exv10w1






Exhibit 10.1




CREDIT AGREEMENT




dated as of December 10, 2009




among




SMITH INTERNATIONAL, INC.




and




M-I L.L.C.,




The Lenders From Time to Time Party Hereto




and




JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

as Administrative Agent




WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Syndication Agent




CALYON NEW YORK BRANCH, DNB NOR BANK ASA and FORTIS BANK SA/NV, NEW YORK BRANCH,

as Co-Documentation Agents




J.P. MORGAN SECURITIES INC., WELLS FARGO SECURITIES, LLC, CALYON NEW YORK BRANCH, DNB NOR

BANK ASA

as Co-Lead Arrangers




and




J.P. MORGAN SECURITIES INC. AND WELLS FARGO SECURITIES, LLC,

as Joint Bookrunners




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	 
	 	 	 	 
	ARTICLE I Definitions
	 	 	1	 
	 
	Section 1.01 Defined Terms
	 	 	1	 
	 
	Section 1.02 Classification of Loans and Borrowings
	 	 	10	 
	 
	Section 1.03 Terms Generally
	 	 	10	 
	 
	Section 1.04 Accounting Terms; GAAP
	 	 	10	 
	 
	ARTICLE II The Credits
	 	 	10	 
	 
	Section 2.01 Revolving Commitments
	 	 	10	 
	 
	Section 2.02 Loans and Borrowings
	 	 	10	 
	 
	Section 2.03 Requests for Borrowings
	 	 	11	 
	 
	Section 2.04 Letters of Credit
	 	 	12	 
	 
	Section 2.05 Funding of Borrowings
	 	 	14	 
	 
	Section 2.06 Interest Elections
	 	 	15	 
	 
	Section 2.07 Termination, Reduction and Increase of Revolving Commitments
	 	 	15	 
	 
	Section 2.08 Repayment of Loans; Evidence of Debt
	 	 	16	 
	 
	Section 2.09 Prepayment of Loans
	 	 	16	 
	 
	Section 2.10 Fees
	 	 	17	 
	 
	Section 2.11 Interest
	 	 	18	 
	 
	Section 2.12 Alternate Rate of Interest
	 	 	18	 
	 
	Section 2.13 Increased Costs
	 	 	18	 
	 
	Section 2.14 Break Funding Payments
	 	 	19	 
	 
	Section 2.15 Taxes
	 	 	19	 
	 
	Section 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	20	 
	 
	Section 2.17 Mitigation Obligations; Replacement of Lenders
	 	 	21	 
	 
	Section 2.18 Defaulting Lender
	 	 	22	 
	 
	Section 2.19 Smith Guaranty of Obligations of M-I LLC
	 	 	23	 
	 
	ARTICLE III Representations and Warranties
	 	 	25	 
	 
	Section 3.01 Organization; Powers
	 	 	25	 
	 
	Section 3.02 Authorization; Enforceability
	 	 	25	 
	 
	Section 3.03 Governmental Approvals; No Conflicts
	 	 	25	 
	 
	Section 3.04 Financial Condition
	 	 	25	 
	 
	Section 3.05 Properties
	 	 	25	 
	 
	Section 3.06 Litigation and Environmental Matters
	 	 	25	 
	 
	Section 3.07 Compliance with Laws and Agreements
	 	 	26	 
	 
	Section 3.08 Investment Company Status
	 	 	26	 
	 
	Section 3.09 Taxes
	 	 	26	 
	 
	Section 3.10 ERISA
	 	 	26	 






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TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	 
	 	 	 	 
	Section 3.11 Disclosure
	 	 	26	 
	 
	ARTICLE IV Conditions
	 	 	26	 
	 
	Section 4.01 Effective Date
	 	 	26	 
	 
	Section 4.02 Each Credit Event
	 	 	27	 
	 
	ARTICLE V Affirmative Covenants
	 	 	27	 
	 
	Section 5.01 Financial Statements; Ratings Change and Other Information
	 	 	27	 
	 
	Section 5.02 Notices of Material Events
	 	 	28	 
	 
	Section 5.03 Existence; Conduct of Business
	 	 	28	 
	 
	Section 5.04 Payment of Obligations
	 	 	29	 
	 
	Section 5.05 Maintenance of Properties; Insurance
	 	 	29	 
	 
	Section 5.06 Books and Records; Inspection Rights
	 	 	29	 
	 
	Section 5.07 Compliance with Laws
	 	 	29	 
	 
	Section 5.08 Use of Proceeds and Letters of Credit
	 	 	29	 
	 
	Section 5.09 Financial Covenants
	 	 	29	 
	 
	ARTICLE VI Negative Covenants
	 	 	29	 
	 
	Section 6.01 Subsidiary Indebtedness
	 	 	29	 
	 
	Section 6.02 Liens
	 	 	30	 
	 
	Section 6.03 Fundamental Changes
	 	 	30	 
	 
	Section 6.04 Transactions with Affiliates
	 	 	30	 
	 
	Section 6.05 Restrictions on M-I LLC Dividends
	 	 	31	 
	 
	ARTICLE VII Events of Default
	 	 	31	 
	 
	ARTICLE VIII The Administrative Agent
	 	 	32	 
	 
	ARTICLE IX Miscellaneous
	 	 	33	 
	 
	Section 9.01 Notices
	 	 	33	 
	 
	Section 9.02 Waivers; Amendments
	 	 	34	 
	 
	Section 9.03 Expenses; Indemnity; Damage Waiver
	 	 	34	 
	 
	Section 9.04 Successors and Assigns
	 	 	35	 
	 
	Section 9.05 Survival
	 	 	37	 
	 
	Section 9.06 Counterparts; Integration; Effectiveness
	 	 	37	 
	 
	Section 9.07 Severability
	 	 	37	 
	 
	Section 9.08 Right of Setoff
	 	 	38	 
	 
	Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process
	 	 	38	 
	 
	Section 9.10 WAIVER OF JURY TRIAL
	 	 	38	 
	 
	Section 9.11 Headings
	 	 	38	 
	 
	Section 9.12 Confidentiality
	 	 	38	 
	 
	Section 9.13 Interest Rate Limitation
	 	 	39	 






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TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	 
	 	 	 	 
	Section 9.14 Syndication Agent and Documentation Agents
	 	 	39	 
	 
	Section 9.15 USA Patriot Act
	 	 	39	 
	 
	Section 9.16 Amendment and Restatement
	 	 	40	 
	 
	 	 	 	 
	Schedule 1.01 — Applicable Margin
	 	 	 	 
	Schedule 2.01 — Revolving Commitments
	 	 	 	 
	Schedule 6.01 — Existing Subsidiary Indebtedness
	 	 	 	 
	Schedule 6.02 — Existing Liens
	 	 	 	 
	 
	 	 	 	 
	Exhibit A — Assignment and Assumption
	 	 	 	 
	Exhibit B-1 — Tranche A Revolving Note
	 	 	 	 
	Exhibit B-2 — Tranche B Revolving Note
	 	 	 	 
	Exhibit B-3 — Swingline Note
	 	 	 	 






iii









 





CREDIT AGREEMENT




     CREDIT AGREEMENT (as amended, modified, restated, supplemented and in effect from time to
time, herein called this “Agreement”) dated as of December 10, 2009, among SMITH
INTERNATIONAL, INC., a Delaware corporation, M-I L.L.C., a Delaware limited liability company, the
LENDERS party hereto, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Syndication Agent, CALYON NEW YORK
BRANCH, DNB NOR BANK ASA and FORTIS BANK SA/NV, NEW YORK BRANCH, as Co-Documentation Agents, J.P.
MORGAN SECURITIES INC., WELLS FARGO SECURITIES, LLC, CALYON NEW YORK BRANCH and DNB NOR BANK ASA,
as Co-Lead Arrangers, and J.P. MORGAN SECURITIES INC. and WELLS FARGO SECURITIES, LLC, as Joint
Bookrunners, and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent for the
Lenders.



ARTICLE I

Definitions




     The parties hereto agree as follows:



     Section 1.01 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:



     “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.



     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
(a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.



     “Adjusted One Month LIBOR Rate” means, for any day, the sum of (i) 1.00% per annum
plus (ii) the LIBO Rate for an interest period of one (1) month multiplied by (b) the Statutory
Reserve Rate.



     “Administrative Agent” means JPMorgan Chase Bank, National Association, in its
capacity as administrative agent for the Lenders hereunder, and its successors in that capacity.



     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.



     “Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.



     “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a)
the Chase Floating Rate for that day in effect on such day and (b) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the
Chase Floating Rate for that day or the Federal Funds Effective Rate shall be effective from and
including the effective date of such change in the Chase Floating Rate for that day or the Federal
Funds Effective Rate, respectively.



     “Applicable Percentage” means, with respect to any Lender and amounts relating to the
Tranche A Revolving Commitments or the Tranche B Revolving Commitments, as the case may be, the
percentage of the total Revolving Commitments represented by such Lender’s Tranche A Revolving
Commitment or Tranche B Revolving Commitment, as the case may be; provided that in the case of
Section 2.18 when a Defaulting Lender shall exist, subject to the provisions of Section
2.18(c)(i), “Applicable Percentage” shall mean the percentage of the total Tranche A
Revolving Commitments or Tranche B Revolving Commitments, as the case may be (disregarding any
Defaulting Lender’s Tranche A Revolving Commitment or Tranche B Revolving Commitment, as the case
may be) represented by such Lender’s Tranche A Revolving Commitment or Tranche B Revolving
Commitment, as the case may be. If the Tranche A Revolving Commitments or Tranche B Revolving
Commitments, as the case may be have terminated or expired, the Applicable Percentages shall be
determined based upon the Tranche A Revolving Commitments or Tranche B Revolving Commitments, as
the case may be, most recently in effect, giving effect to any assignments.



 









 





     “Applicable Margin” means, for any day with respect to any ABR Loan or Eurodollar Loan
or with respect to the commitment fees payable hereunder, as the case may be, the applicable margin
per annum set forth on Schedule 1.01 hereto under the caption “ABR Applicable Margin”,
“Adjusted LIBO Applicable Margin” or “Commitment Fee”, as the case may be, based upon the ratings
by Moody’s and S&P, respectively, applicable on such date to the Index Debt. For purposes of the
foregoing, (i) if both Moody’s and S&P shall not have in effect a rating for the Index Debt (other
than by reason of the circumstances referred to in the last sentence of this definition), then such
rating agencies shall be deemed to have established a rating in Category 5, and if either (but not
both), Moody’s and S&P shall not have in effect a rating for the Index Debt (other than by reason
of the circumstances referred to in the last sentence of this definition), then the remaining
rating shall control; (ii) if the ratings established or deemed to have been established by Moody’s
and S&P for the Index Debt shall fall within different Categories, the Applicable Margin shall be
based on the higher of the two ratings unless one of the two ratings is two or more Categories
lower than the other, in which case the Applicable Margin shall be determined by reference to the
Category next below that of the higher of the two ratings; and (iii) if the ratings established or
deemed to have been established by Moody’s and S&P for the Index Debt shall be changed (other than
as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as
of the date on which it is first announced by the applicable rating agency, irrespective of when
notice of such change shall have been furnished to the Agent and the Lenders pursuant to
Section 5.01 or otherwise. Each change in the Applicable Margin shall apply during the
period commencing on the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody’s or S&P shall change,
or if either such rating agency shall cease to be in the business of rating corporate debt
obligations, the Borrowers and the Lenders shall negotiate in good faith to amend this definition
to reflect such changed rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Margin shall be determined by
reference to the rating most recently in effect prior to such change or cessation.



     “Approved Fund” has the meaning assigned to such term in Section 9.04.



     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section
9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other
form approved by the Administrative Agent.



     “Board” means the Board of Governors of the Federal Reserve System of the United
States of America and any successor entity performing similar functions.



     “Borrower” means (i) as to the Tranche A Revolving Commitments, Smith and (ii) as to
the Tranche B Revolving Commitments, M-I LLC. The term “Borrowers” means Smith and M-I LLC.



     “Borrowing” means (a) Loans of the same Type made, converted or continued on the same
date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect and
(b) a Swingline Loan.



     “Borrowing Request” means a request by a Borrower for a Borrowing in accordance with
Section 2.03.



     “Business Day” means any day that is not a Saturday, Sunday or other day on which
national banks in New York City are authorized or required by law to remain closed;
provided that, when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in Dollar deposits in
the London interbank market.



     “Capital Lease Obligations” means, as to any Person, the obligations of such Person to
pay rent or other amounts under a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board, as amended) and, for
purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP (including such Statement No. 13). Capital Lease Obligations
shall not include the interest component of any applicable rental payment.



     “Ceiling Rate” means, on any day, the maximum nonusurious rate of interest permitted
for that day by whichever of applicable federal or New York (or any jurisdiction whose usury laws
are deemed to apply to the Notes or any other Loan Documents despite the intention and desire of
the parties to apply the usury laws of the State of New York) laws permits the higher interest
rate, stated as a rate per annum. On each day, if any, that the Texas Finance Code establishes the
Ceiling Rate, the Ceiling Rate shall be the “weekly ceiling” (as defined in the Texas Finance Code)
for that day. Administrative Agent may from time to time, as to current and future balances,
implement any other ceiling under the Texas Finance Code by notice to the Borrowers, if and to the
extent permitted by the Texas Finance Code. Without notice to the Borrowers or any other Person,
the Ceiling Rate shall automatically fluctuate upward and downward as and in the amount by which
such maximum nonusurious rate of interest permitted by applicable law fluctuates.



2









 





     “Change in Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof), of Equity Interests representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of Smith; (b) occupation of a majority
of the seats (other than vacant seats) on the board of directors of Smith by Persons who were
neither (i) nominated by the board of directors of Smith nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of Smith by any Person or group.



     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.13(b), by any
lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any)
with any request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.



     “Chase Floating Rate” means the Prime Rate; provided that the Chase Floating Rate
shall, on any day, not be less than the Adjusted One Month LIBOR Rate for deposits being delivered
in the London interbank market on that day. The Chase Floating Rate is a variable rate and any
change in the Chase Floating Rate due to any change in the Prime Rate or the Adjusted One Month
LIBOR Rate is effective from and including the effective date of such change in the Prime Rate or
the Adjusted One Month LIBOR Rate, respectively.



     “CLO” has the meaning assigned to such term in Section 9.04.



     “Code” means the Internal Revenue Code of 1986, as amended from time to time.



     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling” and “Controlled”
have meanings correlative thereto.



     “Debt to Capitalization Ratio” shall mean, as of any day, without duplication, the
ratio of (a) interest bearing Indebtedness (including Indebtedness bearing imputed interest as a
result of having been issued at a discount and including the principal component of Capital Lease
Obligations) to (b) the sum of (i) such interest bearing Indebtedness plus (ii) stockholders’
equity as determined in accordance with GAAP plus (iii) minority interests in majority-owned
Subsidiaries. For purposes of this definition, the term “Indebtedness” shall not include
intercompany debt which is held by a Borrower or any of their Subsidiaries.



     “Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.



     “Defaulting Lender” means any Lender, as reasonably determined by the Administrative
Agent, that has (a) failed to fund any portion of its Loans or participations in Letters of Credit
or Swingline Loans within three Business Days of the date required to be funded by it hereunder
unless such Lender’s failure to fund such Loan is based on such Lender’s good faith determination
that the conditions precedent to funding such Loan under this Agreement have not been satisfied and
such Lender has notified the Administrative Agent in writing of such, (b) notified a Borrower, the
Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender in writing that it does
not intend to comply with any of its funding obligations under this Agreement or has made a public
statement to the effect that it does not intend to comply with its funding obligations under this
Agreement or under other agreements in which it commits to extend credit, (c) failed, within three
Business Days after written request by the Administrative Agent (based on the reasonable belief
that it may not fulfill its funding obligation), to confirm that it will comply with the terms of
this Agreement relating to its obligations to fund prospective Loans and participations in then
outstanding Letters of Credit and Swingline Loans, (d) otherwise failed to pay over to the
Administrative Agent or any other Lender any other amount required to be paid by it hereunder
within three Business Days of the date when due, unless the subject of a good faith dispute, or (e)
(i) become or is insolvent or has a parent company that has become or is insolvent or (ii) become
the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee
or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent
to, approval of or acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding or appointment. A
Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any
ownership interest in such Lender or a parent company thereof or the exercise of control over a
Lender or parent company thereof by a Governmental Authority or instrumentality thereof.



     “Dollars” or “$” refers to lawful money of the United States of America.



3









 





     “Effective Date” means the first date on which the conditions specified in Section
4.01 are satisfied (or waived in accordance with Section 9.02).



     “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, relating in any way to the environment, preservation or reclamation
of natural resources or the management, release or threatened release of any Hazardous Material.



     “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of a
Borrower or any Material Subsidiary directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment or (e) any contract,
agreement or other consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.



     “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with a Borrower, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.



     “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by a
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by a Borrower or any ERISA Affiliate from the PBGC or
a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by a Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by a Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from a Borrower or any ERISA Affiliate of any notice, concerning
the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.



     “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.



     “Eurodollar Office” means with respect to any Lender the office or offices of such
Lender which shall be making or maintaining the Eurodollar Borrowing of such Lender hereunder. A
Eurodollar Office of any Lender may be, at the option of such Lender, either a domestic or foreign
office.



     “Event of Default” has the meaning assigned to such term in Article VII.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
a Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by
the United States of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the applicable Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by a
Borrower under Section 2.17(b)), any withholding tax that is imposed on amounts payable to
such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or
designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with
Section 2.15(e), except to the extent that such Foreign Lender (or its assignor, if any)
was entitled, at the time of designation of a new lending office (or assignment), to receive
additional amounts from the applicable Borrower with respect to such withholding tax pursuant to
Section 2.15(a).



4









 





     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by the
Administrative Agent.



     “Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or controller of the applicable Borrower.



     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than that in which the Borrowers are located. For purposes of this definition, the United
States of America, each State thereof and the District of Columbia shall be deemed to constitute a
single jurisdiction.



     “GAAP” means generally accepted accounting principles in the United States of America.



     “Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.



     “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or obligation;
provided, that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business.



     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.



     “Indebtedness” shall mean and include with respect to any Person (a) all items which
in accordance with GAAP would be included on the liability side of a balance sheet of such Person
on the date as of which Indebtedness is to be determined (excluding capital stock, surplus, surplus
reserves and deferred credits); (b) all guaranties, letter of credit contingent reimbursement
obligations, endorsements and other contingent obligations in respect of, or any obligations to
purchase or otherwise acquire, Indebtedness of others, and (c) all Indebtedness secured by any Lien
existing on any interest of such Person in property owned subject to such Lien whether or not the
Indebtedness secured thereby shall have been assumed; provided, that the term “Indebtedness” shall
not mean or include any Indebtedness in respect of which monies sufficient to pay and discharge the
same in full (either on the expressed date of maturity thereof or on such earlier date as such
Indebtedness may be duly called for redemption and payment) shall be deposited, in a manner and
with a depository, agency or trustee reasonably acceptable to the Agent, in trust for the payment
thereof. “Indebtedness” shall not include trade payables and expense accruals incurred in the
ordinary course of the applicable Person’s business provided that such payables have not remained
unpaid for a period of ninety (90) days after the same became due. Expenses which are classified
as “operating lease expenses” under GAAP shall not constitute “Indebtedness” under this Agreement.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Index Debt” means senior, unsecured, long-term indebtedness for borrowed money of
Smith that is not guaranteed by any other Person or subject to any other credit enhancement.



     “Interest Election Request” means a request by a Borrower to convert or continue a
Revolving Loan in accordance with Section 2.06.



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     “Interest Expense” shall mean, for any period, the sum of (a) the cash interest
payments by an obligor made or accrued in accordance with GAAP during such period in connection
with all of its interest-bearing Indebtedness and (b) the interest component of any Capital Lease
Obligations.



     “Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline
Loan), the first day of each January, April, July and October, (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period, and (c) with respect to any Swingline
Loan, the day that such Loan is required to be repaid.



     “Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the date which is one or two weeks
thereafter or on the numerically corresponding day in the calendar month that is one, two, three,
six, nine or twelve months thereafter, as a Borrower may elect; provided, that (i) if any
Interest Period would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the next preceding
Business Day, and (ii) any Interest Period that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which
such Borrowing is made and thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.



     “Issuing Bank” means JPMorgan Chase Bank, National Association (or any other Lender
which agrees to issue any Letter of Credit upon request by a Borrower), in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.04(i). The Issuing Bank may, in its discretion, arrange for one or more Letters
of Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank”
shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.



     “LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of
Credit.



     “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements
that have not yet been reimbursed by or on behalf of the Borrowers at such time. The LC Exposure
of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.



     “Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other than any such
Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the
context otherwise requires, the term “Lenders” includes the Swingline Lender.



     “Letter of Credit” means any letter of credit issued pursuant to this Agreement.



     “LIBO Rate”, with respect to any Eurodollar Borrowing for any Interest Period: (a) a
rate per annum equal to the offered rate for deposits in Dollars for a period equal or comparable
to such Interest Period which appears on Page BBAM of the Bloomberg Financial Markets Information
Service as of 11:00 A.M. (New York time) two Business Days prior to the first day of such Interest
Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on
such page or service or such page or service shall cease to be available, the rate per annum equal
to the rate determined by the Administrative Agent as the offered rate on such other page or other
service that displays an average British Bankers Association Interest Settlement Rate for deposits
in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such
Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, or (c) in the event the rates referenced in the preceding
subsections (a) and (b) are not available, the rate per annum determined by the Administrative
Agent (in its reasonable discretion) as the rate of interest at which Dollar deposits (for delivery
on the first day of such Interest Period) in same day funds in the approximate amount of the
applicable Eurodollar Borrowing and with a term equivalent to such Interest Period would be offered
by the Administrative Agent’s Eurodollar Office to major banks in the offshore Dollar market at
their request at approximately 11:00 a.m. (New York time) two Business Days prior to the first day
of such Interest Period.



     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities.



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     “Loan Documents” means, collectively, this Agreement, the Notes, all instruments,
certificates and agreements now or hereafter executed or delivered to the Administrative Agent or
any Lender pursuant to any of the foregoing or in connection with the obligations of the Borrowers
under this Agreement and the other Loan Documents or any commitment regarding such obligations, and
all amendments, modifications, renewals, extensions, increases and rearrangements of, and
substitutions for, any of the foregoing.



     “Loans” means the loans made by the Lenders to a Borrower pursuant to this Agreement.



     “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
property or condition (financial or otherwise) of Smith and its Subsidiaries, taken as a whole, (b)
the validity or enforceability against the Borrowers of any of the Loan Documents or (c) the rights
of or benefits available to the Administrative Agent or the Lenders under any Loan Document.



     “Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any Borrower or any of their
Material Subsidiaries in an aggregate principal amount exceeding $50,000,000. For purposes of
determining Material Indebtedness, the “principal amount” of the obligations in respect of any Swap
Agreement at any time shall be the maximum aggregate amount (giving effect to any netting
agreements) that would be required to be paid if such Swap Agreement were terminated at such time.



     “Material Subsidiary” means M-I LLC and each other Subsidiary of Smith with assets
comprising 5% or more of the aggregate fair market value of all assets of Smith and its
Subsidiaries on a consolidated basis or with a tangible net worth comprising 5% or more of the
tangible net worth of Smith and its Subsidiaries on a consolidated basis.



     “M-I LLC” means M-I L.L.C., a Delaware limited liability company.



     “Moody’s” means Moody’s Investors Service, Inc.



     “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.



     “Notes” shall have the meaning assigned to such term in Section 2.02(a)
hereof.



     “Obligations” means, as at any date of determination thereof, the sum of the
following: (i) the aggregate principal amount of Loans outstanding hereunder, plus (ii) the
aggregate amount of the LC Exposure.



     “Other Taxes” means any and all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any payment made under any
Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any
Loan Document.



     “Participant” has the meaning set forth in Section 9.04.



     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.



     “Permitted Encumbrances” means:



     (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance
with the provisions of this Agreement;



     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing obligations that are not
overdue by more than 30 days or are being contested in compliance with Section 5.04;



     (c) Liens, pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations;



     (d) deposits to secure insurance obligations and the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, in each case in the ordinary course of business;



     (e) judgment and similar liens in respect of judgments that do not constitute an Event of
Default under this Agreement; and



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     (f) easements, zoning restrictions, rights-of-way and similar encumbrances and restrictions on
real property imposed by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of a Borrower or any of their Subsidiaries;



     (g) Liens arising from Swap Agreements;


provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.




     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.



     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which a Borrower or any ERISA Affiliate is (or, if such plan were terminated,
would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.



     “Prime Rate” means, on any day, the prime rate of JPMorgan Chase Bank, National
Association in effect for that day at the principal offices of JPMorgan Chase Bank, National
Association in New York City. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate or a favored rate, and Administrative Agent and each Lender
disclaims any statement, representation or warranty to the contrary. Administrative Agent or any
Lender may make commercial loans or other loans at rates of interest at, above or below the Prime
Rate.



     “Register” has the meaning set forth in Section 9.04.



     “Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.



     “Required Lenders” means, at any time, Lenders having Revolving Exposures and unused
Revolving Commitments representing more than 50% of the sum of the total Revolving Exposures and
unused Revolving Commitments at such time.



     “Revolving Availability Period” means the period from and including the Effective Date
to but excluding the earlier of the Revolving Maturity Date and the date of termination of the
applicable Revolving Commitment.



     “Revolving Commitment” means a Tranche A Revolving Commitment or a Tranche B Revolving
Commitment.



     “Revolving Exposure” means Tranche A Revolving Exposure, Tranche B Revolving Exposure
or Swingline Exposure at such time.



     “Revolving Loan” means a Tranche A Revolving Loan or a Tranche B Revolving Loan.



     “Revolving Maturity Date” means March 1, 2013.



     “S&P” means Standard & Poor’s Ratings Group.



     “Smith” means Smith International, Inc., a Delaware corporation.



     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative Agent is subject, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any comparable regulation.
The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.



     “Subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests



8









 




representing more than 50% of the equity or more than 50% of the ordinary voting power or, in
the case of a partnership, more than 50% of the general partnership interests are, as of such date,
owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or
one or more Subsidiaries of the parent or by the parent and one or more Subsidiaries of the parent.




     “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom stock or
similar plan providing for payments only on account of services provided by current or former
directors, officers, employees or consultants of a Borrower or any of their Subsidiaries shall be a
Swap Agreement.



     “Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall
be its Applicable Percentage of the total Swingline Exposure at such time. The initial maximum
amount of Swingline Exposure is $100,000.000.



     “Swingline Lender” means JPMorgan Chase Bank, National Association, in its capacity as
lender of Swingline Loans hereunder.



     “Swingline Loan” means a Loan made pursuant to Section 2.20.



     “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.



     “Tranche A Revolving Commitment” means, with respect to each Lender, the commitment,
if any, of such Lender to make Tranche A Revolving Loans and to acquire participations in Letters
of Credit issued at the request of Smith and in Swingline Loans, expressed as an amount
representing the maximum aggregate amount of such Lender’s Tranche A Revolving Exposure hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b)
reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04. The initial amount of each Lender’s Tranche A Revolving Commitment is set
forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Tranche A Revolving Commitment, as applicable. The initial aggregate amount
of the Lenders’ Tranche A Revolving Commitments is $1,000,000,000. The aggregate Tranche A
Revolving Commitments shall be automatically reduced from time to time by the aggregate Tranche B
Revolving Exposure of the Lenders.



     “Tranche A Revolving Exposure” means, with respect to any Lender at any time, the sum
of the outstanding principal amount of such Lender’s Tranche A Revolving Loans, its LC Exposure at
such time attributable to Letters of Credit requested by Smith and its Swingline Exposure.



     “Tranche A Revolving Loan” means a Loan made pursuant to Section 2.01(a).



     “Tranche B Revolving Commitment” means, with respect to each Lender, the commitment,
if any, of such Lender to make Tranche B Revolving Loans and to acquire participations in Letters
of Credit issued at the request of M-I LLC, expressed as an amount representing the maximum
aggregate amount of such Lender’s Tranche B Revolving Exposure hereunder, as such commitment may be
(a) reduced or increased from time to time pursuant to Section 2.07 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender pursuant to Section
9.04. The initial amount of each Lender’s Tranche B Revolving Commitment is set forth on
Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have
assumed its Tranche B Revolving Commitment, as applicable. The initial aggregate amount of the
Lenders’ Tranche B Revolving Commitments is $125,000,000.



     “Tranche B Revolving Exposure” means, with respect to any Lender at any time, the sum
of the outstanding principal amount of such Lender’s Tranche B Revolving Loans and its LC Exposure
at such time attributable to Letters of Credit requested by M-I LLC.



     “Tranche B Revolving Loan” means a Loan made pursuant to Section 2.01(b).



     “Transactions” means (a) the execution, delivery and performance by each Borrower of
the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder and (b) the execution, delivery and
performance by the Borrowers of each other document and instrument required to satisfy the
conditions precedent to the initial Loan hereunder.



9









 





     “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.



     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.



     Section 1.02 Classification of Loans and Borrowings. For purposes of this Agreement,
Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan”). Borrowings
also may be classified and referred to by Type (e.g., a “Eurodollar Borrowing”).



     Section 1.03 Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.



     Section 1.04 Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if a Borrower notifies the Administrative Agent
that such Borrower requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Borrowers that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.



ARTICLE II

The Credits




     Section 2.01 Revolving Commitments.



     (a) Subject to the terms and conditions set forth herein, each Lender agrees to make Tranche A
Revolving Loans to Smith from time to time during the Revolving Availability Period in an aggregate
principal amount that will not result in such Lender’s Tranche A Revolving Exposure exceeding such
Lender’s Tranche A Revolving Commitment. Within the foregoing limits and subject to the terms and
conditions set forth herein, Smith may borrow, prepay and reborrow Tranche A Revolving Loans.



     (b) Subject to the terms and conditions set forth herein, each Lender agrees to make Tranche B
Revolving Loans to M-I LLC from time to time during the Revolving Availability Period in an
aggregate principal amount that will not result in such Lender’s Tranche B Revolving Exposure
exceeding such Lender’s Tranche B Revolving Commitment. Within the foregoing limits and subject to
the terms and conditions set forth herein, M-I LLC may borrow, prepay and reborrow Tranche B
Revolving Loans.



     (c) In no event shall any Lender have any obligation to make any Loan if, as a result thereof,
(i) the sum of the aggregate of all Tranche A Revolving Exposure plus the aggregate of all
Tranche B Revolving Exposure would exceed $1,000,000,000 (minus any reduction of the Tranche A
Revolving Commitments pursuant to Section 2.07(b) hereof) or (ii) the aggregate of all
Tranche A Revolving Exposure would exceed the aggregate of all Tranche A Revolving Commitments or
(iii) the aggregate of all Tranche B Revolving Exposure would exceed the aggregate of all Tranche B
Revolving Commitments.



     Section 2.02 Loans and Borrowings.



     (a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of
Loans of the same Type made by the Lenders ratably in accordance with their respective Tranche A
Revolving Commitments or Tranche B Revolving Commitments, as the case may be. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other



10









 






	 	 	Lender of its obligations hereunder; provided that the Revolving Commitments of the
Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans
as required. The Tranche A Revolving Loans made by each Lender shall be evidenced by a single Note
of Smith in substantially the form of Exhibit B-1 payable to the order of such Lender in a
principal amount equal to the applicable Tranche A Revolving Commitment of such Lender, and
otherwise duly completed. The Tranche B Revolving Loans made by each Lender shall be evidenced by
a single Note of M-I LLC in substantially the form of Exhibit B-2 payable to the order of
such Lender in a principal amount equal to the applicable Tranche B Revolving Commitment of such
Lender, and otherwise duly completed. The Swingline Loans made by the Swingline :Lender shall be
evidenced by a single Note of Smith in substantially the form of Exhibit B-3 payable to the
order of the Swingline Lender in the principal amount of $100,000,000, and otherwise duly completed
Such notes, together with all renewals, extensions, modifications and replacements thereof and
substitutions therefor, being herein called a “Note” and collectively called the
“Notes”. Each Lender is hereby authorized by the applicable Borrower to endorse on the
schedule (or a continuation thereof) that may be attached to each Note of such Lender, to the
extent applicable, the date, amount, type of and the applicable period of interest for each Loan
made by such Lender to such Borrower hereunder, and the amount of each payment or prepayment of
principal of such Loan received by such Lender, provided, that any failure by such Lender to make
any such endorsement shall not affect the obligations of such Borrower under such Note or hereunder
in respect of such Loan.





     (b) Subject to Section 2.12, each Revolving Loan shall be comprised entirely of ABR
Loans or Eurodollar Loans as the applicable Borrower may request in accordance herewith. Each
Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such Loan;
provided that any exercise of such option shall not affect the obligation of the applicable
Borrower to repay such Loan in accordance with the terms of this Agreement or otherwise result in
an increased cost to the Borrowers.



     (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing
shall be in an aggregate amount that is equal to $2,000,000 or an increment of $100,000 in excess
thereof. At the time that each ABR Revolving Loan is made, such Borrowing shall be in an aggregate
amount that is equal to $2,000,000 or an increment of $100,000 in excess thereof; provided
that an ABR Revolving Loan may be in an aggregate amount that is equal to the entire unused balance
of the total Tranche A Revolving Commitments or Tranche B Revolving Commitments, as the case may
be, or that is required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.04(e). Each Swingline Loan shall be in an amount that is an integral multiple of
$100,000. Borrowings of more than one Type may be outstanding at the same time; provided
that there shall not at any time be more than a total of fourteen (14) Eurodollar Borrowings
outstanding.



     (d) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled
to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Maturity Date.



     Section 2.03 Requests for Borrowings. To request a Revolving Loan, the applicable
Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a
Eurodollar Borrowing, not later than noon, New York City time, three Business Days before the date
of the proposed Borrowing and (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New
York City time, on the date of the proposed Borrowing; provided that any such notice of an
ABR Revolving Loan to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.04(e) may be given not later than 11:00 a.m., New York City time, on the date of
the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be
confirmed by hand delivery or telecopy to the Administrative Agent on the same day as the
telephonic request of a written Borrowing Request in a form approved by the Administrative Agent
and signed by the applicable Borrower. Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.02:




     (i) the aggregate amount of such Borrowing;




     (ii) the date of such Borrowing, which shall be a Business Day;




     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;




     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable
thereto, which shall be a period contemplated by the definition of the term “Interest
Period”; and




     (v) the location and number of the applicable Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.05.


If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar
Revolving Loan, then the applicable Borrower shall be deemed to have selected an Interest Period of
one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this


11









 






Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount
of such Lender’s Loan to be made as part of the requested Borrowing. Notwithstanding the
foregoing, Borrowers acknowledge that the applicable Borrower shall bear all risk of loss resulting
from disbursements made upon telephonic request.




     Section 2.04 Letters of Credit.



     (a) General. Subject to the terms and conditions set forth herein, any Borrower may
request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, at any time and from time to time during the
Revolving Availability Period. In the event of any inconsistency between the terms and conditions
of this Agreement and the terms and conditions of any form of letter of credit application or other
agreement submitted by the applicable Borrower to, or entered into by the applicable Borrower with,
the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall
control.



     (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter
of Credit), the applicable Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the
amount of such Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the applicable Borrower also shall submit a letter of credit
application on the Issuing Bank’s standard form in connection with any request for a Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance, amendment, renewal or extension of each Letter of Credit the applicable Borrower shall be
deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or
extension, (x) in the case of any Letter of Credit, the total LC Exposure shall not exceed
$200,000,000, the aggregate of all Tranche A Revolving Exposure shall not exceed the aggregate of
all Tranche A Revolving Commitments and the sum of the aggregate of all Tranche A Revolving
Exposure plus the aggregate of all Tranche B Revolving Exposure shall not exceed
$1,000,000,000 (minus any reduction of the Tranche A Revolving Commitments pursuant to Section
2.07(b) hereof), and (y) in the case of a Letter of Credit requested by M-I LLC, the total
Tranche B Revolving Exposures shall not exceed the total Tranche B Revolving Commitments. All
Letters of Credit requested by Smith shall be issued under the Tranche A Revolving Commitments.



     (c) Expiration Date. Each Letter of Credit shall expire no later than three years
after the date of issuance. Any Letter of Credit that shall have an expiration date after the
Revolving Maturity Date shall be subject to cash collateralization (in the manner described in
Section 2.04(j) hereof), such cash collateralization to be delivered to the Administrative
Agent on the later of the date of issuance of such Letter of Credit or the date which is ninety
(90) days prior to the Revolving Maturity Date.



     (d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of the
Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s
Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.
In consideration and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the applicable Borrower on the date due as provided in paragraph (e) of this
Section, or of any reimbursement payment required to be refunded to the applicable Borrower for any
reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the
Revolving Commitments, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.



     (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, the applicable Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than 1:00 p.m., New York
City time, on the date that such LC Disbursement is made, if the applicable Borrower shall have
received notice of such LC Disbursement prior to 11:00 a.m., New York City time, on such date, or,
if such notice has not been received by the applicable Borrower prior to such time on such date,
then not later than 1:00 p.m., New York City time, on (i) the Business Day that the applicable
Borrower receives such notice, if such notice is received prior to 11:00 a.m., New York City time,
on the day of receipt, or (ii) the Business Day immediately following the day that the applicable
Borrower receives such notice, if such notice is not received prior to such time on the day of
receipt; provided that the applicable Borrower may, subject to the conditions to



12









 




borrowing set forth herein, request in accordance with Section 2.02 or Section
2.20 that such payment be financed with an ABR Revolving Loan or Swingline Loan in an
equivalent amount and, to the extent so financed, the applicable Borrower’s obligation to make such
payment shall be discharged and replaced by the resulting ABR Revolving Loan or Swingline Loan;
provided that the Tranche A Revolving Commitments shall be utilized to make payments related to
Letters of Credit requested by Smith and the Tranche B Revolving Commitments shall be utilized to
make payments related to Letters of Credit requested by M-I LLC. If the applicable Borrower fails
to make such payment when due, the Administrative Agent shall notify each Lender of the applicable
LC Disbursement, the payment then due from the applicable Borrower in respect thereof and such
Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender
shall pay to the Administrative Agent its Applicable Percentage (determined on the basis of the
Tranche A Revolving Commitments or the Tranche B Revolving Commitments, as the case may be) of the
payment then due from the applicable Borrower, in the same manner as provided in Section
2.05 with respect to Loans made by such Lender (and Section 2.05 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any payment from the applicable
Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to
reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or Swingline Loan as
contemplated above) shall not constitute a Loan and shall not relieve the applicable Borrower of
its obligation to reimburse such LC Disbursement.




     (f) Obligations Absolute. The applicable Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii)
any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii)
payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the
provisions of this Section, constitute a legal or equitable discharge of, or provide a right of
setoff against, the applicable Borrower’s obligations hereunder. Neither the Administrative Agent,
the Lenders nor the Issuing Bank, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit
or any payment or failure to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or relating to any
Letter of Credit (including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank
from liability to the applicable Borrower to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent
permitted by applicable law) suffered by the applicable Borrower that are caused by the Issuing
Bank’s failure to exercise care when determining whether drafts and other documents presented under
a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the
absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally
determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have
exercised care in each such determination. In furtherance of the foregoing and without limiting
the generality thereof, the parties agree that, with respect to documents presented which appear on
their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or information to the contrary,
or refuse to accept and make payment upon such documents if such documents are not in strict
compliance with the terms of such Letter of Credit.



     (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a Letter of
Credit. The Issuing Bank shall promptly notify the Administrative Agent and the applicable
Borrower by telephone (confirmed by telecopy) of such demand for payment and whether the Issuing
Bank has made or will make an LC Disbursement thereunder; provided that any failure to give
or delay in giving such notice shall not relieve the applicable Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement.



     (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless the applicable Borrower shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such LC Disbursement is made to but excluding the date that the applicable
Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Revolving
Loans; provided that, if the applicable Borrower fails to reimburse such LC Disbursement
when due pursuant to paragraph (e) of this Section, then Section 2.11(c) shall
apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank,
except that interest accrued on and



13









 




after the date of payment by any Lender pursuant to paragraph (e) of this Section to
reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.




     (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by
written agreement among the Borrowers, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement
of the Issuing Bank. At the time any such replacement shall become effective, the respective
Borrowers shall pay all applicable unpaid fees accrued for the account of the replaced Issuing Bank
pursuant to Section 2.10(c). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under
this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein
to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing
Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and
shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with
respect to Letters of Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.



     (j) Cash Collateralization. If any Event of Default shall occur and be continuing, on
the Business Day that a Borrower receives notice from the Administrative Agent or the Required
Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, such Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in
cash equal to the LC Exposure attributable to such Borrower as of such date plus any accrued and
unpaid interest thereon; provided that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default described in
clause (h) or (i) of Article VII. Each such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the obligations of the
applicable Borrower under this Agreement. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits, which investments shall be made at the option
and sole discretion of the Administrative Agent and at the applicable Borrower’s risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the
applicable Borrower for the LC Exposure at such time or, if the maturity of the Loans has been
accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50%
of the total LC Exposure), be applied to satisfy other obligations of the applicable Borrower under
this Agreement. If a Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to such Borrower within three Business Days after all Events of
Default have been cured or waived.



     Section 2.05 Funding of Borrowings.



     (a) Each Lender shall make each Tranche A Loan or Tranche B Loan, as the case may be, to be
made by it hereunder on the proposed date thereof by wire transfer of immediately available funds
by 1:00 p.m., New York City time, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be
made as provided in Section 2.20. The Administrative Agent will make such Loans available
to the applicable Borrower by promptly crediting the amounts so received, in like funds, to an
account of the applicable Borrower maintained with the Administrative Agent and designated by the
applicable Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans
made to finance the reimbursement of an LC Disbursement as provided in Section 2.04(e)
shall be remitted by the Administrative Agent to the Issuing Bank.



     (b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has
made such share available on such date in accordance with paragraph (a) of this Section and
may, in reliance upon such assumption, make available to the applicable Borrower a corresponding
amount. If a Lender has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay
to the Administrative Agent forthwith on demand such corresponding amount with interest thereon,
for each day from and including the date such amount is made available to the applicable Borrower
to but excluding the date of payment to the Administrative Agent, at (i) in the case of such
Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of a
Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan included in such
Borrowing.



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     Section 2.06 Interest Elections.



     (a) Each Revolving Loan initially shall be of the Type specified in the applicable Borrowing
Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request. Thereafter, the applicable Borrower may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this Section. The applicable
Borrower may elect different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be
converted or continued.



     (b) To make an election pursuant to this Section, the applicable Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing Request would be
required under Section 2.03 if such Borrower were requesting a Revolving Loan of the Type
resulting from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed by hand delivery
or telecopy to the Administrative Agent on the same day as such telephonic request of a written
Interest Election Request in a form approved by the Administrative Agent and signed by the
applicable Borrower.



     (c) Each telephonic and written Interest Election Request shall specify the following
information:




     (i) the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof to
be allocated to each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);




     (ii) the effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;




     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and




     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period contemplated
by the definition of the term “Interest Period”.



     If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period
of one month’s duration.



     (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.



     (e) If the applicable Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative Agent, at the request
of the Required Lenders, so notifies the Borrowers, then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing
and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end
of the Interest Period applicable thereto.



     Section 2.07 Termination, Reduction and Increase of Revolving Commitments.



     (a) Unless previously terminated, the Revolving Commitments shall terminate on the Revolving
Maturity Date.



     (b) Smith may at any time terminate, or from time to time reduce, the Tranche A Revolving
Commitments; provided that (i) each reduction of the Tranche A Revolving Commitments shall
be in an amount that is an integral multiple of $5,000,000, (ii) Smith shall not terminate the
Tranche A Revolving Commitments unless the Tranche B Revolving Commitments shall be terminated
concurrently, (iii) Smith shall not reduce the Tranche A Revolving Commitments to an amount less
than the then current aggregate amount of the Tranche B Revolving Commitments, and (iv) Smith shall
not terminate or reduce the Tranche A Revolving Commitments if, after giving effect to any
concurrent prepayment of the applicable Revolving Loans in accordance with Section 2.09,
the sum of the Tranche A Revolving Exposures would exceed the total Tranche A Revolving
Commitments.



15









 





     (c) M-I LLC may at any time terminate, or from time to time reduce, the Tranche B Revolving
Commitments; provided that (i) each reduction of the Tranche B Revolving Commitments shall
be in an amount that is an integral multiple of $5,000,000, (ii) M-I LLC may not reduce the Tranche
B Revolving Commitments more than once in any period of three (3) months, and (iii) M-I LLC shall
not terminate or reduce the Tranche B Revolving Commitments if, after giving effect to any
concurrent prepayment of the applicable Revolving Loans in accordance with Section 2.09,
the sum of the Tranche B Revolving Exposures would exceed the total Tranche B Revolving
Commitments.



     (d) Provided that no Default or Event of Default has occurred and is continuing, the Borrowers
may elect to increase the aggregate of the Tranche B Revolving Commitments to an amount not
exceeding $175,000,000; provided that in no event may the aggregate of the Tranche B Revolving
Commitments exceed the then current aggregate of the Tranche A Revolving Commitments.



     (e) The applicable Borrower shall notify the Administrative Agent of any election to terminate
or reduce the Revolving Commitments under paragraph (b) or paragraph (c) of this
Section, at least three Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. The Borrowers shall notify the
Administrative Agent of any election to increase the Revolving Commitments under paragraph
(d) of this Section, at least thirty days prior to the effective date of such increases,
specifying such election and the effective date thereof. Promptly following receipt of any notice,
the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered
by a Borrower pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Revolving Commitments delivered by a Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case such notice may be
revoked by the applicable Borrower (by notice to the Administrative Agent on or prior to the
specified effective date) if such condition is not satisfied. Any termination or reduction of the
Tranche A Revolving Commitments and any termination of the Tranche B Revolving Commitments shall be
permanent, but reductions or increases of the Tranche B Revolving Commitments shall not. Each
reduction and increase of the Revolving Commitments shall be made ratably among the Lenders in
accordance with their respective Revolving Commitments.



     Section 2.08 Repayment of Loans; Evidence of Debt.



     (a) Smith hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Tranche A Revolving Loan of such
Lender on the Revolving Maturity Date and (ii) to the Swingline Lender the then unpaid principal
amount of each Swingline Loan on the earlier of the Revolving Maturity Date and the first date
after such Swingline Loan is made that is the 15th or last day of a calendar month and is at least
two Business Days after such Swingline Loan is made; provided that on each date that a Tranche A
Revolving Loan is made, the Borrower shall repay all Swingline Loans then outstanding. M-I LLC
hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender
the then unpaid principal amount of each Tranche B Revolving Loan of such Lender on the Revolving
Maturity Date.



     (b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.



     (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and payable from the Borrower
to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.



     (d) The entries made in the accounts maintained pursuant to paragraph (b) or
(c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in any manner affect
the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.



     Section 2.09 Prepayment of Loans.



     (a) Each Borrower shall have the right at any time and from time to time to prepay any
Borrowing in whole or in part, subject to the requirements of this Section.



     (b) The applicable Borrower shall notify the Administrative Agent (and, in the case of
prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving Loan, not later than
noon, New York City time, three Business Days before the date of prepayment or (ii) in the case of
prepayment of an ABR Revolving Loan, not later than noon, New York City time, one Business Day
before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later
than 3:00 p.m., New York City time, on the date of



16









 




prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the
principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of optional prepayment is given in connection with a conditional notice of termination of
the Revolving Commitments as contemplated by Section 2.07, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with Section 2.07.
Promptly following receipt of any such notice (other than a notice relating solely to Swingline
Loans), the Administrative Agent shall advise the Lenders of the contents thereof. Each partial
prepayment of any Borrowing shall be in an amount equal to $2,000,000 or an increment of $100,000
in excess thereof.




     (c) Prepayments of Tranche A Revolving Loans shall be applied ratably among the Lenders
holding Tranche A Revolving Loans and prepayments of Tranche B Revolving Loans shall be applied
ratably among the Lenders holding Tranche B Revolving Loans.



     Section 2.10 Fees.



     (a) Smith agrees to pay to the Administrative Agent for the account of each Lender a
commitment fee, which shall accrue at the Applicable Margin on the average daily unused amount of
the Tranche A Revolving Commitment of such Lender during the period from and including the date
hereof to but excluding the date on which such Tranche A Revolving Commitment terminates and M-I
LLC agrees to pay to the Administrative Agent for the account of each Lender a commitment fee,
which shall accrue at the Applicable Margin on the average daily unused amount of the Tranche B
Revolving Commitment of such Lender during the period from and including the date hereof to but
excluding the date on which such Tranche B Revolving Commitment terminates. For purposes of
computing such commitment fees, (i) a Tranche A Revolving Commitment of a Lender shall be deemed to
be used to the extent of the Tranche A Revolving Exposure plus the then current unused
balance of the Tranche B Revolving Commitments of such Lender, (ii) a Tranche B Revolving
Commitment of a Lender shall be deemed to be used to the extent of the Tranche B Revolving Exposure
of such Lender, and (iii) the Swingline Exposure of each Lender shall be disregarded, except in
respect of the Swingline Lender, whose Tranche A Revolving Commitment shall be reduced by the
Swingline Exposure for purposes of calculating fees due under this Section 2.10(a).
Accrued commitment fees shall be payable in arrears on the first day of January, April, July and
October of each year and on the date on which the applicable Revolving Commitments terminate,
commencing on the first such date to occur after the date hereof. All commitment fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).



     (b) Each Borrower requesting a Letter of Credit hereunder agrees to pay (i) to the
Administrative Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit requested by such Borrower, which shall accrue at the same
Applicable Margin as used to determine the interest rate applicable to Eurodollar Revolving Loans
on the average daily amount of such Lender’s applicable LC Exposure (excluding any portion thereof
attributable to applicable unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s applicable Revolving
Commitment terminates and the date on which such Lender ceases to have any applicable LC Exposure,
and (ii) to the Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on
the average daily amount of the applicable LC Exposure (excluding any portion thereof attributable
to applicable unreimbursed LC Disbursements) during the period from and including the Effective
Date to but excluding the later of the date of termination of the applicable Revolving Commitments
and the date on which there ceases to be any applicable LC Exposure (with a minimum fronting fee
for each Letter of Credit of $250), as well as the Issuing Bank’s standard fees with respect to the
amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder.
Accrued participation fees and fronting fees shall be due and payable on the first day of January,
April, July and October of each year, commencing on the first such date to occur after the
Effective Date; provided that all such fees shall be payable on the date on which the
applicable Revolving Commitments terminate and any such fees accruing after the date on which the
applicable Revolving Commitments terminate shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this paragraph shall be payable within 10 days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but excluding the last
day).



     (c) Each Borrower agrees to pay to the Administrative Agent, for its own account, fees payable
in the amounts and at the times separately agreed upon between such Borrower and the Administrative
Agent.



     (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds,
to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for
distribution, in the case of commitment fees and participation fees, to the Lenders entitled
thereto. Fees paid shall not be refundable under any circumstances, absent manifest error in the
calculation or assessment of such fees.




17











 





     Section 2.11 Interest.



     (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear
interest at the lesser of (i) the Alternate Base Rate plus the Applicable Margin or (ii) the
Ceiling Rate.



     (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the lesser of (i)
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable
Margin or (ii) the Ceiling Rate.



     (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or
other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity,
upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to the lesser of (i) the Ceiling Rate or (ii) in the case of
overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in
the preceding paragraphs of this Section or in the case of any other amount, 2% plus the rate
applicable to ABR Revolving Loans as provided in paragraph (a) of this Section.



     (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and, in the case of Revolving Loans, upon termination of the applicable Revolving
Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this
Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability
Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of
such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior
to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.



     (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be conclusive absent manifest
error.



     Section 2.12 Alternate Rate of Interest. If prior to the commencement of any Interest
Period for a Eurodollar Borrowing:



     (a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO
Rate for such Interest Period; or



     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate
for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;



then the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any
Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR
Borrowing; provided that if the circumstances giving rise to such notice affect only one
Type of Borrowings, then the other Type of Borrowings shall be permitted.



     Section 2.13 Increased Costs.



     (a) If any Change in Law shall:




     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or the
Issuing Bank; or




     (ii) impose on any Lender or the Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of
Credit or participation therein;



and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or the Issuing Bank of participating in,



18









 







issuing or maintaining
any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or
the Issuing Bank hereunder (whether of principal, interest or otherwise), then the applicable
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank, as the case may be, for such additional
costs incurred or reduction suffered.



     (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such Lender’s or the
Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if
any, as a consequence of this Agreement or the Loans made by, or participations in Letters of
Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by the Issuing
Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking into consideration
such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing
Bank’s holding company with respect to capital adequacy), then from time to time the applicable
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s
holding company for any such reduction suffered.



     (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
applicable Borrower and shall be conclusive absent manifest error. The applicable Borrower shall
pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.



     (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right
to demand such compensation; provided that no Borrower shall be required to compensate a
Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as the case may be,
notifies the applicable Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 180-day period referred to above shall be extended to include
the period of retroactive effect thereof.



     Section 2.14 Break Funding Payments. In the event of (a) the payment of any principal
of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other
than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant
hereto (regardless of whether such notice may be revoked and is revoked in accordance with the
terms of this Agreement), or (d) the assignment of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto as a result of a request by a Borrower pursuant to
Section 2.17, then, in any such event, the applicable Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. Such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of
(i) the amount of interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the
period from the date of such event to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert or continue, for the period that would have been
the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would bid were it to bid,
at the commencement of such period, for Dollar deposits of a comparable amount and period from
other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the
applicable Borrower and shall be conclusive absent manifest error. The applicable Borrower shall
pay such Lender the amount shown as due on any such certificate within 10 days after receipt
thereof.



     Section 2.15 Taxes.



     (a) Any and all payments by or on account of any obligation of any Borrower hereunder or under
any other Loan Document shall be made free and clear of and without deduction for any Indemnified
Taxes or Other Taxes; provided that if any Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or Issuing Bank (as
the case may be) receives an amount equal to the sum it would have received had no such deductions
been made, (ii) the applicable Borrower shall make such deductions and (iii) the applicable
Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable law.



     (b) In addition, each Borrower shall pay any applicable Other Taxes to the relevant
Governmental Authority in accordance with applicable law.



19









 





     (c) Each Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank,
within 10 days after written demand therefor, for the full amount of any applicable Indemnified
Taxes or applicable Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,
as the case may be, on or with respect to any payment by or on account of any obligation of such
Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or liability delivered to
the applicable Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own
behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.



     (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by any
Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.



     (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrowers are located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to the
Borrowers (with a copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable law or reasonably
requested by the Borrowers as will permit such payments to be made without withholding or at a
reduced rate.



     (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes or “gross-up” payment as to which it has been
indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant
to this Section 2.15, it shall pay over such refund to the applicable Borrower (but only to
the extent of indemnity payments made, or additional amounts paid, by the applicable Borrower under
this Section 2.15 with respect to the Taxes or Other Taxes giving rise to such refund), net
of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such refund);
provided, that the applicable Borrower, upon the request of the Administrative Agent or such
Lender, agrees to repay the amount paid over to such Borrower (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such
Lender in the event the Administrative Agent or such Lender is required to repay such refund to
such Governmental Authority. This Section shall not be construed to require the Administrative
Agent or any Lender to make available its tax returns (or any other information relating to its
taxes which it deems confidential) to any Borrower or any other Person.



     Section 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.



     (a) Each Borrower shall make each payment required to be made by it hereunder or under any
other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or
of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to
the time expressly required hereunder or under such other Loan Document for such payment (or, if no
such time is expressly required, prior to 1:00 p.m., New York City time), on the date when due, in
immediately available funds, without set-off, deduction or counterclaim. Any amounts payable to
the Administrative Agent that are received after such time on any date may, in the discretion of
the Administrative Agent (and shall, if the Administrative Agent is unable to transfer such funds
on the same day to the Lenders in accordance with customary banking industry procedures), be deemed
to have been received on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its offices at JPMorgan
Chase Bank, National Association, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, except
payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein
and except that payments pursuant to Sections 2.13, 2.14, 2.15 and
9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other
Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment under any Loan Document shall be due
on a day that is not a Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments under each Loan Document shall be made in Dollars.



     (b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then
due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed
LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of principal and unreimbursed LC Disbursements then due to such parties.



20









 





     (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Revolving Loans or
participations in LC Disbursements or Swingline Loans, resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC
Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Revolving Loans and participations in LC Disbursements and Swingline
Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be
shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued
interest on their respective Revolving Loans and participations in LC Disbursements and Swingline
Loans; provided that (i) if any such participations are purchased and all or any portion of
the payment giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and (ii) the provisions
of this paragraph shall not be construed to apply to any payment made by any Borrower pursuant to
and in accordance with the express terms of this Agreement or any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to
a Borrower or any of their Subsidiaries or any of their Affiliates (as to which the provisions of
this paragraph shall apply). Each Lender agrees that it will not exercise any right of set-off or
counterclaim or otherwise obtain payment in respect of any Obligation owed to it other than
principal of and interest accruing on the Loans and participations in the LC Disbursements and
Swingline Loans, unless all of the outstanding principal of and accrued interest on the Loans and
LC Disbursements have been paid in full. Each Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender acquiring a participation
pursuant to the foregoing arrangements may exercise against the applicable Borrower rights of
set-off and counterclaim with respect to such participation as fully as if such Lender were a
direct creditor of the applicable Borrower in the amount of such participation.



     (d) Unless the Administrative Agent shall have received notice from a Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders or the
Issuing Bank hereunder that such Borrower will not make such payment, the Administrative Agent may
assume that such Borrower has made such payment on such date in accordance herewith and may,
without obligation, in reliance upon such assumption, distribute to the Lenders or the Issuing
Bank, as the case may be, the amount due. If the applicable Borrower has not in fact made such
payment when due, then each of the Lenders or the Issuing Bank, as the case may be, severally
agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such
Lender or Issuing Bank with interest thereon, for each day from and including the date such amount
is distributed to it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation.



     (e) If any Lender shall fail to make any payment required to be made by it pursuant to this
Agreement, then the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender’s obligations hereunder until all such unsatisfied
obligations are fully paid.



     Section 2.17 Mitigation Obligations; Replacement of Lenders.



     (a) If any Lender requests compensation under Section 2.13, or if a Borrower is
required to pay any additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The applicable Borrower hereby agrees to pay all reasonable costs
and expenses incurred by any Lender in connection with any such designation or assignment
(including any applicable assignment fee).



     (b) If any Lender requests compensation under Section 2.13, or if a Borrower is
required to pay any additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.15, or if any Lender defaults in its obligation to fund
Loans hereunder, then the applicable Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in Section 9.04,
including without limitation Section 9.04(f)), all its interests, rights and obligations
under this Agreement to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment); provided that (i) the applicable
Borrower shall have received the prior written consent of the Administrative Agent, which consent
shall not unreasonably be withheld, (ii) such assignor Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts) and (iii) in the case of any such assignment resulting
from a claim for compensation under



21









 







Section 2.13 or payments required to be made pursuant
to Section 2.15, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the
applicable Borrower to require such assignment and delegation cease to apply, or if an Event of
Default has occurred which is continuing. The Borrowers shall pay all reasonable costs and
expenses incurred by any Lender (other than a Lender which has defaulted in its obligation to fund
Loans hereunder) in connection with any such assignment or delegation (including any applicable
assignment fee).



     Section 2.18 Defaulting Lender. Notwithstanding any provision of this Agreement to
the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply
for so long as such Lender is a Defaulting Lender:



     (a) fees shall cease to accrue on the unfunded portion of any Commitment of such Defaulting
Lender pursuant to this Agreement;



     (b) the Commitments and Obligations of such Defaulting Lender shall not be included in
determining whether all Lenders or the Required Lenders have taken or may take any action hereunder
(including any consent to any amendment or waiver pursuant to Section 9.02), provided that any
waiver, amendment or modification requiring the consent of all Lenders or each affected Lender
which affects such Defaulting Lender differently than other affected Lenders shall require the
consent of such Defaulting Lender and provided further, neither the Tranche A Revolving Commitment
nor the Tranche B Revolving Commitment of a Defaulting Lender may be increased without the written
consent of such Defaulting Lender;



     (c) if any Swingline Exposure or LC Exposure exists at the time a Lender becomes a Defaulting
Lender then:




     (i) so long as no Default or Event of Default shall have occurred which is continuing
and the other conditions precedent described in Article IV hereof have been
satisfied, all or any part of such Swingline Exposure and LC Exposure shall be reallocated
among the Lenders which are not Defaulting Lenders (the “Non-Defaulting Lenders”) in
accordance with their respective Applicable Percentages but only to the extent (i) the sum of
all Non-Defaulting Lenders’ Tranche A Revolving Exposures plus such Defaulting Lender’s
Swingline Exposure and LC Exposure with respect to Letters of Credit requested by Smith does
not exceed the total of all Non-Defaulting Lenders’ Tranche A Revolving Commitments, (ii) the
sum of all Non-Defaulting Lenders’ Tranche A Revolving Exposures and Tranche B Revolving
Exposures plus such Defaulting Lender’s Swingline Exposure and LC Exposure does not exceed
the total of all Non-Defaulting Lenders’ Tranche A Revolving Commitments (calculated without
regard to the last sentence of the definition of “Tranche A Revolving Commitment”), and (iii)
the sum of all Non-Defaulting Lenders’ Tranche B Revolving Exposures plus such Defaulting
Lender’s LC Exposure with respect to Letters of Credit requested by M-I LLC does not exceed
the total of all Non-Defaulting Lenders’ Tranche B Revolving Commitments; and




     (ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Borrower shall within one Business Day following notice by the
Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, cash
collateralize such Defaulting Lender’s LC Exposure (after giving effect to any partial
reallocation pursuant to clause (i) above) in accordance with the procedures set
forth in Section 2.04(j) for so long as such LC Exposure is outstanding;




     (iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC
Exposure pursuant to this Section 2.18(c), the Borrower shall not be required to pay
any fees to such Defaulting Lender pursuant to Section 2.10 with respect to such
Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is
cash collateralized;




     (iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to this
Section 2.18(c), then the fees payable to the Lenders pursuant to Section
2.10 shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable
Percentages; and




     (v) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to this Section 2.18(c), then, without prejudice to any rights
or remedies of the Issuing Bank or any Lender hereunder, all fees that otherwise would have
been payable to such Defaulting Lender with respect to such Defaulting Lender’s LC Exposure
shall be payable to the Issuing Bank until such LC Exposure is cash collateralized and/or
reallocated;



     (d) so long as any Lender is a Defaulting Lender, the Swingline Lender shall not be required
to fund any Swingline Loan and the Issuing Bank shall not be required to issue, amend or increase
any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the
Revolving Commitments of the non-Defaulting Lenders and/or cash collateral will be provided



22









 







by the Borrower in accordance with Section 2.18(c), and participating interests in any such newly
issued or increased Letter of Credit or newly made Swingline Loan shall be allocated among
non-Defaulting Lenders in a manner consistent with Section 2.18(c)(i) (and Defaulting
Lenders shall not participate therein); and



     (e) any amount payable to such Defaulting Lender hereunder (whether on account of principal,
interest, fees or otherwise and including any amount that would otherwise be payable to such
Defaulting Lender pursuant to Section 2.16) shall, in lieu of being distributed to such
Defaulting Lender, be retained by the Administrative Agent in a segregated account and, subject to
any applicable requirements of law, be applied at such time or times as may be determined by the
Administrative Agent (i) first, to the payment of any amounts owing by such Defaulting Lender to
the Administrative Agent hereunder, (ii) second, pro rata, to the payment of any amounts owing by
such Defaulting Lender to the Issuing Bank or Swingline Lender hereunder, (iii) third, pro rata to
the funding of any Loan and the funding or cash collateralization of any participating interest in
any Swingline Loan or Letter of Credit in respect of which such Defaulting Lender has failed to
fund its portion thereof as required by this Agreement, as determined by the Administrative Agent,
(iv) fourth, if so determined by the Administrative Agent and the Borrower, held in such account as
cash collateral for future funding obligations of the Defaulting Lender under this Agreement, (v)
fifth, pro rata, to the payment of any amounts owing to the Borrower or the Lenders as a result of
any final, non-appealable judgment of a court of competent jurisdiction obtained by the Borrower or
any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its
obligations under this Agreement and (vi) sixth, to such Defaulting Lender or as otherwise directed
by a court of competent jurisdiction; provided that if such payment is (x) a prepayment of the
principal amount of any Loans or reimbursement obligations in respect of LC Disbursements which a
Defaulting Lender has funded its participation obligations and (y) made at a time when the
conditions set forth in Section 4.02 are satisfied, such payment shall be applied solely to
prepay the Loans of, and reimbursement obligations owed to, all Non-Defaulting Lenders pro rata
prior to being applied to the prepayment of any Loans, or reimbursement obligations owed to, any
Defaulting Lender.


In the event that the Administrative Agent, the Borrower and the Issuing Bank and the Swingline
each agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to
be a Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the
inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of
the Loans of the other Lenders (other than Swingline Loans) as the Administrative shall determine
may be necessary in order for such Lender to hold such Loans in accordance with its Applicable
Percentage.




     Section 2.19 Smith Guaranty of Obligations of M-I LLC. Smith, as a primary obligor
and not as a surety, unconditionally guarantees to Administrative Agent for the ratable benefit of
Lenders the full, prompt and punctual payment of the Tranche B Revolving Loans, together with
accrued and unpaid interest attributable thereto, and the LC Exposure attributable to Letters of
Credit requested by M-I LLC and all other liabilities and obligations, now or hereafter created or
incurred, of M-I LLC under this Agreement and the other Loan Documents (herein collectively called
the “Guaranteed Debt”) when due (whether at its stated maturity, by acceleration or
otherwise) in accordance with the Loan Documents. The foregoing guaranty is irrevocable,
unconditional and absolute, and if for any reason all or any portion of the Guaranteed Debt shall
not be paid when due, Smith will immediately pay the Guaranteed Debt to Administrative Agent or
other Person entitled to it, in Dollars, regardless of (a) any defense, right of set-off or
counterclaim which M-I LLC may have or assert and (b) whether Administrative Agent or any Lender or
any other Person shall have taken any steps to enforce any rights against any obligor or any other
Person to collect any of the Guaranteed Debt. The Guaranteed Debt shall include, to the extent
permitted by applicable law, interest and other liabilities accruing or arising in connection with
the applicable obligations after (a) commencement of any case under any bankruptcy or similar laws
by or against M-I LLC or (b) the obligations of M-I LLC shall cease to exist by operation of law or
for any other reason. The liability of Smith under this Section shall be unconditional
irrespective of (i) any lack of enforceability of the applicable obligations, (ii) any change of
the time, manner or place of payment, or any other term, of the applicable obligations, provided,
however, that unless Smith expressly consents in writing to an extension of the Revolving Maturity
Date, the guaranty provided under this Section shall not apply to any principal advances made or
Letters of Credit issued after the Revolving Maturity Date last consented to in writing by Smith;
provided further, however, that the guaranty provided under this Section shall continue in full
force and effect as to all other amounts comprising the Guaranteed Debt, (iii) any exchange,
release, or non-perfection of any collateral securing payment of the applicable obligations, (iv)
any law, regulation or order of any jurisdiction affecting any term of the applicable obligations
or the rights of Administrative Agent or any Lender with respect thereto, and (v) any other
circumstance which might otherwise constitute a defense available to, or a discharge of, M-I LLC,
save and except any circumstances involving fraud, bad faith, or gross negligence on the part of
Administrative Agent or any Lender. Smith waives promptness, diligence, and notices with respect
to the applicable obligations and the guaranty provided under this Section and any requirement that
Administrative Agent or any Lender exhaust any right to take any action against M-I LLC or any
collateral security. Smith agrees that it shall never be entitled to be subrogated to any of
Administrative Agent’s or any Lender’s rights against any obligor or any other Person or any other
collateral or offset rights held by Administrative Agent or any Lender for payment of the
applicable obligations until final termination of the guaranty provided under this Section. Smith
agrees that, if at any time all or any part of any payment previously applied by Administrative
Agent or any Lender to the Guaranteed Debt is or must be returned by Administrative Agent or any
Lender—or recovered from Administrative Agent or any Lender—for any reason (including the order
of any bankruptcy court), the guaranty provided under this Section shall automatically be
reinstated to the same



23









 







effect as if the prior application had not been made. Subject to the
automatic reinstatement provisions of the preceding sentence, the guaranty provided under this
Section shall terminate and be of no further force or effect upon full payment of the Guaranteed
Debt and final termination of the obligation—if any—to make any further advances to, or to issue
any further Letters of Credit at the request of, M-I LLC under the Loan Documents.



     Section 2.20 Swingline Loans.



     (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make
Swingline Loans to Smith from time to time during the Revolving Availability Period, in an
aggregate principal amount at any time outstanding that will not result in (i) the aggregate
principal amount of outstanding Swingline Loans exceeding the lower of (x) $100,000,000 or (y) the
Tranche A Revolving Commitment of the Swingline Lender or (ii) the sum of the total Tranche A
Revolving Exposures exceeding the total Tranche A Revolving Commitments; provided that the
Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding
Swingline Loan and provided further that the Swingline Lender shall not, without the consent of the
Required Lenders, make any Swingline Loan if any Event of Default exists of which the Swingline
Lender has actual knowledge. Within the foregoing limits and subject to the terms and conditions
set forth herein, Smith may borrow, prepay and reborrow Swingline Loans.



     (b) To request a Swingline Loan, Smith shall notify the Administrative Agent of such request
by telephone (confirmed by telecopy), not later than 1:00 p.m, New York City time, on the day of a
proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such notice received from
Smith. The Swingline Lender shall make each Swingline Loan available to Smith by means of a credit
to the general deposit account of Smith with the Swingline Lender (or, in the case of a Swingline
Loan made to finance the reimbursement of an LC Disbursement as provided in Section
2.04(e), by remittance to the Issuing Bank) by 4:00 p.m., New York City time, on the requested
date of such Swingline Loan.



     (c) The Swingline Lender may by written notice given to the Administrative Agent not later
than 1:00 p.m, New York City time, on any Business Day require the Revolving Lenders with a Tranche
A Revolving Commitment to acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in
which Revolving Lenders will participate. The Administrative Agent will give notice thereof to
each Revolving Lender by 2:00 p.m., New York City time on such Business Day, specifying in such
notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender
with a Tranche A Revolving Commitment hereby absolutely and unconditionally agrees, upon receipt of
notice as provided above, to pay to the Administrative Agent, for the account of the Swingline
Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender
acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant
to this paragraph is absolute and unconditional, subject to Swingline Lender’s compliance with the
provisions of Section 2.20(a) hereof, and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction or termination of
the Commitments, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under
this paragraph by wire transfer of immediately available funds, in the same manner as provided in
Section 2.05 with respect to Loans made by such Lender (and Section 2.05 shall
apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from
the Revolving Lenders. The Administrative Agent shall notify Smith in writing of any
participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments
in respect of such Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from Smith (or other party on
behalf of Smith) in respect of a Swingline Loan after receipt by the Swingline Lender of the
proceeds of a sale of participations therein shall be promptly remitted to the Administrative
Agent; any such amounts received by the Administrative Agent shall be remitted by the
Administrative Agent to the Swingline Lender and to the Revolving Lenders that shall have made
their payments pursuant to this paragraph, as their interests may appear, such remittance to be
made on the day of receipt if such payment is received by 3:00 p.m., New York City time and prior
to 11:00 a.m., New York City time of the following Business Day if such payment is received after
3:00 p.m., New York City time. The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve Smith of any default in the payment thereof.



     (d) Notwithstanding the foregoing procedures for requesting a Swingline Loan, Smith and the
Swingline Lender may agree to implement an alternate arrangement with respect to Swingline Loans
providing for direct advances of Swingline Loans by the Swingline Lender to Smith (but otherwise in
accordance with the terms and provisions of this Agreement). The Swingline Lender will give notice
to the Administrative Agent of each Swingline Loan made by Smith within one (1) Business Day after
making such Swingline Loan.



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ARTICLE III

Representations and Warranties




     The Borrowers represent and warrant to the Lenders that:



     Section 3.01 Organization; Powers. Each of the Borrowers and their Material
Subsidiaries is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so would not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.



     Section 3.02 Authorization; Enforceability. The Transactions to be entered into by
each Borrower are within such Borrower’s powers and have been duly authorized by all necessary
action. This Agreement has been duly executed and delivered by the Borrowers and constitutes, and
each other Loan Document to which any Borrower is to be a party, when executed and delivered by
such Borrower, will constitute, a legal, valid and binding obligation of the applicable Borrower,
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding in equity or at law.



     Section 3.03 Governmental Approvals; No Conflicts. The Transactions (a) do not
require any material consent or approval of, registration or filing with, or any other action by,
any Governmental Authority, except such as have been obtained or made and are in full force and
effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other
organizational documents of any Borrower or any of their Material Subsidiaries or any order of any
Governmental Authority, (c) will not violate or result in a default under any material indenture,
agreement or other instrument binding upon any Borrower or any of their Material Subsidiaries or
their assets, or give rise to a right thereunder to require any payment to be made by any Borrower
or any of their Material Subsidiaries, and (d) will not result in the creation or imposition of any
Lien on any asset of any Borrower or any of their Material Subsidiaries.



     Section 3.04 Financial Condition. Smith has heretofore furnished to the
Administrative Agent its consolidated balance sheet and statements of operations, stockholders’
equity and cash flows as of and for the fiscal years ended December 31, 2007 and December 31, 2008,
reported on by Deloitte & Touche LLP, independent registered public accounting firm. Such
financial statements present fairly, in all material respects, the financial position and results
of operations and cash flows of Smith and its consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP. Since December 31, 2008 through the date of Borrowers’
execution of this Agreement, there has been no material adverse change in the business, assets,
operations, prospects or condition, financial or otherwise, of Smith and its Subsidiaries, taken as
a whole, other than as a result of industry conditions generally.



     Section 3.05 Properties.



     (a) Each of the Borrowers and their Material Subsidiaries has good title to, or valid
leasehold interests in, all its real and personal property material to its business, except for
minor defects in title that do not interfere with its ability to conduct its business as currently
conducted or to utilize such properties for their intended purposes.



     (b) Each of the Borrowers and their Material Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property material to its
business, and the use thereof by the Borrowers and their Material Subsidiaries does not infringe
upon the rights of any other Person, except for any such infringements that could not reasonably be
expected to result in a Material Adverse Effect.



     Section 3.06 Litigation and Environmental Matters.



     (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrowers, threatened against or affecting
any Borrower or any of their Material Subsidiaries (i) as to which, in the reasonable judgment of
the Borrowers, there is a reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected to result in a Material Adverse Effect or (ii) that
involve any of the Loan Documents or the Transactions.



     (b) Except with respect to any other matters that, in the reasonable judgment of the
Borrowers, could not reasonably be expected to result in a Material Adverse Effect, neither any
Borrower nor any of their Material Subsidiaries (i) has failed to comply with any Environmental Law
or to obtain, maintain or comply with any permit, license or other approval required under any



25









 







Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.



     Section 3.07 Compliance with Laws and Agreements. Each of the Borrowers and their
Material Subsidiaries is in compliance with all laws, regulations and orders of any Governmental
Authority applicable to it or its property and all indentures, agreements and other instruments
binding upon it or its property, except where the failure to do so could not reasonably be expected
to result in a Material Adverse Effect. No Default has occurred and is continuing.



     Section 3.08 Investment Company Status. Neither any Borrower nor any of their
Material Subsidiaries is an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.



     Section 3.09 Taxes. Each of the Borrowers and their Material Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been filed and has paid or
caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being
contested in good faith by appropriate proceedings and for which the applicable Borrower or
Material Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the
extent that the failure to do so could not reasonably be expected to result in a Material Adverse
Effect.



     Section 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other ERISA Events for which liability is reasonably expected to
occur, could reasonably be expected to result in a Material Adverse Effect. The present value of
all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed the fair market value of the assets of such
Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based
on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did
not, as of the date of the most recent financial statements reflecting such amounts, exceed the
fair market value of the assets of all such underfunded Plans, in each of such cases so as to cause
a Material Adverse Effect.



     Section 3.11 Disclosure. Each of the Borrowers has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which such Borrower or any of its
Material Subsidiaries is subject, and all other matters known to the Borrowers, that could
reasonably be expected to result in a Material Adverse Effect. None of the reports, financial
statements, certificates or other information furnished by or on behalf of any Borrower to the
Administrative Agent or any Lender in connection with the negotiation of this Agreement or any
other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, taken as a whole, in the light of the circumstances
under which they were made, not misleading.



ARTICLE IV

Conditions




     Section 4.01 Effective Date. The obligations of the Lenders to make Loans and of the
Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance with Section
9.02):



     (a) The Administrative Agent (or its counsel) shall have received from each party hereto
either (i) counterparts of this Agreement signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed counterparts of this Agreement.



     (b) The Administrative Agent (or its counsel) shall have received from the Borrowers an
original of each applicable Note signed on behalf of the applicable Borrower.



     (c) The Administrative Agent (or its counsel) shall have received from Borrowers and from each
other party to the Loan Documents (other than the Notes) either (i) counterparts of each applicable
Loan Document signed on behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed signature page of the
applicable Loan Document) that such party has signed counterparts of such Loan Document.



     (d) The Administrative Agent shall have received written opinions (addressed to the
Administrative Agent and the Lenders and dated the Effective Date) of (i) Richard E. Chandler,
General Counsel of Smith and (ii) James C, Webster, General Counsel M-I LLC and (iii) Gardere Wynne
Sewell LLP, counsel for the Borrowers, in form and substance satisfactory to the



26









 







Administrative
Agent and its counsel, covering such other matters relating to the Borrowers, the Loan Documents or
the Transactions as the Required Lenders shall reasonably request.



     (e) The Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the organization, existence
and good standing of each Borrower, the authorization of the Transactions and any other legal
matters relating to the Borrowers, the Loan Documents or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.



     (f) The Administrative Agent shall have received a certificate, dated the Effective Date and
signed by the President, a Vice President or a Financial Officer of each of the Borrowers,
confirming compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.



     (g) The Administrative Agent shall have received all fees and other amounts due and payable on
or prior to the Effective Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses (including fees, charges and disbursements of counsel) required to be
reimbursed or paid by any Borrower hereunder or under any other Loan Document.



     (h) The Administrative Agent shall have received confirmation that all fees accrued under the
Credit Agreement dated as of May 5, 2005 referred to in Section 9.16 hereof have been paid
in full and that there are no outstanding letters of credit or loans under such Credit Agreement.



     The Administrative Agent shall notify the Borrowers and the Lenders of the Effective Date, and such
notice shall be conclusive and binding.



     Section 4.02 Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or extend any Letter of
Credit, is subject to receipt of the request therefor in accordance herewith and to the
satisfaction of the following conditions:



     (a) The representations and warranties of each Borrower set forth in the Loan Documents shall
be true and correct in all material respects on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as applicable.



     (b) At the time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have
occurred and be continuing and there shall have occurred no event which would be reasonably likely
to have a Material Adverse Effect.



     Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be
deemed to constitute a representation and warranty by the applicable Borrower on the date thereof
as to the matters specified in paragraphs (a) and (b) of this Section.



ARTICLE V

Affirmative Covenants




     Until the Revolving Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in full and all Letters
of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, the
Borrowers covenant and agree with the Lenders that:



     Section 5.01 Financial Statements; Ratings Change and Other Information. The
Borrowers will furnish to the Administrative Agent and each Lender:



     (a) within 105 days after the end of each fiscal year, Smith’s audited consolidated balance
sheet and related statements of operations, stockholders’ equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures for the previous
fiscal year, all reported on by Deloitte & Touche LLP or other independent registered public
accounting firm of recognized national standing (without a “going concern” or like qualification or
exception and without any qualification or exception as to the scope of such audit) to the effect
that such consolidated financial statements present fairly in all material respects the financial
condition and results of operations of Smith and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied;



27









 





     (b) concurrently with any delivery of financial statements under clause (a) above, a
certificate of the independent registered public accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their examination of such
financial statements of any Default (which certificate may be limited to the extent required by
accounting rules or guidelines);



     (c) within 60 days after the end of each fiscal quarter of each fiscal year, Smith’s unaudited
(i) consolidated balance sheets as of the end of such fiscal quarter and the then elapsed portion
of the fiscal year as of the end of such fiscal quarter, (ii) related statements of operations for
such fiscal quarter and the then elapsed portion of the fiscal year, and (iii) related statements
of cash flows for the then elapsed portion of the fiscal year, in the case of (ii) and (iii),
setting forth in comparative form the figures for the corresponding period of the previous fiscal
year. The quarterly financial statements should be certified by a Financial Officer of Smith as
presenting fairly in all material respects the financial condition and results of operations of the
applicable Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year-end audit adjustments and the absence of
footnotes;



     (d) concurrently with any delivery of financial statements under clause (a) or
(c) above, a consolidating balance sheet and statement of operations of M-I LLC for such
period, certified by a Financial Officer of Smith as presenting fairly in all material respects the
financial condition and results of operations of M-I LLC in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of footnotes;



     (e) concurrently with any delivery of financial statements under clause (a) or
(c) above, a certificate of a Financial Officer of Smith (i) certifying as to whether, to
the knowledge of such officer, a Default has occurred and, if such officer has knowledge of the
occurrence of a Default, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Section 5.09 and (iii) to the extent that any change in GAAP or in the
application thereof has occurred since the date of the audited financial statements referred to in
Section 3.04 which affects the financial statements accompanying such certificate,
specifying the effect of such change on such financial statements;



     (f) promptly after the same become publicly available, copies of each Form 10-Q and Form 10-K
filed by Smith with the Securities and Exchange Commission or with any Governmental Authority
succeeding to any or all of the functions of said Commission;



     (g) promptly after Moody’s or S&P shall have announced a change in the rating established or
deemed to have been established for the Index Debt, written notice of such rating change; and



     (h) promptly following any request therefore, such other information regarding the operations,
business affairs and financial condition of any Borrower or any of their Subsidiaries, or
compliance with the terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.



     Section 5.02 Notices of Material Events. The Borrowers will, promptly after becoming
aware of the same, furnish to the Administrative Agent and each Lender written notice of the
following:



     (a) the occurrence of any Default;



     (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting any Borrower or any of their Affiliates that, if
adversely determined, could reasonably be expected to result in a Material Adverse Effect;



     (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, results in, or could reasonably be expected to result in, a Material Adverse Effect;
and



     (d) any other development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.


Each notice delivered under this Section shall be accompanied by a statement setting forth the
details of the event or development requiring such notice and any action taken or proposed to be
taken with respect thereto.




     Section 5.03 Existence; Conduct of Business. The Borrowers will, and will cause each
of their Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep
in full force and effect its legal existence and the rights, licenses,



28









 







permits, privileges and
franchises material to the conduct of its business; provided that the foregoing shall not prohibit
any merger, consolidation, liquidation or dissolution permitted under Section 6.03.



     Section 5.04 Payment of Obligations. The Borrowers will, and will cause each of their
Subsidiaries to, pay its obligations, including Tax liabilities, that, if not paid, could result in
a Material Adverse Effect before the same shall become delinquent or in default, except where (a)
the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) a
Borrower or its applicable Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.



     Section 5.05 Maintenance of Properties; Insurance. The Borrowers will, and will cause
each of their Subsidiaries to, (a) keep and maintain all property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted, and (b) maintain,
with financially sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.



     Section 5.06 Books and Records; Inspection Rights. The Borrowers will, and will cause
each of their Subsidiaries to, keep proper books of record and account in which full, true and
correct entries are made of all dealings and transactions in relation to its business and
activities. The Borrowers will, and will cause each of their Material Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice
to the Borrowers, to visit and inspect its properties, to examine and make extracts from its books
and records, and to discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.



     Section 5.07 Compliance with Laws. The Borrowers will, and will cause each of their
Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect.



     Section 5.08 Use of Proceeds and Letters of Credit. The proceeds of the Loans will be
used only to refinance existing Indebtedness and for other working capital needs and general
corporate purposes. No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X, or to fund any activity or business with any Person or in or with
any country or territory which in any manner would result in a material violation by any Person of
any sanction or prohibition imposed by a Governmental Authority that could reasonably be expected
to result in a Material Adverse Effect.



     Section 5.09 Financial Covenants. Smith will have and maintain, on a consolidated
basis, a Debt to Capitalization Ratio of not greater than (i) 45% until such time the Borrowers
shall have delivered evidence to the Administrative Agent that there is no other Indebtedness of
the Borrowers which is parri passu with the Obligations under loan documentation providing for a
more onerous Debt to Capitalization Ratio and (ii) 50% at all times thereafter.



ARTICLE VI

Negative Covenants




     Until the Revolving Commitments have expired or terminated and the principal of and interest
on each Loan and all fees payable hereunder have been paid in full and all Letters of Credit have
expired or terminated and all LC Disbursements shall have been reimbursed, the Borrowers covenant
and agree with the Lenders that:



     Section 6.01 Subsidiary Indebtedness. The Borrowers will not permit any Subsidiary of
Smith (including without limitation M-I LLC) to create, incur, assume or permit to exist any
Indebtedness, except:



     (a) Indebtedness created hereunder;



     (b) Indebtedness existing on the date hereof and set forth in Schedule 6.01, all
Indebtedness issuable under the instruments and documents set forth in Schedule 6.01 and
extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof;



     (c) Indebtedness of any such Subsidiary to any other such Subsidiary;



     (d) Indebtedness of any such Subsidiary as an account party in respect of trade letters of
credit;



29









 





     (e) Indebtedness arising under Swap Agreements which have been entered into for bona fide
hedging purposes and not for speculative purposes; and



     (f) other Indebtedness in an aggregate principal amount not exceeding, at any one time
outstanding, $275,000,000.



     Section 6.02 Liens. The Borrowers will not, and will not permit any of their
Subsidiaries to, create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts
receivable) or rights in respect of any thereof, except:



     (a) Permitted Encumbrances;



     (b) any Lien on any property or asset of a Borrower or any of their Subsidiaries existing on
the date hereof and set forth in Schedule 6.02; provided that (i) such Lien shall not apply
to any other property or asset of a Borrower or any of their Subsidiaries (other than proceeds of
such property or asset) and (ii) such Lien shall secure only those obligations which it secures on
the date hereof and extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof;



     (c) any Lien existing on any property or asset prior to the acquisition thereof by a Borrower
or any of their Subsidiaries or existing on any property or asset of any Person that becomes a
Subsidiary of a Borrower after the date hereof prior to the time such Person becomes a Subsidiary
of a Borrower; provided that (i) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Subsidiary of a Borrower, as the case may be, (ii) such
Lien shall not apply to any other property or assets of a Borrower or any Subsidiary of a Borrower
(other than proceeds of such property or asset) and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such Person becomes a
Subsidiary of a Borrower, as the case may be and extensions, renewals and replacements thereof that
do not increase the outstanding principal amount thereof; and



     (d) Liens on fixed or capital assets acquired, constructed or improved by a Borrower or any of
their Subsidiaries; provided that (i) such security interests secure Indebtedness permitted by
Section 6.01, (ii) such security interests and the Indebtedness secured thereby are
incurred prior to or within 90 days after such acquisition or the completion of such construction
or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such security interests
shall not apply to any other property or assets of a Borrower or any of their Subsidiaries (other
than proceeds of such property or asset); provided, however, that the aggregate amount of the
Indebtedness secured by Liens permitted under this Section 6.02(d) shall not exceed
$150,000,000.



     Section 6.03 Fundamental Changes.



     (a) The Borrowers will not, and will not permit any of their Subsidiaries to, merge into or
consolidate with any other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets, or all or substantially all of the stock of
any of their Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or
dissolve, except that, so long as at the time thereof and immediately after giving effect thereto
no Default shall have occurred and be continuing, (i) any Subsidiary of a Borrower may merge into
Smith in a transaction in which Smith is the surviving corporation, (ii) any Subsidiary of a
Borrower (other than M-I LLC) may merge into any other Subsidiary of a Borrower in a transaction in
which the surviving entity is a Subsidiary of a Borrower, (iii) any Subsidiary of a Borrower may
sell, transfer, lease or otherwise dispose of its assets to a Borrower or to another Subsidiary of
a Borrower, and (iv) any Subsidiary of a Borrower (other than M-I LLC) may liquidate or dissolve if
Smith determines in good faith that such liquidation or dissolution is in the best interests of
Smith and is not materially disadvantageous to the Lenders.



     (b) The Borrowers will not, and will not permit any of their Subsidiaries to, engage to any
material extent in any business other than businesses of the type conducted by the Borrowers and
their Subsidiaries on the date of execution of this Agreement and businesses reasonably related
thereto.



     Section 6.04 Transactions with Affiliates. The Borrowers will not, and will not
permit any of their Subsidiaries to, sell, lease or otherwise transfer any property or assets to,
or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any
other transactions with, any of its Affiliates, except (a) in the ordinary course of business at
prices and on terms and conditions not less favorable to the applicable Borrower or the applicable
Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties and (b)
transactions between or among a Borrower and its wholly owned Subsidiaries not involving any other
Affiliate.



30









 





     Section 6.05 Restrictions on M-I LLC Dividends. So long as there shall be any
outstanding Tranche B Revolving Loans (or Letters of Credit issued at the request of M-I LLC), M-I
LLC will not make distributions to the owners of its Equity Interests as such; provided, however,
that distributions of proceeds from equity offerings by M-I LLC shall not be restricted by this
Section.



ARTICLE VII

Events of Default




     If any of the following events (“Events of Default”) shall occur:



     (a) any Borrower shall fail to pay any principal of any Loan or any reimbursement obligation
in respect of any LC Disbursement when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or otherwise;



     (b) any Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable under this
Agreement or any other Loan Document, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of five Business Days;



     (c) any representation or warranty made or deemed made by or on behalf of any Borrower in or
in connection with any Loan Document or any amendment or modification thereof or waiver thereunder,
or in any report, certificate, financial statement or other document furnished pursuant to or in
connection with any Loan Document or any amendment or modification thereof or waiver thereunder,
shall prove to have been materially incorrect when made or deemed made;



     (d) any Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Sections 5.01 or 5.09 or in Article VI;



     (e) any Borrower shall fail to observe or perform any covenant, condition or agreement
contained in any Loan Document (other than those specified in clause (a), (b) or
(d) of this Article), and such failure shall continue unremedied for a period of 30 days
after the earlier of (i) such Borrower becoming aware of such failure and (ii) notice thereof from
the Administrative Agent to such Borrower (which notice will be given at the request of any
Lender);



     (f) any event or condition occurs that enables or permits (with or without the giving of
notice, the lapse of time or both) the holder or holders of any Material Indebtedness of Smith or
M-I LLC (but not of any other Subsidiary of Smith and not of any Subsidiary of M-I LLC) or any
trustee or agent on its or their behalf to cause any such Material Indebtedness of Smith or M-I LLC
to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity;



     (g) any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity (other than the voluntary prepayment, repurchase, redemption or
defeasance thereof);



     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of any Borrower or any of their
Material Subsidiaries or the debts, or of a substantial part of the assets, of any of them under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter
in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for any Borrower or any of their Material Subsidiaries or for a substantial part
of the assets of any of them, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be
entered;



     (i) any Borrower or any of their Material Subsidiaries shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner,
any proceeding or petition described in clause (h) of this Article, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar
official for any Borrower or any of their Material Subsidiaries or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any
action for the purpose of effecting any of the foregoing;



     (j) any Borrower or any of their Material Subsidiaries shall become unable, admit in writing
its inability or fail generally to pay its debts as they become due;



     (k) one or more judgments for the payment of money in an aggregate amount in excess of
$50,000,000 (exclusive of amounts covered by insurance) shall be rendered against any Borrower or
any of their Material Subsidiaries and the same shall remain



31









 







undischarged for a period of
45 consecutive days during which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets of any Borrower or any of
their Material Subsidiaries to enforce any such judgment;



     (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when
taken together with all other ERISA Events that have occurred, could reasonably be expected to
result in a Material Adverse Effect;



     (m) a Change in Control shall occur;



     (n) M-I LLC shall cease to be a Subsidiary of Smith (unless all Tranche B Revolving Exposure
shall have been paid in full (or in respect of Letters of Credit requested by M-I LLC, appropriate
cash collateral shall have been provided) and the right of M-I LLC to request additional Tranche B
Revolving Loans or Letters of Credit shall have been terminated);


then, and in every such event (other than an event described in clause (h) or (i)
of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Borrowers, take either or both of the following actions, at the same or different
times:  (i) terminate the Revolving Commitments, and thereupon the Revolving Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other obligations of the Borrowers
accrued hereunder, shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrowers; and in case of any
event described in clause (h) or (i) of this Article, the Revolving Commitments
shall automatically terminate and the principal of the Loans then outstanding, together with
accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrowers.




ARTICLE VIII

The Administrative Agent




     Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent
as its agent and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms of the Loan
Documents, together with such actions and powers as are reasonably incidental thereto.



     The bank serving as the Administrative Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with any Borrower or any of their Subsidiaries or any of
their other Affiliates as if it were not the Administrative Agent hereunder.



     The Administrative Agent shall not have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c)
except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
any Borrower or any of their Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct, BUT REGARDLESS OF THE PRESENCE OF ORDINARY NEGLIGENCE. The Administrative
Agent shall not be deemed to have knowledge of any Default unless and until written notice thereof
is given to the immediate officers of the Administrative Agent responsible for this Agreement by a
Borrower or a Lender and is called a “notice of default”, and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with any Loan Document, (ii) the contents of any
certificate, report or other document delivered thereunder or in connection therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or conditions set
forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.



32









 





     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be counsel for a
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such counsel, accountants
or experts.



     The Administrative Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the preceding paragraphs
shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any
such sub-agent, and shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Administrative Agent.



     Subject to the appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may (and, in the event (i) neither the Administrative
Agent nor any Affiliate, as a Lender, has any Revolving Exposure or unused Revolving Commitment and
(ii) the Required Lenders so request, the Administrative Agent shall) resign at any time by
notifying the Lenders, the Issuing Bank and the Borrowers. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor, with the prior written consent of the
Borrowers (unless an Event of Default shall have occurred which is continuing, in which event the
Borrowers’ consent shall not be required). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may,
on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent which shall
be a bank with an office in New York City, or an Affiliate of any such bank. Upon the acceptance
of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrowers to a successor Administrative Agent shall
be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and
such successor. After the Administrative Agent’s resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as Administrative Agent.



     Each Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or related agreement or any document furnished
hereunder or thereunder.



ARTICLE IX

Miscellaneous




     Section 9.01 Notices.



     (a) Except in the case of notices and other communications expressly permitted to be given by
telephone (and subject to paragraph (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:




     (i) if to Smith or to M-I LLC, to 1310 Rankin Rd., Houston, Texas 77073, Attention:
William Restrepo  (Fax. 281-233-5505);




     (ii) if to the Administrative Agent, to JPMorgan Chase Bank, National Association, 10
South Dearborn, Floor 7, Chicago, Illinois 60603-2003, Attention: Claudia Kech (Fax:
888-292-9533);




     (iii) if to the Swingline Lender, to JPMorgan Chase Bank, National Association, 10 South
Dearborn, Floor 7, Chicago, Illinois 60603-2003, Attention: Claudia Kech (Fax: 888-292-9533);
and




     (iv) if to any other Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.



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     (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to Article II unless otherwise
agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or a
Borrower may, in its discretion, agree to accept notices and other communications to it hereunder
by electronic communications pursuant to procedures approved by it; provided that approval of such
procedures may be limited to particular notices or communications.



     (c) Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given to any party hereto in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt.



     Section 9.02 Waivers; Amendments.



     (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in
exercising any right or power hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Administrative
Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any
provision of any Loan Document or consent to any departure by any Borrower therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this Section, and
then such waiver or consent shall be effective only in the specific instance and for the purpose
for which given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of
whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge
of such Default at the time.



     (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may
be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered into by the
Administrative Agent and the Borrowers that are parties thereto, in each case with the written
consent of the Required Lenders; provided that no such agreement shall (i) except as
expressly provided in Section 2.07(d), increase the Tranche A Revolving Commitment or the
Tranche B Revolving Commitment of any Lender without the written consent of such Lender, (ii)
reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon,
or reduce any fees payable hereunder, without the written consent of each Lender affected thereby
or change any provision of this Agreement requiring ratable funding by Lenders, (iii) postpone the
scheduled date of payment of the principal amount of any Loan or LC Disbursement (including the
Revolving Maturity Date), or any interest thereon, or any fees payable hereunder, or reduce the
amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any
Revolving Commitment, without the written consent of each Lender affected thereby, (iv) change
Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments
required thereby or change Section 2.07(e) in a manner that would alter the pro rata
treatment required thereby, without the written consent of each Lender, (v) change any of the
provisions of this Section or the definition of “Required Lenders” or any other provision of any
Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any
rights thereunder or make any determination or grant any consent thereunder, without the written
consent of each Lender, (vi) release Smith from any liability under Section 2.19 hereof
without the written consent of each Lender, (vii) terminate or modify any indemnity provided to a
Lender hereunder or under any other Loan Document without the written consent of such Lender or
(viii) reduce or eliminate a requirement under this Agreement to provide cash collateral for any
Letter of Credit; provided further that (A) no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank or the
Swingline Lender without the prior written consent of the Administrative Agent or the Issuing Bank
or the Swingline Lender, as the case may be, and (B) any change to Section 2.18 shall
require the written consent of each of the Administrative Agent and the Issuing Bank and the
Swingline Lender.



     Section 9.03 Expenses; Indemnity; Damage Waiver.



     (a) The Borrowers shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges and disbursements
of counsel for the Administrative Agent, in connection with the syndication of the credit
facilities provided for herein, the preparation and administration of the Loan Documents or any
amendments, modifications or waivers of the provisions thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket expenses
incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges
and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection



34









 







with the Loan Documents,
including its rights under this Section, or in connection with the Loans made or Letters of Credit
issued hereunder, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.



     (b) The Borrowers shall indemnify the Administrative Agent, the Issuing Bank and each Lender,
and each Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents
of their respective obligations thereunder or the consummation of the Transactions or any other
transactions contemplated hereby or the enforcement of any obligations hereunder or under any of
the other Loan Documents, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit
if the documents presented in connection with such demand do not strictly comply with the terms of
such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on
or from any property currently or formerly owned or operated by any Borrower or any of their
Subsidiaries, or any Environmental Liability related in any way to any Borrower or any of their
Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses resulted from the gross negligence or willful misconduct of such
Indemnitee (or any of its Related Parties), BUT THE PRESENCE OF ORDINARY NEGLIGENCE SHALL NOT
AFFECT THE AVAILABILITY OF SUCH INDEMNITY.



     (c) To the extent that any Borrower fails to pay any amount required to be paid by it to the
Administrative Agent or the Issuing Bank or the Swingline Lender under paragraph (a) or
(b) of this Section (and without limiting their obligation to do so), each Lender severally
agrees to pay to the Administrative Agent or the Issuing Bank or the Swingline Lender, as the case
may be, such Lender’s pro rata share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Administrative Agent or the Issuing Bank or the
Swingline Lender in its capacity as such. For purposes hereof, a Lender’s “pro rata share” shall
be determined based upon (without duplication) its share of the sum of the total Revolving
Exposures and unused Revolving Commitments at the time; provided that the obligation to indemnify
the Swingline Lender will be limited to Tranche A Revolving Lenders only.



     (d) To the extent permitted by applicable law, neither any Borrower nor any of their
Subsidiaries shall assert, and each hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the
use of the proceeds thereof.



     (e) All amounts due under this Section shall be payable not later than three Business Days
after written demand therefor.



     Section 9.04 Successors and Assigns.



     (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) no Borrower may
assign or otherwise transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by any Borrower without such
consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank
that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of
this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Bank and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.



     (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender
may assign to one or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Revolving Commitment and the Loans at the time owing
to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:
(A) the Borrowers, provided that no consent of any Borrower shall be required for an assignment to
a Lender, an Affiliate of a Lender, an Approved Fund (as defined below) or, if an Event of Default
has occurred and is continuing, any other assignee; and (B) the Administrative Agent,



35









 







provided that
no consent of the Administrative Agent shall be required for an assignment to an assignee that is a
Lender immediately prior to giving effect to such assignment or an Affiliate of such a Lender, and
(C) the Issuing Bank and the Swingline Lender.



     (ii) Assignments shall be subject to the following additional conditions: (A) except in the
case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire
remaining amount of the assigning Lender’s Revolving Commitment, the amount of the Revolving
Commitment of the assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent)
shall not be less than $5,000,000, and shall not result in the assigning Lender holding a Revolving
Commitment of less than $5,000,000, unless each of Smith and the Administrative Agent otherwise
consent (such consent not to be unreasonably withheld or delayed), provided that no such consent of
Smith shall be required if an Event of Default has occurred and is continuing; (B) each partial
assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s
rights and obligations under this Agreement; (C) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with a processing and
recordation fee of $3,500; (D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and (E) in the case of an assignment to a CLO
(as defined below), the assigning Lender shall retain the sole right to approve any amendment,
modification or waiver of any provision of this Agreement, provided that the Assignment and
Assumption between such Lender and such CLO may provide that such Lender will not, without the
consent of such CLO, agree to any amendment, modification or waiver described in the first proviso
to Section 9.02(b) that affects such CLO.



     For the purposes of this Section 9.04(b), the terms “Approved Fund” and “CLO” have the
following meanings:




     “Approved Fund” means (a) a CLO and (b) with respect to any Lender that is a
fund which invests in bank loans and similar extensions of credit, any other fund that
invests in bank loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.




     “CLO” means any entity (whether a corporation, partnership, trust or otherwise)
that is engaged in making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is administered or
managed by a Lender or an Affiliate of such Lender.



     (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, from and after the effective date specified in each Assignment and Assumption the
assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and
the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment
and Assumption, be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of this
Section.



     (iv) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall
maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Revolving
Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, absent manifest error, and the Borrowers, the Administrative Agent,
the Issuing Bank, the Swingline Lender and the Lenders may treat each Person whose name is recorded
in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection
by the Borrowers, the Issuing Bank, the Swingline Lender and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.



     (v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning
Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation fee referred to in
paragraph (b) of this Section and any written consent to such assignment required by
paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and
Assumption and record the information contained therein in the Register. No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the Register as provided in
this paragraph.



     (c) (i) Any Lender may, without the consent of any Borrower, the Administrative Agent or the
Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Revolving Commitment and the Loans owing to it); provided that
(A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of such obligations, (C)
the Borrowers, the Administrative Agent, the Issuing Bank, the



36









 







Swingline Lender and the other
Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement and (D) no such participation may be sold to
any entity which is engaged principally in the oilfield products and services business unless the
Borrowers shall have given their prior written consent. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any amendment, modification
or waiver described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (d) of this Section, the Borrowers agree that each Participant shall
be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same
extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph
(b) of this Section. To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.16(c) as though it were a Lender.



     (d) A Participant shall not be entitled to receive any greater payment under Section
2.13 or 2.15 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrowers’ prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15
unless the Borrowers are notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrowers, to comply with Section 2.15(e) as
though it were a Lender.



     (e) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.



     (f) No Lender may pledge, assign or convey a participation interest in its Tranche A Revolving
Commitment, Tranche A Revolving Loans or LC Exposure attributable to Letters of Credit requested by
Smith unless such Lender shall, concurrently therewith pledge, assign or convey a participation in
(as the case may be) an equivalent share of its Tranche B Revolving Commitment, Tranche B Revolving
Loans or LC Exposure attributable to Letters of Credit requested by M-I LLC (as the case may be).



     Section 9.05 Survival. All covenants, agreements, representations and warranties made
by the Borrowers in the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the execution and delivery of
the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of
any investigation made by any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal of or any accrued
interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and
unpaid or any Letter of Credit is outstanding and so long as the Revolving Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and
9.03 and Article VIII shall survive and remain in full force and effect regardless
of the consummation of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Letters of Credit and the Revolving Commitments or the termination
of this Agreement or any provision hereof.



     Section 9.06 Counterparts; Integration; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement, the other Loan Documents and any separate letter agreements with respect to fees
payable to the Administrative Agent constitute the entire contract among the parties relating to
the subject matter hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof which, when taken together,
bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns. Delivery
of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.



     Section 9.07 Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.




37











 





     Section 9.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of any Borrower against
any of and all the obligations of such Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of setoff) which such
Lender may have.



     Section 9.09 Governing Law; Jurisdiction; Consent to Service of Process.



     (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE
OF NEW YORK.



     (b) Each Borrower hereby irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent permitted by law,
in such Federal court. Each of the parties hereto agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan
Document shall affect any right that the Administrative Agent, the Issuing Bank, the Swingline
Lender or any Lender may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against any Borrower or its properties in the courts of any
jurisdiction.



     (c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement or any other
Loan Document in any court referred to in paragraph (b) of this Section. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.



     (d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document
will affect the right of any party to this Agreement to serve process in any other manner permitted
by law.



     Section 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.



     Section 9.11 Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.



     Section 9.12 Confidentiality. Each of the Administrative Agent, the Issuing Bank and
the Lenders agrees to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the extent required by
any regulatory authority, (c) to the extent required in the opinion of legal counsel by applicable
laws or regulations or by any subpoena or similar legal process, (d) to any other party to this
Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an
agreement containing provisions substantially the same as those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights
or obligations under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to any Borrower and its



38









 




obligations, (g) with the consent of the Borrowers or (h) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section or (ii) is disclosed
to the Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis by a source
other than the Borrowers, which disclosure is not the result of a breach of a duty of
confidentiality owed by the discloser to a Borrower if such breach was reasonably discoverable by
the Administrative Agent, the Issuing Bank or the applicable Lender, as the case may be. For the
purposes of this Section, “Information” means all information received from any Borrower
relating to any Borrower or its business, other than any such information that is known to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure
by the applicable Borrower. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of such Information as
such Person would accord to its own confidential information.




     Section 9.13 Interest Rate Limitation. Borrowers and the Lenders intend to strictly
comply with all applicable federal and New York laws, including applicable usury laws (or the usury
laws of any jurisdiction whose usury laws are deemed to apply to the Notes or any other Loan
Documents despite the intention and desire of the parties to apply the usury laws of the State of
New York). Accordingly, the provisions of this Section shall govern and control over every other
provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this
Section, even if such provision declares that it controls. As used in this Section, the term
“interest” includes the aggregate of all charges, fees, benefits or other compensation which
constitute interest under applicable law, provided that, to the maximum extent permitted by
applicable law, (a) any non-principal payment shall be characterized as an expense or as
compensation for something other than the use, forbearance or detention of money and not as
interest, and (b) all interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, using the actuarial method, during the full term of the
Notes. In no event shall any Borrower or any other Person be obligated to pay, or any Lender have
any right or privilege to reserve, receive or retain, (a) any interest in excess of the maximum
amount of nonusurious interest permitted under the laws of the State of New York or the applicable
laws (if any) of the United States or of any other jurisdiction, or (b) total interest in excess of
the amount which such Lender could lawfully have contracted for, reserved, received, retained or
charged had the interest been calculated for the full term of the Notes at the Ceiling Rate. The
daily interest rates to be used in calculating interest at the Ceiling Rate shall be determined by
dividing the applicable Ceiling Rate per annum by the number of days in the calendar year for which
such calculation is being made. None of the terms and provisions contained in this Agreement or in
any other Loan Document (including, without limitation, Article VII hereof) which directly
or indirectly relate to interest shall ever be construed without reference to this Section, or be
construed to create a contract to pay for the use, forbearance or detention of money at any
interest rate in excess of the Ceiling Rate. If the term of any Note is shortened by reason of
acceleration or maturity as a result of any Default or by any other cause, or by reason of any
required or permitted prepayment, and if for that (or any other) reason any Lender at any time,
including but not limited to, the stated maturity, is owed or receives (and/or has received)
interest in excess of interest calculated at the Ceiling Rate, then and in any such event all of
any such excess interest shall be canceled automatically as of the date of such acceleration,
prepayment or other event which produces the excess, and, if such excess interest has been paid to
such Lender, it shall be credited pro tanto against the then-outstanding principal balance of the
applicable Borrower’s obligations to such Lender, effective as of the date or dates when the event
occurs which causes it to be excess interest, until such excess is exhausted or all of such
principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of
such excess shall be promptly refunded to its payor.



     Section 9.14 Syndication Agent and Documentation Agents. WELLS FARGO BANK, NATIONAL
ASSOCIATION, in its capacity as Syndication Agent, shall have no rights, powers, duties,
obligations or liabilities under this Agreement or any of the other Loan Documents, but to the
extent that for any reason any Person makes a claim against WELLS FARGO BANK, NATIONAL ASSOCIATION,
in its capacity as Syndication Agent and not as a Lender the indemnification provisions in
Article VIII and in Section 9.03 (other than Section 9.03(c)) shall apply.
CALYON NEW YORK BRANCH, in its capacity as Documentation Agent, shall have no rights, powers,
duties, obligations or liabilities under this Agreement or any of the other Loan Documents, but to
the extent that for any reason any Person makes a claim against CALYON NEW YORK BRANCH, in its
capacity as Documentation Agent and not as a Lender the indemnification provisions in Article VIII
and in Section 9.03 (other than Section 9.03(c)) shall apply. DNB NOR BANK ASA, in
its capacity as Documentation Agent, shall have no rights, powers, duties, obligations or
liabilities under this Agreement or any of the other Loan Documents, but to the extent that for any
reason any Person makes a claim against DNB NOR BANK ASA, in its capacity as Documentation Agent
and not as a Lender the indemnification provisions in Article VIII and in Section 9.03
(other than Section 9.03(c)) shall apply. FORTIS BANK SA/NV, NEW YORK BRANCH, in its
capacity as Documentation Agent, shall have no rights, powers, duties, obligations or liabilities
under this Agreement or any of the other Loan Documents, but to the extent that for any reason any
Person makes a claim against FORTIS BANK SA/NV, NEW YORK BRANCH, in its capacity as Documentation
Agent and not as a Lender the indemnification provisions in Article VIII and in Section
9.03 (other than Section 9.03(c)) shall apply.



     Section 9.15 USA Patriot Act. Each Lender that is subject to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Act”) hereby notifies the Borrowers that pursuant to the requirements of the Act,



39









 




it is required to obtain, verify and record information that identifies the Borrowers, which
information includes the names and addresses of the Borrowers and other information that will allow
such Lender to identify the Borrowers in accordance with the Act.




     Section 9.16 Amendment and Restatement. This Agreement amends and restates in its
entirety that certain Credit Agreement dated as of May 5, 2005 executed by and among the Borrowers,
Comerica Bank, as Administrative Agent, and certain financial institutions therein set forth, as
the same may have been amended prior to the date hereof. Upon the effectiveness of this Agreement,
all obligations of the lenders and agents under such May 5, 2005 Credit Agreement shall cease and
terminate.



[Signature Pages Follow]




40









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.



	 	 	 	 	 
	 	SMITH INTERNATIONAL, INC.,

a Delaware corporation

 	 
	 	By:  	/s/  William Restrepo
 	 
	 	 	William Restrepo, Senior Vice President, 	 
	 	 	Chief Financial Officer and Treasurer 	 
	 
	 	M-I L.L.C.,

a Delaware limited liability company

 	 
	 	By:  	/s/  Frank Richter
 	 
	 	 	Frank Richter, Chief Financial Officer, Vice 	 
	 	 	President and Treasurer 	 
	 




 









 





	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

 individually and

as Administrative
Agent and as Swingline Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Thomas Okamoto
 

Thomas Okamoto
	 	 
	 

	 	Title:
	 	Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, individually and as
Syndication Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Donald W. Herrick, Jr.
 

Donald W. Herrick, Jr.
	 	 
	 

	 	Title:
	 	V.P. & Senior Portfolio Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	CALYON NEW YORK BRANCH, individually 
and as Documentation Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Page Dillehunt
 

	 	 
	 

	 	Name:
	 	Page Dillehunt	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Michael Willis	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Michael Willis	 	 
	 

	 	Title:
	 	Managing Director	 	 






 









 





	 	 	 	 	 	 	 
	 	 	DNB NOR BANK ASA, individually and as Documentation Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Philip E. Kurpiewski
 

Philip E. Kurpiewski
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Nikolai A. Nachamkin	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Nikolai A. Nachamkin	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	FORTIS BANK SA/NV, NEW YORK BRANCH, individually and
as Documentation Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Douglas Riahi
 

Douglas Riahi
	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Diran Cholakian	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Diran Cholakian	 	 
	 

	 	Title:
	 	Director	 	 






 









 





	 	 	 	 	 	 	 
	 	 	DEUTSCHE BANK AG, NEW YORK BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Rainer Meier
 

Rainer Meier
	 	 
	 

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ming K. Chu	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Ming K. Chu	 	 
	 

	 	Title:
	 	Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.

successor to Merrill Lynch Bank USA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Shelley A. McGregor
 

Shelley A. McGregor
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	COMERICA BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Cyd Dillahunty
 

Cyd Dillahunty
	 	 
	 

	 	Title:
	 	Vice President — Texas Division	 	 






 









 





	 	 	 	 	 	 	 
	 	 	HSBC BANK USA, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Dale Wilson
 

Dale Wilson
	 	 
	 

	 	Title:
	 	Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Bruce Robinson	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Bruce Robinson	 	 
	 

	 	Title:
	 	Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	STATE BANK OF INDIA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Prabodh Parikh
 

Prabodh Parikh
	 	 
	 

	 	Title:
	 	Vice-President & Head (Credit)	 	 






 









 





	 	 	 	 	 	 	 
	 	 	BANK OF CHINA, NEW YORK BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Richard Bradspies
 

Richard Bradspies
	 	 
	 

	 	Title:
	 	Deputy General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	BANK HAPOALIM B.M.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ James P. Surless
 

James P. Surless
	 	 
	 

	 	Title:
	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Frederic S. Becker	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Frederic S. Becker	 	 
	 

	 	Title:
	 	Senior Vice President	 	 






 









 





	 	 	 	 	 	 	 
	 	 	BANK OF TAIWAN, LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Chwan-Ming Ho
 

Chwan-Ming Ho
	 	 
	 

	 	Title:
	 	Vice President and General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	THE BANK OF EAST ASIA LIMITED, LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Chong Tan
 

Chong Tan
	 	 
	 

	 	Title:
	 	VP & Credit Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Victor Li	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Victor Li	 	 
	 

	 	Title:
	 	General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	E.SUN COMMERCIAL BANK, LTD., LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Benjamin Lin
 

Benjamin Lin
	 	 
	 

	 	Title:
	 	EVP & General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	HUA NAN COMMERCIAL BANK, LTD., 
LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Oliver S.H. Hsu
 

Oliver S.H. Hsu
	 	 
	 

	 	Title:
	 	V.P. & General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	CHANG HWA COMMERCIAL BANK LTD., 

LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Beverly Chen
 

Beverly Chen
	 	 
	 

	 	Title:
	 	VP & General Manager	 	 






 









 





	 	 	 	 	 	 	 
	 	 	TAIWAN COOPERATIVE BANK, 

LOS ANGELES BRANCH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Tzu-Neng Ko
 

Tzu-Neng Ko
	 	 
	 

	 	Title:
	 	AVP & Deputy General Manager	 	 







 












 





Schedule 1.01




	 	 	 	 	 	 	 	 	 
	 	 	Borrower Index Debt	 	 	 	 	 	 
	 	 	Ratings of	 	ABR Applicable	 	Adjusted LIBO	 	 
	Category	 	S&P/Moody’s	 	Margin	 	Applicable Margin	 	Commitment Fee
	1
	 	A2/A
	 	1.00%
	 	2.00%
	 	0.20%
	 	 	 	 	 	 	 	 	 
	2
	 	A3/A-
	 	1.25%
	 	2.25%
	 	0.25%
	 	 	 	 	 	 	 	 	 
	3
	 	Baa1/BBB+
	 	1.50%
	 	2.50%
	 	0.375%
	 	 	 	 	 	 	 	 	 
	4
	 	Baa2/BBB
	 	1.75%
	 	2.75%
	 	0.50%
	 	 	 	 	 	 	 	 	 
	5
	 	Lower than Baa2/BBB
	 	2.25%
	 	3.25%
	 	0.625%






 









 




SCHEDULE 2.01



	 	 	 	 	 	 	 	 	 
	Lender
	 	Tranche A Commitments	 	Tranche B Commitments
	JPMorgan Chase Bank, National Association
	 	$	120,000,000	 	 	$	15,000,000	 
	Wells Fargo Bank, National Association
	 	$	120,000,000	 	 	$	15,000,000	 
	Calyon New York Branch
	 	$	120,000,000	 	 	$	15,000,000	 
	DnB NOR Bank ASA
	 	$	120,000,000	 	 	$	15,000,000	 
	Fortis Bank SA/NV, New York Branch
	 	$	120,000,000	 	 	$	15,000,000	 
	Deutsche Bank AG, New York Branch
	 	$	95,000,000	 	 	$	11,875,000	 
	Bank of America, N.A.
	 	$	75,000,000	 	 	$	9,375,000	 
	Comerica Bank
	 	$	35,000,000	 	 	$	4,375,000	 
	HSBC Bank USA, N.A.
	 	$	35,000,000	 	 	$	4,375,000	 
	State Bank of India
	 	$	35,000,000	 	 	$	4,375,000	 
	Bank of China, New York Branch
	 	$	25,000,000	 	 	$	3,125,000	 
	Bank Hapoalim B.M.
	 	$	25,000,000	 	 	$	3,125,000	 
	Bank of Taiwan, Los Angeles Branch
	 	$	20,000,000	 	 	$	2,500,000	 
	The Bank of East Asia Limited, Los
Angeles Branch
	 	$	15,000,000	 	 	$	1,875,000	 
	E.Sun Commercial Bank, Ltd., Los Angeles
Branch
	 	$	10,000,000	 	 	$	1,250,000	 
	Hua Nan Commercial Bank, Ltd., Los
Angeles Branch
	 	$	10,000,000	 	 	$	1,250,000	 
	Chang Hwa Commercial Bank Ltd., Los
Angeles Branch
	 	$	10,000,000	 	 	$	1,250,000	 
	Taiwan Cooperative Bank, Los Angeles
Branch
	 	$	10,000,000	 	 	$	1,250,000	 
	 
	 	 	 	 	 	 	 	 
	TOTALS
	 	$	1,000,000,000	 	 	$	125,000,000	 




 







 





SCHEDULE 6.01




Existing Subsidiary Indebtedness




[attached]




 









 





SCHEDULE 6.02




Existing Liens




None





 












 




ASSIGNMENT AND ASSUMPTION


          Reference is made to the Credit Agreement dated as of December 10, 2009 (as amended and in
effect on the date hereof, the “Credit Agreement”), among SMITH INTERNATIONAL, INC., a
Delaware corporation, and M-I L.L.C., a Delaware limited liability company, as the Borrowers, the
Lenders named therein and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative Agent for
the Lenders. Terms defined in the Credit Agreement are used herein with the same meanings.


          The Assignor named on the reverse hereof hereby sells and assigns, without recourse, to the
Assignee named on the reverse hereof, and the Assignee hereby purchases and assumes, without
recourse, from the Assignor, effective as of the Assignment Date set forth on the reverse hereof,
the interests set forth on the reverse hereof (the “Assigned Interest”) in the Assignor’s
rights and obligations under the Credit Agreement, but excluding accrued interest and fees to and
excluding the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the Credit
Agreement. From and after the Assignment Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the Assigned Interest, have the rights
and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the Assigned
Interest, relinquish its rights and be released from its obligations under the Credit Agreement.


          This Assignment and Assumption is being delivered to the Administrative Agent together with
(i) if the Assignee is a Foreign Lender, any documentation required to be delivered by the Assignee
pursuant to Section 2.15 of the Credit Agreement, duly completed and executed by the
Assignee, and (ii) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by
the Assignee. The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent
pursuant to Section 9.04(b) of the Credit Agreement.


          This Assignment and Assumption shall be governed by and construed in accordance with the laws
of the State of New York.


Date of Assignment:


Legal Name of Assignor:


Legal Name of Assignee:


Assignee’s Address for Notices:


Effective Date of Assignment

(“Assignment Date”):


	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Percentage Assigned of	 
	 	 	 	 	 	 	Facility/Commitment (set forth, to	 
	 	 	 	 	 	 	at least 8 decimals, as a percentage	 
	 	 	 	 	 	 	of the Facility and the aggregate	 
	 	 	 	 	 	 	Commitments of all Lenders	 
	Facility
	 	Principal Amount Assigned	 	 	thereunder)	 
	Tranche A Revolving Loans:
	 	$	 	 	 	 		%
	 
	 	 	 	 	 	 	 
	Tranche B Revolving Loans:
	 	$	 	 	 	 		%
	 
	 	 	 	 	 	 	 




EXHIBIT A


 







 








          The terms set forth above and on the reverse side hereof are hereby agreed to:




	 	 	 	 	 	 	 
	 	 	[Name of Assignor], as Assignor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	[Name of Assignee]_, as Assignee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






EXHIBIT A




2









 





          The undersigned hereby consent to the within assignment:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	SMITH INTERNATIONAL, INC.,	 	 	 	JPMORGAN CHASE BANK,	 	 
	a Delaware corporation	 	 	 	NATIONAL ASSOCIATION, as	 	 
	 	 	 	 	 	 	 	 	Administrative Agent	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	 	 	By:	 	 	 	 
	Name:

	 	 

	 	 	 	 	 	Name:
	 	 

	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 
	Title:

	 	 	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	M-I L.L.C.,	 	 	 	 	 	 	 	 	 	 
	a Delaware limited liability company	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 





EXHIBIT A





3











 





NOTE

(Tranche A Revolving Loans)




Chicago, Illinois




			
			
	$                    
	 	                                        , 20___






     FOR VALUE RECEIVED, SMITH INTERNATIONAL, INC., a Delaware corporation (together with permitted
successors, herein collectively called “Maker”), promises to pay to the order of
                                         (“Payee”), at the office of JPMorgan Chase Bank, National
Association, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, in immediately available
funds and in lawful money of the United States of America, the principal sum of
                                         Dollars ($                    ) (or the unpaid principal balance of all Tranche
A Revolving Loans advanced against this note, if that amount is less), together with interest on
the unpaid principal balance of this note from time to time outstanding at the rate or rates and on
the date or dates provided in that certain Credit Agreement (as amended, supplemented, restated or
replaced from time to time, the “Credit Agreement”) dated as of December 10, 2009 among
Maker, M-I L.L.C., certain signatory banks named therein (including the Payee) and JPMorgan Chase
Bank, National Association, as Administrative Agent; provided, that for the full term of
this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the
holder of this note for the use, forbearance or detention of the debt evidenced hereby shall not
exceed the Ceiling Rate. Any term defined in the Credit Agreement which is used in this note and
which is not otherwise defined in this note shall have the meaning ascribed to it in the Credit
Agreement.



     1. Credit Agreement; Advances; Security. This note has been issued pursuant to the
terms of the Credit Agreement, and is one of the Notes referred to in the Credit Agreement.
Advances against this note by Payee or other holder hereof shall be governed by the terms and
provisions of the Credit Agreement. Reference is hereby made to the Credit Agreement for all
purposes. Payee is entitled to the benefits of and security provided for in the Credit Agreement.
The unpaid principal balance of this note at any time shall be the total of all amounts lent or
advanced against this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on a schedule which may be
attached hereto (and thereby made a part hereof for all purposes) or otherwise recorded in the
holder’s records; provided, that any failure to make notation of (a) any advance shall not
cancel, limit or otherwise affect Maker’s obligations or any holder’s rights with respect to that
advance, or (b) any payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker’s entitlement to credit for that payment as of the date received by the
holder.



     2. Mandatory Payments of Principal and Interest.



     (a) Accrued and unpaid interest on the unpaid principal balance of this note shall be due and
payable as provided in the Credit Agreement.



     (b) On the Revolving Maturity Date, the entire unpaid principal balance of this note and all
accrued and unpaid interest on the unpaid principal balance of this note shall be finally due and
payable.



     (c) All payments hereon made pursuant to this Paragraph shall be applied first to accrued
interest, the balance to principal.



     (d) If any interest payment provided for in this note shall become due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day (unless the result of
such extension of time would be to extend the date for payment of interest on a Eurodollar Loan
into another calendar month or beyond the Revolving Maturity Date, and in either such event such
payment shall be made on the Business Day immediately



EXHIBIT B-1





 









 








preceding the day on which such payment would otherwise have been due), and such extension of
time shall in such case be included in the computation of interest on this note.



     (e) The Credit Agreement provides for prepayments of the indebtedness evidenced hereby upon
terms and conditions specified therein.



     3. Default. The Credit Agreement provides for the acceleration of the maturity of
this note and other rights and remedies upon the occurrence of certain events specified therein.



     4. Waivers by Maker and Others. Except to the extent, if any, that notice of default
is expressly required herein or in any of the other Loan Documents, Maker and any and all
co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited
to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof may be extended and
re-extended from time to time without notice to any of them. Each such person agrees that his, her
or its liability on or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or to maintain
perfection of any lien against or security interest in any such security or the partial or complete
unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with
or without notice and before or after maturity.



     5. Paragraph Headings. Paragraph headings appearing in this note are for convenient
reference only and shall not be used to interpret or limit the meaning of any provision of this
note.



     6. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.



     7. Successors and Assigns. This note and all the covenants and agreements contained
herein shall be binding upon, and shall inure to the benefit of, the respective legal
representatives, heirs, successors and assigns of Maker and Payee.



     8. Records of Payments. The records of Payee shall be prima facie evidence of the
amounts owing on this note.



     9. Severability. If any provision of this note is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and enforceability of the
remaining provisions of this note shall not be affected thereby, and this note shall be liberally
construed so as to carry out the intent of the parties to it.



     10. Revolving Loan. Subject to the terms and provisions of the Credit Agreement,
Maker may use all or any part of the credit provided to be evidenced by this note at any time
before the Revolving Maturity Date. Maker may borrow, repay and reborrow hereunder, and except as
set forth in the Credit Agreement there is no limitation on the number of advances made hereunder.



     11. Business Loans. Maker warrants and represents to Payee and all other holders of
this note that all loans evidenced by this note are and will be for business, commercial,
investment or other similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in the Texas Finance Code.



EXHIBIT B-1




2









 








	 	 	 	 	 	 	 
	 	 	SMITH INTERNATIONAL, INC.

a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






EXHIBIT B-1





3











 




NOTE
(Tranche B Revolving Loans)


Chicago, Illinois


			
	 	 	 
	$                    	 	                                        , 20___




     FOR VALUE RECEIVED, M-I L.L.C., a Delaware limited liability company (together with permitted
successors, herein collectively called “Maker”), promises to pay to the order of
                                         (“Payee”), at the office of JPMorgan Chase Bank, National
Association, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, in immediately available
funds and in lawful money of the United States of America, the principal sum of
                                         Dollars ($                    ) (or the unpaid principal balance of all Tranche
B Revolving Loans advanced against this note, if that amount is less), together with interest on
the unpaid principal balance of this note from time to time outstanding at the rate or rates and on
the date or dates provided in that certain Credit Agreement (as amended, supplemented, restated or
replaced from time to time, the “Credit Agreement”) dated as of December 10, 2009 among
Maker, Smith International, Inc., certain signatory banks named therein (including the Payee) and
JPMorgan Chase Bank, National Association, as Administrative Agent; provided, that for the
full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be
paid to the holder of this note for the use, forbearance or detention of the debt evidenced hereby
shall not exceed the Ceiling Rate. Any term defined in the Credit Agreement which is used in this
note and which is not otherwise defined in this note shall have the meaning ascribed to it in the
Credit Agreement.


     1. Credit Agreement; Advances; Security. This note has been issued pursuant to the
terms of the Credit Agreement, and is one of the Notes referred to in the Credit Agreement.
Advances against this note by Payee or other holder hereof shall be governed by the terms and
provisions of the Credit Agreement. Reference is hereby made to the Credit Agreement for all
purposes. Payee is entitled to the benefits of and security provided for in the Credit Agreement.
The unpaid principal balance of this note at any time shall be the total of all amounts lent or
advanced against this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on a schedule which may be
attached hereto (and thereby made a part hereof for all purposes) or otherwise recorded in the
holder’s records; provided, that any failure to make notation of (a) any advance shall not
cancel, limit or otherwise affect Maker’s obligations or any holder’s rights with respect to that
advance, or (b) any payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker’s entitlement to credit for that payment as of the date received by the
holder.


     2. Mandatory Payments of Principal and Interest.


     (a) Accrued and unpaid interest on the unpaid principal balance of this note shall be due and
payable as provided in the Credit Agreement.


     (b) On the Revolving Maturity Date, the entire unpaid principal balance of this note and all
accrued and unpaid interest on the unpaid principal balance of this note shall be finally due and
payable.


     (c) All payments hereon made pursuant to this Paragraph shall be applied first to accrued
interest, the balance to principal.


     (d) If any interest payment provided for in this note shall become due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day (unless the result of
such extension of time would be to extend the date for payment of interest on a Eurodollar Loan
into another calendar month or beyond the Revolving Maturity Date, and in either such event such
payment shall be made on the Business Day immediately preceding the day on which such payment would
otherwise have been due), and such extension of time shall in such case be included in the
computation of interest on this note.


EXHIBIT B-2


 







 




     (e) The Credit Agreement provides for prepayments of the indebtedness evidenced hereby upon
terms and conditions specified therein.


     3. Default. The Credit Agreement provides for the acceleration of the maturity of
this note and other rights and remedies upon the occurrence of certain events specified therein.


     4. Waivers by Maker and Others. Except to the extent, if any, that notice of default
is expressly required herein or in any of the other Loan Documents, Maker and any and all
co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited
to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof may be extended and
re-extended from time to time without notice to any of them. Each such person agrees that his, her
or its liability on or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or to maintain
perfection of any lien against or security interest in any such security or the partial or complete
unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with
or without notice and before or after maturity.


     5. Paragraph Headings. Paragraph headings appearing in this note are for convenient
reference only and shall not be used to interpret or limit the meaning of any provision of this
note.


     6. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.


     7. Successors and Assigns. This note and all the covenants and agreements contained
herein shall be binding upon, and shall inure to the benefit of, the respective legal
representatives, heirs, successors and assigns of Maker and Payee.


     8. Records of Payments. The records of Payee shall be prima facie evidence of the
amounts owing on this note.


     9. Severability. If any provision of this note is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and enforceability of the
remaining provisions of this note shall not be affected thereby, and this note shall be liberally
construed so as to carry out the intent of the parties to it.


     10. Revolving Loan. Subject to the terms and provisions of the Credit Agreement,
Maker may use all or any part of the credit provided to be evidenced by this note at any time
before the Revolving Maturity Date. Maker may borrow, repay and reborrow hereunder, and except as
set forth in the Credit Agreement there is no limitation on the number of advances made hereunder.


     11. Business Loans. Maker warrants and represents to Payee and all other holders of
this note that all loans evidenced by this note are and will be for business, commercial,
investment or other similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in the Texas Finance Code.


	 	 	 	 	 	 	 
	 	 	M-I L.L.C.,

a Delaware limited liability company	 	 
	 	 	 	 	 	 	 
	 
	 	By:	 	 	 	 
	 
	 	Name:
	 	 

	 	 
	 
	 	Title:
	 	 

	 	 
	 
	 	 	 	 

	 	 





EXHIBIT B-2




2










 





NOTE

(Swingline Loans)




Chicago, Illinois




			
	 	 	 
	$                    
	 	                                        , 20___






     FOR VALUE RECEIVED, SMITH INTERNATIONAL, INC., a Delaware corporation (together with permitted
successors, herein collectively called “Maker”), promises to pay to the order of
                                         (“Payee”), at the office of JPMorgan Chase Bank, National
Association, 10 South Dearborn, Floor 7, Chicago, Illinois 60603-2003, in immediately available
funds and in lawful money of the United States of America, the principal sum of
                                         Dollars ($                    ) (or the unpaid principal balance of all
Swingline Loans advanced against this note, if that amount is less), together with interest on the
unpaid principal balance of this note from time to time outstanding at the rate or rates and on the
date or dates provided in that certain Credit Agreement (as amended, supplemented, restated or
replaced from time to time, the “Credit Agreement”) dated as of December 10, 2009 among
Maker, M-I L.L.C., certain signatory banks named therein (including the Payee) and JPMorgan Chase
Bank, National Association, as Administrative Agent; provided, that for the full term of
this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to the
holder of this note for the use, forbearance or detention of the debt evidenced hereby shall not
exceed the Ceiling Rate. Any term defined in the Credit Agreement which is used in this note and
which is not otherwise defined in this note shall have the meaning ascribed to it in the Credit
Agreement.



     1. Credit Agreement; Advances; Security. This note has been issued pursuant to the
terms of the Credit Agreement, and is one of the Notes referred to in the Credit Agreement.
Advances against this note by Payee or other holder hereof shall be governed by the terms and
provisions of the Credit Agreement. Reference is hereby made to the Credit Agreement for all
purposes. Payee is entitled to the benefits of and security provided for in the Credit Agreement.
The unpaid principal balance of this note at any time shall be the total of all amounts lent or
advanced against this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. All loans and advances and all payments and permitted
prepayments made hereon may be endorsed by the holder of this note on a schedule which may be
attached hereto (and thereby made a part hereof for all purposes) or otherwise recorded in the
holder’s records; provided, that any failure to make notation of (a) any advance shall not
cancel, limit or otherwise affect Maker’s obligations or any holder’s rights with respect to that
advance, or (b) any payment or permitted prepayment of principal shall not cancel, limit or
otherwise affect Maker’s entitlement to credit for that payment as of the date received by the
holder.



     2. Mandatory Payments of Principal and Interest.



     (a) Accrued and unpaid interest on the unpaid principal balance of this note shall be due and
payable as provided in the Credit Agreement.



     (b) On the Revolving Maturity Date, the entire unpaid principal balance of this note and all
accrued and unpaid interest on the unpaid principal balance of this note shall be finally due and
payable.



     (c) All payments hereon made pursuant to this Paragraph shall be applied first to accrued
interest, the balance to principal.



     (d) If any interest payment provided for in this note shall become due on a day other than a
Business Day, such payment may be made on the next succeeding Business Day (unless the result of
such extension of time would be to extend the date for payment of interest on a Eurodollar Loan
into another calendar month or beyond the Revolving Maturity Date, and in either such event such
payment shall be made on the Business Day immediately preceding the day on which such payment would
otherwise have been due), and such extension of time shall in such case be included in the
computation of interest on this note.



     (e) The Credit Agreement provides for prepayments of the indebtedness evidenced hereby upon
terms and conditions specified therein.



     3. Default. The Credit Agreement provides for the acceleration of the maturity of
this note and other rights and remedies upon the occurrence of certain events specified therein.



EXHIBIT B-3




 









 





     4. Waivers by Maker and Others. Except to the extent, if any, that notice of default
is expressly required herein or in any of the other Loan Documents, Maker and any and all
co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited
to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof may be extended and
re-extended from time to time without notice to any of them. Each such person agrees that his, her
or its liability on or with respect to this note shall not be affected by any release of or change
in any guaranty or security at any time existing or by any failure to perfect or to maintain
perfection of any lien against or security interest in any such security or the partial or complete
unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with
or without notice and before or after maturity.



     5. Paragraph Headings. Paragraph headings appearing in this note are for convenient
reference only and shall not be used to interpret or limit the meaning of any provision of this
note.



     6. Choice of Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
APPLICABLE LAWS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN
EFFECT.



     7. Successors and Assigns. This note and all the covenants and agreements contained
herein shall be binding upon, and shall inure to the benefit of, the respective legal
representatives, heirs, successors and assigns of Maker and Payee.



     8. Records of Payments. The records of Payee shall be prima facie evidence of the
amounts owing on this note.



     9. Severability. If any provision of this note is held to be illegal, invalid or
unenforceable under present or future laws, the legality, validity and enforceability of the
remaining provisions of this note shall not be affected thereby, and this note shall be liberally
construed so as to carry out the intent of the parties to it.



     10. Revolving Loan. Subject to the terms and provisions of the Credit Agreement,
Maker may use all or any part of the credit provided to be evidenced by this note at any time
before the Revolving Maturity Date. Maker may borrow, repay and reborrow hereunder, and except as
set forth in the Credit Agreement there is no limitation on the number of advances made hereunder.



     11. Business Loans. Maker warrants and represents to Payee and all other holders of
this note that all loans evidenced by this note are and will be for business, commercial,
investment or other similar purpose and not primarily for personal, family, household or
agricultural use, as such terms are used in the Texas Finance Code.



	 	 	 	 	 	 	 
	 	 	SMITH INTERNATIONAL, INC.

a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






EXHIBIT B-3





2