AMENDED AND RESTATED JANUARY 20, 1998
                             REFLECTS 5-FOR-2 STOCK SPLIT DATED JULY 14, 1997,
                                2-FOR-1 STOCK SPLIT DATED JANUARY 20, 1998 AND
                              MERGERS & ACQUISITIONS THROUGH SEPTEMBER 1, 1997


                          COMPAQ COMPUTER CORPORATION
                          1989 EQUITY INCENTIVE PLAN

     SECTION  1.  Purpose.  The  purposes  of  the Compaq Computer Corporation
                  -------
1989 Equity Incentive Plan (the "Plan") are to encourage eligible employees of
Compaq  Computer  Corporation (the "Company") and its Affiliates, to acquire a
proprietary  and vested interest in the growth and performance of the Company,
to  generate  an  increased  incentive  to  contribute to the Company's future
success  and  prosperity,  thus  enhancing  the  value  of the Company for the
benefit of its stockholders, and to enhance the ability of the Company and its
Affiliates  to  attract  and  retain talented and highly competent individuals
upon whom, in large measure, the sustained progress, growth, and profitability
of  the  Company  depend.

     SECTION  2.  Definitions.  As used in the Plan, the following terms shall
                  -----------
have  the  meanings  set  forth  below:

     (a)   "Affiliate"  shall  mean  (i)  any Person that directly, or through
one  or more intermediaries, controls, or is controlled by, or is under common
control  with,  the  Company  or  (ii)  any  entity in which the Company has a
significant  equity  interest,  as  determined  by  the  Committee.
     (b)   "Award"  shall  mean  any  Option,  Stock  Appreciation  Right,
Restricted  Stock  Award,  or any other right, interest, or option relating to
Shares  granted  pursuant  to  the  provisions  of  the  Plan.
     (c)   "Award  Notice"  shall mean any written notice, agreement, or other
instrument or document evidencing any Award granted by the Committee hereunder
signed  by    the  Company  and  delivered  to  the  Participant.
     (d)   "Board"  shall  mean  the  Board  of  Directors  of  the  Company.
     (e)   "Code"  shall  mean  the  Internal Revenue Code of 1986, as amended
from  time  to  time.
     (f)   "Committee"  shall  mean the Human Resources Committee of the Board
of  Directors,  composed  of  not  less  than  two directors each of whom is a
Non-Employee  Director.
     (g)   "Common Stock"  shall  mean  the  common  stock, $.01 par value, of
the  Company.
     (h)   "Company"  shall  mean  Compaq  Computer  Corporation.
     (i)   "Employee"  shall  mean  any  employee  of  the  Company  or of any
Affiliate.
     (j)   "Exchange  Act"  shall  mean the Securities Exchange Act of 1934 as
amended.
     (k)   "Fair  Market  Value"  shall  mean  (i)  with respect to the Common
Stock, the last sale price of the Common Stock on the date on which such value
is determined, as reported on the consolidated tape of New York Stock Exchange
issues  or,  if  there  shall  be  no trades on such date, on the date nearest
preceding such date;  (ii) with respect to any other property, or with respect
to the Common Stock if it is not then listed for trading on the New York Stock
Exchange,  the  market  value  of  such property determined by such methods or
procedures  as  shall  be  established  from  time  to  time by the Committee.
     (l)   "Incentive Stock Option" shall mean an Option granted under Section
6 hereof that is intended to meet the requirements of Section 422A of the Code
or  any  successor  provision  thereto.
     (m)   "Net  After-Tax Amount"  shall mean the net amount of compensation,
assuming for this purpose only that all vested options are exercised upon such
Change  in  Control,  to be received (or deemed to have been received) by such
optionee  in  connection with such Change of Control under any Award Agreement
and under any other plan, arrangement or contract of the company to which such
optionee  is  a  party,  after  giving  effect  to all income and excise taxes
applicable  to  such  payments.
<PAGE>

     (n)   "Non-Employee Director"  shall  have  the meaning set forth in Rule
13e-3(b)(3)(i) promulgated by the Securities and Exchange Commission under the
Exchange  Act.
     (o)   "Nonqualified Stock Option"  shall  mean  an  Option  granted under
Section  6  hereof  that  is  not  intended  to  be an Incentive Stock Option.
     (p)   "Option"  shall  mean  any r ight granted to a Participant allowing
such  Participant  to  purchase Shares at such price or prices and during such
period  or  periods  as  the  Committee  shall  determine.
     (q)   "Participant"  shall  mean  an  Employee  who  is  selected  by the
Committee  to  receive  an  Award  under  the  Plan.
     (r)   "Person"  shall  mean any natural person, corporation, partnership,
association,  joint-stock  company,  trust,  unincorpo-rated  organization, or
government  or  political  subdivision  thereof.
     (s)   "Restricted Stock"  shall  mean  any  share of capital stock of the
Company  issued  with  the restriction that the holder may not sell, transfer,
pledge,  or  assign  such  share  and  with  such  other  restrictions  as the
Committee,  in its sole discretion, may impose (including, without limitation,
any  restriction on the right to vote such shares and the right to receive any
cash  dividends), which restrictions may lapse separately or in combination at
such  time  or  times, in installments or otherwise, as the Committee may deem
appropriate.
     (t)   "Restricted Stock Award"  shall  mean  an Award of Restricted Stock
under  Section  8  hereof.
     (u)   "Shares"  shall  mean the Common Stock and such other securities of
the  Company  as  the  Committee  may  from  time  to  time  determine.
     (v)   "Stock  Appreciation  Right"  shall  mean  any  right  granted to a
Participant  pursuant  to  Section  7  hereof to receive, upon exercise by the
Participant,  the excess of (i) the Fair Market Value of one Share on the date
of  exercise  or,  if the Committee shall so determine in the case of any such
right other than one related to any Incentive Stock Option, at any time during
     a  specified period before the date of exercise over (ii) the grant price
of  the  right  as  specified by the Committee, in its sole discretion, on the
date of grant.  The grant price of a right granted to an individual subject to
Section  16  of the Exchange Act shall not be less than 50% of the Fair Market
Value  of  one  Share  on  the  date  of grant.  Any payment by the Company in
respect  of  such  right  may  be made in cash, Shares, other property, or any
combination  thereof,  as  the  Committee,  in  its  sole  discretion,  shall
determine.
     (w)   "Tandem"  shall  mean  Tandem  Computers  Incorporated.
     (x)   "Tandem Substitute Options" shall mean any Options issued under the
Plan  pursuant  to  that certain Agreement and Plan of Merger dated as of June
22,  1997  among  Tandem,  the  Company  and  Compaq-Project,  Inc.

     SECTION  3.  Administration.  The  Plan  shall  be  administered  by  the
                  --------------
Committee.  The Committee shall have full power and authority, subject to such
orders  or resolutions not inconsistent with the provisions of the Plan as may
from  time  to  time be adopted by the Board, to:  (i) select the Employees of
the Company and its Affiliates to whom Awards may from time to time be granted
hereunder;  (ii)  determine  the type or types of Awards to be granted to each
Participant  hereunder;  (iii) determine the number of Shares to be covered by
each  Award  granted  hereunder;  (iv) determine the terms and conditions, not
inconsistent  with the provisions of the Plan, of any Award granted hereunder;
(v) determine whether, to what extent, and under what circumstances Awards may
be  settled  in  cash, canceled, or suspended; (vi) determine whether, to what
extent,  and  under  what  circumstances Shares and other amounts payable with
respect  to an Award under this Plan shall be deferred either automatically or
at  the  election  of the Participant; (vii) interpret and administer the Plan
and  any instrument or agreement entered into under the Plan; (viii) establish
such  rules  and  regulations  and  appoint  such  agents  as  it  shall  deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination  and take any other action that the Committee deems necessary or
desirable for administration of the Plan.  Decisions of the Committee shall be
final,  conclusive,  and  binding upon all persons, including the Company, any
Participant,  any stockholder of the Company, and any Employee.  A majority of
the  members  of  the Committee may determine its actions and fix the time and
place  of  its  meetings.  The  Committee may delegate its power and authority
under  this Plan to a Chief Executive Officer of the Company who is a director
of  the  Company  with respect to the administration of the Plan for grants to
persons  other  than  executive officers.  In the case of such delegation, the
term  "Committee"  as  used in this Plan shall be deemed to refer to the Chief
Executive  Officer  of  the  Company.
<PAGE>

     SECTION  4.  Shares  Subject  to  the  Plan.
                  ------------------------------

     (a)    Total Number.  Subject  to adjustment as provided in this Section,
            ------------
the  total  number  of  Shares  available  for  grant  under the Plan shall be
268,333,112 Shares.

     (b)    Reduction  of  Shares  Available.
            --------------------------------

          (i)    The  grant of an Option or Restricted Stock Award will reduce
the  Shares available for grant by the number of Shares subject to such Award.

          (ii)   The  grant  of Stock Appreciation Rights related to an Option
will  reduce  the number of Shares available for grant only to the extent that
the  number  of Stock Appreciation Rights granted exceeds the number of Shares
subject  to  the  related  Option.

          (iii)  The  grant  of  Stock  Appreciation  Rights not related to an
Option  will  reduce the number of Shares available for grant by the number of
Stock  Appreciation  Rights  granted.

          (iv)   Any  Shares  issued  by the Company through the assumption or
substitution  of  outstanding grants from an acquired company shall not reduce
the  Shares  available  for  grants  under  the  Plan.

     (c)    Increase  of  Shares  Available.
            -------------------------------

          (i)   The  lapse,  cancellation,  or  other termination of an Option
that  has  not been fully exercised shall increase the available Shares by the
number  of  Shares  that  have  not  been issued upon exercise of such Option;
provided  that  in  the  event  the  cancellation  of  an Option is due to the
exercise of Stock Appreciation Rights related to such Option, the cancellation
of such Option shall only increase the Shares available by the excess, if any,
of  the  number  of  Shares  subject  to  such Option over the number of Stock
Appreciation  Rights  exercised.

          (ii)  The  lapse,  cancellation,  or  other  termination  of  Stock
Appreciation  Rights that have not been exercised shall increase the available
Shares  by  the  number  of  Stock Appreciation Rights so lapsed, canceled, or
terminated;  provided that in the event the cancellation of Stock Appreciation
Rights  is due to the exercise of an Option related to such Stock Appreciation
Rights,  the  lapse,  cancellation, or termination of such Stock Apprecia-tion
Rights  shall only increase the Shares available by the excess, if any, of the
number  of  Stock  Appreciation Rights so lapsed, canceled, or terminated over
the  number  of  Shares  for  which  such  Option  is  exercised.

          (iii) Any  Restricted  Shares  forfeited  by  a  Participant  shall
increase  the  available  Shares  by  the  number  of  Shares  so  forfeited.

     (d)    Other  Adjustments.  The  total  number  of shares of Common Stock
            ------------------
available  for  Awards  under  the  Plan  or which may be allocated to any one
Participant,  the  number  of  shares  of  Common Stock subject to outstanding
Options,  the exercise price for such Options, the number of outstanding Stock
Appreciation  Rights,  the  base  value  of  such  rights,  and  the number of
outstanding  shares of Restricted Stock shall be appropriately adjusted by the
Committee  for  any  increase or decrease in the number of outstand-ing Shares
resulting  from  a  stock  dividend,  subdivision, or combination of Shares or
reclassification,  as  may be necessary to maintain the proportionate interest
of the Award holder.  In the event of a merger or consolidation of the Company
or  a  tender  offer  for  shares of Common Stock, the Committee may make such
adjustments  with  respect to Awards under the Plan and take such other action
as  it  deems  necessary  or appropriate to reflect or in anticipation of such
merger,  consolidation,  or  tender  offer  including, without limitation, the
substitution  of  new  Awards,  the  termination  or adjustment of outstanding
Awards,  the  acceleration  of  Awards,  or  the  removal  of  restrictions on
outstanding Awards.  The payment to the Participant of an amount in cash equal
to  the  excess,  if  any,  of  the  Fair Market Value of the number of shares
subject  to any Award over the aggregate grant price thereof, in consideration
of  the  cancellation  thereof pursuant to this Section 4(d), shall extinguish
any  rights  of  the  Participant  in  connection  with  such  Award.

     SECTION  5.  Eligibility.  Any  Employee  (excluding  any  member  of the
                  -----------
Committee)  shall  be  eligible  to  be  selected  as  a  Participant.

     SECTION  6.  Stock  Options.  Options  may  be  granted  hereunder  to
                  --------------
Participants  either  alone  or  in addition to other Awards granted under the
Plan.  The Company shall deliver an Award Notice to each Participant receiving
an  Option.    Any  such  Option  shall  be subject to the following terms and
conditions  and to such additional terms and conditions, not inconsistent with
the  provisions  of  the  Plan,  as  the  Committee  shall  deem  desirable:
<PAGE>

     (a)    Option  Price.  The  purchase price per Share purchasable under an
            -------------
Option  shall  be  determined  by the Committee in its sole discretion and set
forth in the applicable Award Notice;  provided that such purchase price shall
not be less than (i) 100% of the Fair Market Value of the Share on the date of
the grant of the Option in the case of any Incentive Stock Option, or (ii) 50%
of such Fair Market Value in the case of any Nonqualified Stock Option granted
to  an  individual  subject  to  Section  16  of  the  Exchange  Act.

     (b)    Option  Period.    The  term  of each Option shall be fixed by the
            --------------
Committee in its sole discretion and set forth in the applicable Award Notice;
provided that no Option shall be exercisable after the expiration of ten years
from  the  date  the  Option  is  granted.

     (c)    Exercisability. Options shall be exercisable at such time or times
            --------------
as  determined  by  the  Committee in its sole discretion and set forth in the
applicable  Award Notice. An executive officer of the Company may not exercise
an  Option  for  a  period  of  six  months  from  the  date  of  grant.

     (d)    Method of Exercise. Any Option may be exercised by the Participant
            ------------------
in whole or in part at such time or times and by such methods as the Committee
may  specify.    Unless  otherwise specified in the applicable grant and Award
Notice,  the  Participant may make payment in cash or by certified check, bank
draft,  or  postal or express money order payable to the order of the Company,
or,  with  the  consent  of the Board (or the Committee, if established by the
Board),  in  whole or in part in Common Stock owned by the Optionee, valued at
Fair  Market  Value.

     (e)    Incentive  Stock Options.  In accordance with rules and procedures
            ------------------------
established  by  the Committee, the aggregate Fair Market Value (determined as
of  the  time  of  grant)  of the Shares with respect to which Incentive Stock
Options  held by any Participant become exercisable for the first time by such
Participant  during  any  calendar  year  under  the Plan (and under any other
benefit plans of the Company or of any parent or subsidiary corporation of the
Company) shall not exceed $100,000 or, if different, the maximum limitation in
effect  at  the time of grant under Section 422A of the Code, or any successor
provision,  and  any  regulations  promulgated  thereunder.   The terms of any
Incentive Stock Option granted hereunder shall comply in all respects with the
provisions  of  Section  422A of the Code, or any successor provision, and any
regulations  promulgated  thereunder.

     (f)    Form  of  Settlement.  In  its  sole discretion, the Committee may
            --------------------
provide,  at  the time of grant, that the Shares to be issued upon an Option's
exercise shall be in the form of Restricted Stock or other similar securities.

     (g)    Certificates.  Upon the Company's determination that an Option has
            ------------
been  validly  exercised as to any of the Shares, the Secretary of the Company
shall  issue certificates in the Participant's name for such Shares.  However,
the Company shall not be liable to the Participant for damages relating to any
     delays  in issuing the certificates to him, any loss of the certificates,
or  any  mistakes  or  errors  in  the  issuance of the certificates or in the
certificates  themselves.

     SECTION  7.  Stock Appreciation Rights.  Stock Appreciation Rights may be
                  -------------------------
granted  hereunder to Participants either alone or in addition to other Awards
granted  under  the  Plan  and  may, but need not, relate to a specific Option
granted under Section 6.  The provisions of Stock Appreciation Rights need not
be  the  same  with  respect  to each recipient.  Any Stock Appreciation Right
related  to  a  Nonqualified Stock Option may be granted at the same time such
Option  is  granted or at any time thereafter before exercise or expiration of
such  Option.    Any  Stock  Appreciation  Right related to an Incentive Stock
Option  must  be granted at the same time such Option is granted.  In the case
of  any Stock Appreciation Right related to any Option, the Stock Appreciation
Right  Award  or  applicable  portion thereof shall terminate and no longer be
exercisable  upon  the  termination  or exercise of the related Option, except
that  a  Stock Appreciation Right Award granted with respect to fewer than the
full  number  of Shares covered by a related Option shall not be reduced until
the  number of Shares issued upon exercise or canceled upon termination of the
related  Option  exceeds  the  number  of  shares  not  covered  by  the Stock
Appreciation  Right Award.  Any Option related to any Stock Appreciation Right
shall  no  longer  be exercisable to the extent the related Stock Appreciation
Right  has  been  exer-cised.    No  Stock Appreciation Right unrelated to any
Option  shall  be  exercisable after the expiration of ten years from the date
such  Award  is  granted.    The  Committee  may  impose  such  conditions  or
restrictions  on the exercise of any Stock Appreciation Right as it shall deem
appropriate.    The  Company shall deliver an Award Notice to each Participant
receiving  a  Stock  Appreciation  Right.
<PAGE>

     SECTION  8.  Restricted  Stock.
                  -----------------

     (a)    Issuance.    Restricted  Stock  Awards  may be issued hereunder to
            --------
Participants,  for  no cash consideration or for such nominal consideration as
may be required by applicable law, either alone or in addition to other Awards
granted under the Plan.  The provisions of Restricted Stock Awards need not be
the  same  with respect to each recipient.  The Company shall deliver an Award
Notice  to  each  Participant  receiving  a  Restricted  Stock  Award.

     (b)    Registration.    Any  Restricted  Stock  issued  hereunder  may be
            ------------
evidenced  in  such  manner as the Committee in its sole discretion shall deem
appropriate,  including,  without  limitation,  book-entry  registration  or
issuance  of  a  stock  certificate  or  certificates.  In the event any stock
certificate  is  issued in respect of shares of Restricted Stock awarded under
the  Plan,  such  certificate  shall  be  registered  in  the  name  of  the
Partici-pant,  and  shall  bear  an appropriate legend referring to the terms,
conditions,  and  restrictions  applicable  to such Award.  Promptly after the
lapse  of  restrictions  with  respect  to any shares of Restricted Stock, the
lapse  of such restrictions shall be evidenced in such manner as the Committee
shall  deem  appropriate.

     SECTION  9.  Termination  or  Suspension    of  Employment.
                  ---------------------------------------------

     (a)    Nonqualified  Stock  Options  and  Stock  Appreciation  Rights.
            --------------------------------------------------------------

          (i)    If  the  Participant's  employment  with  the  Company or its
Affiliates  is  terminated  for  any  reason  other than death, disability, or
retirement,  the Participant's right to exercise any Nonqualified Stock Option
or  Stock  Appreciation  Right  shall  terminate,  and  such  Op-tion or Stock
Appreciation  Right  shall expire, on the earlier of (A) the first anniversary
of  such  termina-tion  of  employment  or  (B)  the date such Option or Stock
Appreciation  Right  would have expired had it not been for the termination of
employment.    The Participant shall have the right to exercise such Option or
Stock  Appreciation  Right  prior  to  such  expiration  to  the extent it was
exercisable  at the date of such term-ination of employment and shall not have
been  exercised.

          (ii)   If  the  Participant's  employment  with  the  Company or its
Affiliates  is  terminated  by reason of death, disability, or retirement, the
Participant or his successor (if employment is terminated by death) shall have
the  right  to  exercise  any  Nonqualified Stock Option or Stock Appreciation
Right  to  the  extent  it  was exercisable at the date of such termination of
employment  and  shall  not  have  been  exercised, but in no event shall such
option be exercisable later than the date the Option would have expired had it
not  been  for  the  termination  of  such  employment.

          (iii)  Notwithstanding  the  foregoing,  the  Committee  may, in its
discretion,  provide (a) that an Option granted to a Participant may terminate
at a date earlier than that set forth above, and (b) that an Option granted to
a Participant not subject to Section 16 of the Exchange Act may terminate at a
date  later  than that set forth above, provided such date shall not be beyond
the  date the Option would have expired had it not been for the termination of
the  Participant's  employment.

          (iv)   Any  time  spent  by  a  Participant  in the status of "leave
without pay"  shall  be  disregarded for purposes of determining the extent to
which an Option  or  any  portion  thereof  has  vested.

     (b)    Incentive  Stock  Options.  Except as  otherwise determined by the
            -------------------------
Committee  at  the  time  of grant, if  the Participant's employ-ment with the
Company  is terminated for any reason, the Participant shall have the right to
exercise  any  Incentive Stock Option and any related Stock Appreciation Right
during  the  90 days after such termination of employment to the extent it was
exercisable  at  the  date of such termination, but in no event later than the
date  the  Option  would  have expired had it not been for the termina-tion of
such  employment.  If the Participant does not exercise such Option or related
Stock  Appreciation  Right  to  the  full  extent  permitted  by the preceding
sentence,  the remaining exercisable portion of such Option automatically will
be  deemed  a Nonqualified Stock Option, and such Option and the related Stock
Appreciation  Right will be exercisable during the period set forth in Section
9(a)  of  the  Plan,  provided that in the event that employment is terminated
because of death or the Participant dies in such 90-day period the Option will
continue to be an Incentive Stock Option to the extent provided by Section 421
or  Section  422A of the Code, or any successor provision, and any regulations
promulgated  thereunder.

     (c)    Restricted Stock.  Except as otherwise determined by the Committee
            ----------------
at the time of grant, upon termination of employment for any reason during the
restriction  period,  all  shares  of  Restricted  Stock  still  subject  to
restriction  shall  be  forfeited  by  the  Participant  and reacquired by the
Company  at  the  price  (if  any) paid by the Participant for such Restricted
Stock;  provided  that  in  the event of a Participant's retirement, permanent
disability, or death, or in cases of special circumstances, the Committee may,
in  its  sole  discretion,  when  it  finds that a waiver would be in the best
interests  of  the  Company,  waive, in whole or in part, any or all remaining
restrictions  with  respect  to such Participant's shares of Restricted Stock.
<PAGE>

     (d)    Disability  and Retirement.  The term "disability" means total and
            --------------------------
permanent  disability.    The  meaning  of  the  terms  "total  and  permanent
disability"  and  "retirement"  shall  be  determined  by  the  Committee.

     (e)    Acceleration of Exercisability.  Nothing contained herein shall in
            -------------------------------
any  way  limit the authority of the Committee in its sole discretion to cause
any  outstanding  Option  or  Stock  Appreciation  Right to become immediately
exercisable  when  it  finds  that  such  acceleration  would  be  in the best
interests  of  the  Company.

     SECTION 10.  Change  in  Control.
                  -------------------

     (a)    Immediate Vesting. Notwithstanding any other provision of the Plan
            -----------------
to  the  contrary, upon a Change in Control, as defined below, all outstanding
Awards  shall  vest,  become  immediately  exercisable or payable, or have all
restrictions lifted as may apply to the type of Award; provided, however, that
unless  otherwise  determined  by  the  Committee  at  the  time  of  award or
thereafter,  if  it is determined that the Net After-Tax Amount to be realized
by  any  optionee, taking into account the accelerated vesting provided for by
this  paragraph  10(a)  as  well  as all other payments to be received by such
optionee in connection with such Change in Control, would be higher if options
did  not  vest  in accordance with the foregoing paragraph 10(a), then, and to
such  extent,  the  options  shall not vest.  The determination of whether any
such  option  should  not  vest  shall  be  made  by  a  nationally recognized
accounting firm selected by the Company, which shall be instructed to consider
that (i) stock options shall be vested in the order in which they were granted
and  within  each grant in the order in which they would otherwise have vested
and  (ii)  unless and to the extent any other plan, arrangement or contract of
the  Company  pursuant to which any such payment is to be received provides to
the  contrary,  any other payment contingent upon a Change of Control shall be
deemed  to  have  occurred  after  any  acceleration  of options.  Further, no
outstanding  Stock Appreciation Right may be terminated, amended, or suspended
upon  or  after  a  Change  in  Control.

     (b)    Change  in Control.  A "Change in Control" shall be deemed to have
            ------------------
occurred  if:    (i)   any "person" as such term is used in Sections 13(d) and
14(d)  of  the  Exchange  Act  (other  than  the Company, any trustee or other
fiduciary  holding  securities under any employee benefit plan of the Company,
or  any  company  owned,  directly  or  indirectly, by the stockholders of the
Company  in  substantially the same proportions as their ownership of Stock of
the  Company),  is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securi-ties of the Company
representing  30%  or  more of the combined voting power of the Company's then
outstanding  securities;  (ii) during any period of two consecutive years (not
including  any  period  prior to the adoption of the Plan), individuals who at
the  beginning  of  such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into an
agree-ment  with the Company to effect a transac-tion described in clause (i),
(iii), or (iv) of this Section 10(b)) whose election by the Board of Directors
or  nomination  for  election  by the Company's stockholders was approved by a
vote  of  at least two-thirds of the directors then still in office who either
were  directors  at  the beginning of the two-year period or whose election or
nomination  for  election was previously so approved,  cease for any reason to
constitute  at  least  a  majority  of  the  Board  of  Directors;  (iii)  the
stockholders  of  the Company approve a merger or consolidation of the Company
with  any other corpora-tion, other than a merger or consolidation which would
result  in the voting securities of the Company out-standing immediately prior
thereto  continuing  to represent (either by remaining outstanding or by being
converted  into  voting  securi-ties of the surviving entity) more than 50% of
the  combined  voting  power  of  the voting securities of the Company or such
surviving  entity  outstanding immediately after such merger or consolidation;
provided,  however,  that  a  merger  or consolidation effected to implement a
recapitalization  of  the  Company (or similar transaction) in which no person
acquires  more  than  30%  of  the combined voting power of the Company's then
outstanding  securities  shall  not  constitute  a  Change  in  Control of the
Company;  or   (iv) the stockholders of the Company approve a plan of complete
liquidation  of the Company or an agreement for the sale or disposition by the
Company  of  all  or  sub-stantially  all  of  the  Company's  assets.

     SECTION 11.  Amendments  and  Termination.
                  ----------------------------

     (a)    The  Board  may  amend,  alter,  or  discontinue  the Plan, but no
amendment,  alteration, or discontinuation shall be made that would impair the
rights  of  a  Participant  under  an  Award  theretofore granted, without the
Participant's consent, or that without the approval of the stockholders would:

     (i)    except  as  is  provided in Section 4(b) of the Plan, increase the
total  number  of  Shares  reserved  for  the  purpose  of  the  Plan;  or
<PAGE>

     (ii)   change the employees or class of employees eligible to participate
in  the  Plan.

     (b)    The  Committee  may  amend  the  terms  of  any  Award theretofore
granted,  prospectively  or  retroactively, but no such amendment shall impair
the  rights  of  any  Participant without his consent.  The Committee may also
substitute  new  Awards  for  previously  granted  Awards,  including  without
limitation  previously  granted  Options  and Stock Appreciation Rights having
higher  option  prices.

     (c)    Employee Status Change to Part-Time.  At  such time as a full-time
            -----------------------------------
employee becomes a part-time employee of the Company, on the next vesting date
following  such  status change, all Awards previously granted to such employee
will  be automatically amended to reflect the vesting of all such Awards to be
reduced  by one-half with respect to any portion of the Awards not yet vested.

     SECTION 12.  General  Provisions.
                  -------------------

     (a)    Nontransferability.  No  Award  shall  be  assigned,  alienated,
            ------------------
pledged,  attached,  sold  or  otherwise  transferred  or  encumbered  by  a
Participant, except by will or the laws of descent and distribution, provided,
however, that an Award  may  be  transferable,  to the extent set forth in the
applicable  Award  Notice  and  in  accordance  with procedures adopted by the
Committee,  (i)  if  such Award Notice provisions do not disqualify such Award
for  exemption  under  Rule  16b-3  or  (ii)  if such Award is not intended to
qualify  for  exemption  under  such  rule.

     (b)    No  Claims.  No Employee or Participant shall have any claim to be
            ----------
granted  any Award under the Plan and there is no obligation for uniformity of
treatment  of  Employees  or  Participants  under  the  Plan.

     (c)    Notices.  Any  notice  necessary  under  this  Plan  or  any Award
            -------
hereunder  shall  be  addressed to the Company in care of its Secretary at the
principal  executive  office  of  the  Company  in  Houston,  Texas and to the
Participant  at  the address appearing in the personnel records of the Company
for  such Participant or to either party at such other address as either party
hereto may hereafter designate in writing to the other.  Any such notice shall
be  deemed  effective  upon  receipt  thereof  by  the  addressee.

     (d)    Unusual  Events.  The  Committee  shall  be  authorized  to  make
            ---------------
adjustments  in  the terms and conditions of Awards in recog-nition of unusual
or  nonrecurring  events  affecting the Company or its financial statements or
changes  in  applicable  laws,  regula-tions,  or  accounting principles.  The
Committee  may  correct  any  defect,  supply  any  omission, or reconcile any
inconsistency  in  the  Plan  or  any Award in the manner and to the extent it
shall  deem desirable to carry it into effect.  In the event the Company shall
assume  outstanding employee benefit awards or the right or obligation to make
such  future  awards in connection with the acquisition of another corporation
or  business  entity,  the  Committee  may,  in  its  discretion,  make  such
adjustments  in  the  terms  of  Awards  under  the  Plan  as  it  shall  deem
appropriate.

     (e)    Compliance  Requirements.  All  certificates  for Shares delivered
            ------------------------
under  the  Plan pursuant to any Award shall be subject to such stock-transfer
orders  and  other  restrictions as the Committee may deem advisable under the
rules,  regulations,  and  other  requirements  of the Securities and Exchange
Commission,  any stock exchange upon which the Shares are then listed, and any
applicable  federal  or  state  securities  law, and the Committee may cause a
legend  or  legends  to  be  put  on any such certificates to make appropriate
reference to such restrictions.  The Company shall not be required to issue or
deliver  any  Shares  under  the  Plan  prior  (i)  to  the  completion of any
registration  or  qualification of such Shares under any federal or state law,
or  under  any  ruling  or  regulation  of  any  governmental body or national
securities exchange that the Committee in its sole discretion shall deem to be
necessary  or  appropriate  and  (ii)  to the Participant's entering into such
written  representations,  warranties,  and  agreements  as  the  Company  may
reasonably  request in order to comply with applicable securities laws or with
this  Plan.

     (f)    Dividends.  Subject  to the provisions of this Plan, the recipient
            ---------
of an  Award  may,  if so determined by the Committee at the time of grant, be
entitled  to receive, currently or on a deferred basis, interest or dividends,
or  interest  or  dividend  equivalents,  with respect to the number of shares
covered by the Award, as determined at the time of the Award by the Committee,
in  its  sole  discretion, and the Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Shares or otherwise
reinvested.

     (g)    No  Other  Consideration.  Except  as  otherwise  required  in any
            ------------------------
applicable  grant  and Award Notice or by the terms of the Plan, recipients of
Awards  under  the  Plan  shall not be required to make any payment or provide
consideration  other  than  the  rendering  of  services.
<PAGE>

     (h)    Withholding.  The Company shall be authorized to withhold from any
            -----------
Award  granted  or  payment due under the Plan the amount of withholding taxes
due  in respect of an Award or payment hereunder and to take such other action
as  may  be  necessary  in  the  opinion  of the Company to satisfy any of its
obligations  with  respect  to  the  payment  of  such  taxes.

     (i)    Other Plans.  Nothing  contained  in  this  Plan shall prevent the
            -----------
Board from  adopting other or additional compensation arrangements, subject to
stockholder  approval,  if such approval is required by applicable law, or the
rules of any stock exchange on which the Common Stock is then listed; and such
arrangements may be either generally applicable or applicable only in specific
cases.

     (j)    Governing Law.  The validity, construction, and effect of the Plan
            -------------
and  any  rules  and  regulations relating to the Plan and any Award hereunder
shall  be  determined in accordance with the laws of the State of Delaware and
applicable  federal  law.

     (k)    Conformity With Law.  If  any provision of this Plan is or becomes
            -------------------
or is  deemed  invalid, illegal or unenforceable in any jurisdiction, or would
disqualify  the  Plan  or  any  Award  under  any law deemed applicable by the
Committee,  such  provision  shall  be  construed  or  deemed  amended in such
jurisdiction  to  conform  to  applicable laws or if it cannot be construed or
deemed  amended  without,  in  the  determination of the Committee, materially
altering the intent of the Plan, it shall be stricken and the remainder of the
Plan  shall  remain  in  full  force  and  effect.

     SECTION 13.  Effective Date of Plan.  The  Plan  shall be effective as of
                  ----------------------
January  18, 1989 (the "Effective Date"), subject to approval by the Company's
stockholders  within  one  year  thereafter. Awards may be granted at any time
after  the  Effective  Date and prior to termination of the Plan by the Board,
except  that  no  Incentive Stock Option shall be granted pursuant to the Plan
after  10 years from the Effective Date, but any Award theretofore granted may
extend  beyond  that  date.  The Plan will expire when no Shares are available
for  issuance.

     SECTION 14.  Tandem Substitute Options.  Tandem  Substitute Options shall
                  -------------------------
be governed by the terms of the Plan and the related option conversion notice,
except  that,  notwithstanding  any provision of the Plan or option conversion
notice  to  the  contrary,  the  terms  and conditions set forth on Appendix A
hereto  shall  govern  such  options to the extent set forth on such Appendix.
<PAGE>

                   APPENDIX A FOR TANDEM SUBSTITUTE OPTIONS
                   ----------------------------------------

The term "Options" as used in this Appendix A means Tandem Substitute Options.
Exercisability:  Generally, Options may be exercised beginning six months from
the  vesting  date  or,  with respect to certain Options, beginning six months
from  the original grant date.  Optionees are not entitled to exercise Options
if  employment  with  the  Company  is terminated prior to six months from the
vesting date or, with respect to certain Options, prior to six months from the
original  grant  date.    The original grant date and the vesting date are set
forth  on  the  related  option  conversion  notice.

Vesting:  Vesting stops when the optionee's employment with the Company or any
of  its Affiliates terminates.  The vesting schedule for each Option is as set
forth  on  the  related  Option  Conversion  Notice.

Death:    If  an  optionee  dies  while  an  employee  of  the  Company or its
Affiliates,  Options  become  fully vested regardless of length of service and
expire  one  year  after  the  date  of  death.

Disability:    If  an  optionee's  employment  terminates because of permanent
disability,  Options  (i)  become  20%  vested,  if  more  than the percentage
actually  vested  on  the  termination  date and (ii) expire 90 days after the
termination  date.

Termination:    If  employment with the Company or its Affiliates ends for any
reason  other  than  death or permanent disability, Options expire on the 30th
day  after  the  termination  date.

Leave  of Absence:  Vesting during an approved leave of absence is governed by
the  applicable leave of absence policy in effect at the time an optionee goes
on  leave.

Unvested  Shares:    Six months after the original grant date (as set forth on
the  related option conversion notice), optionees can purchase unvested option
shares.  Unvested option shares may not be sold or otherwise transferred until
they  become  vested.    The Company may buy back unvested shares at the price
paid  by  the  optionee  for  such shares upon optionee's termination from the
Company  or  its  Affiliates  (except death).  In such event, the Company must
give  notice  to  the  optionee  within  60  days  after the termination date,
provided,  however,  that  upon  termination  due to permanent disability, the
Company  must provide notice within 60 days after the last date upon which the
optionee's option is exercisable.  Optionees must deliver the number of shares
requested  in  such notice to the Company within 60 days after receipt of such
notice,  with  the  stock certificates fully endorsed or accompanied by a duly
executed stock power.  Certificates for unvested shares shall contain a legend
referring  to  the  Company's  right to repurchase.  As the optionee's vesting
percentage  increases, the optionee may request, at reasonable intervals, that
the  Company exchange those legended certificates for shares which have vested
for  certificates for shares without legends.  No certificates shall be issued
for  partial  shares.

Form  of  Payment:    A  notice of exercise must include payment of the option
price  for the shares being purchased.  Payment may be made by:  (i) cashier's
check or a money order, (ii) irrevocable directions on a Company approved form
to  a securities broker approved by the Company to sell the shares and deliver
all  or a portion of the sale proceeds to the Company in payment of the option
price,  or (iii) certificates for Common Stock, along with any forms needed to
transfer  the  shares to the Company.  The fair market value of the shares, on
the effective date of the Option exercise will be applied to the Option price.
Transfers:    Options cannot be assigned or transferred, except by will or the
laws  of  descent  and  distribution.

Individual Provisions:  To the extent that an optionee's option agreement with
Tandem  provides  terms  and  conditions  contrary  to  those set forth above,
notwithstanding  any other provision in the Plan, the option conversion notice
or  this  Appendix  A to the contrary, the terms and conditions of such option
agreement  shall  govern  the  related  Tandem  Substitute Option (except with
respect  to the vesting schedule, trading restrictions and notice of exercise,
in  which  case  the  terms  and  conditions  contained  in the related option
conversion  notice  shall  govern).
<PAGE>