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exv10w2

 

EXHIBIT 10.2

CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT

AGREEMENT, entered into as of the ___day of ___, 20___, by and between Smith International, Inc.,
a Delaware Corporation (the “Company”) and                     (the “Executive”).

[WHEREAS, the Executive and the Company are parties to that certain employment agreement dated
                     (the “Original Agreement”); and

WHEREAS, the Executive and the Company desire to amend and restate the Original Agreement;
and]

WHEREAS, 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. In addition to the Original Agreement, the Company and the
Executive are parties to an Amendment to Employment Agreement Dated as of ___(the
“Amendment”). Upon full execution and delivery of this Agreement, the parties agree that the
Amendment shall be cancelled and of no force and effect as of ___. The terms of the
Original Employment Agreement, as written, without giving effect to the Amendment, shall remain in
force and effect; 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 l (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. Notwithstanding the foregoing, the Executive and the Company acknowledge that, except
as may otherwise be provided under this Agreement or any other written agreement between the
Executive and the Company, the employment of the Executive by the Company is “at will.”

                    (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
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 2; 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, 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, (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 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 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 “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
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.

                    (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 12(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 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 of
directors of the Company, or if following the Change of Control the Company is not publicly-traded
and any parent corporation of the Company is publicly traded, the board of directors of such
parent(s) of the Company (excluding the Executive, if the Executive is a member of such board) at a
meeting of such 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, authority, duties or
responsibilities (including as a result of the Company’s ceasing to be a publicly traded entity),
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 4(a)(i)(B) hereof or 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 11(c) of this Agreement.

For purposes of this Section 5(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. The Executive’s mental or physical incapacity following the occurrence
of any of the circumstances described in clauses (i) through (v) shall not affect the Executive’s
ability to terminate employment for Good Reason. Notwithstanding anything herein to the contrary,
the Executive’s resignation under this Agreement with or without Good Reason shall in no way affect
the Executive’s ability to terminate employment by reason of the Executive’s retirement or to be
eligible to receive benefits under any retirement or pension plan of the Company and its
affiliates.

                    (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 12(b) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which indicates the specific 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 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)
shall be hereinafter referred to as the “Accrued Obligations”); and

         B. the amount equal to the product of (1) the Termination Multiple (as defined
below) 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 a number of years after the Date of Termination equal to the
Termination Multiple, assuming for this purpose that all accrued benefits are fully
vested, and, assuming that the Executive’s compensation in each of such years is that
required by Section 4(b)(i) and Section 4(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 a number of years after the Executive’s Date of Termination equal to the Termination
Multiple, 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 equal to those which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 4(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 a number of years after the Date of
Termination equal to the Termination Multiple 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”).

Notwithstanding the foregoing provisions of this Section 6(a), to the extent required in order to
comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
amounts and benefits to be paid or provided under this Section 6(a) shall be paid or provided to
the Executive on the first business day after the date that is six months following the Date of
Termination. To the extent that the benefits to be provided to the Executive under Section
6(a)(ii) are so delayed, the Executive shall be entitled to COBRA continuation coverage under
Section 4980B of the Code (“COBRA Coverage”) during such period of delay, and the Company shall
reimburse the Executive for any Company portions of such COBRA Coverage in the seventh month
following the Date of Termination.

For purposes of this Section 6, “Termination Multiple” shall mean (x) three, if the Date of
Termination occurs on or prior to the first anniversary of the Effective Date, (y) two, if the Date
of Termination occurs after the first anniversary of the Effective Date and on or prior to the
second anniversary of the Effective Date and (z) one, if the Date of Termination occurs after the
second anniversary of the Effective Date and on or prior to the third anniversary of the Effective
Date.

                    (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
Benefits as utilized in this Section 6(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 6(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 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 12(g), 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 interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of 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 9) (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 9(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. The reduction of the amounts payable hereunder, if applicable,
shall be made by first reducing the payments under Section 6(a)(i)(B), unless an alternative method
of reduction is elected by the Executive, and in any event shall be made in such a manner as to
maximize the Payments actually made to the Executive. For purposes of reducing the Payments to the
Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced.
If the reduction of the amount payable under this Agreement would not result in a reduction of the
Payments to the Reduced Amount, no amounts payable under the Agreement shall be reduced pursuant to
this Section 9(a). The Company’s obligation to make Gross-Up Payments under this Section 9 shall
not be conditioned upon the Executive’s termination of employment.

                    (b) Subject to the provisions of Section 9(c), all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by a 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 9, 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 9(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 the Executive
gives such notice to the Company (or such shorter period ending on the date that any payment 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 the Company 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 9(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole discretion, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the applicable taxing authority in respect of such claim
and may, at its sole discretion, either pay the tax claimed to the appropriate taxing authority on
behalf of the Executive and direct the Executive to 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 pays
such claim and directs the Executive to sue for a refund, the Company shall 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

 

 

payment or with respect to any imputed income with respect to such payment; 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 a Gross-Up Payment or payment by the Company of
an amount on the Executive’s behalf pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 9(c), if applicable) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable thereto). If, after
payment by the Company of an amount on the Executive’s behalf pursuant to Section 9(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 the amount of such
payment shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

                    (e) Notwithstanding any other provision of this Section 9, the Company may, in its sole
discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing
authority, for the benefit of the Executive, all or any portion of any Gross-Up Payment, and the
Executive hereby consents to such withholding.

                    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, 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:

If to the Executive:

                                                            

                                                            

 

 

                                                            

                    or at the most current address set forth in his personnel file at Smith
International, Inc.

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) If any compensation or benefits provided by this Agreement may result in the application
of Section 409A of the Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to, where applicable, (i) exclude such
compensation from the definition of “deferred compensation” within the meaning of such Section 409A
or (ii) comply with the provisions of Section 409A, other applicable provision(s) of the Code
and/or any rules, regulations or other regulatory guidance issued under such statutory provisions
and to make such modifications, in each case, without any diminution in the value of the payments
to the Executive.

                    [(g) 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, this ___day of ___,

	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	[Executive Name]	 	 
	 
	 	 	 	 	 	 
	 	 	SMITH INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Doug Rock	 	 
	 

	 	 	 	President, CEO & Chairman of	 	 
	 

	 	 	 	the Boardexv10w3

 

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into as of ___(the
“Effective Date”), by and between Smith International, Inc. (hereafter “Company”) and ___
(hereafter “Employee”). The Company and Employee may sometimes hereafter be referred to singularly
as a “Party” or collectively as the “Parties.”

W I T N E S S E T H:

     WHEREAS, the Company desires to continue to secure the employment services of Employee subject
to the terms and conditions hereafter set forth; and

     WHEREAS, the Employee is willing to enter into this Agreement upon the terms and conditions
hereafter set forth;

     NOW, THEREFORE, in consideration of Employee’s employment with the Company, and the premises
and mutual covenants contained herein, the Parties hereto agree as follows:

     1. Employment. During the Employment Period (as defined in Section 4 hereof),
the Company shall employ Employee, and Employee shall serve as, an advisor to the Company, in the
capacity of a non-officer, common law employee of the Company. In this regard, the Company intends
that Employee shall not be considered to be an executive officer for purposes of the compensation
disclosure requirements under the Securities Exchange Act of 1934, and Employee hereby agrees that
he shall not be performing any services hereunder in such capacity. Employee’s principal place of
employment shall be at the main offices of the Company in the Houston, Texas metropolitan area.

     2. Compensation. The Company shall pay to Employee during the Employment Period a
base salary of $                     per year, as may be adjusted (the “Base Salary”). The Base Salary shall be
payable in accordance with the Company’s normal payroll schedule and procedures for its employees.
Nothing contained herein shall preclude the payment of any other compensation to Employee.

     3. Duties and Responsibilities of Employee. During the Employment Period, Employee
shall devote his services to the business of the Company and perform the duties and
responsibilities assigned to him by the Company to the best of his ability and with reasonable
diligence. This Section 3 shall not be construed as preventing Employee from (a) engaging
in reasonable volunteer services for charitable, educational or civic organizations, or (b)
investing his assets in such a manner that will not require a material amount of his time or
services in the operations of the businesses in which such investments are made; provided, however,
no such other activity shall conflict with Employee’s loyalties and duties to the Company.
Employee shall at all times use his best efforts to, in good faith, comply with United States laws
applicable to Employee’s actions on behalf of the Company and its Affiliates (as defined in
Section 6(d)). Employee understands and agrees that he may be required to travel from time
to time for purposes of the Company’s business.

     4. Term of Employment. Employee’s initial term of employment with the Company under
this Agreement shall be for the period of (2) two years commencing upon                      through
                     (the “Initial Term of Employment”). Thereafter, the Employment Period hereunder may
be extended on a month-to-month basis or for such other period as mutually agreed by the Parties.
The Initial Term of Employment, and any extension of employment hereunder, shall each be referred
to herein as a “Term of Employment.” The period from the Effective Date through the date of
Employee’s termination of employment for whatever reason shall be referred to herein as the
“Employment Period.”

     Employee may terminate his employment with the Company and all Affiliates at any time by
providing 30 days Notice of Termination to the Company pursuant to Section 7. Company may
terminate the employment of Employee with the Company and all Affiliates at any time by providing
30 days Notice of Termination to Employee pursuant to Section 7; provided, however, no
advance Notice of Termination shall be required if Employee is being terminated for Cause (as
defined in Section 6(c)).

     If Employee is terminated by the Company without Cause prior to                     , including, but not
limited to, termination following a Change-of-Control Event (as defined in Section 6(c)),
Employee will be eligible to receive the Benefits described in Section 6 as if he
terminated on                     . In addition, in such event the Stock Options and Performance-based
Restricted Stock Units allocated to him pursuant to the Smith International, Inc. 1989 Long-Term
Incentive Plan (“LTIP”) will continue to vest through                      as if he was still employed
through such date. Restricted

 

 

Stock Units that vest according to this provision and the terms of a Restricted Stock Unit
Agreement between the Company and Executive will be payable to Executive not later than 60 days
after the date upon which such Units become vested. In addition, in such event the Employee will
have the right to exercise all vested but unexercised Stock Options as of                      pursuant to
the post-termination exercise period provided under the retirement provisions of the LTIP as if he
retired from the Company for age on such date.

     5. Benefits. Subject to the terms and conditions of this Agreement, during the
Employment Period, Employee shall be entitled to the following:

          (a) Reimbursement of Business Expenses. The Company shall pay or reimburse Employee for all
reasonable travel, entertainment and other business expenses paid or incurred by Employee in the
performance of his duties hereunder. The Company shall also provide Employee with suitable office
space, including staff support.

          (b) Other Employee Benefits. Employee shall be entitled to participate in any pension,
retirement, 401(k), profit-sharing, and other employee benefits plans or programs of the Company to
the same extent as available to any other employees of the Company under the terms and conditions
of such plans or programs. Employee shall also be entitled to participate in any group insurance,
hospitalization, medical, dental, health, life, accident, disability and other employee benefits
plans or programs of the Company to the extent available to any other employees of the Company
under the terms and conditions of such plans or programs.

          (c) Vacation. Employee shall be entitled to the number of vacation days in each calendar year
determined in accordance with the Company’s Vacation policy for its employees as in effect from
time to time.

          (d) Perq Payments. Employee shall be entitled to receive a Perq payment of $  per
month during the Employment Period.

     6. Rights and Payments upon Termination. The Employee’s right to compensation and
benefits for periods after the date on which his employment with the Company terminates (the
“Termination Date”), shall be determined in accordance with this Section 6, as follows:

          (a) Minimum Payments. Employee shall be entitled to the following minimum payments under this
Section 6(a), in addition to any other benefits to which he may be entitled to receive in
accordance with the terms and conditions of any employee benefit plan or program under which he is
covered as of his Termination Date:

     (1) his unpaid salary through his Termination Date;

     (2) his unpaid Vacation days for that year which have earned through his
Termination Date; and

     (3) reimbursement of his reasonable business expenses that were incurred but
unpaid as of his Termination Date; and

     (4) a lump sum representing eighteen (18) months of COBRA payments, less
applicable taxes and withholding.

     Such salary, accrued Vacation days and COBRA payments shall be paid to Employee within
five (5) business days following the Termination Date in a cash lump sum less applicable
withholdings. Business expenses shall be reimbursed in accordance with the Company’s normal
procedures.

          (b) Other Severance Benefits. Employee shall be entitled to any other severance benefits only
to the extent so provided under the terms and conditions of any plans or programs maintained by the
Company under which he is covered as of his Termination Date; provided, however, Employee shall not
be entitled to any such other severance benefits if he is terminated for Cause.

          (c) Definitions.

     (1) “Affiliate” has the same meaning ascribed to such term in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended from time to time.

 

 

     (2) “Cause” means any of the following: (A) the Employee’s conviction by a
court of competent jurisdiction as to which no further appeal can be taken of a crime
involving moral turpitude or a felony or entering the plea of nolo contendere to such
crime by the Employee; (B) the commission by the Employee of a material and
demonstrable act of fraud, or a material and demonstrable misappropriation of funds
or property, of or upon the Company or any Affiliate; (C) the knowing engagement by
the Employee, without the written approval of the Board or Compensation Committee, in
any material activity which directly competes with the business of the Company or any
Affiliate, or which would directly result in a material injury to the business or
reputation of the Company or any Affiliate; or (D) the material breach by Employee of
any material term or condition set forth in this Agreement or a failure by Employee
to materially carry out any of the duties or responsibilities assigned hereunder.

     (3) “Change-of-Control Event” means

(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
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 2; 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, 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, (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 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) “Designated Beneficiary” means Employee’s surviving spouse, if any. If
there is no surviving spouse at the time of the Employee’s death, then the Designated
Beneficiary hereunder shall be the Employee’s estate.

     (5) “Dispute” means any dispute, disagreement, claim, or controversy arising in
connection with or relating to the Agreement or the validity, interpretation,
performance, breach, or termination of the Agreement.

     (6) “Subsidiary” means a corporation or other entity, whether incorporated or
unincorporated, of which at least a majority of the voting securities is owned,
directly or indirectly, by the Company including, without limitation, M-I L.L.C.

     7. Notice of Termination. Any termination of Employee’s employment with the Company
and all Affiliates, either by the Company or by the Employee, shall be communicated by Notice of
Termination to the other Party hereto. The term “Notice of Termination” means a written notice
which sets forth in reasonable detail the basis for termination of the Employee’s employment.

     8. Nondisclosure and Noncompetition. As an inducement to the Company to enter into
this Agreement, Employee represents to and covenants with or in favor of the Company his compliance
with the restrictive covenants in Sections 9 through 19, as a condition to the Company’s
obligation to provide employment to Employee under this Agreement.

     9. Trade Secrets.

          (a) Access to Trade Secrets. As of the Effective Date and on an ongoing basis, the Company
agrees to give Employee access to Trade Secrets which the Employee did not have access to, or
knowledge of, before the Effective Date.

          (b) Agreement Not to Use or Disclose Trade Secrets. In exchange for the Company’s promises to
provide Employee with access to Trade Secrets and Specialized Training and other benefits, Employee
agrees that he will not during the Employment Period, or at any time thereafter, disclose to
anyone, including, without limitation, any person, firm, corporation or other entity, or publish or
use for any purpose, any Trade Secrets and Specialized Training, except as required in the ordinary
course of the Company’s business or as authorized by the Board, Compensation Committee or CEO.

          (c) Agreement to Refrain from Defamatory Statements. Employee shall refrain, both during the
Employment Period and thereafter, from publishing any oral or written statements about any
directors, officers, employees, agents, investors or representatives of the Company or any
Affiliate that are slanderous, libelous, or defamatory; or that disclose private or confidential
information about the business affairs, directors, officers, employees, agents, investors or
representatives of the Company or any Affiliate; or that constitute an intrusion into the seclusion
or private lives of any of such directors, officers, employees, agents, investors or
representatives; or that give rise to unreasonable publicity about the private lives of such
persons; or that place any such person in a false light before the public; or that constitute a
misappropriation of the name or likeness of any such person. A violation or threatened violation
of these restrictive covenants may be enjoined by a court of law notwithstanding the arbitration
provisions of Section 30.

          (d) Definitions. The following terms, when used in this Agreement, are defined below:

     (1) “Trade Secrets” means any and all information and materials (in any form or medium)
that are proprietary to the Company or a Subsidiary, or are treated as confidential by the
Company or Subsidiary as part of, or relating to, all or any portion of its or their
business, including information and materials about the products and services offered, or
the needs of customers served, by the Company or Subsidiary; compilations of information,
records and specifications, processes, programs, and systems of the Company or Subsidiary;
research of or for the Company or Subsidiary; and methods of doing business of the Company
or Subsidiary. Trade Secrets include,

 

 

without limitation, all of the Company’s or Subsidiary’s technical and business
information, whether patentable or not, which is of a confidential, trade secret or
proprietary character, and which is either developed by the Employee alone, with others or
by others; lists of customers; identity of customers; identity of prospective customers;
contract terms; bidding information and strategies; pricing methods or information; computer
software; computer software methods and documentation; hardware; the Company’s or
Subsidiary’s methods of operation; the procedures, forms and techniques used in servicing
accounts or properties; and other documents, information or data that the Company or
Subsidiary requires to be maintained in confidence for the business success of Company or
Subsidiary.

     10. Duty to Return Company Documents and Property. Upon termination of the Employment
Period, Employee shall immediately return and deliver to the Company any and all papers, books,
records, documents, memoranda and manuals, e-mail, electronic or magnetic recordings or data,
including all copies thereof, belonging to the Company or Subsidiary or relating to its business,
in Employee’s possession, whether prepared by Employee or others. If at any time after the
Employment Period, Employee determines that he has any Trade Secrets in his possession or control,
Employee shall immediately return them to the Company, including all copies thereof.

     11. Best Efforts and Disclosure. Employee agrees that, while he is employed with the
Company, he shall devote business time and attention to the Company’s business and shall use his
best efforts to promote its success. Further, Employee shall promptly disclose to the Company all
ideas, inventions, computer programs, and discoveries, whether or not patentable or copyrightable,
which he may conceive or make, alone or with others, during the Employment Period, whether or not
during working hours, and which directly or indirectly:

	 	(a)	 	relate to a matter within the scope, field, duties or responsibility of
Employee’s employment with the Company; or
	 
	 	(b)	 	are based on any knowledge of the actual or anticipated business or interests
of the Company; or
	 
	 	(c)	 	are aided by the use of time, materials, facilities or information of the
Company.

     Employee assigns to the Company, without further compensation, any and all rights, titles and
interest in all such ideas, inventions, computer programs and discoveries in all countries of the
world that pertain to the current products and services of the Company. Employee recognizes that
all ideas, inventions, computer programs and discoveries of the type described above, conceived or
made by Employee alone or with others within 12 months after the Termination Date (voluntary or
otherwise), are likely to have been conceived in significant part either while employed by the
Company or as a direct result of knowledge Employee had of proprietary information or Trade
Secrets. Accordingly, Employee agrees that such ideas, inventions or discoveries shall be presumed
to have been conceived during his Employment Period, unless and until the contrary is clearly
established by the Employee.

     12. Inventions and Other Works. Any and all writings, computer software, inventions,
improvements, processes, procedures and/or techniques which Employee may make, conceive, discover,
or develop, either solely or jointly with any other person or persons, at any time during the
Employment Period, whether at the request or upon the suggestion of the Company or otherwise, which
relate to or are useful in connection with any of the current products and services of the Company
shall be the sole and exclusive property of the Company. Employee agrees to take any and all
actions necessary or appropriate so that the Company can prepare and present applications for
copyright or Letters Patent therefor, and secure such copyright or Letters Patent wherever
possible, as well as reissue renewals, and extensions thereof, and obtain the record title to such
copyright or patents. Employee shall not be entitled to any additional or special compensation or
reimbursement regarding any such writings, computer software, inventions, improvements, processes,
procedures and techniques. Employee acknowledges that the Company from time to time may have
agreements with other persons or entities which impose obligations or restrictions on the Company
regarding inventions made during the course of work thereunder or regarding the confidential nature
of such work. Employee agrees to be bound by all such obligations and restrictions, and to take
all action necessary to discharge the obligations of the Company.

     13. Non-Solicitation Restriction. To protect Trade Secrets following the Employment
Period, it is necessary to enter into the following restrictive covenants which are ancillary to
the enforceable promises between the Company and Employee in Sections 9 through 12 and
other provisions of this Agreement. Employee hereby covenants and agrees that he will not,
directly or indirectly, either individually or as a principal, partner, agent, consultant,
contractor, employee, or as a director or officer of any entity, or in any other manner or capacity
whatsoever, except on behalf of the Company, solicit business, or attempt to solicit business, in
products or services competitive with any products or services offered or performed by the Company
or any Subsidiary from the Company’s or Subsidiary’s customers as of the Termination Date, or those
individuals or entities with whom the Company or Subsidiary conducted business during the two-year
period ending on

 

 

the Termination Date. The prohibitions set forth in this Section 13 shall remain in
effect for a period of one (1) year following the Termination Date.

     14. Non-Competition Restriction. Employee hereby agrees that in order to protect
Trade Secrets, it is necessary to enter into the following restrictive covenant, which is ancillary
to the enforceable promises between the Company and Employee in Sections 9 through 13 and
other provisions of this Agreement. Employee hereby covenants and agrees that during the
Employment Period, and for a period of one (1) year following the Termination Date, Employee will
not, without the prior written consent of the Board or the Compensation Committee, become
interested in any capacity in which Employee would perform any duties, directly or indirectly
(whether as proprietor, stockholder, director, partner, employee, agent, independent contractor,
consultant, trustee, or in any other capacity), with respect to any entity which competes with the
current products and services of the Company or any of its Affiliates including, but not limited
to, Halliburton Company, Weatherford International Ltd., BJ Services Company, Rockbit
International, Varel International, Baker Hughes, Inc. and Tuboscope Vetco International, Inc. or
any of their subsidiaries or other affiliates, as determined by the Company (a “Competing
Enterprise”); provided, however, Employee shall not be deemed to be participating or engaging in a
Competing Enterprise solely by virtue of his ownership of not more than one percent (1%) of any
class of stock or other securities which are publicly traded on a national securities exchange or
in a recognized over-the-counter market.

     15. No-Recruitment Restriction. Employee agrees that during the Employment Period,
and for a period of one (1) year following the Termination Date, Employee will not, either directly
or indirectly, or by acting in concert with others, solicit or influence, or seek to solicit or
influence, any employee or independent contractor performing services for the Company or any
Subsidiary to terminate, reduce or otherwise adversely affect his or her employment or other
relationship with the Company or any Subsidiary.

     16. Tolling. If Employee violates any of the restrictions contained in Sections
13, 14 or 15, then notwithstanding any provision hereof to the contrary, the restrictive period
will be suspended and will not run in favor of Employee from the time of the commencement of any
such violation until the time when the Employee cures the violation to the reasonable satisfaction
of the Compensation Committee.

     17. Reformation. If a court or arbitrator rules that any time period or the
geographic area specified in any restrictive covenant in Sections 9 through 16 is
unenforceable, then the time period will be reduced by the number of months, or the geographic area
will be reduced by the elimination of such unenforceable portion, or both, so that the restrictions
may be enforced in the geographic area and for the time to the full extent permitted by law.

     18. Conflicts of Interest. In keeping with his fiduciary duties to Company, Employee
hereby agrees that he shall not become involved in a conflict of interest, or upon discovery
thereof, allow such a conflict to continue at any time during the Employment Period. In this
respect, Employee agrees to fully comply with any conflict of interest agreement entered into
between the Employee and the Company or any Subsidiary. In the instance of a violation of the
conflict of interest agreement to which Employee is a party, it may be necessary for Board to
terminate Employee’s employment for Cause.

     19. Remedies. Employee acknowledges that the restrictions contained in Sections 9
through 18 of this Agreement, in view of the nature of the Company’s business, are reasonable
and necessary to protect the Company’s or Subsidiary’s legitimate business interests, and that any
violation would result in irreparable injury to the Company or Subsidiary. Notwithstanding the
arbitration provisions in Section 26, in the event of a breach or a threatened breach by
Employee of any provision of Sections 9 through 18, the Company shall be entitled to a
temporary restraining order and injunctive relief restraining Employee from the commission of any
breach, and to recover the Company’s attorneys’ fees, costs and expenses related to the breach or
threatened breach. Nothing contained in this Agreement shall be construed as prohibiting the
Company from pursuing any other remedies available to it for any such breach or threatened breach,
including, without limitation, the recovery of money damages, attorneys’ fees, and costs. These
covenants and agreements shall each be construed as independent of any other provisions in this
Agreement, and the existence of any claim or cause of action by Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants and agreements. Moreover, the restrictive covenants
in Sections 9 through 18 shall supplement, and be in addition to, any other restrictive
covenants to which Employee is a party, or otherwise subject to, under any other agreement or
policy.

     20. Withholdings; Right of Offset. The Company may withhold and deduct from any
benefits and payments made or to be made pursuant to this Agreement (a) all federal, state, local
and other taxes as may be required pursuant to any law or governmental regulation or ruling, (b)
all other normal employee deductions made with respect to Company’s employees generally, and (c)
any advances made to Employee and owed to Company.

 

 

     21. Nonalienation. The right to receive payments under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge or
encumbrance by Employee, his dependents or beneficiaries, or to any other person who is or may
become entitled to receive such payments hereunder. The right to receive payments hereunder shall
not be subject to or liable for the debts, contracts, liabilities, engagements or torts of any
person who is or may become entitled to receive such payments, nor may the same be subject to
attachment or seizure by any creditor of such person under any circumstances, and any such
attempted attachment or seizure shall be void and of no force and effect.

     22. Incompetent or Minor Payees. Should the Board or the Compensation Committee
determine, in its discretion, that Employee or any other person to whom any payment is payable
under this Agreement has been determined to be legally incompetent or is a minor, any payment due
hereunder, notwithstanding any other provision of this Agreement to the contrary, may be made in
any one or more of the following ways: (a) directly to such minor or person; (b) to the legal
guardian or other duly appointed personal representative of the person or estate of such minor or
person; or (c) to such adult or adults as have, in the good faith knowledge of the Board or the
Compensation Committee, assumed custody and support of such minor or person; and any payment so
made shall constitute full and complete discharge of any liability under this Agreement in respect
to the amount paid.

     23. Severability. It is the desire of the parties hereto that this Agreement be
enforced to the maximum extent permitted by law, and should any provision contained herein be held
unenforceable by a court of competent jurisdiction or arbitrator (pursuant to Section 26),
the parties hereby agree and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided, however, if such provision
cannot be reformed, it shall be deemed ineffective and deleted herefrom without affecting any other
provision of this Agreement. This Agreement should be construed by limiting and reducing it only
to the minimum extent necessary to be enforceable under then applicable law.

     24. Title and Headings; Construction. Titles and headings to Sections hereof are for
the purpose of reference only and shall in no way limit, define or otherwise affect the provisions
hereof. The words “herein”, “hereof”, “hereunder” and other compounds of the word “here” shall
refer to the entire Agreement and not to any particular provision.

     25. Governing Law; Jurisdiction. All matters or issues relating to the
interpretation, construction, validity, and enforcement of this Agreement shall be governed by the
laws of the State of Texas, without giving effect to any choice-of-law principle that would cause
the application of the laws of any jurisdiction other than Texas. Jurisdiction and venue of any
action or proceeding relating to this Agreement or any Dispute (to the extent arbitration is not
required under Section 30) shall be exclusively in Harris County, Texas.

     26. Mandatory Arbitration. Except as provided in subsection (h) of this Section
26, any Dispute (as defined in Section 6(c)) must be resolved by binding arbitration in
accordance with the following:

          (a) Party may begin arbitration by filing a demand for arbitration in accordance with the
Arbitration Rules and concurrently Notifying the other Party of that demand. If the Parties are
unable to agree upon a panel of three arbitrators within ten days after the demand for arbitration
was filed (and do not agree to an extension of that ten-day period), either Party may request the
Houston, Texas office of the American Arbitration Association (“AAA”) to appoint the arbitrator or
arbitrators necessary to complete the panel in accordance with the Arbitration Rules. Each
arbitrator so appointed shall be deemed accepted by the Parties as part of the panel.

          (b) The arbitration shall be conducted in the Houston metropolitan area at a place and time
agreed upon by the Parties with the panel, or if the Parties cannot agree, as designated by the
panel. The panel may, however, call and conduct hearings and meetings at such other places as the
Parties may agree or as the panel may, on the motion of one Party, determine to be necessary to
obtain significant testimony or evidence.

          (c) The panel may authorize any and all forms of discovery upon a Party’s showing of need that
the requested discovery is likely to lead to material evidence needed to resolve the Dispute and is
not excessive in scope, timing, or cost.

          (d) The arbitration shall be subject to the Federal Arbitration Act and conducted in
accordance with the Arbitration Rules to the extent that they do not conflict with this Section
26. The Parties and the panel may, however, agree to vary to provisions of this Section
26 or the matters otherwise governed by the Arbitration Rules.

 

 

          (e) The arbitration hearing shall be held within 60 days after the appointment of the panel.
The panel’s final decision or award shall be made within 30 days after the hearing. That final
decision or award shall be made by unanimous or majority vote or consent of the arbitrators
constituting the panel, and shall be deemed issued at the place of arbitration. The panel’s final
decision or award shall be based on this Agreement and applicable law.

          (f) The panel’s final decision or award may include injunctive relief in response to any
actual or impending breach of this Agreement or any other actual or impending action or omission of
a Party under or in connection with this Agreement.

          (g) The panel’s final decision or award shall be final and binding upon the Parties, and
judgment upon that decision or award may be entered in any court having jurisdiction. The Parties
waive any right to apply or appeal to any court for relief from the preceding sentence or from any
decision of the panel made before the final decision or award.

          (h) Nothing in this Section 26 limits the right of either Party to apply to a court
having jurisdiction to (i) enforce the agreement to arbitrate in accordance with this Section
26, (ii) seek provisional or temporary injunctive relief, in response to an actual or impending
breach of the Agreement or otherwise so as to avoid an irreparable damage or maintain the status
quo, until a final arbitration decision or award is rendered or the Dispute is otherwise resolved,
or (iii) challenge or vacate any final arbitration decision or award that does not comply with this
Section 26. In addition, nothing in this Section 26 prohibits the Parties from
resolving any Dispute (in whole or in part) by agreement.

     The panel may proceed to an award notwithstanding the failure of any Party to participate
in such proceedings. The prevailing Party in the arbitration proceeding may be entitled to an
award of reasonable attorneys’ fees incurred in connection with the arbitration in such amount,
if any, as determined by the panel in its discretion. The costs of the arbitration shall be
borne equally by the Parties unless otherwise determined by the panel in its award.

     The panel shall be empowered to impose sanctions and to take such other actions as it deems
necessary to the same extent a judge could impose sanctions or take such other actions pursuant
to the Federal Rules of Civil Procedure and applicable law. Each party agrees to keep all
Disputes and arbitration proceedings strictly confidential except for disclosure of information
required by applicable law which cannot be waived.

     This Section 26 shall not preclude the Parties at any time from mutually agreeing to
pursue non-binding mediation of the Dispute.

     27. Binding Effect: Third Party Beneficiaries. This Agreement shall be binding upon
and inure to the benefit of the Parties hereto, and to their respective heirs, executors,
beneficiaries, personal representatives, successors and permitted assigns hereunder, but otherwise
this Agreement shall not be for the benefit of any third parties.

28. Entire Agreement; Amendment and Termination. This Agreement together with the
Change-of-Control Employment Agreement between the Company and the Employee dated as of
                     (the “Change-of-Control Agreement”) contain the entire agreement of the Parties
hereto with respect to the matters covered herein; moreover, this Agreement supersedes all prior
and contemporaneous agreements and understandings, oral or written, between the Parties concerning
the subject matter hereof other than the Change-of-Control Agreement (it being agreed that should
there be any conflict between this Agreement and the Change-of-Control Agreement, this Agreement
shall control); provided that notwithstanding anything to the contrary in this Agreement or in the
Change-of-Control Agreement, upon the event of a Change of Control, as defined in the
Change-of-Control Agreement (i) the length of Employee’s “Employment Period” for all purposes under
the Change-of-Control Agreement shall not be extended beyond the Term of Employment set forth in
Section 4 of this Agreement (such Term of Employment remaining under this Agreement at the time of
any Change of Control, the “Term of Employment”); (ii) the amount payable by the Company to the
Employee pursuant to the Change-of-Control Agreement shall not exceed the amount that Employee
would have received during the Term of Employment had he remained an employee of the Company during
the entire Term of Employment pursuant to this Agreement; and (iii) the period for the continuation
of the Employee’s benefits set forth in Section 6 of the Change-of-Control Agreement shall not
exceed the Term of Employment. This Agreement may be amended, waived or terminated only by a
written instrument that is identified as an amendment, waiver or termination hereto and that is
executed on behalf of both Parties. 2. Any provisions of the Employment Agreement not specifically
amended herein shall remain in full force and effect.

     29. Survival of Certain Provisions. Wherever appropriate to the intention of the
Parties, the respective rights and obligations of the Parties hereunder shall survive any
termination or expiration of this Agreement.

 

 

     30. Waiver of Breach. No waiver by either Party hereto of a breach of any provision
of this Agreement by any other Party, or of compliance with any condition or provision of this
Agreement to be performed by such other Party, will operate or be construed as a waiver of any
subsequent breach by such other Party or any similar or dissimilar provision or condition at the
same or any subsequent time. The failure of either Party hereto to take any action by reason of
any breach will not deprive such Party of the right to take action at any time while such breach
continues.

     31. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the Company and its Subsidiaries (and its and their successors), as well as upon any
person or entity acquiring, whether by merger, consolidation, purchase of assets, dissolution or
otherwise, all or substantially all of the capital stock, business and/or assets of the Company (or
its successor) regardless of whether the Company is the surviving or resulting corporation. The
Company shall require any successor (whether direct or indirect, by purchase, merger,
consolidation, dissolution or otherwise) to all or substantially all of the capital stock, business
or assets of the Company to expressly assume 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
occurred; provided, however, no such assumption shall relieve the Company of any of its duties or
obligations hereunder unless otherwise agreed, in writing, by Employee.

     This Agreement shall inure to the benefit of and be enforceable by Employee’s personal or
legal representative, executors, administrators, successors, and heirs. In the event of the death
of Employee while any amount is payable hereunder, all such amounts shall be paid to the Designated
Beneficiary (as defined in Section 6(c)).

     32. Notice. Each notice or other communication required or permitted under this
Agreement shall be in writing and transmitted, delivered, or sent by personal delivery, prepaid
courier or messenger service (whether overnight or same-day), prepaid telecopy or facsimile, or
prepaid certified United States mail (with return receipt requested), addressed (in any case) to
the other Party at the address for that Party set forth below that Party’s signature on this
Agreement, or at such other address as the recipient has designated by Notice to the other Party.

     Each notice or communication so transmitted, delivered, or sent (a) in person, by courier or
messenger service, or by certified United States mail shall be deemed given, received, and
effective on the date delivered to or refused by the intended recipient (with the return receipt,
or the equivalent record of the courier or messenger, being deemed conclusive evidence of delivery
or refusal), or (b) by telecopy or facsimile shall be deemed given, received, and effective on the
date of actual receipt (with the confirmation of transmission being deemed conclusive evidence of
receipt, except where the intended recipient has promptly Notified the other Party that the
transmission is illegible). Nevertheless, if the date of delivery or transmission is not a business
day, or if the delivery or transmission is after 5:00 p.m. (CST) on a business day, the notice or
other communication shall be deemed given, received, and effective on the next business day.

     33. Employee Acknowledgment. Employee acknowledges that (a) he is knowledgeable and
sophisticated as to business matters, including the subject matter of this Agreement, (b) he has
read this Agreement and understands its terms and conditions, (c) he has had ample opportunity to
discuss this Agreement with his own legal counsel prior to execution, and (d) no strict rules of
construction shall apply for or against the drafter or any other Party. Employee represents that
he is free to enter into this Agreement including, without limitation, that he is not subject to
any covenant not to compete that would conflict with his duties under this Agreement.

     34. Counterparts. This Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.

[Signature page follows.]

 

 

     IN WITNESS WHEREOF, Employee has hereunto set his hand and Company has caused this Agreement
to be executed in its name and on its behalf by its duly authorized officer, to be effective as of
the Effective Date.

	 	 	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Signature:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	SMITH INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Its:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Date:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 	 	P.O. Box 60068 (77205-0068)	 	 
	 	 	16740 Hardy Street	 	 
	 	 	Houston, TX 77032

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