Exhibit 10.1

 

LOGO [g44002img001.jpg]    2007 Management Incentive Plan (MIP)

Effective

Date: 01/01/07

  

Supersedes:

01/01/06

  

Policy

Number: HR.01.07

  

Issuer:

Human Resources

   Page: 1 of 3

SCOPE

 

1.00 This policy applies to all regular full-time employees of Hydril that have
been approved to participate in the MIP by the Executive Management Team. The
Executive Management Team is defined as the President, Chief Financial Officer
(CFO), Chief Operating Officer (COO), Vice President Human Resources and the
Operational Vice Presidents.

PURPOSE

 

2.00 The purpose of the MIP is to motivate and reward key employees that have a
significant impact on Hydril obtaining its overall financial objectives.

POLICY

Eligibility

 

3.00 Employees eligible to participate in the MIP include key management, sales
and key technical employees that have been recommended by their director and
approved by a member of the executive management team of Hydril.

 

3.01 Participant must be a full-time regular employee at the time of the bonus
payment to be eligible to receive the bonus. In the event that an eligible
employee completes the MIP period and is terminated due to a reduction in force
or retires (must be eligible) before the MIP bonus payment, they will be
eligible to receive the MIP bonus based the established criteria with the
appropriate approval.

 

3.02 Employee participating in the MIP may not participate in any other
incentive bonus plans at Hydril. Exceptions can be approved by the executive
management team or the board of directors.

 

3.03 Employees that become eligible for the MIP during the calendar year will
participate on a prorated basis based on the number of completed months during
the plan year or MIP period.

 

3.04 If the MIP Target percent for an employee changes during the calendar year
due to promotion or demotion, the MIP target level and the salary used to
calculate the MIP will be adjusted for the remainder of the MIP period and
calendar year starting at the first of the month in which the change occurs.

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LOGO [g44002img001.jpg]    2007 Management Incentive Plan (MIP)

Effective

Date: 01/01/07

  

Supersedes:

01/01/06

  

Policy

Number: HR.01.07

  

Issuer:

Human Resources

   Page: 2 of 3

Measurement Criteria

 

3.05 In order to reward employees for individual performance while assuring a
fair return for the company, the MIP is structured with three specific areas to
measure performance.

The three areas of performance measurement are:

 

  •  

Hydril’s total Company Financial Performance.

 

  •  

Division Financial Performance (Pressure Control, Premium Connections)

 

  •  

Individual Performance against established objectives.

The level these 3 criteria affects a participant’s bonus may vary and is based
on the tier (bonus level) level.

 

3.06 Hydril’s Board of Directors and the executive Management team will
establish the Company’s and the Divisions’ Financial Performance targets. The
Consolidated Company financials must be profitable for an incentive bonus to be
paid.

 

3.07 The individual objectives will be set by the employee’s director and
approved by the Vice President, CFO or President of Hydril. The percentage
payout based on the participant’s individual objectives will be recommended by
the supervising Vice President or CFO and approved by the President.

 

3.08 The target level bonus will be set based on which tier the employee is in
which will be affected by the employee’s position and job responsibilities.

 

3.09 The employee may earn one of three levels of bonus based on performance.
The three levels are Minimum, Target and Maximum.

 

3.10 The financial performance for the company and the division will be measured
by operating income and the income requirements for the three levels are defined
in Attachment A.

 

3.11 If the performance as defined above is at or above the maximum level then
the payout is 150% of the target bonus for that area. If performance is at or
above the target level but below the maximum level then the payout is prorated
based on performance level between 100% and 149%. If performance is at or above
the minimum level but below the target level then the payout is prorated based
on performance level between 50% and 99% for that area.

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

LOGO [g44002img001.jpg]    2007 Management Incentive Plan (MIP)

Effective

Date: 01/01/07

  

Supersedes:

01/01/06

  

Policy

Number: HR.01.07

  

Issuer:

Human Resources

   Page: 3 of 3

 

3.12 In order for participation in the individual objectives part of the bonus
to exceed 100% of target, the corporate or division financial performance must
be at or about the target performance established.

 

3.13

Participation in the plan will be for the calendar year January through December
2007. For some participants the plan will be measured and paid semi-annually,
January through June and July through December. For the remaining participants
the MIP will be measured and paid annually. The earned bonus will be paid in the
first quarter of the following year no later than March 31st.

 

3.14 Target operating income includes MIP expense at the planned level as
recorded in the 2007 Plan approved by the Board of Directors. Achievement of
minimum or maximum payout levels will include the expected level of MIP expense
in operating income.

Other

 

3.15 In the event of a change of control of the Company, the MIP may be modified
or terminated after such change of control, provided that amounts properly
accrued under GAAP for the benefit of participants in the MIP up to the time of
the change of control must be used to pay annual incentive payments to
participants in the MIP for 2007.

RESPONSIBILITY

 

4.00 It is the responsibility of the Executive Management Team and the Human
Resources Department to administer this policy. It is the responsibility of the
controller and Finance department to review and approve the bonus information
for accuracy.