EXHIBIT 10.3
SECOND AMENDMENT TO THE
SMITH INTERNATIONAL, INC.
1989 LONG-TERM INCENTIVE COMPENSATION PLAN
(As Amended and Restated as of January 1, 2005)
W I T N E S S E T H
     WHEREAS, Smith International, Inc. (the “Company”) maintains the Smith
International, Inc. 1989 Long-Term Incentive Compensation Plan (the “Plan”) for
the purpose of providing additional incentives to officers and other valued
employees of the Company; and
     WHEREAS, in Section 7.7 of the Plan, the Board of Directors of the Company
(the “Board”) reserved the discretionary right to amend the Plan at any time;
and
     WHEREAS, the Board now desires to amend the Plan, to (i) permit an
electronic Incentive Agreement (the “Agreement”) as evidence of the award; and
(ii) permit that the Agreement, with the approval of the Board, need not be
signed by a representative of the Company or a Participant but can be accepted
by electronic means.
     NOW, THEREFORE, effective as of the dates specified below, the Plan is
hereby amended by this Second Amendment thereto, as follows:
     1. Effective as of January 1, 2006, Section 1.2(s) of the Plan is hereby
amended by replacing the definition of “Incentive Agreement” used therein with
the following new definition:
     Incentive Agreement. The written agreement (whether in a hard copy or in an
electronic form approved by the Committee) between the Company and the Grantee
setting forth the terms and conditions pursuant to which an Incentive Award is
granted under the Plan, as such agreement is further defined in Section 6.1.
2. Effective as of January 1, 2006, Section 2.2(a) of the plan is here by
amended by replacing the first sentence of the Section with the following
sentence:
     Each grant of a Stock Option shall be evidenced by a written Incentive
Agreement, either in hard copy or in an electronic form approved by the
Committee.
     3. Effective as of January 1, 2006, Section 6.1 of the Plan is hereby
amended by replacing the last sentence of the Section with the following
sentence:
     The Incentive Agreement shall be signed by the Grantee to whom the
Incentive Award is made and by an Authorized Officer; provided, however, the
Committee, in its discretion, may from time to time approve another method of
acceptance by the Grantee.
     IN WITNESS WHEREOF, this Second Amendment to the Plan is hereby executed on
this 17th day of October, 2006, to be effective as of the dates specified
therein.

                  ATTEST:       SMITH INTERNATIONAL, INC.
 
               
By:
  /s/ PAMELA L. KUNKEMOELLER       By:   /s/ RICHARD E. CHANDLER, JR.
 
               
 
               
Name:
  Pamela L. Kunkemoeller       Name:   Richard E. Chandler, Jr.
Title:
  Senior Corporate Counsel and Assistant
      Secretary       Title:   Senior Vice President, General Counsel and
     Secretary

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