Exhibit 10.1



                              KANEB SERVICES, INC.

                            1994 STOCK INCENTIVE PLAN


                            Amendment and Restatement
                             Effective July 10, 2001



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                                Table of Contents
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ARTICLE I             PLAN.......................................................................................1

         1.1      Purpose........................................................................................1
         1.2      Term of Plan...................................................................................1

ARTICLE II            DEFINITIONS................................................................................2

         2.1      Affiliate......................................................................................2
         2.2      Award..........................................................................................2
         2.3      Board..........................................................................................2
         2.4      Change of Control..............................................................................2
         2.5      Code...........................................................................................3
         2.6      Committee......................................................................................3
         2.7      Company........................................................................................3
         2.8      Disability.....................................................................................3
         2.9      Distribution Date..............................................................................4
         2.10     Employee Benefits Agreement....................................................................4
         2.11     Employee.......................................................................................4
         2.12     Exchange Act...................................................................................4
         2.13     Fair Market Value..............................................................................4
         2.14     Holder.........................................................................................4
         2.15     Incentive Option...............................................................................4
         2.16     KSI Deferred Compensation Plans................................................................4
         2.17     Mature Shares..................................................................................4
         2.18     Non-Employee Director..........................................................................4
         2.19     Nonqualified Option............................................................................4
         2.20     Option.........................................................................................4
         2.21     Option Agreement...............................................................................4
         2.22     Plan...........................................................................................5
         2.23     Restricted Stock...............................................................................5
         2.24     Restricted Stock Agreement.....................................................................5
         2.25     Restricted Stock Award.........................................................................5
         2.26     Retirement.....................................................................................5
         2.27     Stock..........................................................................................5
         2.28     Ten Percent Stockholder........................................................................5

ARTICLE III           ELIGIBILITY................................................................................6


ARTICLE IV            GENERAL PROVISIONS RELATING TO AWARDS......................................................7

         4.1      Authority to Grant Awards......................................................................7
         4.2      Dedicated Shares; Maximum Awards...............................................................7
         4.3      Non-Transferability............................................................................7
         4.4      Requirements of Law............................................................................7
         4.5      Changes in the Company's Capital Structure.....................................................8
         4.6      Election Under Section 83(b) of the Code......................................................10

ARTICLE V             OPTIONS...................................................................................11

         5.1      Type of Option................................................................................11
         5.2      Exercise Price................................................................................11
         5.3      Duration of Options...........................................................................11
         5.4      Amount Exercisable............................................................................13
         5.5      Exercise of Options...........................................................................13
         5.6      Substitution Options..........................................................................14
         5.7      No Rights as Stockholder......................................................................14

ARTICLE VI            RESTRICTED STOCK AWARDS...................................................................15

         6.1      Restricted Stock Awards.......................................................................15
         6.2      Holder's Rights as Stockholder................................................................15

ARTICLE VII           ADMINISTRATION............................................................................16


ARTICLE VIII          AMENDMENT OR TERMINATION OF PLAN..........................................................17


ARTICLE IX            MISCELLANEOUS.............................................................................18

         9.1      No Establishment of a Trust Fund..............................................................18
         9.2      No Employment or Affiliation Obligation.......................................................18
         9.3      Forfeiture....................................................................................18
         9.4      Tax Withholding...............................................................................18
         9.5      Written Agreement.............................................................................19
         9.6      Indemnification of the Committee..............................................................19
         9.7      Gender........................................................................................20
         9.8      Headings......................................................................................20
         9.9      Other Compensation Plans......................................................................20
         9.10     Other Options or Awards.......................................................................20
         9.11     Option Adjustments Pursuant to the Employee Benefits Agreement................................20
         9.12     Governing Law.................................................................................20

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                                    ARTICLE I

                                      PLAN


         1.1......Purpose. The Plan is intended to advance the best interests of
the Company and its stockholders 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.

         1.2......Term of Plan. No Award shall be granted under the Plan after
July 9, 2011. The Plan shall remain in effect until all Awards under the Plan
have been satisfied or expired.

                                   ARTICLE II

                                   DEFINITIONS

         2.1......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.

         2.2......"Affiliate" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if, at the
time of the action or transaction, each of the corporations other than the
Company owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain. The
term "subsidiary corporation" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the action or transaction, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.

         2.3......"Award" means any Incentive Option, Nonqualified Option or
Restricted Stock Award granted under the Plan.

         2.4......"Board" means the board of directors of the Company.

         2.5......"Change of Control" means the occurrence of any of the
following after June 1, 2001:

                  (a) the acquisition by any individual, entity or group (within
         the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
         "Covered Person") of beneficial ownership (within the meaning of rule
         13d-3 promulgated under the Exchange Act) of 20 percent or more of
         either (i) the then outstanding shares of Stock (the "Outstanding
         Company Common Stock") or (ii) the combined voting power of the then
         outstanding voting securities of the Company entitled to vote generally
         in the election of directors (the "Outstanding Company Voting
         Securities"); provided, however, that for purposes of this Section
         2.4(a), the following acquisitions shall not constitute a Change in
         Control of the Company: (i) any acquisition by the Company, (ii) any
         acquisition by any employee benefit plan (or related trust) sponsored
         or maintained by the Company or any entity controlled by the Company or
         (iii) any acquisition by any corporation pursuant to a transaction
         which complies with clauses (i), (ii) and (iii) of Section 2.4(c);

                  (b) individuals who, as of June 1, 2001, constitute the Board
         of Directors (the "Incumbent Board") cease for any reason to constitute
         at least a majority of the Board of Directors; provided, however, that
         any individual becoming a director subsequent to June1, 2001, whose
         election, or nomination for election, by the Company's stockholders,
         was approved by a vote of at least a majority of the directors then
         comprising the Incumbent Board shall be considered as though such
         individual were a member of the Incumbent Board, but excluding, for
         this purpose, any such individual whose initial assumption of office
         occurs as a result of an actual or threatened election contest with
         respect to the election or removal of directors; or

                  (c) the consummation of (i) a reorganization, merger or
         consolidation or sale of the Company or (ii) a disposition of all or
         substantially all of the assets of the Company (a "Business
         Combination"), in each case, unless, following such Business
         Combination, (A) all or substantially all of the individuals and
         entities who were the beneficial owners, respectively, of the
         Outstanding Company Common Stock and Outstanding Company Voting
         Securities immediately prior to such Business Combination beneficially
         own, directly or indirectly, more than 80 percent of, respectively, the
         then outstanding shares of common stock and the combined voting power
         of the then outstanding voting securities entitled to vote generally in
         the election of directors, as the case may be, of the corporation
         resulting from such Business Combination (including, without
         limitation, a corporation which as a result of such transaction owns
         the Company or all or substantially all of the Company's assets either
         directly or through one or more subsidiaries) in substantially the same
         proportions as their ownership immediately prior to such Business
         Combination of the Outstanding Company Common Stock or Outstanding
         Company Voting Securities, as the case may be, (B) no Covered Person
         (excluding any employee benefit plan (or related trust) of the Company
         or such corporation resulting from such Business Combination)
         beneficially owns, directly or indirectly, 80 percent or more of,
         respectively, the then outstanding shares of common stock of the
         corporation resulting from such Business Combination or the combined
         voting power of the then outstanding voting securities of such
         corporation, except to the extent that such ownership existed prior to
         the Business Combination, and (C) at least a majority of the members of
         the board of directors of the corporation resulting from such Business
         Combination were members of the Incumbent Board at the time of the
         execution of the initial agreement, or of the action of the Board,
         providing for such Business Combination; provided, however, that any
         individual becoming a director subsequent to June 1, 2001 whose
         election, or nomination for election by the Company's stockholders, was
         approved by a vote of at least a majority of the directors then
         comprising the Incumbent Board shall be considered as though such
         individual were a member of the Incumbent Board, but excluding, for
         this purpose, any such individual whose initial assumption of office
         occurs as a result of an actual or threatened election contest with
         respect to the election or removal of directors.

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

         2.7......"Committee" means a committee of at least two persons
appointed by the Board.

         2.8......"Company" means Kaneb Services, Inc., a Delaware corporation.

         2.9......"Disability" means a medically determinable mental or physical
impairment which, in the opinion of a physician selected by the Committee, shall
prevent the Holder from engaging in any substantial gainful activity and which
can be expected to result in death or which has lasted or can be expected to
last for a continuous period of not less than 12 months and which: (a) was not
contracted, suffered or incurred while the Holder was engaged in, or did not
result from having engaged in, a felonious criminal enterprise; (b) did not
result from alcoholism or addiction to narcotics; (c) did not result from an
injury incurred while a member of the Armed Forces of the United States for
which the Holder receives a military pension; and (d) did not result from an
intentionally self-inflicted injury.

         2.10....."Distribution Date" shall have the meaning specified in the
Distribution Agreement by and between the Company, Kaneb Services LLC and Kaneb
Pipeline Partners, L.P.

         2.11....."Employee Benefits Agreement" means the Employee Benefits
Agreement by and between the Company and Kaneb Services LLC, a Delaware limited
liability company.

         2.12....."Employee" means a person employed by the Company or any
Affiliate as a common law employee.

         2.13....."Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.14....."Fair Market Value" of the Stock as of any date means the
closing price of the Stock on such date, or, if the Stock was not traded on such
date, on the immediately preceding day that the Stock was so traded. However, if
the Stock is not listed on a securities exchange, the Fair Market Value will be
an amount determined by the Committee.

         2.15....."Holder" means a person who has been granted an Award or any
person who is entitled to receive stock under an Award.

         2.16....."Incentive Option" means an Option granted under the Plan
which is designated as an "Incentive Option" and satisfies the requirements of
section 422 of the Code.

         2.17....."KSI Deferred Compensation Plans" means the Kaneb Services,
Inc. 1996 Supplemental Deferred Compensation Plan, the Kaneb Services, Inc.
Non-Employee Directors Deferred Stock Unit Plan, the Kaneb Services, Inc.
Deferred Stock Unit Plan, and any other nonqualified deferred compensation plans
that the Company may adopt in the future.

         2.18....."Mature Shares" means shares of Stock that the Holder has held
for at least six months.

         2.19....."Non-Employee Director" means any duly elected member of the
Board who is not an Employee.

         2.20....."Nonqualified Option" means an Option granted under the Plan
other than an Incentive Option.

         2.21....."Option" means either an Incentive Option or a Nonqualified
Option granted under the Plan to purchase shares of Stock.

         2.22....."Option Agreement" means the written agreement which sets out
the terms of an Option.

         2.23....."Plan" means the Kaneb Services, Inc. 1994 Stock Incentive
Plan, as set forth in this document and as it may be amended from time to time.

         2.24....."Restricted Stock" means stock awarded or purchased under the
Plan pursuant to a Restricted Stock Agreement.

         2.25....."Restricted Stock Agreement" means the written agreement which
sets out the terms of a Restricted Stock Award.

         2.26....."Restricted Stock Award" means an Award of Restricted Stock.

         2.27....."Retirement" means the termination of an Employee's employment
relationship with the Company and all Affiliates after attaining the age of 55.

         2.28....."Stock" means the common stock of the Company, no par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.

         2.29....."Ten Percent Stockholder" means an individual who, at the time
the Option is granted, owns stock possessing more than ten percent of the total
combined voting power of all classes of stock or series of the Company or of any
Affiliate. An individual shall be considered as owning the stock owned, directly
or indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust, shall be
considered as being owned proportionately by or for its stockholders, partners
or beneficiaries.


                                   ARTICLE III

                                   ELIGIBILITY


         The individuals who shall be eligible to receive Incentive Options
shall be those key Employees of the Company or any of its Affiliates as the
Committee shall determine from time to time. The individuals who shall be
eligible to receive Awards other than Incentive Options shall be those persons,
including Employees, consultants, advisors and directors, who have substantial
responsibility for the management and growth of the Company or any of its
Affiliates as the Committee shall determine from time to time. Further, shares
of Stock may be issued under the Plan to participants and former participants in
the KSI Deferred Compensation Plans in satisfaction of the Company's obligations
thereunder.


                                   ARTICLE IV

                      GENERAL PROVISIONS RELATING TO AWARDS


         4.1......Authority to Grant Awards. The Committee may grant Awards to
those key Employees of the Company or any of its Affiliates and other eligible
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 shares of Stock to be covered by any Award to be granted to any person
shall be as determined by the Committee.

         4.2......Dedicated Shares; Maximum Awards. The aggregate number of
shares of Stock with respect to which Awards may be granted under the Plan and
to current and former participants in the KSI Deferred Compensation Plans
pursuant to the terms thereof is 3,600,000. Such shares of Stock may be treasury
shares or authorized but unissued shares. The maximum number of shares of Stock
with respect to which Options may be granted under the Plan is 3,600,000 shares.
The maximum number of shares of Stock with respect to which Restricted Stock
Awards may be granted under the Plan is 750,000 shares. The maximum number of
shares with respect to which Options which may be granted to any person under
the Plan during any calendar year is 750,000 shares. If a Holder's Option is
cancelled, the cancelled Option continues to be counted against the maximum
number of shares of Stock for which Options may be granted to the Holder under
the Plan. The number of shares stated in this Section 4.2 shall be subject to
adjustment in accordance with the provisions of Section 4.5. If any outstanding
Award expires or terminates for any reason or any Award is surrendered, the
shares of Stock allocable to the unexercised portion of that Award may again be
subject to an Award under the Plan.

         4.3......Non-Transferability. Incentive Options shall not be
transferable by the Employee other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Employee's lifetime, only by
him. Except as specified in the applicable Award agreements or in domestic
relations court orders, Awards other than Incentive Options 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 Award agreement may
terminate the Award.

         4.4......Requirements of Law. The Company shall not be required to sell
or issue any Stock under any Award if issuing that Stock 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 Option or pursuant to any other Award, the
Company shall not be required to issue any Stock unless the Committee has
received evidence satisfactory to it to the effect that the Holder of that Award
will not transfer the Stock 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 Stock covered by the
Plan pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option or
pursuant to any other Award is not registered, the Company may imprint on the
certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall 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 shares
pursuant thereto, to comply with any law or regulation of any governmental
authority.
         4.5......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 its stockholders 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 stock ahead of or affecting
the Stock 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 corporate
act or proceeding, whether of a similar character or otherwise.

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

                  (b) If while unexercised Options remain outstanding under the
         Plan (i) the Company shall not be the surviving entity in any merger,
         consolidation or other reorganization (or survives only as a subsidiary
         of an entity other than an entity that was wholly-owned by the Company
         immediately prior to such merger, consolidation or other
         reorganization), (ii) 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), (iii) the Company is to be dissolved or (iv) the Company is a
         party to any other corporate transaction (as defined under section
         424(a) of the Code and applicable Department of Treasury Regulations)
         that is not described in clauses (i), (ii) or (iii) of this sentence
         (each such event is referred to herein as a "Corporate 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 stockholders of the Company of such Corporate Change,
         the Board, acting in its sole and absolute discretion without the
         consent or approval of any Holder, shall act to effect one or more of
         the following alternatives, which may vary among individual Holders and
         which may vary among Options held by any individual Holder:

                           (A) 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 Corporate
                  Change) fixed by the Board, after which specified date all
                  such Options that remain unexercised and all rights of Holders
                  thereunder shall terminate;

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

                           (C) with respect to all or selected Holders, 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 Corporate Change and which is then employing
                  him, or a parent or subsidiary of such entity, provided that
                  (1) 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 shares subject to the Option immediately before such
                  assumption or substitution over the aggregate exercise price
                  of such shares, and (2) 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;

                           (D) provide that the number and class or series of
                  shares of Stock covered by an Option (whether vested or
                  unvested) theretofore granted shall be adjusted so that such
                  Option when exercised shall thereafter cover the number and
                  class or series of shares of stock or other securities or
                  property (including, without limitation, cash) to which the
                  Holder would have been entitled pursuant to the terms of the
                  agreement or plan relating to such Corporate Change if,
                  immediately prior to such Corporate Change, the Holder had
                  been the holder of record of the number of shares of Stock
                  then covered by such Option; or

                           (E) make such adjustments to Options then outstanding
                  as the Board deems appropriate to reflect such Corporate
                  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 (C), (D) or (E) above, and
except as otherwise may be provided in an Option Agreement, the Board, in its
sole and absolute discretion and without the consent or approval of any Holder,
may accelerate the time at which some or all Options then outstanding may be
exercised.

                  (c) In the event of changes in the outstanding Stock 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 4.5, 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 shares of stock or other consideration subject to such
         Options. In the event of any such change in the outstanding Stock, the
         aggregate number of shares available under this Plan may be
         appropriately adjusted by the Board, whose determination shall be
         conclusive.

                  (d) 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 Stock
         appropriately adjusted based on the manner the Stock was adjusted under
         the terms of the agreement of merger or consolidation.

                  (e) The issue by the Company of shares of stock of any class
         or series, or securities convertible into shares of stock 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 shares 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 shares of Stock then subject
         to outstanding Options or Restricted Stock Awards.

         4.6......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 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 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.

                                    ARTICLE V

                                     OPTIONS

         5.1......Type of Option. The Committee shall specify in an Option
Agreement whether a given Option is an Incentive Option or a Nonqualified
Option. However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value (determined as of the time an Incentive Option is
granted) of the Stock with respect to which incentive stock options first become
exercisable by an Employee during any calendar year (under the Plan and any
other incentive stock option plan(s) of the Company or any Affiliate) exceeds
$100,000, the Incentive Option shall be treated as a Nonqualified Option. In
making this determination, incentive stock options shall be taken into account
in the order in which they were granted.

         5.2......Exercise Price. The price at which Stock may be purchased
under an Option shall not be less than 100 percent of the Fair Market Value of
the shares of Stock on the date the Option is granted. In the case of any Ten
Percent Stockholder, the price at which shares of Stock may be purchased under
an Incentive Option shall not be less than 110 percent of the Fair Market Value
of the Stock on the date the Incentive Option is granted.

         5.3......Duration of Options. An Option shall not be exercisable after
the earlier of (i) the term of the Option specified in the Option Agreement
(which shall not exceed five years from the date the Option is granted in the
case of an Incentive Option granted to a Ten Percent Stockholder, or ten years
from the date the Option is granted in the case of any other Option), or (ii)
the period of time specified herein that follows the Holder's Retirement,
Disability, death or other severance of the employment or affiliation
relationship between the Holder and the Company and all Affiliates. Except as
specified in Section 9.11, unless the Holder's Option Agreement specifies
otherwise, an Option shall not continue to vest after the severance of the
employment or affiliation relationship between the Company and all Affiliates.

                  (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. Notwithstanding the
         foregoing, unless the Option Agreement specifies a shorter term, in the
         case of an Incentive Option granted to a Ten Percent Stockholder, the
         Option shall expire on the fifth anniversary of the date the Option is
         granted.

                  (b) Early Termination of Option Due to Severance of Employment
         or Affiliation Relationship (Other Than for Death, Disability or
         Retirement). Except as may be otherwise expressly provided in an Option
         Agreement, (i) an Option that has been granted to a person other than a
         Non-Employee Director and that has been in effect for at least two
         years shall terminate on the earlier of the date of the expiration of
         the general term of the Option or 90 days after the date of the
         termination of the employment relationship between the Holder and the
         Company and all Affiliates for any reason other than the death,
         Disability or Retirement of the Holder, and (ii) an Option that has
         been granted to a person other than a Non-Employee Director and that
         has been in effect for less than two years shall terminate on the
         earlier of the date of the expiration of the general term of the Option
         or 30 days after the date of the termination of the employment
         relationship between the Holder and the Company and all Affiliates for
         any reason other than the death, Disability or Retirement of the
         Holder, during which period the Holder shall be entitled to exercise
         the Option in respect of the number of shares that the Holder would
         have been entitled to purchase had the Holder exercised the Option on
         the date of such termination of employment. Whether authorized leave of
         absence, or absence on military or government service, shall constitute
         a termination of the employment relationship between the Holder and the
         Company and all Affiliates shall be determined by the Committee at the
         time thereof.

                  Except as may be otherwise expressly provided in an Option
         Agreement, an Option that has been granted to a Non-Employee Director
         shall terminate on the earlier of the date of the expiration of the
         general term of the Option or 90 days after the Non-Employee Director
         is no longer a director of the Company for any reason other than the
         death or Disability of the Holder.

                  (c) Early Termination of Option Due to Death. Unless the
         Option Agreement specifies otherwise, in the event of the severance of
         the employment or affiliation relationship between the Holder and the
         Company and all Affiliates due to death before the date of expiration
         of the general term of the Option, the Holder's Option shall terminate
         on the earlier of the date of expiration of the general term of the
         Option or the 180 days after the Holder's death.

                  (d) Early Termination of Option Due to Disability. With
         respect to an Option granted to a person other than a Non-Employee
         Director, unless the Option Agreement specifies otherwise, in the event
         of the severance of the employment relationship between the Holder and
         the Company and all Affiliates due to Disability before the date of the
         expiration of the general term of the Option, the Option shall
         terminate on the earlier of the expiration of the general term of the
         Option or 90 days after the termination of the employment relationship
         between the Holder and the Company and all Affiliates terminates due to
         Disability.

                  In the event his affiliation relationship is terminated as a
         result of Disability, a Holder who is a Non-Employee Director may
         exercise an Option for a period of 180 days after the Non-Employee
         Director is no longer a director of the Company or until the expiration
         of the Option period, if sooner, to the extent of the Stock with
         respect to which the Option could have been exercised by the Holder on
         the date the Non-Employee Director ceases being a director of the
         Company.

                  (e) Early Termination of Option Due to Retirement. Unless the
         Option Agreement specifies otherwise, if the Holder is an Employee and
         the employment relationship between the Holder and the Company and all
         Affiliates terminates by reason of Retirement, the Holder's Option
         shall terminate on the earlier of the expiration of the general term of
         the Option or one day less than three months after the date of the
         Holder's termination of employment due to Retirement.

         After the death of the Holder, the Holder's executors, administrators
or any person or persons to whom the Holder'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 shares that the Holder would have been entitled to exercise if the
Holder exercised the Option prior to his death.

         5.4......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. If specified in the Option Agreement,
an Option will be exercisable in full upon the occurrence of a Change of
Control.

         5.5......Exercise of Options. Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with: (a)
cash, certified check, bank draft or postal or express money order payable to
the order of the Company for an amount equal to the exercise price under the
Option, (b) Mature Shares with a Fair Market Value on the date of exercise equal
to the exercise price under the Option, (c) an election to make a cashless
exercise through a registered broker-dealer (if approved in advance by the
Committee) or (d) except as specified below, any other form of payment which is
acceptable to the Committee, and specifying the address to which the
certificates for the shares are to be mailed. As promptly as practicable after
receipt of written notification and payment, the Company shall deliver to the
Holder certificates for the number of shares with respect to which the Option
has been exercised, issued in the Holder's name. If Mature Shares are used for
payment by the Holder, the aggregate Fair Market Value of the shares of Stock
tendered must be equal to or less than the aggregate exercise price of the
shares being purchased upon exercise of the Option, and any difference must be
paid by cash, certified check, bank draft or postal or express money order
payable to the order of the Company. Delivery of the shares shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the Holder,
at the address specified by the Holder.

         Whenever an Option is exercised by exchanging Mature Shares owned by
the Holder, the Holder shall deliver to the Company certificates registered in
the name of the Holder representing a number of shares of Stock legally and
beneficially owned by the Holder, free of all liens, claims and encumbrances of
every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). 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 a Holder 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 shares of Stock 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 a Holder to pay his exercise price upon
the exercise of an Option by having the Company reduce the number of shares of
Stock that will be delivered to the Holder pursuant to the exercise of the
Option. In addition, the Committee shall not permit a Holder to pay his exercise
price upon the exercise of an Option by using shares of Stock other than Mature
Shares.

         An Option may not be exercised for a fraction of a share of Stock.

         5.6......Substitution Options. Options may be granted under the Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the Company
or any Affiliate as the result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation as the
result of which it becomes an Affiliate of the Company. The terms and conditions
of the substitute Options granted may vary from the terms and conditions set out
in the Plan to the extent the Committee, at the time of grant, may deem
appropriate to conform, in whole or in part, to the provisions of the stock
options in substitution for which they are granted.

         5.7......No Rights as Stockholder. No Holder shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.


                                   ARTICLE VI

                             RESTRICTED STOCK AWARDS

         6.1......Restricted Stock Awards. The Committee may make Awards of
Restricted Stock to eligible persons selected by it. The amount of, the vesting
and the transferability restrictions applicable to, any Restricted Stock 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 Stock, the Committee may issue such instructions
to the Company's stock transfer agent in connection therewith as it deems
appropriate. The Committee may also cause the certificate for shares issued
pursuant to a Restricted Stock Award to be imprinted with any legend which
counsel for the Company considers advisable with respect to the restrictions.

         Each Restricted Stock Award shall be evidenced by a Restricted Stock
Award Agreement that contains any vesting, transferability restrictions and
other provisions not inconsistent with the Plan as the Committee may specify.

         6.2......Holder's Rights as Stockholder. Subject to the terms and
conditions of the Plan, each Holder receiving a certificate for Restricted Stock
shall have all the rights of a stockholder with respect to the shares of Stock
included in the Stock 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. Dividends paid with respect to shares of Restricted Stock in cash
or property other than stock in the Company or rights to acquire stock in the
Company shall be paid to the Holder currently. Dividends paid in stock in the
Company or rights to acquire stock in the Company shall be added to and become a
part of the Restricted Stock.

                                   ARTICLE VII

                                 ADMINISTRATION

         The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards 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. The Plan shall be
administered in such a manner as to permit the Options which are designated to
be Incentive Options to qualify as Incentive Options. 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 made;

                  (b) determine the number of shares and the exercise price of
         Stock covered in each Award, subject to the terms of the Plan;

                  (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, or Restricted Stock Award will vest;

                  (e) define the effect, if any, on an Award of the death,
         disability, retirement or termination of employment or affiliation
         relationship between the Holder and the Company and Affiliates;

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

                  (g) 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 VIII

                        AMENDMENT OR TERMINATION OF PLAN

         The Board may amend, terminate or suspend the Plan at any time, in its
sole and absolute discretion; provided, however, that to the extent required to
maintain the status of any Incentive Option under the Code, no amendment that
would change the aggregate number of shares of Stock which may be issued under
Incentive Options, or change the class of Employees eligible to receive
Incentive Options shall be made without the approval of the Company's
stockholders. Subject to the preceding sentence, the Board shall have the power
to make any changes in the Plan and in the regulations and administrative
provisions under it or in any outstanding Incentive Option as in the opinion of
counsel for the Company may be necessary or appropriate from time to time to
enable any Incentive Option granted under the Plan to continue to qualify as an
incentive stock option or such other stock option as may be defined under the
Code so as to receive preferential federal income tax treatment.


                                   ARTICLE IX

                                  MISCELLANEOUS

         9.1......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.

         9.2......No Employment or Affiliation Obligation. The granting of any
Option or 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 Option or Award has been
granted to him.

         9.3......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 or affiliation
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 by the Company or an
Affiliate, which conduct damaged the Company or Affiliate, the Holder shall
forfeit all outstanding Options and all outstanding Awards, and all exercised
Options if the Company has not yet delivered a stock certificate 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.

         9.4......Tax Withholding. Except with respect to each Holder who is a
Non-Employee Director, 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 Stock. 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 shares
of Stock 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 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 Stock by delivering to the Holder of the
Restricted Stock Award a reduced number of shares of Stock in the manner
specified herein. If permitted by the Committee and acceptable to the Holder, at
the time of vesting of shares of Restricted Stock, the Company shall (i)
calculate the amount of the Company's or an Affiliate's minimum statutory tax
withholding obligation on the assumption that all such vested shares of
Restricted Stock are made available for delivery, (ii) reduce the number of such
shares made available for delivery so that the Fair Market Value of the shares
withheld on the vesting date approximates the amount of tax the Company or an
Affiliate is obliged to withhold and (iii) in lieu of the withheld 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 shares of Stock to satisfy its withholding
obligation. Where the Fair Market Value of the withheld shares does not equal
the Company's withholding tax obligation, the Company shall withhold shares with
a Fair Market Value slightly less than the amount of its withholding obligation
and the Holder of the Restricted Stock Award must satisfy the remaining
withholding obligation in some other manner permitted under this Section 9.4.
The withheld shares of Restricted Stock not made available for delivery by the
Company shall be retained as treasury stock or will be cancelled and, in either
case, the Holder's right, title and interest in such Restricted Stock shall
terminate. The Company shall have no obligation upon exercise of any Option or
lapse of restrictions on Restricted Stock 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.

         9.5......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 on behalf of the
Committee and the Company or an executive officer of the Company, other than the
Holder, 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.

         9.6......Indemnification of the Committee. The Company shall indemnify
each present and future member of the Committee against, and each member of the
Committee shall be entitled without further act on his part to indemnity from
the Company for, all expenses (including attorney's fees, the amount of
judgments and the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his being or
having been a member of the Committee, whether or not he continues to be a
member of the Committee at the time of incurring the expenses, including,
without limitation, matters as to which he shall be finally adjudged in any
action, suit or proceeding to have been found to have been negligent in the
performance of his duty as a member of the Committee. However, this indemnity
shall not include any expenses incurred by any member of the Committee in
respect of matters as to which he shall be finally adjudged in any action, suit
or proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Committee. In addition, no right
of indemnification under the Plan shall be available to or enforceable by any
member of the Committee unless, within 60 days after institution of any action,
suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and shall be in addition to all
other rights to which a member of the Committee may be entitled as a matter of
law, contract or otherwise.

         9.7......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.

         9.8......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.

         9.9......Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option, incentive or 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
for Employees.

         9.10.....Other Options or Awards. The grant of an Award shall not
confer upon the Holder the right to receive any future or other Awards under the
Plan, whether or not Awards may be granted to similarly situated Holders, or the
right to receive future Awards upon the same terms or conditions as previously
granted.

         9.11.....Option Adjustments Pursuant to the Employee Benefits
Agreement. Notwithstanding any other provision of the Plan or an Option
Agreement, the exercise price applicable to each outstanding Option, to the
extent that the Option has not expired or been exercised as of the Distribution
Date, shall be reduced in accordance with the formula specified in paragraph (b)
of Section 3.1 of the Employee Benefits Agreement. Notwithstanding any other
provisions of the Plan or Option Agreement, the term of each outstanding Option,
to the extent that the Option has not expired or been exercised as of the
Distribution Date, shall be adjusted in the manner specified in paragraph (e) of
Section 3.1 of the Employee Benefits Agreement.

         9.12.....Governing Law. The provisions of the Plan shall be construed,
administered and governed under the laws of the State of Texas.