CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT



         AGREEMENT by and between Smith International, Inc., a Delaware

corporation (the "Company") and MICHAEL D. PEARCE (the "Executive"), effective

as of the 15th day of May, 2005.



         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. 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





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the "Effective Date" shall mean the date immediately prior to the date of such

termination of employment.



         (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.



         2. 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

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