<PAGE>   1
                                                                   EXHIBIT 10.24


                          INTEGRATED ORTHOPAEDICS, INC.

               1997 AMENDED AND RESTATED LONG TERM INCENTIVE PLAN


                                 R E C I T A L S

         WHEREAS, the Company adopted the Integrated Orthopaedics, Inc. 1997
Long Term Incentive Plan effective June 30, 1997 (the "Plan"); and

         WHEREAS, the Company, through its Board of Directors, wishes to
simplify many of the provisions of the Plan by amending and restating the Plan;
and

         WHEREAS, this simplifying amendment shall be effective as of June 30,
1997, the original effective date of the Initial Plan; and

         WHEREAS, all previous grants of Options and Restricted Stock prior to
the date of this amendment and restatement shall remain in full effect and force
pursuant to its terms,

         NOW, THEREFORE, pursuant to the provisions of the Plan, the Plan is
hereby amended and restated as follows:

                                    SECTION 1
                                     PURPOSE

         This Plan is established (i) to offer selected Employees, Directors and
Consultants of the Company or its Subsidiaries or any predecessor entity an
equity ownership interest in the financial success of the Company, (ii) to
provide the Company an opportunity to attract and retain the best available
personnel for positions of substantial responsibility, and (iii) to encourage
equity participation in the Company by eligible Participants. This Plan provides
for the grant by the Company of (i) Options to purchase Shares, and (ii) shares
of Restricted Stock. Options granted under this Plan may include nonstatutory
options as well as incentive stock options intended to qualify under section 422
of the Code.

                                    SECTION 2
                                   DEFINITIONS

         "ADMINISTRATOR" shall have the meaning set forth in Section 3(a) of
this Plan.

         "BOARD OF DIRECTORS" shall mean the board of directors of the Company,
as duly elected from time to time.

         "CODE" shall mean the Internal Revenue Code of 1986, as amended, and as
interpreted by the regulations thereunder.

         "COMMITTEE" shall mean the Compensation Committee of the Company, or
such other Committee as may be appointed by the Board of Directors from time to
time, which shall be composed solely of two (2) or more Non-employee Directors.

         "COMPANY" shall mean Integrated Orthopaedics, Inc., a Texas
corporation.

         "CONSULTANT" shall mean any individual that is expressly designated and
compensated as a consultant of the Company or its Subsidiaries by the
Administrator in its sole discretion; provided, however, that the term
"Consultant" shall not include directors who are paid only a director's fee by
the Company.

         "DATE OF GRANT" shall mean the date on which the Administrator resolves
to grant an Option to an Optionee or grant Restricted Stock to a Participant, as
the case may be.

         "DIRECTOR" shall mean any person who is a member of the Board of
Directors.

         "EMPLOYEE" shall include every individual performing Services to the
Company or its Subsidiaries if the relationship between such individual and the
Company or its Subsidiaries is the legal relationship of employer and


<PAGE>   2


employee. This definition of "Employee" is qualified in its entirety and is
subject to the definition set forth in section 3401(c) of the Code and the
regulations thereunder. Neither service as a member of the Board of Directors
nor payment of a director's fee shall in itself constitute "Services" for
purposes of this definition.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and as interpreted by the rules and regulations promulgated thereunder.

         "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Administrator in the
applicable Stock Option Agreement, but in no event less than the par value per
Share.

         "FAIR MARKET VALUE" shall mean such amount as the Administrator, in its
sole discretion, shall determine; provided, however, that if there is a public
market for the securities, the Fair Market Value shall be the mean of the bid
and asked prices of the securities per share or unit, as the case may be, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotation
System) as of the date in question or, in the event the securities are listed on
a stock exchange, the Fair Market Value shall be the closing sales price of the
securities per share or unit, as the case may be, on such exchange, as reported
in the Wall Street Journal, as of the date in question.

         "ISO" shall mean a stock option which is granted to an individual and
which meets the requirements of section 422(b) of the Code, pursuant to which
the Optionee has no tax consequences resulting from the grant or, subject to
certain holding period requirements, exercise of the option and the employer is
not entitled to a business expense deduction with respect thereto.

         "NON-EMPLOYEE DIRECTOR" shall mean any person who at the time of grant
is a member of the Board of Directors but is not an Employee of the Company or
any Affiliate; does not receive compensation, directly or indirectly, from the
Company or any Affiliate for services rendered as a consultant or in any
capacity other than Director, except for an amount that does not exceed the
dollar amount to which disclosure would be required under 17 C.F.R Section
229.404(a); does not possess an interest in any other transaction for which
disclosure would be required under 17 C.F.R. Section 229.404(a); and is not
engaged in a business relationship to which disclosure would be required under
17 C.F.R. Section 229.404(b).

         "NONSTATUTORY OPTION" shall mean any Option granted by the
Administrator that does not meet the requirements of sections 421 through 424 of
the Code, as amended.

         "OPTION" shall mean either an ISO or Nonstatutory Option, as the
context requires.

         "OPTIONEE" shall mean a Participant who holds an Option.

         "PARTICIPANTS" shall mean those individuals described in Section 1 of
this Plan selected by the Administrator who are eligible under Section 4 of this
Plan for grants of either Options or Restricted Stock under this Plan.

         "PERMANENT AND TOTAL DISABILITY" shall mean that an individual is
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. An individual shall not be considered to
suffer from Permanent and Total Disability unless such individual furnishes
proof of the existence thereof in such form and manner, and at such times, as
the Administrator may reasonably require. The scope of this definition shall
automatically be reduced or expanded to the extent that section 22(e)(3) of the
Code is amended to reduce or expand the scope of the definition of Permanent and
Total Disability thereunder.

         "PLAN" shall mean this 1997 Amended and Restated Long Term Incentive
Plan, as amended from time to time.

         "PLAN AWARD" shall mean the grant of either an Option or Restricted
Stock, as the context requires.


                                       2
<PAGE>   3


         "RESTRICTED STOCK" shall have that meaning set forth in Section 7(a) of
this Plan.

         "RESTRICTED STOCK ACCOUNT" shall have that meaning set forth in Section
7(a)(ii) of this Plan.

         "RESTRICTED STOCK CRITERIA" shall have that meaning set forth in
Section 7(a)(iv) of this Plan.

         "RESTRICTION PERIOD" shall have that meaning set forth in Section
7(a)(iii) of this Plan.

         "SERVICES" shall mean services rendered to the Company or any
predecessor entity or any of its Subsidiaries as an Employee or Consultant, as
the context requires.

         "SHARE" shall mean one share of Stock, as adjusted in accordance with
Section 9 of this Plan (if applicable).

         "STOCK" shall mean the common stock of the Company, par value $.001 per
share.

         "STOCK OPTION AGREEMENT" shall mean the agreement executed between the
Company and an Optionee that contains the terms, conditions, and restrictions
pertaining to the granting of an Option. Any inconsistencies between this Plan
and any Stock Option Agreement shall be controlled by this Plan.

         "SUBSIDIARY" shall mean any corporation as to which more than fifty
(50%) percent of the outstanding voting stock or shares shall now or hereafter
be owned or controlled directly by a person, any Subsidiary of such person, or
any Subsidiary of such Subsidiary.

         "TEN-PERCENT SHAREHOLDER" shall mean a person that owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any Subsidiary, taking into account the attribution
rules set forth in section 424 of the Code, as amended. For purposes of this
definition of "Ten Percent Shareholder" the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant of
an Option to an Optionee. "Outstanding stock" shall not include reacquired
shares or shares authorized for issuance under outstanding Options held by the
Optionee or by any other person.

         "VEST DATE" shall have that meaning set forth in Section 7(a)(v) of
this Plan.

                                    SECTION 3
                                 ADMINISTRATION

         (a)      GENERAL ADMINISTRATION. This Plan shall be administered by the
Board of Directors or by a Committee (either of which may hereinafter be
referred to as the "Administrator"). In the case a Committee is chosen to
administer the Plan, the members of the Committee shall be appointed by the
Board of Directors for such terms as the Board of Directors may determine. The
Board of Directors 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 of Directors.

         (b)      COMMITTEE PROCEDURES. The Board of Directors shall designate
one of the members of the Committee as chairman. The Committee may hold meetings
at such times, places, and in such manner as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by a majority of all Committee
members, shall be valid acts of the Committee. A majority of the Committee shall
constitute a quorum.

         (c)      AUTHORITY OF COMMITTEE. This Plan shall be administered by, or
under the direction of, the Administrator constituted in such a manner as to
comply at all times with Rule 16b-3 (or any successor rule) under the Exchange
Act. The Administrator shall administer this Plan so as to comply at all times
with the Exchange Act and, subject to the Code, shall otherwise have absolute
and final authority to interpret this Plan and to make all determinations
specified in or permitted by this Plan or deemed necessary or desirable for its
administration or for the conduct of the Administrator's business including
without limitation the authority to take the following actions:


                                       3
<PAGE>   4



                  (i)      To interpret this Plan and to apply its provisions;

                  (ii)     To adopt, amend or rescind rules, procedures and
forms relating to this Plan;

                  (iii)    To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of this Plan;

                  (iv)     To determine when Plan Awards are to be granted under
this Plan;

                  (v)      To select the Optionees and Participants;

                  (vi)     To determine the number of Shares to be made subject
to each Plan Award;

                  (vii)    To prescribe the terms, conditions and restrictions
of each Plan Award, including without limitation the Exercise Price and the
determination whether an Option is to be classified as an ISO or a Nonstatutory
Option;

                  (viii)   To amend any outstanding Stock Option Agreement or
the terms, conditions and restrictions of a grant of Restricted Stock, subject
to applicable legal restrictions and the consent of the Optionee or Participant,
as the case may be, who entered into such agreement;

                  (ix)     To establish procedures so that an Optionee may
obtain a loan through a registered broker-dealer under the rules and regulations
of the Federal Reserve Board, for the purpose of exercising an Option;

                  (x)      To establish procedures for an Optionee (1) to have
withheld from the total number of Shares to be acquired upon the exercise of an
Option that number of Shares having a Fair Market Value, which, together with
such cash as shall be paid in respect of fractional shares, shall equal the
Exercise Price, and (2) to exercise a portion of an Option by delivering that
number of Shares already owned by an Optionee having a Fair Market Value which
shall equal the partial Exercise Price and to deliver the Shares thus acquired
by such Optionee in payment of Shares to be received pursuant to the exercise of
additional portions of the Option, the effect of which shall be that an Optionee
can in sequence utilize such newly acquired shares in payment of the Exercise
Price of the entire Option, together with such cash as shall be paid in respect
of fractional shares;

                  (xi)     To establish procedures whereby a number of Shares
may be withheld from the total number of Shares to be issued upon exercise of an
Option, to meet the obligation of withholding for federal and state income and
other taxes, if any, incurred by the Optionee upon such exercise; and

                  (xii)    To take any other actions deemed necessary or
advisable for the administration of this Plan.

         All interpretations and determinations of the Administrator made with
respect to the granting of Plan Awards shall be final, conclusive, and binding
on all interested parties. The Administrator may make grants of Plan Awards on
an individual or group basis. No member of the Administrator shall be liable for
any action that is taken or is omitted to be taken if such action or omission is
taken in good faith with respect to this Plan or grant of any Plan Award.

         (d) HOLDING PERIOD. The Administrator may in its sole discretion
require as a condition to the granting of any Plan Award, that a Participant
agree not to sell or otherwise dispose of a Plan Award, any Shares acquired
pursuant to a Plan Award, or any other "derivative security" (as defined by Rule
16a-1(c) under the Exchange Act) for a period of time determined by the
Administrator including, without limitation, a period of six (6) months
following the later of (i) the date of the grant of such Plan Award, or (ii) the
date when the Exercise Price of an Option is fixed if such Exercise Price is not
fixed on the Date of Grant.

                                    SECTION 4
                                   ELIGIBILITY

         (a)      GENERAL RULE. Subject to the limitations set forth in
subsection (b) below, Participants shall be eligible to participate in this
Plan.

         (b)      NON-EMPLOYEE INELIGIBLE FOR ISOS. In no event shall an ISO be
granted to any individual who is not an Employee on the Date of Grant.


                                       4
<PAGE>   5



         (c)      FORMER EMPLOYEES. Employees and former employees of any
predecessor entity of the Company may be eligible to participate in this Plan if
selected by the Administrator.

                                    SECTION 5
                             SHARES SUBJECT TO PLAN

         (a)      BASIC LIMITATION. Shares offered under this Plan may be
authorized but unissued Shares or Shares that have been reacquired by the
Company. The aggregate number of Shares that are available for issuance under
this Plan shall not exceed two million five hundred thousand (2,500,000) Shares,
subject to adjustment pursuant to Section 9 of this Plan. The Administrator
shall not issue more Shares than are available for issuance under this Plan. The
number of Shares that are subject to unexercised Options at any time under this
Plan shall not exceed the number of Shares that remain available for issuance
under this Plan. The Company, during the term of this Plan, shall at all times
reserve and keep available sufficient Shares to satisfy the requirements of this
Plan.

         (b)      ADDITIONAL SHARES. In the event any outstanding Option for any
reason expires, is canceled or otherwise terminates, the Shares allocable to the
unexercised portion of such Option shall again be available for issuance under
this Plan. In the event that Shares issued under this Plan revert to the Company
prior to the Vest Date under a grant of Restricted Stock, such Shares shall
again be available for issuance under this Plan.

                                    SECTION 6
                         TERMS AND CONDITIONS OF OPTIONS

         (a)      TERM OF OPTION. The term of each Option shall be ten (10)
years from the Date of Grant or such shorter term as may be determined by the
Administrator; provided, however, in the case of an ISO granted to a Ten-Percent
Shareholder, the term of such ISO shall be five (5) years from the Date of Grant
or such shorter time as may be determined by the Administrator.


         (b)      VESTING OF OPTIONS. The Administrator shall determine the
vesting requirements for each Option granted pursuant to this Plan. The vesting
requirements determined by the Administrator for each Option may consist of a
time-related vesting schedule, performance-based vesting, or a combination of
both time and performance vesting. The Administrator shall be authorized to
recognize for vesting purposes any Services provided to any predecessor entity
of the Company.

         (c)      EXERCISE PRICE AND METHOD OF PAYMENT.

                  (I)      EXERCISE PRICE. The Exercise Price shall be such
price as is determined by the Administrator in its sole discretion and set forth
in the Stock Option Agreement; provided, however, in the case of a Nonstatutory
Option granted to an Optionee, the Exercise Price shall not be less than 85% of
the Fair Market Value of the Shares subject to such option on the Date of Grant;
provided, further, in the case of a Nonstatutory Option intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Exercise Price shall not be less than 100% of the Fair Market Value of
the Shares subject to such option on the Date of Grant ; provided, further, in
the case of an ISO granted to an Optionee, the Exercise Price shall not be less
than 100% of the Fair Market Value of the Shares subject to such option on the
Date of Grant (or 110% in the case of an Option granted to a Participant who is
a Ten-Percent Shareholder on the Date of Grant).

                  (II)     PAYMENT OF SHARES. Payment for the Shares upon
exercise of an Option shall be made in cash, by certified check, or if
authorized by the Administrator, by delivery of other Shares having a Fair
Market Value on the date of delivery equal to the aggregate exercise price of
the Shares as to which said Option is being exercised or by any combination of
such methods of payment or by any other method of payment as may be permitted
under applicable law and authorized by the Administrator.


                                       5
<PAGE>   6


         (d)      EXERCISE OF OPTION.

                  (i)      PROCEDURE FOR EXERCISE; RIGHTS OF SHAREHOLDER. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as shall be determined by the Administrator, including without
limitation performance criteria with respect to the Company and/or the Optionee,
and in accordance with the terms of this Plan.

         An Option may not be exercised for a fraction of a Share.

         An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Stock
Option Agreement by the Optionee entitled to exercise the Option and full
payment for the Shares and any withholding and other applicable taxes with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Administrator, consist of any form of
consideration and method of payment allowable under Section 6(c)(ii) of this
Plan. Upon the receipt of notice of exercise and full payment for the Shares and
taxes, the Shares shall be deemed to have been issued and the Optionee shall be
entitled to receive such Shares and shall be a shareholder with respect to such
Shares, and the Shares shall be considered fully paid and nonassessable. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date on which the stock certificate is issued, except as
provided in Section 9 of this Plan.

         Each exercise of an Option shall reduce, by an equal number, the total
number of Shares that may thereafter be purchased under such Option.

                  (ii)     TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT.
Except as provided in Subsections 6(d)(iii) and 6(d)(iv) below and unless
provided otherwise in the Stock Option Agreement, an Optionee holding an Option
who ceases to be an Employee or Consultant of the Company may, but only until
the earlier of the date (i) the Option held by the Optionee expires, or (ii) (y)
in the case of an ISO, ninety (90) days, and (z) in the case of a Nonstatutory
Option, six (6) months, after the date such Optionee ceases to be an Employee or
a Consultant (or in each case, such shorter period as may be provided in the
Stock Option Agreement), exercise the Option to the extent that the Optionee was
entitled to exercise it on such date, unless the Administrator terminates or
further extends such period in its sole discretion. To the extent that the
Optionee was not entitled to exercise an Option on such date, or if the Optionee
does not exercise it within the time specified herein, such Option shall
terminate. The Administrator shall have the authority (i) to determine the date
an Optionee ceases to be an Employee or a Consultant and (ii) to shorten or
terminate the exercise periods provided above in the event the Optionee resigns
and/or ceases for "cause" to be an Employee or a Consultant.

                  (iii)    PERMANENT AND TOTAL DISABILITY. Notwithstanding the
provisions of Section 6(d)(ii) above, in the event an Optionee is unable to
continue to perform Services for the Company or any of its Subsidiaries as a
result of such Optionee's Permanent and Total Disability, (and, for ISOs, at the
time such Permanent and Total Disability begins, the Optionee was an Employee
and had been an Employee since the Date of Grant), such Optionee may exercise an
Option in whole or in part to the extent that the Optionee was entitled to
exercise it on such date, but only until the earlier of the date (i) the Option
held by the Optionee expires, or (ii) twelve (12) months from the date of
termination of Services due to such Permanent and Total Disability. To the
extent the Optionee is not entitled to exercise an Option on such date or if the
Optionee does not exercise it within the time specified herein, such Option
shall terminate, unless the Administrator further extends such period in its
sole discretion.

                  (iv)     DEATH OF AN OPTIONEE. Upon the death of an Optionee,
any Option held by an Optionee shall terminate and be of no further effect;
provided, however, notwithstanding the provisions of Section 6(d)(ii) above, in
the event an Optionee's death occurs during the term of an Option held by such
Optionee and, at the time of death, the Optionee was an Employee or Consultant
(and, for ISOs, at the time of death, the Optionee was an Employee and had been
an Employee since the Date of Grant), the Option may be exercised in whole or in
part to the extent that the Optionee was entitled to exercise it on such date,
but only until the earlier of the date (i) the Option held by the Optionee
expires, or (ii) twelve (12) months from the date of the Optionee's death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance. To the extent the Option is not entitled to be
exercised on such date or if the Option is not exercised within the time
specified herein, such Option shall terminate, unless the Administrator further
extends such period in its sole discretion.


                                       6
<PAGE>   7


                  (v)      RETURN OF PROCEEDS.

                           (a) The Administrator, in its discretion, may include
as a term of any Optionee's Stock Option Agreement a provision that, if within
one year after ceasing to be an Employee or Consultant (whether voluntarily or
involuntarily), an Optionee shall, directly or indirectly, engage in an activity
that competes with the business of the Company or a Subsidiary as conducted at
the time the Optionee ceased to be an Employee or Consultant (as determined by
the Board of Directors in its sole discretion and good faith) and such Optionee
had exercised Options within six months of the date the Optionee ceased to be an
Employee or Consultant, the Optionee shall be required to remit to the Company
in good funds within 5 business days of receipt of written demand therefore an
amount equal to (i) the excess of (A) the Fair Market Value per share of Common
Stock on the date of exercise of such Option(s) less (B) the aggregate option
exercise price for such number of shares of Common Stock multiplied by (ii) the
number of shares with respect to which the Options were exercised (the
"Proceeds").

                           (b) The Administrator, in its discretion, may include
as a term of any Optionee's Stock Option Agreement a provision requiring the
remittance by an Optionee to the Company in good funds within 5 business days of
receipt of written demand therefore of Proceeds by an Optionee that has
exercised Options within six months of the date the Optionee ceased to be an
Employee or Consultant (whether voluntarily or involuntarily). The Administrator
shall have the authority in its discretion to include such other conditions
and/or terms in an Optionee's Stock Option Agreement that it deems appropriate
or desirable in furtherance of the foregoing provisions.

         (e)      NON-TRANSFERABILITY OF OPTIONS. No Option granted under this
Plan may be sold, pledged, assigned, hypothecated, transferred or disposed of in
any manner other than by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder, and
no Option granted under this Plan is assignable by operation of law or subject
to execution, attachment or similar process. Any Option granted under this Plan
can only be exercised during the Optionee's lifetime by such Optionee unless
exercised pursuant to Section 6(d)(iv). Any attempted sale, pledge, assignment,
hypothecation or other transfer of the Option contrary to the provisions hereof
and the levy of any execution, attachment or similar process upon the Option
shall be null and void and without force or effect. No transfer of the Option by
will or by the laws of descent and distribution shall be effective to bind the
Company unless the Company shall have been furnished written notice thereof and
an authenticated copy of the will and/or such other evidence as the
Administrator may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
the Option. The terms of any Option transferred by will or by the laws of
descent and distribution shall be binding upon the executors, administrators,
heirs and successors of Optionee.

         (f)      TIME OF GRANTING OPTIONS. Any Option granted hereunder shall
be deemed to be granted on the Date of Grant. Written notice of the
Administrator's determination to grant an Option to an Employee, evidenced by a
Stock Option Agreement, dated as of the Date of Grant, shall be given to such
Employee within a reasonable time after the Date of Grant.

         (g)      MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of this Plan, the Administrator may modify, extend or renew
outstanding Options or may accept the cancellation of outstanding Options (to
the extent not previously exercised) for the granting of new Options in
substitution therefor. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, alter or impair the
Optionee's rights or obligations under such Option.

         (h)      RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon
exercise of an Option shall be subject to such rights of repurchase and other
transfer restrictions as the Administrator may determine in its sole discretion.
Such restrictions shall be set forth in the applicable Stock Option Agreement.

         (i)      SPECIAL LIMITATION ON ISOs. To the extent that the aggregate
Fair Market Value (determined on the Date of Grant) of the Shares with respect
to which ISOs are exercisable for the first time by an individual during any
calendar year under this Plan, and under all other plans maintained by the
Company, exceeds $100,000, such Options shall be treated as Options that are not
ISOs.

         (j)      LEAVES OF ABSENCE. Leaves of absence approved by the
Administrator which conform to the policies of the Company shall not be
considered termination of employment if the employer-employee relationship as
defined under the Code or the regulations promulgated thereunder otherwise
exists.


                                       7
<PAGE>   8


         (k)      EARLY EXERCISE. In the Administrator's sole and absolute
discretion, an Option may include a provision whereby the Optionee may elect at
anytime while an Employee or Consultant to exercise the Option as to any part or
all of the Shares subject to the Option prior to the full vesting of the Option.
Any unvested Shares so purchased shall be subject to a repurchase right in favor
of the Company, with the repurchase price to be equal to the original purchase
price of the Shares, or to any other restriction the Administrator determines to
be appropriate, provided however, that (i) the right to repurchase at the
original purchase price shall lapse at a rate equal to the remaining portion of
the original vesting schedule of the Shares so purchased, (ii) such repurchase
right shall be exercisable by the Company within (A) the ninety (90) day period
following the termination of employment or relationship as a Consultant for any
reason whatsoever, or (B) such longer period as may be agreed to by the Company
and the Optionee (for example, for purposes of satisfying the requirements of
Section 1202(c)(3) of the Code (regarding "qualified small business stock")),
and (iii) such repurchase right shall be exercisable for cash or cancellation of
purchase money indebtedness for the Shares. Should the right of repurchase be
assigned by the Company, the assignee shall pay the Company cash equal to the
difference between the original purchase price and stock's fair market value if
the original purchase price is less than the stock's fair market value.

                                    SECTION 7
                                RESTRICTED STOCK

         (a)      AUTHORITY TO GRANT RESTRICTED STOCK. The Administrator shall
have the authority to grant Shares to Participants that are subject to certain
terms, conditions, and restrictions (the "Restricted Stock"). The Restricted
Stock may be granted by the Administrator either separately or in combination
with Options. The terms, conditions and restrictions of the Restricted Stock
shall be determined from time to time by the Administrator without limitation,
except as otherwise provided in this Plan; provided, however, that each grant of
Restricted Stock to an Employee shall require the Employee to remain an Employee
of the Company or any of its Subsidiaries for at least six (6) months from the
Date of Grant. The granting, vesting, and issuing of the Restricted Stock shall
also be subject to the following provisions:

                  (i)      NATURE OF GRANT. Restricted Stock shall be granted to
Participants for Services rendered and at no additional cost to Participant;
provided, however, that the value of the Services performed must, in the opinion
of the Administrator, equal or exceed the par value of the Restricted Stock to
be granted to the Participant.

                  (ii)     RESTRICTED STOCK ACCOUNT. The Company shall establish
a restricted stock account (the "Restricted Stock Account") for each Participant
to whom Restricted Stock is granted, and such Restricted Stock shall be credited
to such account. No certificates will be issued to the Participant with respect
to the Restricted Stock until the Vest Date as provided herein. Every credit of
Restricted Stock under this Plan to a Restricted Stock Account shall be
considered "contingent" and unfunded until the Vest Date. Such contingent
credits shall be considered bookkeeping entries only, notwithstanding the
"crediting" of "dividends" as provided herein. Such accounts shall be subject to
the general claims of the Company's creditors. The Participant's rights to the
Restricted Stock Account shall be no greater than that of a general creditor of
the Company. Nothing contained herein shall be construed as creating a trust or
fiduciary relationship between the Participants and the Company, the Board of
Directors or the Administrator.

                  (iii)    RESTRICTIONS. The terms, conditions, and restrictions
of the Restricted Stock shall be determined by the Administrator on the Date of
Grant. The Restricted Stock may not be sold, assigned, transferred, redeemed,
pledged or otherwise encumbered during the period in which the terms, conditions
and restrictions apply (the "Restriction Period"). More than one grant of
Restricted Stock may be outstanding at any one time, and the Restriction Periods
may be of different lengths. Receipt of the Restricted Stock is conditioned upon
satisfactory compliance with the terms, conditions and restrictions of this Plan
and those imposed by the Administrator.

                  (iv)     RESTRICTED STOCK CRITERIA. At the time of each grant
of Restricted Stock, the Administrator in its sole discretion may establish
certain criteria to determine the times at which restrictions placed on
Restricted Stock shall lapse (i.e., the termination of the Restriction Period),
which criteria may include without limitation performance measures and targets
and/or holding period requirements (the "Restricted Stock Criteria"). The
Administrator may establish a corresponding relationship between the Restricted
Stock Criteria and (i) the number of Shares of Restricted Stock that may be
earned, and (ii) the extent to which the terms, conditions and restrictions on
the Restricted Stock shall lapse. Restricted Stock Criteria may vary among
grants of Restricted


                                       8
<PAGE>   9


Stock; provided, however, that once the Restricted Stock Criteria are
established for a grant of Restricted Stock, the Restricted Stock Criteria shall
not be modified with respect to that grant.

                  (v)      VESTING. On the date the Restriction Period
terminates, the Restricted Stock shall vest in the Participant (the "Vest
Date"), who may then require the Company to issue certificates evidencing the
Restricted Stock credited to the Restricted Stock Account of such Participant.

                  (vi)     DIVIDENDS. The Administrator may provide from time to
time that amounts equivalent to dividends shall be payable with respect to the
Restricted Stock held in the Restricted Stock Account of a Participant. Such
amounts shall be credited to the Restricted Stock Account and shall be payable
to the Participant on the Vest Date.

                  (vii)    TERMINATION OF SERVICES. If a Participant (x) with
the consent of the Administrator, ceases to be an Employee of, or otherwise
ceases to provide Services to, the Company or any of its Subsidiaries, or (y)
dies or suffers from Permanent and Total Disability, the vesting or forfeiture
(including without limitation the terms, conditions and restrictions) of any
grant under this Section 7 shall be determined by the Administrator in its sole
discretion, subject to any limitations or terms of this Plan. If the Participant
ceases to be an Employee of, or otherwise ceases to provide Services to, the
Company or any of its Subsidiaries for any other reason, all grants of
Restricted Stock under this Plan shall be forfeited (subject to the terms of
this Plan).

         (b)      DEFERRAL OF PAYMENTS. The Administrator may establish
procedures by which a Participant may elect to defer the transfer of Restricted
Stock to the Participant. The Administrator shall determine the terms and
conditions of such deferral in its sole discretion.

         (c)      PAYMENT OF TAXES. Notwithstanding the provisions of Section
7(a)(v) above, the Company will not be required to issue any Restricted Stock
unless and until the Participant shall pay to the Company an amount equal to any
withholding and other applicable taxes related to the issuance of the Restricted
Stock. Such payment shall be made in cash, by certified check, or if authorized
by the Administrator, by delivery of other Shares having a Fair Market Value on
the date of delivery equal to such payment or by any combination of such methods
of payment or by any other method of payment as may be permitted under
applicable law and authorized by the Administrator.

                                    SECTION 8
                               ISSUANCE OF SHARES

         As a condition to the transfer of any Shares issued under this Plan,
the Company may require an opinion of counsel, satisfactory to the Company, to
the effect that such transfer will not be in violation of the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities
laws, rules or regulations, or that such transfer has been registered under
federal and all applicable state securities laws. The Company may refrain from
delivering or transferring Shares issued under this Plan until the Administrator
has determined that the Participant has tendered to the Company any and all
applicable federal, state or local tax owed by the Participant as the result of
the receipt of a Plan Award, the exercise of an Option or the disposition of any
Shares issued under this Plan, in the event that the Company reasonably
determines that it might have a legal liability to satisfy such tax. The Company
shall not be liable to any person or entity for damages due to any delay in the
delivery or issuance of any stock certificate evidencing any Shares for any
reason whatsoever.

                                    SECTION 9
                       CAPITALIZATION ADJUSTMENTS; MERGER

         (a)      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, the aggregate number of Shares that have been
authorized for issuance under this Plan, the maximum number of Shares that an
Employee may receive rights to pursuant to Section 6(k) of this Plan, and the
number of Shares of Restricted Stock credited to any Restricted Stock Account of
a Participant (as well as the Exercise Price covered by any outstanding Option),
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, payment of a stock dividend with
respect to the Stock or any other increase or decrease in the number of issued
Shares effected without receipt of consideration by the Company. Such adjustment
shall be made by the Administrator in its sole discretion, which adjustment
shall be final, binding, and conclusive. Except as expressly


                                       9
<PAGE>   10


provided herein, no issuance by the Company of shares of stock of any class
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.

         (b)      DISSOLUTION, LIQUIDATION, SALE OF ASSETS OR MERGER. In the
event of the proposed dissolution or liquidation of the Company, or a proposed
sale of all or substantially all of the assets of the Company, or the proposed
merger of the Company with or into another corporation where the Company is not
the surviving entity, any Options and grants of Restricted Stock shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided in the Stock Option Agreement or by the Administrator. The
Administrator may, in the exercise of its sole discretion, in such instances
declare that any Option shall terminate as of a date fixed by the Administrator
and give each Optionee the right to exercise the Optionee's Option as to all or
any part of the Shares covered by such Option, including Shares as to which the
Option would not otherwise be exercisable. Notwithstanding the provisions of
Section 6(b) to the contrary, the Administrator may, in the exercise of its sole
discretion, provide in any Stock Option Agreement or under any grant of
Restricted Stock that the applicable Plan Award shall become immediately vested
in the event of a change in control of the Company or other extraordinary events
as defined by the Administrator.

                                   SECTION 10
                              NO EMPLOYMENT RIGHTS

         No provision of this Plan, under any Stock Option Agreement or under
any grant of Restricted Stock shall be construed to give any Participant any
right to remain an Employee of, or provide Services to, the Company or any of
its Subsidiaries or to affect the right of the Company to terminate any
Participant's service at any time, with or without cause.

                                   SECTION 11
                              SHAREHOLDER APPROVAL

         With respect to any amendment to this Plan adopted by the Administrator
that is required to be approved by the Company's shareholders pursuant to the
terms of Section 12 of this Plan, such approval shall be obtained within twelve
(12) months after the date such amendment is adopted by the Administrator;
provided, that such amendment shall not become effective until such approval has
been obtained.

         If the Company is required to comply with section 14(c) of the Exchange
Act, the approval by the Company's shareholders of this Plan, and their approval
of any subsequent amendment to this Plan requiring their approval, shall be
solicited substantially in accordance with section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder. If the Company is not required
to comply with section 14(a) of the Exchange Act at the time of seeking such
approval and such approval is not solicited substantially in accordance with the
rules and regulations, if any, in effect under section 14(a) of the Exchange Act
at the time of such approval, the Company shall furnish in writing to the
holders of record of the securities entitled to vote for this Plan substantially
the same information concerning this Plan which would be required by the rules
and regulations in effect under section 14(a) of the Exchange Act at the time
that such information is furnished, if proxies to be voted with respect to the
approval or disapproval of this Plan were then being solicited, on or prior to
the date of the first annual meeting of security holders held subsequent to the
later of: (i) the first registration of an equity security under Section 12 of
the Act or (ii) the acquisition of an equity security which exemption from
section 16(b) under the Exchange Act is claimed.

                                   SECTION 12
                TERM OF PLAN; EFFECT OF AMENDMENT OR TERMINATION

         (a)      TERM OF PLAN. This Plan shall become effective upon its
adoption by the Board of Directors subject to the condition subsequent that this
Plan is approved by the shareholders of the Company. This Plan shall continue in
effect for a term of ten (10) years unless sooner terminated under this Section
12.

         (b)      AMENDMENT AND TERMINATION. The Administrator, in its sole
discretion, may amend, alter, suspend or terminate this Plan; provided, that the
Company shall obtain shareholder approval of any such action to the extent
necessary or desirable under applicable law.

         (c)      EFFECT OF TERMINATION. In the event this Plan is terminated,
no Shares shall be issued under this Plan nor shall any Shares of Restricted
Stock be credited to a Restricted Stock Account, except upon exercise of an


                                       10
<PAGE>   11


Option granted prior to such termination or issuance of Shares of Restricted
Stock previously credited to a Restricted Stock Account. The termination of this
Plan, or any amendment thereof, shall not affect any Shares previously issued to
a Participant, any Option previously granted under this Plan or any Restricted
Stock previously credited to a Restricted Stock Account.

                                   SECTION 13
                                  GOVERNING LAW

         THIS PLAN AND ANY AND ALL STOCK OPTION AGREEMENTS AND AGREEMENTS
RELATING TO THE GRANT OF RESTRICTED STOCK EXECUTED IN CONNECTION WITH THIS PLAN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.








                                       11