Document:

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EXHIBIT 10.15

FIRST AMENDMENT TO THE

SMITH INTERNATIONAL, INC.

EXECUTIVE OFFICER ANNUAL INCENTIVE PLAN

(Effective as of January 1, 2006)

W I T N E S S E T H

     WHEREAS, Smith International, Inc. (the “Company”) maintains the Smith International, Inc.
Executive Officer Annual Incentive Plan (the “Plan”) for the purpose of providing bonus incentives
to executives officers of the Company; and

     WHEREAS, pursuant to Article IX of the Plan, the Compensation and Benefits Committee of the
Board of Directors of the Company (the “Compensation Committee”) has reserved the right to amend
the Plan at any time; and

     WHEREAS, the Compensation Committee now desires to amend the Plan to eliminate or clarify
certain cross-references therein;

     NOW, THEREFORE, effective as of January 1, 2006, the Plan is hereby amended by this First
Amendment thereto, as follows:

	 	1.	 	Section 1.2 of the Plan is revised to completely eliminate and remove the
reference therein to Section 8.3 of the Plan.
	 
	 	2.	 	Section 1.7 of the Plan is revised to change the references therein to Section
1.6 to Section 1.7.

     IN WITNESS WHEREOF, this First Amendment to the Plan is hereby executed on this 17th day of
October, 2006, to be effective as of January 1, 2006.

	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	SMITH INTERNATIONAL, INC.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ PAMELA L. KUNKEMOELLER
	 	 	 	By:
	 	/s/ RICHARD E. CHANDLER, JR.
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

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

	 	Senior Corporate Counsel and
Assistant Secretary
	 	 	 	Title:
	 	Senior Vice President,
General Counsel and Secretary

105exv10w28

 

EXHIBIT 10.28

INDEMNITY AGREEMENT

     This Indemnification Agreement (“Agreement”) is made as of ___, ___by and
between Smith International, Inc. a Delaware corporation, and ___(“Indemnitee”).

RECITALS

     WHEREAS, highly competent persons have become more reluctant to serve publicly-held
corporations as directors or in other capacities unless they are provided with adequate protection
through insurance or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the corporation.

     WHEREAS, the Restated Certificate of Incorporation and Restated Bylaws of the Company require
indemnification of the officers and directors of the Company, and Indemnitee may also be entitled
to indemnification pursuant to the Delaware General Corporation Law (“DGCL”).

     WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to
attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis,
at its sole expense, liability insurance to protect persons serving the Company and its
subsidiaries from certain liabilities.

     WHEREAS, the uncertainties relating to such insurance and to indemnification have increased
the difficulty of attracting and retaining such persons.

     WHEREAS, the Board has determined that the increased difficulty in attracting and retaining
such persons is detrimental to the best interests of the Company’s stockholders and that the
Company should act to assure such persons that there will be increased certainty of such protection
in the future.

     WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate
itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified.

     WHEREAS, this Agreement is a supplement to and in furtherance of the Restated Certificate of
Incorporation and Restated Bylaws of the Company and any resolutions adopted pursuant thereto and
any liability insurance, and shall not be deemed a substitute therefor, nor to diminish or abrogate
any rights of Indemnitee thereunder.

     WHEREAS, Indemnitee does not regard the protection available under the Company’s Restated
Certificate of Incorporation, Restated Bylaws and insurance as adequate in the present
circumstances, and may not be willing to serve as an officer or director without adequate
protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to
serve, continue to serve and to take on additional service for or on behalf of the Company on the
condition that he be so indemnified;

     NOW, THEREFORE, in consideration of the promises and the covenants contained herein, the
Company and Indemnitee do hereby covenant and agree as follows:

     1. Services to the Company. Indemnitee will serve or continue to serve, at the will of the
Company, as an officer, director or key employee of the Company for so long as Indemnitee is duly
elected or appointed or until Indemnitee tenders his resignation; however, this Agreement shall not
impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company
beyond any period otherwise required by law or by other agreements or commitments or the parties,
if any.

     2. Definitions. As used in this Agreement

     (a) A “Change in Control” shall be deemed to occur upon the earliest to occur after
the date of this Agreement of any of the following events:

	 	(i)	 	The acquisition by any Person of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding shares of
common stock of the Company (the “Outstanding Company

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	 	 	 	Common Stock”) or
(B) 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 (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 definition; 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, statutory share exchange or
consolidation or similar transaction involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of assets or stock of
another entity by the Company or any of its subsidiaries (each, 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, 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.

     (b) “Company” shall mean Smith International, Inc. and its successors, and shall
include, in the case of any merger or consolidation, in addition to the resulting
corporation and surviving corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
such consolidation or merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, employees, trustees,
fiduciaries or agents, so that if Indemnitee is or was a director, officer, employee,
trustee, fiduciary or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee. trustee,
fiduciary or agent of another corporation, partnership, joint

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venture, trust employee
benefit program or other enterprise, Indemnitee shall stand in the same position under
the provisions of this Agreement with respect to the resulting or surviving corporation
as Indemnitee would have with respect to such constituent corporation if its separate
existence had continued.

     (c) “Corporate Status” describes the status of a person who is or was a director,
officer, employee, agent, trustee or fiduciary of the Company or of any other
corporation, partnership or joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.

     (d) “Disinterested Director” means a director of the Company who is not and was not
a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

     (e) “Enterprise” shall mean the Company and any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or
was serving at the request of the Company as a director, officer, employee, agent,
trustee or fiduciary.

     (f) “Expenses” shall mean all retainers, court costs, transcript costs, fees of
experts, witness fees, private investigators, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, fax transmission charges,
secretarial services, delivery service fees, reasonable attorneys’ fees, and all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding or in
connection with seeking indemnification under this Agreement. Expenses also shall
include Expenses incurred in connection with any appeal resulting from any Proceeding,
including without limitation the premium, security for, and other costs relating to any
cost bond, supersedeas bond, or other appeal bond or its equivalent. Expenses, however,
shall not include amounts paid in settlement by Indemnitee or the amount of judgments or
fines against Indemnitee.

     (g) “Losses” shall mean all loss, liability, judgments, damages, amounts paid in
settlement, fines, penalties, interest, assessments, other charges or, with respect to an
employee benefit plan, excise taxes or penalties assessed with respect thereto.

     (h) Reference to “other enterprise” shall include employee benefit plans; references
to “fines” shall include any excise tax assessed with respect to any employee benefit
plan; references to “serving at the request of the Company” shall include any service as
a director, officer, employee, trustee, fiduciary or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee, trustee, fiduciary
or agent with respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner “not opposed to the best interests of the Company” as
referred to under applicable law.

     (i) “Person” means an individual, entity, partnership, limited liability company,
corporation, association, joint stock company, trust, joint venture, unincorporated
organization, and a governmental entity or any department agency or political subdivision
thereof.

     (j) The term “Proceeding” shall include any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry,
administrative hearing or any other actual, threatened or completed proceeding, including
any and all appeals, whether brought in the right of the Company or otherwise and whether
of a civil, criminal, administrative or investigative nature and whether formal or
informal, in which Indemnitee was, is or will be involved as a party or otherwise by
reason of or relating to the fact that Indemnitee is or was a director, officer,
employee, agent, trustee or fiduciary of the Company, by reason of or relating to any
action taken by him or of any action on his part while acting as director, officer,
employee, agent, trustee or fiduciary of the Company, or by reason of the fact that he is
or was serving at the request of the Company as a director, officer, employee, agent or
fiduciary of another Enterprise, in each case whether or not serving in such capacity at
the time any Loss or Expense is incurred for which
indemnification, reimbursement, or advancement of Expenses can be provided under
this Agreement, including one initiated by a Indemnitee to enforce his rights under this
Agreement.

     (k) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of relevant corporation law and neither presently is, nor in the
past five years has been, retained to represent: (i) the Company or Indemnitee in any
matter material to either such party (other than with respect to

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matters concerning the
Indemnitee under this Agreement, or of other indemnitees under similar indemnification
agreements), or (ii) any other party to the Proceeding giving rise to a claim for
indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel”
shall not include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the Company or
Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The
Company agrees to pay the reasonable fees and expenses of the Independent Counsel
referred to above and to fully indemnify such counsel against any and all Expenses and
Losses arising out of or relating to this Agreement or its engagement pursuant hereto.

     (l) For purposes of Sections 3 and 4, the meaning of the phrase “to the fullest
extent permitted by law” shall include, but not be limited to:

	 	A.	 	to the fullest extent permitted by Section 145 of the
DGCL or any section that replaces or succeeds Section 145 with respect to
such matters of the DGCL, and
	 
	 	B.	 	to the fullest extent authorized or permitted by any
amendments to or replacements of the DGCL adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify
its officers, directors, employees, agents, trustees, fiduciaries and
other persons acting or serving at the Company’s request.

     3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance
with the provisions of this Section 3 if Indemnitee was or is, or was or is threatened to be made,
a party to or a witness or participant in any Proceeding, other than a Proceeding by or in the
right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee
shall be indemnified against all Expenses and Losses to the fullest extent permitted under law.

     4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 4 if Indemnitee was or is, or was or
is threatened to be made, a party to or a participant in any Proceeding by or in the right of the
Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be
indemnified against all Expenses and Losses actually and reasonably incurred or suffered by him or
on his behalf in connection with such Proceeding or any claim, issue or matter therein to the
fullest extent permitted under law. No indemnification for Expenses shall be made under this
Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally
adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware
Court of Chancery or any court in which the Proceeding was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnification.

     5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding
any other provisions of this Agreement, to the extent that Indemnitee was or is a party to (or a
participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of
any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the
Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or
on his behalf in connection with each successfully resolved claim, issue or matter and any claim,
issue or matter related to any claim, issue, or matter on which the Indemnitee was successful. For
purposes of this Section and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.

     6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection therewith.

     7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be
obligated under this Agreement to make any indemnity in connection with any claim made against
Indemnitee.

     (a) for which payment has actually been made to or on behalf of Indemnitee under any
insurance policy or other indemnity provision, except with respect to any excess beyond
the amount paid under any insurance policy or other indemnity provision; or

     (b) for an accounting of profits made from the purchase and sale (or sale and
purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b)
of the Securities Exchange Act of 1934, as

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     amended, or similar provisions of state
statutory law or common law; or

     (c) in connection with any Proceeding (or any part of any Proceeding) initiated or
brought voluntarily by Indemnitee prior to a Change of Control against the Company or its
directors, officers, employees or other indemnitees, unless (i) the Board of Directors of
the Company authorized the Proceeding (or any part of any Proceeding) prior to its
initiation, or (ii) the Company provides indemnification, in its sole discretion,
pursuant to the powers vested in the Company under applicable law.

     8. Advances of Expenses. Notwithstanding any provision of this Agreement to the contrary,
the Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding for
which indemnification is or may be available pursuant to this Agreement within 20 days after the
receipt by the Company of a statement or statements requesting such advances from time to time,
whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and
interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses
and without regard to Indemnitee’s ultimate entitlement to indemnification under the other
provisions of this Agreement. Advances shall include any and all Expenses incurred pursuing an
action to enforce this right of advancement, including Expenses incurred preparing and forwarding
statements to the Company to support the advances claimed. The Indemnitee shall qualify for
advances solely upon the execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately determined pursuant
to Section 11(a) that Indemnitee is not entitled to be indemnified by the Company in respect
thereof.

     9. Selection of Counsel. In the event the Company is obligated under Section 8 hereof to pay,
and pays the Expenses of any Proceeding against Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such Proceeding, with counsel approved by Indemnitee, which
approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of
its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to Indemnitee under
this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same
Proceeding, provided that (i) Indemnitee shall have the right to employ his counsel in any such
Proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel approved by the Indemnitee to
assume the defense of such Proceeding, then the fees and expenses of Indemnitee’s counsel shall be
at the expense of the Company.

     10. Procedure for Notification and Defense of Claim.

     (a) Indemnitee shall, as a condition precedent to his right to be indemnified under
this Agreement, give the Company notice in writing as soon as practicable of any claim
made against Indemnitee for which indemnification will or could be sought under this
Agreement, provided however, that a delay in giving such notice shall not deprive
Indemnitee of any right to be indemnified under this Agreement unless, and then only to
the extent that, such delay is materially prejudicial to the defense of such claim. The
omission to notify the Company will not relieve the Company from any liability for
indemnification which it may have to Indemnitee otherwise than under this Agreement. The
Secretary of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board in writing that Indemnitee has requested
indemnification.

     (b) The Company will be entitled to participate in any Proceeding at its own
expense.

     11. Procedure Upon Application for Indemnification.

     (a) Upon written request by Indemnitee for indemnification pursuant to the first
sentence of Section 10(a), a determination, if required by applicable law, with respect
to Indemnitee’s entitlement thereto shall be
made in the specific case: (i) if a Change in Control shall have occurred, by
Independent Counsel in a written opinion to the Board of Directors, a copy of which shall
be delivered to Indemnitee; or (ii) if a Change in Control shall not have occurred, (A)
by a majority vote of the Disinterested Directors, even though less than a quorum of the
Board, (B) by a committee of Disinterested Directors designated by a majority vote of the
Disinterested Directors, even though less than a quorum of the Board, or (C) if there are
no such Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be delivered
to Indemnitee; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the person, persons or entity making such
determination with respect to Indemnitee’s entitlement to indemnification, including
providing to such person, persons or entity upon

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reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably necessary to
such determination. Any costs or expenses (including attorneys’ fees and disbursements)
incurred by Indemnitee in so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of the determination as to
Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and
agrees to hold Indemnitee harmless therefrom.

     (b) In the event the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Section 11(a) hereof, the Independent Counsel shall be
selected as provided in this Section 11(b). If a Change in Control shall not have
occurred, the Independent Counsel shall be selected by the Board of Directors, and the
Company shall give written notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change in Control shall have occurred, the
Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board of Directors, in which event the preceding sentence
shall apply), and Indemnitee shall give written notice to the Company advising it of the
identity of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may be, a
written objection to such selection; provided, however, that such objection may be
asserted only on the ground that the Independent Counsel so selected does not meet the
requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the
objection shall set forth with particularity the factual basis of such assertion. Absent
a proper and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is so made and substantiated, the Independent Counsel so
selected may not serve as Independent Counsel unless and until such objection is
withdrawn or a court has determined that such objection is without merit. If, within 20
days after submission by Indemnitee of a written request for indemnification pursuant to
Section 10(a) hereof, no Independent Counsel shall have been selected and not objected
to, either the Company or Indemnitee may petition a court of competent jurisdiction for
resolution of any objection which shall have been made by the Company or Indemnitee to
the other’s selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom all objections are so resolved or the
person so appointed shall act as Independent Counsel under Section 11(a) hereof. Upon
the due commencement of any judicial proceeding or arbitration pursuant to Section 13(a)
of this Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of professional
conduct then prevailing).

     12. Presumptions and Effect of Certain Proceedings.

     (a) In making a determination with respect to entitlement to indemnification
hereunder, the person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement and the Company shall
have the burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption. Neither
the failure of the Company (including by its directors or independent legal counsel) to
have made a determination prior to the commencement of any action pursuant to this
Agreement that indemnification is proper in the circumstances because Indemnitee has met
the applicable standard of conduct, nor an actual determination by the Company (including
by its directors or independent legal counsel) that Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct.

     (b) If the person, persons or entity empowered or selected under Section 11 of this
Agreement to determine whether Indemnitee is entitled to indemnification shall not have
made a determination within sixty (60) days after receipt by the Company of the request
therefor, the requisite determination of entitlement to indemnification shall be deemed
to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee’s statement not materially misleading, in connection with
the request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification in good
faith requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; and provided, further, that the foregoing provisions
of this Section 12(b) shall not apply if the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 11(a) of this
Agreement.

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     (c) The termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not (except as otherwise expressly provided in this Agreement) of
itself adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not meet any applicable standard of conduct under
applicable law (or did or did not hold any particular state of knowledge referred to
under applicable law).

     (d) Reliance as Safe Harbor. For purposes of any determination of good
faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is
based on the records or books of account of the Enterprise, including financial
statements, or on information supplied to Indemnitee by the officers of the Enterprise in
the course of their duties, or on the advice of legal counsel for the Enterprise or on
information or records given or reports made to the Enterprise by an independent
certified public accountant or by an appraiser or other expert selected with the
reasonable care by the Enterprise. The provisions of this Section 12(d) shall not be
deemed to be exclusive or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of conduct set forth in this
Agreement.

     (e) Actions of Others. The knowledge and/or actions, or failure to act, of
any director, officer, agent, trustee, fiduciary or employee of the Enterprise shall not
be imputed to Indemnitee for purposes of determining the right to indemnification under
this Agreement.

     13. Remedies of Indemnitee.

     (a) In the event that (i) a determination is made pursuant to Section 11 of this
Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii)
advancement of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii)
no determination of entitlement to indemnification shall have been made pursuant to
Section 11(a) of this Agreement within 30 days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made pursuant to
Section 3, 4, 5, 6 or the last sentence of Section 11(a) of this Agreement within ten
(10) days after receipt by the Company of a written request therefor, or, if a
determination is required by law, within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an
adjudication (or, in the case of clause (i), to seek an adjudication) by the Delaware
Court of his entitlement to such indemnification or advancement of Expenses; provided,
that nothing contained in this Section 13 shall be deemed to limit Indemnitee’s rights
under Section 12(b). Alternatively, Indemnitee, at his option, may seek an award in
binding arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The Company shall not oppose
Indemnitee’s right to seek any such adjudication or award in arbitration.

     (b) In the event that a determination shall have been made pursuant to Section 11(a)
of this Agreement that Indemnitee is not entitled to indemnification, any judicial
proceeding or arbitration commenced pursuant to this Section 13 shall be conducted in all
respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be
prejudiced by reason of that adverse determination. In any judicial proceeding or
arbitration commenced pursuant to this Section 13 the Company shall have the burden of
proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.

     (c) If a determination shall have been made pursuant to Section 11(a) of this
Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by
such determination in any judicial
proceeding or arbitration commenced pursuant to this Section 13, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee’s statement not materially misleading, in connection with
the request for indemnification, or (ii) a prohibition of such indemnification under
applicable law.

     (d) The Company shall be precluded from asserting in any judicial proceeding or
arbitration commenced pursuant to this Section 13 that the procedures and presumptions of
this Agreement are not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Company is bound by all the provisions of
this Agreement. The Company shall indemnify Indemnitee against any and all Expenses and,
if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a
written request therefore) advance such expenses to Indemnitee, which are incurred by
Indemnitee in connection with any action brought by Indemnitee for indemnification or
advance of Expenses from the Company under this Agreement, under the Company’s
certificate of incorporation or bylaws as in effect from time to time or under any
directors’ and officers’ liability insurance policies maintained by the Company,
regardless of whether

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Indemnitee ultimately is determined to be entitled to such
indemnification, advancement of Expenses or insurance recovery, as the case may be.

     14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

     (a) The rights of indemnification and to receive advancement of Expenses as provided
by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee
may at any time be entitled under applicable law, the Company’s Restated Certificate of
Incorporation, the Company’s Restated Bylaws, any agreement, a vote of stockholders or a
resolution of directors, or otherwise. No amendment, alteration or repeal of this
Agreement or of any provision hereof shall limit or restrict any right of Indemnitee
under this Agreement in respect of any action taken or omitted by such Indemnitee in his
Corporate Status prior to such amendment, alteration or repeal. To the extent that a
change in Delaware law, whether by statute or judicial decision, permits greater
indemnification or advancement of Expenses than would be afforded currently under the
Company’s Restated Certificate of Incorporation, Restated Bylaws and this Agreement, it
is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the
greater benefits so afforded by such change. No right or remedy herein conferred is
intended to be exclusive of any other right or remedy, and every other right and remedy
shall be cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other right or remedy.

     (b) The Company shall, from time to time, make the good faith determination whether
or not it is practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the directors, officers,
employees, trustees, fiduciaries and agents of the Company with coverage for losses from
wrongful acts, or to ensure the Company’s performance of its indemnification obligations
under this Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such coverage. To
the extent that the Company maintains an insurance policy or policies providing liability
insurance for directors, officers, employees, trustees, fiduciaries and agents of the
Company or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such person serves at the request of the Company,
Indemnitee shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage available for any such director, officer,
employee, trustee, fiduciary or agent under such policy or policies. If, at the time of
the receipt of a notice of a claim pursuant to the terms hereof, the Company has director
and officer liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the procedures set
forth in the respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts
payable as a result of such proceeding in accordance with the terms of such policies.

     (c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the Company to
bring suit to enforce such rights.

     (d) The Company shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable (or for which advancement is provided hereunder)
hereunder if and to the extent that Indemnitee has otherwise actually received such
payment under any insurance policy, contract, agreement or otherwise

     (e) The Company’s obligation to indemnify or advance Expenses hereunder to
Indemnitee who is or was serving at the request of the Company as a director, officer,
employee, trustee, fiduciary or agent of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise shall be reduced by any amount
Indemnitee has actually received as indemnification or advancement of expenses from such
other corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise.

     15. Settlement. (a) The Company shall have no obligation to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any Proceeding by the Indemnitee
effected without the Company’s prior written consent.

     (b) The Company shall not, without the prior written consent of Indemnitee, consent
to the entry of any judgment against Indemnitee or enter into any settlement or
compromise which (i) includes an admission of fault of Indemnitee, any non-monetary
remedy affecting or obligation of Indemnitee, or Monetary Loss for

113

 

which Indemnitee is
not indemnified hereunder or (ii) with respect to any Proceeding with respect to which
Indemnitee may be or is made a party, witness or participant or may be or is otherwise
entitled to seek indemnification hereunder, does not include, as an unconditional term
thereof, the full release of Indemnitee from all liability in respect of such Proceeding,
which release shall be in form and substance reasonably satisfactory to Indemnitee.

       (c) Neither the Company nor Indemnitee shall unreasonably withhold their consent to
any proposed settlement.

     16. Duration of Agreement. This Agreement shall continue until and terminate upon the later
of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director or officer
of the Company or as a director, officer, employee, trustee, fiduciary or agent of any other
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which
Indemnitee served at the request of the Company; or (b) 1 year after the final termination of any
Proceeding, including any and all appeals, then pending in respect of which Indemnitee is granted
rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by
Indemnitee pursuant to Section 13 of this Agreement relating thereto.

     17. Successors and Assigns. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and
administrators.

     18. Severability. If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Agreement (including without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law;
(b) such provision or provisions shall be deemed reformed to the extent necessary to conform to
applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the
fullest extent possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to
give effect to the intent manifested thereby.

     19. Enforcement.

     (a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee
to serve as a director or officer of the Company, and the Company acknowledges that
Indemnitee is relying upon this Agreement in serving as a director or officer of the
Company.

     (b) This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral, written and implied, between the parties hereto with respect to the
subject matter hereof.

     20. Effectiveness of Agreement. This Agreement shall be effective as of the date set forth
on the first page and may apply to acts or omissions of Indemnitee which occurred prior to such
date if Indemnitee was an officer, director, employee, trustee, fiduciary or other agent of the
Company, or was serving at the request of the Company as a director, officer, employee, trustee,
fiduciary or agent of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, at the time such act or omission occurred.

     21. Modification and Waiver. No supplement, modification or amendment of this Agreement shall
be binding unless executed in writing by the parties thereto. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this
Agreement nor shall any waiver constitute a continuing waiver.

     22. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon
being served with any summons, citation, subpoena, complaint, indictment, information or other
document relating to any Proceeding or matter which may be subject to indemnification or
advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company
shall not relieve the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.

114

 

     23. Notices. All notices, requests, demands and other communications under this Agreement
shall be in writing and shall be deemed to have been duly given (a) if delivered by hand and
receipted for by the party to whom said notice or other communication shall have been directed, or
(b) mailed by certified or registered mail with postage prepaid, on the third business day after
the date on which it is so mailed:

     (a) If to Indemnitee, at the address indicated on the signature page of this
Agreement, or such other address as Indemnitee shall provide to the Company.

     (b) If to the Company to

Smith International, Inc.

P.O. Box 60068

Houston, Texas 77205

Attention: General Counsel

or to any other address as may have been furnished to Indemnitee by the Company.

     24. Contribution. To the fullest extent permissible under applicable law, if the
indemnification provided for in this Agreement is unavailable to Indemnitee for any reason
whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount
incurred by Indemnitee, whether for Losses and/or for Expenses, in connection with any claim
relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and
reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the
relative benefits received by the Company and Indemnitee as a result of the event(s) and/or
transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and
its directors, officers, employees, trustees, fiduciaries and agents) and Indemnitee in connection
with such event(s) and/or transaction(s).

     25. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among
the parties shall be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, without regard to its conflict of laws rules. Except with respect to any
arbitration or proceeding commenced by Indemnitee pursuant to Section 13(a) of this Agreement, the
Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought only in the
Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or
federal court in the United States of America or any court in any other country, (ii) consent to
submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding
arising out of or in connection with this Agreement, (iii) waive any objection to the laying of
venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the Delaware Court has
been brought in an improper or inconvenient forum.

     26. Identical Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall for all purposes be deemed to be an original but all of which together shall
constitute one and the same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the
existence of this Agreement.

     27. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the
feminine pronoun where appropriate. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this Agreement or to affect the
construction thereof. The term including shall mean including without limitation.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year
first above written.

	 	 	 	 	 	 	 
	SMITH INTERNATIONAL, INC.	 	 	 	INDEMNITEE
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	Name:

	 	 	 	 	 	Name:
	Office:

	 	 	 	 	 	Address:

115

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