SEAGULL ENERGY CORPORATION

                             1998 OMNIBUS STOCK PLAN

                                   I. PURPOSE

The purpose of the  SEAGULL  ENERGY  CORPORATION  1998  OMNIBUS  STOCK PLAN (the
"Plan") is to provide a means through which SEAGULL ENERGY CORPORATION,  a Texas
corporation  (the  "Company"),  and its subsidiaries may attract able persons to
enter the  employ  of the  Company  and to  provide  a means  whereby  those key
employees upon whom the  responsibilities  of the successful  administration and
management of the Company rest, and whose present and potential contributions to
the welfare of the Company are of  importance,  can acquire and  maintain  stock
ownership,  thereby  strengthening  their concern for the welfare of the Company
and their  desire to remain in its employ.  A further  purpose of the Plan is to
provide such key employees with  additional  incentive and reward  opportunities
designed to enhance the profitable growth of the Company.  Accordingly, the Plan
provides for granting  Incentive  Stock  Options  (subject to the  provisions of
Paragraph  VII(c)),  options which do not  constitute  Incentive  Stock Options,
Stock Appreciation Rights,  Restricted Stock Awards, Long-Term Incentive Awards,
or any combination of the foregoing,  as is best suited to the  circumstances of
the particular employee as provided herein.

                                 II. DEFINITIONS

The  following  definitions  shall be  applicable  throughout  the  Plan  unless
specifically modified by any paragraph:

(a) "Award" means, individually or collectively, any Option, Restricted Stock
Award, Long-Term Incentive Award or Stock Appreciation Right.

(b) "Award  Agreement" means any Option  Agreement,  Restricted Stock Agreement,
Long-Term Incentive Award Agreement or Stock Appreciation Rights Agreement.

(c) "Board" means the Board of Directors of the Company.

(d) "Change of Control" means the occurrence of any of the following events: (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 a
previously  wholly-owned  subsidiary  of the Company),  (ii) the Company  sells,
leases or exchanges all or  substantially  all of its assets to any other person
or entity  (other than a  wholly-owned  subsidiary  of the  Company),  (iii) the
Company is to be dissolved and liquidated,  (iv) any person or entity, including
a "group" as contemplated by Section 13(d)(3) of the 1934 Act, acquires or gains
ownership or control (including, without limitation, power to vote) of more than
40% of the outstanding  shares of the Company's  voting stock (based upon voting
power),  or (v) as a result of or in  connection  with a  contested  election of
directors,  the persons who were  directors of the Company  before such election
shall cease to constitute a majority of the Board.

(e)  "Change of Control  Value"  shall mean (i) the per share  price  offered to
shareholders of the Company in any merger, consolidation,  reorganization,  sale
of assets or  dissolution  transaction,  (ii) the  price  per share  offered  to
shareholders  of the  Company in any tender  offer or exchange  offer  whereby a
Change of Control  takes place,  or (iii) if the Change of Control  occurs other
than pursuant to a tender or exchange offer,  the Fair Market Value per share of
the shares into which Awards are exercisable, as determined by the Committee. In
the event that the  consideration  offered to  shareholders  of the Company in a
Change of Control  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.

(f)  "Code" means the Internal Revenue Code of 1986, as amended.  Reference in
the Plan to any section of the Code shall be deemed to include any amendments or
successor provisions to any section and any regulations under such section.

(g)  "Committee" means the Compensation Committee of the Board which shall be
(i) constituted so as to permit the Plan to comply with Rule 16b-3 and
(ii) comprised solely of two or more "outside directors," within the meaning of
section 162(m) of the Code and applicable interpretive authority thereunder.

(h)  "Company" means Seagull Energy Corporation.

(i)  "Director" means an individual elected to the Board by the shareholders of
the Company or by the Board under applicable corporate law who is serving on the
Board on the date the Plan is adopted by the Board or is elected to the Board
after such date.

(j) An  "employee"  means any person  (including an officer or a Director) in an
employment relationship with the Company or any parent or subsidiary corporation
(as defined in section 424 of the Code).

(k) "1934 Act" means the Securities Exchange Act of 1934, as amended.

(l) "Fair Market Value" means,  as of any specified  date, the reported  closing
price of the Stock on the New York Stock  Exchange  Composite Tape on that date,
or if no closing price is reported on that date, on the last  preceding  date on
which such closing price of the Stock is so reported.  In the event Stock is not
publicly traded at the time a determination  of its value is required to be made
hereunder,  the  determination  of its fair  market  value  shall be made by the
Committee in such manner as it deems appropriate.

(m) "Holder" means an employee who has been granted an Award.

(n) "Incentive Stock Option" means an incentive stock option within the meaning
of section 422 of the Code.

(o) "Long-Term  Incentive Award" means an Award granted under Paragraph X of the
Plan.

(p) "Long-Term  Incentive Award Agreement" means a written agreement between the
Company and a Holder with respect to a Long-Term Incentive Award.

(q) "Option" means an Award granted under Paragraph VII of the Plan and includes
both Incentive Stock Options to purchase Stock and Options which do not
constitute Incentive Stock Options to purchase Stock.

(r)  "Option  Agreement"  means a written  agreement  between  the Company and a
Holder with respect to an Option.

(s)  "Plan" means the Seagull Energy Corporation 1998 Omnibus Stock Plan, as
amended from time to time.

(t) "Restricted  Stock Agreement" means a written  agreement between the Company
and a Holder with respect to a Restricted Stock Award.

(u)  "Restricted  Stock Award" means an Award granted under  Paragraph IX of the
Plan.

(v)  "Rule 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as such
may be amended from time to time, and any successor rule, regulation or statute
fulfilling the same or a similar function.

(w) "Spread" means, in the case of a Stock  Appreciation  Right, an amount equal
to the excess,  if any, of the Fair Market Value of a share of Stock on the date
such right is  exercised  over the  exercise  price of such  Stock  Appreciation
Right.

(x) "Stock" means the common stock, par value $0.10 per share, of the Company.

(y) "Stock  Appreciation  Right" means an Award granted under  Paragraph VIII of
the Plan.

(z) "Stock  Appreciation Rights Agreement" means a written agreement between the
Company and a Holder with respect to an Award of Stock Appreciation Rights.

                  III. EFFECTIVE DATE AND DURATION OF THE PLAN

The Plan shall be effective upon the date of its adoption by the Board, provided
the Plan is approved by the  shareholders  of the Company  within  twelve months
thereafter. Notwithstanding any provision in the Plan or in any Award Agreement,
no Option or Stock  Appreciation Right granted on or after the effective date of
the  Plan  shall be  exercisable  and no  Restricted  Stock  Award or  Long-Term
Incentive  Award shall be made prior to such  shareholder  approval.  No further
Awards may be granted under the Plan after the  expiration of ten years from the
date of its  adoption by the Board.  The Plan shall  remain in effect  until all
Awards granted under the Plan have been satisfied or expired.

                               IV. ADMINISTRATION

(a)     Committee.  The Plan shall be administered by the Committee.

(b)     Powers. Subject to the provisions of the Plan, the Committee shall have
sole authority, in its discretion, to determine which employees shall receive an
Award, the time or times when such Award shall be made, the type of Award, the
number of shares of Stock which may be issued under each Option, Stock
Appreciation Right or Restricted Stock Award, and number of shares subject to or
the value of each Long-Term  Incentive Award. In making such  determinations the
Committee  may take into  account  the nature of the  services  rendered  by the
respective employees,  their present and potential contribution to the Company's
success and such other  factors as the  Committee in its  discretion  shall deem
relevant.

(c) Additional  Powers.  The Committee shall have such additional  powers as are
delegated  to it by the other  provisions  of the Plan.  Subject to the  express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective Award  Agreements  executed  thereunder,  to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, including
such terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause designated Options to qualify as Incentive Stock Options,
and to make all other  determinations  necessary or advisable for  administering
the Plan.  The  Committee  may  correct  any  defect or supply any  omission  or
reconcile  any  inconsistency  in any Award  Agreement  in the manner and to the
extent it shall deem expedient to carry it into effect.  The  determinations  of
the  Committee  on the  matters  referred  to in  this  Paragraph  IV  shall  be
conclusive.

                               V. GRANT OF AWARDS;
                           SHARES SUBJECT TO THE PLAN

(a) Stock  Grant and Award  Limits.  The  Committee  may from time to time grant
Awards  to  one  or  more  employees   determined  by  it  to  be  eligible  for
participation  in the Plan in  accordance  with the  provisions of Paragraph VI.
Subject to  adjustment  in the same  manner as  provided  in  Paragraph  XI with
respect to shares of Stock  subject to Awards then  outstanding,  the  aggregate
number of shares of Stock  that may be issued  under the Plan  shall not  exceed
2,500,000 shares. Shares shall be deemed to have been issued under the Plan only
(i) to the extent actually issued and delivered pursuant to an Award, or (ii) to
the extent an Award is settled in cash.  To the extent  that an Award  lapses or
the rights of its Holder  terminate,  any shares of Stock  subject to such Award
shall  again  be  available  for the  grant  of an  Award.  Notwithstanding  any
provision  in the Plan to the  contrary,  the maximum  number of shares of Stock
that may be subject to Awards  granted to any one  employee  during any calendar
year may not exceed  250,000  shares of Stock (subject to adjustment in the same
manner as provided in Paragraph  XI with  respect to shares of Stock  subject to
Awards then  outstanding).  The limitation  set forth in the preceding  sentence
shall be applied in a manner which will permit compensation  generated under the
Plan to  constitute  "performance-based"  compensation  for  purposes of section
162(m) of the Code, including, without limitation, counting against such maximum
number of shares,  to the extent  required  under section 162(m) of the Code and
applicable interpretive authority thereunder,  any shares subject to Awards that
are canceled or repriced. Further,  notwithstanding any provision of the Plan to
the  contrary,  the  aggregate  number of shares of Stock that may be granted as
either Restricted Stock Awards under Paragraph IX or Long-Term  Incentive Awards
under  Paragraph  X  during  the  term of the Plan is  300,000  shares  of Stock
(subject to  adjustment  in the same manner as  provided  in  Paragraph  XI with
respect  to  shares of Stock  subject  to Awards  then  outstanding).

(b) Stock Offered.  The stock to be offered  pursuant to the grant of an Award
may, at the discretion of the Committee, be authorized but unissued Stock or
Stock previously issued and outstanding and reacquired by the Company.

                                 VI. ELIGIBILITY

Awards may be granted only to persons who, at the time of grant,  are employees.
Awards may not be granted to any Director  who is not an employee.  An Award may
be granted on more than one  occasion to the same  person,  and,  subject to the
limitations  set forth in the Plan,  such Award may include an  Incentive  Stock
Option or an Option which is not an Incentive Stock Option, a Stock Appreciation
Right, a Restricted Stock Award, a Long-Term  Incentive Award or any combination
thereof.

                               VII. STOCK OPTIONS

(a)     Option Period.  The term of each Option shall be as specified by the
Committee at the date of grant.

(b)     Limitations on Exercise of Option.  An Option shall be exercisable in
whole or in such installments and at such times as determined by the Committee.

(c)     Special Limitations on Incentive Stock Options.  To the extent that the
aggregate Fair Market Value  (determined  at the time the  respective  Incentive
Stock Option is granted) of Stock with respect to which  Incentive Stock Options
granted after 1986 are  exercisable  for the first time by an individual  during
any calendar year under all incentive  stock option plans of the Company and its
parent and  subsidiary  corporations  exceeds  $100,000,  such  Incentive  Stock
Options  shall be treated as Options  which do not  constitute  Incentive  Stock
Options. The Committee shall determine, in accordance with applicable provisions
of the Code, Treasury Regulations and other administrative pronouncements, which
of a Holder's  Incentive  Stock  Options  will not  constitute  Incentive  Stock
Options  because  of  such  limitation  and  shall  notify  the  Holder  of such
determination  as soon as  practicable  after such  determination.  No Incentive
Stock  Option  shall be granted to an  individual  if, at the time the Option is
granted,  such  individual  owns  stock  possessing  more  than 10% of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary  corporation,  within the meaning of section  422(b)(6)  of the Code,
unless (i) at the time such Option is granted the option  price is at least 110%
of the Fair Market Value of the Stock subject to the Option and (ii) such Option
by its terms is not exercisable after the expiration of five years from the date
of grant. An Incentive Stock Option shall not be transferable  otherwise than by
will or the laws of descent and  distribution,  and shall be exercisable  during
the  Holder's  lifetime  only by such Holder or the  Holder's  guardian or legal
representative.  Notwithstanding  any  provision  in the  Plan or in any  Option
Agreement,  (1) no Incentive  Stock Option shall be granted after the expiration
of 12 months from the date of the  adoption of the Plan by the Board  unless the
Plan has been approved by the  stockholders  of the Company within such 12-month
period in a manner that  satisfies the  requirements  of section 422 of the Code
and (2) any Option granted prior to the expiration of such 12-month  period that
was intended to constitute an Incentive Stock Option shall  constitute an Option
that is not an Incentive  Stock Option if the Plan has not been  approved by the
stockholders  of the  Company  within  such  12-month  period  in a manner  that
satisfies the  requirements  of section 422 of the Code.

(d) Option  Agreement.  Each Option shall be evidenced by an Option Agreement in
such form and containing such provisions not inconsistent with the provisions of
the Plan as the Committee  from time to time shall approve,  including,  without
limitation, provisions to qualify an Incentive Stock Option under section 422 of
the Code.  An Option  Agreement may provide for the payment of the option price,
in whole or in part,  (i) in cash or (ii) by the  delivery of a number of shares
of Stock  (plus cash if  necessary)  having a Fair  Market  Value  equal to such
option price.  Each Option  Agreement shall specify the effect of termination of
employment on the  exercisability of the Option.  Moreover,  an Option Agreement
may provide  for a  "cashless  exercise"  of the Option  pursuant to  procedures
established by the Committee (as the same may be amended from time to time).Such
Option Agreement may also include,  without  limitation,  provisions relating to
(1) subject to the provisions  hereof  accelerating  such vesting on a Change of
Control,   vesting  of  Options,  (2)  tax  matters  (including  provisions  (A)
permitting  the delivery of  additional  shares of Stock or the  withholding  of
shares of Stock from those  acquired upon  exercise to satisfy  federal or state
income tax withholding  requirements  and (B) dealing with any other  applicable
employee  wage  withholding  requirements),   and  (3)  any  other  matters  not
inconsistent with the terms and provisions of this Plan that the Committee shall
in its sole  discretion  determine.  The terms and  conditions of the respective
Option Agreements need not be identical.

(e)  Option  Price  and  Payment.  The  price at  which a share of Stock  may be
purchased upon exercise of an Option shall be determined by the Committee,  but,
subject to adjustment as provided in Paragraph XI, such purchase price shall not
be less than the Fair  Market  Value of a share of Stock on the date such Option
is granted.  The Option or portion  thereof may be  exercised  by delivery of an
irrevocable  notice of  exercise  to the  Company in a manner  specified  by the
Committee.  The purchase price of the Option or portion thereof shall be paid in
full in the manner  prescribed by the  Committee.  Separate  stock  certificates
shall be issued  by the  Company  for  those  shares  acquired  pursuant  to the
exercise of an Incentive Stock Option and for those shares acquired  pursuant to
the exercise of any Option which does not constitute an Incentive Stock Option.

(f)     Shareholder Rights and Privileges.  The Holder shall be entitled to all
the privileges and rights of a shareholder only with respect to such shares of
Stock as have been purchased under the Option and for which certificates of
stock have been registered in the Holder's name.

(g)  Options  and  Rights in  Substitution  for Stock  Options  Granted by Other
Corporations.  Options and Stock  Appreciation  Rights may be granted  under the
Plan from time to time in  substitution  for stock  options held by  individuals
employed  by  corporations  who  become  employees  as a result  of a merger  or
consolidation  of the employing  corporation with the Company or any subsidiary,
or the acquisition by the Company or a subsidiary of the assets of the employing
corporation,  or the  acquisition by the Company or a subsidiary of stock of the
employing  corporation with the result that such employing corporation becomes a
subsidiary.

                         VIII. STOCK APPRECIATION RIGHTS

(a)  Stock  Appreciation  Rights.  A Stock  Appreciation  Right is the  right to
receive an amount  equal to the Spread with respect to a share of Stock upon the
exercise of such Stock  Appreciation  Right.  Stock  Appreciation  Rights may be
granted  in  connection  with the grant of an  Option,  in which case the Option
Agreement will provide that exercise of Stock Appreciation Rights will result in
the  surrender  of the right to purchase the shares under the Option as to which
the Stock Appreciation Rights were exercised.  Alternatively, Stock Appreciation
Rights may be granted independently of Options in which case each Award of Stock
Appreciation  Rights shall be evidenced by a Stock Appreciation Rights Agreement
which  shall  contain  such  terms  and  conditions  as may be  approved  by the
Committee.  The terms and conditions of the respective Stock Appreciation Rights
Agreements  need  not  be  identical.   The  Spread  with  respect  to  a  Stock
Appreciation  Right may be payable  either in cash,  shares of Stock with a Fair
Market  Value  equal to the  Spread or in a  combination  of cash and  shares of
Stock. With respect to Stock Appreciation  Rights that are subject to Section 16
of the 1934 Act, however,  the Committee shall,  except as provided in Paragraph
XI hereof,  retain final  authority  (i) to determine  whether a Holder shall be
permitted to receive cash in full or partial  settlement  of Stock  Appreciation
Rights or (ii) to approve  an  election  by a Holder to receive  cash in full or
partial settlement of Stock Appreciation  Rights. Each Stock Appreciation Rights
Agreement  shall  specify  the  effect  of  termination  of  employment  on  the
exercisability of the Stock Appreciation Rights.

(b) Exercise Price. The exercise price of each Stock Appreciation Right shall be
determined by the Committee,  but such exercise price (i) shall not be less than
the Fair  Market  Value of a share of Stock on the date the  Stock  Appreciation
Right is granted  (or such  greater  exercise  price as may be  required if such
Stock Appreciation Right is granted in connection with an Incentive Stock Option
that must have an exercise  price equal to 110% of the Fair Market  Value of the
Stock on the date of grant  pursuant  to  Paragraph  VII(c)),  and (ii) shall be
subject to adjustment as provided in Paragraph XI.

(c)  Exercise  Period.  The term of each Stock  Appreciation  Right  shall be as
specified by the Committee at the date of grant.

(d) Limitations on Exercise of Stock  Appreciation  Right. A Stock  Appreciation
Right shall be exercisable in whole or in such installments and at such times as
determined by the Committee. In the case of any Stock Appreciation Right that is
granted in  connection  with an  Incentive  Stock  Option,  such right  shall be
exercisable  only when the Fair  Market  Value of the Common  Stock  exceeds the
price specified therefor in the Option or the portion thereof to be surrendered.

                           IX. RESTRICTED STOCK AWARDS

(a) Forfeiture Restrictions To Be Established by the Committee.  Shares of Stock
that  are  the  subject  of  a  Restricted  Stock  Award  shall  be  subject  to
restrictions  on  disposition  by the Holder and an  obligation of the Holder to
forfeit and surrender the shares to the Company under certain circumstances (the
"Forfeiture  Restrictions").  The Forfeiture Restrictions shall be determined by
the  Committee in its sole  discretion,  and the  Committee may provide that the
Forfeiture  Restrictions  shall  lapse  upon (i) the  attainment  of one or more
performance targets established by the Committee that are based on (1) the price
of a share of Stock,  (2) the  Company's  earnings per share,  (3) the Company's
revenue,  (4) the revenue of a business  unit of the Company  designated  by the
Committee,  (5) the return on stockholders'  equity achieved by the Company, (6)
the Company's pre-tax cash flow from operations,  (7) finding costs, (8) reserve
additions, (9) acquisitional growth, or (10) cost containment, (ii) the Holder's
continued  employment with the Company for a specified period of time, (iii) the
occurrence of any event or the satisfaction of any other condition  specified by
the  Committee  in  its  sole  discretion,  or  (iv)  any a  combination  of the
foregoing.   Each   Restricted   Stock  Award  may  have  different   Forfeiture
Restrictions,  in the discretion of the Committee.  The Forfeiture  Restrictions
applicable to a particular Restricted Stock Award shall not be changed except as
permitted by Paragraph IX(b) or Paragraph XI.

(b) Other Terms and  Conditions.  Stock awarded  pursuant to a Restricted  Stock
Award shall be represented by a stock certificate  registered in the name of the
Holder of such  Restricted  Stock  Award.  The  Holder  shall  have the right to
receive  dividends with respect to Stock subject to a Restricted Stock Award, to
vote Stock subject  thereto and to enjoy all other  shareholder  rights,  except
that (i) the Holder  shall not be entitled to delivery of the stock  certificate
until the Forfeiture  Restrictions  have expired,  (ii) the Company shall retain
custody of the Stock until the Forfeiture  Restrictions have expired,  (iii) the
Holder  may not sell,  transfer,  pledge,  exchange,  hypothecate  or  otherwise
dispose of the Stock until the Forfeiture  Restrictions have expired, and (iv) a
breach of the terms and conditions  established by the Committee pursuant to the
Restricted  Stock  Agreement  shall cause a forfeiture of the  Restricted  Stock
Award.  At the time of such Award,  the Committee  may, in its sole  discretion,
prescribe  additional terms,  conditions or restrictions  relating to Restricted
Stock Awards, including, but not limited to, rules pertaining to the termination
of employment (by retirement,  disability, death or otherwise) of a Holder prior
to expiration of the Forfeiture Restrictions.  Such additional terms, conditions
or  restrictions  shall be set forth in a  Restricted  Stock  Agreement  made in
conjunction  with the Award.  Such Restricted  Stock Agreement may also include,
without limitation,  provisions relating to (1) subject to the provisions hereof
accelerating vesting on a Change of Control,  vesting of Awards, (2) tax matters
(including  provisions  (A) covering any  applicable  employee wage  withholding
requirements  and (B)  prohibiting an election by the Holder under section 83(b)
of the Code),  and (3) any other  matters  not  inconsistent  with the terms and
provisions  of this  Plan  that  the  Committee  shall  in its  sole  discretion
determine.   The  terms  and  conditions  of  the  respective  Restricted  Stock
Agreements need not be identical.

(c) Payment for Restricted Stock.  The Committee shall determine the amount and
form of any payment for Stock received pursuant to a Restricted Stock Award,
provided that in the absence of such a determination, a Holder shall not be
required to make any payment for Stock received pursuant to a Restricted Stock
Award, except to the extent otherwise required by law.

(d) Agreements. At the time any Award is made under this Paragraph IX, the
Company and the Holder shall enter into a Restricted Stock Agreement setting
forth each of  the matters contemplated hereby and such other matters as the
Committee may determine to be appropriate.  The terms and provisions of the
respective Restricted Stock Agreements need not be identical.

                          X. LONG-TERM INCENTIVE AWARDS

(a)     Long-Term Incentive Awards.  The Committee shall establish the maximum
number of shares of Stock subject to each Long-Term Incentive Award at the time
of such Award.

(b)     Performance Period.  The Committee shall establish, with respect to and
at the time of each Long-Term Incentive Award, a performance period over which
the performance targets shall be measured.

(c)  Performance  Targets.  A  Long-Term  Incentive  Award shall be awarded to a
Holder  contingent  upon future  performance  of the Company or any  subsidiary,
division or department thereof by or in which such Holder is employed during the
performance  period.  The  Committee  shall  establish the  performance  targets
applicable  to  such  performance  either  (i)  prior  to the  beginning  of the
performance period or (ii) within 90 days after the beginning of the performance
period if the outcome of the performance  targets is substantially  uncertain at
the time such  targets are  established,  but not later than the date 25% of the
performance  period  has  elapsed.  The  performance  targets  may be  absolute,
relative to one or more other companies, or relative to one or more indices. The
performance targets established by the Committee may be based upon (1) the price
of a share of Stock,  (2) the  Company's  earnings per share,  (3) the Company's
revenue,  (4) the revenue of a business  unit of the Company  designated  by the
Committee,  (5) the return on stockholders'  equity achieved by the Company, (6)
the Company's pre-tax cash flow from operations,  (7) finding costs, (8) reserve
additions, (9) acquisitional growth, or (10) cost containment,  or a combination
of any of the foregoing.

(d) Awards  Criteria.  In  determining  the number of shares of Stock subject to
Long-Term  Incentive  Awards,  the Committee  shall take into account a Holder's
responsibility  level,  performance,  potential,  other  Awards  and such  other
considerations as it deems appropriate.  The Committee,  in its sole discretion,
may provide for a reduction in the value of a Holder's Long-Term Incentive Award
during the performance period.

(e)  Payment.  Following  the end of the  performance  period,  the  Holder of a
Long-Term Incentive Award shall be entitled to receive payment of an amount, not
exceeding  the maximum  value of the  Long-Term  Incentive  Award,  based on the
achievement  of  the  performance   targets  for  such  performance  period,  as
determined by the Committee.  Payment of a Long-Term Incentive Award may be made
in cash, Stock or a combination thereof, as determined by the Committee. Payment
shall be made in a lump sum or in  installments  as prescribed by the Committee.
Any  payment to be made in cash shall be based on the Fair  Market  Value of the
Stock on the  payment  date.  If a payment  of cash is to be made on a  deferred
basis,  the Committee shall establish  whether  interest shall be credited,  the
rate thereof and any other terms and conditions applicable thereto.

(f)     Termination of Employment.  A Long-Term Incentive Award shall terminate
if the Holder does not remain continuously in the employ of the Company at all
times during the applicable performance period, except as may be determined by
the Committee.

(g)     Agreements.  At the time any Award is made under this Paragraph X, the
Company and the Holder shall enter into a Long-Term Incentive Award Agreement
setting forth each of the matters contemplated hereby, and, in addition such
matters as are set forth in Paragraph IX(b) as the Committee may determine to be
appropriate.  The terms and provisions of the respective agreements need not be
identical.

                     XI. RECAPITALIZATION OR REORGANIZATION

(a) The shares with  respect to which  Awards may be granted are shares of Stock
as presently  constituted,  but if, and whenever,  prior to the expiration of an
Award   theretofore   granted,   the  Company  shall  effect  a  subdivision  or
consolidation  of shares of Stock or the  payment of a stock  dividend  on Stock
without receipt of consideration  by the Company,  the number of shares of Stock
with respect to which such Award may  thereafter be exercised or  satisfied,  as
applicable,  (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.  Any fractional share resulting from
such adjustment shall be rounded up to the next whole share.

(b) If the Company  recapitalizes,  reclassifies its capital stock, or otherwise
changes  its  capital  structure  (a  "recapitalization"),  thereafter  upon any
exercise or satisfaction,  as applicable,  of an Award  theretofore  granted the
Holder shall be entitled to (or entitled to purchase,  if applicable) under such
Award, in lieu of the number of shares of Stock then covered by such Award,  the
number and class of shares of stock and  securities  to which the  Holder  would
have been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization,  the Holder had been the holder of record of the
number of shares of Stock then covered by such Award.

(c) In the event of a Change of  Control,  and except as  provided  in any Award
Agreement,  outstanding  Awards shall immediately vest and become exercisable or
satisfiable, as applicable. The Committee, in its discretion, may determine that
upon the  occurrence of a Change of Control,  each Award  outstanding  hereunder
shall  terminate  within a specified  number of days after notice to the Holder,
and such Holder shall  receive,  with respect to each share of Stock  subject to
such  Award,  cash in an amount  equal to the  excess,  if any, of the Change of
Control Value over the exercise price, if applicable,  under such Award for such
share. The provisions contained in this paragraph shall not terminate any rights
of the Holder to  further  payments  pursuant  to any other  agreement  with the
Company following a Change of Control.

(d)  In  the  event  of   changes  in  the   outstanding   Stock  by  reason  of
recapitalization,   reorganizations,   mergers,  consolidations,   combinations,
exchanges or other relevant changes in  capitalization  occurring after the date
of the grant of any Award and not otherwise  provided for by this Paragraph XII,
any outstanding  Awards and any Award  Agreements shall be subject to adjustment
by the Committee at its discretion as to the number and price of shares of Stock
or other  consideration  subject to such Awards. In the event of any such change
in the outstanding  Stock,  the aggregate  number of shares  available under the
Plan may be appropriately  adjusted by the Committee,  whose determination shall
be conclusive.

(e) The existence of the Plan and the Awards granted  hereunder shall not affect
in any way the right or power of the Board or the shareholders 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 ahead of or
affecting  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 of proceeding.

(f) Any  adjustment  provided for in  Subparagraphs  (a),  (b), (c) or (d) above
shall be subject to any required shareholder action.

(g) Except as hereinbefore  expressly  provided,  the issuance by the Company of
shares of stock of any class or securities  convertible  into shares of stock of
any class,  for cash,  property,  labor or services,  upon direct sale, upon the
exercise of rights or warrants to  subscribe  therefor,  or upon  conversion  of
shares of  obligations  of the  Company  convertible  into such  shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no  adjustment  by reason  thereof  shall be made with respect to, the number of
shares of Stock subject to Awards theretofore  granted or the purchase price per
share, if applicable.

                   XII. AMENDMENT AND TERMINATION OF THE PLAN

The Board in its  discretion  may terminate the Plan at any time with respect to
any shares for which Awards have not theretofore  been granted.  The Board shall
have the right to alter or amend the Plan or any part thereof from time to time;
provided that no change in any Award theretofore granted may be made which would
impair the rights of the Holder  without the consent of the Holder and provided,
further, that the Board may not, without approval of the shareholders, amend the
Plan (a) to increase the maximum aggregate number of shares of Stock that may be
issued  under  the Plan or (b) to  change  the class of  employees  eligible  to
receive Awards under the Plan.

                               XIII. MISCELLANEOUS

(a) No Right To An Award.  Neither  the  adoption of the Plan by the Company nor
any action of the Board or the Committee shall be deemed to give an employee any
right to be  granted an Award or any of the  rights  hereunder  except as may be
evidenced  by an Award or by an  Option  Agreement,  Stock  Appreciation  Rights
Agreement,  Restricted  Stock  Agreement or Long-Term  Incentive Award Agreement
duly  executed on behalf of the Company,  and then only to the extent and on the
terms and conditions  expressly set forth  therein.  The Plan shall be unfunded.
The Company  shall not be required to establish  any special or separate fund or
to make any other  segregation  of funds or assets to assure the  payment of any
Award.

(b)     No Employment Rights Conferred.  Nothing contained in the Plan shall (i)
confer upon any employee any right with respect to continuation of employment
with the Company or any subsidiary or (ii) interfere in any way with the right
of the Company or any subsidiary to terminate his or her employment at any time.

(c) Other Laws;  Withholding.  The Company  shall not be  obligated to issue any
Stock  pursuant to any Award  granted under the Plan at any time when the shares
covered by such Award have not been registered  under the Securities Act of 1933
and such other state and federal laws,  rules or  regulations  as the Company or
the  Committee  deems  applicable  and, in the opinion of legal  counsel for the
Company, there is no exemption from the registration  requirements of such laws,
rules or  regulations  available  for the issuance  and sale of such shares.  No
fractional  shares of Stock  shall be  delivered,  nor shall any cash in lieu of
fractional  shares  be paid.  The  Company  shall  have the  right to  deduct in
connection  with all  Awards any taxes  required  by law to be  withheld  and to
require  any  payments   required  to  enable  it  to  satisfy  its  withholding
obligations.

(d) No Restriction on Corporate  Action.  Nothing contained in the Plan shall be
construed  to prevent the Company or any  subsidiary  from taking any  corporate
action which is deemed by the Company or such subsidiary to be appropriate or in
its best  interest,  whether or not such action would have an adverse  effect on
the Plan or any Award made under the Plan.  No  employee,  beneficiary  or other
person shall have any claim against the Company or any subsidiary as a result of
any such action.

(e)  Restrictions  on Transfer.  An Award (other than an Incentive Stock Option,
which shall be subject to the transfer  restrictions  set forth in Paragraph VII
(c)) shall not be transferable otherwise than (i) by will or the laws of descent
and  distribution,  (ii) pursuant to a "qualified  domestic  relations order" as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974,  as  amended,  or the rules  thereunder,  or (iii) with the consent of the
Committee.

(f) Rule 16b-3. It is intended that the Plan and any grant of an Award made to a
person  subject to Section  16 of the 1934 Act meet all of the  requirements  of
Rule 16b-3 so that any transaction  under the Plan involving a grant,  award, or
other  acquisition from the Company or disposition to the Company is exempt from
Section  16(b) of the 1934 Act. If any  provision  of the Plan or any such Award
would result in any such  transaction not being exempt from Section 16(b) of the
1934 Act, such  provision or Award shall be construed or deemed  amended so that
such transaction will be exempt from Section 16(b) of the 1934 Act.

(g) Section 162(m).  It is intended that the Plan comply fully with and meet all
the  requirements  of  Section  162(m)  of  the  Code  so  that  Options,  Stock
Appreciation Rights,  Long-Term Incentive Awards hereunder and, if determined by
the Committee,  Restricted Stock Awards,  shall  constitute  "performance-based"
compensation  within the meaning of such  section.  If any provision of the Plan
would  disqualify the Plan or would not otherwise permit the Plan to comply with
Section  162(m) as so  intended,  such  provision  shall be  construed or deemed
amended to conform to the requirements or provisions of Section 162(m); provided
that no such  construction  or  amendment  shall have an  adverse  effect on the
economic value to a Holder of any Award previously granted hereunder.

(h) Facsimile Signature. Any Award Agreement or related document may be executed
by facsimile signature.  If any officer who shall have signed or whose facsimile
signature  shall  have been  placed  upon any such  Award  Agreement  or related
document  shall  have  ceased to be such  officer  before the  related  Award is
granted by the  Company,  such Award may  nevertheless  be issued by the Company
with the same effect as if such person were such officer at the date of grant.

(i) Governing  Law. This Plan shall be construed in accordance  with the laws of
the State of Texas.