Edgar Filing: SMITH INTERNATIONAL INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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SMITH INTERNATIONAL, INC.
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[SMITH INTERNATIONAL, INC. LOGO]

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

APRIL 24, 2002

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To Our Stockholders:

The Annual Meeting of Stockholders (the "Annual Meeting") of Smith
International, Inc. (the "Company") will be held on WEDNESDAY, APRIL 24, 2002,
at 9:00 a.m., at 700 King Street, Wilmington, Delaware, to consider and take
action on the following:

1. Re-election of three directors: G. Clyde Buck, Loren K. Carroll and
Wallace S. Wilson, each for a term of three years;

2. Approval of an amendment to the Smith International, Inc. 1989
Long-Term Incentive Compensation Plan; and

3. Transaction of any other business properly before the Annual Meeting.

YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "IN FAVOR OF" BOTH PROPOSALS.

The Board of Directors has fixed the close of business on March 1, 2002 as
the record date for determining stockholders who are entitled to notice of and
to vote at the meeting.

This Proxy Statement, voting instruction card and Smith International, Inc.
2001 Annual Report are being distributed on or about March 22, 2002.

This year we are again offering three ways to vote your shares. In addition
to the traditional paper proxy card, you may vote via the Internet or by
telephone by following the instructions included in this package. If you vote
via the Internet or by telephone, you will need the Control Number that is
imprinted on your personalized proxy card.

By Order of the Board of Directors

/s/ Neal S. Sutton
Neal S. Sutton
Secretary

PROXY STATEMENT

TABLE OF CONTENTS

PAGE
----

GENERAL INFORMATION ABOUT VOTING............................ 1
PROPOSAL 1: ELECTION OF DIRECTORS........................... 2
Nominees.................................................. 3
Directors Continuing in Office............................ 4
Security Ownership of Directors and Executive Officers.... 6
Information about the Board of Directors and its
Committees............................................. 6
Audit Committee Report.................................... 7
Executive Compensation.................................... 10
Compensation and Benefits Committee Report on Executive
Compensation.......................................... 10
Comparison of Five-Year Cumulative Total Return........ 13
Executive Compensation Tables.......................... 14
I. Summary Compensation Table........................ 14
II. Option/SAR Grants in 2001......................... 15
III. Aggregated Option Exercises in 2001 and December
31, 2001 Option Values................................ 15
Retirement Benefits and Employment Contracts........... 16
Additional Information about Our Directors and Executive
Officers............................................... 18
Stock Ownership of Certain Beneficial Owners.............. 18
PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE SMITH
INTERNATIONAL, INC.
1989 LONG-TERM INCENTIVE COMPENSATION PLAN................ 19
OTHER BUSINESS.............................................. 22
STOCKHOLDERS' PROPOSALS..................................... 22
ANNUAL REPORT AND FINANCIAL INFORMATION..................... 22

[SMITH INTERNATIONAL, INC. LOGO]
P. O. Box 60068
Houston TX 77205-0068

PROXY STATEMENT

YOUR VOTE IS VERY IMPORTANT. For this reason, the Board of Directors is
soliciting proxies to be used at the 2002 Annual Meeting. This Proxy Statement
is being sent to you in connection with this request and has been prepared for
the Board by our management. "We," "our," "Smith" and the "Company" each refers
to Smith International, Inc. This Proxy Statement is first being sent to our
stockholders on or about March 22, 2002. IT IS IMPORTANT THAT YOUR SHARES BE
REPRESENTED AT THIS MEETING. EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE
(1) BY COMPLETING, SIGNING, DATING AND MAILING THE PROXY CARD IN THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE, (2) VIA THE INTERNET AS INDICATED ON THE PROXY CARD
OR (3) BY CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD.

GENERAL INFORMATION ABOUT VOTING

WHO CAN VOTE.

You are entitled to vote your shares of our common stock ("Common Stock")
if our records show that you held your shares as of March 1, 2002. At the close
of business on March 1, 2002, a total of 50,626,764 shares of Common Stock were
outstanding and entitled to vote. Each share of Common Stock has one vote. The
enclosed proxy card shows the number of shares that you are entitled to vote.

HOW YOU CAN VOTE.

If you return your signed proxy card to us, or if you vote by the Internet
or by telephone before the Annual Meeting, we will vote your shares as you
direct. You can specify on your proxy card whether your shares should be voted
for all, one, two or none of the nominees for director. You can also specify
whether you approve, disapprove or abstain from the other proposal. If your
Common Stock is held by a broker, bank or other nominee, you will receive
instructions from them that you must follow in order to have your shares voted.
If the meeting is adjourned, your Common Stock will be voted as specified on
your proxy card on the new meeting date, unless you have revoked your proxy
instructions.

IF YOU RETURN YOUR PROXY CARD BUT DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU
WANT TO VOTE YOUR SHARES, WE WILL VOTE THEM "FOR" THE ELECTION OF ALL NOMINEES
FOR DIRECTOR AS SET FORTH UNDER "ELECTION OF DIRECTORS" BELOW AND "FOR" PROPOSAL
2.

HOW YOU MAY REVOKE YOUR PROXY INSTRUCTIONS.

You can revoke your proxy at any time before it is exercised in any of four
ways:

(1) by submitting written notice of revocation to our Secretary;

(2) by submitting another proxy card that is properly signed and later
dated;

(3) by submitting another proxy via the Internet or by telephone on a
date after the date of your last proxy; or

(4) by voting in person at the meeting.

NUMBER OF VOTES REQUIRED.

Directors must be elected by a plurality of the votes cast at the meeting.
This means that the three nominees receiving the greatest number of votes will
be elected. A majority of the shares represented at the meeting is required to
approve Proposal 2. The Annual Meeting will be held if the holders of a majority
of the outstanding shares of Common Stock entitled to vote (a "quorum") are
present at the meeting in person or by proxy. If you have returned valid proxy
instructions or attend the meeting in person, your Common Stock will be counted
for the purpose of determining whether there is a quorum, even if you wish to
abstain from voting on some or all matters introduced at the meeting. "Broker
non-votes" also count for quorum purposes. If you hold your Common Stock through
a broker, bank or other nominee, generally the nominee may only vote the Common
Stock that it holds for you in accordance with your instructions. However, if
the broker, bank or nominee has not received your instructions within ten days
of the meeting, it may vote on matters that the New York Stock Exchange
determines to be routine. If the broker, bank or nominee cannot vote on a
particular matter because it is not routine, there is a "broker non-vote" on
that matter. Broker non-votes do not count as votes for or against any proposal;
however, an abstention counts as a vote against a proposal. Abstentions and
broker non-votes have no effect on the outcome of the election of directors.

OTHER MATTERS TO BE ACTED UPON AT THE MEETING.

We do not know of any matters to be presented or acted upon at the meeting,
other than those mentioned in this document. If any other matter is presented at
the meeting on which a vote may properly be taken, your signed proxy card gives
authority to Doug Rock and Neal S. Sutton to vote on those matters.

COST OF THIS PROXY SOLICITATION.

We will pay the cost of this proxy solicitation. In addition to soliciting
proxies by mail, some of our employees may solicit stockholders for the same
type of proxy, personally and by telephone. None of these employees will receive
any additional or special compensation for doing this. We have retained Morrow &
Co. to assist in the solicitation of proxies for a fee of $6,500, plus
reasonable out-of-pocket costs and expenses. We will, upon request, reimburse
brokers, banks and other nominees for their expenses in sending proxy material
to their principals and obtaining their proxies.

PROPOSAL 1: ELECTION OF DIRECTORS

At the 2002 Annual Meeting, stockholders will elect three persons as Class
I directors to hold office until the 2005 Annual Meeting, or until they are
succeeded by other qualified directors who have been elected. The nominees are
G. Clyde Buck, Loren K. Carroll and Wallace S. Wilson.

Directors must be elected by a plurality of the votes cast at the meeting.
This means that the three nominees receiving the greatest number of votes will
be elected. Votes withheld for any director will not be counted.

We will vote your shares as you specify on your proxy card. If you properly
execute and return your proxy card (in paper form, electronically via the
Internet or by telephone), but don't specify how you want your shares voted, we
will vote them for the election of all of the nominees listed below. If
unforeseen circumstances (such as death or disability) make it necessary for the
Board of Directors to substitute another person for any of the nominees, and you
have either voted for the substituted nominee or not specified your vote, we
will vote your shares for that other person.

Each of the nominees are currently members of the Board of Directors. A
brief biography of all directors is presented below:

NOMINEES

Directors to be elected to Class I for a term expiring in 2005:

G. CLYDE BUCK [PICTURE]
Age: 64
Director Since: 1992
Recent Business Experience: Mr. Buck has had extensive experience in
energy-related matters. He received a B.A.
in economics from Williams College and a
M.B.A. from Harvard. He is currently Senior
Vice President and Managing Director
Corporate Finance of the investment banking
firm of Sanders Morris Harris Inc., a
position he has held since April 1998. From
1983 to 1998, Mr. Buck was a Managing
Director in the Houston corporate finance
office of Dain Rauscher Incorporated.
Committee Membership: Compensation and Benefits Committee;
Nominating Committee.

LOREN K. CARROLL [PICTURE]
Age: 58
Director Since: 1987
Recent Business Experience: Mr. Carroll joined the Company in December
1984 as Vice President and Chief Financial
Officer. In January 1988 he was appointed
Executive Vice President and Chief
Financial Officer and served in that
capacity until March 1989. Mr. Carroll
rejoined the Company in 1992 as Executive
Vice President and Chief Financial Officer
and continues to hold the office of
Executive Vice President of the Company. On
March 16, 1994, Mr. Carroll was named the
President and Chief Executive Officer of
M-I, a company in which the Company holds a
60% interest.
Committee Membership: Executive Committee.
Other Directorships: Fleetwood Enterprises, Inc.

WALLACE S. WILSON [PICTURE]
Age: 72
Director Since: 1998
Recent Business Experience: Mr. Wilson was President of Wilson
Industries, Inc. from 1964 to 1980, at
which time he assumed the additional
position of Chairman of the Board and Chief
Executive Officer. He served as Chairman of
the Board, President and Chief Executive
Officer of Wilson Industries until April
30, 1998, when Wilson Industries was
purchased by the Company. Mr. Wilson became
a director of the Company on May 15, 1998.
Committee Membership: Compensation and Benefits Committee.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF ALL
NOMINEES FOR DIRECTOR.

DIRECTORS CONTINUING IN OFFICE

Directors of Class II to continue in office until 2003:

BENJAMIN F. BAILAR [PICTURE]
Age: 67
Director Since: 1993
Recent Business Experience: Mr. Bailar is the Dean and H. Joe Nelson,
III Professor of Administration Emeritus of
Jesse H. Jones Graduate School of
Administration of Rice University, where he
held that position from September 1, 1987
through June 1997.
Committee Membership: Chairman, Audit Committee; Nominating
Committee.
Other Directorships: Dana Corporation; Trico Marine Services,
Inc.; Trustee of the Philatelic Foundation.

DOUG ROCK [PICTURE]
Age: 55
Director Since: 1987
Recent Business Experience: Mr. Rock was elected Chairman of the Board
of Directors on February 26, 1991. Mr. Rock
has been with the Company since 1974 and has
been Chief Executive Officer, President and
Chief Operating Officer since March 31,
1989.
Committee Membership: Executive Committee.
Other Directorships: VIAD CORP.

Directors of Class III to continue in office until 2004:

JAMES R. GIBBS [PICTURE]
Age: 57
Director Since: 1990
Recent Business Experience: Mr. Gibbs is the Chairman of the Board,
President & Chief Executive Officer of
Frontier Oil Corporation (formerly Wainoco
Oil Corporation). He was President and Chief
Operating Officer of Frontier from January
1, 1987 to April 1, 1992, at which time he
assumed the additional position of Chief
Executive Officer. He was elected Chairman
of the Board of Frontier in April 1999. He
joined Frontier Oil Corporation in February
1982 as Vice President of Finance and
Administration, and was appointed Executive
Vice President in September 1985.
Committee Membership: Audit Committee; Chairman, Compensation and
Benefits Committee; Executive Committee;
Chairman, Nominating Committee.
Other Directorships: Frontier Oil Corporation; Veritas DGC Inc.;
Gundle/SLT Environmental Inc.; Talon
International, Inc.; advisory director of
Frost Bank-Houston.

JERRY W. NEELY [PICTURE]
Age: 65
Director Since: 1977
Recent Business Experience: Mr. Neely held a number of positions with
the Company from 1965 to 1987. He was
President from February 1976 to December
1977, at which time he assumed the
additional positions of Chairman of the
Board and Chief Executive Officer and served
in those capacities until December 1987.
Since that time, Mr. Neely has been a
private investor.
Committee Membership: Audit Committee; Compensation and Benefits
Committee; Chairman, Executive Committee.
Other Directorships: Elamex S.A. de C.V.; Board of Trustees of
the University of Southern California.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table shows the number of shares of Common Stock beneficially
owned as of March 1, 2002 by each director or nominee for director, the
executive officers named in the Summary Compensation Table included later in
this Proxy Statement and all directors and executive officers as a group. Except
as otherwise indicated, the persons listed below have sole voting power and
investment power relating to the shares shown.

SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

COMMON STOCK
BENEFICIALLY OWNED
--------------------
NO. OF PERCENT
NAME OF INDIVIDUAL SHARES OF CLASS
------------------ --------- --------

Benjamin F. Bailar(1)............................ 4,600 *
Roger A. Brown(2)................................ 43,550 *
G. Clyde Buck(1)................................. 13,600 *
Loren K. Carroll(2).............................. 159,750 *
James R. Gibbs(1)................................ 4,300 *
John J. Kennedy(2)............................... 73,100 *
Jerry W. Neely(1)................................ 248,302 *
Doug Rock(2)(3).................................. 260,520 *
Neal S. Sutton(2)................................ 49,750 *
Wallace S. Wilson(1)............................. 1,277,285 2.5
All directors and executive officers as a group
(16 persons)(1)(2)(3).......................... 2,239,700 4.4

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* Less than 1%

(1) The amounts reported include 400 shares of Common Stock to be issued to each
outside director on or about April 24, 2002 under the Smith International,
Inc. Stock Plan for Outside Directors.

(2) The amounts reported include shares of Common Stock that could be acquired
on or before May 1, 2002 through the exercise of stock options as follows:
Mr. Rock: 241,450 shares; Mr. Carroll: 135,000 shares; Mr. Sutton: 49,750
shares; Mr. Brown: 43,550 shares; and Mr. Kennedy: 73,100 shares; and all
executive officers as a group: 645,051 shares.

(3) The amounts reported include Common Stock allocated to accounts under a
401(k) plan as follows: Mr. Rock: 19,070 shares; all directors and executive
officers as a group: 21,412.

INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES

THE BOARD. During 2001, the Board of Directors held six meetings. All
directors attended at least 75% of the meetings of the Board of Directors and of
all committees on which they served.

COMMITTEES OF THE BOARD. The Company has an Audit Committee and its
members are Messrs. Bailar, Gibbs and Neely. The Audit Committee reviews the
Company's auditing, accounting, financial reporting and internal control
functions. This committee also recommends the firm that the Company should
retain as its independent accountant. All members of the Audit Committee are
non-employee directors. During 2001, the Audit Committee held two meetings.

The Company has a Compensation and Benefits Committee, and its members are
Messrs. Gibbs, Buck, Neely and Wilson. The Compensation and Benefits Committee
reviews the Company's executive compensation and employee benefit plans and
programs, including their establishment, modification and administration. It
also administers the Company's stock option plan. During 2001, this committee
held two meetings. The Executive Compensation Subcommittee of this committee,
comprised of Messrs. Gibbs and Buck, held two meetings during 2001.

The Company has an Executive Committee and its members are Messrs. Neely,
Carroll, Gibbs and Rock. The Executive Committee, between meetings of the Board
of Directors, has limited power to act on behalf of the Board. This committee
meets only as needed and did not meet in 2001.

The Company has a Nominating Committee, which was formed on February 6,
2002, and its members are Messrs. Gibbs, Bailar, and Buck. The Nominating
Committee recommends to the Board of Directors candidates for election to the
Board of Directors. The Nominating Committee will consider recommendations for
nominees for directorships submitted by stockholders. Stockholders who wish the
Nominating Committee to consider their recommendations for nominees for the
position of Director should submit their recommendations in writing to the
Nominating Committee in care of the Secretary of the Company at our principal
executive offices. The Nominating Committee meets only as needed and did not
meet in 2001.

DIRECTORS' COMPENSATION. Employee directors receive no additional
compensation other than their normal salary for serving on the Board or its
committees. Non-employee directors receive $30,000 annually and $1,500 for each
Board meeting attended. In addition, they are paid $3,000 per year for chairing
a committee and $1,250 for each committee meeting attended. Non-employee
directors also receive an annual grant of 400 shares of Common Stock.

NON-EMPLOYEE DIRECTOR PROGRAMS. The Company terminated its Directors'
Retirement Plan in 1998. The Company issued restricted stock grants to each of
the non-employee directors to fund the actuarial value of their accrued benefits
under the retirement plan. These grants will "cliff-vest" upon retirement after
ten years of service as a director. This means the grants will all vest at once
upon retirement after ten years of service.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During 2001,
Messrs. Buck, Gibbs, Neely and Wilson served as members of the Company's
Compensation and Benefits Committee. During 2001, none of Messrs. Buck, Gibbs,
Neely and Wilson was an officer or employee of the Company or any of its
subsidiaries, nor did any of them have any other relationship with the Company
that requires further disclosure under requirements of the U.S. Securities and
Exchange Commission (the "SEC"). From December 1977 to December 1987, Mr. Neely
was Chief Executive Officer and Chairman of the Board of Directors of the
Company. From 1964 to 1980, Mr. Wilson was President of Wilson Industries, Inc.,
at which time he assumed the additional position of Chairman of the Board and
Chief Executive Officer. Mr. Wilson served as Chairman of the Board, President
and Chief Executive Officer of Wilson Industries until April 30, 1998, when
Wilson Industries was purchased by the Company.

AUDIT COMMITTEE REPORT

In accordance with its written charter, the Audit Committee assists the
Board of Directors in oversight of the accounting, auditing, and financial
reporting practices of the Company. A copy of the Audit Committee charter was
previously filed with the Securities and Exchange Commission as a part of the
Company's definitive proxy statement filed March 23, 2001. The charter may be
obtained by accessing the SEC's website at www.sec.gov or by contacting the
Company.

The Audit Committee consists of three independent members, as independence
is defined by the listing standards of the New York Stock Exchange.

Management is responsible for the financial reporting process, the
preparation of consolidated financial statements in accordance with generally
accepted accounting principles, the system of internal controls, and procedures
designed to insure compliance with accounting standards and applicable laws and
regulations. The Company's independent auditors are responsible for auditing the
financial statements. The Audit Committee's responsibility is to monitor and
review these processes and procedures. The members of the Audit Committee are
not professionally engaged in the practice of accounting or auditing and are not
experts in the fields of accounting or auditing. The Audit Committee relies,
without independent verification, on the information provided to it and on the
representations made by management and the independent auditors that the
financial statements have been prepared in conformity with generally accepted
accounting principles.

The Audit Committee met twice during the last fiscal year. The meetings
were conducted so as to encourage communication among the members of the Audit
Committee, management, the internal auditors, and the Company's independent
auditors, Arthur Andersen LLP. Among other things, the Audit Committee discussed
with the Company's internal and independent auditors the overall scope and plans
for their respective audits. The Audit Committee separately met with each of the
internal and independent auditors, with and without management, to discuss the
results of their examinations and evaluations of the Company's internal
controls. The Audit Committee also discussed with Smith's independent auditors
all matters required by generally accepted auditing standards, including those
described in Statement on Auditing Standards ("SAS") No. 61, as amended,
"Communication with Audit Committees".

In addition to the two regular Audit Committee meetings, the Committee
Chairman, on behalf of the Committee, discussed the quarterly interim financial
information of the Company with management and the independent auditors prior to
its release to the public. This included a discussion of the results of Arthur
Andersen's SAS No. 71 reviews.

The Audit Committee obtained a formal written statement from Arthur
Andersen describing all relationships between Arthur Andersen and the Company
that might bear on Arthur Andersen's independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." The Audit Committee discussed with Arthur Andersen any
relationships that may have an impact on their objectivity and independence and
satisfied itself as to Arthur Andersen's independence. The Audit Committee also
reviewed, among other things, the amount of fees paid to Arthur Andersen for
audit and non-audit services and considered whether the provision of non-audit
services by Arthur Andersen is compatible with maintaining Arthur Andersen's
independence. In response to public concerns about the integrity of independent
audits, Smith intends to expand the role of other firms in providing non-audit
services. Arthur Andersen did not provide any financial information systems
design or implementation services to Smith during the fiscal year ended December
31, 2001.

The Audit Committee reviewed and discussed the Company's audited
consolidated financial statements as of and for the year ended December 31, 2001
with management and the independent auditors. Based on the above-mentioned
review and discussions, and subject to the limitations on the Audit Committee's
role and responsibilities described above and in the Audit Committee charter,
the Audit Committee recommended to the Board of Directors that the Company's
audited consolidated financial statements be included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, for filing with the
Securities and Exchange Commission.

Stockholder approval of the appointment of independent auditors is not
required by the Company's Bylaws or otherwise. In the past, however, the Audit
Committee has recommended the appointment of independent auditors to the Board
of Directors, which has, in turn, recommended the ratification of such
appointment to the Company's stockholders. The Company's current independent
auditors, Arthur Andersen, have served in this capacity since 1952 and, as such,
are familiar with the global operations, financial controls and accounting
practices of the Company. After considering a number of factors, including the
underlying financial structure of the Company, the results of Arthur Andersen's
most recent peer review, and the views of some of the Company's larger
stockholders, the Company continues to work with Arthur Andersen. However, in
light of the events currently surrounding Arthur Andersen, the Audit Committee
believes it is appropriate to continue monitoring the situation. Accordingly,
the Company's stockholders are not being asked to ratify the appointment of
independent auditors to review the books and records of the Company for the
fiscal year ending December 31, 2002. The Audit Committee will make a decision
with respect to the appointment of the Company's independent auditors that it
believes to be in the best interest of the Company and its stockholders.

Audit Committee

Benjamin F. Bailar, Chairman
James R. Gibbs
Jerry W. Neely

FEES PAID TO ARTHUR ANDERSEN LLP

Audit Fees. Fees for the fiscal year 2001 audit of the Company's
consolidated financial statements and the review of Forms 10-Q for the fiscal
year 2001 were $1,060,000. These fees also include the audit of the combined
financial statements for fiscal year 2001 of M-I, the Company's majority-owned
joint venture.

Financial Information Systems Design and Implementation. During fiscal
year 2001, the Company did not engage Arthur Andersen to render financial
information systems design and implementation services.

Other Fees. The Company incurred an aggregate of $1,270,000 in fees to
Arthur Andersen during fiscal year 2001 for all non-audit services. Other fees
primarily relate to income tax work, various statutory audits and employee
benefit plan audits and related consultation, other than that directly related
to the audit of the financial statements for fiscal year 2001.

EXECUTIVE COMPENSATION

COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION

COMPENSATION POLICIES

The Company's executive compensation program is designed to help the
Company attract, motivate and retain the executive resources that the Company
needs to maximize its return to stockholders. The objective of the Company's
compensation program for key management positions is to provide compensation
packages that are consistent with competitive market norms for companies similar
in size, activity and complexity to the Company.

The Compensation and Benefits Committee (the "Compensation Committee"),
which consists solely of non-employee directors, administers the executive
compensation programs of the Company and determines the compensation of senior
management. An independent compensation consultant, Towers Perrin, advises the
Compensation Committee on all compensation matters. Towers Perrin has been
advising the Compensation Committee with respect to such matters since April
2001.

The Company's executive compensation program is structured and implemented
to provide competitive compensation opportunities and various incentive award
payments based on Company and individual performance, as well as to link
compensation to financial targets that affect short and long term share price
performance. The Compensation Committee administers all of the Company's
executive compensation programs, including the design of the programs and the
measurement of their effectiveness. The Compensation Committee also reviews and
approves all salary arrangements and other payments to executives, evaluates
their performance and considers other related matters.

TAX CONSIDERATIONS

Section 162(m) of the Internal Revenue Code limits the allowable tax
deduction that may be taken by the Company for compensation paid to the Chief
Executive Officer and the four other highest paid executive officers named in
the Summary Compensation Table. The limit is $1 million per executive per year,
but compensation payable solely upon the attainment of performance goals is
excluded from the limitation. The Compensation Committee has established an
Executive Compensation Subcommittee (the "Subcommittee") to review and establish
compensation for any executive officer whose compensation might exceed $1
million in any year. The Subcommittee consists of two members of the
Compensation Committee, Messrs. Gibbs and Buck, who are independent directors as
defined in the Internal Revenue Code and its regulations. The Compensation
Committee and the Subcommittee will continue to analyze its executive
compensation practices and plans on an ongoing basis with respect to Section
162(m) of the Internal Revenue Code. Where it deems advisable, the Compensation
Committee will take appropriate action to maintain the tax deductibility of its
executive compensation.

TYPES OF COMPENSATION

There are two main types of compensation:

(1) Annual Compensation. This includes base salary and annual
incentives in the form of bonuses. The Company awards bonuses only when the
Company's financial performance during the year meets a certain level
required under the annual incentive plan.

(2) Long-Term Compensation. This includes stock options and other
long-term incentive awards based on Common Stock. The value of these awards
depends upon the Company's performance and future stock value.

FACTORS CONSIDERED IN DETERMINING COMPENSATION

The Compensation Committee wants the compensation of the Company's
executives to be competitive in the worldwide energy industry. The Compensation
Committee estimates an executive's competitive level of

total compensation based on information from a variety of sources, including
proxy statements, special surveys and the Company's compensation consultant. The
companies that are part of the Peer Group described in the Performance Graph are
some of the companies used by the Compensation Committee in establishing both
base salary and performance-based targeted incentive compensation. The sources
used by the Compensation Committee are larger than the Peer Group, but are all
in the energy industry. The Compensation Committee then compares the industry
information with the Peer Group and with the Company's compensation levels to
determine both base salary and incentive compensation.

Annual Compensation

Annual compensation for the Company's executives includes salary and bonus.
This is similar to the compensation programs of most leading companies.

The Compensation Committee annually reviews each executive's base salary.
The Compensation Committee aims to pay salaries slightly above the median of the
range of compensation paid by similar companies. The Compensation Committee also
looks at the specific job duties, the person's achievements and other criteria.
Increases in base salary are primarily the result of individual performance,
which includes meeting specific goals established by the Compensation Committee.
The criteria used in evaluating individual performance vary depending on the
executive's function, but generally include leadership inside and outside the
Company; advancing the Company's interests with customers, vendors and in other
business relationships; product quality and development; and advancement in
skills and responsibility. In 2001, seven executive officers received merit
increases.

Annual Incentive Compensation

The annual incentive plan promotes the Company's pay-for-performance
philosophy by providing executives with direct financial incentives in the form
of cash awards that are paid based on the achievement of performance objectives
established for the fiscal year. Each year, the Compensation Committee sets
corporate goals based upon financial objectives deemed appropriate by the
Compensation Committee. These objectives may include earnings per share, profit
after tax, return on assets, return on net capital employed and other financial
objectives for the year. Where executives have strategic business unit
responsibilities, their goals are based on financial performance measures of
that business unit. No bonus is paid to corporate executives unless certain
threshold company performance levels set by the Compensation Committee are
reached. Business unit executives must meet certain threshold performance levels
in their business unit's annual incentive plan in order to receive a bonus.

Each year the Compensation Committee sets targets for each executive
relating to annual incentive compensation. The target incentive awards for 2001
for eligible Company executives were based on various company, business unit and
individual performance measures. The Compensation Committee does not use a
specific formula for weighing individual performance. Instead, individuals are
assessed based upon how they contributed to the Company's business success in
their respective areas of responsibility. Awards were made in 2001 under the
annual incentive plan for fiscal year 2000 to eligible executives.

Stock Option Program

The Compensation Committee strongly believes that the grant of significant
annual equity awards further links the interests of senior management and the
Company's stockholders. Each year, the Compensation Committee determines the
total amount of options to be made available to the Company's executives. These
amounts vary each year and are based upon what the Compensation Committee
believes is appropriate. The Compensation Committee considers an executive's
total compensation package, including the amount of stock options previously
awarded. Other important factors are the desire to create stockholder value,
encourage equity ownership, provide an appropriate link to stockholder interests
and provide long-term incentive award opportunities in the same range as similar
companies in the Company's industry.

Chief Executive Officer Compensation

The Subcommittee determines the pay level for the Chief Executive Officer,
considering both a pay-for-performance philosophy and market rates of
compensation for similar positions. A significant portion of compensation for
the Chief Executive Officer is based upon the Company's performance. Specific
actions taken by the Subcommittee regarding Mr. Rock's compensation are
summarized below.

Base Salary -- The Subcommittee reviewed the base salary for Mr. Rock at
its December 2000 meeting and increased it to $825,000. In setting Mr. Rock's
base salary for fiscal year 2001, the Subcommittee reviewed the recommendations
by the independent compensation consultant and market comparisons as well as the
Company's acquisition activities and expense control during fiscal year 2000.

Annual Incentive -- The Subcommittee reviewed the predetermined bonus
objectives set by the Compensation Committee based on the Company's fiscal year
financial performance. For fiscal year 2000, Mr. Rock earned an annual bonus in
the amount of $900,000, which was paid in 2001.

Stock Options -- The Company granted Mr. Rock non-qualified stock options
to purchase 161,000 shares of Common Stock on December 4, 2001, at the
recommendation of the Subcommittee. The award of stock options to Mr. Rock was
approximately 22.9% of the total stock options granted to all employees of the
Company in 2001. However, 16,000 of the 161,000 options granted to Mr. Rock are
contingent upon stockholder approval of Proposal 2 of this Proxy Statement. If
Proposal 2 is not approved by the stockholders, the total options granted to Mr.
Rock during 2001 will be 145,000 and will represent 22.9% of the total options
granted to all employees of the Company in 2001. The options were granted at
100% of fair market value on the date of grant. The performance sensitivity of
the grant is built into the option concept, since the options produce no gain
unless the Company's share price rises over the initial grant price.

SUMMARY

The Compensation Committee believes that the compensation program for the
executives of the Company is comparable with compensation programs provided by
other companies in the energy industry and serves the best interests of the
Company's stockholders. The Compensation Committee also believes that annual
performance pay is appropriately linked to individual performance, annual
financial performance of the Company and stockholder value.

Compensation and Benefits Committee

James R. Gibbs, Chairman
G. Clyde Buck
Jerry W. Neely
Wallace S. Wilson

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

The following line graph compares the cumulative total stockholder return
of the Company's Common Stock against the cumulative total return of the S&P 500
Index and our Peer Group for each of the five years in the period starting
December 31, 1996 and ending December 31, 2001. Our Peer Group consists of the
following companies in the same general line of business as the Company: Baker
Hughes, Inc., BJ Services Company, Cooper Cameron Corporation, Halliburton
Company, Schlumberger Limited, Varco International Inc. and Weatherford
International, Inc.

The results are based on an assumed $100 investment on December 31, 1996
and reinvestment of dividends (if applicable). For each index, total return is
based on market capitalization of its components.

(PERFORMANCE GRAPH)

--------------------------------------------------------------------------------------------
Dec. 1996 Dec. 1997 Dec. 1998 Dec. 1999 Dec. 2000 Dec. 2001
--------------------------------------------------------------------------------------------

Smith $100.00 $136.77 $ 56.13 $110.72 $166.16 $119.49
S&P 500 $100.00 $133.36 $171.48 $207.56 $188.66 $166.24
Peer Group $100.00 $160.72 $ 86.73 $123.83 $170.92 $117.05

EXECUTIVE COMPENSATION TABLES

The following table shows compensation for services to the Company of the
persons who during 2001 were the Chief Executive Officer and the other four most
highly compensated executive officers (the "Named Officers"):

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
-------------------------------------
AWARDS PAYOUTS
ANNUAL ----------------------- -----------
COMPENSATION RESTRICTED SECURITIES LONG TERM
----------------- OTHER ANNUAL STOCK UNDERLYING INCENTIVE ALL OTHER
NAME OF INDIVIDUAL AND SALARY BONUS COMPENSATION AWARDS OPTIONS PLAN COMPENSATION
PRINCIPAL POSITION YEAR $(1) $ $ $ (#)(2) PAYOUTS($) $(3)
---------------------- ---- ------- ------- ------------ ---------- ---------- ----------- ------------

Doug Rock........................ 2001 825,000 900,000 -- -- 161,000 -- 210,576
Chairman of the Board, Chief
Executive Officer, President 2000 749,996 429,000 -- -- 97,000 -- 140,792(4)
and Chief Officer 1999 715,000 -- -- -- 99,400 -- 84,130
Loren K. Carroll................. 2001 530,004 468,000 -- -- 69,000 -- 122,580
Executive Vice President;
President and Chief Executive 2000 468,000 250,000 -- -- 55,000 -- 84,774
Officer of M-I 1999 450,008 -- -- -- 40,500 -- 52,319
Neal S. Sutton................... 2001 345,000 262,400 -- -- 31,000 -- 75,132
Senior Vice
President -- Administration, 2000 327,990 126,000 -- -- 22,000 -- 52,524
General Counsel and Secretary 1999 315,016 -- -- -- 20,200 -- 35,650
Roger A. Brown................... 2001 300,000 220,000 -- -- 31,000 -- 64,644
President of Smith Bits 2000 275,002 120,000 -- -- 22,000 -- 45,446
1999 260,000 99,440 -- -- 20,200 -- 40,957
John J. Kennedy.................. 2001 340,008 165,000 -- -- 31,000 -- 62,845
President and Chief Executive 2000 329,992 140,000 -- -- 22,000 -- 54,446
Officer of Wilson 1999 302,322 -- -- -- 20,200 -- 34,212

---------------

(1) The amounts in this column include compensation deferred by the Named
Officers in 1999, 2000 and 2001 under the Smith International, Inc.
Supplemental Executive Retirement Plan ("SERP") and the Smith International,
Inc. 401(k) Retirement Plan (the "401(k) Plan").

(2) The number of securities underlying options granted to each Named Officer in
2001 includes options which are contingent upon stockholder approval of
Proposal 2 of this Proxy Statement. If Proposal 2 is not approved by the
stockholders, the number of securities underlying options granted to each
Named Officer in 2001 will be as follows: Mr. Rock: 145,000; Mr. Carroll:
62,000; Mr. Sutton: 28,000; Mr. Brown: 28,000; and Mr. Kennedy: 28,000.

(3) The amounts in this column include the Company's contribution to each Named
Officer's account in the SERP in 1999, 2000 and 2001, excluding interest (at
120% of the applicable Federal long-term rate). In 2001, SERP contributions
to each Named Officer's account are as follows: Mr. Rock: $195,031; Mr.
Carroll: $103,580; Mr. Sutton: $56,132; Mr. Brown: $47,805 and Mr. Kennedy:
$53,844. In addition, this column also reflects the Company's contributions
to the 401(k) Plan. The 2001 contributions to each Named Officer's 401(k)
account are as follows: Mr. Rock: $15,545; Mr. Carroll: $19,000; Mr. Sutton:
$19,000; Mr. Brown: $16,839 and Mr. Kennedy: $9,001.

(4) Mr. Rock received a lump sum cash payment of $9,694 in January 2001 for the
actuarial present value of his vested accrued benefits under the Smith
International, Inc. Supplemental Pension Plan, which was terminated
effective December 31, 2000.

OPTION/SAR GRANTS IN 2001

The following table shows all grants of options to the Named Officers in
2001. No stock appreciation rights were granted in 2001.

INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR GRANT DATE
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1)(2) IN 2001 ($/SHARE) DATE VALUE($)(3)(4)
---- ---------------- --------------- ----------- ---------- -------------------

Doug Rock.................... 161,000 22.9 47.00 12-04-11 3,826,970
Loren K. Carroll............. 69,000 9.8 47.00 12-04-11 1,640,130
Neal S. Sutton............... 31,000 4.4 47.00 12-04-11 736,870
Roger A. Brown............... 31,000 4.4 47.00 12-04-11 736,870
John J. Kennedy.............. 31,000 4.4 47.00 12-04-11 736,870

---------------

(1) Options were granted to the Named Officers on December 4, 2001 at an
exercise price of $47.00. The exercise price per share is equal to the
closing price of the Common Stock on the New York Stock Exchange Composite
Tape on the date of grant. Options granted vest at a rate of 25% per year
and will not begin to become exercisable until December 4, 2002. If a change
of control occurs, all outstanding options would become exercisable
immediately.

(2) The number of securities underlying options granted to each Named Officer in
2001 includes options that are contingent upon stockholder approval of
Proposal 2 of this Proxy Statement. If Proposal 2 is not approved by the
stockholders, the number of securities underlying options granted to each
Named Officer in 2001 will be as follows: Mr. Rock: 145,000; Mr. Carroll:
62,000; Mr. Sutton: 28,000; Mr. Brown: 28,000 and Mr. Kennedy: 28,000.

(3) Present value was calculated using the Black-Scholes option pricing model.
Use of this model should not be viewed in any way as a forecast of the
future performance of the Common Stock, which will be determined by future
events and unknown factors. The estimated values under the Black-Scholes
model are based upon certain assumptions as to variables such as interest
rate and stock price volatility. The ultimate value of the options will
depend on the future market price of the Company's Common Stock.

(4) The grant date present value for each Named Officer includes options that
are contingent upon stockholder approval of Proposal 2 of this Proxy
Statement. If Proposal 2 is not approved by the stockholders, the grant date
present value for each Named Officer will be as follows: Mr. Rock:
$3,446,650; Mr. Carroll: $1,473,740; Mr. Sutton: $665,560; Mr. Brown:
$665,560 and Mr. Kennedy: $665,560.

AGGREGATED OPTION EXERCISES IN 2001 AND DECEMBER 31, 2001 OPTION VALUES

The following table provides information on options exercised by the Named
Officers during 2001 and the value of options held by those officers on December
31, 2001.

NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2001(1) DECEMBER 31, 2001($)(2)
ACQUIRED ON VALUE ------------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------------- -------------------------

Doug Rock.................. -- -- 241,450/318,450 3,289,746/2,835,091
Loren K. Carroll........... -- -- 135,000/146,500 2,047,338/1,229,948
Neal S. Sutton............. -- -- 49,750/ 67,100 751,231/ 636,533
Roger A. Brown............. -- -- 43,550/ 67,100 751,231/ 636,533
John J. Kennedy............ -- -- 73,100/ 67,100 1,339,987/ 636,533

---------------

(1) The number of unexercisable securities underlying unexercised options at
December 31, 2001 for each Named Officer includes options granted in 2001
which are contingent upon stockholder approval of

Proposal 2 of this Proxy Statement. If Proposal 2 is not approved by the
stockholders, the number of unexercisable securities underlying unexercised
options at December 31, 2001 for each Named Officer will be as follows: Mr.
Rock: 302,450; Mr. Carroll: 139,500; Mr. Sutton: 64,100; Mr. Brown: 64,100
and Mr. Kennedy: 64,100.

(2) Value based on the closing price on the New York Stock Exchange Composite
Tape for the Common Stock on December 31, 2001 ($53.62). The value of
unexercised and unexercisable in-the-money options at December 31, 2001 for
each Named Officer includes options granted in 2001 which are contingent
upon stockholder approval of Proposal 2 of this Proxy Statement. If Proposal
2 is not approved by the stockholders, the value of unexercised and
unexercisable in-the-money options at December 31, 2001 for each Named
Officer will be as follows: Mr. Rock: $2,729,171; Mr. Carroll: $1,183,608;
Mr. Sutton: $616,673; Mr. Brown: $616,673 and Mr. Kennedy: $616,673.

RETIREMENT BENEFITS AND EMPLOYMENT CONTRACTS

PENSION PLAN

Smith International, Inc. Restated Pension Plan. The Company has a defined
benefit pension plan (the "Restated Pension Plan"), which is currently frozen.
The benefit accruals were frozen effective March 1, 1987, and the amount of the
pension benefit was fixed for all eligible employees based only upon benefit
accruals from September 1, 1985 to March 1, 1987. Any benefits under the
Restated Pension Plan are offset by benefits paid under a previous pension plan
of the Company.

The following table illustrates the estimated annual retirement benefit
payable as a life annuity under the Restated Pension Plan to any employee
retiring at normal retirement age in various compensation levels and certain
years-of-service classifications.

PENSION PLAN TABLE

ESTIMATED ANNUAL PENSION FOR
YEARS OF SERVICE
------------------------------
COMPENSATION 20 25 30
------------ -------- -------- --------

$ 125,000.............................................. $ 3,280 $ 3,280 $ 3,280
200,000.............................................. 5,250 5,250 5,250
300,000.............................................. 7,875 7,875 7,875
400,000.............................................. 10,500 10,500 10,500
500,000.............................................. 13,125 13,125 13,125
700,000.............................................. 18,375 18,375 18,375
800,000.............................................. 21,000 21,000 21,000
900,000.............................................. 23,625 23,625 23,625
1,000,000.............................................. 26,250 26,250 26,250

Since benefit accruals under the Restated Pension Plan have been frozen
since March 1, 1987, the years of service for the Named Officers include only
the period from September 1, 1985 to March 1, 1987. The annual pension benefits
that would be payable at age 65 under the Restated Pension Plan to the Named
Officers are as follows: Mr. Rock: $8,150; Mr. Carroll: $4,282; Mr. Sutton:
$-0-; Mr. Brown: $-0- and Mr. Kennedy: $-0-. The benefits are not subject to any
reduction for Social Security.

Smith International, Inc. Supplemental Pension Plan. The Company terminated
the Smith International, Inc. Supplemental Pension Plan effective December 31,
2000. Lump sum cash payments aggregating $1.6 million were made to participants
in January 2001 for the actuarial present value of the participant's vested
accrued benefits under the plan.

SMITH INTERNATIONAL, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN ("SERP")

The Company adopted the SERP effective October 1, 1993. It is a
non-qualified, deferred compensation plan covering all of the executive officers
and certain other participants. The primary purpose of the SERP is to provide
executives who are affected by the Internal Revenue Code limitations under the
Company's 401(k) Retirement Plan (the "401(k) Plan") with the opportunity to
defer a portion of their current compensation. Distributions will generally be
made following a participant's termination of employment, although certain in-
service withdrawals are permitted in limited circumstances. A participant in the
SERP may defer up to 100% of his or her salary or bonus paid during a plan year.
The Company may also make contributions to the SERP on behalf of its
participants.

Age-Weighted Contributions. Effective as of the last day of each quarter
during the year, a contribution by the Company may be allocated under the SERP
based on the participant's age-weighted contribution percentage ("AWCP") ranging
from 2 to 6%. The difference between a participant's (i) "Total 401(k)
Compensation" and his or her (ii) "Net 401(k) Compensation" is multiplied by the
AWCP to compute the age-weighted contribution for the year. "Total 401(k)
Compensation" generally means the total of all cash amounts paid by the Company
to a participant, including deferred amounts. "Net 401(k) Compensation"
generally means Total 401(k) Compensation less participant contributions to the
SERP, but not to exceed $200,000 for any year. Effective January 1, 1995, the
SERP was amended to fix the AWCP for the executive officers at 6%.

Matching Contributions. The SERP contains matching provisions that mirror
the matching formulas in effect for the 401(k) Plan, but without regard to
certain Internal Revenue Code limits applicable to the 401(k) Plan. Matching
contributions for a plan year in both the SERP and the 401(k) Plan combined
cannot exceed 6% of a participant's Total 401(k) Compensation net of any
incentive bonus. Effective January 1, 1995, the SERP was amended so that
executive officers will receive matching contributions up to 6% of their Total
401(k) Compensation.

Discretionary Profit Sharing Contributions. The Compensation Committee
may, in its discretion, determine the amount of any profit sharing contribution
for a plan year and how that amount is to be allocated among the SERP
participants.

EMPLOYMENT AGREEMENTS

The Company has employment agreements with Messrs. Rock and Sutton and one
other senior officer. These agreements have an initial term of three years and
are automatically extended for an additional year at each anniversary date. Each
of the employment agreements with Messrs. Rock and Sutton and the other senior
officer contains the employee's salary and other conditions of employment and
entitles the employee to participate in the Company's bonus program and other
benefit programs.

On January 4, 2000, the Company entered into Change-of-Control Employment
Agreements ("Agreements") with seven executive officers, including Messrs. Rock,
Carroll, Sutton, Brown and Kennedy. In the event of a "change of control" of the
Company (as defined in the Agreements), the Agreements provide for the continued
employment of the seven executive officers for a period of three years and
provide for the continuation of salary and benefits. If the executive is
terminated by the Company (other than for cause, death or disability), or if the
executive elects to terminate his or her employment for "Good Reason" (as
defined in the Agreements), the executive is entitled to receive a lump sum
payment in cash equal to the aggregate of the following amounts: (i) current
annual base salary and pro rata bonus through the date of termination; (ii) any
compensation previously deferred by the executive and any accrued vacation pay;
(iii) three times the executive's annual base salary and Highest Annual Bonus
(as defined in the Agreements); and (iv) any actuarial difference in the SERP
benefit the executive would have received had the executive's employment
continued for three years after the date of the executive's termination.

The executive would also receive continued coverage under applicable
welfare and benefit plans for three years. The Agreements also provide for an
additional payment to the executive of an amount equal to any Excise Tax (as
defined in the Agreements), imposed on the aggregate cash payment described
above and any

income taxes imposed on such additional payment, so that the executive receives
the amount that would have been received had any Excise Tax not been imposed.
The determination of whether and when the additional payment is required and the
amount of such payment will be made by Arthur Andersen.

ADDITIONAL INFORMATION ABOUT OUR
DIRECTORS AND EXECUTIVE OFFICERS

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The rules of the SEC require that the Company disclose late filings of
reports of stock ownership (and changes in stock ownership) by its directors and
executive officers. Based on Company records and representations by its
directors and executive officers, the Company believes that during 2001 all
filings were made in compliance with SEC requirements, except that Mr. Carroll
filed an amended Form 5 to report a gift of 2,700 shares made in December 2000,
which was inadvertently omitted from his Form 5.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table shows certain information about stock ownership of all
persons known to the Company to own of record or beneficially more than 5% of
the outstanding Common Stock of the Company as of March 1, 2002. This
information is based upon information furnished to the Company by these persons
and statements filed with the SEC:

NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
------------------- -------------------- ----------

FMR Corp.................................................... 7,392,264(1) 14.6%
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc. ............................. 3,342,300(2) 6.6%
100 East Pratt Street
Baltimore, Maryland 21202

---------------

(1) Fidelity Management & Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp. ("FMR") and an investment adviser, is the beneficial
owner of 5,531,414 shares as a result of acting as investment adviser to
various registered investment companies (the "Funds"). Edward C. Johnson 3d,
FMR's Chairman, through its control of Fidelity, and the Funds each has sole
power to dispose of the 5,531,414 shares owned by the Funds. Neither FMR nor
Mr. Johnson has the sole power to vote or direct the voting of the shares
owned directly by the Fidelity Funds, which power resides with the Funds'
Boards of Trustees. Fidelity carries out the voting of the shares under
written guidelines established by the Funds' Boards of Trustees. Fidelity
Management Trust Company ("FMTC"), a wholly owned subsidiary of FMR, is the
beneficial owner of 1,289,050 shares as a result of its serving as
investment manager of various institutional accounts. Mr. Johnson and FMR,
through its control of FMTC, each has sole dispositive power over 1,289,050
shares and sole power to vote or to direct the voting of 1,289,050 shares
owned by the institutional accounts. Members of the Edward C. Johnson 3d
family are the predominant owners of Class B shares of common stock of FMR,
representing approximately 49% of the voting power of FMR. Mr. Johnson owns
12.0% and Abigail P. Johnson, a Director of FMR, owns 24.5% of the voting
stock of FMR. The Johnson family group and all other Class B shareholders
have entered into a shareholders' voting agreement under which all Class B
shares will be voted in accordance with the majority vote of Class B shares.
Through their ownership of voting common stock and the shareholders' voting
agreement, members of the Johnson family may be deemed, under the Investment
Company Act of 1940, to form a controlling group with respect to FMR.
Fidelity International Limited ("FIL") beneficially owns 571,800 shares. FIL
has sole power to vote and to dispose of such shares.

(2) These shares are owned by various individual and institutional investors for
which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment adviser with power to direct investments

and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.

PROPOSAL 2: APPROVAL OF AN AMENDMENT TO THE
SMITH INTERNATIONAL, INC. 1989 LONG-TERM
INCENTIVE COMPENSATION PLAN

At the meeting, you will be asked to approve an amendment to the Smith
International, Inc. 1989 Long-Term Incentive Compensation Plan (the "1989 Plan")
to increase by 2,300,000 the number of shares of Common Stock reserved for the
1989 Plan. Upon your approval, the term of the 1989 Plan would be extended to
April 24, 2012.

The 1989 Plan was originally approved by the stockholders at the May 9,
1989 annual meeting. Since 1989, a total of 4,900,000 shares of Common Stock
have been reserved for issuance under the 1989 Plan. On February 6, 2002, the
Board of Directors approved an amendment to the 1989 Plan to reserve an
additional 2,300,000 shares of Common Stock reserved for issuance under the 1989
Plan. At the Annual Meeting, the Company's stockholders will be asked to approve
the proposed amendment to the 1989 Plan described above.

Of the total shares authorized for issuance under the 1989 Plan, at
December 31, 2001, all but 3,016 shares have been awarded in the form of stock
options or restricted stock. Of the shares awarded, 2,669,944 shares remained to
be issued upon exercise of stock options or restricted stock awards. Should the
stockholders approve the proposed amendment to the 1989 Plan, a total of
approximately 4,969,944 shares, or 10% of the Company's outstanding Common
Stock, would be reserved for issuance under the 1989 Plan.

The Company has dramatically grown in size and the number of employees over
the past several years. The additional 2,300,000 shares will allow the Company
to continue its long-term incentive program and to recognize the increased pool
of employees eligible to participate. The Company intends to award stock options
at the same levels and on the same criteria as it has done since the inception
of the 1989 Plan.

The Board of Directors has found that stock options granted to employees
have been highly effective in recruiting and retaining competent personnel. The
Board of Directors believes that the growth of the Company is dependent upon its
ability to attract, employ and retain executives and employees of outstanding
ability who will dedicate their maximum productive efforts toward the
advancement of the Company. The growing competition among companies for capable
managers makes it necessary for the Company to maintain a strong and competitive
incentive program.

The following table shows information as of December 31, 2001, with respect
to the 1989 Plan and the Smith International, Inc. Stock Plan for Outside
Directors under which equity securities of the Company are authorized for
issuance, aggregated as follows:

EQUITY COMPENSATION PLAN INFORMATION

(A) (B) (C)
--- --- ---
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE EXERCISE FUTURE ISSUANCE UNDER
EXERCISE OF PRICE OF OUTSTANDING EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OPTIONS, WARRANTS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS AND RIGHTS REFLECTED IN COLUMN (A))
------------- -------------------- ---------------------------- -------------------------

Equity compensation plans
approved by security holders:
(a) 1989 Plan................. 2,669,944 $ 44.42 3,016
(b) Stock Plan for Outside
Directors................. 30,000 $ -0- 18,000
Equity compensation plans not
approved by security
holders....................... Not applicable Not applicable Not applicable
-------------- --------------- --------------
Total...................... 2,699,944 $ 44.42 21,016
============== =============== ==============

As of March 1, 2002, options to purchase an aggregate of 2,698,156 shares
of Common Stock were outstanding under the 1989 Plan, having exercise prices of
$8.38 to $69.06 and expiring from April 28, 2002 to December 4, 2011. The
outstanding figure includes stock options for 702,990 shares which were issued
on December 4, 2001. Of the 702,990 stock options granted on December 4, 2001,
69,690 options were issued conditionally and subject to stockholder approval of
the amendment to the 1989 Plan. All stock options granted under the 1989 Plan
are conditioned upon continued employment. The last reported sales price of the
Company's Common Stock on March 18, 2002 was $68.99 per share.

Taking into account the 69,690 options that were issued conditionally as
discussed above, there are not enough shares currently available under the 1989
Plan to honor exercises of all outstanding options. The following table shows
the amount of shares that will be allocated to each of the following under the
1989 Plan for outstanding options issued on December 4, 2001, assuming Proposal
2 is approved by the stockholders:

1989 PLAN

DOLLAR
VALUE NUMBER
NAME AND POSITION ($) OF SHARES
----------------- ------ ---------

Doug Rock................................................... -- 16,000
Chairman of the Board, Chief Executive Officer, President
and Chief Operating Officer
Loren K. Carroll............................................ -- 7,000
Executive Vice President; President and Chief Executive
Officer of M-I
Neal S. Sutton.............................................. -- 3,000
Senior Vice President -- Administration, General Counsel
and Secretary
Roger A. Brown.............................................. -- 3,000
President of Smith Bits
John J. Kennedy............................................. -- 3,000
President and Chief Executive Officer of Wilson
Executive Group (other than the above Named Officers)....... -- 7,920
Non-Executive Director Group................................ -- --
Non-Executive Officer Employee Group........................ -- 29,770

Under the 1989 Plan, the following Named Officers have been granted
options, including the options issued conditionally, exercisable into shares of
Common Stock: Mr. Rock: 996,400; Mr. Carroll: 441,600;

Mr. Sutton: 226,540; Mr. Brown: 180,600 and Mr. Kennedy: 164,900. All current
executive officers as a group have been granted options exercisable into
2,391,720 shares of Common Stock. All employees, other than executive officers,
as a group, have been granted options exercisable into 3,089,749 shares of
Common Stock. Non-employee directors are not eligible to receive options under
the 1989 Plan.

The following is a summary of the 1989 Plan and is qualified in its
entirety by the full text of the 1989 Plan. Any stockholder may obtain a copy of
the 1989 Plan by writing to Smith International, Inc., 16740 Hardy Street,
Houston, Texas 77032, Attention: Corporate Secretary. Requests may also be made
by fax to (281) 233-5996 or to the Company's website at (www.smith.com).

The 1989 Plan is administered by the Compensation Committee. All full-time
salaried employees of the Company who are performing management, supervisory,
sales, scientific or engineering services or who the Compensation Committee
decides are key employees are eligible to receive awards under the 1989 Plan.

The Compensation Committee determines awards based upon an employee's
ability to influence the Company's performance. Future awards are based on
future performance and cannot, therefore, be determined. Nonqualified stock
options have been granted to all Named Officers, seven Executive Group employees
and 349 Non-Executive Officer employees, for a total of 356 current employees.
Please see "Executive Compensation" above for more information about stock
options granted.

The 1989 Plan provides for the following types of awards: (a) nonstatutory
stock option; (b) stock appreciation right related to an option; (c) stock
appreciation right not related to an option; (d) stock award; (e) restricted
stock; (f) cash award; and (g) any combination of the foregoing.

Exercise and Termination of Awards. The purchase price for a nonstatutory
stock option is payable in cash or in shares of Common Stock and may be
exercised only by the employee. If an employee voluntarily resigns or is
terminated for cause, all of the awards immediately terminate. If an employee
retires, the award expires three years thereafter unless it expires sooner by
its terms. If an employee is terminated by the Company for any other reason, the
award expires one year thereafter unless it expires sooner by its terms. An
award may not be exercised after ten years from the date the award is granted.

Adjustment of Awards. If any change occurs in the capitalization of the
Company, such as a stock dividend or stock split, or if a merger takes place in
which the Company is the surviving corporation, the Compensation Committee can
decide to adjust the outstanding awards and the number of shares reserved under
the 1989 Plan. In the event of a takeover bid or tender offer for 25% or more of
the outstanding securities of the Company, the restrictions on any restricted
stock would lapse immediately, all outstanding options and stock appreciation
rights become exercisable immediately, and all performance objectives are deemed
to be met and payment made immediately.

Federal Income Tax Consequences. The 1989 Plan permits the Compensation
Committee to grant nonqualified stock options ("NQSOs") to certain key employees
of the Company. The following discussion is intended only as a summary of the
effect of federal income taxation upon the optionee and the Company with respect
to the grant and exercise of NQSOs under the 1989 Plan.

Upon the grant of a NQSO, the optionee will not recognize any taxable
income, and the Company will not be entitled to a federal income tax deduction.
Upon the exercise of an NQSO, the excess of the fair market value of the shares
acquired on the exercise of the option over the purchase price (the "spread")
will be compensation that is taxable to the optionee as ordinary income. To
determine the amount of the spread, the fair market value of the stock on the
date of exercise is used; however, if an optionee is subject to the six month
short-swing profit recovery provisions of Section 16(b) of the Securities
Exchange Act of 1934 (generally executive officers), the fair market value will
generally be determined at the end of the six-month period, unless such optionee
elects to be taxed based on the fair market value at the date of exercise. Any
such election must be made and filed with the Internal Revenue Service within 30
days after exercise in accordance with the regulations under Section 83(b) of
the Internal Revenue Code. The Company, in computing its federal income tax,
will generally be entitled to a deduction in an amount equal to the compensation
taxable to the optionee in the Company's taxable year in which the amount is
taxable to the optionee.

Amendment of the 1989 Plan. The Board of Directors may terminate, modify
or amend the 1989 Plan at any time without stockholder approval, except for
amendments that (a) change the class of persons eligible to receive awards; (b)
materially increase benefits; (c) transfer the administration of the 1989 Plan
to anyone who is not a "disinterested person" under the federal securities law;
or (d) increase the number of shares subject to the 1989 Plan.

The affirmative vote of a majority of the votes represented at the Annual
Meeting will be sufficient to approve the amendment to the 1989 Plan.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE 1989 PLAN.

OTHER BUSINESS

The Board of Directors does not intend to present any other business for
action at the meeting, and the Company has not been advised of any other
business intended to be presented by others.

STOCKHOLDERS' PROPOSALS

In order to be considered for inclusion in next year's Proxy Statement,
stockholder proposals must be submitted to the Company in writing by no later
than November 22, 2002. In addition, in order for a stockholder to bring any
business before a stockholder meeting, timely notice must be received by the
Company in writing by no later than November 22, 2002, in accordance with the
Company's Restated Bylaws.

ANNUAL REPORT AND FINANCIAL INFORMATION

A COPY OF THE COMPANY'S 2001 ANNUAL REPORT TO STOCKHOLDERS ACCOMPANIES THIS
PROXY STATEMENT. WE WILL PROVIDE WITHOUT CHARGE THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001, TO ANY PERSON REQUESTING
A COPY IN WRITING AND STATING THAT HE OR SHE WAS A BENEFICIAL HOLDER OF THE
COMPANY'S COMMON STOCK ON MARCH 1, 2002. THE COMPANY WILL ALSO FURNISH COPIES OF
ANY EXHIBITS TO THE FORM 10-K AT $0.50 PER PAGE, PAID IN ADVANCE. REQUESTS AND
INQUIRIES SHOULD BE ADDRESSED TO:

MARGARET K. DORMAN
INVESTOR RELATIONS
SMITH INTERNATIONAL, INC.
P. O. BOX 60068
HOUSTON TX 77205-0068

The Company's 2001 Annual Report to Stockholders should not be regarded as
proxy soliciting material or as a communication for which a solicitation of
proxies is to be made.

By Order of the Board of Directors

/s/ Neal S. Sutton
Neal S. Sutton
Secretary

P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SMITH INTERNATIONAL, INC.
R
The undersigned hereby appoints Doug Rock and Neal S. Sutton, and each
O of them, as his or her Proxy with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of SMITH
X INTERNATIONAL, INC. to be held at 700 King Street, Wilmington, Delaware on
April 24, 2002 at 9:00 a.m., and at any adjournments thereof, on all
Y matters that may properly come before the meeting.

YOUR SHARES WILL BE VOTED AS DIRECTED ON THIS CARD. IF SIGNED AND NO
DIRECTION IS GIVEN FOR ANY ITEM, IT WILL BE VOTED IN FAVOR OF ITEMS 1 AND 2.

Please sign and date this card on the reverse and mail promptly in the
enclosed postage-paid envelope.

Comments/Address Change:
----------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------
YOUR VOTE IS VERY IMPORTANT. THANK YOU FOR VOTING.

PLEASE MARK YOUR
[X] VOTES AS IN THIS 7551
EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED BELOW, OR WHERE NO DIRECTION IS
GIVEN, WILL BE VOTED "FOR" ITEMS 1 AND 2 AND IN THE DISCRETION OF THE
PROXIES ON ALL OTHER MATTERS.
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
-------------------------------------------------------------------------------
FOR WITHHELD NOMINEES:

1. Election of 01. G. Clyde Buck
Directors. [ ] [ ] 02. Loren K. Carroll
03. Wallace S. Wilson

For, except vote withheld from the following nominee(s):

--------------------------------------------------------

FOR AGAINST ABSTAIN

2. Approval of amendment to 1989 [ ] [ ] [ ]
Long-Term Incentive Compensation
Plan.

3. In the discretion of the proxies on any other matters that may properly
come before the meeting or any adjournment thereof.

--------------------------------------------------------------------------------
---------------------------------
SPECIAL ACTION
---------------------------------
Comments or change of address
on reverse side.

---------------------------------

SIGNATURES(S) DATE
------------------------------------------ --------------------

NOTE: Signature(s) should agree with name(s) as printed on this proxy. When
signing in a fiduciary capacity, please give title as such. Co-fiduciaries
and joint owners should each sign.

YOUR SHARES WILL BE VOTED AS DIRECTED ON THIS CARD. IF SIGNED AND NO
DIRECTION IS GIVEN FOR ANY ITEM, IT WILL BE VOTED IN FAVOR OF ITEMS 1 AND 2.

To vote by telephone or internet, please see the reverse of this card.
To vote by mail, please sign and date this card on the reverse, tear off at
the perforation, and mail promptly in the enclosed postage-paid envelope.

Comments/Address Change:
----------------------------------------------------

-----------------------------------------------------------------------------

-----------------------------------------------------------------------------
YOUR VOTE IS VERY IMPORTANT. THANK YOU FOR VOTING.

o IF YOU ARE VOTING BY MAIL, DETACH PROXY CARD HERE, SIGN, o
DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED

[SMITH INTERNATIONAL LOGO]

LOG ONTO OUR WEB SITE AT http://www.smith.com
FOR MORE COMPREHENSIVE INFORMATION

TO VIEW YOUR STOCKHOLDER ACCOUNT ON THE INTERNET, PLEASE CALL EQUISERVE TRUST
COMPANY, N.A. TOLL FREE AT 1-877-THEWEB7 (1-877-843-9327) AND THEY WILL MAIL YOU
A PASSWORD THAT PROVIDES YOU SECURE ACCOUNT ACCESS. IF YOU ARE CALLING FROM
OUTSIDE NORTH AMERICA, PLEASE CALL 201-536-8073.

PLEASE MARK YOUR
[X] VOTES AS IN THIS 7551
EXAMPLE.

1. Election of 01. G. Clyde Buck
Directors. [ ] [ ] 02. Loren K. Carroll
03. Wallace S. Wilson

For, except vote withheld from the following nominee(s):

--------------------------------------------------------

FOR AGAINST ABSTAIN

2. Approval of amendment to 1989 [ ] [ ] [ ]
Long-Term Incentive Compensation
Plan.

3. In the discretion of the proxies on any other matters that may properly
come before the meeting or any adjournment thereof.

---------------------------------

SIGNATURES(S) DATE
------------------------------------------ --------------------
NOTE: Signature(s) should agree with name(s) as printed on this proxy. When
signing in a fiduciary capacity, please give title as such. Co-fiduciaries
and joint owners should each sign.

o PLEASE CAREFULLY DETACH HERE AND RETURN THIS PROXY o
IN THE ENCLOSED REPLY ENVELOPE

[SMITH INTERNATIONAL LOGO]

SMITH INTERNATIONAL, INC. encourages you to take advantage of convenient ways by
which you can vote your shares. You can vote your shares electronically over the
Internet or by telephone. This eliminates the need to return the proxy card.

TO VOTE YOUR SHARES BY TELEPHONE OR VIA THE INTERNET, YOU MUST HAVE YOUR PROXY
CARD AND SOCIAL~SECURITY NUMBER AVAILABLE. THE SERIES OF NUMBERS THAT APPEAR ON
THE TOP OF YOUR PROXY CARD MUST BE USED TO ACCESS THE SYSTEM.

1. To vote by telephone: On a touch-tone telephone, call 1-877-779-8683 toll
free from the U.S. and Canada.

2. To vote via the Internet: Access the World Wide Web site
http://www.eproxyvote.com/sii

Voting by telephone and via the Internet is available 24 hours a day, 7 days a
week.

Your vote by telephone or via the Internet authorizes the named proxies in the
same manner as if you~completed, signed, dated and mailed the proxy card.

If you choose to vote your shares by telephone or via the Internet, there is no
need for you to mail back your proxy card.

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.

VOTING INSTRUCTIONS
SMITH INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS -- APRIL 24, 2002

TO: ALL SMITH AND M-I EMPLOYEES PARTICIPATING IN THE SMITH STOCK FUND:

We have been requested to forward to you the enclosed proxy material with
respect to securities held by Vanguard in your 401(k) account but not registered
in your name. These securities can be voted only by Vanguard's nominee as the
holder of record. We urge you to send in your instructions so that your
securities may be voted in accordance with your wishes.

The Annual Meeting of Stockholders of SMITH INTERNATIONAL, INC. will be held at
700 King Street, Wilmington, Delaware on April 24, 2002 at 9:00 A.M.

YOUR SHARES WILL BE VOTED AS DIRECTED ON THIS CARD. IF SIGNED AND NO
DIRECTION IS GIVEN FOR ANY ITEM, IT WILL BE VOTED IN FAVOR OF ITEMS 1 AND 2.

To vote by telephone or internet, please see the reverse of this card. To
vote by mail, please sign and date this card on the reverse, tear off at the
perforation, and mail promptly in the enclosed postage-paid envelope.

YOUR VOTE IS VERY IMPORTANT. THANK YOU FOR VOTING.

------------
SEE
REVERSE SIDE
------------

--------------------------------------------------------------------------------
o IF YOU ARE VOTING BY MAIL, DETACH PROXY CARD HERE, o
SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED

YOUR VOTE IS IMPORTANT!

YOU CAN VOTE IN ONE OF THREE WAYS:

1. Call toll-free 1-888-215-7566 on a Touch-Tone telephone and follow the
instructions on the reverse side. There is NO CHARGE to you for this call.

2. Vote by Internet at our Internet address: http://www.proxyvoting.com/smith

3. Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.

PLEASE VOTE

[SMITH INTERNATIONAL LOGO]

PLEASE MARK YOUR
[X] VOTES AS IN THIS 7551
EXAMPLE.

THIS PROXY WILL BE VOTED AS DIRECTED BELOW, OR WHERE NO DIRECTION IS
GIVEN, WILL BE VOTED "FOR" ITEMS 1 AND 2 AND AS RECOMMENDED BY THE BOARD OF
DIRECTORS OF SMITH INTERNATIONAL, INC. ON ALL OTHER MATTERS.
-------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
-------------------------------------------------------------------------------
FOR WITHHELD NOMINEES:

1. Election of 01. G. Clyde Buck
Directors. [ ] [ ] 02. Loren K. Carroll
03. Wallace S. Wilson

For, except vote withheld from the following nominee(s):

--------------------------------------------------------

FOR AGAINST ABSTAIN

2. Approval of amendment to 1989 [ ] [ ] [ ]
Long-Term Incentive Compensation
Plan.

3. In the discretion of the proxies on any other matters that may properly
come before the meeting or any adjournment thereof.

--------------------------------------------------------------------------------

SIGNATURES(S) DATE
------------------------------------------ --------------------
NOTE: Signature(s) should agree with name(s) as printed on this proxy.

--------------------------------------------------------------------------------

o PLEASE CAREFULLY DETACH HERE AND RETURN THIS PROXY o
IN THE ENCLOSED REPLY ENVELOPE

VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
QUICK * * * EASY * * * IMMEDIATE

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.

VOTE BY PHONE: YOU WILL BE ASKED TO ENTER A CONTROL NUMBER LOCATED IN THE BOX
IN THE LOWER RIGHT OF THIS FORM.

OPTION A: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS:
PRESS 1

OPTION B: IF YOU CHOOSE TO VOTE ON EACH ITEM SEPARATELY; PRESS 0. YOU WILL
HEAR THESE INSTRUCTIONS:

ITEM 1: TO VOTE FOR ALL NOMINEES, PRESS 1; TO WITHHOLD FOR ALL
NOMINEES, PRESS 9 TO WITHHOLD FOR AN INDIVIDUAL NOMINEE, PRESS 0
AND LISTEN TO THE INSTRUCTIONS.

ITEM 2: TO VOTE FOR, PRESS 1; AGAINST, PRESS 9; ABSTAIN, PRESS 0.

WHEN ASKED, YOU MUST CONFIRM YOUR VOTE BY PRESSING 1.

VOTE BY INTERNET: THE WEB ADDRESS IS http://www.proxyvoting.com/smith

IF YOU VOTE BY PHONE OR INTERNET -- DO NOT MAIL THE PROXY CARD

THANK YOU FOR VOTING.

----------------------------
CALL TOLL FREE ON A TOUCH
TONE TELEPHONE

1-888-215-7566 -----------------------------
CONTROL NUMBER
THERE IS NO CHARGE TO YOU FOR THIS CALL FOR TELEPHONE/INTERNET VOTING