SMITH INTERNATIONAL, INC. PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
EXHIBIT 10.5
XXXXX INTERNATIONAL, INC.
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT
THIS PERFORMANCE-BASED RESTRICTED STOCK UNIT AGREEMENT (this “Agreement”) is made and entered
into by and between Xxxxx International, Inc., a Delaware corporation (the “Company”) and
«Full_Legal_Name», an individual and employee of the Company (“Grantee”), on the «Grant_Date» day
of «Grant_Date», «Grant_Date», (the “Grant Date”), subject to the terms and provisions of the Xxxxx
International, Inc., 1989 Long-Term Incentive Compensation Plan, as amended and restated effective
January 1, 2005 (the “Plan”). The Plan is hereby incorporated herein in its entirety by this
reference. Capitalized terms not otherwise defined in this Agreement shall have the meaning given
to such terms in the Plan.
WHEREAS, Grantee is an employee of the Company, and in connection therewith, the Company
desires to grant to Grantee performance-based restricted stock units, subject to the terms and
conditions of this Agreement and the Plan, with a view to increasing Grantee’s interest in the
Company’s success and growth; and
WHEREAS, Grantee desires to be the holder of such units subject to the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the premises, mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
1. Grant of Target Units. Subject to the terms and conditions of this Agreement and the Plan,
the Company hereby grants to Grantee «Shares_Granted» («Shares_Granted») Target Units (“Target
Units”). Subject to Section 3 hereof, each Target Unit shall initially represent one
share of the Company’s Common Stock (“Share”), $1.00 par value. Each Target Unit represents an
unsecured promise of the Company to deliver Shares to the Grantee pursuant to the terms and
conditions of the Plan and this Agreement. As a holder of Target Units, the Grantee has only the
rights of a general unsecured creditor of the Company.
2. Transfer Restrictions. Grantee shall not sell, assign, transfer, exchange, pledge,
encumber, gift, devise, hypothecate or otherwise dispose of (collectively, “Transfer”) any Target
Units granted hereunder. Any purported Transfer of Target Units in breach of this Agreement shall
be void and ineffective, and shall not operate to Transfer any interest or title in the purported
transferee.
3. Performance Criteria and Stock Awards. Upon satisfaction of the Performance Criteria as
established by the Compensation and Benefits Committee of the Company’s Board of Directors (the
“Committee”), the Company shall determine the number of Shares payable to Grantee as provided under
this Agreement, subject to certification by the Committee that the specified Performance Criteria
have been satisfied. The maximum number of Shares of the Company’s Common Stock that will be
awarded under this Agreement is determined as a percentage of Grantee’s Target Units, such
percentage based on the Company’s fiscal year «YEAR» return on equity, as calculated by reference
to the Company’s audited financial statements, in such manner as established by the Committee.
4. Vesting and Payment of Target Units.
(a) Grantee’s interest in the Target Units granted hereunder shall vest in accordance with the
following schedule, conditioned on Grantee’s continued employment with the Company as of each such
vesting date (the “Vesting Date”), except as provided in Section 5 hereof.
| Vesting Date | Percentage of Target Units Vested | |
| «Vest_Date1» | 33 1/3 % | |
| «Vest_Date2» | 33 1/3 % | |
| «Vest_Date3» | 33 1/3 % | |
| TOTAL | 100% |
(b) Settlement of Target Units. Subject to Section 7 hereof, the Company
shall grant to Grantee, within two and one-half (21/2) months after the end of the calendar year in
which Target Units become vested pursuant to Section 4(a) above, a number of Shares equal
to the number of such vested Target Units determined in accordance with
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Sections 3 and 4,
(provided Grantee has not terminated employment prior to the applicable Vesting Date) unless
otherwise provided under Section 5 hereof. Each vested Target Unit shall thus be exchanged
by the Company for one Share, and such Target Unit shall be cancelled as of the effective time of
such exchange as reflected on the Company’s stock records. All Shares delivered to or on behalf of
Grantee in exchange for vested Target Units shall be subject to any further vesting, transfer or
other restrictions as may be required by securities law or other applicable law as determined by
the Company.
(c) Dividends, Splits and Voting Rights. If the Company (i) declares a stock dividend
or makes a distribution on Common Stock in Shares, (ii) subdivides or reclassifies outstanding
Shares into a greater number of Shares, or (iii) combines or reclassifies outstanding Shares into a
smaller number of Shares, then the number of Target Units granted under this Agreement shall be
proportionately increased or reduced, as applicable, so as to prevent the enlargement or dilution
of Grantee’s rights and duties hereunder. The determination of the Committee regarding such
adjustments shall be binding. Until such time as Shares are actually delivered to Grantee in
exchange for vested Target Units pursuant to Section 4(b) (above), Grantee shall have no
voting, dividend or other ownership rights in such Shares.
5. Forfeiture.
(a) Termination Due to Death or Disability. If Grantee’s employment with the Company
is terminated due to death or Disability of the Grantee, then, in either such event, all
outstanding Units hereunder shall become fully vested as of such termination date and shall be
payable to Grantee, or Grantee’s Beneficiary in the event of Grantee’s death, in Shares within
thirty (30) days of such date; provided, however, that if Grantee’s employment with the Company is
terminated due to death or Disability of the Grantee before the date upon which the number of
Shares payable to Grantee is determined under Section 3, then payment for such outstanding
Units that are payable hereunder shall be made to Grantee, or Grantee’s Beneficiary in the event of
Grantee’s death, within the time provided under Section 4(b).
For purposes of this Section 5(a), “Disability” means, as determined by the Committee
in its discretion exercised in good faith, a physical or mental condition of the Grantee that would
entitle Grantee to payment of disability income payments under the Company’s long-term disability
insurance policy or plan for employees, as then effective, if any; or in the event that the Grantee
is not covered, for whatever reason, under the Company’s long-term disability insurance policy or
plan, “Disability” means a permanent, and total disability as defined in Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”). A determination of Disability may be made
by a physician selected or approved by the Committee and, in this respect, the Grantee must submit
to any reasonable examination(s) required by such physician upon request in order to render an
opinion regarding whether there is a Disability. This definition of Disability shall be
construed in accordance with the meaning given such term under the Code with respect to a
termination of Employment due to Disability for a “Key Employee” as defined in Code Section 409A.
(b) Termination Other than Death or Disability. If Grantee’s employment with the
Company is voluntarily or involuntarily terminated by the Company or Grantee for any reason other
than due to death or Disability, then Grantee shall immediately forfeit all Target Units which are
not already vested as of such date. Upon the forfeiture of any Target Units hereunder, the Grantee
shall cease to have any rights in connection with such Target Units as of the date of such
forfeiture. A transfer of employment by the Grantee, without an interruption of employment
service, between or among the Company and any parent or subsidiary of the Company, shall not be
considered a termination of employment for purposes of this Agreement.
6. Grantee’s Representations. Notwithstanding any provision hereof to the contrary, the
Grantee hereby agrees and represents that Grantee will not acquire any Shares, and that the Company
will not be obligated to issue any Shares to the Grantee hereunder, if the issuance of such Shares
constitutes a violation by the Grantee or the Company of any law or regulation of any governmental
authority. Any determination in this regard that is made by the Committee, in good faith, shall be
final and binding. The rights and obligations of the Company and the Grantee are subject to all
applicable laws and regulations.
7. Tax Withholding. To the extent that the receipt of Shares hereunder results in compensation
income to Grantee for federal, state or local income tax purposes, the Company, in its complete
discretion, is authorized to (a) withhold, at such time as determined by the Company, from any cash
or other remuneration (including withholding from delivery to Grantee a number of Shares, based on
the market value of such Shares, as of the applicable Vesting Date), or combination thereof, then
or thereafter payable to Grantee, an amount that the Company requires to meet its tax withholding
obligations under applicable law or regulation (the “Withholding Liability”); or (b) require
Grantee to pay an amount, at such time as the Company shall specify, equal to the Withholding
Liability in cash, by certified or cashier’s check payable to the Company, or in any other form
acceptable to the Company. Further, the Company’s obligation to deliver vested Shares, or any
stock
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certificate or certificates representing vested Shares, to Grantee shall be subject to, and
conditioned upon, payment of the Withholding Liability.
8. Miscellaneous.
(a) No Fractional Shares. All provisions of this Agreement concern whole Shares. If
the application of any provision hereunder would yield a fractional Share, such fractional Share
shall be rounded down to the next whole Share.
(b) Not an Employment Agreement. This Agreement is not an employment agreement, and
no provision of this Agreement shall be construed or interpreted to create any employment
relationship between Grantee and the Company for any time period. The employment of Grantee with
the Company shall be subject to termination to the same extent as if this Agreement had not been
executed.
(c) Dispute Resolution. Any dispute or controversy arising out of or relating to this
Agreement, or any breach hereof, shall be resolved by binding arbitration in accordance with (i)
the Commercial Arbitration Rules (“Rules”) of the American Arbitration Association (“AAA”) before a
single arbitrator (unless otherwise mutually agreed by the parties) as selected pursuant to the
Rules and (ii) the Federal Arbitration Act. Judgment on any award rendered by the arbitrator may
be entered in any court of competent jurisdiction. The venue for any arbitration proceeding shall
be in Xxxxxx or Xxxxxxxxxx County, Texas, except if otherwise mutually agreed by the parties. The
fees of the AAA and the arbitrator shall be split equally by the parties. All other costs and
expenses, including attorneys’ fees, relating to the resolution of any such dispute shall be borne
by the party incurring such costs and expenses.
(d) Notices. Any notice, instruction, authorization, request or demand required
hereunder shall be in writing, and shall be delivered either by personal delivery, by telegram,
telex, telecopy or similar facsimile means, by certified or registered mail, return receipt
requested, or by courier or delivery service, addressed to the Company at its then current main
corporate address, and to Grantee at his address indicated on the Company’s records, or at such
other address and number as a party has previously designated by written notice given to the other
party in the manner hereinabove set forth. Notices shall be deemed given when received, if sent by
facsimile means (confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communications sent by facsimile means); and when delivered and receipted
for (or upon the date of attempted delivery where delivery is refused), if hand-delivered,
sent by express courier or delivery service, or sent by certified or registered mail, return
receipt requested.
(e) Amendment, Termination and Waiver. This Agreement may be amended, modified,
terminated or superseded only by written instrument executed by or on behalf of the Company and by
Grantee. Any waiver of the terms or conditions hereof shall be made only by a written instrument
executed and delivered by the party waiving compliance. Any waiver granted by the Company shall be
effective only if executed and delivered by a duly authorized executive officer of the Company
other than Grantee. The failure of any party at any time or times to require performance of any
provisions hereof shall in no manner affect the right to enforce the same. No waiver by any party
of any term or condition herein, or the breach thereof, in one or more instances shall be deemed to
be, or construed as, a further or continuing waiver of any such condition or breach or a waiver of
any other condition or the breach of any other term or condition.
(f) Governing Law and Severability. This Agreement shall be governed by the internal
laws, and not the laws of conflict, of the State of Texas. The invalidity of any provision of this
Agreement shall not affect any other provision of this Agreement, which shall remain in full force
and effect.
(g) Successors and Assigns. This Agreement shall bind, be enforceable by, and inure
to the benefit of, the Company and its successors and assigns, and Grantee and Grantee’s permitted
assigns under the Plan in the event of death or Disability.
[Signature page follows.]
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IN WITNESS WHEREOF, this Restricted Stock Unit Agreement is approved, granted and executed as
of the date first written above.
| XXXXX INTERNATIONAL, INC. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| GRANTEE: | ||||
| «Full_Legal_Name» | ||||
| Signature | ||||
| Print Name | ||||
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