<PAGE>

                                                                   EXHIBIT 10.26


                              METRO NETWORKS, INC.


                             1997 STOCK OPTION PLAN
<PAGE>

                              METRO NETWORKS, INC.
                             1997 STOCK OPTION PLAN

                               TABLE OF CONTENTS


                                                                     Page

SECTION 1

           DEFINITIONS............................................... -1-

SECTION 2

           THE PLAN.................................................. -3-
           2.1.    Name.............................................. -3-
           2.2.    Purpose........................................... -3-
           2.3.    Intention......................................... -3-

SECTION 3

           ADMINISTRATION............................................ -4-
           3.1.    Administration.................................... -4-
           3.2.    Duties............................................ -4-
           3.3.    Registered Shares................................. -4-

SECTION 4

           PARTICIPATION............................................. -5-
           4.1.    Eligibility....................................... -5-
           4.2.    Ten-Percent Stockholders.......................... -5-

SECTION 5

           SHARES SUBJECT TO PLAN.................................... -6-
           5.1.    Shares Available for Options...................... -6-
           5.2.    Adjustments....................................... -6-

SECTION 6

           OPTIONS................................................... -7-
           6.1.    Option Grant and Agreement........................ -7-
           6.2.    Conditions with Respect to Incentive Stock
                   Options........................................... -7-
           6.3.    Option Price...................................... -8-
           6.4.    Option Term....................................... -8-
           6.5.    Limitations on Exercise of Options................ -8-
           6.6.    Method of Exercising Options; Withholding
                   Tax............................................... -9-
           6.7.    Rights in the Event of Sale, Merger or
                   Other Reorganization.............................. -10-


                                      -i-
<PAGE>

           6.8.    Rights in the Event of Death...................... -11-
           6.9.    Rights in the Event of Total and Permanent
                   Disability........................................ -11-
           6.10.   Rights in the Event of Termination of
                   Employment........................................ -11-

SECTION 7

           SHARES ISSUED PURSUANT TO AN OPTION....................... -12-
           7.1.    Issuance of Certificates.......................... -12-
           7.2.    Compliance with Securities and Other Laws......... -13-
           7.3.    Requirements in the Event of a Disposition
                   of Shares......................................... -13-
           7.4.    Legend............................................ -13-

SECTION 8

           TERMINATION, AMENDMENT AND MODIFICATION OF PLAN........... -13-
           8.1.    Board Termination, Amendment and
                   Modification of Plan.............................. -13-
           8.2.    Plan Termination.................................. -14-
           8.3.    Effect of Termination, Amendment or
                   Modification of Plan.............................. -14-

SECTION 9

           MISCELLANEOUS............................................. -14-
           9.1.    No Employment Rights.............................. -14-
           9.2.    Binding Effect.................................... -14-
           9.3.    Singular, Plural, Gender.......................... -14-
           9.4.    Headings.......................................... -15-
           9.5.    Effective Date; Ratification by Stockholders...... -15-
           9.6.    Rights as Stockholder............................. -15-
           9.7.    Applicable Law.................................... -15-
           9.8.    Reports........................................... -15-


                                     -ii-
<PAGE>

                                  PLAN SUMMARY


          The Plan is designed to advance the Company's interests by encouraging
employees and Non-Employee Directors of the Company and its Subsidiaries to
acquire a proprietary interest in the Company.  It provides that an aggregate of
1,500,000 shares of the Company's Common Stock may be optioned to employees and
Non-Employee Directors of the Employer Company.  Options granted under the Plan
may be either Incentive Stock Options, which qualify for favorable federal
income tax treatment, or Nonstatutory Stock Options. All employees of the
Employer Company are eligible to receive Incentive Stock Options or Nonstatutory
Stock Options, but the Administrator is entitled to select the individuals to
whom such options actually will be granted and to determine whether the options
will be Incentive Stock Options or Nonstatutory Stock Options.  All Non-Employee
Directors are eligible to receive Nonstatutory Stock Options.

          To meet the statutory requirements for Incentive Stock Options under
Corporation Section 422 of the Internal Revenue Code of 1986, as amended, the
Plan provides the purchase price of the optioned stock must be fixed at no less
than the fair market value of the Company's Common Stock as of the time the
Option is granted (or in the case of an Optionee who beneficially owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding shares of capital stock of the Employer Company or its Parent or
Subsidiary, no less than one hundred ten percent (110%) of the fair market value
of the Company's Common Stock as of the time the Option is granted).  To the
extent that the aggregate fair market value of stock exercisable by an Optionee
for the first time in any one calendar year under all plans of the Employer
Company and any Parent and Subsidiary exceeds $100,000, options for such shares
shall not be considered Incentive Stock Options but instead shall be considered
Nonstatutory Stock Options granted under the Plan.  Incentive Stock Options
granted under the Plan are nontransferable (other than by will or the laws of
descent and distribution) and Incentive Stock Options may not be exercised more
than ten years (five years in the case of an Optionee who beneficially owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding shares of capital stock of the Employer Company or Parent or
Subsidiary) after the date they are granted.


                                      -i-
<PAGE>

          The Company will receive no cash consideration for granting Options
under the Plan.  However, when an Option is exercised, the holder is required to
pay the Option Price for the number of shares of stock to be issued under the
exercised Option.

          The Plan will be administered by the Administrator and will terminate
five years after the earlier of the date it is adopted by the Board of Directors
or the date it is approved by the Company's stockholders, unless earlier ter
minated by the Administrator.




                                     -ii-
<PAGE>

                              METRO NETWORKS, INC.

                             1997 STOCK OPTION PLAN

                                   SECTION 1

                                  DEFINITIONS


          As used herein, the following terms have the meanings hereinafter set
forth unless the context clearly indicates to the contrary:

          (a) "Act" means the Securities Act of 1933, as amended.

          (b) "Administrator" means the Board or the Com mittee, whichever shall
be administering the Plan from time to time in the discretion of the Board, as
described in Section 3 of the Plan.

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

          (d) "Code" means the Internal Revenue Code of 1986, as amended.

          (e) "Committee" means the committee appointed by the Board in
accordance with Section 3 of the Plan.

          (f) "Company" means Metro Networks, Inc., a Delaware corporation.

          (g) "Employee" means an individual who is employed (within the meaning
of Section 3401 of the Code and the regulations thereunder) by the Company or a
subsidiary of the Company.

          (h) "Employer Company" means the Company, whether the Company or a
Subsidiary Corporation  of the Company, which employs the Employee.

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

          (j) "Fair Market Value of Shares" shall mean (i) if the Shares are not
publicly traded on the day in question, the fair market value of the Shares on
the day in question as determined and set forth in writing by the Administrator
(which, in making such determination, shall
<PAGE>

make a good faith effort to establish the true fair market value of the Shares
as of such date using such methods as it deems appropriate, including
independent appraisals, and taking into consideration any requirements set forth
in the Code or the regulations thereunder) or (ii) if the Shares are publicly
traded on the day in question, the closing price of the Shares on the day in
question. The closing price shall be the average of the highest and lowest
quoted selling prices on the New York Stock Exchange or, if the Shares are not
listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Shares are listed or admitted to trading or, if
not listed or admitted to trading on any national securities exchange, as
reported by the Nasdaq Stock Market's National Market on the day in question.

          (k) "Incentive Stock Option" means an Option for Shares which
qualifies for treatment pursuant to Section 422 of the Code.

          (l) "Non-Employee Director" shall have the meaning assigned to this
phrase in Rule 16b-3 of the Securities and Exchange Commission adopted under the
Exchange Act.

          (m) "Nonstatutory Stock Option" means an Option which is not an
Incentive Stock Option and which is designated as a Nonstatutory Stock Option by
the Board.

          (n) "Option" means an option to purchase a Share pursuant to the
provisions of this Plan.

          (o) "Optionee" means an Employee or Non-Employee Director to whom an
Option has been granted hereunder.

          (p) "Option Price" means the price per share of the Shares subject to
each option as provided in Section 6.3.

          (q) "Option Term" means the period of time during which an Option may
be exercised.

          (r) "Parent Corporation" shall have the meaning assigned to that term
under Section 424 of the Code.

          (s) "Plan" means the Metro Networks, Inc. 1997 Stock Option Plan, the
terms of which are set forth herein.

          (t) "Share" or "Shares" means Common Stock of the Company, par value
$.001 per share, or, in the event that


                                      -2-
<PAGE>

the outstanding Shares are hereafter changed into or ex changed for different
shares or securities of the Company or some other corporation or other entity,
such other shares or securities.

          (u) "Stock Option Agreement" means the agreement described in Section
6.1 between the Company and the Optionee under which the Optionee may purchase
Shares hereunder.

          (v) "Subsidiary Corporation" shall have the meaning assigned to that
term under Section 424 of the Code.

          (w) "Total and Permanent Disability" means the inability of an
Employee to engage in any substantial gain  ful activity by reason of any
medically determinable physi  cal 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 months.

                                   SECTION 2

                                    THE PLAN

          2.1 Name.  This Plan shall be known as "Metro Networks, Inc. 1997
Stock Option Plan".

          2.2  Purpose.  The purpose of this Plan is to ad vance the interests
of the Company and its stockholders by affording Employees of the Employer
Company and Non-Employee Directors an opportunity to acquire or increase their
proprietary interest in the Company by the grant to such individuals of Options
under the terms set forth herein.  By thus encouraging such individuals to
acquire or increase their proprietary interest in the Company, the Company seeks
to attract, motivate and retain those highly competent individuals upon whose
judgment, initiative, leadership, and continued efforts the success of the
Company in large measure depends.

          2.3  Intention.  It is intended that the Options issued as Incentive
Stock Options under this Plan will qualify as Incentive Stock Options under
Section 422 of the Code and the terms of this Plan shall be interpreted in
accordance with such intention.


                                      -3-
<PAGE>

                                   SECTION 3

                                 ADMINISTRATION

          3.1  Administration.  The Plan shall be adminis tered, in the
discretion of the Board from time to time, by the Board or by the Committee
acting as the Administrator. The Committee shall be appointed by the Board, in a
manner consistent with the Company's Bylaws, and shall consist of not less than
two (2) members of the Board.  The Board may from time to time remove members
from, or add members to, the Committee.  Vacancies on the Committee, however
caused, shall be filled by the Board.  The Board may appoint one (1) of the
members of the Committee as Chairman.  The Administrator shall hold meetings at
such times and places as it may determine.  Acts of a majority of the
Administrator at which a quorum is present, or acts reduced to or approved in
writing by the unanimous consent of the members of the Administrator, shall be
the valid acts of the Administrator.

          3.2  Duties.  The Administrator shall from time to time at its
discretion select the Employees and Non-Employee Directors who are to be granted
Options, determine the number of Shares to be subject to Options to be granted
to each Optionee and designate such Options as Incentive Stock Options or
Nonstatutory Stock Options; provided that Options granted to Non-Employee
Directors shall be Nonstatutory Stock Options.  The interpretation and
construction by the Administrator of any provisions of the Plan or of any Option
granted thereunder shall be final.  No member of the Administrator shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted hereunder.

          3.3  Registered Shares.  If any Shares are registered under Section 12
of the Exchange Act, then notwithstanding the first or second sentence of
Section 3.2 after such registration the grant of any Option under the Plan to
any person who shall be an officer (as defined in Section 16 of the Exchange
Act) of the Employer Company at the time of such grant shall only be made either
(A) with the approval of the Board or (B) with the approval of the Committee if
all of the members of the Committee are Non-Employee Directors.


                                      -4-
<PAGE>

                                   SECTION 4

                                 PARTICIPATION

          4.1  Eligibility.  The Optionees shall be such persons (collectively,
"Participants"; individually a "Par  ticipant") as the Administrator may select
from among the following classes of persons, subject to the terms and conditions
of Section 4.2 below:

               (a) Employees and Non-Employee Directors of the Company; and

               (b) Employees and Non-Employee Directors of the Company's
     Subsidiary Corporations.

          4.2  Ten-Percent Stockholders.  A Participant who beneficially owns
more than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company, as determined under Sections 422 and 424 of
the Code, shall not be eligible to receive an Incentive Stock Option unless (i)
the Option Price of the Shares subject to such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such Shares on the date of grant
and (ii) such Option by its terms is not exercisable after the expiration of
five (5) years from the date of grant.

          (a) Stock Ownership.  For purposes of Sec tion 4.2 above, in
determining stock ownership, a Partici  pant's beneficial ownership of any class
of outstanding stock of the Employer Company or a Parent Corporation or a
Subsidiary Corporation shall be determined as provided in Rule 16a-1(a) of the
Securities and Exchange Commission adopted under the Exchange Act, and in any
event (i) such Participant shall be considered as owning the stock owned,
directly or indirectly, by or for his or her brothers and sisters, spouse,
ancestors and lineal descendants; (ii) 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; and
(iii) stock with respect to which such Participant holds an Option shall not be
counted.

          (b) Outstanding Stock.  For purposes of Section 4.2 above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant of the Option to the Optionee.  "Outstanding stock"
shall not include shares authorized for issue under out-


                                      -5-
<PAGE>

standing Options held by the Optionee or by any other person.

                                   SECTION 5

                             SHARES SUBJECT TO PLAN

          5.1  Shares Available for Options.  Subject to adjustment pursuant to
the provisions of Section 5.2 hereof, the total number of Shares which may be
issued upon the ex  ercise of all Options shall not exceed 1,500,000 Shares.
Such Shares may be either authorized and unissued Shares or issued Shares which
have been reacquired by the Company.  If any Option shall expire or terminate
for any reason without having been exercised in full, new Options may be granted
covering Shares originally set aside for the exercise of such expired or
terminated Option.

           5.2 Adjustments.

          (a) Stock Splits and Dividends.  Subject to any required action by the
Board and/or stockholders, the number of Shares covered by the Plan as provided
in Section 5.1 hereof, the number of Shares covered by each outstanding Option
and the Option Price thereof shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a subdivision or
consolidation of Shares or the payment of a stock dividend (but only if paid in
Shares), a stock split or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company.

          (b) Mergers.  Subject to any required action by the Board and/or
stockholders, if the Company shall merge with another corporation and the
Company is the surviving corporation in such merger and under the terms of such
merger the Shares outstanding immediately prior to the merger remain outstanding
and unchanged, each outstanding Option shall continue to apply to the Shares
subject thereto and shall also pertain and apply to any additional securities
and other property, if any, to which a holder of the number of Shares subject to
the Option would have been entitled as a result of the merger.

          (c) Adjustment Determination.  To the extent that the foregoing
adjustments relate to securities of the Company, such adjustments shall be made
by the Administrator, whose determination shall be conclusive and binding on all
persons.  In computing any adjustment under


                                      -6-
<PAGE>

this Section 5.2, any fractional Share which might otherwise become subject to
an Option shall be eliminated.

                                   SECTION 6

                                    OPTIONS

          6.1  Option Grant and Agreement.  Each Option grant shall be evidenced
by a written Stock Option Agreement, dated as of the date of grant and executed
by the Company and the Optionee, which Stock Option Agreement shall set forth
the number of Options granted, whether the Options are Incentive Stock Options
or Nonstatutory Stock Options, the Option Price, the Option Term and such other
terms and conditions as may be determined appropriate by the Administrator,
provided that such terms and conditions are consistent with the Plan.  The Stock
Option Agreement shall incorporate this Plan by reference and provide that any
inconsistencies or disputes shall be resolved in favor of the Plan language.

          6.2  Conditions with Respect to Incentive Stock Options.  Each
Incentive Stock Option shall be subject to the following conditions, which
conditions shall be stated within the applicable Stock Option Agreement.  Any
Incentive Stock Option which does not comply with these provisions shall not be
considered an Incentive Stock Option and instead shall be considered a
Nonstatutory Option issued under the Plan:

               (a) To the extent that the aggregate Fair Market Value of Shares
     (determined as of the time an Option is granted) exercisable for the first
     time by an Optionee during any calendar year under this Plan and all
     similar plans maintained by the Employer Company and its Subsidiary
     Corporation and its Parent Corporation exceeds $100,000, such excess
     Options shall be deemed Nonstatutory Stock Options.

               (b) Options granted to an Optionee may be exercised in any order,
     so that an Optionee may exer  cise an Option if another Option, granted to
     him at an earlier time, remains outstanding.

               (c) No Incentive Stock Option may be assigned or transferred by
     an Optionee other than by will or by the laws of descent and distribution.
     During the lifetime of an Incentive Stock Optionee, the Option may be
     exercisable only by the Optionee. Transfer of an Incentive Stock Option by
     will or by the



                                      -7-
<PAGE>

     laws of descent and distribution shall not be effective to bind the Company
     unless the Company shall have been furnished with written notice thereof
     and an authenti cated copy of the will or such other evidence as the Board
     may deem necessary to establish the validity of the transfer and the
     acceptance by the transferee of the terms and conditions of such Incentive
     Stock Option.

               (d) The maximum number of Options which any Participant may
     receive under the Plan during any calendar year is 100,000.

          6.3  Option Price. The Option Price shall be determined by the
Administrator, subject to any limitations imposed by this Plan.  The Option
Price for Incentive Stock Options shall not be less than the Fair Market Value
of Shares on the date such Incentive Stock Options are granted and, in the case
of Incentive Stock Options granted to an Optionee described in Section 4.2
hereof, the Option Price shall not be less than one hundred ten percent (110%)
of the Fair Market Value of Shares on the date of grant.

          6.4  Option Term.  The Option Term shall be deter mined by the
Administrator, subject to any limitations im  posed by this Plan, but in any
event shall not be more than ten years from the date such Option is granted,
and, in the case of an Incentive Stock Option granted to an Optionee described
in Section 4.2 hereof, shall not be more than five years from the date such
Option is granted.  Options may be subject to earlier termination as provided in
this Plan.

           6.5 Limitations on Exercise of Options.  Notwith standing anything
contained in this Plan to the contrary:

               (a) Options may not be exercised until the Plan has been ratified
     by the stockholders as provided in Section 9.5.

               (b) Options shall be exercised in full or in such equal or
     unequal installments as the Administrator shall determine; provided that if
     an Optionee does not purchase all of the Shares which the Optionee is
     entitled to purchase on a certain date or within an established installment
     period, the Optionee's right to purchase any unpurchased Shares shall
     continue during the Option Term (taking into account any early termina
     tion of such Option Term which may be provided for under the Plan).


                                      -8-
<PAGE>

               (c) If any Shares are registered under Section 12 of the Exchange
     Act, all Options granted thereafter to an officer (as defined in Section 16
     of the Exchange Act) of the Company shall be subject to the limitation that
     such Options shall not be exercised within six (6) months from the date of
     grant.

          6.6  Method of Exercising Options; Withholding Tax.  Options shall be
exercised by a written notice, de livered to the Company at its principal office
in Houston, Texas or such other address that may be designated by the Company,
specifying the number of Shares to be purchased and tendering payment in full
for such Shares.  Payment may be tendered in cash or by certified, bank
cashier's or teller's check or by Shares (valued at Fair Market Value as of the
date of tender), or some combination of the foregoing or such other form of
consideration which has been approved by the Board or the Committee, including
any approved cashless exercise mechanism.  The right to deliver in full or
partial payment of such Option Price any consideration other than cash shall be
limited to such frequency as the Board or the Committee shall determine in its
absolute discretion.  In the event all or part of the Option Price is paid in
Shares, any excess of the value of such Shares over the Option Price will be
returned to the Optionee as follows:  (i) any whole Share remaining in excess of
the Option Price will be re  turned in kind, and may be represented by one or
more share certificates; and (ii) any partial Shares remaining in ex  cess of
the Option Price will be returned in cash.

          In the event the Company determines that it is required to withhold
state or Federal income tax as a result of the exercise of an Option, as a
condition to the exercise thereof, the Optionee may be required to make
arrangements satisfactory to the Company to enable it to satisfy such
withholding requirements.  Payment of such withholding re  quirements may be
made, in the discretion of the Administra  tor, (i) in cash, (ii) by delivery of
Shares registered in the name of the Optionee, or by the Company not issuing
such number of Shares subject to the Option, having a Fair Market Value at the
time of exercise equal to the amount to be withheld, (iii) by the Company not
issuing such number of Shares subject to the Option as have a Fair Market Value
at the time of exercising equal to the amount to be withheld or (iv) any
combination of (i), (ii) and (iii) above.


                                      -9-
<PAGE>

          6.7  Rights in the Event of Sale, Merger or Other Reorganization.
Except as expressly provided in Section 5.2 and this Section 6.7, the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or spin-off of assets or stock
of another corporation, and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or Option Price of Shares subject to an Option.  The grant of an Option
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dis  solve,
liquidate, sell or transfer all or any part of its business or assets.  In any
such event (other than a merger in which the Company is the surviving
corporation as described in Section 5.2(b) and under the terms of which the
shares of Common Stock outstanding immediately prior to the merger remain
outstanding and unchanged), all rights of the Optionee with respect to the
unexercised portion of any Option shall wholly and completely terminate and all
Options shall be canceled at the time of any such merger, consolidation, sale or
transfer of assets, liquidation or dissolution, except to the extent that any
agreement or undertaking of any party to any such merger, consolidation, or sale
or transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, shall make specific provision with respect to the Plan
and the rights of Optionees with respect to Options granted thereunder.
Notwithstanding the foregoing, the holder of any such Option or right
theretofore granted and still outstanding shall have the right immediately prior
to the effective date of such merger, consolidation, sale or transfer of assets,
liquidation or dissolution to exercise such Option in whole or in part without
regard to any installment provision that may have been made part of the terms
and conditions of such Option or right; provided, that any conditions precedent
to such exercise set forth in the Stock Option Agreement referred to in Section
6.1 above, other than the passage of time, have occurred.  In no event, however,
may any Incentive Stock Option which becomes exercisable pursuant to this
Section 6.7 be exercised, in whole or in part, later than the date preceding the
tenth anniversary date of the grant thereof.



                                     -10-
<PAGE>

          6.8  Rights in the Event of Death.  If an Optionee's employment with
the Employer Company or service as a Non-Employee Director terminated on account
of death, the person or persons who shall have acquired the right, by will or
the laws of descent and distribution, to exercise the Optionee's Options shall
continue to have (subject to Sections 6.2 and 6.5 above) the right, for a period
which shall not exceed the earlier of the remaining Option Term (taking into
account any earlier termination date provided by the Plan) or one year from the
date of such Optionee's death, to exercise any Options which such Optionee would
have been entitled to exercise on the date of such Optionee's death.  At the
expiration of such one year period, or such earlier time as may be applicable,
any such Options which remain unexercised shall expire.  In no event may any
Options be exercised that could not have been exer  cised by an Optionee on the
date of such Optionee's death.

          6.9  Rights in the Event of Total and Permanent Disability.  If an
Optionee's employment with the Employer Company or service as a Non-Employee
Director is terminated on account of Total and Permanent Disability, the
Optionee shall have (subject to Sections 6.2 and 6.5 above) the right, for a
period which shall not exceed the earlier of the remaining Option Term (taking
into account any earlier termination date provided by the Plan) or one year from
the date of such Optionee's Total and Permanent Disability, to exercise any
Options which such Optionee would have been entitled to exercise on the date of
such Optionee's Total and Permanent Disability.  At the expiration of such one
year period, or such earlier time as may be applicable, any such Options which
remain unexercised shall expire.  In no event may any Options be exercised that
could not have been exercised by an Optionee on the date of such Optionee's
Total and Permanent Disability.

          6.10 Rights in the Event of Termination of Employment or Service.  In
the event that an Optionee's employment with the Employer Company or service as
a Non-Employee Director terminates, other than by reason of death or Total and
Permanent Disability or termination for "cause", the Optionee shall have
(subject to Sections 6.2 and 6.5 above) the right, for a period which shall not
exceed the earlier of the remaining Option Term (taking into account any earlier
termination date provided by the Plan) or three months from such termination of
employment or service as a Non-Employer Director, to exercise any Options which
such Optionee would have been entitled to exercise on the date of such
Optionee's termination.  At the expiration of such three month period, or such
earlier time as may be


                                     -11-
<PAGE>

applicable, any such Options which remain unexercised shall expire. In no event
may any Options be exercised that could not have been exercised by an Optionee
on the date of such Optionee's termination of employment or service.
Notwithstanding the foregoing, if an Optionee's employment or service is
terminated for "cause", the Company may notify the Optionee that any Options not
exercised prior to the termination are canceled. For purposes hereof, a
termination of employment or service for "cause" shall include, but not be
limited to, dismissal as a result of (1) Optionee's conviction of any crime or
offense involving money or other property of the Company or its subsidiaries or
which constitutes a felony in the jurisdiction involved; (2) Optionee's gross
negligence, gross incompetence or willful misconduct in the performance of his
or her duties; or (3) Optionee's willful failure or refusal to perform his or
her duties.

                                   SECTION 7

                      SHARES ISSUED PURSUANT TO AN OPTION

          7.1  Issuance of Certificates.  The Company shall not be required to
issue or deliver any certificate for Shares purchased upon the exercise of any
Option, or any portion thereof, prior to fulfillment of all of the follow  ing
applicable conditions:

               (a) The admission of such Shares to listing on all stock
     exchanges or markets on which the Shares are then listed to the extent such
     admission is necessary;

               (b) The completion of any registration or other qualification of
     such Shares under any federal or state securities laws or under the rulings
     or regula  tions of the Securities and Exchange Commission or any other
     governmental regulatory body, which the Board shall in its sole discretion
     deem necessary or advisa  ble, or the determination by the Board in its
     sole dis  cretion that no such registration or qualification is required;

               (c) The obtaining of any approval or other clearance from any
     federal or state governmental agency which the Board shall, in its sole
     discretion, deter  mine to be necessary or advisable; and

               (d) The lapse of such reasonable period of time following the
     exercise of the Option as the Board


                                     -12-
<PAGE>

     from time to time may establish for reasons of adminis trative convenience.

          7.2  Compliance with Securities and Other Laws. In no event shall the
Company be required to sell, issue or deliver Shares pursuant to Options if in
the opinion of the Board the issuance thereof would constitute a violation by
either the Optionee or the Company of any provision of any law or regulation of
any governmental authority or any se  curities exchange.  As a condition of any
sale or issuance of Shares pursuant to Options, the Company may place legends on
the Shares, issue stop-transfer orders and require such agreements or
undertakings from the Optionee as the Company may deem necessary or advisable to
assure compliance with any such law or regulation, including if the Company or
its counsel deems it appropriate, representations from the Op  tionee that the
Optionee is acquiring the Shares solely for investment and not with a view to
distribution and that no distribution of the Shares acquired by the Optionee
will be made unless registered pursuant to applicable federal and state
securities laws or unless, in the opinion of counsel to the Company, such
registration is unnecessary.

          7.3  Requirements in the Event of a Disposition of Shares.  Any
Optionee, or person representing such Optionee, who sells, exchanges, transfers
or otherwise disposes of any Shares acquired pursuant to the exercise of an
Option within two years following the grant of such Option or within one year
following the actual transfer of such Shares to the Optionee, shall be obligated
to notify the Company in writing of the date of disposition, the number of
Shares so disposed and the amount of consideration received as a re  sult of
such disposition.  The Company shall have the right to take whatever reasonable
action it deems appropriate against an Optionee, including early termination of
any Options which remain outstanding, in order to recover any additional taxes
the Company incurs as a result of such Optionee's failure to so notify the
Company.

          7.4 Legend. All certificates for Shares purchased upon the exercise of
an Incentive Stock Option shall bear a legend indicating that such Shares were
issued pursuant to an Incentive Stock Option Plan.

                                   SECTION 8

                TERMINATION, AMENDMENT AND MODIFICATION OF PLAN

          8.1  Board Termination, Amendment and Modification of Plan.  The Board
may at any time amend or modify the


                                     -13-
<PAGE>

Plan; provided, however, that no such action of the Board, without approval of
the stockholders of the Company (in the same manner as provided in Section 9.5),
may:

               (a) Increase the benefits accruing to Participants under the
     Plan;

               (b) Increase the number of Shares which may be issued under the
     Plan;

               (c) Modify the requirements as to eligibility for participation
     in the Plan;

               (d) Change the Option Price with respect to any outstanding
     Option other than to change the manner of determining the Fair Market Value
     of the Shares to conform with any then applicable provisions of the Code or
     regulations or rulings thereunder; or

               (e) Amend this Section 8.1 to defeat its purpose.

          8.2  Plan Termination.  Unless terminated earlier as provided in
Section 8.1, the Plan shall terminate five years from the date it is adopted by
the Board or, if earlier, five years from the date it is approved by
stockholders of the Company and no Option shall be granted under this Plan after
such date.

          8.3  Effect of Termination, Amendment or Modification of Plan.
Notwithstanding Sections 8.1 and 8.2, no termination, amendment or modification
of the Plan shall in any manner affect any Option theretofore granted under the
Plan without the consent of the Optionee or a person who shall have acquired the
right to exercise the Option by will or the laws of descent and distribution.

                                   SECTION 9

                                 MISCELLANEOUS

          9.1  No Employment Rights.  Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any individual the right to continue in the employ or service of the
Employer Company.

           9.2 Binding Effect.  The Plan shall be binding upon the successors
and assigns of the Company.


                                     -14-
<PAGE>

          9.3  Singular, Plural, Gender.  Whenever used herein, except where the
context clearly indicates to the contrary, nouns in the singular shall include
the plural, and the masculine pronoun shall include the feminine gender.

          9.4  Headings.  Headings of the Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.

          9.5  Effective Date; Ratification by Stockholders. This Plan shall
become effective upon its adoption by the Board but is subject to the
ratification and approval by the affirmative vote of the holders of a majority
of the Com  pany's outstanding shares of capital stock within 12 months
following such adoption.  If this Plan is not so approved by the stockholders
this Plan shall become null and void and of no force or effect.  Any Options
granted pursuant to the Plan may not be exercised until the Plan shall have been
ratified and approved by the stockholders pursuant to this Section.

          9.6  Rights as Stockholder.  An Optionee or trans feree of an Option
shall have no rights as a stockholder with respect to any Shares subject to such
Option prior to the purchase of such Shares by exercise of such Option as
provided herein.

          9.7  Applicable Law.  This Plan and the Options granted hereunder
shall be interpreted, administered and otherwise subject to the laws of the
State of Texas, except to the extent the General Corporation Law of Delaware
shall govern.

          9.8 Reports. The Company will comply with all applicable reporting
requirements applicable to Incentive Stock Options under the Code.



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