Document:

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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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                                                                    EXHIBIT 10.2

                      [FORM OF CHANGE IN CONTROL AGREEMENT]

                                 HYDRIL COMPANY
                       3300 North Sam Houston Parkway East
                              Houston, Texas 77032

                                                                          [Date]

[Name]
Hydril Company
3300 North Sam Houston Parkway East
Houston, Texas 77032

Dear [Name]:

                  Hydril Company (the "Corporation") considers it essential to
the best interests of its stockholders to foster the continuous employment of
key management personnel. In connection with this, the Corporation's Board of
Directors (the "Board") recognizes that, as is the case with many corporations,
the possibility of a change in control of the Corporation may exist and that
such possibility, and that such uncertainty and questions that it may raise
among management, could result in the departure or distraction of management
personnel to the detriment of the Corporation and its stockholders.

                  The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management, including
yourself, to their assigned duties without distraction arising from the
possibility of a change in control of the Corporation.

                  In order to induce you to remain in its employ, the
Corporation hereby agrees that after this letter agreement (the "Agreement") has
been fully executed, you shall receive the severance benefits set forth in this
Agreement in the event your employment with the Corporation or one or more of
its subsidiaries is terminated under the circumstances described below
subsequent to a "Change of Control" (as defined in Section 2).

                  1. Term of Agreement. This Agreement shall commence on January
1, 1999 and shall continue in effect through the earlier of (i) December 31,
2002 or (ii) the end of the calendar month in which your 65th birthday occurs.

                  2. Change in Control. No benefits shall be payable hereunder
unless there has been a Change in Control. For purposes of this Agreement, 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 date hereof 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 Corporation on the date hereof or
any person controlled by such a director, becomes the "beneficial owner" (as
defined in

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[Name]                                 -2-                                [Date]

Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 35% or more of the combined voting power of the
Corporation's then outstanding voting securities without prior approval of a
least two-thirds of the members of the Board of Directors of the Corporation in
office immediately prior to such person's attaining such percentage interest;
(b) the Corporation 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 of Directors of the Corporation 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 a sale of assets, the
entity that is the successor to the business of the Corporation; or (c) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of the Corporation (including for this
purpose any new member whose election or nomination for election by the
Corporation'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 of Directors
of the Corporation.

                  3. Termination Following Change in Control.

                  (i) General. If any of the events described in Section 2
constituting a Change in Control shall have occurred, you shall be entitled to
the benefits provided in Section 4 (iii) upon the subsequent termination of your
employment during the term of this Agreement if such termination is (a) by the
Corporation without Cause or (b) by you for Good Reason.

                  (ii) Cause. Termination by the Corporation of your employment
for "Cause" shall mean termination (a) upon your willful and continued failure
to substantially perform your duties with the Corporation or any such actual or
anticipated failure after your issuance of a Notice of Termination (as defined
in Section 3(iv)) for Good Reason (as defined in Section 3(iii)), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, (b) upon your willful
participation in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise, or (c) upon there being substantial
evidence that you are guilty of a crime classified as a felony (or the
equivalent thereof) under applicable law, or that you have been convicted of
such a crime. For purposes of this Section 3(ii), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith. In addition, "Cause" shall exist if as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance of
your duties (hereinafter, "Disability"). Notwithstanding the foregoing, you
shall not be deemed terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than

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[Name]                                 -3-                                [Date]

three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board (after reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the Board's good
faith opinion you were guilty of conduct set forth above in this Section 3(ii)
and specifying the particulars thereof in reasonable detail.

                  (iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of any of the following circumstances unless, in the case of subsections
(a), (e), (f) or (g), such circumstances are fully corrected prior to the Date
of Termination (as defined in Section 3(v)) specified in the Notice of
Termination (as defined in Section 3(iv)) given in respect thereof:

                  (a) the assignment to you of any duties inconsistent with the
         position in the Corporation or any subsidiary of the Corporation that
         you held immediately prior to the Change in Control, or a significant
         adverse alteration in the nature or status of your responsibilities or
         the conditions of your employment from those in effect immediately
         prior to such Change in Control;

                  (b) the reduction of your annual base salary as in effect on
         the date hereof or as the same may be increased from time to time;

                  (c) the relocation of the offices at which you are principally
         employed immediately prior to the date of the Change in Control to a
         location more than 25 miles from such location or your relocation to
         anywhere other than such prior office except for required travel on the
         Corporation's business to an extent substantially consistent with your
         present business travel obligations;

                  (d) failure to pay to you any portion of your current
         compensation or to pay to you any portion of an installment of deferred
         compensation under any deferred compensation program of the Corporation
         within seven (7) days of the date such compensation is due;

                  (e) failure to continue in effect any material compensation or
         benefit plan in which you participate immediately prior to the Change
         in Control, unless an equitable arrangement (embodied in an ongoing
         substitute or alternative plan) has been made with respect to such
         plan, or failure to continue your participation therein (or in such
         substitute or alternative plan) on a basis not materially less
         favorable, both in terms of the amount of benefits provided and the
         level of your participation relative to other participants, as existed
         at the time of the Change in Control;

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[Name]                                 -4-                                [Date]

                  (f) failure to obtain a satisfactory agreement from any
         successor to assume and agree to perform this Agreement, as
         contemplated in Section 5; or

                  (g) (any purported termination of your employment that is not
         effected pursuant to a Notice of Termination satisfying the
         requirements of Section 3(iv) hereof (and, if applicable, the
         requirements of Section 3(ii) hereof), which purported termination
         shall not be effective for purposes of this Agreement.

Your right to terminate your employment pursuant to this Section 3(iii) shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.

                  (iv) Notice of Termination. Any purported termination of your
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 6. "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.

                  (v) Date of Termination, Etc. "Date of Termination" shall mean
(a) if your employment is terminated due to your death, the date of your death;
(b) if your employment is terminated for Disability thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)-day period), and
(c) if your employment is terminated pursuant to Section 3(ii) or Section 3(iii)
or for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination for Cause shall
not be less than thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason shall not be less than
fifteen (15) nor more than sixty (60) days from the date such Notice of
Termination is given). Notwithstanding anything to the contrary contained in
this Section 3(v), if within fifteen (15) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, or as set forth in Section 10;
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.

                  4. Compensation Upon Termination or During Disability.
Following a Change in Control, you shall be entitled to the benefits described
below during a period of

<PAGE>   5

[Name]                                 -5-                                [Date]

disability, or upon termination of your employment, as the case may be, provided
that such period or termination occurs during the term of this Agreement. The
benefits to which you are entitled, subject to the terms and conditions of this
Agreement, are:

                  (i) During any period during which you fail to perform your
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, you shall continue to receive your base salary at the rate in
effect at the commencement of any such period, together with all compensation
payable to you under the Corporation's disability plan or program or other
similar plan during such period, until this Agreement is terminated by the
Corporation pursuant to Section 3(ii) hereof or by you. Thereafter, or in the
event your employment is terminated by reason of your death, your benefits shall
be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.

                  (ii) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason, the Corporation shall pay you
your full base salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Corporation at the
time such payments are due, and the Corporation shall have no further
obligations to you under this Agreement.

                  (iii) If your employment by the Corporation shall be
terminated by you for Good Reason or by the Corporation other than for Cause
(including Disability), then you shall be entitled to the benefits provided
below:

                  (a) the Corporation shall pay to you your full base salary,
         when due, through the Date of Termination at the rate in effect at the
         time Notice of Termination is given, at the time specified in Section
         4(v), plus all other amounts to which you are entitled under any
         compensation plan of the Corporation at the time such payments are due;

                  (b) in lieu of any further salary payments to you for periods
         subsequent to the Date of Termination, the Corporation shall pay as
         severance pay to you, at the time specified in Section 4(v), a lump sum
         severance payment (together with the payments provided in Sections
         4(iii)(c) and (d) below, the "Severance Payments") equal to 200% of
         your annual salary as in effect as of the Date of Termination or
         immediately prior to the Change in Control, whichever is greater and
         without regard to whether you have been employed by the Corporation or
         any of its subsidiaries for at least 12 consecutive months, and 200% of
         the average of the annual bonuses awarded to you pursuant to the
         Corporation's bonus plan(s) for executive officers, or any successor
         bonus plan(s) thereto, with respect to the three fiscal years preceding
         the Date of Termination; provided that if you shall not have been
         continuously employed by the Corporation or any of its

<PAGE>   6

[Name]                                 -6-                                [Date]

         subsidiaries for the preceding three full fiscal years, such average
         annual bonuses shall be determined based on the aggregate of all
         bonuses paid to you with respect to any of such three fiscal years and
         the actual period of your employment through the end of the preceding
         fiscal year (stated in years, including a fraction thereof); and
         provided further that if no bonuses shall have been paid to you with
         respect to the preceding fiscal year, such bonuses (for purposes of
         computing both the average annual bonuses and the aggregate amount of
         Severance Payments) shall be the greater of (x) the bonus award to you
         for such fiscal year, if any, theretofore approved by the Corporation's
         Board of Directors or a duly constituted committee thereof, (y) your
         target bonus for such fiscal year, stated as a percentage of your base
         annual salary, theretofore approved by the Corporation's Board of
         Directors or a duly constituted committee thereof, or (z) your current
         annual salary multiplied by the highest percentage that your bonuses
         represented in relation to your base annual salary with respect to
         either of the first two of the three preceding fiscal years.

                  (c) the Corporation shall pay to you all legal fees and
         expenses incurred by you as a result of such termination (including all
         such fees and expenses, if any, incurred in contesting or disputing any
         such termination or in seeking to obtain or enforce any right or
         benefit provided by this Agreement (as set forth in Section 10 of this
         Agreement); and

                  (d) for a twenty-four (24) month period after such
         termination, the Corporation shall arrange to provide you with life,
         disability, accident and group health insurance benefits substantially
         similar to those that you were receiving immediately prior to the
         Notice of Termination. Benefits otherwise receivable by you pursuant to
         this Section 4(iii)(d) shall be reduced to the extent comparable
         benefits are actually received by you during the twenty-four (24) month
         period following your termination, and any such benefits actually
         received by you shall be reported to the Corporation.

                  (iv) The payments provided for in Section 4(iii)(a) shall be
made not later than the fifth day following the Date of Termination. The
payments provided for in Sections 4(iii)(b), (c) and (d) shall be made not later
than the thirtieth day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Corporation shall pay to you on such day an estimate, as
determined in good faith by the Corporation, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"), as soon as the amount thereof can be determined but in
no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Corporation to you, payable on the fifth day

<PAGE>   7

[Name]                                 -7-                                [Date]

after demand by the Corporation (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code).

         (x) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise nor,
except as provided in Section 4(iii)(d), shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.

         5. Successors, Binding Agreement.

         (i) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to terminate your employment and
to receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Where the context requires,
"Corporation" shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

         (ii) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.

         6. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as

<PAGE>   8

[Name]                                 -8-                                [Date]

either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.

                  7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas without regard to its conflicts of law
principles. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Corporation under
Section 4 shall survive the expiration of the term of this Agreement. The
section headings contained in this Agreement are for convenience only, and shall
not affect the interpretation of this Agreement.

                  8. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

                  9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

                  10. Arbitration, Dispute Resolution.

                  (i) Arbitration Procedure. Any disagreement, dispute,
controversy or claim arising out of or relating to this Agreement or the
interpretation of this Agreement or any arrangements relating to this Agreement
or contemplated in this Agreement or the breach, termination or invalidity
thereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Agreement) in
Houston, Texas. The arbitral tribunal shall consist of one arbitrator. In making
any decision, the arbitrator shall apply and follow the substantive law of Texas
without reference to the conflicts of law provisions thereof. The parties to the
arbitration jointly shall directly appoint such arbitrator within thirty (30)
days of initiation of arbitration. If the parties shall fail to appoint such
arbitrator as provided above, such arbitrator shall be appointed by the AAA as
provided in the Arbitration Rules. You and the

<PAGE>   9

[Name]                                 -9-                                [Date]

Corporation agree that the arbitral award may be enforced against the parties to
the arbitration proceeding or their assets wherever they may be found and that a
judgment upon the arbitral award may be entered in any court having jurisdiction
thereof. The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence reasonably
required by you to present your case. The Corporation shall pay to you all
reasonable arbitration expenses and legal fees incurred by you as a result of a
termination of your employment in seeking to obtain or enforce any right or
benefit provided by this Agreement (whether or not you are successful in
obtaining or enforcing such right or benefit). Such payments shall be made
within five (5) days after the your request for payment accompanied with such
evidence of fees and expenses incurred as the Corporation reasonably may
require.

                  (ii) Compensation During Dispute. Your compensation during any
disagreement, dispute, controversy or claim arising out of or relating to this
Agreement or the interpretation of this Agreement shall be as follows:

                  (a) If a purported termination by you for Good Reason occurs
         or is deemed to occur following a Change in Control and during the term
         of this Agreement, and such termination is disputed in accordance with
         Sections 3(v) and 10(i) of this Agreement, the Corporation shall
         continue to pay you the full compensation in effect when the notice
         giving rise to the dispute was given (including, but not limited to,
         salary) and continue you as a participant in all compensation, benefit
         and insurance plans in which you were participating when the notice
         giving rise to the dispute was given, until the dispute is finally
         resolved in accordance with Section 10(i). Amounts paid under this
         Section 10(ii)(a) are in addition to all other amounts due under this
         Agreement and shall not be offset against or reduce any other amounts
         due under this Agreement. You agree to remain in the employ of the
         Corporation during the resolution of the dispute and to continue to
         provide services unless your employment is terminated earlier by death,
         Disability or retirement, or by action of the Corporation. If the
         dispute is resolved by a determination that you did not have Good
         Reason, this Agreement, in accordance with its terms, shall continue to
         apply to the circumstances of the your employment by the Corporation
         and any termination thereof.

                  (b) If there is a termination by the Corporation followed by a
         dispute as to whether you are entitled to the payments and other
         benefits provided under this Agreement, then, during the period of that
         dispute the Corporation shall pay you fifty percent (50%) of the amount
         specified in Sections 4(iii)(a) and 4(iii)(b) hereof, and the
         Corporation shall provide you with the other benefits provided in
         Section 4(iii) of this Agreement, if, but only if, you agree in writing
         that if the dispute is resolved against you, you shall promptly refund
         to the Corporation all payments you receive under Sections 4(iii)(a)
         and 4(iii)(b) of this Agreement plus interest at the rate provided in
         Section 1274(d) of the Code, compounded quarterly. If the dispute is
         resolved in your favor,

<PAGE>   10

[Name]                                -10-                                [Date]

         promptly after resolution of the dispute the Corporation shall pay you
         the sum that was withheld during the period of the dispute plus
         interest at the rate provided in Section 1274(d) of the Code,
         compounded quarterly.

                  11. Confidential Information and Non-Solicitation.

                  (i) For a period of two (2) years after a termination of your
employment with the Company with respect to which you receive Severance Payments
under Section 4 of this Agreement, you shall not, except as may be required by
applicable law, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company. "Confidential Information" shall
mean information about the Company, its subsidiaries and affiliates, and their
respective clients and customers that is not available to the general public and
that was learned by you in the course of your employment by the Company,
including (without limitation) any patterns, proprietary knowledge, trade
secrets, data, formulae, information, and client and customer lists and all
papers, resumes, records (including computer records) and the documents
containing such Confidential Information. You acknowledge that such Confidential
Information is specialized, unique in nature and of great value to the Company,
and that such information gives the Company a competitive advantage in
conducting its business. Upon the termination of your employment for any reason
whatsoever, you shall promptly deliver to the Company all documents, computer
tapes and disks (and all copies thereof) containing any Confidential
Information.

                  (ii) You recognize that you possess confidential information
about other employees of the Company relating to their education, experience,
skills, abilities, compensation and benefits, and interpersonal relationships
with customers of the Company. You recognizes that the information you possess
about these other employees is not generally known, is of substantial value to
the Company in developing its business and in securing and retaining customers,
and has been acquired by you because of your business position with the Company.
For a period of two (2) years after a termination of your employment with the
Company with respect to which you receive Severance Payments under Section 4 of
this Agreement, you shall not, directly or indirectly, solicit, recruit or hire
any employee of the Company for the purpose of being employed by you or by any
other person on whose behalf you are acting as an agent, representative or
employee and that you will not convey any such confidential information or trade
secrets about other employees of the Company to any business, individual,
partner, firm, corporation, or other entity.

                  (iii) You agree that the Company will or would suffer
irreparable injury if you were to violate any of the covenants set forth in this
Section 1 1 and that the Company would by reason of such violation be entitled
to injunctive relief in a court of appropriate jurisdiction, and you further
consent and stipulate to the entry of such injunctive relief in such a court
prohibiting you from violating any of such covenants.

<PAGE>   11

[Name]                                 -11-                               [Date]

        (iv) If it is determined by a court of competent jurisdiction in any
state that any restriction in this Section 11 is excessive in duration or scope
or is unreasonable or unenforceable under the laws of that state, it is the
intention of the parties that such restriction may be modified or amended by the
court to render it enforceable to the maximum extent permitted by the law of
that state.

         12. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein, is
hereby terminated and cancelled.

         If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which shall then constitute our agreement on this subject.

                                             Sincerely,

                                             By:
                                                 -------------------------------
                                                 [Name]
                                                 [Title]

Agreed to this ___ day of __________, 2000

[Name]

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