Exhibit 10.1


LONE STAR TECHNOLOGIES, INC.



2006 EMPLOYMENT RETENTION POLICY


In
order to attract and retain officers and key employees of Lone Star
Technologies, Inc. (the “Corporation”)
and its operating subsidiaries, particularly in the event of a threat of, or
the occurrence of, a Change-in-Control (as defined in Section 1.1 hereof), the
Board of Directors of the Corporation (the “Board”)
has adopted this 2006 Employment Retention
Policy (the “Policy”):


I.              DEFINITIONS


1.1           Certain Definitions.  For purposes of this Policy, the following
terms shall have the meanings respectively ascribed thereto:


“Cause” for termination of a person’s
employment means his or her illegal conduct or gross misconduct that
in either case is willful and results in material damage to his or her Employer’s
business or reputation or his or her willful
failure or refusal to perform his or her duties or obligations to his or her Employer or to comply in all material respects
with the lawful directives of the Employer’s Chief Executive Officer or Board of Directors, provided
that he or she has received written notice from his or her Employer stating the
nature of such failure or refusal and has reasonable opportunity to correct the
stated deficiency.


“Change-in-Control” means, with respect
to an Employer that is a subsidiary of the Corporation,
(i) any event that results in the Corporation not controlling the Employer or
owning all or substantially all of the Employer’s assets and/or voting equity
securities or (ii) any Change-in-Control of the Corporation.


“Change-in-Control” means, with
respect to the Corporation, any of the following:


(i)            any
event affecting the Corporation that would be required to be reported by a reporting company as a change-in-control pursuant
to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”);


(ii)           any “person” (as that term is used in Section 13(d) of the Exchange Act)
becomes the “beneficial owner” (as defined by Rule 13d-3 under the
Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of either the then outstanding shares of the
Corporation’s Common Stock or the combined
voting power of the Corporation’s then outstanding securities;


(iii)          at
any time during any 24-month period, the individuals who were serving on the Board at the beginning of that
period or who were nominated for election
or were elected to the Board during that period by a vote of at least
two-thirds of such individuals still in office shall cease to constitute a
majority of the Board;


(iv)          any merger or consolidation of the Corporation with any other corporation
or any sale of all or substantially all of the
assets of the Corporation, other than a 



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merger, consolidation or sale that results in the voting securities of the
Corporation outstanding
immediately prior thereto continuing to represent more than 50% of the combined
voting power of the voting securities of the Corporation or the surviving entity or any parent thereof outstanding
immediately thereafter; or


(v)           the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the
Corporation.


“Effective
Date” means October 24, 2006, which is the date of adoption of
this Policy by the Board.


“Employer”
is the Corporation or any corporation that is or becomes a subsidiary of the Corporation and their respective successors and
assigns.


“Good Reason” with respect to the
voluntary termination of a person’s employment means
the occurrence, contemporaneously with or after a Change-in-Control and without
such person’s express written consent, of (i) any adverse change in his or her status,
title, position, authority, duties such person is regularly asked to perform,
or responsibilities, (ii) a reduction in his or her compensation or any adverse
change in his or her benefits, (iii) any material change in his or her employment
location or (iv) the failure or refusal of any successor to his or her Employer
to expressly assume his or her Employer’s
obligations under this Policy; provided, however, a change in a person’s
reporting requirements shall not in and of itself constitute Good Reason for
purposes of this Policy.


“Named Executive Officer” means each
person who on the Effective Date, or at the time of the occurrence of a
Change-in-Control, is a “named executive officer” whose compensation is
required to be individually disclosed in the Corporation’s proxy statement.


“SIP
Officer” means any officer or key employee of the Corporation or
any of its operating subsidiaries who is designated to participate in the
Corporation’s Strategic Incentive Plan other than a Named Executive Officer.


“Other Officer” means any officer or
key manager of the Corporation or an operating subsidiary other than a Named
Executive Officer or SIP Officer. “Participant”
means each Named Executive Officer, an SIP Officer or Other Officer who has been
designated by the Human Resources Committee of the Corporation as a participant
in the Policy and has elected to receive the benefits of this Policy by
executing and delivering to the Corporation a letter agreement in the form
attached as Exhibit “A.”


II.            CASH SEVERANCE
PAYMENTS; TAX GROSS-UP 

AND “BEST NET” PROVISIONS


2.1           Cash Severance for Named Executive Officers.  If the employment of a Participant who is a Named
Executive Officer is terminated without Cause or if he or she resigns for Good
Reason contemporaneously with or within two years after a Change-in-Control
with respect to his or her Employer, the Corporation will pay such Named
Executive Officer contemporaneously with the termination of his or her
employment a cash severance amount equal to the mathematical product of (i) the
sum of (a) the Named Executive Officer’s then 



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current annual salary (divided by 12) and (b)
the higher of his or her average bonus for the immediately preceding two years
or his or her target bonus for the current year (divided by 12) and (ii) a
severance multiple of either 36, in the case of the Chief Executive Officer of
the Corporation, or 30, in the case of each Named Executive Officer other than
such Chief Executive Officer.


2.2           Cash Severance for SIP Officers.  If the employment of a Participant who is an
SIP Officer is terminated without Cause or if he or she resigns for Good Reason
contemporaneously with or within two years after a Change-in-Control with
respect to his or her Employer, the Corporation will pay such SIP Officer
contemporaneously with the termination of his or her employment a cash
severance amount equal to the mathematical product of (i) the sum of (a) such
SIP Officer’s then current annual salary (divided by 12) and (b) the higher of
his or her average bonus for the two immediately preceding years or his or her
target bonus for the current year (divided by 12) and (ii) a severance multiple
of up to 24 (as determined by the Human Resources Committee of the
Corporation).


2.3           Cash Severance for Other Officers.  If the employment of a Participant who is an
Other Officer is terminated without Cause or if he or she resigns for Good
Reason contemporaneously with or within two years after a Change-in-Control
with respect to his or her Employer, the Corporation will pay such Other
Officer contemporaneously with the termination of his or her employment a cash
severance amount equal to the mathematical product of (i) the sum of (a) such
Other Officer’s then current annual salary (divided by 12) and (b) the higher
of his or her average bonus for the immediately preceding two years or his or
her target bonus for the current year (divided by 12) and (ii) a severance
multiple of up to 12 (as determined by the Human Resources Committee of the
Corporation).


2.4           Tax Gross-up and “Best Net” Provisions.  In connection with the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, the Corporation
will (i) “gross-up” for tax purposes the payments and benefits to be received
by the Named Executive Officers by making additional payments to or for the
benefit of each Named Executive Officer to the extent necessary so that after
payment of the excise tax and all federal, state and local income, employment
and other applicable taxes and excise tax on the additional payments, each
Named Executive Officer ends up with what he or she would have received absent
payment of the excise tax (i.e., in the same position he or she would have been
had there been no excise tax), and (ii) provide for the “Best Net” for the SIP
Officers and the Other Officers so that an SIP Officer’s or an Other Officer’s
aggregate severance payments and benefits would be reduced to $1.00 less than
that amount which would trigger the Section 4999 excise tax if such
reduction would result in such SIP Officer or Other Officer receiving a greater
after-tax benefit than he or she would receive if the full severance benefits
were paid (i.e., the aggregate severance payments and benefits that an SIP
Officer or Other Officer receives will be either the full amount of severance
payments and benefits or an amount of severance payments and benefits reduced
to the extent necessary so that the SIP Officer or Other Officer incurs no
excise tax, whichever results in the SIP Officer or Other Officer receiving the
greater amount, taking into account applicable federal, state and local income,
employment and other applicable taxes, as well as the excise tax).



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III.           OTHER SEVERANCE
BENEFITS


3.1           Pro Rated Annual Bonus.  Contemporaneously with the occurrence of a
Change-in-Control of a Participant’s Employer, the Corporation will pay such
Participant a cash amount equal to (i) such Participant’s target bonus amount for
the year in which the Change-in-Control occurs multiplied by (ii) a fraction of
which (a) the numerator is the number of days elapsed in such year through the
date of the Change-in-Control and (b) the denominator is 365.  Nothing in this Policy shall impair in any respect
the ability of the Human Resources Committee and the Board of Directors of the
Corporation under the annual cash bonus plan to increase the amount of any
Participant’s bonus for that year above his or her prorated target bonus
payment amount.


3.2           Continued Medical Insurance.  If the employment of a Participant is
terminated without Cause or if he or she resigns for Good Reason within two
years after a Change-in-Control of such Participant’s Employer, the Corporation
will continue to provide the same or equivalent medical insurance coverage for
such Participant until the first to occur of (i) such Participant commencing
employment with an employer who provides substantially equivalent medical
insurance coverage or (ii) 36 months (in the case of the Chief Executive
Officer of the Corporation), 30 months (in the case of each Named Executive
Officer other than such Chief Executive Officer) or a number of months equal to
the applicable severance multiple, as determined by the Human Resources
Committee (in the case of the SIP Officers and the Other Officers).


3.3           Outplacement Services.  If the employment of a Participant is
terminated without Cause or if he or she resigns for Good Reason within two
years after a Change-in-Control of such Participant’s Employer, the Corporation
will promptly (and in any event, within 30 days) reimburse the Participant for
the reasonable cost of all outplacement services selected by such Participant
up to a maximum of $20,000 per Participant in the aggregate.  Outplacement services may include without
limitation office space rental, fees and expenses of employment search firms,
secretarial expense, travel expense related to seeking employment, professional
counseling and other services reasonably related to a Participant seeking new
employment or adjusting to the loss of his or her current employment by an
Employer.


IV.           MISCELLANEOUS
PROVISIONS


4.1           Amendment and Termination.  The Board shall have the right to amend or
terminate this Policy at any time, but any such amendment or termination,
whether adopted prior to or after a Change-in-Control, shall not adversely
affect any person covered by this Policy (i.e., a Participant) prior to such
amendment or termination.


4.2           Adoption of Policy by Others.  The
Corporation will request that the other Employers adopt this Policy and will
make reasonable efforts to require any
successor to the business or assets of any Employer expressly to assume and to
agree to be bound by this Policy.


4.3           Attorneys’ Fees.  If any Participant is required to institute a
lawsuit or take other legal action to enforce his or her rights under this
Policy, the Corporation shall pay such Participant’s reasonable attorneys’ fees
and expenses.



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