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                                                                    EXHIBIT 10.1

                             PIONEER COMPANIES, INC.

                         2001 EMPLOYEE STOCK OPTION PLAN

SECTION 1. Purpose of the Plan.

      The Pioneer Companies, Inc. 2001 Employee Stock Option Plan (the "Plan")
is intended to promote the interests of Pioneer Companies, Inc., a Delaware
corporation (the "Company"), by encouraging key personnel of the Company and its
affiliates to acquire or increase their equity interest in the Company and to
provide a means whereby they may develop a sense of proprietorship and personal
involvement in the development and financial success of the Company, and to
encourage them to remain with and devote their best efforts to the business of
the Company, thereby advancing the interests of the Company and its
stockholders. The Plan is also intended to enhance the ability of the Company,
its subsidiaries and affiliated entities to attract and retain the services of
individuals who are essential for the growth and profitability of the Company.
Options granted under the Plan may either be "incentive stock options" intended
to qualify as such under the Internal Revenue Code, or "nonqualified stock
options," which are not intended to so qualify.

SECTION 2. Definitions.

      As used in the Plan, the following terms shall have the meanings set forth
below:

      "Board" shall mean the Board of Directors of the Company.

      "Cause" shall have the meaning set forth in Section 7(c) hereof.

      "Change in Control" shall be deemed to occur if, subsequent to the
effective date of this Plan, (i) any "person" (as that term is used in Sections
13 and 14(d) (2) of the Exchange Act) is or becomes the beneficial owner (as
that term is used in Section 13 (d) of the Exchange Act), directly or
indirectly, of 30% or more of either the outstanding shares of Common Stock or
the combined voting power of the Company's then outstanding voting securities
entitled to vote generally, (ii) during any period of two consecutive years,
individuals who constitute the Board at the beginning of such period cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new director was
approved by a vote of at least three-quarters of the directors then still in
office who were directors at the beginning of the period or (iii) the Company
undergoes a liquidation or dissolution or a sale of all or substantially all of
the assets of the Company. Any merger, consolidation or corporate reorganization
in which the owners of the combined voting power of the Company's then
outstanding securities entitled to vote generally prior to said combination, own
50% or more of the resulting entity's outstanding securities entitled to vote
generally shall not, by itself, be considered a Change in Control.
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      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations thereunder.

      "Committee" shall mean the Compensation Committee of the Board or any
other committee of the Board designated from time to time by the Board to
administer the Plan.

      "Common Stock" shall mean the common stock of the Company, $0.01 par
value.

      "Eligible Person" means any person who is an employee, officer, director,
consultant or advisor of the Company or any affiliate, or any person who is
determined by the Committee to be a prospective employee, officer, director,
consultant or advisor of the Company or any affiliate.

      "Employee" shall mean any person who is an employee of the Company or any
parent or subsidiary thereof within the meaning of Treasury Regulations Section
1.421-7(h).

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

      "Fair Market Value" of a Common Stock as of a given date shall mean the
per share value of a share of Common Stock as determined by the Committee in
good faith taking into consideration all factors that it deems appropriate,
including, without limitation, recent sales of shares of Common Stock in
transactions negotiated at arms' length; provided, however, that in the event
that the Common Stock becomes listed or traded on a securities exchange or
market, the Fair Market Value shall be the closing sales price of the Common
Stock on the applicable exchange or market on the trading day immediately
preceding the date as of which Fair Market Value is to be determined or, in the
absence of any reported sales of Common Stock on such date, on the first
preceding date on which any such sale shall have been reported.

      "Incentive Stock Option" or "ISO" shall mean a stock option granted under
Section 6(a) of the Plan that is intended to qualify as an "incentive stock
option" under Section 422 of the Code or any successor provision thereto.

      "Non-Qualified Stock Option" or "NSO" shall mean a stock option granted
under Section 6(a) of the Plan that is not an Incentive Stock Option.

      "Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.

      "Optionee" shall mean an individual to whom an Option has been granted,
which Option has not expired, under the Plan.

      "Option Agreement" shall mean an agreement between the Company and an
Optionee under which the Optionee may purchase Common Stock under the Plan.

      "Option Price" shall mean the price at which each share of Common Stock
subject to an Option may be purchased, determined in accordance with Section
6(a) hereof.


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      "Person" shall mean individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.

      "Rule 16b-3" shall mean Rule 16b-3 promulgated by the SEC under the
Exchange Act, or any successor rule or regulation as in effect from time to
time.

      "SEC" shall mean the Securities and Exchange Commission, or any successor
thereto.

      "Subsidiary" shall mean a subsidiary corporation of the Company, within
the meaning of Section 424(f) of the Code.

SECTION 3. Administration.

      The Plan shall be administered by the Committee comprised of three
directors selected by the Board. Solely to the extent deemed necessary or
advisable by the Board, each Committee member shall meet the definition of a
"nonemployee director" for purposes of Rule 16b-3 and of an "outside director"
under section 162(m) of the Code. A majority of the Committee shall constitute a
quorum, and the acts of the members of the Committee who are present at any
meeting thereof at which a quorum is present, or acts that are unanimously
approved by the members of the Committee in writing, shall be the acts of the
Committee. The Board shall also have the authority to exercise the powers and
duties of the Committee under the Plan, and/or to delegate to one or more
officers of the Company its authority under the Plan as and to the extent
permitted under Section 157 of the Delaware General Corporation Law or other
applicable law. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to: (i) designate
the Eligible Persons to whom an Option shall be granted; (ii) the time or times
at which an Option shall be granted, (iii) determine the type of Option to be
granted; (iv) determine the number of shares of Common Stock subject to each
Option; (v) determine the Option Price and the time or times when each Option
shall become exercisable and the duration of the exercise period; (vi) determine
the terms and conditions of any Option; (vii) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash, shares
of Common Stock, other securities, other Options or other property, or canceled,
forfeited, or suspended and the method or methods by which an Option may be
settled, exercised, canceled, forfeited, or suspended; (viii) interpret and
administer the Plan and any instrument or agreement relating to an Option made
under the Plan; (ix) establish, amend, suspend, rescind or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the proper
administration of the Plan. All such actions and determinations shall be within
the sole discretion of the Committee and shall be final, conclusive, and binding
upon all Persons.


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SECTION 4. Shares Available for Options.

      (a)   Shares Available: Subject to adjustment as provided in Section 4(c),
            the maximum aggregate number of shares of Common Stock which may be
            issued and sold under the Plan shall be 1,000,000 shares. The number
            of shares of Common Stock reserved for issuance under the Plan shall
            at no time be less than the maximum number of shares which may be
            purchased at any time pursuant to outstanding Options. Shares of
            Common Stock covered by an Option that shall have been exercised
            shall not again be available for an Option grant. If any Option
            shall terminate or expire for any reason without being wholly
            exercised, the number of shares to which such forfeited, terminated
            or expired Option relates shall again be available for grant
            hereunder.

      (b)   Sources of Shares Deliverable Under Options. Shares of Common Stock
            issued and sold under the Plan may consist, in whole or in part, of
            authorized and unissued shares or treasury shares.

      (c)   Adjustments. In the event of a dividend or other distribution
            (whether in the form of cash, securities, or other property),
            recapitalization, stock split, reverse stock split, reorganization,
            merger, consolidation, split-up, spin-off, combination, repurchase,
            or exchange of shares of Common Stock or other securities of the
            Company, issuance of warrants or other rights to purchase shares of
            Common Stock or other securities of the Company, or in the case of
            any other transaction described in section 424(a) of the Code, the
            Committee shall, in such manner as it may deem equitable and
            appropriate, change any or all of (i) the maximum aggregate number
            of shares that may be issued and sold under Section 4(a) hereof,
            (ii) the maximum aggregate number of shares that may be subject to
            Options granted to any one individual under Section 6(a)(iii)
            hereof, (iii) the number and type of shares subject to outstanding
            Options and/or the Option Price; provided, in each case, that with
            respect to Incentive Stock Options, no such adjustment shall be
            authorized to the extent that such authority would cause a violation
            of Section 422(b)(1) of the Code, or any successor provision
            thereto; and provided, further, that the number of shares subject to
            any Option denominated in shares of Common Stock shall always be a
            whole number. In the event of any merger, consolidation,
            reorganization or similar corporate event in which shares of the
            Common Stock are to be exchanged for payment of cash (the "Cash
            Consideration"), the Committee may, in its discretion, (i) make
            equitable adjustments as provided above or (ii) cancel any
            outstanding Option in exchange for payment in cash of an amount
            equal to the excess (if any) of (A) the Cash Consideration per share
            multiplied by the shares underlying such Option over (B) the Option
            Price for such shares.

SECTION 5. Eligibility.

      All Eligible Persons are eligible to receive a grant of an Option under
the Plan.


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SECTION 6. Options.

      (a)   Options. Subject to the provisions of the Plan, the Committee's
            authority hereunder shall include the following terms and conditions
            and such additional terms and conditions as the Committee shall
            determine that are not inconsistent with the provisions of the Plan.

            (i)   Option Grant. The Committee shall, in its sole discretion,
                  determine and designate from time to time those Eligible
                  Persons who are to be granted an Option. The grant of an
                  Option shall first be effective upon the date it is approved
                  by the Committee, except to the extent the Committee shall
                  specify a later date upon which the grant of an Option shall
                  first be effective. The Company and the Optionee shall execute
                  an Option Agreement which shall set forth such terms and
                  conditions of the Option as may be determined by the Committee
                  to be consistent with the Plan, and which may include
                  additional provisions and restrictions that are not
                  inconsistent with the Plan. Notwithstanding the foregoing,
                  Incentive Stock Options may only be granted to Eligible
                  Persons who are Employees.

            (ii)  Maximum Limit. Notwithstanding anything elsewhere in the Plan
                  to the contrary, the maximum number of shares of Common Stock
                  that may be subject to Options granted to any Optionee during
                  any one calendar year shall be 500,000 shares, subject to
                  adjustments as provided in Section 4(c) hereof.

            (iii) Option Price. The Option Price in respect of an Option shall
                  be determined by the Committee; provided, however, that in the
                  case of an Incentive Stock Option, the Option Price shall not
                  be less than 100 percent of the Fair Market Value of a share
                  of Common Stock on the date of grant.

            (iv)  Vesting. An Option shall vest and become exercisable in the
                  manner and subject to such conditions provided by the
                  Committee and set forth in the Option Agreement. The
                  Committee, in its sole discretion, may accelerate the
                  exercisability of any Option at anytime. The period during
                  which a vested Option may be exercised shall be determined by
                  the Committee, subject to such limitations as may apply upon
                  the termination of an Optionee's employment or other service
                  or as otherwise specified by the Committee in the Option
                  Agreement.

            (v)   Time and Method of Exercise. The Committee shall determine the
                  time or times at which an Option may be exercised in whole or
                  in part, and the method or methods by which, and the form or
                  forms (which may include, without limitation, cash, check
                  acceptable to the Company, shares of Common Stock already
                  owned for more than six months, a


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                  "cashless-broker" exercise (through procedures approved by the
                  Company), other securities or other property, or any
                  combination thereof) in which payment of the Option Price may
                  be made or deemed to have been made.

      (b)   Substitution, Cancellation and Rescission of Options.

            (i)   Options may be granted from time to time in substitution for
                  similar awards held by employees of other corporations who
                  become Eligible Persons as the result of a merger or
                  consolidation of the employing corporation with the Company or
                  any subsidiary, or the acquisition by the Company or any
                  subsidiary of the assets of the employing corporation, or the
                  acquisition by the Company or any subsidiary or an affiliate
                  of stock of the employing corporation.

            (ii)  The Committee shall have the authority to effect, at any time
                  and from time to time, with the consent of the affected
                  Optionees, the cancellation of any or all outstanding Options
                  and the grant in substitution therefor of new Options covering
                  the same or different numbers of shares of Common Stock and
                  having an Option Price which may be the same as or different
                  than the Option Price of the cancelled Options.

            (iii) The Committee may provide in an Option Agreement that the
                  Company may cancel, suspend or otherwise limit any Options if
                  the Optionee engages in activity that is detrimental to the
                  Company.

      (c)   General.

            (i)   Options May Be Granted Separately or Together. Options may, in
                  the discretion of the Committee, be granted either alone or in
                  addition to any other Option granted under the Plan or any
                  award granted under any other plan of the Company or any
                  affiliate.

            (ii)  Limits on Transfer of Options.

                  (A) Except as provided in (C) below, each Option, and each
                  right under any Option, shall be exercisable only by the
                  Optionee during the Optionee's lifetime, or, if permissible
                  under applicable law and to the extent permitted by the
                  Committee, by the Optionee's guardian or legal representative.

                  (B) Except as provided in (C) below, no Option and no right
                  thereunder may be assigned, alienated, pledged, attached, sold
                  or otherwise transferred or encumbered by an Optionee
                  otherwise than by will or by the laws of descent and
                  distribution, and any such purported assignment, alienation,
                  pledge, attachment, sale, transfer or


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                  encumbrance shall be void and unenforceable against the
                  Company or any affiliate.

                  (C) Notwithstanding anything in the Plan to the contrary and
                  to the extent specifically provided by the Committee with
                  respect to a grant, a Nonqualified Stock Option may be
                  transferred to immediate family members or related family
                  trusts, limited partnerships or similar entities or Persons or
                  on such terms and conditions as the Committee may establish
                  from time to time.

            (iii) Term of Options. The term of each Option shall be for such
                  period as may be determined by the Committee; provided, that
                  in no event shall such term of any Option exceed a period of
                  10 years from the date of its grant.

            (iv)  Delivery of Shares or other Securities and Payment of
                  Consideration. No shares of Common Stock shall be delivered
                  pursuant to any Option until payment in full of any amount
                  required to be paid pursuant to the Plan or the applicable
                  Option Agreement (including, without limitation, any Option
                  Price, tax payment or tax withholding) is received by the
                  Company. Such payment may be made by such method or methods
                  and in such form or forms as the Committee shall determine,
                  including, without limitation, cash, shares of Common Stock,
                  other securities, other Options or other property, withholding
                  of shares of Common Stock, cashless exercise with simultaneous
                  sale, or any combination thereof; provided that the combined
                  value, as determined by the Committee, of all cash and cash
                  equivalents and the fair market value of any such shares or
                  other property so tendered to the Company, as of the date of
                  such tender, is at least equal to the full amount required to
                  be paid pursuant to the Plan or the applicable Option
                  Agreement to the Company.

      (d)   Additional Rules for ISOs.

            (i)   Annual Limits. No Incentive Stock Option shall be granted to
                  an Optionee as a result of which the aggregate Fair Market
                  Value (determined as of the date of grant) of the stock with
                  respect to which "incentive stock options" are exercisable for
                  the first time in any calendar year under the Plan and any
                  other stock option plans of the Company, any Subsidiary, or
                  any parent corporation, would exceed $100,000, determined in
                  accordance with section 422(d) of the Code. This limitation
                  shall be applied by taking options into account in the order
                  in which granted. Any Option intended to be an Incentive Stock
                  Option that is granted in excess of such limit shall instead
                  be treated as a Nonqualified Stock Option.


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            (ii)  Termination of Employment. An Incentive Stock Option may
                  provide that such Option may be exercised not later than three
                  months following termination of employment of the Optionee
                  with the Company and all Subsidiaries, subject to special
                  rules relating to death and disability, as and to the extent
                  determined by the Committee to be consistent with the
                  requirements of section 422 of the Code and Treasury
                  Regulations thereunder.

            (iii) Other Terms and Conditions. Any Incentive Stock Option granted
                  hereunder shall contain such additional terms and conditions,
                  not inconsistent with the terms of this Plan, as are deemed
                  necessary or desirable by the Committee, which terms, together
                  with the terms of this Plan, shall be intended and interpreted
                  to cause such Incentive Stock Option to qualify as an
                  "incentive stock option" under section 422 of the Code. Such
                  terms shall include, if applicable, limitations on Incentive
                  Stock Options granted to ten-percent owners of the Company as
                  determined under sections 422(b)(6) and 424(d) of the Code. An
                  Option Agreement for an Incentive Stock Option shall provide
                  that such Option shall be treated as a Nonqualified Stock
                  Option to the extent that certain requirements applicable to
                  "incentive stock options" under the Code shall not be
                  satisfied.

            (iv)  Disqualifying Dispositions. If shares of Common Stock acquired
                  by exercise of an Incentive Stock Option are disposed of
                  within two years following the Date of Grant or one year
                  following the transfer of such shares to the Optionee upon
                  exercise, the Optionee shall, promptly following such
                  disposition, notify the Company in writing of the date and
                  terms of such disposition and provide such other information
                  regarding the disposition as the Committee may reasonably
                  require.

SECTION 7. Termination of Service

      (a)   Death. Unless otherwise provided by the Committee and set forth in
            the Option Agreement, if an Optionee shall die at any time after the
            date of grant and while he is an Eligible Person, the executor or
            administrator of the estate of the decedent, or the person or
            persons to whom an Option shall have been validly transferred in
            accordance with Section 6(c) hereof pursuant to will or the laws of
            descent and distribution, shall have the right, during the period
            ending one year after the date of the Optionee's death (subject to
            the term of the Option), to exercise the Optionee's Option to the
            extent that it was exercisable at the date of the Optionee's death
            and shall not have been previously exercised.

      (b)   Disability. Unless otherwise provided by the Committee and set forth
            in the Option Agreement, if an Optionee's employment or other
            service with the Company or any Subsidiary shall be terminated as a
            result of his permanent


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            and total disability (within the meaning of section 22(e)(3) of the
            Code) at any time after the date of grant and while he is an
            Eligible Person, the Optionee (or in the case of an Optionee who is
            legally incapacitated, his guardian or legal representative) shall
            have the right, during a period ending one year after the date of
            his disability (subject to the term of the Option), to exercise an
            Option to the extent that it was exercisable at the date of such
            termination of employment or other service and shall not have been
            exercised.

      (c)   Termination for Cause. Unless otherwise provided by the Committee
            and set forth in the Option Agreement, if an Optionee's employment
            or other service with the Company or any Subsidiary shall be
            terminated for Cause, the Optionee's right to exercise any
            unexercised portion of an Option shall immediately terminate and all
            rights thereunder shall cease. Unless otherwise provided by the
            Committee and set forth in the Option Agreement, termination for
            "Cause" shall mean (i) the failure by the Optionee to substantially
            perform his duties (other than any such failure resulting from his
            death or disability); (ii) conduct which is detrimental to the
            Company's reputation, goodwill or business operations; (iii) the
            negligent performance by the Optionee of his duties to the Company;
            (iv) willful fraud or dishonesty in connection with the Optionee's
            performance of duties hereunder; or (v) the conviction of the
            Optionee by a court of competent jurisdiction of a felony or a crime
            involving moral turpitude; provided, however, that in the event the
            Optionee shall be a party to any employment agreement with the
            Company that provides for a definition of "Cause" that is different
            from the foregoing, then such definition in such employment
            agreement shall govern with respect to the Optionee for the purposes
            of this Plan. The Committee shall have the power, exercisable in a
            reasonable manner, to determine whether the Optionee has been
            terminated for Cause and the date upon which such termination for
            Cause occurs. Any such determination shall be final, conclusive and
            binding upon the Optionee.

      (d)   Other Termination of Service. Unless otherwise provided by the
            Committee and set forth in the Option Agreement, if an Optionee's
            employment or other service with the Company or any Subsidiary shall
            be terminated for any reason other than death, permanent and total
            disability or termination for Cause, the Optionee shall have the
            right, during the period ending 90 days after such termination
            (subject to the term of the Option), to exercise an Option to the
            extent that it was exercisable at the date of such termination and
            shall not have been exercised. For purposes of this Section 7(d), an
            Optionee shall not be considered to have terminated employment or
            other service with the Company or any Subsidiary until the
            expiration of the period of any military, sick leave or other bona
            fide leave of absence, up to a maximum period of 90 days or such
            greater period during which the Optionee is guaranteed reemployment
            either by statute or contract.


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SECTION 8 Amendment and Termination.

      Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Option Agreement or in the Plan:

      (a)   Amendments to the Plan. The Board or the Committee may amend, alter,
            suspend, discontinue, or terminate the Plan without the consent of
            any stockholder, Participant, Optionee or beneficiary of an Option,
            or other Person; provided, however, notwithstanding any other
            provision of the Plan or any Option Agreement, without the approval
            of the stockholders of the Company no such amendment, alteration,
            suspension, discontinuation, or termination shall be made that would
            increase the total number of shares available for Options under the
            Plan, except as provided in Section 4(c) of the Plan.

      (b)   Amendments to Options. The Committee may waive any conditions or
            rights under, amend any terms of, or alter any Option theretofore
            granted, provided no change in any Option shall reduce the benefit
            to the Optionee without the consent of such Optionee.

SECTION 9. Change in Control.

      Notwithstanding any other provision of this Plan to the contrary, in the
event of a Change in Control of the Company, the Committee may, in its sole
discretion, provide for all outstanding Options to become fully vested at such
time as determined by the Committee.

SECTION 11 Stock Certificates

      (a)   Issuance of Certificates. Subject to Section 11(b) hereof, the
            Company shall issue a stock certificate in the name of the Optionee
            (or other person exercising the Option in accordance with the
            provisions of the Plan) for the shares of Common Stock purchased by
            exercise of an Option as soon as practicable after due exercise and
            payment of the aggregate Option Price for such shares. A separate
            stock certificate or separate stock certificates shall be issued for
            any shares of Common Stock purchased pursuant to the exercise of an
            Option that is an Incentive Stock Option, which certificate or
            certificates shall not include any shares of Common Stock that were
            purchased pursuant to the exercise of an Option that is a
            Nonqualified Stock Option.

      (b)   Conditions. The Company shall not be required to issue or deliver
            any certificate for shares of Common Stock purchased upon the
            exercise of any Option granted hereunder or any portion thereof
            prior to fulfillment of all of the following conditions:

            (i)   the completion of any registration or other qualification of
                  such shares, under any federal or state law or under the
                  rulings or regulations of the


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                  SEC or any other governmental regulatory body, that the
                  Committee shall in its sole discretion deem necessary or
                  advisable;

            (ii)  the obtaining of any approval or other clearance from any
                  federal or state governmental agency which the Committee shall
                  in its sole discretion determine to be necessary or advisable;

            (iii) the lapse of such reasonable period of time following the
                  exercise of the Option as the Committee from time to time may
                  establish for reasons of administrative convenience;

            (iv)  satisfaction by the Optionee of all applicable withholding
                  taxes or other withholding liabilities; and

            (v)   if required by the Committee, in its sole discretion, the
                  receipt by the Company from an Optionee of (A) a
                  representation in writing that the shares of Common Stock
                  received upon exercise of an Option are being acquired for
                  investment and not with a view to distribution and (B) such
                  other representations and warranties as are deemed necessary
                  by counsel to the Company.

      (c)   Legends. The Company reserves the right to legend any certificate
            for shares of Common Stock, conditioning sales of such shares upon
            compliance with applicable federal and state securities laws and
            regulations.

SECTION 12. General Provisions.

      (a)   No Rights to Awards. No Eligible Person or other Person shall have
            any claim to be granted any Option, there is no obligation for
            uniformity of treatment of Eligible Persons or holders or
            beneficiaries of Options and the terms and conditions of Options
            need not be the same with respect to each recipient.

      (b)   Withholding. The Company or any affiliate is authorized to withhold
            from any payment due or transfer made under any Option or under the
            Plan or from any compensation or other amount owing to an Optionee
            the amount (in cash, shares, other securities, shares that would
            otherwise be issued pursuant to such Option, other Options or other
            property) of any applicable taxes payable in respect of an Option,
            its exercise, the lapse of restrictions thereon, or any payment or
            transfer under an Option or under the Plan and to take such other
            action as may be necessary in the opinion of the Company to satisfy
            all obligations for the payment of such taxes. In addition, the
            Committee may provide, in an Option Agreement, that the Optionee may
            direct the Company to satisfy such Optionee's tax obligation through
            the withholding of shares otherwise to be acquired upon the exercise
            or payment of such Option.

      (c)   No Right to Employment. The grant of an Option shall not be
            construed as giving the Optionee the right to be retained in the
            employ of the Company or


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            any affiliate. Further, the Company or an affiliate may at any time
            dismiss an Optionee from employment, free from any liability or any
            claim under the Plan, unless otherwise expressly provided in the
            Plan or in any Option Agreement.

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

      (e)   Severability. If any provision of the Plan or Option Agreement is or
            becomes or is deemed to be invalid, illegal, or unenforceable in any
            jurisdiction or as to any Person or Option, or would disqualify the
            Plan or any Option under any law deemed applicable by the Committee,
            such provision shall be construed or deemed amended to conform to
            the 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 or the Option Agreement, such provision shall
            be stricken as to such jurisdiction, Person or Option and the
            remainder of the Plan and any such Option shall remain in full force
            and effect.

      (f)   Other Laws. The Committee may refuse to issue or transfer any shares
            or other consideration under an Option if, acting in its sole
            discretion, it determines that the issuance of transfer or such
            shares or such other consideration might violate any applicable law
            or regulation or entitle the Company to recover the same under
            Section 16(b) of the Exchange Act, and any payment tendered to the
            Company by an Optionee, other holder or beneficiary in connection
            with the exercise of such Option shall be promptly refunded to the
            relevant Optionee, holder or beneficiary.

      (g)   No Trust or Fund Created. Neither the Plan nor the Option shall
            create or be construed to create a trust or separate fund of any
            kind or a fiduciary relationship between the Company or any
            affiliate and an Optionee or any other Person. To the extent that
            any Person acquires a right to receive payments from the Company or
            any affiliate pursuant to an Option, such right shall be no greater
            than the right of any general unsecured creditor of the Company or
            any affiliate.

      (h)   No Fractional Shares. No fractional shares shall be issued or
            delivered pursuant to the Plan or any Option Agreement, and the
            Committee shall determine whether cash, other securities, or other
            property shall be paid or transferred in lieu of any fractional
            shares or whether such fractional shares or any rights thereto shall
            be canceled, terminated, or otherwise eliminated.

      (i)   Headings. Headings are given to the Sections and subsections of the
            Plan solely as a convenience to facilitate reference. Such headings
            shall not be deemed in any way material or relevant to the
            construction or interpretation of the Plan or any provision thereof.


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<PAGE>
      (j)   Section 162(m) IPO Transition Rule. The Plan is intended to qualify
            for the transition relief provided under Treasury Regulation Section
            1.162-27(f). Accordingly, all compensation realized by Optionees in
            connection with Options granted under the Plan within the reliance
            period described therein is intended to be exempt from the
            limitation on tax deductibility under section 162(m) of the Code.
            For purposes of the Plan, the reliance period will expire on the
            earlier of (i) the expiration of the Plan, (ii) a "material
            modification" of the Plan (within the meaning of Treasury Regulation
            Section 1.162-27(h)(1)(iii)), (iii) the issuance of all Common Stock
            that has been allocated under the Plan, or (iv) the first meeting of
            Company stockholders at which directors are to be elected that
            occurs after the close of the third calendar year following the
            calendar year in which the Common Stock is first registered under
            Section 12 of the Exchange Act.

      (k)   Compliance with State Blue Sky Requirements. Prior to the date that
            the Common Stock is first registered under Section 12 of the
            Exchange Act and notwithstanding anything in this Plan or any Option
            Agreement to the contrary, this Plan shall be administered in
            compliance with the applicable requirements under state securities
            laws and regulations.

SECTION 13. Effective Date of the Plan.

      The Plan shall be effective upon the effective date of the Company's Joint
Plan of Reorganization effected as a result of the Company's petition for
reorganization under chapter 11 of the Bankruptcy Code, as filed July 31, 2001.

SECTION 14. Term of the Plan.

      No Option shall be granted under the Plan after the 10th anniversary of
the effective date of the Plan. However, unless otherwise expressly provided in
the Plan or in an applicable Option Agreement, any Option granted prior to such
termination, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Option or to waive any
conditions or rights under such Option, shall extend beyond such termination
date.


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