required to satisfy the requirements of Rule 16b-3
under the Securities Exchange Act of 1934 (or any other comparable provisions in
effect at the time or times in question). Without limiting the generality of the
foregoing, the Committee may determine that a Stock Appreciation Right may be
exercised only during the period beginning on the third business day and ending
on the twelfth business day following the publication of the Company's quarterly
and annual summarized financial data. Such publication shall be deemed to occur
when the data first appears on a wire service, in a financial news service or in
a newspaper of general circulation. The Company may provide written notification
to the Holder of a Stock Appreciation Right specifying the date on which such
financial data was published.

         (h) No Stock Appreciation Right or related Option granted to an officer
of the Company may be exercised prior to six months after the date of grant
except in the event death or disability of the officer occurs prior to the
expiration of the six-month period.

         (i) Each Stock Appreciation Right shall be evidenced by a written
instrument and may, but need not, include any other terms and conditions not
inconsistent with the Plan as the Committee may approve.

9.        STOCK APPRECIATION RIGHTS UNRELATED TO OPTIONS

         The Committee may at any time and from time to time approve the grant
by the Company to Eligible Persons of Stock Appreciation Rights that are
unrelated to Options, and determine the specific Eligible Persons to whom such
Stock Appreciation Rights may be granted, the terms and provisions of the Stock
Appreciation Rights agreements, and the time or times at which such Stock
Appreciation Rights may be exercised, subject to the following terms and
conditions.

         (a) The date of grant shall be the date the Committee takes the
necessary action to approve the grant; provided, however, that if the minutes or
appropriate resolutions of the Committee provide that a Stock Appreciation Right
is to be granted as of a date in the future, the date of grant shall be such
future date. In any event, the intended Eligible Person must be an Eligible
Person on the date of grant.

         (b) A Stock Appreciation Right shall entitle the Holder, upon exercise
of the Stock Appreciation Right, to receive payment of an amount determined by
dividing:

                  (i) the number of shares of Common Stock as to which the Stock
         Appreciation Right is exercised multiplied by the amount of the
         appreciation in such shares (for this purposes the "appreciation" shall
         be the amount by which the Fair Market Value of the shares of Common
         Stock subject to the Stock Appreciation Right on the exercise date
         exceeds an amount which shall be determined by the Committee at the
         time of grant; by

                  (ii) the Fair Market Value of a share of Common Stock on the
         exercise date.

                                       8
<PAGE>   9

         (c) In lieu of issuing shares of Common Stock upon the exercise of a
Stock Appreciation Right, the Committee may elect to pay the holder of the Stock
Appreciation Right cash equal to the Fair Market Value on the exercise date of
any or all of the shares which would otherwise be issuable. No fractional shares
of Common Stock shall be issued upon the exercise of a Stock Appreciation Right;
instead, the holder of the Stock Appreciation Right shall be entitled to receive
a cash adjustment equal to the same fraction of the Fair Market Value of the
share of Common Stock on the exercise date or to purchase the portion necessary
to make a whole share at its Fair Market Value on the date of exercise.

         (d) The Committee may impose such conditions on the exercise of a Stock
Appreciation Right granted hereunder as may be required to satisfy the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934 (or any
other comparable provisions in effect at the time or times in question). Without
limiting the generality of the foregoing, the Committee may determine that a
Stock Appreciation Right may be exercised only during the period beginning on
the third business day and ending on the twelfth business day following the date
of publication of the Company's quarterly and annual summarized financial data.
Such publication shall be deemed to occur when the data first appears on the
wire service, in a financial news service or in a newspaper of general
circulation. The Company may provide written notification to the Holder of a
Stock Appreciation Right specifying the date on which such financial data was
published.

         (e) No Stock Appreciation Right granted to an officer of the Company
may be exercised prior to six months after the date of grant except in the event
death or disability of the officer occurs prior to the expiration of said
six-month period.

         (f) A Stock Appreciation Right shall not be assignable or transferable
by the Holder otherwise than by will or the laws of descent and distribution,
and may be exercised during the lifetime of the Holder only by the Holder.

         (g) Each Stock Appreciation Right hereunder shall be evidenced by a
written instrument and may, but need not, include any other terms and condition
not inconsistent with the Plan as the Committee may approve.

                                       9
<PAGE>   10

10.      STOCK AWARD AND RESTRICTED STOCK

         The Committee may at any time and from time to time approve the grant
by the Company of a Stock Award or Restricted Stock to Eligible Persons, and
determine the specific Eligible Persons to whom such Stock awards and restricted
stock may be granted, the number of shares to be granted and the terms and
provisions of such award of Common Stock. A stock award consists of the transfer
by the Company to a participant of shares of Common Stock, without other payment
therefor, as additional compensation for his/her services to the Company. A
share of restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price which may be below their
Fair Market Value or for no payment, but subject to restrictions on their sale
or other transfer by the participant. The transfer of Common Stock pursuant to
stock awards and the transfer and sale of restricted stock shall be subject to
the following terms and conditions:

         (a) The number of shares to be transferred or sold by the Company to a
participant pursuant to a stock award or as restricted stock shall be determined
by the Committee. The criteria of the grant of performance based restricted
stock will be established by the Committee at the date the restricted stock is
granted. If the Committee elects to grant time-based restricted stock, such
restricted stock shall vest over at least a three (3) year period.

         (b) The Committee shall determine the prices, if any, at which shares
of restricted stock shall be sold to a participant, which may vary from time to
time and among participants and which may be below the Fair Market Value of such
shares of Common Stock at the date of sale.

         (c) All shares of restricted stock transferred or sold hereunder shall
be subject to such restrictions as the Committee may determine, including,
without limitation any or all of the following:

                  (i)   A prohibition against the sale, transfer, pledge or
         other encumbrance of the shares of restricted stock, such prohibition
         to lapse at such time or times as the Committee shall determine
         (whether in annual or more frequent installments, at the time of the
         death, disability or retirement of the holder of such shares, or
         otherwise);

                  (ii)  A requirement that the holder of shares of restricted
         stock forfeit, or (in the case of shares sold to a participant) resell
         back to the Company at his cost, all or a part of such shares in the
         event of termination of his employment during any period in which such
         shares are subject to restrictions;

                  (iii) A prohibition against employment of the holder of such
         restricted stock by any competitor of the Company or a subsidiary of
         the Company, or against such holder's dissemination of any secret or
         confidential information belonging to the Company or a subsidiary of
         the Company.

         (d) In order to enforce the restrictions imposed by the Committee
pursuant to (c) above, the participant receiving restricted stock shall enter
into an agreement with the Company setting forth the conditions of the grant.
Shares of restricted stock shall be registered in the name of the participant
and deposited, together with a stock power endorsed in blank, with the Company.

                                       10
<PAGE>   11

         (e) At the end of any time period during which the shares of restricted
stock are subject to forfeiture and restrictions on transfer, such shares will
be delivered free of all restrictions to the participant or to the participant's
legal representative, beneficiary or heir.

         (f) Subject to the terms and conditions of the Plan, each participant
receiving restricted stock shall have all the rights of a stockholder with
respect to shares of stock during any period in which such shares are subject to
forfeiture and restrictions on transfer, including without limitation, the right
to vote such shares. Dividends paid in cash or property other than Common Stock
with respect to shares of restricted stock shall be paid to the participant
currently or, at the election of the participant, be reinvested by the
participant under the Company's Automatic Dividend Reinvestment Service. Shares
purchased with reinvested dividends shall not be restricted.

11.       CASH AWARDS

         The Committee may at any time and from time to time approve the payment
by the Company of a cash award to Eligible Persons. A cash award consists of a
monetary payment made by the Company to a participant as additional compensation
for his/her services to the Company. Payment of a cash award will normally
depend on achievement of performance objectives by the Company or by
individuals. The amount of any monetary payment constituting a cash award shall
be determined by the Committee in its sole discretion. Cash awards may be
subject to other terms and conditions, which may vary from time to time and
among participants, as the Committee determines to be appropriate.

12.      ADJUSTMENT PROVISIONS

         (a) Subject to Section 12(b), if the outstanding shares of Common Stock
of the Company are increased, decreased or exchanged for a different number or
kind of shares or other securities, or if additional shares or new or different
shares or other securities are distributed with respect to such shares of Common
Stock or other securities, through merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the
maximum number and kind of shares provided in Section 3 of the Plan, (ii) the
number and kind of shares or other securities subject to the then outstanding
Options and Stock Appreciation Rights, and (iii) the price for each share or
other unit of any other securities subject to then outstanding Options and the
value of any then outstanding Stock Appreciation Rights without change in the
aggregate purchase price or value as to which such Options or Stock Appreciation
Rights remain exercisable.

         (b) Notwithstanding any provision in this Plan or in any Incentive to
the contrary, (i) the restrictions on all shares of restricted stock awarded
shall lapse immediately; (ii) all outstanding Options and Stock Appreciation
Rights will become exercisable immediately; and (iii) all performance objectives
shall be deemed to be met and payment made immediately if any of the

                                       11
<PAGE>   12

following events (a "Change of Control") occur unless otherwise determined by
the Board of Directors and a majority of the members of the Incumbent Board (as
defined below):

                  (i) The acquisition by any individual, entity or group (within
         the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
         Act of 1934, as amended (the "Exchange Act")) (a "Person") of
         beneficial ownership (within the meaning of Rule 13d-3 promulgated
         under the Exchange Act) of 20% or more of either (i) the then
         outstanding shares of common stock of the Company (the "Outstanding
         Company Common Stock") or (ii) the combined voting power of the then
         outstanding voting securities of the Company entitled to vote generally
         in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that for purposes of this subsection
         (i), the following acquisitions shall not constitute a Change of
         Control: (A) any acquisition directly from the Company, (B) any
         acquisition by the Company, (C) any acquisition by any employee benefit
         plan (or related trust) sponsored or maintained by the Company or any
         corporation controlled by the Company or (D) any acquisition by any
         corporation pursuant to a transaction which complies with clauses (A),
         (B) and (C) of subsection (iii) of this paragraph (b); or

                  (ii) Individuals who, as of the date hereof, constitute the
         Board (the "Incumbent Board") cease for any reason to constitute at
         least a majority of the Board; provided, however, that any individual
         becoming a director subsequent to the date hereof whose election, or
         nomination for election by the Company's shareholders, was approved by
         a vote of at least a majority of the directors then comprising the
         Incumbent Board shall be considered as though such individual were a
         member of the Incumbent Board, but excluding, for this purpose, any
         such individual whose initial assumption of office occurs as a result
         of an actual or threatened election contest with respect to the
         election or removal of directors or other actual or threatened
         solicitation of proxies or consents by or on behalf of a Person other
         than the Board; or

                  (iii) Consummation of a reorganization, merger or
         consolidation or sale or other disposition of all or substantially all
         of the assets of the Company (a "Business Combination"), in each case,
         unless, following such Business Combination, (A) all or substantially
         all of the individuals and entities who were the beneficial owners,
         respectively, of the Outstanding Company Common Stock and Outstanding
         Company Voting Securities immediately prior to such Business
         Combination beneficially own, directly or indirectly, more than 60% of,
         respectively, the then outstanding shares of common stock and the
         combined voting power of the then outstanding voting securities
         entitled to vote generally in the election of directors, as the case
         may be, of the corporation resulting from such Business Combination
         (including, without limitation, a corporation which as a result of such
         transaction owns the Company or all or substantially all of the
         Company's assets either directly or through one or more subsidiaries)
         in substantially the same proportions as their ownership, immediately
         prior to such Business Combination of the Outstanding Company Common
         Stock and Outstanding Company Voting Securities, as the case may be,
         (B) no Person (excluding any corporation resulting from such Business
         Combination or any employee benefit plan (or related trust) of the
         Company or such corporation resulting from such Business Combination)
         beneficially owns, directly or indirectly, 20% or more of,

                                       12
<PAGE>   13

         respectively, the then outstanding shares of common stock of the
         corporation resulting from such Business Combination or the combined
         voting power of the then outstanding voting securities of such
         corporation except to the extent that such ownership existed prior to
         the Business Combination and (C) at least a majority of the members of
         the board of directors of the corporation resulting from such Business
         Combination were members of the Incumbent Board at the time of the
         execution of the initial agreement, or of the action of the Board,
         providing for such Business Combination; or

                  (iv) Approval by the shareholders of the Company of a complete
         liquidation  or dissolution of the Company.

         (c) Adjustments under Sections 12(a) and 12(b) shall be made by the
Committee, whose determination as to what adjustments shall be made and the
extent thereof shall be final, binding and conclusive. No fractional interest
shall be issued under the Plan on account of any such adjustment.

13.      GENERAL PROVISIONS

         (a) With respect to any shares of Common Stock issued or transferred
under any provisions of the Plan, such shares may be issued or transferred
subject to such conditions, in addition to those specifically provided in the
Plan, as the Committee may direct.

         (b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Holder any right to continue in the employ of the Company
or any of its subsidiaries or affect the right of the Company to terminate the
employment of any Holder at any time with or without cause.

         (c) No shares of Common Stock shall be issued or transferred pursuant
to an Incentive Award unless and until all then applicable requirements imposed
by federal and state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any stock exchanges upon which
the Common Stock may be listed, shall have been fully met. As a condition
precedent to the issuance of shares pursuant to the grant or exercise of an
Incentive Award, the Company may require the Holder to take any reasonable
action to meet such requirements.

         (d) No Holder (individually or as a member of a group) and no
beneficiary or other person claiming under or through such Holder shall have any
right, title or interest in or to any shares of Common Stock allocated or
reserved under the Plan or subject to any Incentive Award except as to such
shares of Common Stock, if any, that have been issued or transferred to such
Holder.

         (e) The Company may make such provisions as it deems appropriate for
the withholding of any taxes that the Company or any subsidiary corporation
determines it is required to withhold in connection with any Incentive Award.

         (f) No Incentive Award and no right under the Plan, contingent or
otherwise, shall be assignable (except as provided in Section 7(g) of the Plan),
or subject to any encumbrance, pledge

                                       13
<PAGE>   14

or charge of any nature except that, under such rules and regulations as the
Company may establish pursuant to the terms of the Plan, a beneficiary may be
designated with respect to an Incentive Award in the event of the death of the
Holder of such Incentive Award and except also, that if such beneficiary is the
executor or administrator of the estate of the Holder of such Incentive Award,
then any rights with respect to such Incentive Award may be transferred to the
person or persons or entity (including a trust) entitled thereto under the will
of the holder of such Incentive Award, or in the case of intestacy, under the
laws relating to intestacy.

         (g) Nothing in the Plan is intended to be a substitute for, or to
preclude or limit the establishment of, any other plan, practice or arrangement
for the payment of compensation or benefits to employees generally, or to any
class or group of employees that the Company now has or may hereafter lawfully
put into effect, including, without limitation, any retirement, pension,
insurance, stock purchase, incentive compensation or bonus plan.

         (h) The Company may make a loan or guarantee a loan to an Optionee
(including an Optionee who is an officer of the Company or any subsidiary
corporation of the Company) in connection with the exercise of an Option in an
amount not to exceed the aggregate exercise price of the Option being exercised
and any federal and state taxes payable in connection with such exercise for the
purpose of assisting such Optionee to exercise such Option. The Company may also
make a loan or guarantee a loan to an optionee (including an optionee who is an
officer of the Company or any subsidiary corporation of the Company) in
connection with the exercise of an option granted under the Smith International,
Inc. 1971 and 1982 Stock Option Plans in an amount not to exceed the aggregate
exercise price of the option being exercised and any federal and state taxes
payable in connection with such exercise for the purpose of assisting such
optionee to exercise such option. Any such loan or guarantee may be secured by
shares of Common Stock or other collateral deemed adequate by the Committee and
shall comply in all respects with all applicable laws and regulations. The Board
of Directors and the Committee may adopt policies regarding eligibility for such
loans and guarantees, the maximum amounts thereof and any terms and conditions
not specified in the Plan upon which such loans will be made and guarantees
extended.

         (i) The Company shall have the right to withhold from any payments made
under the Plan or to collect as a condition of payment, any taxes required by
law to be withheld. At any time when a participant is required to pay to the
Company an amount required to be withheld under applicable income tax laws in
connection with a distribution of Common Stock or upon exercise of an option or
Stock Appreciation Right, the participant may satisfy this obligation in whole
or in part by electing (the "Election") to have the Company withhold from the
distribution shares of Common Stock having a value equal to the amount required
to be withheld. The value of the shares to be withheld shall be based on the
Fair Market Value of the Common Stock on the date that the amount of tax to be
withheld shall be determined ("Tax Date"). Each Election must be made prior to
the Tax Date. The Committee may disapprove of any Election, may suspend or
terminate the right to make Elections, or may provide with respect to any
Incentive that the right to make Elections shall not apply to such Incentive. An
Election is irrevocable.

         (j) If a participant is an officer of the Company within the meaning of
Section 16 of the 1934 Act, then an Election is subject to the following
additional restrictions:

                                       14
<PAGE>   15

                  (i) No Election shall be effective for a Tax Date which occurs
         within six months of the grant of the award, except that this
         limitation shall not apply in the event death or disability of the
         participant occurs prior to the expiration of the six-month period.

                  (ii) The Election must be made either six months prior to the
         Tax Date or must be made during a period beginning on the third
         business day following the date of release for publication of the
         Company's quarterly or annual summary statements of sales and earnings
         and ending on the twelfth business day following such date.

         (k) Anything in this Plan to the contrary notwithstanding, the Company,
may if it shall determine it necessary or desirable for any reason, at the time
of award of any Incentive or the issuance of any shares of Common Stock pursuant
to any Incentive, require the recipient of the Incentive, as a condition to the
receipt thereof or to the receipt of shares of Common Stock issued pursuant
thereto, to deliver to the Company a written representation of present intention
to acquire the Incentive or the shares of Common Stock issued pursuant thereto
for his own account for investment and not for distribution.

14.       AMENDMENT AND TERMINATION

         (a) The Board of Directors shall have the power, in its discretion, to
amend, suspend or terminate the Plan at any time. No such amendment shall,
without approval of the shareholders of the Company, except as provided in
Section 12 of the Plan:

                  (i)      Change the class of persons eligible to receive
         Incentive Awards under the Plan;

                  (ii)     Materially increase the benefits accruing to Eligible
         Persons under the Plan;

                  (iii)    Increase the number of shares of Common Stock subject
         to the Plan; or

                  (iv)     Transfer the administration of the Plan to any person
         who is not a Disinterested Person.

         (b) The Committee may, with the consent of a Holder, make such
modifications in the terms and conditions of an Option or a Stock Appreciation
Right as it deems advisable.

         (c) No amendment, suspension or termination of the Plan shall, without
the consent of the Holder, alter, terminate, impair or adversely affect any
right or obligation under any Incentive Award previously granted under the Plan.

         (d) No amendment to the Plan shall be made that would permit the
granting of Incentive Awards to members of the Committee.

                                       15
<PAGE>   16

         (e) A Stock Appreciation Right or an Option held by a person who was an
Employee at the time such Right or Option was granted shall terminate if and
when the Holder ceases to be an Employee, except as follows:

                  (i) If the employment of an Employee is terminated for cause,
         for which the Company shall be the sole judge, or if the Employee
         voluntarily resigns, all of the Stock Appreciation Rights and Options
         of the Employee shall expire immediately. Retirement with the consent
         of the Company shall not be deemed a voluntary resignation for purposes
         of this subparagraph (i) .

                  (ii) If the employment of an Employee is terminated by the
         Company other than for cause, for which the Company shall be the sole
         judge, then the Stock Appreciation Rights and Options expire one year
         thereafter unless by their terms they expire sooner. During said
         period, the Stock Appreciation Rights and Options may be exercised in
         accordance with their terms, but only to the extent exercisable on the
         date of termination of employment.

                  (iii) If the employee retires at normal retirement age or
         retires with the consent of the Company at an earlier date the Stock
         Appreciation Rights and Options of the Employee shall expire three
         years thereafter unless by their terms they expire sooner. During said
         period, the Stock Appreciation Rights and Options may be exercised in
         accordance with their terms, but only to the extent exercisable on the
         date of retirement.

                  (iv) If an Employee dies or becomes permanently and totally
         disabled while employed by the Company or a parent or subsidiary
         corporation, the Stock Appreciation Rights and Options of the Employee
         shall expire three years after the date of death or permanent and total
         disability unless by their terms they expire sooner. If the Employee
         dies or becomes permanently and totally disabled within the one-year
         period referred to in subparagraph (ii) above, the Stock Appreciation
         Rights and Options shall expire one year after the date of death or
         permanent and total disability, unless by their terms they expire
         sooner. If the Employee dies or becomes permanently and totally
         disabled within the three-year period referred to in subparagraph (iii)
         above, the Stock Appreciation Rights and Options shall expire upon the
         later of three years after retirement or one year after the date of
         death or permanent and total disability, unless by their terms they
         expire sooner. During said periods the Stock Appreciation Rights and
         Options may be exercised by the Employee, or in the event of the death
         of the Employee, the Stock Appreciation Rights and Options may be
         exercised by the Employee's designated beneficiaries or personal
         representatives or the trusts, entities or persons to whom his rights
         under the Stock Appreciation Rights and Options have been transferred,
         in accordance with Section 7(g) of the Plan, or have passed by will or
         the laws of descent and distribution, in accordance with their terms,
         but only to the extent exercisable on the date of retirement or
         termination of employment.

                  (v) Notwithstanding the above, a Stock Appreciation Right or
         Option may not be exercised after the expiration of ten years from the
         date the Stock Appreciation Right or Option is granted.

                                       16
<PAGE>   17

         (f) The Committee may in a particular case provide for earlier
termination or expiration periods for any Stock Appreciation Right or Option but
may not extend any of the periods provided for in this section.

         (g) The Committee may in its sole discretion determine, with respect to
a Stock Appreciation Right or Option, that any Holder who is on leave of absence
for any reason will be considered as still in the employ of the Company,
provided that the Stock Appreciation Right or Option shall be exercisable during
a leave of absence only as to the amount of number of shares with respect to
which it was exercisable at the commencement of such leave of absence.

15.      EFFECTIVE DATE OF PLAN AND DURATION OF PLAN

         This Plan shall become effective upon adoption by the Board of
Directors of the Company (February 6, 1989) and Incentive Awards may be made
under the Plan at any time thereafter, provided, however, that no shares of
Common Stock may be issued under the Plan, no Stock Appreciation Rights granted
under the Plan may be exercised and no Cash Award may be paid prior to
completion of the following: (a) the approval of the Plan by shareholders owning
a majority of the outstanding shares of Common Stock of the Company, with the
votes of any officers who are shareholders not being counted for the purpose of
determining a majority, (b) the registration of the Plan and securities to be
issued in connection therewith under the Securities Act of 1933, and (c) the
listing of the shares of Common Stock reserved for issuance under the Plan on
the New York Stock Exchange, Inc. and the Pacific Stock Exchange, Inc. Unless
previously terminated by the Board of Directors, the Plan shall terminate at the
close of business on April 22, 2008, and no Incentive Award may be granted under
the Plan thereafter, but such termination shall not affect any Incentive Award
issued or granted on or prior to said date.

                                       17<PAGE>   1
                                                                  EXHIBIT 10.11

                     CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT

         AGREEMENT by and between Smith International, Inc., a Delaware
corporation (the "Company") and DOUGLAS L. ROCK (the "Executive"), dated as of
the 4th day of January, 2000.

         The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.

         NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

         1. Other Agreements. The Company and the Executive are parties to: (i)
An Employment Agreement dated as of December 10, 1987 (the "Employment
Agreement"); (ii) an Amendment to Employment Agreement dated as of October 16,
1989 (the "Amendment") and (ii) a First Amendment to the Amendment to the
Employment Agreement dated as of November 12, 1992 (the "First Amendment").
Upon full execution and delivery of this Agreement, the parties agree that the
Amendment and the First Amendment shall be cancelled and of no force and effect
as of January 4, 2000. The terms of the Employment Agreement, as written,
without giving effect to the Amendment or the First Amendment, shall remain in
force and effect;

<PAGE>   2

provided that in the event of a Change of Control, the terms of this Agreement
shall control, except with respect to any Accrued Obligations, as defined
herein.

         2. Certain Definitions. (a) The "Effective Date", shall mean the first
date during the Change of Control Period (as defined in Section 2 (b)) on which
a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control
or (ii) otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination of employment.

         (b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.

         3. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:

         (a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the

                                       2
<PAGE>   3

then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (iv)
any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 3; or

         (b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or

         (c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business

                                       3
<PAGE>   4

Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or

         (d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

         4. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of such date (the "Employment Period").

         5. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the
120-day period immediately preceding the Effective Date and (B) the Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35
miles from such location.

         (ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and

                                       4
<PAGE>   5

time during normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.

         (b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.

         (ii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the

                                       5
<PAGE>   6

"Annual Bonus") in cash (i) under the Company's Annual Incentive Plan based
upon meeting the targets in the Annual Incentive Plan, provided that the
Executive's target bonus percentage shall be at least equal to the Executive's
target bonus percentage for the fiscal year prior to the Effective Date or
equal to an increase in the target bonus percentage given to any similarly
situated executive after the Effective Date, or, if higher, (ii) under any
annual incentive plan or discretionary award by the Company to similarly
situated executives which is enacted or approved after the Effective Date. Each
such Annual Bonus shall be paid no later than the end of the third month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.

         (iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, it any, that such
distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its affiliated
companies.

         (iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's-family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide

                                       6
<PAGE>   7

the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer executives of the
Company and its affiliated companies.

         (v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.

         (vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

         (vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.

                                       7
<PAGE>   8

         (viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and its affiliated companies.

         6. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.

         (b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean:

         (i) the willful and continued failure of the Executive to perform
         substantially the Executive's duties with the Company or one of its
         affiliates (other than any such failure resulting from incapacity due
         to physical or mental illness), after a written demand for substantial
         performance is delivered to the Executive by the Board or the Chief
         Executive

                                       8
<PAGE>   9

         Officer of the Company which specifically identifies the manner in
         which the Board or Chief Executive Officer believes that the Executive
         has not substantially performed the Executive's duties, or

         (ii) the willful engaging by the Executive in illegal conduct or gross
         misconduct which is materially and demonstrably injurious to the
         Company.

         For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.

         (c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:

         (i) the assignment to the Executive of any duties inconsistent in any
         respect with the Executive's position (including status, offices,
         titles and reporting requirements), authority, duties or
         responsibilities as contemplated by Section 4(a) of this Agreement, or
         any other action by the Company which results in a diminution in such
         position,

                                       9
<PAGE>   10

         authority, duties or responsibilities, excluding for this purpose an
         isolated, insubstantial and inadvertent action not taken in bad faith
         and which is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

         (ii) any failure by the Company to comply with any of the provisions
         of Section 4(b) of this Agreement, other than an isolated,
         insubstantial and inadvertent failure not occurring in bad faith and
         which is remedied by the Company promptly after receipt of notice
         thereof given by the Executive;

         (iii) the Company's requiring the Executive to be based at any office
         or location other than as provided in Section 5(a)(i)(B) hereof or the
         Company's requiring the Executive to travel on Company business to a
         substantially greater extent than required immediately prior to the
         Effective Date;

         (iv) any purported termination by the Company of the Executive's
         employment otherwise than as expressly permitted by this Agreement; or

         (v) any failure by the Company to comply with and satisfy Section
         12(c) of this Agreement.

         For purposes of this Section 6(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first anniversary
of the Effective Date shall be deemed to be a termination for Good Reason for
all purposes of this Agreement.

         (d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which indicates the specific

                                      10
<PAGE>   11

termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than thirty days after the giving of such
notice). The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

         (e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.

         7. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Employment Period, the
Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:

         (i) the Company shall pay to the Executive in a lump sum in cash
         within 30 days after the Date of Termination the aggregate of the
         following amounts:

                  A. the sum of (1) the Executive's Annual Base Salary through
         the Date of Termination to the extent not theretofore paid, (2) the
         product of (x) the higher of (I) the

                                      11
<PAGE>   12

         highest Annual Bonus paid to the Executive for the last three full
         fiscal years prior to the Effective Date and (II) the Annual Bonus
         paid or payable, including any bonus or portion thereof which has been
         earned but deferred (and annualized for any fiscal year consisting of
         less than twelve full months or during which the Executive was
         employed for less than twelve full months), for the most recently
         completed fiscal year during the Employment Period, if any (such
         higher amount being referred to as the "Highest Annual Bonus") and (y)
         a fraction, the numerator of which is the number of days in the
         current fiscal year through the Date of Termination, and the
         denominator of which is 365 and (3) any compensation previously
         deferred by the Executive (together with any accrued interest or
         earnings thereon) and any accrued vacation pay, in each case to the
         extent not theretofore paid (the sum of the amounts described in
         clauses (1), (2), and (3) and any amounts accrued under the Employment
         Agreement with the Executive not otherwise fully accrued under the
         terms of this Agreement shall be hereinafter referred to as the
         "Accrued Obligations"); and

                  B. the amount equal to the product of (1) three and (2) the
         sum of (x) the Executive's Annual Base Salary and (y) the Highest
         Annual Bonus; and

                  C. an amount equal to the excess of (a) the actuarial
         equivalent of the benefit under any excess or supplemental retirement
         plan in which the Executive participates (the "SERP") which the
         Executive would receive if the Executive's employment continued for
         three years after the Date of Termination assuming for this purpose
         that all accrued benefits are fully vested, and, assuming that the
         Executive's compensation in each of the three years is that required
         by Section 5(b)(i) and Section 5(b)(ii), over (b) the actuarial
         equivalent of the Executive's actual benefit (paid or payable), if
         any, under the SERP as of the Date of Termination;

         (ii) for three years after the Executive's Date of Termination, or
         such longer period as may be provided by the terms of the appropriate
         plan, program, practice or policy, the Company shall continue benefits
         to the Executive and/or the Executive's family at least

                                      12
<PAGE>   13

         equal to those which would have been provided to them in accordance
         with the plans, programs, practices and policies described in Section
         5(b)(iv) of this Agreement if the Executive's employment had not been
         terminated or, if more favorable to the Executive, as in effect
         generally at any time thereafter with respect to other peer executives
         of the Company and its affiliated companies and their families,
         provided, however, that if the Executive becomes reemployed with
         another employer and is eligible to receive medical or other welfare
         benefits under another employer provided plan, the medical and other
         welfare benefits described herein shall be secondary to those provided
         under such other plan during such applicable period of eligibility.
         For purposes of determining eligibility (but not the time of
         commencement of benefits) of the Executive for retiree benefits
         pursuant to such plans, practices, programs and policies, the
         Executive shall be considered to have remained employed until three
         years after the Date of Termination and to have retired on the last
         day of such period;

         (iii) the Company shall, at its sole expense as incurred, provide the
         Executive with outplacement services the scope and provider of which
         shall be selected by the Executive in his sole discretion; and

         (iv) to the extent not theretofore paid or provided, the Company shall
         timely pay or provide to the Executive any other amounts or benefits
         required to be paid or provided or which the Executive is eligible to
         receive under any plan, program, policy or practice or contract or
         agreement of the Company and its affiliated companies (such other
         amounts and benefits shall be hereinafter referred to as the "Other
         Benefits").

         (b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other

                                      13
<PAGE>   14

Benefits as utilized in this Section 7(b) shall include, without limitation,
and the Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the Company
and affiliated companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans, programs, practices
and policies relating to death benefits, if any, as in effect with respect to
other peer executives and their beneficiaries at any time during the 120-day
period immediately preceding the Effective Date or, if more-favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.

         (c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 7(c)
shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive and/or the Executive's family, as in effect
at any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.

         (d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent

                                      14
<PAGE>   15

theretofore unpaid. If the Executive voluntarily terminates employment during
the Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In
such case, all Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.

         8. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.

         9. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance thereof (including
as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case

                                      15
<PAGE>   16

interest on any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").

         10.      Certain Additional Payments by the Company.

         (a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 10) (a "Payment") would be
subject to excise or other similar tax, or federal income tax above the rate
ordinarily applicable to wages and salaries paid in the ordinary course of
business, whether as a result of the provisions of Sections 280G and 4999 of
the Code, any similar or analogous provisions of any statute or regulation
adopted subsequent to the date hereof, or otherwise, or any interest or
penalties are incurred by the Executive with respect to such tax (such excise
tax, other similar tax or federal income tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 10(a), if it shall be determined that the Executive
is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of
the greatest amount (the "Reduced Amount") that could be paid to the Executive
such that the receipt of Payments would not give rise to any Excise Tax, then
no Gross-Up Payment shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.

         (b) Subject to the provisions of Section 10(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the

                                      16
<PAGE>   17

amount of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Arthur Andersen L.L.P. or such other
certified public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 10(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

         (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment

                                      17
<PAGE>   18

of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:

         (i) give the Company any information reasonably requested by the
         Company relating to such claim,

         (ii) take such action in connection with contesting such claim as the
         Company shall reasonably request in writing from time to time,
         including, without limitation, accepting legal representation with
         respect to such claim by an. attorney reasonably selected by the
         Company,

         (iii) cooperate with the Company in good faith in order effectively to
         contest such claim, and

         (iv) permit the Company to participate in any proceedings relating to
         such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 10(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall

                                      18
<PAGE>   19

indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

         (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 10(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 10(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

         11. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,

                                      19
<PAGE>   20

communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 10 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.

         12. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.

         (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

         (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

         13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by
the parties hereto or their respective successors and legal representatives.

         (b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

                                      20
<PAGE>   21

         If to the Executive:
                  Douglas L. Rock

         If to the Company:
                  Smith International, Inc.
                  16740 Hardy Street
                  Houston, TX 77032
                  Fax:  (281) 233-5996
                  Attention:  General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

         (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.

         (d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.

         (e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.

         (f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section l (a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be

                                      21
<PAGE>   22

terminated by either the Executive or the Company at any time prior to the
Effective Date, in which case the Executive shall have no further rights under
this Agreement ; provided, that this Agreement may not be terminated by the
Company if it is reasonably demonstrated by the Executive that such termination
(i) was at the request of a third party who has taken steps reasonably
calculated to effect a Change of Control or (ii) otherwise arose in connection
with or anticipation of a Change of Control. From and after the Effective Date
this Agreement shall supersede any other agreement between the parties with
respect to the subject matter hereof.

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.

                                                /s/ DOUGLAS L. ROCK
                                                -------------------------------
                                                DOUGLAS L. ROCK

                                                SMITH INTERNATIONAL, INC.

                                                By:  /s/ NEAL S. SUTTON
                                                     --------------------------
                                                     Neal S. Sutton

                                      22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}]]