Document:

exv10w1

Exhibit 10.1

Malcolm W. Anderson

Senior Vice President, Human Resources

September 25, 2009

Personal & Confidential

Margaret K. Dorman

2918 Freshmeadows Drive

Houston, TX 77063

Dear Margaret:

We wanted to take this opportunity to thank you for your contributions to Smith International, Inc.
(“Smith” or “the Company”) and to summarize the benefits you will be eligible for upon your
retirement from the Company, subject to the terms of this letter agreement (the “Agreement”).

Timing of Your Departure: Your last day of employment will be October 16, 2009 (the
“Retirement Date”).

Special Severance Benefits: Contingent upon your compliance with the terms of this
Agreement, including, but not limited to, your timely execution, without revocation, of the
attached General Release (the “Release”) and your ongoing cooperation pursuant to the terms below:

	•	 	Severance Payment: You will be eligible for a one-time lump sum severance payment of
$2,697,514 less applicable taxes and deductions (the “Severance Payment”). The Severance Payment
will not be considered compensation under any compensation or benefit plan sponsored or maintained
by Smith and, except as to any equity compensation or as expressly provided herein, will be
in lieu of any payment to which you otherwise would have been entitled under (i) the Amended and
Restated Change-of-Control Employment Agreement between you and the Company effective as of January
1, 2009 and (ii) the Company’s general severance pay policy. You will not be eligible for any other
severance payment except as described herein. The Severance Payment will be made as soon as
practicable but no later than fifteen (15) days following the effective date of the executed
Release.
	 
	•	 	Special Long-Term Incentive Plan Treatment: You will vest in any stock options,
performance restricted stock units (“PRSUs”) granted prior to December 1, 2008 and time based
restricted stock units (“TRSUs”) previously granted pursuant to the annual grant program under
Smith’s Long-Term Incentive Plan (“LTIP”) and will have thirty-six (36)

 

 

	 	 	months following your Retirement Date, but in no event longer than the term of the original grant,
to exercise any vested stock options. Except as specifically modified herein, all terms and
conditions of the LTIP will continue to apply. You currently have 72,000 Non Qualified Stock
Options that are vested, 16,605 TRSUs that are not vested and 92,845 PRSUs which are not vested.
The un-vested TRSUs granted on December 1, 2008 and the PRSUs granted prior to December 1, 2008
will be accelerated. The PRSUs granted December 1, 2008 will be paid out and accelerated at a 50
percent performance level reflecting anticipated achievement of the 2009 performance metrics.
Based on the above, the Special Long-Term Incentive Program treatment will result in the issuance
of 76,517 shares to you.

	•	 	Company-Subsidized Health Coverage: Provided that you and your eligible dependents, if
any, are participating in Smith’s group health, dental and vision plans on the Retirement Date and
elect on a timely basis to continue that participation in some or all of the offered plans through
the federal law commonly known as “COBRA,” Smith will reimburse you for any such COBRA premiums you
pay during the period which begins on your Retirement Date and ends on the earlier to occur of (1)
the date eighteen (18) months after your Retirement Date or (2) the date you are eligible to enroll
in the health, dental and/or vision plans of another employer. The Company shall make such
reimbursement as soon as administratively practicable after the end of the period described in the
preceding sentence. You agree to notify Smith promptly if you are eligible to enroll in the plans
of another employer or if you or any of your dependents cease to be eligible to continue
participation in Company plans through COBRA. You will receive separate information regarding your
COBRA benefits, including the federal subsidy.
	 
	•	 	Career Transition Services: You will be eligible for executive outplacement services
through Right Management Outplacement Services for a period of twelve (12) months following your
Retirement Date.

In order to receive the Severance Payment, the Special Long-Term Incentive Program Treatment, the
Company-Subsidized Health Coverage, and the Career Transition Services (together, the “Special
Severance Benefits”), you must execute the Release on a timely basis. The Release may not be
executed prior to your Retirement Date, and you have twenty-one (21) days to consider the Release.
As described more fully in the Release, you have seven days following the date you execute the
Release to revoke your signature by delivering a written revocation to Malcolm W. Anderson, Senior
Vice President of Human Resources, at 1310 Rankin Road, Building 18, Houston, TX 770073 or fax
number (832) 348-1241. The Release will not become effective until you sign it and the seven-day
revocation period has passed without you having exercised your right to revoke your signature. If
you do not execute the Release or if you revoke the Release after you execute it, the Company will
not provide you the Special Severance Benefits. You are advised to consult an attorney prior to
executing the Release. Please also note that the Release contains provisions regarding
non-disparagement of the Company and its officers, employees, directors, products and services and
your ongoing cooperation with transition efforts and other important matters related to your
employment.

 

 

You must also continue to comply with Company policy through your separation date and with all
ongoing obligations to the Company during and following your separation from employment, including
those regarding the use and protection of confidential information.

You acknowledge that your Retirement Date is also the date on which your “separation from service”
with Smith, as defined in Treasury Regulation section 1.409A-1(h), occurs. As you are a “specified
employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and
the final regulations and any guidance promulgated thereunder, as each may be amended from time to
time (together, “Section 409A”) at the Retirement Date, if some or any portion of the Special
Severance Benefits, when considered together with any other severance payments or separation
benefits which may be considered deferred compensation under Section 409A (together, the “Deferred
Compensation Separation Benefits”), would result in the imposition of additional tax under Section
409A if paid to you on or within the six (6) month period following your Retirement Date, then to
the extent such portion of the Deferred Compensation Separation Benefits resulting in the
imposition of additional tax would otherwise have been payable on or within the first six (6)
months following your Retirement Date, will instead become payable on the first payroll date that
occurs on or after the date six (6) months and one (1) day following your Retirement Date (or such
longer period as is required to avoid the imposition of additional tax under Section 409A). All
subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with
the payment schedule applicable to each payment or benefit. For these purposes, each payment and
benefit payable under this Agreement and each other Deferred Compensation Separation Benefit is
hereby designated as a separate payment and will not collectively be treated as a single payment.

Other Compensation and Benefits: All other compensation and benefits will be governed by
the terms of the applicable plans and programs. You will be paid for any earned but unused
vacation at the time of your separation from employment, and you also will be reimbursed for
eligible business expenses that you incurred during the course of your employment per Company
policy.

If any contest or dispute shall arise under this Agreement involving the failure or refusal of the
Company to perform fully in accordance with the terms hereof, the Company shall reimburse you, on a
current basis, for your reasonable legal fees and expenses, if any, incurred by you in connection
with such contest or dispute if you prevail on your claim against the Company.

 

 

I hope these severance arrangements are helpful as you plan your future. You have been a valuable
member of the team, and we wish you the very best. Please sign below and return an executed
original of this Agreement to me to acknowledge your understanding of these terms and conditions.

	 	 	 	 	 
	 	Sincerely,

 	 
	 	/s/ MALCOLM W. ANDERSON
 	 
	 	Malcolm W. Anderson 	 
	 	 	 
	 

I have read, understand, and agree to the terms and conditions set forth in the letter agreement
from Malcolm W. Anderson dated September 25, 2009 (the “Agreement”).

	 	 	 	 	 
	 	 	 
	/s/ MARGARET K. DORMAN
 	 	 
	Margaret K. Dorman 	 	 
	 	 	 

September 28, 2009

Dateexv10w2

Exhibit 10.2

GENERAL RELEASE

     This General Release Agreement (this “Release”) is between Smith International, Inc. and
Margaret K. Dorman (“Executive”) (collectively referred to as the “Parties” or separately as a
“Party”).

	1.	 	Release by Executive

	 	1.1.	 	In exchange for the Severance Payment, Special Long-Term Incentive Program Treatment,
Company-Subsidized Health Coverage, and Career Transition Services (together, the “Special
Severance Benefits”) described in and made available to Executive pursuant to the terms of
the September 25, 2009 letter to Executive from Malcolm W. Anderson (the “Agreement”),
Executive, on behalf of herself, her heirs, beneficiaries, agents, representatives and
assigns, agrees to release and hereby does release Smith International, Inc., its parents,
subsidiaries, affiliates, and related entities, and its and their compensation and benefits
plans (including trustees, fiduciaries, and administrators of those plans), employees,
officers, directors, representatives, successors, assigns and agents (collectively,
hereinafter “Smith” or the “Company”), from all claims, demands, actions or liabilities of
every kind including, but not limited to, those that are related to Executive’s employment
with Smith, the termination of that employment, severance payments, bonus payments,
incentive or equity compensation, claims for payments or benefits under the Amended and
Restated Change-of-Control Employment Agreement or any other agreement with the Company
(whether written or oral), and claims for attorneys’ fees. Executive also agrees that this
Release covers, but is not limited to, claims arising from the Age Discrimination in
Employment Act of 1967, as amended, the Older Workers Benefit Protection Act, Title VII of
the Civil Rights Act of 1964, as amended, and any other federal, state or local law dealing
with discrimination in employment, harassment, or retaliation, including, but not limited
to, discrimination based on sex, sexual orientation, race, national origin, religion,
disability, veteran status or age, and claims for attorneys’ fees, provided, however, that
the foregoing release by Executive shall not apply to claims arising under the Agreement.
This Release covers both claims that Executive knows about and those that Executive may
not know about which have accrued by the time Executive executes this Release, except as
expressly provided to the contrary within this Release.
	 
	 	1.2.	 	This Release does not prevent Executive from enforcing non-forfeitable rights to
Executive’s accrued benefits under any employee benefit plan within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, as of the date of
termination of Executive’s employment with Smith International, Inc., which are not
released hereby but survive unaffected by this document.
	 
	 	1.3.	 	The Age Discrimination in Employment Act prohibits employment discrimination based on
age and is enforced by the U.S. Equal Employment Opportunity Commission (“EEOC”). Other
federal laws prohibit discrimination in employment based on sex, race, color, national
origin, religion, disability, or veteran status. These laws are enforced by the EEOC and
the U.S. Department of Labor (“DOL”). There are also state and local laws prohibiting
discrimination, which are enforced by state

 

 

	 	 	 	and local human rights agencies. This Release does not preclude filing a charge with or
participating in an investigation or proceeding conducted by the EEOC, DOL, or any other
federal, state or local agency charged with enforcement of anti-discrimination laws,
although by signing this Release, Executive waives any right to monetary recovery based on
claims asserted in such a charge.

	2.	 	Release by the Company

	 	2.1.	 	In return for the consideration provided in the Agreement and by this Release, the
Company, as defined in paragraph 1.1 above, agrees to release and hereby does release
Executive and her heirs, beneficiaries, agents, representatives and assigns, from all
claims, demands, actions or liabilities of every kind including, but not limited to, those
that are related to Executive’s employment with Smith, the termination of that employment,
claims under the Amended and Restated Change-of-Control Employment Agreement or any other
agreement with the Company (whether written or oral), and claims for attorneys’ fees,
provided, however, that the foregoing release by the Company shall not apply to claims
arising under the Agreement. This Release covers both claims that the Company knows
about and those that the Company may not know about which have accrued by the time Smith
International, Inc. executes this Release.

	3.	 	Indemnification

	 	3.1.	 	The Company acknowledges and agrees that Executive has been covered by, and will continue to
receive the benefit of, for all periods through the Retirement Date, the Company’s
indemnification insurance provided to all its Officers and Directors (“D&O Insurance”)
pursuant to the terms and conditions of any applicable D&O Insurance policy documents as they
existed during Executive’s employment. Executive’s rights and benefits under the Company’s
D&O Insurance shall not be diminished or affected by this Release or her termination of
employment and Executive’s release of claims provided in paragraph 1.1 does not include any
right to claim indemnity in accordance with the Company’s D&O Insurance plan requirements.

	4.	 	Executive acknowledges and agrees that:

	 	4.1.	 	The Special Severance Benefits described in and provided pursuant to the Agreement
constitute consideration for this Release, and Executive would not otherwise be entitled to
the Special Severance Benefits had Executive not signed this Release. Executive further
understands and agrees that the payments and benefits provided for under the Agreement
shall not be considered compensation for purposes of any compensation or benefit program
maintained or sponsored by Smith or any affiliated or related entity, and Executive is not
eligible for and shall not receive any additional severance benefits, bonus payments, or
other compensation.
	 
	 	4.2.	 	Executive has been given the opportunity to take at least twenty-one (21) days
(regardless of how many days Executive remains on payroll) within which to consider this
Release. In the event that Executive executes this Release before the expiration of that
21-day period, Executive certifies, by such execution, that she knowingly and

 

 

	 	 	 	voluntarily waived the right to the full 21 days for reasons personal to her, with no
pressure or incentive by any Smith representative to do so.

	 	4.3.	 	This Release does not waive any claims that Executive may have that arise after the
date she signs this Release.
	 
	 	4.4.	 	Executive has not relied on any representations, promises, or agreements of any kind,
whether written or oral, made to her in connection with her voluntary decision to accept
the separation benefits provided for in the Agreement, except for those set forth in the
Agreement itself.
	 
	 	4.5.	 	Executive acknowledges her ongoing obligations to Smith regarding the protection of
Smith’s confidential information to which she had access by virtue of her employment as
provided by paragraph 10 of her Amended and Restated Change-in-Control Employment Agreement
effective January 1, 2009.

	5.	 	The Parties agree they will not malign, defame, or disparage the reputation, character,
image, products, or services of the other Party. Further, Executive will not malign, defame,
or disparage the reputation or character of the directors, officers, employees or agents of
the Company or its affiliates. Nothing in the Agreement or this Release is intended to
preclude, prevent, or interfere with either Party’s ability to provide truthful, accurate
information as specifically required by law upon formal legal process. Executive agrees to
inform the Company’s General Counsel immediately upon any request for information regarding
the Company, its affiliates, or any of their officers, directors, employees, or agents. The
Company agrees to inform Executive immediately upon any request for information regarding
Executive.
	 
	6.	 	Executive agrees that she will make herself reasonably available to respond to questions
related to the transition of her responsibilities and for interview, deposition, and as a
witness at trial or, at the election of the Company, provide a sworn statement for any matters
in which the Company is a party and for which she may have any knowledge of any relevant
facts. Executive further agrees to fully cooperate with the Company in any internal
investigation or any administrative, regulatory or judicial investigation or proceeding upon
reasonable request by the Company. The Company agrees to reimburse Executive for any out of
pocket expense incurred by her as a result of such assistance, including but not limited to
costs of travel or lost compensation. Nothing in this Agreement shall be construed in any way
to limit or otherwise influence the scope or nature of Executive’s testimony in any such
proceeding. Executive agrees not to withhold from the Company any information, whether
damaging or favorable, relevant to any such matters.
	 
	7.	 	Nothing in the Agreement or this Release constitutes an admission of wrongdoing, and both
Parties specifically deny any wrongdoing and any unlawful or improper conduct.
	 
	8.	 	This Release is not effective or enforceable for seven days after Executive signs it, and
Executive may revoke it during that time. To revoke, Executive agrees to deliver a written
notice of revocation to Malcolm W. Anderson, Senior Vice President of Human Resources, at 1310
Rankin Road , Building 18, Houston, TX 77073 or fax number (832) 348-1241. This must be done
prior to the conclusion of the seventh day after Executive signs the Release. If Smith does
not receive a written revocation by the end of the seven-

 

 

	 	 	day period, this Release will become fully enforceable at that time. Executive will receive the
Special Severance Benefits after the revocation period has expired and provided Executive has
not revoked this Release. Revocation of this Release does not alter or change the termination
of Executive’s employment by Smith.

	9.	 	In case any part of this Release shall be invalid, illegal or otherwise unenforceable, the
validity, legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
	 
	10.	 	The Parties acknowledge that the foregoing release is part of an agreement between them that
is written in a manner calculated to be understood by both Parties. The Parties have
carefully read and fully understand all of the provisions of this Release. The Parties
represent and warrant that they have the authority to execute this Release. The Parties
acknowledge that their execution of this Release is knowing and voluntary and that they have
had a reasonable time to deliberate regarding its terms. The Parties represent and affirm
that they have not assigned their rights or claims subject to this Release to any third party.
Executive confirms that she has been advised to and had the opportunity to consult with an
attorney prior to executing the Release.

     IN WITNESS WHEREOF, the Parties hereto have executed this Release on the date set forth below.

	 	 	 	 	 
	SMITH INTERNATIONAL, INC.:

 	 	 
	By:  	
 	 	 
	 	Malcolm W. Anderson 	 	 
	 	 	 	 
	Its: Senior Vice President Human Resources

 	 	 
	 	 	 
	
 	 	 
	Date 	 	 
	 
	EXECUTIVE:

 	 	 
	
 	 	 
	Margaret K. Dorman 	 	 
	 	 	 
	
 	 	 
	Date

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