<PAGE>
 
                                                                    EXHIBIT 10.1

                           RED MAN PIPE & SUPPLY CO.
                           INCENTIVE STOCK PLAN 1997

                                   SECTION 1
                                   ---------
                                   PREAMBLE
                                   --------

     Red Man Pipe & Supply Co., an Oklahoma corporation (the "Company"), hereby
establishes the Red Man Pipe & Supply Co. Incentive Stock Plan 1997 (the "Plan")
as a means whereby the Company may, through awards of stock options and
restricted stock:

     A.    Provide Officers, Directors and key employees who have substantial
           responsibilities for the direction and management of the Company and
           its Subsidiaries with additional incentive to promote the success of
           the business of the Company and its Subsidiaries;

     B.    Enable such employees to acquire equity interests in the Company; and

     C.    Enable the Company to attract and retain the services of key
           employees upon whose judgment and effort the successful conduct of
           its operations is largely dependent.

     Except as specifically provided herein, the provisions of the Plan do not
apply to or affect any option or stock appreciation right hereafter granted
under any other plan of the Company or any Subsidiary, and all such options,
stock appreciation rights or stock issued thereunder continue to be governed by
and subject to the applicable provisions of the plan or agreement under which
they were granted.


                                   SECTION 2
                                   ---------
                                  DEFINITIONS
                                  -----------

     2.01  "Administrator" shall mean the Board of Directors or the Compensation
Committee as defined in Paragraph 2.08 of this Section 2.

     2.02  "Award" shall mean a grant of an Option or the award of Restricted
Stock under the Plan.

     2.03  "Award Agreement" shall mean an agreement between the Company and a
Participant which evidences the grant of an Option and/or the award of
Restricted Stock to a Participant and sets forth the terms and conditions of
such Option and/or Restricted Stock.

     2.04  "Board" or "Board of Directors" means the Board of Directors of the
Company.

     2.05  "Code" means the Internal Revenue Code of 1986, as it exists now and
as it may be amended from time to time.

     2.06  "Common Stock" means the Class A Common Stock of the Company, one
cent ($0.01) par value per share.

     2.07  "Company" means Red Man Pipe & Supply Co., an Oklahoma corporation,
and any successor thereto.

     2.08  "Compensation Committee" means the committee appointed by the Board
of Directors to administer the Plan; provided, however, unless a majority of the
members of the Board determines otherwise: (i) the Committee shall be
constituted in a manner that satisfies the requirements of Rule 16b-3 under the
Exchange Act, which Committee shall administer the Plan with respect to eligible
Participants who are subject to Section 16(b) of the Exchange Act; and (ii) the
Committee shall be constituted in a manner that satisfies the

                                       1
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requirements of Section 162(m) of the Code, which Committee shall administer the
Plan with respect to "covered employees" as defined in Section 162(m) of the
Code.

     2.09  "Director(s)" means a member or members of the Board.

     2.10  "Disability" means being unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12) months.

     2.11  "Exchange Act" means the Securities Exchange of 1934, as it exists
now or from time to time may hereafter be amended.

     2.12 "Fair Market Value" means for the relevant day:

     A.    If shares of Common Stock are listed or admitted to unlisted trading
           privileges on any national or regional securities exchange, the last
           reported sale price on the composite tape of that exchange on the day
           Fair Market Value is determined.

     B.    If trading of the Common Stock is not reported on a stock exchange,
           Fair Market Value will be determined by the Board in its discretion,
           based upon the best available data.

     2.13  "Incentive Stock Option" or "ISO" means an Option that complies with
the terms and conditions set forth in Section 422 of the Code and is designated
as an ISO at the time of its grant.

     2.14  "Officer" means a corporate officer of the Company or any Subsidiary
or affiliate of the Company.

     2.15  "Option" means the right of a Participant to purchase a specified
number of shares of Common Stock, subject to the terms and conditions of the
Plan.

     2.16  "Option Date" means the date upon which an Option is granted, or
Restricted Stock is awarded, to a Participant under the Plan.

     2.17  "Option Price" means the price per share at which an Option may be
exercised.

     2.18  "Participant" means an individual to whom an Option or Restricted
Stock has been granted under the Plan.

     2.19  "Plan" means the Red Man Pipe & Supply Co. Incentive Stock Plan 1997
herein and as from time to time amended.

     2.20  "Restricted Stock" means Common Stock awarded to a Participant
pursuant to the Plan and subject to the restrictions contained or authorized in
Section 7 hereof.

     2.21  "Securities Act" means the Securities Act of 1933, as it exists now
or from time to time may be hereafter be amended.

     2.22  "Subsidiary" means any corporation or other entity of which the
majority voting power or equity interest is owned directly or indirectly by the
Company.

     2.23  "Termination of Employment" means:

     A.    With respect to an employee, when the employee's employment
           relationship with the Company and all of its Subsidiaries is
           terminated, regardless of any severance arrangements. A transfer

                                       2
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           from the Company to a Subsidiary or affiliate of the Company or
           Subsidiary, or vice versa, is not a termination of employment for
           purposes of the Plan;

     B.    With respect to an Officer or Director, when such individual is no
           longer serving as an Officer or Director of the Company or any of its
           Subsidiaries.

     2.24  "Rules of Construction"

     A.    Governing Law:  The construction and operation of the Plan are
           governed by the laws of the State of Oklahoma.

     B.    Undefined Terms:  Unless the context requires another meaning, any
           term not specifically defined in the Plan has the meaning given to it
           by the Code.

     C.    Headings: All headings in the Plan are for reference only and are not
           to be utilized in construing the Plan.

     D.    Gender: Unless clearly appropriate, all nouns of either gender refer
           indifferently to persons of either gender and the neuter.

     E.    Singular and Plural: Singular terms refer also to the plural and vice
           versa.

     F.    Severability:  If any provision of the Plan is determined to be
           illegal or invalid for any reason, the remaining provisions shall
           continue in full force and effect and shall be construed and enforced
           as if the illegal or invalid provision did not exist, unless the
           continuance of the Plan in such circumstances is not consistent with
           its purposes.

                                   SECTION 3
                                   ---------
                           STOCK SUBJECT TO THE PLAN
                           -------------------------

     Five Thousand (5,000) shares of the Company's Class A Common Stock have
been reserved for issuance under this Plan.  Options may be:

     A.    Incentive Stock Options;

     B.    Other forms of statutory stock options; or

     C.    Non-statutory (non-qualified) options.

                                   SECTION 4
                                   ---------
                                ADMINISTRATION
                                --------------

     The Plan shall be administered by the Board of Directors, or it may
delegate all or part of the duties under the Plan to the Compensation Committee,
subject to such conditions and limitations as the Board may establish.  In
addition to any other powers set forth in this Plan, the Administrator has the
exclusive authority:

     A.    To construe and interpret the Plan, and to remedy any ambiguities or
           inconsistencies therein;

     B.    To establish, amend and rescind appropriate rules and regulations
           relating to the Plan;

     C.    Subject to the express provisions of the Plan, to determine the
           individuals who will receive Awards of Options and/or Restricted
           Stock, the times when they will receive them, the number of shares to
           be subject to each Award and the Option Price, payment terms, payment
           method and expiration date applicable to each Award;

                                       3
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     D.    To contest on behalf of the Company or Participants, at the expense
           of the Company, any ruling or decision on any matter relating to the
           Plan or to any Awards of Options and/or Restricted Stock;

     E.    Generally, to administer the Plan, and to take all such steps and
           make all such determinations in connection with the Plan and the
           Awards of Options and/or Restricted Stock as it may deem necessary or
           advisable;

     F.    To determine the form in which tax withholding under the Plan will be
           made; and

     G.    To amend the Plan or any Option or Restricted Stock granted or
           awarded hereunder as may be necessary in order for any business
           combination involving the Company to qualify for pooling-of-interest
           treatment under APB No. 16.

                                   SECTION 5
                                   ---------
                             ELIGIBLE PARTICIPANTS
                             ---------------------

     Subject to the provisions of the Plan, the persons who shall be eligible to
participate in the Plan and be granted Awards shall be those persons who are
Officers, Directors and key employees of the Company or any Subsidiary who shall
be in a position, in the opinion of the Administrator, to make contributions to
the growth, management, protection and success of the Company and its
Subsidiaries.  In making any such selection and in determining the form of
Award, the Administrator may give consideration to the functions and
responsibilities of the person, to the person's contributions to the Company and
its Subsidiaries, the value of the individual's service to the Company and its
Subsidiaries and such other factors deemed relevant by the Administrator.

                                   SECTION 6
                                   ---------
                        TERMS AND CONDITIONS OF OPTIONS
                        -------------------------------

     The Administrator may, in its discretion, grant Options to any Participant
under the Plan.  Each Option shall be evidenced by a written agreement between
the Company and the Participant.  Unless the Administrator at the time of grant
specifically designates Options granted under the Plan as Incentive Stock
Options, all Options granted under the Plan shall be non-statutory options.
Each Option agreement, in such form as is approved by the Administrator, shall
be subject to the following express terms and conditions and to such other terms
and conditions, not inconsistent with the Plan as the Administrator may deem
appropriate:

     A.    Option Period: Each Option granted under the Plan shall be for such
           period as is established by the Board, except that each ISO shall
           expire no later than ten (10) years after the Option Date. Where
           Options are exercisable in installments, the right to purchase any
           shares shall be cumulative, so that when the right to purchase any
           shares has matured, such shares may be purchased thereafter until the
           expiration of the Option. The Board shall have the power to
           accelerate the exercisability of installments for any Option granted
           under the Plan.

     B.    Option Price: At the time when the Option is granted, the
           Administrator will fix the Option Price; provided, however, that the
           Option price shall be no less than the Fair Market Value on the
           Option Date.

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     C.    Incentive Stock Options: ISO's may only be granted to employees of
           the Company or of a Subsidiary. No more than five thousand (5,000)
           shares of the Company's Class A Common Stock may be issued upon the
           exercise of ISO's granted under this Plan and no ISO may be granted
           under the Plan after the tenth (10th) anniversary of the date the
           Plan is approved by the shareholders of the Company. The aggregate
           Fair Market Value (determined as of the Option Date of the ISO) of
           the Common Stock with respect to which ISO's are first exercisable by
           a Company or Subsidiary employee during any calendar year under all
           Option Plans of the Company shall not exceed One Hundred Thousand
           Dollars ($100,000). An ISO granted to an employee who, at the time
           the ISO is granted, owns Common Stock possessing more than ten
           percent (10%) of the total combined voting power of all classes of
           capital stock of the Company or a Subsidiary thereof, shall have an
           exercise price equal to not less than one hundred ten percent (110%)
           of the Fair Market Value on the Option Date. Notwithstanding any
           other provision of this Plan, an ISO shall not be transferable or
           assignable otherwise than by will or the laws of descent and
           distribution. Any Participant who disposes of shares acquired upon
           the exercise of an ISO either (i) within two (2) years after the
           Option Date of the Option under which the shares were acquired, or
           (ii) within one (1) year after the acquisition of such shares shall
           notify the Company of such disposition and of the amount realized.
           Failure by a Participant to so notify the Company of such a
           disposition of shares shall entitle the Company to treat the shares
           of Common Stock issued to such Participant as void ab initio or to
           recover from the Participant the greater of the value of the shares
           disposed of as of the date of disposition or the value of the shares
           disposed of as of the date the Company learns of such disposition
           from either (i) any amounts due to such Participant from the Company
           or a Subsidiary, or (ii) otherwise. The Company may, at its
           discretion, place a legend noting the possible consequences of a
           Participant's failure to provide such disposition notice on shares of
           Common Stock delivered upon the exercise of an ISO.

     E.    No person shall have any rights of a shareholder with respect to any
           shares to be delivered upon the exercise of an Option until such time
           as such Option is validly exercised.

                                   SECTION 7
                                   ---------
                TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS
                -----------------------------------------------

     The Administrator may grant Restricted Stock to any Participant under the
Plan, the purchase price of which shall be established by the Administrator,
which purchase price may be financed by the Company on terms established by the
Administrator.  Each grant of Restricted Stock shall be evidenced by an Award
Agreement between the Company and the Participant.  All shares of Common Stock
awarded to Participants under the Plan as Restricted Stock shall be subject to
the following express terms and conditions and to such other terms and
conditions, not inconsistent with the Plan, as the Board shall deem appropriate:

     A.    Restrictions on Transfer:  Shares of Restricted Stock awarded to
           Participants shall contain such restrictions on transfer as the Board
           may determine in its sole discretion.  Except as may be

                                       5
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           permitted under Section 11 of the Plan, shares of Restricted Stock
           awarded to Participants may not be sold or transferred before such
           restrictions on transfer lapse, and may only be pledged to the
           Company or any Subsidiary to satisfy any obligations that the
           Participant may have to the Company or the Subsidiary with respect to
           the acquisition of such shares of Restricted Stock. Subject to the
           provisions of subparagraphs B and C below and any other restrictions
           imposed by law, the certificates for any shares of Restricted Stock,
           the restrictions on which have lapsed, will be transferred to the
           Participant, or in the event of his death, to the beneficiary or
           beneficiaries designated by writing filed by the Participant with the
           Board for such purpose or, if none, to his estate. Delivery of shares
           in accordance with the preceding sentence shall be made within the
           thirty (30) day period after such restrictions shall lapse.

     B.    Certificates Deposited with Company: Each certificate issued in
           respect of shares of Restricted Stock awarded under the Plan shall be
           registered in the name of the Participant and deposited with the
           Company. Each such certificate shall bear the following (or a
           similar) legend:

               "The transferability of this certificate and the shares of stock
               represented hereby are subject to the terms and conditions
               (including forfeiture) relating to Restricted Stock contained in
               the Red Man Pipe & Supply Co. Incentive Stock Plan 1997 and an
               agreement entered into between the registered owner and Red Man
               Pipe & Supply Co.  Copies of such Plan and Agreement are on file
               at the principal office of Red Man Pipe & Supply Co."

     C.    Shareholder Rights: Subject to the foregoing restrictions, each
           Participant shall have all the rights of a shareholder with respect
           to his shares of Restricted Stock, including, but not limited to, the
           right to vote such shares.

     D.    Dividends: On each Common Stock dividend payment date, each
           Participant shall receive an amount equal to the dividend paid on
           that date on a share of Common Stock, multiplied by his number of
           shares of Restricted Stock.

                                   SECTION 8
                                   ---------
                        MANNER OF EXERCISE OF OPTIONS;
                        ------------------------------
                         DEFERRAL OF RECEIPT OF SHARES
                         -----------------------------

     To exercise an Option in whole or in part, a Participant (or, after his
death, his executor or administrator) or his assignee (as contemplated in
Section 11 hereof) must give written notice to the Administrator, or the person
designated by the Administrator, stating the number of shares with respect to
which he intends to exercise the Option.  The Company will issue the shares with
respect to which the Option is exercised upon payment in full of the Option
Price.  The Option Price may be paid:

     A.    In cash;

     B.    In shares of Common Stock held by the Participant, his executor,
           administrator or assignee, and having an aggregate Fair Market Value,
           as determined as of the close of business on the day on which such
           Option is exercised, equal to the Option Price;

                                       6
<PAGE>
 
     C.   If permitted by the Administrator, a promissory note in the amount of
          the Option Price, which note shall provide for full personal liability
          of the maker and shall contain such other terms and provisions as the
          Administrator may determine, including without limitation the right to
          repay the note partially or wholly with Common Stock;

     D.   If authorized by the Administrator in the Award Agreement for the
          Option being exercised, by delivery of irrevocable instructions to a
          broker to promptly deliver to the Company the amount of sale or loan
          proceeds necessary to pay for all Common Stock acquired through such
          exercise and any tax withholding obligations resulting from such
          exercise;

     E.   If authorized by the Administrator in the Award Agreement for the
          Option being exercised, by the withholding by the Company, pursuant to
          a written election delivered by the Participant, his executor,
          administrator or assignee, to the Administrator on or prior to the
          date of exercise, from the shares of Common Stock issuable upon any
          exercise of the Option that number of shares having a Fair Market
          Value as of the close of business on the day on which such Option is
          exercised equal to such Option Price;

     F.   As authorized by the Administrator in the Award Agreement for the
          Option being exercised, by a combination of such methods.

                                   SECTION 9
                                   ---------
                                    VESTING
                                    -------

     A Participant may not exercise an Option until it has become vested.  The
portion of an Option Award that is vested depends upon the vesting restrictions,
if any, established by the Administrator for such Option at the time of its
grant and the period that has elapsed since the Option Date.

                                  SECTION 10
                                  ----------
              ADJUSTMENTS TO REFLECT CHANGES IN CAPITAL STRUCTURE
              ---------------------------------------------------

     If there is any change in the corporate structure or shares of the Company,
adjustments will be made as necessary to prevent accretion, or to protect
against dilution, in the number and kind of shares authorized by the Plan and,
with respect to outstanding Options and/or Restricted Stock, in the number and
kind of shares covered thereby and in the applicable Option Price.  For the
purpose of this Section 10, a change in the corporate structure or shares of the
Company includes, without limitation, any change resulting from a
recapitalization, stock split, stock dividend, consolidation, rights offering,
spin-off, reorganization or liquidation and any transaction in which shares of
Common Stock are changed into or exchanged for a different number or kind of
shares of stock or other securities of the Company or another corporation.

                                  SECTION 11
                                  ----------
                 NON-TRANSFERABILITY OF OPTIONS AND RESTRICTED
                 ---------------------------------------------
               STOCK; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS
               -------------------------------------------------

A.   Unless otherwise expressly provided in this Section 11, by applicable law
     or by any Award Agreement, as the same may be amended, evidencing the grant
     or award of Restricted Stock or Options, Awards are non-transferable and
     shall not be subject in any manner to sale, transfer, anticipation,
     alienation, assignment, pledge, encumbrance or charge.  Awards shall be
     exercised only by the person to whom such Awards were

                                       7
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     granted or awarded (a "Recipient") and amounts payable or shares issuable
     pursuant to Awards shall be delivered only to or for the account of a
     Recipient.

B.   Except as precluded by any applicable law, the Administrator may permit
     Awards to be transferred to and exercised by and paid to certain persons or
     entities related to the Recipient, including but not limited to members of
     the Recipient's immediate family (parents, grandparents, children,
     grandchildren, spouse, siblings), charitable institutions or trusts or
     other entities whose beneficiaries or beneficial owners are members of the
     Recipient's immediate family and/or charitable institutions, or to such
     other persons or entities as may be approved by the Administrator, pursuant
     to such conditions and procedures as the Administrator may establish.  Any
     permitted transfer shall be subject to the condition that the Administrator
     receive evidence satisfactory to it that the transfer is being made for
     estate and/or tax planning purposes on a gratuitous or donative basis and
     without consideration other than nominal consideration.

C.   The exercise and transfer restrictions in this Section 11 shall not apply
     to:

     (1)  Transfers to the Company;

     (2)  The designation of a beneficiary to receive benefits in the event of
          the Recipient's death or, if the Recipient has died, transfers to or
          exercise by the Recipient's beneficiary, or, in the absence of a
          validly designated beneficiary, transfers by will or the laws of
          descent and distribution;

     (3)  Transfers pursuant to a domestic relations order;

     (4)  If the Recipient has suffered a disability, permitted transfers or
          exercises on behalf of the Recipient by his or her legal
          representative; or

     (5)  The authorization by the Administrator of "cashless exercise"
          procedures with third parties who provide financing for the purpose of
          (or who otherwise facilitate) the exercise of Awards consistent with
          applicable laws and the express authorization of the Administrator.

D.   In the event of a transfer of an Award pursuant to Subsection B or C of
     this Section 11, the Recipient will remain liable for any taxes (including
     withholding and social security taxes) due upon or as a consequence of the
     exercise of or lapse of any restrictions in respect of an Award and neither
     the Company nor the Administrator shall have any obligation to provide
     notice to a transferee of any event or information that has, will or could
     in any way affect an Award or its exercise.

                                  SECTION 12
                                  ----------
                             RIGHTS AS SHAREHOLDER
                             ---------------------

     No person shall have any rights of a shareholder as to shares of Common
Stock subject to an Award under the Plan until, after proper exercise of the
Award or other action required, such shares shall have been recorded on the
Company's official shareholder records as having been issued or transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a shareholder for any purpose whatsoever prior to such issuance.  No
adjustment shall be made for cash dividends or other rights for which the

                                       8
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record date is prior to the date such shares are recorded as issued or
transferred in the Company's official shareholder records, except as provided
herein or in an Agreement.

                                  SECTION 13
                                  ----------
                                WITHHOLDING TAX
                                ---------------

     Upon the exercise of an Option, or the lapse of restrictions on Restricted
Stock, requiring tax withholding, the Participant will be required to pay to the
Company for remittance to the appropriate taxing authorities an amount necessary
to satisfy the employee's portion of federal, state and local taxes, if any,
incurred by reason of the exercise of an Option or the lapse of such
restrictions.  A Participant may elect to have any tax withholding obligation
incurred upon the exercise of or lapse of restrictions in respect of an Award
satisfied by payment of cash by the Participant, by the withholding of cash
otherwise due the Participant, or, except in the case of ISO's, by the
withholding of shares of Common Stock issuable upon such occurrence and having
an aggregate Fair Market Value on the day prior to the day of exercise or lapse
sufficient to satisfy the applicable tax withholding requirement; provided,
however, that if the Participant elects to have shares of Common Stock withheld
from the shares deliverable upon such exercise or lapse, a Participant's
election must be delivered to the Administrator in writing on or prior to the
date of exercise of the Options or lapse of restrictions with respect to
Restricted Stock.

                                  SECTION 14
                                  ----------
                           TERMINATION OF EMPLOYMENT
                           -------------------------

     In the event of a Participant's Termination of Employment, the following
rules shall apply:

     A.   Resignation in order to assume employment, approved by the Company's
          Chief Executive Officer, with a governmental, charitable or
          educational institution, or business entity affiliated with the
          Company:  When a Participant resigns to assume employment, approved by
          the Company's Chief Executive Officer, with a governmental, charitable
          or educational institution, or business entity in which the Company
          has an equity interest, the Administrator may (i) authorize the
          continuation of Options granted or Restricted Stock awarded prior to
          termination as if the Participant were still employed by the Company
          and (ii) permit the exercise of such Options or lapse of restrictions
          in respect of Restricted Stock during periods after such Termination
          of Employment, but not beyond the original expiration date of the
          Option.  Such actions will not be authorized to the extent they would
          cause outstanding ISO's to be considered to have been modified for
          purposes of Section 424(h) of the Code.  Unless the Administrator
          determines otherwise, termination of such approved employment, except
          to rejoin the Company or accept other employment which would qualify
          under this Paragraph A, or divestiture by the Company of its equity
          interest in such business entity, shall be treated as a termination of
          employment pursuant to Paragraphs B, C or D of this Section 14.

     B.   Termination of Employment for any reason other than death, disability
          or resignation for approved employment pursuant to Paragraph A of this
          Section 14:  Any Option or Restricted Stock shall expire forthwith;
          provided, however, that with the approval of the Board evidenced by a
          writing signed by an executive officer

                                       9
<PAGE>
 
          of the Company other than the Participant, unvested Options may be
          accelerated to vest immediately; any Options exercisable at the time
          of such termination may be exercised up to a date after such
          termination that is determined by the Board, but not exceeding five
          (5) years from the date of such termination and not beyond the date
          the Option otherwise would have expired in accordance with the Award
          Agreement evidencing such Option and/or the restrictions on Restricted
          Stock may be eliminated so that such Restricted Stock is free of such
          restrictions at the time of Termination of Employment and not
          forfeited upon such Termination of Employment.

     C.   Death of a Participant:  A Participant's estate or beneficiaries shall
          have a period up to the later of one (1) year after the Participant's
          death or the expiration date specified in the Award Agreement within
          which to exercise the Option; provided, however, in the case of ISO's,
          the Participant's estate or beneficiaries may exercise an Option only
          until the expiration date specified in the Award Agreement.  Any
          Option may be immediately exercised in full by the Participant's
          estate or beneficiaries.  In the event the Participant's estate is
          closed with exercisable Options then unexercised, the rights under
          this Paragraph shall pass by will or the laws of descent and
          distribution.  In the case of Restricted Stock, the restrictions on
          such Restricted Stock shall be deemed to have lapsed immediately
          before such Participant's death.

     D.   Disability of a Participant:  In the event of a Participant's
          Disability during employment, the Participant, or his or her guardian
          or legal representative, shall have a period up to the expiration date
          specified in the Award Agreement within which to exercise the Option.
          In the case of Restricted Stock, the restrictions on such Restricted
          Stock shall be deemed to have lapsed immediately before the
          Termination of Employment of such Participant.

                                  SECTION 15
                                  ----------
                            NO RIGHT TO EMPLOYMENT
                            ----------------------

     Participation in the Plan will not give any Participant a right to be
retained as an employee of the Company or any Subsidiary, or any right or claim
to any benefit under the Plan, unless the right to claim has specifically
accrued under the Plan.

                                  SECTION 16
                                  ----------
                             AMENDMENT OF THE PLAN
                             ---------------------

     Except as provided in this Section 16, the Board may amend, modify, suspend
or discontinue this Plan for the purpose of meeting any changes in legal
requirements or for nay other purpose permitted by law.  Except for any
adjustments pursuant to Section 10, the Board may not:

     A.   Increase the maximum number of shares that may be issued under the
          Plan; or

     B.   Decrease the exercise price with respect to any Option previously
          granted.

The Board may from time to time amend or revise the terms of the Plan in whole
or in part and may, without limitation, adopt any amendment deemed necessary.

                                       10
<PAGE>
 
                                  SECTION 17
                                  ----------
                                    NOTICE
                                    ------

     Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Administrator, if so required under the Plan, and
otherwise to the Chairman of the Board or to the Chief Executive Officer of the
Company, and shall become effective when it is received by the office of such
Administrator, Chairman or the Chief Executive Officer.

                                  SECTION 18
                                  ----------
                    COMPANY BENEFIT AND COMPENSATION PLANS
                    --------------------------------------

     Nothing contained in the Plan shall prevent any Participant prior to death,
or the Participant's dependents or beneficiaries after the Participant's death,
from receiving, in addition to any Options or Restricted Stock provided for
under the Plan, any salary, incentive or performance plan Awards, payments under
a Company retirement plan or other benefits that may be otherwise payable or
distributable to such Participant, or to the Participant's dependents or
beneficiaries under any other plan or policy of the Company or otherwise.  To
the extent permitted by law, grants of Options or awards of Restricted Stock
under the Plan may be made in combination with, or as alternatives to, grants,
Awards or payments under other Company plans.

                                  SECTION 19
                                  ----------
                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

     No person shall at any time have a right to be selected as a Participant in
the Plan, nor having been selected as a Participant for one Award, to be
selected as a Participant for any other Award, and no person shall have any
authority to enter into any agreement assuring such selection or making any
warranty or representation with respect thereto.  A Participant shall have no
rights to or interest in any Option or Restricted Stock except as set forth
therein.

                                  SECTION 20
                                  ----------
                                 UNFUNDED PLAN
                                 -------------

     Insofar as it provides for grants of Options and Awards of Restricted
Stock, the Plan shall be unfunded.  Although bookkeeping accounts may be
established with respect to Participants who are or may become entitled to
Common Stock under the Plan, any such accounts shall be used merely as a
bookkeeping convenience.  The Company shall not be required to segregate any
assets that may at any time be represented by Common Stock, nor shall the Plan
be construed as providing for such segregation, nor shall the Company nor the
Board be deemed to be a trustee of any Common Stock issuable or deliverable
under the Plan.  Any liability of the Company to a Participant with respect to a
grant of Options or award of Restricted Stock under the Plan shall be based
solely upon any contractual obligations that may be created by the Plan or an
Award Agreement; no such obligation of the Company shall be deemed to be secured
by any pledge or other encumbrance on any property of the Company.  Neither the
Company nor the Board shall be required to give any security or bond for the
performance of any obligation that may be created by the Plan.

                                  SECTION 21
                                  ----------
                             SHAREHOLDER APPROVAL
                             --------------------

     Continuance of the Plan, and the validity of any Options granted or
Restricted Stock awarded under the Plan, shall be subject to approval by the
shareholders of the Company of the Plan within twelve (12) months after the date
the Plan is adopted by the Board.

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<PAGE>
 
                                  SECTION 22
                                  ----------
                      CONDITIONS UPON ISSUANCE OF SHARES
                      ----------------------------------

     An Option shall not be exercisable, a share of Common Stock shall not be
issued pursuant to the exercise of an Option, and restrictions on Restricted
Stock awarded shall not lapse until such time as the Plan has been approved by
the shareholders of the Company and unless the Award of Restricted Stock,
exercise of such Option and the issuance and delivery of such share pursuant
thereto shall comply with all relevant provisions of law, including without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares of Common Stock may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.  As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Common Stock is being purchased only for investment and without present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

                                  SECTION 25
                                  ----------
                    EFFECTIVE DATE AND TERMINATION OF PLAN
                    --------------------------------------

A.   Effective Date:  The Plan is effective as of the date of its adoption by
     the Board, subject to its approval by the Shareholders of the Company,
     pursuant to Section 21 hereof.

B.   Termination of the Plan:  The Board may terminate the Plan at any time with
     respect to any shares that are not then subject to Options or Restricted
     Stock.  Termination of the Plan will not affect the rights and obligations
     of any Participant with respect to Options or Restricted Stock awarded
     before termination.


     The undersigned, being the duly elected Secretary of Red Man Pipe & Supply
Co., does hereby certify that the foregoing Red Man Pipe & Supply Co. Incentive
Stock Plan 1997 was approved by the Board of Directors as of the 15th day of
December, 1997, and by the shareholders of Red Man Pipe & Supply Co. on
the 15th day of December, 1997.


                              /s/ BETTY J. KETCHUM 
                              ___________________________________
                              Secretary

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