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                                                                   EXHIBIT 10.17

                               KANEB SERVICES LLC
                               2001 INCENTIVE PLAN

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                               KANEB SERVICES LLC
                               2001 INCENTIVE PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         Section
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<S>                                                                      <C>
ARTICLE I - PURPOSES AND TERM

              Purposes.......................................................1.1
              Term of Plan...................................................1.2

ARTICLE II - DEFINITIONS

              Affiliate......................................................2.1
              Award..........................................................2.2
              Board..........................................................2.3
              Code...........................................................2.4
              Committee......................................................2.5
              Common Share...................................................2.6
              Company........................................................2.7
              Employee Benefits Agreement....................................2.8
              Fair Market Value..............................................2.9
              Holder........................................................2.10
              KSI Deferred Compensation Plans...............................2.11
              Option........................................................2.12
              Optionee......................................................2.13
              Option Agreement..............................................2.14
              Plan..........................................................2.15
              Restricted Common Share Award.................................2.16
              Restricted Common Shares......................................2.17
              Restricted Common Share Agreement.............................2.18
              Shareholder...................................................2.19
              Termination of Employment.....................................2.20

ARTICLE III - ELIGIBILITY

ARTICLE IV - DEDICATED COMMON SHARES

ARTICLE V - GENERAL PROVISIONS RELATING TO AWARDS

              Authority to Grant Awards......................................5.1
              Dedicated Common Shares........................................5.2
              Non-Transferability............................................5.3
              Requirements of Law............................................5.4
              Changes in the Company's Capital Structure.....................5.5
</TABLE>

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<TABLE>
<CAPTION>
                                                                         Section
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<S>                                                                      <C>
ARTICLE VI - OPTIONS

              Exercise Price.................................................6.1
              Duration of Options............................................6.2
              Amount Exercisable.............................................6.3
              Exercise of Options............................................6.4
              No Rights as Shareholder.......................................6.5

ARTICLE VII - RESTRICTED COMMON SHARE AWARDS

              Restricted Common Share Awards.................................7.1
              Holder's Rights as a Shareholder...............................7.2
              Election Under Section 83(b) of the Code.......................7.3

ARTICLE VIII - ADMINISTRATION

ARTICLE IX - AMENDMENT OR TERMINATION OF PLANS

ARTICLE X - ISSUANCE OF COMMON SHARES TO PARTICIPANTS AND FORMER
             PARTICIPANTS IN THE KSI DEFERRED COMPENSATION PLANS

ARTICLE XI - MISCELLANEOUS

              No Establishment of a Trust Fund..............................11.1
              No Employment Obligation......................................11.2
              Forfeiture ...................................................11.3
              Tax Withholding...............................................11.4
              Written Agreement.............................................11.5
              Gender........................................................11.6
              Headings......................................................11.7
              Other Compensation Plans......................................11.8
              Other Awards..................................................11.9
              Governing Law................................................11.10
</TABLE>


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                                   ARTICLE I

                                PURPOSES AND TERM

         1.1 PURPOSES. The Plan is intended to advance the best interests of the
Company and its shareholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in
their employment or affiliation with the Company or any of its Affiliates. The
Plan is also intended to facilitate the Company's compliance with certain
provisions of the Employee Benefits Agreement.

         1.2 TERM OF PLAN. The Plan is effective on June 1, 2001. The Plan shall
remain in effect until it is terminated pursuant to Article VII.

                                   ARTICLE II

                                   DEFINITIONS

         The words and phrases defined in this Article shall have the meaning
set out in these definitions throughout the Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower or
different meaning.

         2.1 "AFFILIATE" means an entity that is treated as a single employer
together with the Company for certain employee benefit purposes pursuant to
section 414(c) of the Code.

         2.2 "AWARD" means any Option or Restricted Common Share Award granted
under the Plan.

         2.3 "BOARD" means the Board of Directors of the Company.

         2.4 "CODE" means the Internal Revenue Code of 1986, as amended.

         2.5 "COMMITTEE" means the Compensation Committee of the Board.

         2.6 "COMMON SHARE" means an undivided fractional member interest in the
Company having the powers, preferences, rights and duties set forth in Section
4.2 of the Limited Liability Company Agreement of Kaneb Services LLC.

         2.7 "COMPANY" means Kaneb Services LLC, a Delaware limited liability
company.

         2.8 "EMPLOYEE BENEFITS AGREEMENT" means the Employee Benefits Agreement
by and between Kaneb Services, Inc., a Delaware corporation and the Company.

         2.9 "FAIR MARKET VALUE" of a Common Share as of any date means that
date (or, if there was no sale on such date, on the next preceding date on which
there was such a sale) (a) the average of the high and low sales prices of a
Common Share on the principal securities exchange


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on which Common Shares are listed; or (b) if Common Shares are not listed on a
securities exchange, an amount determined by the Committee in its sole
discretion.

         2.10 "HOLDER" means a person who has been granted an Award or any
person who is entitled to receive Common Shares under an Award.

         2.11 "KSI DEFERRED COMPENSATION PLANS" means the Kaneb Services, Inc.
Deferred Stock Unit Plan, the Kaneb Services, Inc., Non-Employee Directors
Deferred Stock Unit Plan and the Kaneb Services, Inc. 1996 Supplemental Deferred
Compensation Plan.

         2.12 "OPTION" means an option granted under the Plan to purchase Common
Shares.

         2.13 "OPTIONEE" means a person to whom an Option is granted.

         2.14 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.

         2.15 "PLAN" means the Kaneb Services LLC 2001 Incentive Plan, as set
forth in this document and as it may be amended from time to time.

         2.16 "RESTRICTED COMMON SHARE AWARD" means an Award of Restricted
Common Shares.

         2.17 "RESTRICTED COMMON SHARES" means Common Shares awarded or
purchased under the Plan pursuant to a Restricted Common Share Agreement.

         2.18 "RESTRICTED COMMON SHARE AGREEMENT" means the written agreement
which sets out the terms of a Restricted Common Share Award.

         2.19 "SHAREHOLDER" means a shareholder of the Company as defined in the
Limited Liability Company Agreement of Kaneb Services LLC.

         2.20 "TERMINATION OF EMPLOYMENT" means the termination of the
Optionee's status as a common law employee of the Company and all of its
Affiliates.

                                  ARTICLE III

                                   ELIGIBILITY

         The individuals who shall be eligible to receive Awards shall be those
persons who have substantial responsibility for the management and growth of the
Company and its Affiliates as the Committee shall determine from time to time.
Further, Options shall be granted and Common Shares shall be issued to persons
in accordance with the terms of the Employee Benefits Agreement.


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                                   ARTICLE IV

                             DEDICATED COMMON SHARES

         The maximum number of Common Shares with respect to which Awards may be
granted under the Plan is 1,300,000. The maximum number of Common Shares the
Company shall issue to current and former participants in the KSI Deferred
Compensation Plans pursuant to Article 11 of the Employee Benefits Agreement is
300,000. The number of Common Shares stated in this Article IV shall be subject
to adjustment in accordance with the provisions of Section 5.3. If any
outstanding Award expires for any reason or any Award is surrendered, the Common
Shares allocable to the unexercised or nonvested portion of that Award may again
be subject to an Award under the Plan.

                                   ARTICLE V

         GENERAL PROVISIONS RELATING TO AWARDS

         5.1 AUTHORITY TO GRANT AWARDS. The Committee may grant Awards to those
persons as it shall from time to time determine, under the terms and conditions
of the Plan. Subject only to any applicable limitations set out in the Plan, the
number of Common Shares to be covered by any Award to be granted to any person
shall be as determined by the Committee.

         5.2 NON-TRANSFERABILITY. Except as specified in the applicable Option
Agreement or Restricted Common Share Agreement or in a domestic relations court
order, an Award shall not be transferable by the Holder other than by will or
under the laws of descent and distribution, and shall be exercisable, during the
Holder's lifetime, only by him. In the discretion of the Committee, any attempt
to transfer an Award other than under the terms of the Plan and the applicable
Option Agreement or Restricted Common Share Agreement may terminate the Award.

         5.3 REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Common Shares under any Award if issuing the Common Shares would
constitute or result in a violation by the Holder or the Company of any
provision of any law, statute or regulation of any governmental authority.
Specifically, in connection with any applicable statute or regulation relating
to the registration of securities, upon exercise of any Award, the Company shall
not be required to issue any Common Shares unless the Committee has received
evidence satisfactory to it to the effect that the Holder will not transfer the
Common Shares except in accordance with applicable law, including receipt of an
opinion of counsel satisfactory to the Company to the effect that any proposed
transfer complies with applicable law. The determination by the Committee on
this matter shall be final, binding and conclusive. The Company may, but shall
in no event be obligated to, register any Common Shares covered by the Plan
pursuant to applicable securities laws of any country or any political
subdivision. In the event the Common Shares issuable on exercise of an Option or
any other Award are not registered, the Company may imprint on the certificate
evidencing the Common Shares any legend that counsel for the Company considers
necessary or advisable to comply with applicable law. The Company shall


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not be obligated to take any other affirmative action in order to cause the
exercise of an Option or vesting under an Award, or the issuance of Common
Shares pursuant thereto, to comply with any law or regulation of any
governmental authority.

         5.4 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.

         (a) The existence of outstanding Awards shall not affect in any way the
right or power of the Company or the Shareholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, preferred or prior preference member
interests ahead of or affecting the Common Shares or its rights, the dissolution
or liquidation of the Company, any sale or transfer of all or any part of its
assets or business or any other act or proceeding, whether of a similar
character or otherwise.

         (b) If the Company shall effect a subdivision or consolidation of
Common Shares or other capital readjustment, or other increase or reduction of
the number of Common Shares outstanding, without receiving compensation for it
in money, services or property, then (1) the number, class or series and per
share price of Common Shares subject to outstanding Options under the Plan shall
be appropriately adjusted in such a manner as to entitle an Optionee to receive
upon exercise of an Option, for the same aggregate cash consideration, the
equivalent total number of Common Shares he would have received had he exercised
his Option in full immediately prior to the event requiring the adjustment, and
(2) the number of Common Shares then reserved to be issued under the Plan shall
be adjusted by substituting for the total number of Common Shares then reserved,
that number of Common Shares that would have been received by the owner of an
equal number of outstanding Common Shares as the result of the event requiring
the adjustment.

         (c) If while unexercised Options remain outstanding under the Plan (1)
the Company shall not be the surviving entity in any merger, consolidation or
other reorganization (or survives only as an entity that is wholly-owned by an
entity other than an entity that was wholly-owned by the Company immediately
prior to such merger, consolidation or other reorganization), (2) the Company
sells, leases or exchanges or agrees to sell, lease or exchange all or
substantially all of its assets to any other person or entity (other than an
entity wholly-owned by the Company), (3) the Company is to be dissolved or (4)
the Company is a party to any other transaction that is not described in clauses
(1), (2) or (3) of this sentence (each such event is referred to herein as a
"Company Change"), then, except as otherwise provided in an Option Agreement or
as a result of the Board's effectuation of one or more of the alternatives
described below, there shall be no acceleration of the time at which any Option
then outstanding may be exercised, and no later than ten days after the approval
by the Shareholders of such Company Change, the Board, acting in its sole and
absolute discretion without the consent or approval of any Optionee, shall act
to effect one or more of the following alternatives, which may vary among
individual Optionees and which may vary among Options held by any individual
Optionee:

                  (1) accelerate the time at which some or all of the Options
         then outstanding may be exercised so that such Options may be exercised
         in full for a limited period of time on or before a specified date
         (before or after such Company Change) fixed by the Board, after which
         specified


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         date all such Options that remain unexercised and all rights of
         Optionees thereunder shall terminate;

                  (2) require the mandatory surrender to the Company by all or
         selected Optionees of some or all of the then outstanding Options held
         by such Optionees (irrespective of whether such Options are then
         exercisable under the provisions of the Plan or the Option Agreements
         evidencing such Options) as of a date, before or after such Company
         Change, specified by the Board, in which event the Board shall
         thereupon cancel such Options and the Company shall pay to each such
         Optionee an amount of cash per share equal to the excess, if any, of
         the per share price offered to Shareholders in connection with such
         Company Change over the exercise prices under such Options for such
         shares;

                  (3) with respect to all or selected Optionees, have some or
         all of their then outstanding Options (whether vested or unvested)
         assumed or have a new Option substituted for some or all of their then
         outstanding Options (whether vested or unvested) by an entity which is
         a party to the transaction resulting in such Company Change and which
         is then employing him, or a parent or subsidiary of such entity,
         provided that (A) such assumption or substitution is on a basis where
         the excess of the aggregate fair market value of the shares subject to
         the Option immediately after the assumption or substitution over the
         aggregate exercise price of such shares is equal to the excess of the
         aggregate fair market value of all Common Shares subject to the Option
         immediately before such assumption or substitution over the aggregate
         exercise price of such Common Shares, and (B) the assumed rights under
         such existing Option or the substituted rights under such new Option as
         the case may be will have the same terms and conditions as the rights
         under the existing Option assumed or substituted for, as the case may
         be;

                  (4) provide that the number of Common Shares covered by an
         Option (whether vested or unvested) theretofore granted shall be
         adjusted so that such Option when exercised shall thereafter cover the
         number of securities or property (including, without limitation, cash)
         to which the Optionee would have been entitled pursuant to the terms of
         the agreement or plan relating to such Company Change if, immediately
         prior to such Company Change, the Optionee had been the holder of
         record of the number of Common Shares then covered by such Option; or

                  (5) make such adjustments to Options then outstanding as the
         Board deems appropriate to reflect such Company Change (provided,
         however, that the Board may determine in its sole and absolute
         discretion that no such adjustment is necessary).

         In effecting one or more of alternatives (3), (4) or (5) above, and
except as otherwise may be provided in an Option Agreement, the Board, in its
sole and absolute discretion and without


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the consent or approval of any Optionee, may accelerate the time at which some
or all Options then outstanding may be exercised.

         (d) In the event of changes in the outstanding Common Shares by reason
of recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 5.3,
any outstanding Options and any agreements evidencing such Options shall be
subject to adjustment by the Board in its sole and absolute discretion as to the
number and price of Common Shares subject to such Options. In the event of any
such change in the outstanding Common Shares, the aggregate number of Common
Shares available under the Plan may be appropriately adjusted by the Board,
whose determination shall be conclusive.

         (e) After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Holder shall be entitled to
have his Restricted Common Shares appropriately adjusted based on the manner in
which the Common Shares were adjusted under the terms of the agreement of merger
or consolidation.

         (f) The issue by the Company of securities of any class or series for
cash or property, or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe for them, or upon conversion of
securities or obligations of the Company convertible into shares or other
securities, shall not affect, and no adjustment by reason of such issuance shall
be made with respect to, the number, class or series, or price of Common Shares
then subject to outstanding Options or Restricted Common Share Awards.

                                   ARTICLE VI

                                     OPTIONS

         6.1 EXERCISE PRICE. The price at which Common Shares may be purchased
under an Option shall be specified in the Optionee's Option Agreement.

         6.2 DURATION OF OPTIONS. An Option shall not be exercisable after the
earlier of (a) the term of the Option specified in the Option Agreement (which
shall not exceed ten years from the date the Option is granted), or (b) the
period of time specified herein or in the Optionee's Option Agreement that
follows the Optionee's Termination of Employment. Unless an Optionee's Option
Agreement specifies otherwise, the Optionee's Option shall not continue to vest
after the date of the Optionee's Termination of Employment.

         (a) General Term of Option. Unless the Option Agreement specifies a
shorter term, an Option shall expire on the tenth anniversary of the date the
Option is granted.

         (b) Early Termination of Option Due to Termination of Employment (Other
Than for Death). Except as may be otherwise expressly provided in an Option
Agreement, an Option shall terminate on the earlier of (1) the date of the
expiration of the general term of the Option or (2) the date that is 90 days
after the date of the Optionee's Termination of Employment for any reason other
than the death of the Optionee, during which period the Optionee shall be
entitled to


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exercise the Option in respect of the number of Common Shares that the Optionee
would have been entitled to purchase had the Optionee exercised the Option on
the date of such Termination of Employment. Whether a leave of absence, or
absence on military or government service shall constitute a Termination of the
Employment shall be determined by the Committee at the time thereof.

         (c) Early Termination of Option Due to Death. Unless his Option
Agreement specifies otherwise, in the event an Optionee incurs a Termination of
the Employment due to death, the Optionee's Option shall terminate on the
earlier of (1) the date of expiration of the general term of the Option or (2)
the date that is 180 days after the date of the Optionee's Termination of
Employment due to death.

         After the death of an Optionee, his executors, administrators or any
person or persons to whom the Optionee's Option may be transferred by will or by
the laws of descent and distribution, shall have the right, at any time prior to
the termination of the Option to exercise the Option, in respect to the number
of Common Shares that the Optionee would have been entitled to exercise if the
Optionee exercised the Option immediately prior to his death.

         6.3 AMOUNT EXERCISABLE. Each Option may be exercised at the time, in
the manner and subject to the conditions the Committee specifies in the Option
Agreement in its sole discretion.

         6.4 EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery
of written notice to the Committee setting forth the number of Common Shares
with respect to which the Option is to be exercised, together with: (a) cash, a
certified check, a bank draft or a postal or express money order payable to the
order of the Company for an amount equal to the exercise price under the Option,
(b) an election to make a cashless exercise through a registered broker-dealer
(if approved in advance by the Committee) or (c) any other form of payment which
is acceptable to the Committee, and specifying the address to which the
certificates for the Common Shares are to be mailed. As promptly as practicable
after receipt of written notification and payment, the Company shall deliver to
the Optionee certificates for the number of Common Shares with respect to which
the Option has been exercised, issued in the Optionee's name. Delivery of the
Common Shares shall be deemed effected for all purposes when the transfer agent
of the Company shall have deposited the certificates in the United States mail,
addressed to the Optionee, at the address specified by the Optionee.

         The delivery of certificates upon the exercise of Options is subject to
the condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale or
other disposition.

         The Committee may permit an Optionee to elect to pay the exercise price
upon exercise of an Option by authorizing a third-party broker to sell all or a
portion of the Common Shares acquired upon exercise of the Option and remit to
the Company a sufficient portion of the sale proceeds to pay the exercise price
and any applicable tax withholding resulting from such exercise. The Committee
shall not permit an Optionee to pay his exercise price upon the exercise of an
Option by having the Company reduce the number of Common Shares that will be
delivered to the Optionee pursuant to the exercise of the Option.


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         An Option may not be exercised for a fraction of a Common Share.

         6.5 NO RIGHTS AS SHAREHOLDER. No Optionee shall have any rights as a
Shareholder with respect to Common Shares covered by his Option until the date a
certificate is issued for the Common Shares.

                                  ARTICLE VII

                         RESTRICTED COMMON SHARE AWARDS

         7.1 RESTRICTED COMMON SHARE AWARDS. The Committee may make Awards of
Restricted Common Shares to eligible persons selected by it. The amount of, the
vesting and the transferability restrictions applicable to, any Restricted
Common Share Award shall be determined by the Committee in its sole discretion.
If the Committee imposes vesting or transferability restrictions on a Holder's
rights with respect to shares of Restricted Common Shares, the Committee may
issue such instructions to the Company's transfer agent in connection therewith
as it deems appropriate. The Committee may also cause the certificate for shares
issued pursuant to a Restricted Common Share Award to be imprinted with any
legend which counsel for the Company considers advisable with respect to the
restrictions. Each Restricted Common Share Award shall be evidenced by a
Restricted Common Share Award Agreement that contains any vesting,
transferability restrictions and other provisions that are not inconsistent with
the Plan as the Committee may specify.

         7.2 HOLDER'S RIGHTS AS SHAREHOLDER. Subject to the terms and conditions
of the Plan, each Holder receiving a certificate for Restricted Common Shares
shall have all the rights of a shareholder with respect to the Common Shares
included in the Common Shares Award during any period in which such shares are
subject to forfeiture and restrictions on transfer, including without
limitation, the right to vote such shares, if unrestricted shares of the same
class have the right to vote. Distributions paid with respect to shares of
Restricted Common Shares in cash or property other than Common Shares or rights
to acquire Common Shares shall be paid to the Holder currently. Distributions
paid in Common Shares or rights to acquire Common Shares shall be added to and
become a part of the Restricted Common Shares.

         7.3 ELECTION UNDER SECTION 83(B) OF THE CODE. No Holder shall exercise
the election permitted under section 83(b) of the Code with respect to any
Restricted Common Share Award without the written approval of the Chief
Financial Officer of the Company. Any Holder who makes an election under section
83(b) of the Code with respect to any Restricted Common Share Award without the
written approval of the Chief Financial Officer of the Company may, in the
discretion of the Committee, forfeit any or all Awards granted to him under the
Plan.


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                                  ARTICLE VIII

                                 ADMINISTRATION

         The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be as effective as if it had been made
by a majority vote at a meeting properly called and held. In carrying out its
authority under the Plan, the Committee shall have full and final authority and
discretion, including but not limited to the following rights, powers and
authorities, to:

                  (a) determine the persons to whom and the time or times at
which Awards will be granted;

                  (b) determine the number of Common Shares covered by each
Award;

                  (c) determine the terms, provisions and conditions of each
Award, which need not be identical;

                  (d) accelerate the time at which any outstanding Option may be
exercised;

                  (e) prescribe, amend and rescind rules and regulations
relating to administration of the Plan; and

                  (f) make all other determinations and take all other actions
deemed necessary, appropriate or advisable for the proper administration of the
Plan.

The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of the Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive and
binding on all parties.

                                   ARTICLE IX

                        AMENDMENT OR TERMINATION OF PLAN

         The Board or the Committee may amend, terminate or suspend the Plan at
any time, in its sole and absolute discretion.

                                   ARTICLE X

              ISSUANCE OF COMMON SHARES TO PARTICIPANTS AND FORMER
              PARTICIPANTS IN THE KSI DEFERRED COMPENSATION PLANS

         The Company shall issue Common Shares reserved for issuance under
Article IV to current and former participants in the KSI Deferred Compensation
Plans in accordance with the


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terms of Article II of the Employee Benefits Agreement in order to satisfy the
Company's obligations thereunder.

                                   ARTICLE XI

                                  MISCELLANEOUS

         11.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside
nor shall a trust fund of any kind be established to secure the rights of any
Holder under the Plan. All Holders shall at all times rely solely upon the
general credit of the Company for the payment of any benefit which becomes
payable under the Plan.

         11.2 NO EMPLOYMENT OBLIGATION. The granting of any Award shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ, or
utilize the services of, any Holder. The right of the Company or any Affiliate
to terminate the employment of any person shall not be diminished or affected by
reason of the fact that an Award has been granted to him.

         11.3 FORFEITURE. Notwithstanding any other provisions of the Plan, if
the Committee finds by a majority vote after full consideration of the facts
that the Holder, before or after termination of his employment relationship with
the Company or an Affiliate for any reason committed or engaged in willful
misconduct, gross negligence, a breach of fiduciary duty, fraud, embezzlement,
theft, a felony, a crime involving moral turpitude or proven dishonesty in the
course of his employment as a common law employee of the Company or an
Affiliate, which conduct damaged the Company or Affiliate, the Holder shall
forfeit all outstanding Awards if the Company has not yet delivered a
certificate for Common Shares to the Holder with respect thereto. The decision
of the Committee as to the cause of the Holder's discharge, the damage done to
the Company or an Affiliate shall be final. No decision of the Committee,
however, shall affect the finality of the discharge of the Holder by the Company
or an Affiliate in any manner.

         11.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Holder any sums required by
federal, state or local tax law to be withheld with respect to the grant or
exercise of an Option, or lapse of restrictions on Restricted Common Shares. In
the alternative, the Company may require the Holder of an Award to pay such sums
for taxes directly to the Company or any Affiliate in cash or by check within
ten days after the date of exercise or lapse of restrictions. In the discretion
of the Committee, and with the consent of the Holder, the Company may reduce the
number of Common Shares issued to the Holder upon his exercise of an Option to
satisfy the tax withholding obligations of the Company or an Affiliate; provided
that the Fair Market Value of the Common Shares held back shall not exceed the
Company's or the Affiliate's minimum statutory withholding tax obligations. The
Committee may, in its discretion, permit a Holder to satisfy any tax withholding
obligations arising upon the vesting of Restricted Common Shares by delivering
to the Holder of the Restricted Common Share Award a reduced number of shares of
Common Shares in the manner specified herein. If permitted by the Committee and
acceptable to the Holder, at the time of vesting of Restricted Common Shares,
the Company shall (a) calculate the amount of the Company's or an Affiliate's
minimum statutory tax withholding

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obligation on the assumption that all such vested Restricted Common Shares are
made available for delivery, (b) reduce the number of such Common Shares made
available for delivery so that the Fair Market Value of the Common Shares
withheld on the vesting date approximates the amount of tax the Company or an
Affiliate is obliged to withhold and (c) in lieu of the withheld Common Shares,
remit cash to the United States Treasury and other applicable governmental
authorities, on behalf of the Holder, in the amount of the withholding tax due.
The Company shall withhold only whole Common Shares to satisfy its withholding
obligation. Where the Fair Market Value of the withheld Common Shares does not
equal the Company's withholding tax obligation, the Company shall withhold
Common Shares with a Fair Market Value slightly less than the amount of its
withholding obligation and the Holder of the Restricted Common Share Award must
satisfy the remaining withholding obligation in some other manner permitted
under this Section 11.4. The withheld Common Shares not made available for
delivery by the Company shall be retained as treasury Common Shares or will be
cancelled and, in either case, the Holder's right, title and interest in such
Restricted Common Shares shall terminate. The Company shall have no obligation
upon exercise of any Option or lapse of restrictions on Restricted Common Shares
until the Company or an Affiliate has received payment sufficient to cover all
tax withholding amounts due with respect to that exercise. Neither the Company
nor any Affiliate shall be obligated to advise a Holder of the existence of the
tax or the amount which it will be required to withhold.

         11.5 WRITTEN AGREEMENT. Each Award shall be embodied in a written
agreement which shall be subject to the terms and conditions of the Plan and
shall be signed by the Holder and by a member of the Committee or an executive
officer of the Company on behalf of the Company. The agreement may contain any
other provisions that the Committee in its discretion shall deem advisable which
are not inconsistent with the terms of the Plan.

         11.6 GENDER. If the context requires, words of one gender when used in
the Plan shall include the other and words used in the singular or plural shall
include the other.

         11.7 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.

         11.8 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other compensation or benefit plans in effect for the Company or any
Affiliate, nor shall the Plan preclude the Company from establishing any other
forms of incentive compensation arrangements.

         11.9 OTHER AWARDS. The grant of an Award shall not confer upon a Holder
the right to receive any future or other Awards under the Plan, or the right to
receive future Awards upon the same terms or conditions as previously granted.

         11.10 GOVERNING LAW. The provisions of the Plan shall be construed,
administered and governed under the laws of the State of Texas.



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