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                                                                   EXHIBIT 10.28

 
                              DRYPERS CORPORATION

                     AMENDED AND RESTATED 1995 KEY EMPLOYEE
                               STOCK OPTION PLAN


                        Originally Adopted May 26, 1995



                      Amended and Restated August 18, 1995
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                              DRYPERS CORPORATION

                      1995 KEY EMPLOYEE STOCK OPTION PLAN


                               TABLE OF CONTENTS
 
 
                                                      Section  
                                                      -------
ARTICLE I - PLAN
 
    Purpose..........................................   1.1
    Effective Date of Plan...........................   1.2
 
ARTICLE II - DEFINITIONS
 
    Affiliate........................................   2.1
    Board of Directors...............................   2.2
    Code.............................................   2.3
    Committee........................................   2.4
    Company..........................................   2.5
    Disinterested Person.............................   2.6
    Employee.........................................   2.7
    Fair Market Value................................   2.8
    Incentive Option.................................   2.9
    Nonqualified Option..............................  2.10
    Option...........................................  2.11
    Option Agreement.................................  2.12
    Outside Director.................................  2.13
    Plan.............................................  2.14
    Stock............................................  2.15
    10% Stockholder..................................  2.16
 
ARTICLE III - ELIGIBILITY
 
ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS
 
    Authority to Grant Options.......................   4.1
    Dedicated Shares.................................   4.2
    Non-Transferability..............................   4.3
    Requirements of Law..............................   4.4
    Changes in the Company's Capital Structure.......   4.5
    Election Under Section 83(b) of the Code.........   4.6

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ARTICLE V - OPTIONS
 
    Type of Option...................................   5.1
    Option Price.....................................   5.2
    Duration of Options..............................   5.3
    Amount Exercisable--Incentive Options............   5.4
    Exercise of Options..............................   5.5
    Exercise on Termination of Employment............   5.6
    Substitution Options.............................   5.7
    No Rights as Stockholder.........................   5.8
 
ARTICLE VI - ADMINISTRATION
 
ARTICLE VII - AMENDMENT OR TERMINATION OF PLAN
 
ARTICLE VIII - MISCELLANEOUS
 
    No Establishment of a Trust Fund.................   8.1
    No Employment Obligation.........................   8.2
    Forfeiture.......................................   8.3
    Tax Withholding..................................   8.4
    Written Agreement................................   8.5
    Indemnification of the Committee and the
      Board of Directors.............................   8.6
    Gender...........................................   8.7
    Headings.........................................   8.8
    Other Compensation Plans.........................   8.9
    Other Options or Awards..........................  8.10
    Governing Law....................................  8.11

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                                   ARTICLE I

                                      PLAN

          1.1  PURPOSE.  This Plan is a plan for key employees (including
officers and employee directors and consultants) of the Company and its
Affiliates and is intended to advance the best interests of the Company, its
Affiliates, and its stockholders by providing those persons who have substantial
responsibility for the management and growth of the Company and its Affiliates
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue in the
employ of the Company or any of its Affiliates.

          1.2  EFFECTIVE DATE OF PLAN.  This Plan is effective August 18, 1995
if within one year of that date it shall have been approved by at least a
majority vote of stockholders voting in person or by proxy at a duly held
stockholders' meeting, or if the provisions of the Company's Certificate of
Incorporation or By-laws or applicable state law prescribes a greater degree of
stockholder approval for this action, the approval by the holders of that
percentage, at a duly held meeting of stockholders.  No Incentive Option or
Nonqualified Option shall be granted pursuant to this Plan after May 26, 2005.

                                   ARTICLE II

                                  DEFINITIONS

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

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

          2.2  "BOARD OF DIRECTORS" means the board of directors of the Company.

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

          2.4  "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors.  The
Committee shall be comprised of members who are Disinterested Persons and
Outside Directors and in no event less than two in number.

          2.5  "COMPANY" means Drypers Corporation, a Delaware corporation.

          2.6  "DISINTERESTED PERSON" means a "disinterested person" as that
term is defined in Rule 16b-3 under the Securities Exchange Act of 1934.

          2.7  "EMPLOYEE" means a person employed by the Company or any
Affiliate to whom an Option is granted.

          2.8  "FAIR MARKET VALUE" of the Stock as of any date means (a) the
closing price on that date on the principal securities exchange on which the
Stock is listed; or (b) if the Stock is not listed on a securities exchange, the
closing price of the Stock on that date as reported on the Nasdaq Stock Market;
or (c) if the Stock is not listed on the Nasdaq Stock Market, the average of the
high and low bid quotations for the Stock on that date as reported by the
National Quotation Bureau Incorporated; or (d) if none of the foregoing is
applicable, an amount, at the election of the Committee equal to (x) the average
between the closing bid and ask prices per share of Stock on the last preceding
date on which those prices were reported or (y) the value of the Stock as
determined by the Committee in its sole discretion.

          2.9  "INCENTIVE OPTION" means an option granted under this Plan which
is designated as an "Incentive Option" and satisfies the requirements of Section
422 of the Code.

          2.10  "NONQUALIFIED OPTION" means an option granted under this Plan
other than an Incentive Option.

          2.11  "OPTION" means both an Incentive Option and a Nonqualified
Option granted under this Plan to purchase shares of Stock.

          2.12  "OPTION AGREEMENT" means the written agreement that sets out the
terms of an Option.

          2.13  "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies the criteria of Section 162(m) of the
Code.

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          2.14  "PLAN" means the Drypers Corporation Amended and Restated 1995
Key Employee Stock Option Plan, as set out in this document and as it may be
amended from time to time.

          2.15  "STOCK" means the common stock of the Company, $.001 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company or
another corporation, that other stock or security.

          2.16  "10% STOCKHOLDER" means an individual who, at the time the
Option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any Affiliate.  An
individual shall be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its stockholders, partners,
or beneficiaries.

                                  ARTICLE III

                                  ELIGIBILITY

          The individuals who shall be eligible to receive Incentive Options and
Nonqualified Options shall be those key employees of the Company or any of its
Affiliates as the Committee shall determine from time to time.  However, no
member of the Committee shall be eligible to receive any Option or to receive
stock, stock options, or stock appreciation rights under any other plan of the
Company or any of its Affiliates, if to do so would cause the individual not to
be a Disinterested Person or Outside Director.  The Board of Directors may
designate one or more individuals who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.

                                   ARTICLE IV

                     GENERAL PROVISIONS RELATING TO OPTIONS

          4.1  AUTHORITY TO GRANT OPTIONS.  The Committee may grant to those key
employees of the Company or any of its Affiliates, as it shall from time to time
determine, Options under the terms and conditions of this Plan.  Subject only to
any applicable limitations set out in this Plan, the number of shares of Stock
to be covered by any Option to be granted to an employee of the Company or any
of its Affiliates shall be as determined by the Committee.

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          4.2  DEDICATED SHARES.  The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 2,500,000
shares.  The shares may be treasury shares or authorized but unissued shares.
The maximum number of shares subject to Options that may be issued to any
Employee under the Plan during each year is 500,000 shares.  The number of
shares stated in this Section 4.2 shall be subject to adjustment in accordance
with the provisions of Section 4.5.

          In the event that any outstanding Option shall expire or terminate for
any reason or any Option is surrendered, the shares of Stock allocable to the
unexercised portion of that Option may again be subject to an Option under the
Plan.

          4.3  NON-TRANSFERABILITY.  Options shall not be transferable by the
Employee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Employee's lifetime, only by him.

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

          4.5  CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.  The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of 

                                       4
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its assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

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

          If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of substantially all its assets, while unexercised
Options remain outstanding under this Plan, (a) subject to the provisions of
clause (c) below, after the effective date of the merger, consolidation,
liquidation, sale or other disposition, as the case may be, each holder of an
outstanding Option shall be entitled, upon exercise of the Option, to receive,
in lieu of shares of Stock, the number and class or classes of shares of stock
or other securities or property to which the holder would have been entitled if,
immediately prior to the merger, consolidation, liquidation, sale or other
disposition, the holder had been the holder of record of a number of shares of
Stock equal to the number of shares as to which the Option shall be so
exercised; (b) all Options, immediately prior to the effective date of the
merger, consolidation, liquidation, sale or other disposition, as the case may
be, shall be exercisable in full; and (c) all outstanding Options may be
canceled by the Board of Directors as of the effective date of any merger,
consolidation, liquidation, sale or other disposition, if (i) notice of
cancellation shall be given to each holder of an Option and (ii) each holder of
an Option shall have the right to exercise that Option in full (without regard
to any limitations set out in or imposed under this Plan or the Option Agreement
granting such Option) during a period set by the Board of Directors preceding
the effective date of the merger, consolidation, liquidation, sale or other
disposition and, if in the event all outstanding Options may not be exercised in
full under applicable securities laws without registration of the shares of
Stock issuable on exercise of the Options, the Board of Directors may limit the
exercise of the Options to the number of shares of Stock, if any, as may be
issued without registration. The method of choosing which Options may be
exercised, and the number of shares of Stock for which Options may be exercised,
shall be solely within the discretion of the Board of Directors.

                                       5
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          The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.

          4.6  ELECTION UNDER SECTION 83(B) OF THE CODE.  No Employee shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee.  Any Employee doing so shall forfeit all Options
issued to him under this Plan.

                                   ARTICLE V

                                    OPTIONS

          5.1 TYPE OF OPTION.  The Committee shall specify whether a given
Option shall constitute an Incentive Option or a Nonqualified Option.

          5.2 OPTION PRICE.  The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of:  (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under an Incentive Option shall be more than 100% of Fair
Market Value. In the case of any 10% Stockholder, the price at which shares of
Stock may be purchased under an Incentive Option shall not be less than 110% of
the Fair Market Value of the Stock on the date the Incentive Option is granted.

          The price at which shares of Stock may be purchased under a
Nonqualified Option shall not be less than the greater of:  (a) 80% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
The Committee in its discretion may provide that the price at which shares of
Stock may be purchased under a Nonqualified Option shall be more than 100% of
Fair Market Value.

          5.3 DURATION OF OPTIONS.  No Option shall be exercisable after the
expiration of 10 years from the date the Option is granted.  In the case of a
10% Stockholder, no Incentive Option shall be exercisable after the expiration
of five years from the date the Incentive Option is granted.

          5.4 AMOUNT EXERCISABLE--INCENTIVE OPTIONS.  Each Option may be
exercised from time to time, in whole or in part, in the manner and subject to
the 

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conditions the Committee, in its sole discretion, may provide in the Option
Agreement, as long as the Option is valid and outstanding, provided that no
Option may be exercisable within six (6) months of the date of grant, except to
the extent that vesting is accelerated pursuant to Section 4.5 of this Plan, in
which case the Option may be exercisable immediately upon such vesting.  To the
extent that the aggregate Fair Market Value (determined as of the time an
Incentive Option is granted) of the Stock with respect to which Incentive
Options first become exercisable by the Optionee during any calendar year (under
this Plan and any other incentive stock option plan(s) of the Company or any
Affiliate) exceeds $100,000, the Incentive Options shall be treated as
Nonqualified Options.  In making this determination, Incentive Options shall be
taken into account in the order in which they were granted.

          5.5 EXERCISE OF OPTIONS.  Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with:
(a) cash, certified check, bank draft, or postal or express money order payable
to the order of the Company, (b) Stock at its Fair Market Value on the date of
exercise, and/or (c) any other form of payment which is acceptable to the
Committee, in each case for an amount equal to the exercise price of such
shares, and specifying the address to which the certificates for such shares are
to be mailed.  As promptly as practicable after receipt of written notification
and payment, the Company shall deliver to the Employee certificates for such
shares, issued in the Employee's name.  If shares of Stock are used in payment
of the exercise price, the aggregate Fair Market Value of the shares of Stock
tendered must be equal to or less than the aggregate exercise price of the
shares being purchased upon exercise of the Option, and any difference must be
paid by cash, certified check, bank draft or postal or express money order
payable to the Company.  Delivery of the shares shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the Employee, at the
address specified by the Employee in his notice of exercise.

          Whenever an Option is exercised by exchanging shares of Stock owned by
the Employee, the Employee shall deliver to the Company certificates registered
in the name of the Employee representing a number of shares of Stock legally and
beneficially owned by the Employee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates, (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange).  The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition of an Option.

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          5.6 EXERCISE ON TERMINATION OF EMPLOYMENT.  Unless it is expressly
provided otherwise in the Option Agreement, Options shall terminate one day less
than three months after severance of employment of the Employee from the Company
and all Affiliates for any reason, with or without cause, other than death,
retirement  under the then established rules of the Company, or severance for
disability.  Whether authorized leave of absence or absence on military or
government service shall constitute severance of the employment of the Employee
shall be determined by the Committee at that time.

          In determining the employment relationship between the Company and the
Employee, employment by any Affiliate shall be considered employment by the
Company, as shall employment by a corporation issuing or assuming a stock option
in a transaction to which Section 424(a) of the Code applies, or by a parent
corporation or subsidiary corporation of the corporation issuing or assuming a
stock option (and for this purpose, the phrase "corporation issuing or assuming
a stock option" shall be substituted for the word "Company" in the definitions
of parent corporation and subsidiary corporation in Section 2.1, and the parent-
subsidiary relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code).

          DEATH.  If, before the expiration of an Option, the Employee, whether
in the employ of the Company or after he has retired or was severed for
disability, dies, the Option shall continue until the earlier of the Option's
expiration date or one year following the date of his death, unless it is
expressly provided otherwise in the Option Agreement. After the death of the
Employee, his executors, administrators or any persons to whom his Option may be
transferred by will or by the laws of descent and distribution shall have the
right, at any time prior to the Option's expiration or termination, whichever is
earlier, to exercise it, to the extent to which he was entitled to exercise it
immediately prior to his death, unless it is expressly provided otherwise in the
Option Agreement.

          RETIREMENT.  If, before the expiration of an Incentive Option, the
Employee shall be retired in good standing from the employ of the Company under
the then established rules of the Company, the Incentive Option shall terminate
on the earlier of the Option's expiration date or one day less than three months
after his retirement. Unless it is expressly provided otherwise in the Option
Agreement, if before the expiration of a Nonqualified Option, the Employee shall
be retired in good standing from the employ of the Company under the then
established rules of the Company, the Nonqualified Option shall terminate on the
earlier of the Nonqualified Option's expiration date or one day less than one
year after his retirement. In the event of retirement, the Employee shall have
the right prior to the termination of the Option to exercise the Option, to the
extent to which he was entitled to exercise it immediately prior to his
retirement, unless it is expressly provided otherwise in the Option Agreement.

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          DISABILITY.  If, before the expiration of an Option, the Employee
shall be severed from the employ of the Company for disability, the Option shall
terminate on the earlier of the Option's expiration date or one day less than
one year after the date he was severed because of disability, unless it is
expressly provided otherwise in the Option Agreement. In the event that the
Employee shall be severed from the employ of the Company for disability, the
Employee shall have the right prior to the termination of the Option to exercise
the Option, to the extent to which he was entitled to exercise it immediately
prior to his severance of employment for disability, unless it is expressly
provided otherwise in the Option Agreement.

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

          5.8 NO RIGHTS AS STOCKHOLDER.  No Employee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.

                                   ARTICLE VI

                                 ADMINISTRATION

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

    (a) determine the Employees to whom and the time or times at which Options
    will be made,

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      (b) determine the number of shares and the purchase price of Stock covered
    in each Option, subject to the terms of this Plan,

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

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

      (e) define the effect, if any, on an Option of the death, disability,
    retirement, or termination of employment of the Employee,

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

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

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

                                  ARTICLE VII

                        AMENDMENT OR TERMINATION OF PLAN

          The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to qualify this Plan under Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended, no
amendment that would (a) materially increase the number of shares of Stock that
may be issued under this Plan, (b) materially modify the requirements as to
eligibility for participation in this Plan, or (c) otherwise materially increase
the benefits accruing to participants under this Plan, shall be made without the
approval of the holders of a majority of the outstanding shares of the Company's
voting stock present in person or by proxy and entitled to vote thereon;
provided further, however, that to the extent required to maintain the status of
any Incentive Option under the Code, no amendment that would (a) change the
aggregate number of shares of Stock that may be issued under Incentive Options,
(b) change the class of employees eligible to receive Incentive Options, or (c)
decrease the exercise price for Incentive Options below the Fair Market Value of
the Stock at the time it is granted, shall be made without the approval of the
holders of a majority of the outstanding shares of the Company's voting stock
present in person or by proxy and entitled to vote thereon. Subject to the
preceding sentence, the Board

                                      10
<PAGE>
 
shall have the power to make any changes in this Plan and in the regulations and
administrative provisions under it or in any outstanding Incentive Option as in
the opinion of counsel for the Company may be necessary or appropriate from time
to time to enable any Incentive Option granted under this Plan to continue to
qualify as an incentive stock option or such other stock option as may be
defined under the Code so as to receive preferential federal income tax
treatment.

                                  ARTICLE VIII

                                 MISCELLANEOUS

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

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

          8.3  FORFEITURE.  Notwithstanding any other provisions of this Plan,
if during the time that an Employee holds an Option the Committee finds by a
majority vote after full consideration of the facts that the Employee, before or
after termination of his employment with the Company or an Affiliate for any
reason, (a) committed or engaged in fraud, embezzlement, theft, commission of a
felony, or proven dishonesty in the course of his employment by the Company or
an Affiliate, which conduct damaged the Company or an Affiliate, or disclosed
trade secrets of the Company or an Affiliate, or (b) participated, engaged in or
had a material, financial or other interest, whether as an employee, officer,
director, consultant, contractor, stockholder, owner, or otherwise, in any
commercial endeavor anywhere in the world where the Company conducts business
that is competitive with the business of the Company or an Affiliate without the
written consent of the Company or such Affiliate, then the Employee shall
forfeit all outstanding Options, including all exercised Options pursuant to
which the Company has not yet delivered a stock certificate.  Clause (b) shall
not be deemed to have been violated solely by reason of the Employee's ownership
of stock or securities of any publicly owned corporation, if that ownership does
not result in effective control of such corporation.

          The decision of the Committee as to the cause of the Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of the
Employee's 

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<PAGE>
 
competitive activity shall be final. No decision of the Committee, however,
shall affect the finality of the discharge of the Employee by the Company or an
Affiliate in any manner.

          8.4  TAX WITHHOLDING.  The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Employee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option.  In the alternative, the Company may require the Employee
(or other person exercising the Option) to pay the sum directly to the employer
corporation. If the Employee (or other person exercising the Option) is required
to pay the sum directly, payment in cash or by check of such sums for taxes
shall be delivered within 10 days after the date of exercise or lapse of
restrictions. The Company shall have no obligation upon exercise of any Option
until payment has been received, unless withholding (or offset against a cash
payment) as of or prior to the date of exercise is sufficient to cover all sums
due with respect to that exercise. The Company and its Affiliates shall not be
obligated to advise an Employee of the existence of the tax or the amount that
the employer corporation will be required to withhold.

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

          8.6  INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of the
Committee and/or the Board of Directors at the time of incurring the expenses--
including, without limitation, matters as to which he shall be finally adjudged
in any action, suit or proceeding to have been found to have been negligent in
the performance of his duty as a member of the Committee of the Board of
Directors.  However, this indemnity shall not include any expenses incurred by
any member of the Committee and/or the Board of Directors in respect of matters
as to which he shall be finally adjudged in any action, suit or proceeding to
have been guilty of gross negligence or willful misconduct in the 

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<PAGE>
 
performance of his duty as a member of the Committee or the Board of Directors.
In addition, no right of indemnification under this Plan shall be available to
or enforceable by any member of the Committee and the Board of Directors unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each member of the Committee and the
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.

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

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

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

          8.10  OTHER OPTIONS.  The grant of an Option shall not confer upon the
Employee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Employees, or the
right to receive future Options upon the same terms or conditions as previously
granted.

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

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