Exhibit 10.1


 


LONE STAR
TECHNOLOGIES, INC.


PHANTOM
STOCK DEFERRED COMPENSATION PLAN


 


Purpose:  The purpose of the Plan is to set forth the
terms and conditions of the phantom stock deferred compensation arrangement
that Lone Star Technologies, Inc. (the “Company”) makes available to its
non-employee directors. The Plan and the form of deferred compensation
agreement (the “Agreement”) fix in advance the specific terms of the grant and
cash settlement of phantom stock rights in satisfaction of the requirements of Rule 16b-3
of the Securities and Exchange Commission. 
That rule exempts all transactions contemplated by the Plan from
the short-swing profits liability provisions of Section 16(b) of the
Securities Exchange Act of 1934.


 


Participation:  Any non-employee director of the Company who
is entitled to receive compensation from the Company for serving on its Board
of Directors may participate in the Plan. 
An eligible director who elects to have his compensation earned during a
calendar year deferred under the Plan shall notify the Company’s Secretary of
his election no later than the last business day of the preceding calendar
year. The Board of Directors may permit a newly-elected or appointed
non-employee director to elect to defer compensation earned during the balance
of the calendar year in which such director is first elected or appointed,
provided that such deferral election is made within thirty days after the date
of such election or appointment and applies only to compensation earned after
the date of the deferral election. Upon receiving the director’s notification,
the Company and the director will enter into an Agreement containing such terms
and conditions not inconsistent with the Plan as the Company deems appropriate.


 


Director’s Account:
The Company will establish a bookkeeping account (a “Director’s Account”) in
the name of each Director who elects to defer compensation under the Plan.  As of the end of each calendar quarter with
respect to which a Director’s compensation is deferred, the Director’s Account
shall be credited with a number of deferred compensation units (“Units”) equal
to the quotient of the Director’s compensation for the quarter (including Board
and committee meeting fees) divided by the closing price per share of the
Company’s Common Stock in the open market as of such date (if such stock was
traded in the open market on such date, but if not, then the closing price per
share of such stock in the open market as of the next preceding date such stock
was traded in the open market).  If the
Company effects a split of its shares of Common Stock or pays a dividend in the
form of shares of the Company’s Common Stock, or if the outstanding shares of
the Company’s Common Stock are combined into a smaller number of shares, the
Units then credited to Director’s Account shall be increased or decreased to
reflect proportionately the increase or decrease in the number of outstanding
shares of the Company’s Common Stock resulting from such split, dividend or
combination.  In the event of a dividend
on or reclassification of shares of the Company’s Common Stock not covered by
the foregoing, or in the event of the liquidation or reorganization of the
Company, the Board of Directors of the Company shall make such adjustments, if
any, to the Directors’ Accounts as such Board may deem appropriate. For
purposes of the Plan, 


 





















 


the
value of a Director’s Account as of any date will be an amount equal to
the product of the number of deferred compensation Units credited to such Director’s Account
and the closing price per share of the Company’s Common Stock in the open
market on such date (if such stock was traded in the open market on such date,
but if not, then the closing price per share of such stock in the open market
as of the next preceding date such stock was traded in the open market).


 


Payment of
Deferral Accounts: A Director’s deferral election for
each year beginning after December 31, 2005 may include an election of the
date payment of the deferral account for that year will be made or begin and
the manner in which payment of such account will be made. The date payment of
the deferral account will be made or begin shall be more than six months
following the date of the Director’s deferral election.  With respect to years ending before January 1,
2006, and, if and to the extent the time and manner of payment is not specified
in a Director’s deferral election for a year beginning after December 31,
2005, the Director will be deemed to have elected to receive his deferral
account for such year in the form of a lump sum cash payment at or as soon as
practicable after the end of the calendar quarter in which the Director ceases
to be a member of the Board.  A Director may,
with the approval of the Board of Directors, make prospective changes to the
Director’s payment election(s) or deemed payment election(s), subject to the
timing and other requirements applicable to subsequent deferral elections under
Section 409A of the Internal Revenue Code of 1986, including any
applicable transition rules with respect to pre-2007 deferrals. Unless the
Company determines otherwise, (a) the available forms of payment include a
lump sum distribution and the payment of equal quarterly or less frequent
installments over a period not exceeding ten years, subject to acceleration due
to death, change in control or other acceleration event permitted by the
Company and Section 409A of the Internal Revenue Code; and (b) payment
will be made or begin on the earlier of the date elected by the Director or the
date on which the Director ceases to be a member of the Board of Directors,
subject to acceleration as described in (a) above.


 


Construction:  The Company intends that the Plan will comply
with the deferral and payment requirements of Section 409A of the Internal
Revenue Code. The Plan will be construed and applied accordingly. Unless the
Board of Directors determines otherwise, the Plan will be administered by the
Board of Directors.


 


Amendment and Termination of the Plan:  The Board of Directors of the Company
reserves the right at any time to modify or terminate the Plan, except that the
Board of Directors may not impair any deferrals of compensation already made
under the Plan. Subject to the provisions of the Plan and applicable law, the
Company may permit the amendment of outstanding deferral agreements at any time
and from time to time.