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                                                                   EXHIBIT 10.34


                              AMENDED AND RESTATED
             ALLIANCE DATA SYSTEMS CORPORATION AND ITS SUBSIDIARIES
                     STOCK OPTION AND RESTRICTED STOCK PLAN



                            Effective April 25, 2001







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                              AMENDED AND RESTATED
             ALLIANCE DATA SYSTEMS CORPORATION AND ITS SUBSIDIARIES
                     STOCK OPTION AND RESTRICTED STOCK PLAN

     Section 1. PURPOSE. The purpose of the Amended and Restated Alliance
Data Systems Corporation and its Subsidiaries Stock Option and Restricted
Stock Plan (the "Plan") is to promote the interests of Alliance Data Systems
Corporation, a Delaware corporation (the "Company"), and any Subsidiary
thereof and the interest of the Company's stockholders by providing an
opportunity to stockholders and selected employees, officers, directors and
other persons performing services for the Company or any Subsidiary thereof
as of the date of the adoption of the Plan or at any time thereafter to
purchase Common Stock of the Company. By encouraging such stock ownership,
the Company seeks to attract, retain and motivate such employees and other
persons and to encourage such employees and other persons to devote their
best efforts to the business and financial success of the Company. It is
intended that this purpose will be effected by the granting of "non-qualified
stock options" and/or "incentive stock options" to acquire the Common Stock
of the Company and/or by the granting of rights to purchase or receive (upon
satisfaction of certain conditions) the Common Stock of the Company on a
"restricted stock" basis. Under the Plan, the Committee shall have the
authority (in its sole discretion) to grant "incentive stock options" within
the meaning of Section 422(b) of the Code, "non-qualified stock options" as
described in Treasury Regulation Section 1.83-7 or any successor regulation
thereto, or "restricted stock" awards.

     The Plan is an amendment and restatement of the Alliance Data Systems
Corporation and its Subsidiaries Stock Option and Restated Stock Purchase
Plan (the "Prior Plan"). All Options and Awards granted prior to the
Effective Date hereof shall be deemed granted pursuant to the terms of the
Prior Plan (except to the extent provisions of this Plan are expressly made
applicable). Options and Awards granted prior to the Effective Date may be
granted only to the extent shares are available for issuance under the terms
of the Prior Plan. As of the Effective Date all Options and Awards granted
shall be granted under the terms and limitations of this Plan.

     Section 2. DEFINITIONS. For purposes of the Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context:

                2.1 "Award" shall mean an award of (i) the right to purchase
Common Stock granted under the provisions of Section 7 of the Plan or (ii) a
grant of Common Stock subject to specified restrictions.

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

                2.3 "Cause" shall mean either the failure to perform in a
competent manner or the willful failure to perform the assigned duties of
one's position, as determined by the Company in its sole discretion.

                2.4 "Change of Control Value" means, for the purposes of
Section 8, the amount determined in Clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to stockholders of
the Company in any merger, consolidation, sale of assets or



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dissolution transaction, (ii) the price per share offered to stockholders of
the Company in any tender offer or exchange offer whereby a Corporate Change
takes place or (iii) if a Corporate Change occurs other than as described in
Clause (i) or Clause (ii), the Fair Market Value per share determined by the
Committee as of the date determined by the Committee to be the date of
cancellation and surrender of an Option or Award. If the consideration
offered to stockholders of the Company in any transaction described in this
definition or Section 8 consists of anything other than cash, the Committee
shall determine the fair cash equivalent of the portion of the consideration
offered which is other than cash.

                2.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations promulgated thereunder.

                2.6 "Committee" shall mean the Board of Directors or a
delegate, as provided for in Section 5 hereof.

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

                2.8 "Corporate Change" mans one of the following events: (i)
the merger, consolidation or other reorganization of the Company in which the
outstanding Common Stock is converted into or exchanged for a different class
of securities of the Company, a class of securities of any other issuer
(except a direct or indirect wholly owned subsidiary of the Company), cash or
other property, (ii) the sale, lease or exchange of all or substantially all
of the assets of the Company to any other corporation or entity (except a
direct or indirect wholly owned subsidiary of the Company), (iii) the
adoption by the stockholders of the Company of a plan of liquidation and
dissolution, (iv) the acquisition (other than any acquisition pursuant to any
other clause of this definition) by any person or entity, including without
limitation a "group" as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (whether or not such Act is then applicable
to the Company), of beneficial ownership, as contemplated by such Section, of
more than twenty percent (20%) (based on voting power) of the Company's
outstanding capital stock, or (v) as a result of or in connection with a
contested election of directors, the persons who were the directors of the
Company before such election shall cease to constitute a majority of the
Board of Directors.

                2.9 "Eligible Optionee" shall mean, with respect to a
Non-Qualified Option and/or Award, any stockholder of the Company, and any
person employed by, or performing services for, the Company or any Parent or
Subsidiary of the Company including, without limitation, directors and
officers of the Company and employees of any stockholder of the Company that
is performing services for the Company.

                2.10 "Employee" shall mean, with respect to an ISO, any
person, including, without limitation, an officer or director of the Company,
who, at the time an ISO is granted to such person hereunder, is employed on a
full-time basis by the Company or any Parent or Subsidiary of the Company.

                2.11 "Effective Date" shall mean the date established by the
Board of Directors in connection with its adoption of the Plan, provided the
Plan is approved by the requisite



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proportion of the stockholders of the Company within twelve (12) months after
adoption by the Board of Directors. Options and Awards may be granted under
the Plan prior to such approval by stockholders, provided that Options and
Awards may not vest or be exercised prior to such approval and all such
Options and Awards shall expire if the stockholders fail to timely approve
the Plan.

                2.12 "Excluded Group" shall mean the group including (a) the
Executive (as defined in Section 5.1), (b) any person who is included in the
Executive Committee, (c) any person with respect to his or her compensation
as a director; and (d) any Insider.

                2.13 "Fair Market Value" shall mean, with respect to Grants
on the date of the initial public offering of the Company, the opening value
on the New York Stock Exchange, and thereafter the average of the high and
low prices on the New York Stock Exchange during the trading hours of the New
York Stock Exchange. Prior to the initial public offering, the Committee
shall make a good faith determination of the Fair Market Value of the Company.

                2.14 "Grant" shall mean an Award or an Option.

                2.15 "Insider" shall mean all officers and directors of the
Company (and its affiliates) who are subject to Section 16b of the Securities
Exchange Act of 1934, as amended.

                2.16 "ISO" shall mean an Option that constitutes an incentive
stock option under Section 422(b) of the Code.

                2.17 "Non-Qualified Option" shall mean an Option granted to a
Participant pursuant to the Plan that is intended to be, and qualifies as, a
"non-qualified stock option" as described in Treasury Regulation Section
1.83-7 or any successor regulation thereto and that shall not constitute or
be treated as an ISO.

                2.18 "Option" shall mean any ISO or Non-Qualified Option
granted to an Employee or Eligible Optionee pursuant to the Plan.

                2.19 "Participant" shall mean any Employee or Eligible
Optionee to whom an Award and/or an Option is granted under the Plan.

                2.20 "Parent" of the Company shall have the meaning set forth
in Section 424(e) of the Code.

                2.21 "Percentile within the Standard & Poor 500" shall mean
the percentile determined by taking every company that was in the Standard &
Poor 500 for the entire measurement period for the Performance Based
Restricted Stock, that continues to be publicly traded at the end of the
measurement period and ranking their cumulative total shareholder return at
the end of the measurement period.

                2.22 "Performance Based Restricted Stock" means an Award of
Common Stock subject to specified restrictions that cause such Common Stock
to vest upon attainment of specified financial goals by the Company.



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                2.23 "Pooling Transaction" means an acquisition of the
Company in a transaction which is intended to be treated as a "pooling of
interests" under generally accepted accounting principles.

                2.24 "Retired" or "Retirement" shall mean that a Participant
has attained at least age 60 and completed at least 60 months of service with
the Company, a Parent or a Subsidiary. The Participant shall receive credit
for his first and last month of service with the Company, Parent or a
Subsidiary without regard to whether he was actually employed by the Company
or Parent, or a Subsidiary on every day of the month.

                2.25 "Subsidiary" of the Company shall have the meaning set
forth in Section 424(f) of the Code.

     Section 3. ELIGIBILITY. Awards and/or Options may be granted to any
Employee or Eligible Optionee; provided however, that an ISO may only be
granted to an Employee. The Committee shall have the sole authority to select
the persons to whom Awards and/or Options are to be granted hereunder, and to
determine whether a person is to be granted a Non-Qualified Option, an ISO or
an Award or any combination thereof; provided that the granting of
Performance Based Restricted Stock Awards will be upon the recommendation of
the Chief Executive Officer of the Company for approval by a committee of
members of the Board of Directors as described in Section 5.1. No person
shall have any right to participate in the Plan unless selected for
participation by the Committee. Any person selected by the Committee for
participation during any one period will not by virtue of such participation
have the right to be selected as a Participant for any other period.

     Section 4. COMMON STOCK SUBJECT TO THE PLAN.

                4.1 NUMBER OF SHARES. The total number of shares of Common
Stock for which Options and/or Awards may be granted under the Plan shall not
exceed in the aggregate eight million seven hundred fifty-three thousand
shares (8,753,000) of Common Stock (subject to adjustment as provided in
Section 8 hereof); provided, however, that all shares issued or to be issued
pursuant to Options or Awards granted under the Prior Plan shall be counted
against such aggregate share limit. The maximum number shares of Common Stock
for which Options or Awards can be granted to an individual in a calendar
year is four million (4,000,000); provided, however, that the maximum number
of shares of Common Stock that may be granted as a Performance Based Stock
Award to any one individual in a single year is 150,000.

                4.2 REISSUANCE. The shares of Common Stock that may be
subject to Options and/or Awards granted under the Plan may be either
authorized and unissued shares or shares reacquired at any time and now or
hereafter held as treasury stock as the Committee may determine. In the event
that an outstanding Option expires or is terminated for any reason, the
shares allocable to the unexercised portion of such Option may again be
subject to an Option and/or Award granted under the Plan. If any shares of
Common Stock issued or sold pursuant to an Award or the exercise of an Option
shall have been repurchased by the Company, then such shares may again be
subject to an Option and/or Award granted under the Plan.



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                4.3 SPECIAL ISO LIMITATIONS.

                    (a) The aggregate Fair Market Value (determined as of the
date an ISO is granted) of the shares of Common Stock with respect to which
ISOs are exercisable for the first time by an Employee during any calendar
year (under all incentive stock option plans of the Company or any Parent or
Subsidiary of the Company) shall not exceed $100,000.

                    (b) If any Option intended to be an ISO fails to qualify
as such, it shall be treated as a Non-Qualified Option.

                    (c) No ISO shall be granted to an Employee who, at the
time the ISO is granted, owns (actually or constructively under the
provisions of Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
Parent or Subsidiary of the Company, unless (i) the option price is at least
110% of the Fair Market Value (determination as of the time the ISO is
granted) of the shares of Common Stock subject to the ISO and (ii) the ISO by
its terms is not exercisable more than five years from the date it is granted.

                4.4 LIMITATIONS NOT APPLICABLE TO NON-QUALIFIED OPTIONS OR
AWARDS. Notwithstanding any other provision of the Plan, the provisions of
Section 4.3(a) and (b) shall not apply, nor shall be construed to apply, to
any Non-Qualified Option or Award granted under the Plan.

     Section 5. Administration of the Plan

                5.1 ADMINISTRATION. The Plan shall be administered by the
Board of Directors; provided, however, that the Board of Directors may,
subject to the other express provisions of the Plan, delegate all or a
portion of its responsibilities and authority under the Plan to a committee
consisting of no less than three members of the Board of Directors. Any such
committee shall act by a majority of its members at the time in office and
eligible to vote on a particular matter, and such action may be taken either
by a vote at a meeting (including, without limitation, a telephone
conference) or in writing without a meeting. The Board of Directors may
remove any member of such a committee at any time, and a member of such a
committee may resign upon notice to the Board of Directors. Either the Board
of Directors or such a committee may further delegate all or a portion of its
responsibilities and authority under the Plan to the Chief Executive Officer
of the Company; provided, however, that the Chief Executive Officer shall not
have, or be delegated, any authority with respect to the grant of Options or
Awards to Insiders. Subject to the provisions of this Section 5.1, the Board
of Directors shall be responsible for making all determinations with respect
to (i) all matters under the Plan pertaining to (a) Participants who are
members of the Executive Committee of the Company (the "Executive Committee")
which shall include for purposes of the Plan all Participants who are subject
to Code Section 162(m) and (b) members of the Excluded Group, and (ii) the
number of shares available under the Plan for Options. The Committee shall be
responsible for and make all determinations with respect to Award grants to
Participants who are not members of the Excluded Group. Notwithstanding the
foregoing, the Chief Executive Officer of the Company (the "Executive") shall
have the authority, be responsible for, make all determinations with respect
to and constitute the Committee for all matters under the Plan pertaining to
Participants



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who are not members of the Excluded Group other than (i) the making of Plan
amendments, and (ii) Performance Based Restricted Stock Awards. References
herein to the "Committee" shall mean the Board of Directors, any committee
described in this Section 5.1 and the Chief Executive Officer to the extent
of any responsibilities or authority assigned or delegated to any of them
under or pursuant to the Plan. The provisions of this Section 5.1 shall also
govern Options and Awards granted under the Prior Plan.

                5.2 Grant of Options/Awards.

                    (a) OPTIONS. Except as provided in Subsection (c)
hereunder, the Committee shall have the sole authority and discretion under
the Plan (i) to select the Employees and Eligible Optionees who are to be
granted Options hereunder; (ii) to designate whether any Option to be granted
hereunder is to be an ISO or a Non-Qualified Option; (iii) to establish the
number of shares of Common Stock that may be subject to each Option; (iv) to
determine the time and the conditions subject to which Options may be
exercised in whole or in part; (v) to determine the amount (not less than the
par value per share) and the form of the consideration that may be used to
purchase shares of Common Stock upon exercise of any Option (including,
without limitation, the circumstances under which issued and outstanding
shares of Common Stock that have been held by a Participant for at least six
months may be used by the Participant to exercise an Option); (vi) to impose
restrictions and/or conditions with respect to shares of Common Stock
acquired upon exercise of an Option; (vii) to determine the circumstances
under which shares of Common Stock acquired upon exercise of any Option may
be subject to repurchase by the Company; (viii) to determine the
circumstances and conditions subject to which shares acquired upon exercise
of an Option may be sold or otherwise transferred, including, without
limitation, the circumstances and conditions subject to which a proposed sale
of shares of Common Stock acquired upon exercise of an Option may be subject
to the Company's right of first refusal (as well as the terms and conditions
of any such right of first refusal); (ix) to establish a vesting provision
for any Option relating to the time when (or the circumstances under which)
the Option may be exercised by a Participant, including, without limitation,
vesting provisions that may be contingent upon (A) the Company's meeting
specified financial goals, (B) a Corporate Change of the Company or (C) the
occurrence of other specified events; (x) to accelerate the time when
outstanding Options may be exercised, including, without limitation,
accelerations to a date or dates within six months of the date of grant;
provided, however, that the exercise of any ISOs may be "accelerated" solely
within the meaning of Section 424(h) of the Code; and (xi) to establish any
other terms, restrictions and/or conditions applicable to any Option not
inconsistent with the provisions of the Plan. For purposes of this
subsection, an Option shall be deemed granted on the date the Committee
selects an individual to be an Optionee, determine the number of Shares to be
issued pursuant to such Option, and specify the terms and conditions of such
Option. Notwithstanding the general discretionary nature of the grant of
Options hereunder, (i) every exempt employee within the meaning of the Fair
Labor Standards Act may receive a Grant on the date of the initial public
offering of the Company, with an exercise price equal to the Fair Market
Value of the Common Stock on the date of Grant, and (ii) every individual who
has accepted an offer of employment with the Company as an exempt employee
within the meaning of the Fair Labor Standards Act and who first performs an
hour of service with the Company within thirty (30) days of the initial
public offering of the Company may receive a Grant with an exercise price
equal to the Fair Market



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Value of the Common Stock on the date such employee first performs an hour of
service with the Company.

                    (b) AWARDS. Subject to Section 3 and Section 5.1, the
Committee shall have the sole authority and discretion under the Plan (i) to
select the Employees and Eligible Optionees who are to be granted Awards
hereunder; (ii) to determine the consideration (which may be cash, property
or services rendered) to be paid by a Participant to acquire shares of Common
Stock pursuant to an Award, which amount may be equal to, more than or less
than 100% of the Fair Market Value of such shares on the date the Award is
granted (but in no event less than the par value of such shares); (iii) to
determine the time or times, and the conditions subject to which, Awards may
be made; (iv) to determine the time or times and the conditions subject to
which the shares of Common Stock subject to an Award are to become vested
and/or no longer subject to repurchase by the Company; (v) to establish
transfer restrictions and the terms and conditions on which any such transfer
restrictions with respect to shares of Common Stock acquired pursuant to an
Award shall lapse; (vi) to establish vesting provisions with respect to any
shares of Common Stock subject to an Award, including, without limitation,
vesting provisions which may be contingent upon (A) the Company's meeting
financial goals specified by the Committee, (B) a Corporate Change with
respect to the Company or (C) the occurrence of other specified events; (vii)
to determine the circumstances under which shares of Common Stock acquired
pursuant to an Award may be subject to repurchase by the Company; (viii) to
determine the circumstances and conditions subject to which any shares of
Common Stock acquired pursuant to an Award may be sold or otherwise
transferred, including, without limitations, the circumstances and conditions
subject to which a proposed sale of shares of Common Stock acquired pursuant
to an Award may be subject to the Company's right of first refusal (as well
as the terms and conditions of any such right of first refusal); (ix) to
determine the form of consideration that may be used to purchase shares of
Common Stock pursuant to an Award (including, without limitation, the
circumstances under which issued and outstanding shares of Common Stock that
have been held by a Participant for at least six months may be used by the
Participant to purchase the Common Stock subject to an Award); (x) to
accelerate the time at which any or all restrictions imposed with respect to
any shares of Common Stock subject to an Award will lapse, including, without
limitation, accelerations to a date or dates within six months of the date of
grant; and (xi) to establish any other terms, restrictions and/or conditions
applicable to any Award not inconsistent with the provisions of the Plan.

                    (c) FORMULA AWARDS. Subject to the provisions below, each
non-employee member of the Board of Directors on the date of the initial
public offering of the Company shall receive a Non-Qualified Option for
42,000 shares of Common Stock, with an exercise price equal to the Fair
Market Value of a share of Common Stock on the date of the initial public
offering of the Company; provided, however, that, notwithstanding the
foregoing, if such director has elected in writing, on a form provided by the
Committee, by the date of the initial public offering of the Company to
receive his director compensation from the Company in the form of cash and
Non-Qualified Options the aforementioned Non-Qualified Option shall be for
28,500 shares instead of 42,000 shares of Common Stock. Subject to the
provisions below, every individual who becomes a non-employee member of the
Board of Directors after the initial public offering shall receive on the
date he becomes such a director a Non-Qualified Option for 42,000 shares of
Common Stock, with an exercise price equal to the Fair Market Value of a
share of Common Stock on such date; provided, however, that notwithstanding
the foregoing, if



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such director has elected in writing, on a form provided by the Committee, by
the date he becomes such a director to receive all of his director
compensation from the Company in the form of cash and Non-Qualified Options,
the aforementioned Non-Qualified Option shall be for 28,500 shares instead of
42,000 shares of Common Stock.

                  A non-employee director receiving a formula Grant under
this Section 5.2(c) shall not be precluded from receiving additional Grants
under the Plan.

                  The vesting schedule and other terms of the Grants to
directors under this Section 5.2(c) shall be set forth in agreements with the
directors.

                    (d) BONA FIDE OFFER TO PURCHASE SHARES. This subsection
shall lapse and be of no further force or effect upon completion of an
initial public offering of the Common Stock of the Company. If a Participant
shall at any time prior to the date on which an underwritten public offering
of the Company's Common Stock, registered under the Securities Act of 1933,
as amended (a "Public Offering"), desire to sell all or any of the Common
Stock acquired by the Participant pursuant to an Option or an Award ("Plan
Shares") and obtains a bona fide written offer which Participant desires to
accept (referred to in this Section as the "Offer") to purchase all, or a
portion of the Participant's Plan Shares the Participant shall transmit
copies of the Offer to the Company within five (5) business days after
Participant's receipt of the Offer. Except as provided below, prior to a
Public Offering a Participant may sell Plan Shares only for cash. The Offer
shall set forth its date, the proposed price per share of Common Stock, the
number of shares of Common Stock being sold, and the other terms and
conditions upon which the purchase is proposed to be made, as well as the
name and address of the prospective purchaser. Transmittal of the Offer to
the Company by Participant shall constitute an offer by Participant to sell
all of the Plan Shares which are subject to the Offer to the Company at a
price equal to the cash consideration plus the Fair Market Value of the
non-cash consideration specified in the Offer for such Common Stock (the
"Purchase Price") and upon the other terms set forth in the Offer, except as
hereinafter provided. For a period of sixty (60) days after the submission of
the Offer to the Company, the Company shall have the option, exercisable by
notice to Participant, to accept Participant's offer as to all, but not less
than all, of the Plan Shares that are the subject of the Offer. If the
Company does not exercise its option to purchase within the specified 60 day
period or if the Company waives, in writing, the 60 day period, the
Participant may then, and only then, accept the offer from the prospective
purchaser. Any sale of Plan Stock which occurs without complying with the
provisions of this Section 5.2(d) is null and void.

                    (e) PERFORMANCE BASED RESTRICTED STOCK. The measurement
period for the financial goals that are part of any Performance Based
Restricted Stock Awards will be five complete fiscal years. Such Awards will
be made at the beginning of the measurement period; provided, however, that
notwithstanding the foregoing, Participants who are hired within the first
two years of a measurement period may be granted such an Award with such
modifications as are deemed appropriate by the Committee.

                5.3 INTERPRETATION. The Committee shall be authorized to
interpret the Plan and may, from time to time, adopt such rules and
regulations, not inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the purposes of the Plan.



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                5.4 FINALITY. The interpretation and construction by the
Committee of any provision of the Plan, any Grant, or any factual matter
pertaining thereto under or any agreement evidencing any such Grant shall be
final and conclusive upon all parties.

                5.5 EXPENSES, ETC. All expenses and liabilities incurred by
the Committee in the administration of the Plan shall be borne by the
Company. The Committee may employ attorneys, consultants, accountants or
other persons in connection with the administration of the Plan. The Company,
and its officers and directors, shall be entitled to rely upon the advice,
opinions or valuations of any such persons. No member of the Committee shall
be liable for any action, determination or interpretation taken or made in
good faith with respect to the Plan or any Option and/or Award granted
hereunder.

                5.6 AUTHORITY OF THE BOARD OF DIRECTORS. Notwithstanding any
provision of this Plan to the contrary, the Board of Directors may
independently exercise any and all powers of the Committee or the Executive
or allocate their respective responsibilities to others under the Plan,
including retaining any of them for itself, with respect to any and all
aspects of the Plan in the sole discretion of the Board of Directors. The
Committee and the Executive shall have no authority or obligation with
respect to any matters in connection with the Plan over which the Board of
Directors chooses to act.

     Section 6. TERMS AND CONDITIONS OF OPTIONS.

                6.1 ISOs. The terms and conditions of each ISO granted under
the Plan shall be specified by the Committee and shall be set forth in a
written ISO agreement between the Company and the Participant in such form as
the Committee shall approve. The terms and conditions of each ISO shall be
such that each ISO issued hereunder shall constitute and shall be treated as
an "incentive stock option" as defined in Section 422(b) of the Code. The
terms and conditions of any ISO granted hereunder need not be identical to
those of any other ISO granted hereunder. If any portion of an Option
designated as an ISO is determined for any reason not to qualify as an
incentive stock option within the meaning of Section 422 of the Code, such
Option shall be treated as a Non-Qualified Option for all purposes under the
provisions of the Plan.

                The terms and conditions of each ISO shall include the
following:

                (a) The option price shall be fixed by the Committee but
shall in no event be less than 100% (or 110% in the case of an Employee
referred to in Section 4.3(c) hereof) of the Fair Market Value of the shares
of Common Stock subject to the ISO on the date the ISO is granted.

                (b) ISOs, by their terms, shall not be transferable otherwise
than by will or the laws of descent and distribution, and, during a
Participant's lifetime, an ISO shall be exercisable only by the Participant
or by the guardian or legal representative of the Participant acting in a
fiduciary capacity on behalf of the Participant under state law and court
supervision. The Committee may in its discretion, require a Participant's
guardian or legal representative to supply it with such evidence as the
Committee deems necessary to establish the authority of the guardian or legal
representative to act on behalf of the Participant.



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<PAGE>

                (c) The Committee shall fix the term of all ISOs granted
pursuant to the Plan (including, without limitation, the date on which such
ISO shall expire and terminate); provided, however, that such term shall in
no event exceed ten years from the date on which such ISO is granted (or, in
the case of an ISO granted to an Employee referred to in Section 4.3(c)
hereof, such term shall in no event exceed five years from the date on which
such ISO is granted). Each ISO shall be exercisable in such amount or
amounts, under such conditions and at such times or intervals or in such
installments as shall be determined by the Committee in its sole discretion;
provided, however, that, subject to Section 5.2(a)(x) hereof, in no event
shall any ISO be granted to any director or officer of the Company or an
affiliate who is an Insider that is exercisable, in whole or in part, prior
to the date that is six months after the date such ISO is granted to such
director or officer.

                (d) To the extent that the Company or any Parent or
Subsidiary of the Company is required to withhold any Federal, state or local
taxes (including FICA) in respect of any compensation income realized by any
Participant as a result of the exercise of an ISO (if any) a "disqualifying
disposition" of any shares of Common Stock acquired upon exercise of an ISO
granted hereunder, the Company shall deduct from any payments of any kind
otherwise due to such Participant the aggregate amount of such minimum
Federal, state or local taxes required to be so withheld or, if such payments
are insufficient to satisfy such Federal, state or local taxes required to be
withheld, such Participant will be required to pay to the Company, or make
other arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. All matters with respect
to the total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Committee, in its sole
discretion. If the Committee determines that withholding for FICA purposes is
required upon exercise of an ISO, it will withhold in accordance with this
subsection. In order to effect the withholding described in this subsection
on a disqualifying disposition, the Optionee shall, within ten (10) days of
such disposition, notify the Company in writing as provided in Section 18
hereof.

                (e) In the sole discretion of the Committee the terms and
conditions of any ISO may include any or all of the following provisions:

                    (i) In the event that the Company or any Parent or
Subsidiary of the Company terminates a Participant's employment for Cause,
the unexercised portion of any ISO held by such Participant at that time may
only be exercised within one month after the date on which the Participant
ceased to be so employed, and only to the extent that the Participant could
have otherwise exercised such ISO as of the date on which he ceased to be so
employed. In the event that a Participant terminates his employment with the
Company or any Parent or Subsidiary of the Company, for any reason whatsoever
other than as a result of his death or "disability" (within the meaning of
Section 22(e)(3) of the Code), the unexercised portion of any ISO held by
such person shall cease to be exercisable after his termination date. For
purposes of this subsection, a Participant who transfers to a Subsidiary or
Parent shall not be regarded as having terminated employment, but if a
Subsidiary is sold, exchanged or otherwise disposed of by the Company, a
Participant who continues in the employ of the Subsidiary shall be regarded
as having terminated his or her employment.



                                       10
<PAGE>

                  Notwithstanding the foregoing and anything else herein to
the contrary, if the Committee determines, after full consideration of the
facts presented on behalf of the Company and the Participant, that the
Participant has been engaged in disloyalty to the Company or any of its
affiliates, including, without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his employment
or service, or has disclosed trade secrets or confidential information of the
Company or of an affiliate, any unexercised ISO previously granted to the
Participant shall terminate immediately and the Participant shall forfeit all
shares of Common Stock for which the Company has not yet delivered the share
certificates upon refund by the Company of the option price. The Company may
also withhold delivery of share certificates pending the resolution of any
inquiry that could lead to a finding resulting in a forfeiture.

                  (ii)  In the event a Participant shall cease to be employed
by the Company or any Parent or Subsidiary of the Company on a full-time
basis as a result of the termination of such Participant's employment by such
entity other than for Cause or as a result of his death or "disability"
(within the meaning of Section 22(e)(3) of the Code), the unexercised portion
of any ISO held by such Participant at that time may only be exercised within
three (3) months after the date on which the Participant ceased to be so
employed, and only to the extent that the Participant could have otherwise
exercised such ISO as of the date on which he ceased to be so employed. The
foregoing notwithstanding, however if the Participant's cessation of
employment pursuant to this Section 6.1(e)(ii) is by reason of the
Participant's Retirement, "one year" shall be substituted for "three (3)"
months in the preceding sentence, except that the Participant shall not be
entitled to treat any portion of an Option as an ISO if it is exercised more
than three (3) months after Participant's cessation of employment by reason
of Retirement.

                  (iii) In the event a Participant shall cease to be employed
by the Company or any Parent or Subsidiary of the Company on a full-time
basis by reason of his "disability" (within the meaning of Section 22(e)(3)
of the Code), the unexercised portion of any ISO held by such Participant at
that time may only be exercised within one year after the date on which the
Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised such ISO as of the date on which
he ceased to be so employed.

                  (iv) In the event a Participant shall die while in the
employ of the Company or a Parent or Subsidiary of the Company (or within a
period of one month after ceasing to be an Employee for any reason other than
his "disability" (within the meaning of Section 22(e)(3) of the Code) or
within a period of one year after ceasing to be an Employee by reason of such
"disability"), the unexercised portion of any ISO held by such Participant at
the time of his death may only be exercised within one year after the date of
such Participant's death, and only to the extent that the Participant could
have otherwise exercised such ISO at the time of his death. In such event,
such ISO may be exercised by the executor or administrator of the
Participant's estate or by any person or persons who shall have acquired the
ISO directly from the Participant by bequest or inheritance or, if the
Committee so provides, by the person or persons designated by the Participant
as a beneficiary hereunder.

                6.2 NON-QUALIFIED OPTIONS. The terms and conditions of each
Non-Qualified Option granted under the Plan shall be specified by the
Committee, in its sole discretion, and shall be set forth in a written
Non-Qualified Option agreement between the Company and the



                                      11
<PAGE>

Participant in such form as the Committee shall approve. The terms and
conditions of each Non-Qualified Option will be such (and each Non-Qualified
Option agreement shall expressly so state) that each Non-Qualified Option
issued hereunder shall not constitute nor be treated as an "incentive stock
option" as defined in Section 422(b) of the Code, but will be a
"non-qualified stock option" for Federal, state and local income tax
purposes. The terms and conditions of any Non-Qualified Option granted
hereunder need not be identical to those of any other Non-Qualified Option
granted hereunder.

                  The terms and conditions of each Non-Qualified Option
agreement shall include the following:

                  (a) The option (exercise) price shall be fixed by the
Committee and may be equal to, more than or less than 100% of the Fair Market
Value of the shares of Common Stock subject to the Non-Qualified Option on
the date such Non-Qualified Option is granted.

                  (b) The Committee shall fix the term of all Non-Qualified
Options granted pursuant to the Plan (including, without limitation, the date
on which such Non-Qualified Option shall expire and terminate). Such term may
be more than ten years from the date on which such Non-Qualified Option is
granted. Each Non-Qualified Option shall be exercisable in such amount or
amounts, under such conditions (including, without limitation, provisions
governing the rights to exercise such Non-Qualified Option), and at such
times or intervals or in such installments as shall be determined by the
Committee in its sole discretion; provided, however, that, subject to Section
5.2(a)(x) hereof, in no event shall any Non-Qualified Option be granted to
any director or officer of the Company or an affiliate who is an Insider that
is exercisable, in whole or in part, prior to the date that is six months
after the date such Non-Qualified Option is granted to such director or
officer.

                  (c) Except as otherwise provided in this Section 6.2(c), no
Non-Qualified Option shall be transferable otherwise than by will or the laws
of descent and distribution, and during a Participant's lifetime a
Non-Qualified Option shall be exercisable only by the Participant or by the
guardian or legal representative of the Participant acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.
The Committee may in its discretion, require a Participant's guardian or
legal representative to supply it with such evidence as the Committee deems
necessary to establish the authority of the guardian or legal representative
to act on behalf of the Participant. Notwithstanding the foregoing, a
Non-Qualified Option shall be transferable pursuant to a "domestic relations
order" as defined in the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and also shall be transferable,
without payment of consideration, to (a) immediate family members of the
holder (I.E., optionee, spouse or former spouse, parents, issue including
adopted and "step" issue, or siblings), (b) trusts for the benefit of
immediate family members, (c) partnerships whose only partners are such
family members, and (d) to any other transferee permitted by a rule adopted
by the Committee in an individual case. Any transferee will be subject to all
of the conditions set forth in the Non-Qualified Option prior to its transfer.

                  (d) To the extent that the Company is required to withhold
any Federal, state or local taxes in respect of any compensation income
realized by any Participant in respect of any Non-Qualified Option granted
hereunder or in respect of any shares of Common Stock




                                       12
<PAGE>

acquired upon exercise of a Non-Qualified Option, the Company shall deduct
from any payments of any kind otherwise due to such Participant the aggregate
minimum amount of such Federal, state or local taxes required to be so
withheld or, if such payments are insufficient to satisfy such Federal, state
or local taxes, or if no such payments are due or to become due to such
Participant, then, such Participant will be required to pay to the Company,
or make other arrangements satisfactory to the Company regarding payment to
the Company of the aggregate amount of any such taxes. All matters with
respect to the total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Board of Directors, in its
sole discretion.

                (e) In the sole discretion of the Committee the terms and
conditions of any Non-Qualified Option may include provisions similar to any
of the provisions set forth in Subsection 6.1(e) hereof.

     Section 7. TERMS AND CONDITIONS OF AWARDS. The terms and conditions of
each Award granted under the Plan shall be specified by the Committee, in its
sole discretion, and shall be set forth in a written agreement between the
Participant and the Company, in such form as the Committee shall approve. The
terms and provisions of any Award granted hereunder need not be identical to
those of any other Award granted hereunder.

                (a) The consideration (which may be cash, property or
services rendered) to be paid by a Participant to acquire the shares of
Common Stock pursuant to an Award shall be fixed by the Committee and may be
equal to, more than or less than 100% of the Fair Market Value of the shares
of Common Stock subject to the Award on the date the Award is granted (but in
no event less than the par value of such shares).

                (b) Each Award shall contain such vesting provisions, such
transfer restrictions and such other restrictions and conditions as the
Committee, in its sole discretion, may determine, including, without
limitation, the circumstances under which the Company shall have the right
and option to repurchase shares of Common Stock acquired pursuant to an
Award; provided, however, that, subject to Section 5.2(b)(x) hereof, in no
event shall any portion of any Award be granted to an officer or director of
the Company or an affiliate who is an Insider that is exercisable, in whole
or in part, prior to the date that is six months after the date such Award
(or portion thereof) is granted to such director or officer.

                (c) Stock certificates representing Common Stock acquired
pursuant to an Award shall bear a legend referring to any restrictions
imposed on such Stock and such other matters as the Committee may determine.

                (d) To the extent that the Company or any Parent or
Subsidiary is required to withhold any Federal, state or local taxes
(including FICA) in respect of any compensation income realized by the
Participant in respect of any compensation income realized by the Participant
in respect of an Award granted hereunder, in respect of any shares acquired
pursuant to an Award, or in respect of the vesting of any such shares of
Common Stock, then the Company shall deduct from any payments of any kind
otherwise due to such Participant the aggregate amount of such minimum
Federal, state or local taxes required to be so withheld, or if such payments
are insufficient to satisfy such Federal, state or local taxes, or if no such
payments are due or to become due to such Participant, then such Participant
will be required to pay to the




                                      13
<PAGE>

Company, or make other arrangements satisfactory to the Company regarding
payment to the Company of, the aggregate amount of any such taxes. All
matters with respect to the total amount of taxes to be withheld in respect
of any such compensation income shall be determined by the Committee, in its
sole discretion.

     Section 8. RECAPITALIZATION OR REORGANIZATION.

                (a) Except as hereinafter otherwise provided, Options and
Awards and any agreements evidencing Options and Awards shall be subject to
adjustment by the Committee at its discretion as to the number and price of
shares of Common Stock or other consideration subject to Options or Awards in
the event of changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock-splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of the grant of
any Options or Awards.

                (b) The existence of the Plan and the Options or Awards
granted hereunder shall not affect in any way the right or power of the Board
of Directors or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of debt or equity securities having any priority or
preference with respect to or affecting Common Stock or the rights thereof,
the dissolution or liquidation of the Company or any sale, lease, exchange or
other disposition of all or any part of its assets or business or any other
corporate act or proceeding.

                (c) The shares with respect to which Options and Awards may
be granted are shares of Common Stock as presently constituted, but if, and
whenever, prior to the expiration of an Option or Award theretofore granted,
the Company shall effect a subdivision or consolidation or the payment of a
stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock subject to an Award or with
respect to which Options may thereafter be exercised (i) in the event of an
increase in the number of outstanding shares shall be proportionately
increased and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares
shall be proportionately reduced, and the purchase price per share shall be
proportionately increased.

                (d) If the Company recapitalizes or otherwise changes its
capital structure, thereafter upon any exercise of an Option theretofore
granted the Optionee shall be entitled to purchase under such Option, in lieu
of the number of shares of Common Stock as to which such Option shall then be
exercisable, the number and class of shares of stock and securities and the
cash and other property to which the Optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to such
recapitalization, the Optionee had been the holder of record of the number of
shares of Common Stock then covered by such Option.

                (e) In the event of a Corporate Change, then no later than
(i) two business days prior to any Corporate Change referenced in Clause (i),
(ii), (iii) or (v) of the definition thereof or (ii) ten business days after
any Corporate Change referenced in Clause (iv) of the definition thereof, the
Committee, acting in its sole discretion without the consent or approval of



                                       14
<PAGE>

any Optionee, shall act to effect one or more of the following alternatives
with respect to outstanding Options which acts may vary among individual
Optionees, may vary among Options held by individual Optionees and, with
respect to acts taken pursuant to Clause (i) above, may be contingent upon
effectuation of the Corporate Change; (A) accelerate the time at which
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 Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of Optionees thereunder
shall terminate; (B) require the mandatory surrender to the Company by
selected Optionees of some or all of the outstanding Options held by such
Optionees (irrespective of whether such Options are then exercisable under
the provisions of the Plan) as of a date (before or after such Corporate
Change) specified by the Committee, in which event the Committee shall
thereupon cancel such Options and pay to each Optionee an amount of cash per
share equal to the excess, if any, of the Change of Control Value of the
shares subject to such Option over the exercise price(s) under such Options
for such shares; (C) make such adjustments to Options then outstanding as the
Committee deems appropriate to reflect such Corporate Change (provided,
however, that the Committee may determine in its sole discretion that no
adjustment is necessary to Options then outstanding); (D) provide that
thereafter upon any exercise of an Option theretofore granted the Optionee
shall be entitled to purchase under such Option, in lieu of the number of
shares of Common Stock as to which such Option shall then be exercisable, the
number and class of shares of stock or other securities or property
(including, without limitation, cash) to which the Optionee would have been
entitled pursuant to the terms of the agreement of merger, consolidation or
sale of assets or plan of liquidation and dissolution if, immediately prior
to such merger, consolidation or sale of assets or any distribution in
liquidation and dissolution of the Company, the Optionee had been the holder
of record of the number of shares of Common Stock then covered by such
Option; or (E) provide, if so negotiated by the Company, for the assumption
of the Options by the surviving entity in any Corporate Change.

                (f) Plan provisions to the contrary notwithstanding, with
respect to any Awards outstanding at the time a Corporate Change occurs, the
Committee may, in its discretion, provide (i) for full vesting of all Common
Stock awarded to the Participants pursuant to such Awards as of the date of
such Corporate Change and (ii) that all restrictions applicable to such Award
shall terminate as of such date.

     Section 9. EFFECT OF THE PLAN ON EMPLOYMENT RELATIONSHIP. Neither the
Plan nor any Option and/or Award granted hereunder to a Participant shall be
construed as conferring upon such Participant any right to continue in the
employ of (or otherwise provide services to) the Company or any Subsidiary or
Parent thereof, or limit in any respect the right of the Company or any
Subsidiary or Parent thereof to terminate such Participant's employment or
other relationship with the Company or any Subsidiary or Parent, as the case
may be, at any time.

     Section 10. AMENDMENT OF THE PLAN. The Board of Directors may amend the
Plan from time to time as it deems desirable; provided, however, that (i)
without the approval of the holders of a majority of the outstanding capital
stock of the Company entitled to vote thereon or consent thereto, the Board
of Directors may not amend, the Plan (x) to increase (except for increases
due to adjustments in accordance with Section 8 hereof) the aggregate number
of shares of Common Stock for which Options and/or Awards may be granted
hereunder, (y) to decrease the minimum exercise price specified by the Plan
in respect of ISOs or (z) to change the class of Employees




                                      15
<PAGE>

eligible to receive ISOs under the Plan and (ii) without the approval of the
Participant or Participants adversely effected, the Board of Directors may
not amend the Plan in a manner that has an adverse effect on the vested
rights of any Participant under any Award or Option theretofore granted under
the Plan. Notwithstanding the foregoing, a committee described in Section 5.1
hereof may make any technical or clerical changes to the Plan, and the Board
may also delegate to such a committee the right to amend the Plan, or any
other responsibility with respect to the Plan, in any respect not described
in Section 10(i) above.

     Section 11. AMENDMENT OF AN AWARD OR OPTION. Subject to provisions of
the Plan, the Committee shall have the right to amend any Option or Award
issued to a Participant, subject to the Participant's written consent, in the
event such amendment is not favorable to the Participant or if such amendment
has the effect of changing an ISO to a Non-Qualified Option; provided,
however, that the consent of the Participant shall not be required for any
amendment made pursuant to Section 5.2(a)(x) or Section 5.2(b)(x). In
elaboration of the foregoing, a Participant is not required to consent to the
deemed acceleration of an ISO, unless such deemed acceleration would cause
the ISO to be treated as a Non-Qualified Option or otherwise have adverse
income tax consequences.

     Section 12. TERMINATION OF THE PLAN. The Board of Directors may
terminate the Plan at any time. Unless the Plan shall theretofore have been
terminated by the Board of Directors, the Plan shall terminate ten years
after the Effective Date. No Grant may be made hereunder after termination of
the Plan. The termination or amendment of the Plan shall not alter or impair
any rights or obligations under any Option and/or Award theretofore granted
under the Plan.

     Section 13. AWARDS TO FOREIGN NATIONALS AND EMPLOYEES OUTSIDE THE UNITED
STATES. To the extent the Committee deems it necessary, appropriate or
desirable to comply with foreign law or practice and to further the purpose
of this Plan, the Committee may, without amending the Plan, (i) establish
rules applicable to Grants to Participants who are foreign nationals or are
employed outside the United States, or both, including rules that differ from
those set forth in the Plan, and (ii) make Grants to such Participants in
accordance with those rules.

     Section 14. GOVERNING LAW. To the extent not preempted by Federal law
the Plan, and all agreements thereunder, shall be construed in accordance
with and governed by the laws of the State of Texas, without regard to its
conflicts of law principles.

     Section 15. INDEMNIFICATION. Each person who constitutes, or has been a
member of, the Committee, or of the Board of Directors, shall be indemnified
and held harmless by the Company, Parent, or Subsidiary as applicable against
and from any loss, cost, liability or expense that may be imposed upon or
reasonably incurred by such person in connection with or resulting from any
claim, action, suit or proceeding to which such person may be a party or in
which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by such
person in a suit, a settlement approved by the Company, or paid by such
person in satisfaction of any judgment in any such action, suit, or
Proceeding against such person, except in relationship to matters as to which
it shall be adjudged in such action, suit or proceeding, that the director or
Committee or Committee member is liable for gross negligence or willful
misconduct in the performance of his or her duties, provided such person
shall give the Company, Parent or Subsidiary, as applicable, an opportunity,
at its own



                                       16
<PAGE>

expense, to handle and defend the same before such person undertakes to
handle or defend it. The foregoing right of indemnification shall not be
exclusive of any rights of indemnification to which such person may be
entitled under the Company's Articles of Incorporation or by-laws, as a
matter of law, or otherwise, or any other power that the Company may have to
indemnify them or hold them harmless.

     Section 16. SUCCESSORS. All obligations of the Company under the Plan or
an Agreement with respect to Grants hereunder shall be binding upon any
successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase of all or substantially all of the
business and/or assets of the Company, or of a merger, consolidation, or
otherwise.

     Section 17. EFFECT UPON OTHER COMPENSATION. Nothing contained herein
shall preclude the Company, Parent or any Subsidiary from adopting other or
additional compensation arrangements for its employees or directors. The
effect under any other benefit plan of the Company, Parent, or any Subsidiary
of an inclusion in income by virtue of a Grant hereunder shall be determined
under such other plan.

     Section 18. NOTICE. Notice to the Company pursuant to the Plan shall be
deemed given if in writing including, without limitation, facsimile or any
other communication transmitted to the general counsel of the Company. Notice
to the Grantee or Grantee's estate, if applicable, shall be given by
registered mail to such person's last known address.

     Section 19. DELIVERY OF THE PLAN. A copy of this Plan shall be delivered
to the Secretary of the Company and shall be shown by him to each eligible
person making reasonable inquiry concerning it.

     Section 20. POOLING TRANSACTION. Notwithstanding anything contained
herein to the contrary, in the event of Corporate Change which is also
intended to constitute a Pooling Transaction, the Committee is authorized and
directed to take such actions, if any, as are specifically recommended by an
independent accounting firm retained by the Company to the extent reasonably
necessary in order to assure that the Pooling Transaction will qualify as
such.

     Section 21. GOVERNMENT APPROVALS. Each Grant is subject to the
requirement that, if at any time, the Committee determines in its sole
discretion, that the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with, a Grant
or the issuance of Shares hereunder, no Grant shall be made or Shares issued,
in whole or in part, unless such consent or approval has been effected or
obtained free of conditions as acceptable to the Committee.



                                       17