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                                                                    EXHIBIT 10.1

                                 HYDRIL COMPANY
                             1999 STOCK OPTION PLAN

         1. OBJECTIVES. This Stock Option Plan (the "Plan") is intended as an
incentive to retain and attract persons of training, experience and ability to
serve as key employees or officers of Hydril Company (the "Company") or its
Subsidiaries to encourage the sense of proprietorship of such persons and to
stimulate the active interest of such persons in the development and financial
success of the Company. It is further intended that the options granted pursuant
to this Plan (the "Options") will be either incentive stock options or
nonqualified stock options.

         2. DEFINITIONS. As used herein, the terms set forth below shall have
the following respective meanings:

                  "BOARD" means the Board of Directors of the Company.

                  "CODE" means the United States Internal Revenue Code of 1986,
as amended from time to time.

                  "COMMITTEE" means the Compensation Committee of the Board or
such other committee of the Board as is designated by the Board to administer
the Plan.

                  "COMMON STOCK" means the Common Stock, par value $0.50 per
share, of the Company.

                  "DIRECTOR" means any individual serving as a member of the
Board of Directors of the Company.

                  "EFFECTIVE DATE" means the date the Plan is approved by the
Board of Directors of the Company.

                  "EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended from time to time.

                  "FAIR MARKET VALUE" means, as of a particular date, (a) if the
shares of Common Stock are listed on a securities exchange, the final closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal such securities exchange on that date, or, if there
shall have been no such sale so reported on that date, on the last preceding
date on which such a sale was so reported, (b) if the shares of Common Stock are
not so listed but are quoted on the Nasdaq National Market, the final closing
sales price per share of Common Stock on the Nasdaq National Market on that
date, or, if there shall have been no such sale so reported on that date, on the
last preceding date on which such a sale was so reported, (c) if the Common
Stock is not so listed or quoted, the mean between the closing bid and asked
price on that date, or, if there are no


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quotations available for such date, on the last preceding date on which such
quotations shall be available, as reported by Nasdaq, or, if not reported by
Nasdaq, by the National Quotation Bureau, Inc. or (d) if none of the above is
applicable, such amount as may be determined by the Board (or an Independent
Third Party, should the Board elect in its sole discretion to instead utilize an
Independent Third Party for this purpose), in good faith, to be the fair market
value per share of Common Stock.

                  "INDEPENDENT THIRD PARTY" means an individual or entity
independent of the Company (and any transferor or transferee of Common Stock
acquired upon the exercise of an option under the Plan, if applicable) with
experience in providing investment banking appraisal or valuation services and
with expertise generally in the valuation of securities or other property for
purposes of this Plan. The Company's independent accountants shall be deemed to
satisfy the criteria for an Independent Third Party if selected by the Board for
that purpose. The Board may utilize one or more Independent Third Parties.

                  "ISO" means an incentive stock option within the meaning of
Code Section 422.

                  "NONQUALIFIED OPTION" means a nonqualified stock option within
the meaning of Code Section 83.

                  "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee that sets forth the terms, conditions and limitations
applicable to an Option.

                  "OPTIONEE" means a key employee or officer of the Company or
its Subsidiaries to whom an Option has been granted under this Plan.

                  "SUBSIDIARY" means (i) with respect to grants of Nonqualified
Options, any corporation, limited liability company or similar entity of which
the Company directly or indirectly owns shares representing more than 50% of the
voting power of all classes or series of equity securities of such entity which
have the right to vote generally on matters submitted to a vote of the
stockholders of equity interests in such entity, and (ii) with respect to grants
of ISOs, any subsidiary within the meaning of Section 424(f) of the Code.

         3. ELIGIBILITY. All key employees and officers of the Company and its
Subsidiaries are eligible for Options under this Plan. The Committee shall
select the Optionees in the Plan from time to time by the grant of Options under
the Plan. The granting of Options under this Plan shall be entirely
discretionary and nothing in this Plan shall be deemed to give any key employee
or officer of the Company or its Subsidiaries any right to participate in this
Plan or to be granted an Option.

         4. OPTION AGREEMENT.

                  The Committee shall determine the type or types of Options to
be made to each Optionee under this Plan. Each Option made hereunder shall be
embodied in an Option Agreement, which shall contain such terms, conditions and
limitations as shall be determined by the Committee in its sole discretion and
shall be signed by the Optionee and by the Chief Executive Officer or any other
authorized officer of the Company for and on behalf of the Company. An Option
Agreement may include provisions for (i) restrictions on the transfer of Common
Stock subject to an Option,


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(ii) the Company's right of first refusal to repurchase certain Common Stock
acquired pursuant to the Plan, (iii) the repurchase by the Company of Common
Stock acquired pursuant to the Plan and the repurchase of an Optionee's Option
rights under the Plan, (iv) the Optionee's right to require the Company to
purchase optioned Common Stock and to cash-out unexercised vested Options. Any
such purchases of optioned Common Stock or cash-out of unexercised vested
Options by the Company may be for cash or a promissory note providing for: (a) a
term not to exceed five years, (b) annual payments of principal and accrued
interest, (c) interest at prime rate as in effect from time to time, and (d) the
Company's right to accelerate payment. Options may be made in combination or in
tandem with, in replacement of, or as alternatives to grants or rights (i) under
this Plan or any other employee plan of the Company or any of its Subsidiaries,
including the plan of any acquired entity, or (ii) made to any Company or
Subsidiary employee by the Company or any Subsidiary. An Option may provide for
the granting or issuance of additional, replacement or alternative Options upon
the occurrence of specified events, including the exercise of the original
Option.

         5. COMMON STOCK RESERVED FOR THE PLAN. Subject to adjustment as
provided in Paragraph 11 hereof, the maximum number of shares of Common Stock
issuable pursuant to the exercise of Options granted under the Plan shall be
175,000 shares of Common Stock. The Board and the appropriate officers of the
Company shall from time to time take whatever actions are necessary to execute,
acknowledge, file and deliver any documents required to be filed with or
delivered to any governmental authority or any stock exchange or transaction
reporting system on which shares of Common Stock are listed or quoted in order
to make shares of Common Stock available for issuance pursuant to this Plan.
Shares of Common Stock subject to Options that are forfeited or terminated or
expire unexercised in such a manner that all or some of the shares subject
thereto are not issued to an Optionee shall immediately become available for the
granting of Options.

         6. OPTION PRICE. The purchase price of each share of Common Stock that
is subject to an Option granted pursuant to this Plan shall be 100% of the Fair
Market Value of such share of Common Stock on the date the Option is granted.

         7. OPTION PERIOD. Options granted pursuant to this Plan shall have a
term not in excess of ten years.

         8. STOCK OPTIONS.

                  (a) INCENTIVE STOCK OPTIONS. An ISO shall consist of a right
to purchase a specified number of shares of Common Stock at a price specified by
the Committee in the Option Agreement or otherwise, which shall not be less than
the Fair Market Value of the Common Stock on the grant date and shall have such
terms, conditions and limitations as are established by the Committee.

                  (b) NONQUALIFIED OPTION. A Nonqualified Option shall consist
of a right to purchase a specified number of shares of Common Stock at a price
specified by the Committee in the Option Agreement or otherwise and shall have
such terms, conditions and limitations as are established by the Committee.



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         9. EXERCISE OF OPTIONS.

                  (a) Options shall be exercisable in accordance with the terms
of the Option Agreement.

                  (b) An Option may be exercised solely by the Optionee during
his lifetime or after his death by the person or persons entitled thereto under
his will or the laws of descent and distribution.

                  (c) The purchase price of the shares as to which an Option is
exercised shall be paid in full at the time of the exercise. Such purchase price
shall be payable (i) in cash, (ii) if permitted by the Committee, by means of
tendering theretofore owned shares of Common Stock which have been held by the
Optionee for more than six months or surrendering all or part of that or any
other Option, valued at Fair Market Value on the date of exercise, or (iii) any
combination thereof. The Committee may provide for procedures to permit the
exercise or purchase of Options by (a) loans from the Company or (b) use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Option. No holder of an Option shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect of any shares subject to any Option
unless and until certificates evidencing such shares shall have been issued by
the Company to such holder.

         10. ASSIGNABILITY. No Option or any other benefit shall be assignable
or otherwise transferable except by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the Code or
Title I of the United States Employee Retirement Income Security Act, or the
rules thereunder; provided, however, that the Committee may provide for
assignability under the terms of the Option Agreement. No ISO under this Plan
shall be assignable or otherwise transferable, except by will or the laws of
descent and distribution. The Committee may prescribe and include in applicable
Option Agreements other restrictions on transfer. Any attempted assignment of an
Option or any other benefit in violation of this Paragraph 10 or the terms of an
Option Agreement shall be null and void.

         11. ADJUSTMENTS; CHANGE IN CONTROL.

                  (a) The existence of outstanding Options shall not affect in
any manner the right or power of the Company or its stockholders to make or
authorize any or all adjustments, recapitalizations, reorganizations or other
changes in the share capital of the Company or its business or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred or
prior preference shares (whether or not such issue is prior to, on a parity with
or junior to the shares of Common Stock) or the dissolution or liquidation of
the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding of any kind, whether or not
of a character similar to that of the acts or proceedings enumerated above.

                  (b) In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable in
shares of Common Stock or capital reorganization or reclassification or other
transaction involving an increase or reduction in the number of outstanding
shares of Common Stock, the Committee shall adjust proportionally (i) the number
of shares of Common Stock reserved under this Plan and covered by outstanding
Options; (ii) the exercise price of such Options; (iii) the number of shares to
be subject to future Options; and


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(iv) the appropriate Fair Market Value and other price determinations for such
Options. In the event of any other recapitalization or capital reorganization of
the Company, consolidation or merger of the Company with another corporation or
entity or the adoption by the Company of a plan of exchange affecting the shares
of Common Stock or any distribution to holders of shares of Common Stock of
securities or property (other than normal cash dividends or dividends payable in
shares of Common Stock), the Committee shall make such adjustments or other
provisions as it may deem equitable, including adjustments to avoid fractional
shares, to give proper effect to such event; provided that such adjustments
shall only be such as are necessary to maintain the proportionate interest of
the Optionees and preserve, without exceeding, the value of the Options. In the
event of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Committee shall be authorized (i)
to issue or assume stock options, regardless of whether in a transaction to
which Section 424(a) of the Code applies, by means of substitution of new
Options for previously issued Options or an assumption of previously issued
Options as a part of such adjustment; (ii) to make provision, prior to the
transaction, for the acceleration of the vesting and exercisability of, or lapse
of restrictions with respect to, Options and the termination of options that
remain unexercised at the time of such transaction; or (iii) to provide for the
acceleration of the vesting and exercisability of the options and the
cancellation thereof in exchange for such payment as shall be mutually agreeable
to the Optionee and the Committee.

                  (c) An Option shall become fully exercisable upon a Change in
Control (as hereinafter defined) of the Company. For purposes of this Plan, a
"Change in Control" shall be conclusively deemed to have occurred if (and only
if) any of the following events shall have occurred: (a) after the Effective
Date any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than a person who is a Director of the Company on the
Effective Date or any person controlled by such a Director, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company's then outstanding voting securities
without prior approval of a least two-thirds of the members of the Board in
office immediately prior to such person's attaining such percentage interest;
(b) the Company is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of the
Board in office immediately prior to such transaction or event thereafter
constitute less than a majority of the members of the board of directors or
comparable governing body of the entity that is the survivor of such transaction
or event or, in the case of sale of assets, the entity that is the successor to
the business of the Company; or (c) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board (including
for this purpose any new member whose election or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members then still in office who were members at the beginning of such period)
cease for any reason to constitute at least a majority of the Board.

         12. PURCHASE FOR INVESTMENT. Unless the Options and Common Stock
covered by this Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an Option under this Plan may be required by the
Company to give a representation in writing in form and substance satisfactory
to the Company to the effect that he is acquiring such shares for his own
account for investment and not with a view to, or for sale in connection with,
the distribution of such shares or any part thereof.



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         13. TAXES. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes that it determines is required in
connection with any Options granted to any Optionee hereunder.

         14. AMENDMENTS OR TERMINATION. The Board may amend, alter or
discontinue this Plan, except that (a) no amendment or alteration that would
impair the rights of any Optionee under any Option that he has been granted
shall be made without his consent, (b) no amendment or alteration shall be
effective prior to approval by the Company's stockholders to the extent such
approval is then required pursuant to applicable legal requirements. Any
amendment or modification to the Plan shall also be subject to any necessary
approvals of any stock exchange or regulatory body having jurisdiction over the
securities of the Company.

         15. GOVERNMENT REGULATIONS. This Plan, and the granting and exercise of
Options hereunder, and the obligation of the Company to sell and deliver Common
Stock under such Options, shall be subject to all applicable foreign and United
States laws, rules and regulations, and to such approvals on the part of any
governmental agencies or national securities exchanges or transaction reporting
systems as may be required.

         16. TERMINATION OF EMPLOYMENT. Upon the termination of employment for
any reason of an Optionee who is an employee of the Company or any Subsidiary,
any unexercised, deferred or unpaid Options shall be treated as provided in the
specific Option Agreement evidencing the Option. In the event of such a
termination, the Committee may, in its discretion, provide for the extension of
the exercisability of an Option for any period that is not beyond the applicable
expiration date thereof, accelerate the vesting or exercisability of an Option,
eliminate or make less restrictive any restrictions contained in an Option,
waive any restriction or other provision of this Plan or an Option or otherwise
amend or modify the Option in any manner that is either (a) not adverse to such
Optionee or (b) consented to by such Optionee.

         17. ADMINISTRATION. This Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion but subject to any necessary approvals of any
stock exchange or regulatory body having jurisdiction over the securities of the
Company, provide for the extension of the exercisability of an Option,
accelerate the vesting or exercisability of an Option, eliminate or make less
restrictive any restrictions contained in an Option, waive any restriction or
other provision of this Plan or an Option or otherwise amend or modify an Option
in any manner that is either (a) not adverse to the Optionee holding such Option
or (b) consented to by such Optionee, including (in either case) an amendment or
modification that may result in an ISO's losing its status as an ISO. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or in any Option in the manner and to the extent the
Committee deems necessary or desirable to carry it into effect. Any decision of
the Committee in the interpretation and administration of this Plan shall lie
within its sole and absolute discretion and shall be final, conclusive and
binding on all parties concerned. No member of the Committee or officer of the
Company to whom it has delegated authority in accordance with the provisions of
Paragraph 18 of this Plan shall be liable for anything done or omitted to be
done by him or her, by any member of the Committee or by any


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officer of the Company in connection with the performance of any duties under
this Plan, except for his or her own willful misconduct or as expressly provided
by statute.

         18. DELEGATION OF AUTHORITY. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.

         19. GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by mandatory
provisions of the Code or the securities laws of the United States, shall be
governed by and construed in accordance with the laws of Delaware.

         20. NO EMPLOYMENT GUARANTEED. No provision of this Plan or any Option
Agreement hereunder shall confer any right upon any employee to continued
employment with the Company or any Subsidiary.

         21. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of the
Effective Date. Notwithstanding the foregoing, the adoption of this Plan is
expressly conditioned upon the approval of the holders of a majority of shares
of Common Stock present, or represented, and entitled to vote at a meeting of
the Company's stockholders held on or before the date one year after the
Effective Date. If the stockholders of the Company should fail so to approve
this Plan prior to such date, this Plan shall terminate and cease to be of any
further force or effect and all grants of Options hereunder shall be null and
void.

         22. TERM OF PLAN. This Plan shall terminate on the date that is ten
years after the Effective Date.


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