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                                                                    EXHIBIT 10.5

                          HOME INTERIORS & GIFTS, INC.
                             1998 STOCK OPTION PLAN
                                FOR KEY EMPLOYEES


1.       Purpose.

         Home Interiors & Gifts, Inc., a Texas corporation (herein, together
with its successors, referred to as the "Company"), by means of this 1998 Stock
Option Plan for Key Employees (the "Plan"), desires to afford certain
individuals and key employees of the Company and any direct or indirect
subsidiary or parent corporation thereof now existing or hereafter formed or
acquired (such parent and subsidiary corporations sometimes referred to herein
as "Related Entities") who are responsible for the continued growth of the
Company an opportunity to acquire a proprietary interest in the Company, and
thus to create in such persons an increased interest in and a greater concern
for the welfare of the Company and any Related Entities.

         The stock options described in Sections 6 and 7 (the "Options"), and
the shares of Common Stock (as hereinafter defined) acquired pursuant to the
exercise of such Options, are a matter of separate inducement and are not in
lieu of any salary or other compensation for services. As used in the Plan, the
terms "parent corporation" and "subsidiary corporation" shall mean,
respectively, a corporation within the definition of such terms contained in
Sections 424(e) and 424(f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").

2.       Administration.

         The Plan shall be administered by the Option Committee, or any
successor thereto, of the Board of Directors of the Company (the "Board of
Directors"), or by any other committee appointed by the Board of Directors to
administer the Plan (the "Committee"); provided, the entire Board of Directors
may act as the Committee if it chooses to do so. The number of individuals that
shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board of Directors, and, unless a majority of
the Board of Directors determines otherwise, shall be no less than two
individuals. The Chairman of the Board of Directors of the Company shall be a
member of the Committee at all times. A majority of the Committee shall
constitute a quorum (or if the Committee consists of only two members, then both
members shall constitute a quorum), and subject to the provisions of Section 5,
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all members of the Committee, shall
be the acts of the Committee. Whenever the Company shall have a class of equity
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each member of the Committee shall be
required to be a "Non-Employee Director" within the meaning of Rule 16b-3, as
amended ("Rule 16b-3"), or other applicable rules under Section 16(b) of the
Exchange Act and the Committee shall administer the Plan so as to comply at all
times with the Exchange Act.



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         The members of the Committee shall serve at the pleasure of the Board
of Directors, which shall have the power, at any time and from time to time, to
remove members from or add members to the Committee. Removal from the Committee
may be with or without cause. Any individual serving as a member of the
Committee shall have the right to resign from membership on the Committee by
written notice to the Board of Directors. The Board of Directors, and not the
remaining members of the Committee, shall have the power and authority to fill
vacancies on the Committee, however caused. The Board of Directors shall
promptly fill any vacancy that causes the number of members of the Committee to
be less than two or, if the Company has a class of equity securities registered
pursuant to Section 12 of the Exchange Act, any other number that Rule 16b-3 may
require from time to time.

3.       Shares Available.

         Subject to the adjustments provided in Section 10, the maximum
aggregate number of shares of common stock, par value $0.10 per share, of the
Company ("Common Stock") in respect of which Options may be granted for all
purposes under the Plan shall be 1,353,924 shares. If, for any reason, any
shares as to which Options have been granted cease to be subject to purchase
thereunder, including the expiration of any such Option, the termination of any
such Option prior to exercise, or the forfeiture of any such Option, such shares
shall thereafter be available for grants under the Plan. Options granted under
the Plan may be fulfilled in accordance with the terms of the Plan with (i)
authorized and unissued shares of the Common Stock, (ii) issued shares of Common
Stock held in the Company's treasury, or (iii) issued shares of Common Stock
reacquired by the Company in each situation as the Board of Directors or the
Committee may determine from time to time.

4.       Eligibility and Basis of Participation.

         Grants of Incentive Options (as hereinafter defined) and Non-Qualified
Options (as hereinafter defined) may be made under the Plan, subject to and in
accordance with Section 6, to Key Employees. As used herein, the term "Key
Employee" shall mean any employee of the Company or any Related Entity,
including officers and directors of the Company or any Related Entity who are
also employees of the Company or any Related Entity, who are regularly employed
on a salaried basis and who are so employed on the date of such grant, whom the
Committee identifies as having a direct and significant effect on the
performance of the Company or any Related Entity.

         Grants of Non-Qualified Options may be made, subject to and in
accordance with Section 7, to any Eligible Non-Employee. As used herein, the
term "Eligible Non-Employee" shall mean any person or entity of any nature
whatsoever, specifically including an individual, firm, company, corporation,
partnership, trust, or other entity (collectively, a "Person"), that the
Committee designates as eligible for a grant of Options pursuant to the Plan
because such Person performs bona fide consulting, advisory, or other services
for the Company or any Related Entity (other than services in connection with
the offer or sale of securities in a capital- raising transaction) and the Board
of Directors or the Committee determines that the Person



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has a direct and significant effect on the financial development of the Company
or any Related Entity.

         The adoption of the Plan shall not be deemed to give any Person a right
to be granted any Options.

5.       Authority of Committee.

         Subject to and not inconsistent with the express provisions of the
Plan, the Code and, if applicable, Rule 16b-3, the Committee shall have plenary
authority to:

         a.       determine the Key Employees and Eligible Non-Employees to whom
                  Options shall be granted, the time when such Options shall be
                  granted, the number of Options, the purchase price or exercise
                  price of such Options, the period(s) during which such Options
                  shall be exercisable (whether in whole or in part, including
                  whether such Options shall become immediately exercisable upon
                  the consummation of a Change in Control), the restrictions to
                  be applicable to Options and all other terms and provisions
                  thereof (which need not be identical);

         b.       require, as a condition to the granting of any Option, that
                  the Person receiving such Option agree not to sell or
                  otherwise dispose of such Option, any Common Stock acquired
                  pursuant to such Option, or any other "derivative security"
                  (as defined by Rule 16a-1(c) under the Exchange Act) for a
                  period of six months following the later of (i) the date of
                  the grant of such Option or (ii) the date when the exercise
                  price of such Option is fixed if such exercise price is not
                  fixed at the date of grant of such Option, or for such other
                  period as the Committee may determine;

         c.       provide an arrangement through registered broker-dealers
                  whereby temporary financing may be made available to an
                  optionee by the broker-dealer, under the rules and regulations
                  of the Board of Governors of the Federal Reserve, for the
                  purpose of assisting the optionee in the exercise of an
                  Option, such authority to include the payment by the Company
                  of the commissions of the broker-dealer;

         d.       provide the establishment of procedures for an optionee (i) to
                  have withheld from the total number of shares of Common Stock
                  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 aggregate exercise price under such Option for the
                  number of shares then being acquired (including the shares to
                  be so withheld), and (ii) to exercise a portion of an Option
                  by delivering that number of shares of Common Stock already
                  owned by such optionee having an aggregate Fair Market Value
                  which shall equal the partial Option 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 such Option, the effect of which shall
                  be that



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                  such 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;

         e.       provide (in accordance with Section 13 or otherwise) the
                  establishment of a procedure whereby a number of shares of
                  Common Stock or other securities may be withheld from the
                  total number of shares of Common Stock or other securities to
                  be issued upon exercise of an Option to meet the obligation of
                  withholding for income, social security and other taxes
                  incurred by an optionee upon such exercise or required to be
                  withheld by the Company or a Related Entity in connection with
                  such exercise;

         f.       prescribe, amend, modify and rescind rules and regulations
                  relating to the Plan; and

         g.       make all determinations permitted or deemed necessary,
                  appropriate or advisable for the administration of the Plan,
                  interpret any Plan or Option provision, perform all other
                  acts, exercise all other powers, and establish any other
                  procedures determined by the Committee to be necessary,
                  appropriate, or advisable in administering the Plan or for the
                  conduct of the Committee's business. Any act of the Committee,
                  including interpretations of the provisions of the Plan or any
                  Option and determinations under the Plan or any Option, made
                  in good faith, shall be final, conclusive and binding on all
                  applicable interested parties.

         The Committee may delegate to one or more of its members, or to one or
more agents, such administrative duties as it may deem advisable, and the
Committee or any Person to whom it has delegated duties as aforesaid may employ
one or more Persons to render advice with respect to any responsibility the
Committee or such Person may have under the Plan; provided, however, that
whenever the Company has a class of equity securities registered under Section
12 of the Exchange Act, the Committee may not delegate any duties to a member of
the Board of Directors who, if elected to serve on the Committee, would not
qualify as a "Non-Employee Director" to administer the Plan as contemplated by
Rule 16b-3, as amended, or other applicable rules under the Exchange Act. The
Committee may employ attorneys, consultants, accountants, or other Persons and
the Committee, the Company, and its officers and directors shall be entitled to
rely upon the advice, opinions, or valuations of any such Persons. No member or
agent of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan and all members
and agents of the Committee shall be fully protected by the Company in respect
of any such action, determination or interpretation.

6.       Stock Options for Key Employees.

         Subject to the express provisions of the Plan, the Committee shall have
the authority to grant incentive stock options pursuant to Section 422 of the
Code ("Incentive Options"), to



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grant non-qualified stock options (options which do not qualify under Section
422 of the Code) ("Non-Qualified Options"), and to grant both types of Options
to Key Employees. No Incentive Option shall be granted pursuant to the Plan
after the earlier of ten years from the date of adoption of the Plan or ten
years from the date of approval of the Plan by the shareholders of the Company.
Incentive Options may be granted only to Key Employees. The terms and conditions
of the Options granted under this Section 6 shall be determined from time to
time by the Committee; provided, however, that the Options granted under this
Section 6 shall be subject to all terms and provisions of the Plan (other than
Section 7), including the following:

         a.       Option Exercise Price. Subject to Section 4, the Committee
                  shall establish the Option exercise price at the time any
                  Option is granted at such amount as the Committee shall
                  determine; provided, that, in the case of an Incentive Option,
                  such price shall not be less than the Fair Market Value per
                  share of Common Stock at the date the Option is granted; and
                  provided, further, that in the case of an Incentive Option
                  granted to a person who, at the time such Incentive Option is
                  granted, owns shares of the Company or any Related Entity
                  which possess more than 10% of the total combined voting power
                  of all classes of shares of the Company or of any Related
                  Entity, the Option exercise price shall not be less than 110%
                  of the Fair Market Value per share of Common Stock at the date
                  the Option is granted. The Option exercise price shall be
                  subject to adjustment in accordance with the provisions of
                  Section 10 of the Plan.

         b.       Payment. The price per share of Common Stock with respect to
                  each Option exercise shall be payable at the time of such
                  exercise. Such price shall be payable in cash or by any other
                  means acceptable to the Committee, including by the delivery
                  to the Company of shares of Common Stock owned by the optionee
                  or by the delivery or withholding of shares pursuant to a
                  procedure created pursuant to Section 5.d. of the Plan. Shares
                  delivered to or withheld by the Company in payment of the
                  Option exercise price shall be valued at the Fair Market Value
                  of the Common Stock on the day preceding the date of the
                  exercise of the Option.

         c.       Exercisability of Stock Option. Unless otherwise determined by
                  the Committee at the time of grant, stock options granted
                  hereunder shall become exercisable according to the vesting
                  schedule set forth below:

                  one-fifth of the shares of Common Stock underlying the stock
                  option grant shall become exercisable on the first anniversary
                  of the date of grant and remain exercisable until the stock
                  option expires; and

                  one-fifth of the shares of Common Stock underlying the stock
                  option grant shall become exercisable on the second
                  anniversary of the date of grant and remain exercisable until
                  the stock option expires; and




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                  one-fifth of the shares of Common Stock underlying the stock
                  option grant shall become exercisable on the third anniversary
                  of the date of grant and remain exercisable until the stock
                  option expires; and

                  one-fifth of the shares of Common Stock underlying the stock
                  option grant shall become exercisable on the fourth
                  anniversary of the date of grant and remain exercisable until
                  the stock option expires; and

                  one-fifth of the shares of Common Stock underlying the stock
                  option grant shall become exercisable on the fifth anniversary
                  of the date of grant and remain exercisable until the stock
                  option expires.

                  No Option by its terms shall be exercisable after the
                  expiration of ten years from the date of grant of the Option,
                  unless, as to any Non-Qualified Option, otherwise expressly
                  provided in such Option; provided, however, that no Incentive
                  Option granted to a person who, at the time such Option is
                  granted, owns stock of the Company, or any Related Entity,
                  possessing more than 10% of the total combined voting power of
                  all classes of stock of the Company, or any Related Entity,
                  shall be exercisable after the expiration of five years from
                  the date such Option is granted.

         d.       Death. If an optionee's employment with the Company or a
                  Related Entity terminates due to the death of such optionee,
                  the estate of such optionee, or a Person who acquired the
                  right to exercise such Option by bequest or inheritance or by
                  reason of the death of the optionee, shall have the right to
                  exercise such Option in accordance with its terms at any time
                  and from time to time within 180 days after the date of death
                  unless a longer or shorter period is expressly provided in
                  such Option or established by the Committee pursuant to
                  Section 8 (but in no event after the expiration date of such
                  Option).

         e.       Disability. If the employment of an optionee terminates
                  because of his Disability (as defined below), such optionee or
                  his legal representative shall have the right to exercise the
                  Option in accordance with its terms at any time and from time
                  to time within 180 days after the date of such termination
                  unless a longer or shorter period is expressly provided in
                  such Option or established by the Committee pursuant to
                  Section 8 (but in no event after the expiration date of the
                  Option); provided, however, that in the case of an Incentive
                  Option, the optionee or his legal representative shall in any
                  event be required to exercise the Incentive Option within one
                  year after termination of the optionee's employment due to his
                  Disability.

         f.       Termination for Good Cause; Voluntary Termination. Unless an
                  optionee's Option expressly provides otherwise, such optionee
                  shall immediately forfeit all rights under his Option, except
                  as to the shares of Common Stock already purchased thereunder,
                  if the employment of such optionee with the Company or



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                  a Related Entity is terminated by the Company or any Related
                  Entity for Good Cause (as defined below) or if such optionee
                  voluntarily terminates employment without the consent of the
                  Company or any Related Entity. The determination that there
                  exists Good Cause for termination shall be made by the
                  Committee (unless otherwise agreed to in writing by the
                  Company and the optionee).

         g.       Other Termination of Employment. If the employment of an
                  optionee with the Company or a Related Entity terminates for
                  any reason other than those specified in subsections 6(d), (e)
                  or (f) above, such optionee shall have the right to exercise
                  his Option in accordance with its terms, within 30 days after
                  the date of such termination, unless a longer or shorter
                  period is expressly provided in such Option or established by
                  the Committee pursuant to Section 8 (but in no event after the
                  expiration date of the Option); provided, that no Incentive
                  Option shall be exercisable more than three months after such
                  termination.

         h.       Maximum Exercise. The aggregate Fair Market Value of Common
                  Stock (determined at the time of the grant of the Option) with
                  respect to which Incentive Options are exercisable for the
                  first time by an optionee during any calendar year under all
                  plans of the Company and any Related Entity shall not exceed
                  $100,000. However, notwithstanding such limitations, to the
                  extent the aggregate Fair Market Value of the Common Stock
                  with respect to Options which are designated as Incentive
                  Options are exercisable for the first time by any Optionee
                  during any calendar year (under all plans of the Company and
                  any Related Entity) exceeds $100,000 (whether due to
                  acceleration of exercisability, miscalculation or error) such
                  excess Options shall be treated as Non-Qualified Options. In
                  the event that only a portion of the Options granted at the
                  same time can be applied to the $100,000 limit, the Company
                  shall issue separate share certificate(s) for such number of
                  shares as does not exceed the $100,000 limit, and shall
                  designate such shares as Incentive Option stock in its share
                  transfer records.

7.       Stock Option Grants to Eligible Non-Employees.

         Subject to the express provisions of the Plan, the Committee shall have
the authority to grant Non-Qualified Options (and not Incentive Options) to
Eligible Non-Employees; provided, however, that whenever the Company has any
class of equity securities registered pursuant to Section 12 of the Exchange
Act, no Eligible Non-Employee then serving on the Committee shall be granted
Options hereunder if the grant of such Options would cause such Eligible Non-
Employee to no longer be a "Non-Employee Director" as set forth in Section 2
hereof. The terms and conditions of the Options granted under this Section 7
shall be determined from time to time by the Committee; provided, however, that
the Options granted under this Section 7 shall be subject to all terms and
provisions of the Plan (other than Section 6), including the following:




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         a.       Option Exercise Price. Subject to Section 4, the Committee
                  shall establish the Option exercise price at the time any
                  Non-Qualified Option is granted at such amount as the
                  Committee shall determine. The Option exercise price shall be
                  subject to adjustment in accordance with the provisions of
                  Section 10 of the Plan.

         b.       Payment. The price per share of Common Stock with respect to
                  each Option exercise shall be payable at the time of such
                  exercise. Such price shall be payable in cash or by any other
                  means acceptable to the Committee, including by the delivery
                  to the Company of shares of Common Stock owned by the optionee
                  or by the delivery or withholding of shares pursuant to a
                  procedure created pursuant to Section 5.d. of the Plan. Shares
                  delivered to or withheld by the Company in payment of the
                  Option exercise price shall be valued at the Fair Market Value
                  of the Common Stock on the day preceding the date of the
                  exercise of the Option.

         c.       Exercisability of Stock Option. Subject to Section 8, each
                  Option shall be exercisable in one or more installments as the
                  Committee may determine at the time of the grant. No Option
                  shall be exercisable after the expiration of ten years from
                  the date of grant of the Option, unless otherwise expressly
                  provided in such Option.

         d.       Death. If the retention by the Company or any Related Entity
                  of the services of any Eligible Non-Employee terminates
                  because of his death, the estate of such optionee, or a Person
                  who acquired the right to exercise such Option by bequest or
                  inheritance or by reason of the death of the optionee, shall
                  have the right to exercise such Option in accordance with its
                  terms, at any time and from time to time within 180 days after
                  the date of death unless a longer or shorter period is
                  expressly provided in such Option or established by the
                  Committee pursuant to Section 8 (but in no event after the
                  expiration date of such Option).

         e.       Disability. If the retention by the Company or any Related
                  Entity of the services of any Eligible Non-Employee terminates
                  because of his Disability, such optionee or his legal
                  representative shall have the right to exercise the Option in
                  accordance with its terms at any time and from time to time
                  within 180 days after the date of the optionee's termination
                  unless a longer or shorter period is expressly provided in
                  such Option or established by the Committee pursuant to
                  Section 8 (but in no event after the expiration of the
                  Option).

         f.       Termination for Good Cause; Voluntary Termination. If the
                  retention by the Company or any Related Entity of the services
                  of any Eligible Non-Employee is terminated (i) for Good Cause,
                  (ii) as a result of removal of the optionee from office as a
                  director of the Company or of any Related Entity for cause by
                  action of the shareholders of the Company or such Related
                  Entity in accordance with the by-laws of the Company or such
                  Related Entity, as applicable, and the



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                  corporate law of the jurisdiction of incorporation of the
                  Company or such Related Entity, or (iii) as a result of the
                  voluntary termination by the optionee of such optionee's
                  service without the consent of the Company or any Related
                  Entity, then such optionee shall immediately forfeit his
                  rights under his Option except as to the shares of Common
                  Stock already purchased. The determination that there exists
                  Good Cause for termination shall be made by the Committee
                  (unless otherwise agreed to in writing by the Company and the
                  optionee).

         g.       Other Termination of Relationship. If the retention by the
                  Company or any Related Entity of the services of any Eligible
                  Non-Employee terminates for any reason other than those
                  specified in subsections 7(d), (e) or (f) above, such optionee
                  shall have the right to exercise his or its Option in
                  accordance with its terms within 30 days after the date of
                  such termination, unless a longer or shorter period is
                  expressly provided in such Option or established by the
                  Committee pursuant to Section 8 (but in no event after the
                  expiration date of the Option).

         h.       Ineligibility for Other Grants. Any Eligible Non-Employee who
                  receives an Option pursuant to this Section 7 shall be
                  ineligible to receive any Options under any other Section of
                  the Plan.

8.       Change of Control.

         If (i) a Change of Control shall occur, (ii) the Company shall enter
into an agreement providing for a Change of Control, or (iii) any member of the
HMC Group shall enter into an agreement providing for a Change of Control, then
the Committee may declare any or all Options outstanding under the Plan to be
exercisable in full at such time or times as the Committee shall determine,
notwithstanding the express provisions of such Options. Each Option accelerated
by the Committee pursuant to the preceding sentence shall terminate,
notwithstanding any express provision thereof or any other provision of the
Plan, on such date (not later than the stated exercise date) as the Committee
shall determine.

9.       Purchase Option.

         a.       Except as otherwise expressly provided in any particular
                  Option, if (i) any optionee's employment (or, in the case of
                  any Option granted under Section 7, the optionee's
                  relationship) with the Company or a Related Entity terminates
                  for any reason at any time or (ii) a Change of Control occurs,
                  the Company and/or its designee(s) shall have the option (the
                  "Purchase Option") to purchase, and if the option is
                  exercised, the optionee (or, with respect to Common Stock
                  acquired pursuant to the exercise of an Option, the optionee's
                  assignee, or the optionee's executor or the administrator of
                  the optionee's estate, in the event of the optionee's death,
                  or the optionee's legal representative in the event of the
                  optionee's incapacity (hereinafter, collectively with such
                  optionee, the "Grantor")) shall sell to the Company and/or its
                  assignee(s), all or any portion



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                  (at the Company's option) of the shares of Common Stock and/or
                  Options held by the Grantor (such shares of Common Stock and
                  Options collectively being referred to as the "Purchasable
                  Shares").

         b.       The Company shall give notice in writing to the Grantor of the
                  exercise of the Purchase Option within one year after the
                  earlier of the date of the termination of the optionee's
                  employment or engagement or such Change of Control. Such
                  notice shall state the number of Purchasable Shares to be
                  purchased and the purchase price of such Purchasable Shares.
                  If no notice is given within the time limit specified above,
                  the Purchase Option shall terminate.

         c.       The purchase price to be paid for the Purchasable Shares
                  purchased pursuant to the Purchase Option shall be, in the
                  case of any Common Stock, the Fair Market Value per share as
                  of the date of the notice of exercise of the Purchase Option
                  times the number of shares being purchased, and in the case of
                  any Option, the Fair Market Value per share times the number
                  of vested shares (including by acceleration) subject to such
                  Option which are being purchased, less the applicable per
                  share Option exercise price. The purchase price shall be paid
                  in cash. The closing of such purchase shall take place at the
                  Company's principal executive offices within ten days after
                  the purchase price has been determined. At such closing, the
                  Grantor shall deliver to the purchaser(s) the certificates or
                  instruments evidencing the Purchasable Shares being purchased,
                  duly endorsed (or accompanied by duly executed stock powers)
                  and otherwise in good form for delivery, against payment of
                  the purchase price by check of the purchaser(s). In the event
                  that, notwithstanding the foregoing, the Grantor shall have
                  failed to obtain the release of any pledge or other
                  encumbrance on any Purchasable Shares by the scheduled closing
                  date, at the option of the purchaser(s) the closing shall
                  nevertheless occur on such scheduled closing date, with the
                  cash purchase price being reduced to the extent of, and paid
                  to the holder of, all unpaid indebtedness for which such
                  Purchasable Shares are then pledged or encumbered.

         d.       To assure the enforceability of the Company's rights under
                  this Paragraph 9, each certificate or instrument representing
                  Common Stock or an Option held by him or it shall bear a
                  conspicuous legend in substantially the following form:

                  "THE SHARES [REPRESENTED BY THIS CERTIFICATE] [ISSUABLE
                  PURSUANT TO THIS AGREEMENT] ARE SUBJECT TO AN OPTION TO
                  REPURCHASE PROVIDED UNDER THE PROVISIONS OF THE COMPANY'S
                  1998 STOCK OPTION PLAN FOR KEY EMPLOYEES AND A STOCK OPTION
                  AGREEMENT ENTERED INTO PURSUANT THERETO. A COPY OF SUCH
                  OPTION PLAN AND OPTION AGREEMENT ARE AVAILABLE UPON WRITTEN
                  REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES."



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         The Company's rights under this Section 9 shall terminate upon the
consummation of a Qualifying Public Offering.

10.      Adjustment of Shares and Price.

         Unless otherwise expressly provided in a particular Option, in the
event that, by reason of any merger, consolidation, combination, liquidation,
reorganization, recapitalization, stock dividend, stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares or other like
change in capital structure of the Company (collectively, a "Reorganization"),
the Common Stock is substituted, combined, or changed into any cash, property,
or other securities, or the shares of Common Stock are changed into a greater or
lesser number of shares of Common Stock, the number and/or kind of shares and/or
interests subject to an Option and the per share price or value thereof shall be
appropriately and equitably adjusted by the Committee to give appropriate effect
to such Reorganization. Any fractional shares or interests resulting from such
adjustment shall be eliminated. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option granted hereunder other than an
"incentive stock option" for purposes of Section 422 of the Code.

         In the event the Company is not the surviving entity of a
Reorganization and, following such Reorganization, any optionee will hold
Options issued pursuant to the Plan which have not been exercised, cancelled, or
terminated in connection therewith, the Company shall cause such Options to be
assumed (or cancelled and replacement Options issued) by the surviving entity or
a Related Entity.

11.      Assignment or Transfer.

         Except as otherwise expressly provided in any Non-Qualified Option, no
Option granted under the Plan or any rights or interests therein shall be
assignable or transferable by an optionee except by will or the laws of descent
and distribution, and during the lifetime of an optionee, Options granted to him
or her hereunder shall be exercisable only by the optionee or, in the event that
a legal representative has been appointed in connection with the Disability of
an optionee, such legal representative.

12.      Compliance with Securities Laws.

         The Company shall not in any event be obligated to file any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), or any applicable state securities laws, to permit exercise
of any Option or to issue any shares of Common Stock. Each optionee (or, in the
event of his death or, in the event a legal representative has been appointed in
connection with his Disability, the Person exercising the Option) shall, as a
condition to his right to exercise any Option, deliver to the Company an
agreement or certificate containing such representations, warranties and
covenants as the Company may deem necessary or appropriate to ensure that the
issuance of shares of Common Stock pursuant



                                     - 11 -

<PAGE>   12



to such exercise is not required to be registered under the Securities Act or
any applicable state securities laws.

         Certificates for shares of Common Stock, when issued, may have
substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:

                  "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
                  BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                  OR ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED
                  FOR SALE, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF
                  UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE
                  ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN
                  OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
                  OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT
                  VIOLATE APPLICABLE FEDERAL OR STATE LAWS."

         This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.

13.      Withholding Taxes.

         By acceptance of the Option, the optionee will be deemed to (i) agree
to reimburse the Company or any Related Entity by which the optionee is employed
for any federal, state, or local taxes required by any government to be withheld
or otherwise deducted by such corporation in respect of the optionee's exercise
of all or a portion of the Option; (ii) authorize the Company or any Related
Entity by which the optionee is employed to withhold from any cash compensation
paid to the optionee or on the optionee's behalf, an amount sufficient to
discharge any federal, state, and local taxes imposed on the Company or the
Related Entity by which the optionee is employed, and which otherwise has not
been reimbursed by the optionee, in respect of the optionee's exercise of all or
a portion of the Option; and (iii) agree that the Company may, in its
discretion, hold the stock certificate to which the optionee is entitled upon
exercise of the Option as security for the payment of the aforementioned
withholding tax liability, until cash sufficient to pay that liability has been
accumulated, and may, in its discretion, effect such withholding by retaining
shares issuable upon the exercise of the Option having a Fair Market Value on
the date of exercise which is equal to or less than the amount to be withheld.



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<PAGE>   13




14.      Costs and Expenses.

         The costs and expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Option nor to any optionee.

15.      Other Incentive Plans

         The adoption of the Plan does not preclude the adoption by appropriate
means of any other incentive plan.

16.      Effect on Employment.

         Nothing contained in the Plan or any agreement related hereto or
referred to herein shall affect, or be construed as affecting, the terms of
employment of any Key Employee except to the extent specifically provided herein
or therein. Nothing contained in the Plan or any agreement related hereto or
referred to herein shall impose, or be construed as imposing, an obligation on
(i) the Company or any Related Entity to continue the employment of any Key
Employee, and (ii) any Key Employee to remain in the employ of the Company or
any Related Entity.

17.      Tax Treatment.

         Notwithstanding any provisions in this Plan or any agreement to the
contrary, neither the Company nor any Related Entity shall have any liability to
any employee if any Option intended to be an Incentive Option is not treated as
an incentive stock option under Section 422 of the Code.

18.      Definitions.

         In addition to the terms specifically defined elsewhere in the Plan, as
used in the Plan, the following terms shall have the respective meanings
indicated:

         "Affiliate" shall mean, as to any Person, a Person that directly, or
         indirectly through one or more intermediaries, controls, or is
         controlled by, or is under common control with, such Person.

         "Board of Directors" shall have the meaning set forth in Section 2 
         hereof.

         "Change of Control" shall mean the first to occur of the following
         events: (i) any sale, lease, exchange, or other transfer (in one
         transaction or series of related transactions) of all or substantially
         all of the assets of the Company to any Person or group of related
         Persons for purposes of Section 13(d) of the Exchange Act, other than
         one or more members of the HMC Group, (ii) a majority of the Board of
         Directors of the Company shall consist of Persons who are not
         Continuing Directors; or (iii) the acquisition by



                                     - 13 -

<PAGE>   14



         any Person or Group (other than one or more members of the HMC Group)
         of the power, directly or indirectly, to vote or direct the voting of
         securities having more than 50% of the ordinary voting power for the
         election of directors of the Company.

         "Code" shall have the meaning set forth in Section 1 hereof.

         "Committee" shall have the meaning set forth in Section 2 hereof.

         "Common Stock" shall have the meaning set forth in Section 3 hereof.

         "Company" shall have the meaning set forth in Section 1 hereof.

         "Continuing Director" shall mean, as of the date of determination, any
         Person who (i) was a member of the Board of Directors of the Company on
         the date of adoption of the Plan, (ii) was nominated for election or
         elected to the Board of Directors of the Company with the affirmative
         vote of a majority of the Continuing Directors who were members of such
         Board of Directors at the time of such nomination or election, or (iii)
         is a member of the HMC Group.

         "Disability" shall mean (i) permanent disability as defined under the
         appropriate provisions of the applicable long-term disability plan
         maintained for the benefit of employees of the Company or any Related
         Entity who are regularly employed on a salaried basis or (ii) if no
         such long-term disability plan exists, an inability to perform a
         participant's employment duties and responsibilities by reason of any
         physical or mental condition for a period of 26 consecutive weeks or a
         period of 26 weeks during any 12- month period in connection with the
         same physical or mental condition or (iii) another meaning agreed to in
         writing by the Committee and the optionee; provided, however, that in
         the case of the optionee holding an Incentive Option "disability" shall
         have the meaning specified in Section 22(e)(3) of the Code.

         "Eligible Non-Employee" shall have the meaning set forth in Section 4 
         hereof.

         "Exchange Act" shall have the meaning set forth in Section 2 hereof.

         "Fair Market Value" shall, as it relates to the Common Stock, mean the
         average of the daily market prices of such Common Stock as reported on
         the principal national securities exchange on which the shares of
         Common Stock are then listed for each day during the ten consecutive
         trading days prior to the date of determination, or if such Common
         Stock is not listed on a national securities exchange, the last
         reported bid price in the over-the-counter market, or if such shares
         are not traded in the over-the-counter market, the per share cash price
         for which all of the outstanding Common Stock could be sold to a
         willing purchaser in an arm's-length transaction (without regard to
         minority discount, absence of liquidity, or transfer restrictions
         imposed by any applicable law or agreement) at the date of the event
         giving rise to a need for a determination. Except as may be otherwise
         expressly provided in a



                                     - 14 -

<PAGE>   15



         particular Option, Fair Market Value shall be determined in good faith
         by the Committee.

         "Good Cause", with respect to any Key Employee, shall mean (unless
         another definition is agreed to in writing by the Company and the
         optionee) termination by action of the Board of Directors because of:
         (A) the optionee's conviction of, or plea of nolo contendere to, a
         felony or a crime involving moral turpitude; (B) the optionee's
         personal dishonesty, incompetence, willful misconduct, willful
         violation of any law, rule, or regulation (other than minor traffic
         violations or similar offenses) or breach of fiduciary duty which
         involves personal profit; (C) the optionee's commission of material
         mismanagement in the conduct of his duties as assigned to him by the
         Board of Directors or the optionee's supervising officer or officers of
         the Company; (D) the optionee's willful failure to execute or comply
         with the policies of the Company or his stated duties as established by
         the Board of Directors or the optionee's supervising officer or
         officers of the Company, or the optionee's intentional failure to
         perform the optionee's stated duties; or (E) substance abuse or
         addiction on the part of the optionee. "Good Cause", with respect to
         any Eligible Non-Employee, shall mean (unless another definition is
         agreed to in writing by the Company and the optionee) termination by
         action of the Board of Directors because of: (A) the optionee's
         conviction of, or plea of nolo contendere to, a felony or a crime
         involving moral turpitude; (B) the optionee's personal dishonesty,
         incompetence, willful misconduct, willful violation of any law, rule,
         or regulation (other than minor traffic violations or similar offenses)
         or breach of fiduciary duty which involves personal profit; (C) the
         optionee's commission of material mismanagement in providing services
         to the Company or any Related Entity; (D) the optionee's willful
         failure to comply with the policies of the Company in providing
         services to the Company or any Related Entity, or the optionee's
         intentional failure to perform the services for which the optionee has
         been engaged; (E) substance abuse or addiction on the part of the
         optionee; or (F) the optionee's willfully making any material
         misrepresentation or willfully omitting to disclose any material fact
         to the board of directors of the Company or any Related Entity with
         respect to the business of the Company or any Related Entity.

         "Grantor" has the meaning set forth in Section 9 hereof.

         "Group" shall have the meaning given such term in Regulation 13D under
         the Exchange Act.

         "HMC Group" shall mean Hicks, Muse, Tate & Furst Incorporated, its
         Affiliates and their respective employees, officers, and directors (and
         members of their respective families and trusts for the primary benefit
         of such family members).

         "Incentive Options" shall have the meaning set forth in Section 6 
         hereof.

         The term "including" when used herein shall mean "including, but not
         limited to".




                                     - 15 -

<PAGE>   16



         "Key Employee" shall have the meaning set forth in Section 4 hereof.

         "Non-Qualified Options" shall have the meaning set forth in Section 6 
         hereof.

         "Options" shall have the meaning set forth in Section 1 hereof.

         "Person" shall have the meaning set forth in Section 4 hereof.

         "Plan" shall have the meaning set forth in Section 1 hereof.

         "Purchasable Shares" shall have the meaning set forth in Section 9 
         hereof.

         "Purchase Option" shall have the meaning set forth in Section 9 hereof.

         "Qualifying Public Offering" shall mean a firm commitment underwritten
         public offering of Common Stock the result of which is that the HMC
         Group shall own less than 10% of the fully diluted Common Stock of the
         Company.

         "Related Entities" shall have the meaning set forth in Section 1 
         hereof.

         "Reorganization" shall have the meaning set forth in Section 10 hereof.

         "Rule 16b-3" shall have the meaning set forth in Section 2 hereof.

         "Securities Act" shall have the meaning set forth in Section 12 hereof.

         "Subsidiary" shall mean, with respect to any Person, (i) a corporation
         a majority of whose outstanding shares of capital stock or other equity
         interests with voting power, under ordinary circumstances, to elect
         directors, is at the time, directly or indirectly, owned by such
         Person, by one or more subsidiaries of such Person or by such Person
         and one or more subsidiaries of such Person, and (ii) any other Person
         (other than a corporation) in which such Person, a subsidiary of such
         Person or such Person and one or more subsidiaries of such Person,
         directly or indirectly, at the date of determination thereof, has (x)
         at least a majority ownership interest or (y) the power to elect or
         direct the election of the directors or other governing body of such
         Person.

19.      Amendment of Plan.

         The Board of Directors shall have the right to amend, modify, suspend
or terminate the Plan at any time; provided, that no amendment shall be made
which shall increase the total number of shares of Common Stock which may be
issued and sold pursuant to Options granted under the Plan or decrease the
minimum Option exercise price in the case of an Incentive Option, or modify the
provisions of the Plan relating to eligibility with respect to Incentive Options
unless such amendment is made by or with the approval of the shareholders. The
Board of Directors shall be authorized to amend the Plan and the Options granted
thereunder



                                     - 16 -

<PAGE>   17


(i) to qualify as "incentive stock options" within the meaning of Section 422 of
the Code or (ii) to comply with Rule 16b-3 (or any successor rule) under the
Exchange Act (or any successor law) and the regulations (including any temporary
regulations) promulgated thereunder. No amendment, modification, suspension or
termination of the Plan shall alter or impair any Options previously granted
under the Plan, without the consent of the holder thereof.

20.      Effective Date.

         The Plan shall be effective as of June 4, 1998, and shall be void
retroactively if not approved by the shareholders of the Company within twelve
months thereafter.




                                     - 17 -