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EXHIBIT 10.1 EMPLOYMENT AGREEMENT WITH
NON-COMPETITION PROVISION
THIS EMPLOYMENT AGREEMENT ( this "Agreement"), made this
[___] day of December, 2008 and effective as of the 1st day of
January, 2009 (the "Effective Date"), is entered into by SMITH
INTERNATIONAL, INC. , a Delaware corporation with its principal
place of business at Houston, Texas (the "Company"), and DOUG
ROCK , an individual (the "Executive"). The Company and
Executive are referred to in this Agreement singularly as a "Party"
and collectively as the "Parties".
WHEREAS, the Company has and wishes to continue to employ
Executive, and Executive desires to continue his employment by the
Company; and
WHEREAS , the Parties wish this Agreement to memorialize
their agreements as to the terms and conditions of
Executive’s employment.
NOW
THEREFORE , in consideration of the mutual covenants and
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by the Parties, the Parties do agree as follows:
1. Other
Agreements . The Company and Executive are parties to:
(i) an Employment Agreement dated as of December 10, 1987
(the "Employment Agreement"); and (ii) a Change-of-Control
Employment Agreement dated as of January 4, 2000 (the "Change
of Control Agreement"). The Employment Agreement and the Change of
Control Agreement (collectively, the "Prior Agreements") determine
the terms of Executive’s employment prior to the Effective
Date except as provided hereinafter. Except as to eligibility for
an annual bonus for 2008 as further described in paragraph 4.2, the
Parties intend that the Prior Agreements expire and have no further
force or effect as of 11:59 p.m. on December 31, 2008 and
that this Agreement control and determine all terms of Executives
employment with the Company on or after the Effective Date. As
further described in paragraph 9.9, from and after the Effective
Date this Agreement shall supersede any other pre-existing
agreement between the parties with respect to the subject matter
hereof. The foregoing notwithstanding, the Parties understand and
agree that the terms of all awards made under the Company’s
Long-Term Incentive Compensation Plan (the "LTICP"), which awards
were made prior to the Effective Date, shall continue to be
controlled by the LTICP and the relevant award agreements.
Furthermore, the Parties understand and agree that
Executive’s service on the Company’s Board of Directors
(the "Board") does not fall within the scope of this Agreement.
2. Term of
Employment . The Company hereby agrees to continue
Executive’s employment, and Executive accepts the
continuation of his employment, under the terms set forth in this
Agreement, for the period commencing on the Effective Date and
ending on the first day following the conclusion of the
Company’s annual meeting of shareholders for calendar year
2010 (the "Termination Date"), unless terminated sooner in
accordance with the provisions of paragraph 5. The "Employment
Period" under this Agreement shall mean the period of time that
starts on the Effective Date and that ends on the Date of
Termination as determined under paragraph 5.5.
3. Title; Capacities;
Duties . Executive shall serve as Special Executive Advisor
or in such other position as the Board may determine from time to
time. The foregoing description of Executive’s position shall
not limit the Company from assigning to Executive other duties and
functions in addition to or in substitution for those described
above. Executive shall be subject to the supervision of, and shall
have such authority as is delegated to him by, the Board or the
Company’s Chief Executive Officer. The parties intend, and
reasonably anticipate, that in no event shall Executive’s
average level of services to the Company and the group of entities
which are considered a single employer with the Company for
purposes of Section 414(b) and (c) of Internal Revenue Code of
1986, as amended (the "Code") during the Employment Period be less
than 20% of the average level of services Executive performed for
the Company such entities during the 36-month period prior to the
Effective Date. 4. Compensation and Benefits . 4.1
Salary . During the Employment Period, the Company
shall pay Executive an annual base salary of $1,300,000, which
shall be paid in regular periodic installments consistent with the
Company’s general pay practices. 4.2 Bonus .
Executive’s eligibility for an annual bonus based on the
Company’s performance for 2008, shall be determined under the
terms of the Prior Agreements, provided that such bonus shall be
paid no later than the 15th day of the third month of 2009 unless
Executive shall elect to defer the receipt of such Annual Bonus
under the Smith International, Inc. Amended and Restated
Post-2004 Supplemental Executive Retirement Plan, effective as
of January 1, 2006, as amended from time to time, or a
successor plan (collectively, the "SERP"). Executive shall be
eligible for a cash bonus based on the Company’s performance
for 2009, under the Company’s Annual Incentive Plan, at a
bonus target of 120% of Annual Base Salary, upon meeting the goals
the Board sets for the Company’s Chief Executive Officer (the
"Annual Bonus"). The Annual Bonus shall be paid no later than the
15th day of the third month of 2010 unless Executive shall elect to
defer the receipt of such Annual Bonus under the SERP. Executive
shall not be eligible for an annual bonus, nor for any pro-ration
thereof, based on the Company’s performance related to its
2010 fiscal year or otherwise with respect to the Company’s
2010 fiscal year. 4.3 Incentive Savings and Retirement
Plans . The Employment Period shall constitute
Executive’s continued employment, with no break in service,
for purposes of Executive’s vesting and eligibility in all of
the Company’s equity-based compensation programs and all
other savings and retirement plans, practices, policies or
programs. The foregoing sentence notwithstanding, Executive shall
not be eligible to receive any awards under the LTICP during the
Employment Period. 4.4 Welfare Benefit Plans . During
the Employment Period, Executive and/or Executive’s-family,
as the case may be, shall continue to 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 senior executives of
the Company and its affiliated companies. 4.5 Fringe
Benefits . During the Employment Period, Executive shall be
entitled to continued participation in the Company’s
Executive Perquisite Program which provides compensation to
Executive to cover: an annual physical, financial planning and tax
return preparation, payment of club dues, an automobile allowance,
mobile phone purchase, and fees for legal counseling for Executive.
4.6 Reimbursement of Expenses . The Company shall
reimburse Executive for all reasonable travel, entertainment and
other expenses incurred or paid by Executive in connection with, or
related to, the performance of his duties, responsibilities or
services under this Agreement, upon presentation by Executive of
documentation, expense statements, vouchers and/or such other
supporting information as is required under the Company’s
policies and practices related to reimbursement of business
expenses. 4.7 Office and Support Staff . During the
Employment Period, Executive shall be entitled to an office with
furnishings and other appointments, and to personal secretarial and
other assistance as provided generally with respect to other senior
executives of the Company. 4.8 Vacation . During the
Employment Period, Executive shall be entitled to paid vacation in
accordance with the plans, policies, programs and practices of the
Company with respect to other senior executives of the Company. 5.
Employment Termination . Executive’s employment
by the Company pursuant to this Agreement shall terminate upon the
occurrence of any of the following: 5.1 Death or
Disability . Executive’s employment shall terminate
automatically upon Executive’s death during the Employment
Period. If the Company determines in good faith that a Disability
of Executive has occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may give to
Executive written notice of its intention to terminate
Executive’s employment. In such event, Executive’s
employment with the Company shall terminate effective on the 30th
day after receipt of such notice by Executive (the "Disability
Effective Date"), provided that, within the 30 days after such
receipt, Executive shall not have returned to full-time performance
of Executive’s duties. For purposes of this Agreement,
"Disability" shall mean the absence of Executive from
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 Executive or Executive’s legal
representative. 5.2 Upon a Change of Control .
Executive’s employment shall terminate automatically upon a
Change of Control. For purposes of this Agreement, a "Change of
Control" shall mean: 5.2.1 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 30% 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
subparagraph, 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 subparagraph 5.2.3; or 5.2.2 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 5.2.3 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, 30% 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 5.2.4 Approval by the shareholders of the
Company of a complete liquidation or dissolution of the Company.
5.3 For Cause . The Company may terminate
Executive’s employment during the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall mean: 5.3.1
The willful and continued failure of Executive to perform
substantially 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 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 Executive has not substantially
performed
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