NATIONAL ENTERPRISES, INC. 1994 STOCK OPTION PLAN

SECTION 1. PURPOSE

The  purposes of this  National  Enterprises,  Inc.  1994 Stock Option Plan (the
"Plan") are to  encourage  key  Employees  of National  Enterprises,  Inc.  (The
"Company") to develop a proprietary  interest in the Company,  and to compensate
certain members of the Board of Directors of the Company for their services.

SECTION 2.  ADMINISTRATION

The Plan  shall be  initially  administered  by the  Board of  Directors  of the
Company (the "Board").  A majority of the Board shall  constitute a quorum,  and
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 Board,  shall be
deemed the acts of the Board for purposes of this Plan.

Subject to the terms of the Plan and  applicable  law,  the Board shall have the
sole power,  authority  and  discretion  to: (i)  designate  the  Employees  and
Directors who are to be Participants; (ii) determine the number of Options to be
granted  to a  Participant;  (iii)  determine  the terms and  conditions  of any
Option;  (iv) interpret,  construe and administer the Plan and any instrument or
agreement  relating to an Option granted under the Plan;  (v) establish,  amend,
suspend, or waive such rules and regulations and appoint such agents as it shall
deem  appropriate  for  the  proper  administration  of the  Plan;  (vi)  make a
determination  as to the right of any  Person  to  receive  payment  of (or with
respect  to) an  Option;  and (vii) make any other  determinations  and take any
other actions that the Board deems necessary or desirable for the administration
of the Plan.

Unless   otherwise   expressly   provided   in  the  Plan,   all   designations,
determinations, interpretations, and other decisions with respect to the Plan or
any Option granted  thereunder shall be within the sole discretion of the Board,
may be made at any time,  and shall be final,  conclusive,  and binding upon all
Persons.

At any time the Board may delegate its  authority  to  administer  the Plan to a
Compensation  Committee  (the  "Committee"),  as  designated  by the  Board  and
composed of not less than two members of the Board.  A majority of the Committee
shall constitute a quorum,  and 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 deemed act of the Committee.

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SECTION 3.  SHARES AVAILABLE FOR OPTIONS

3.1  CALCULATIONS  OF NUMBER OF  SHARES.  The  number  of shares  available  for
granting  Options  under r the  Plan  shall  be  1,500,000  Shares,  subject  to
adjustment  as provided in Section 3.2 Further,  if any Opsin  granted under the
Plan is forfeited,  canceled,  surrendered,  or otherwise  terminates or expires
without the delivery of Shares or other permitted consideration, then the Shares
subject to such Option shall again be available  for granting  Options under the
Plan.

3.2.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR
REORGANIZATION

     The number  and/or  value of Shares  covered by an Option shall be adjusted
from time to time as follows:

     (a) Subject to any required  action by  shareholders  of the  Company,  the
number of Shares covered by each  outstanding  Option,  and the exercise  price,
shall be proportionately  adjusted for any increase or decrease in the number of
issued Shares of the Company  resulting from a subdivision or  consolidation  of
Shares or the  payment  of a stock  dividend  (but only in  Shares) or any other
increase  or  decrease  in the  number of Shares  effected  without  receipt  of
consideration by the Company.

     (b) Subject to any required action by  shareholders of the Company,  if the
Company  shall be the surviving  corporation  in any  Reorganization,  merger or
consolidation,  each  outstanding  Option  shall  pertain  to and  apply  to the
securities to which a holder of the number of Shares subject to the Option would
have been  entitled,  and if a plan or  agreement  reflect  any such event is in
effect that  specifically  provides for the exchange,  conversion or exchange of
Shares,  then any adjustment to Shares relating to an Option hereunder shall not
be inconsistent with the terms of any such plan or agreement.

     (c) In the event of a change  in the  Shares of the  Company  as  presently
constituted,  which is limited to a change of par value into the same  number of
Shares with a different  par value or without  par value,  the Shares  resulting
from any such change shall be deemed to be the Shares  within the meaning of the
Plan.

     To the extent that the foregoing  adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Board, whose determination
shall be final, binding and conclusive.

     Except as expressly  provided in the Plan,  any person to whom an Option is
granted shall have no rights by reason of any  subdivision or  consolidation  of
stock of any class or the payment of any stock dividend or any other increase or
decrease  in the  number  of  shares  of stock of any  class or by reason of any
dissolution, liquidation,  reorganization, merger or consolidation or spinoff of
assets or stock of another  corporation,  and any issue by the Company of shares
of stock of any class,  or  securities  convertible  into shares of stock of any
class, shall not affect, and no adjustments by reason thereof shall be made with
respect to, the number or exercise price of Shares subject to an Option.

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     The grant of an Option pursuant to the Plan shall not affect in any way the
right  or  power  of  the  Company  to  make   adjustments,   reclassifications,
Reorganizations  or changes of its capital or business  structure or to merge or
to consolidate or to dissolve,  liquidate or sell or transfer all or any part of
its business or assets.

SECTION 4. ELIGIBILITY

Any Employee or Director  shall be eligible to be a  Participant.  Grants may be
made to the same Employee or Director on more than one occasion.

SECTION 5. OPTIONS

The Board is hereby  authorized to grant Options to Employees and Directors with
the  following  teens  and  conditions  and  with  such  additional   terms  and
conditions,  which are not inconsistent  with the provisions of the Plan, as the
Board shall determine:

     (i)  EXERCISE  PRICE.  The per Share  exercise  price of an Option shall be
     determined by the Board at the date of grant.

     (ii) TIME AND METHOD OF  EXERCISE.  The Board shall  determine  the time or
     times at which an  Option  may be  exercised  in whole or in part,  and the
     method by which payment of the exercise  price with respect  thereto may be
     made; provided,  however, no Option shall be exercisable prior to the first
     anniversary  of the adoption of the Plan,  except as provided in Section 7.
     Subject to any  limitations  in the Option  Agreement,  a  Participant  may
     purchase Shares subject to the exercisable portion of an Option in whole at
     any time,  or in part from time to time,  by delivering to the Secretary of
     the Company, written notice specifying the number of Shares with respect to
     which the Option is being  exercised,  together with payment in full of the
     purchase  price of such  Shares  plus,  if so  elected  by  Participant  as
     provided in Section 8.2, any applicable  federal,  state or local taxes for
     which the Company has a  withholding  obligation  in  connection  with such
     purchase.  Such  payment  shall  be  payable  in full  in cash or by  check
     acceptable to the Company at the time of purchase.

     (iii) TERMS OF OPTIONS. The term of each Option shall be for such period as
     may be determined by the Board;  provided,  however, that in no event shall
     the term of any  Option  exceed a period of 10 years and one month from the
     date of its grant.

     (iv)  TERMINATION  OF EMPLOYMENT OR  DIRECTORSHIP.  Options,  to the extent
     vested and  exercisable  as or the date a  Participant  who is an  Employee
     ceases to be an Employee for any reason other than Termination for Cause or
     Voluntary  Termination,  may be exercised within one year of such date, but
     not thereafter;  provided,  however,  that in no event shall any Options be
     exercisable  after the  expiration  date of such Option as set forth in the
     related Option Agreement.  If a Participant who is an Employee ceases to be
     an Employee as a result of death,  such Options may be exercised within one
     year of such  Participant's  death by the person to whom his  rights  shall
     pass by will or the laws of descent and distribution.  If a Participant who
     is an  Employee  ceases  to be an  Employee  as a result of  Disability  or
     Retirement,  such  Options  may  be  exercised  within  one  year  of  such
     Participant's  Disability or Retirement by either the  Participant  or such
     Participant's legal representative. In the event of a Participant who is an
     Employee has his or her employment terminated with the Company by reason of
     Termination for Cause or Voluntary Termination,  the Options outstanding on
     such date of  termination  may not be exercised  after such  termination of
     employment.  With respect to any Director who is a Participant but not also
     an Employee,  if he or she voluntarily  resigns from the Board of Directors
     or is removed or fails to be  re-elected  to the Board of Directors for any
     reason  other than death or  retirement,  then his or her Options  shall be
     treated in the same manner as a Participant who ceased to be an Employee by
     reason of Termination for Cause or Voluntary Termination; otherwise if such
     Participant ceases to be a member of the Board or Directors due to death or

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     retirement (using the same standard as Retirement of an Employee), then his
     or her Options  shall be treated in the same  manner as a  Participant  who
     ceased  to be an  Employee  by reason of death or  Retirement.  Subject  to
     Section 7, to the extent Options or any portion thereof are not exercisable
     an the date the  Participant who is an Employee ceases to be an Employee or
     the  Participant  who is a Director but not also an Employee ceases to be a
     Director,  such Options or portion thereof shall automatically lapse and be
     canceled unexercised on such date. In all events, the provisions of Section
     7 shall take  precedence  over the  provisions  of this Section  5(iv);  in
     particular,  but without  limitation,  if a Change in Control  occurs,  the
     vesting and disposition of the  Participant's  Options shall be governed by
     Section  7(d)  rather  than  the   provisions   of  this   Section   5(iv),
     notwithstanding the fact that in connection with such Change in Control the
     Participant's  employment  or  membership  an the Board of Directors of the
     Company has bun terminated.

     (v) LIMITS ON TRANSFER OF OPTIONS.  No Option or rights thereunder shall be
     assignable,  alienable, saleable or transferable by a Participant otherwise
     than by will or by the laws of descent and distribution.  Bach Option shall
     be exercisable during that  Participant's  lifetime only by the Participant
     or, if permissible under.  applicable law, by the Participant's guardian or
     legal  representative.  No Option or any rights  thereunder may be pledged,
     alienated,  attached or otherwise  encumbered,  and any  purported  pledge,
     alienation,   attachment   or   encumbrance   thereof  shall  be  void  and
     unenforceable against the Company.

     (vi)  SHARE  CERTIFICATES.  Upon  exercise  of  an  Option,  delivery  of a
     certificate  for hilly paid and  nonassessable  Shares shall be wade to the
     Person  exercising the Option either at such time during ordinary  business
     hours  after 15 days but not more than 30 days from the date of  receipt of
     the notice by the Company as shall be designated in such notice, or at such
     time,  place and manner as may be agreed upon by the Company and the Person
     exercising the Option.

     (vii)  OPTION  AGREEMENT.  Each  Option  shall be  evidenced  by an  Option
     Agreement,  which shall have such terms and  provisions,  not  inconsistent
     with the Plan, that the Board determines.

SECTION 6. AMENDMENT AND TERMINATION

The Board in its  discretion  may terminate the Plan at any time with respect to
any Shares for which a grant has not theretofore been made. The Board shalt also
have the right to alter or amend the Plan or any part thereof from time to time;
provided,  however,  that no change in any Option  theretofore  made may be made
which  would  impair the rights of the  Participant  without the consent of such
Participant;  and provided further,  that notwithstanding any other provision of
the Plan or any Option  Agreement,  without the approval of the  shareholders of
the Company no such amendment or alteration shall be made that would:

     (i)  increase the total number of Shares  available  for Options  under the
          Plan, except as provided in Section 3.2 hereof;

     (ii) change the data of Persons eligible to receive Options;

     (iii)extend the maximum  period  during which  Options may be granted under
          the Plan; or

     (iv) materially  increase the benefits  accruing to Participants  under the
          Plan.


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SECTION 7. VESTING UPON THE OCCURRENCE OF CERTAIN EVENTS

     (a) Each Option  grants  hereunder may only be exercised to the extent that
the  Participant  is vested in such Option Bach Option shall vest  separately in
accordance with the option vesting schedule,  if any, determined by the Board in
its sole discretion,  which will be incorporated in the Option Agreement entered
into between the Company and each Participant.  The option vesting schedule will
be accelerated in the event the provisions of paragraphs (b), (c), (d) or (e) of
this subsection  apply;  or if, in the sole  discretion of the Board,  the Board
determines that  acceleration of the option vesting  schedule would be desirable
for the Company.

     (b) In the event of the  dissolution or  liquidation  of the Company,  each
Option  granted  under the Plan shall  terminate as of a date to be fixed by the
Board; provided, however, that not less than thirty (30) days' written notice of
the date so fixed shall be given to each  Participant and each such  Participant
shall be fully vested in and shall have the right during such period to exercise
the Option, even though such Option would not otherwise be exercisable under the
option vesting schedule. At the end of such period, any unexercised Option shall
terminate and be of no further effect.

     (c) In the event of a Reorganization:

          (1) If them is no plan or agreement respecting the Reorganization,  or
     if such plan or  agreement  does not  specifically  provide for the change,
     conversion  or exchange of the Shares  under  outstanding  and  unexercised
     Options for other securities then the provisions of the above paragraph (b)
     of this  Section 7 shall  apply as if the  Company  had  dissolved  or been
     liquidated on the effective date of the Reorganization; or

          (2) If there is a plan or agreement respecting the Reorganization, and
     if such plan or agreement specifically provides for the change,  conversion
     or exchange of the Sharps under  outstanding  and  unexercised  Options for
     securities of another  corporation,  then the Board shall adjust the Shares
     under such outstanding and unexercised Options (and shall adjust the Shares
     remaining  under the Plan which are then  available to be awarded under the
     Plan, if such plan or agreement makes no specific provision  therefor) in a
     manner not  inconsistent  with the provisions of such plan or agreement for
     the  adjustment,  change,  conversion  or  exchange of such Shares and such
     Options.

     (d) In the event of a Change in Control of the Company,  all Options  shall
become fully vested and immediately exercisable.

SECTION 8. GENERAL PROVISIONS

8.1 NO RIGHTS TO  OPTIONS.  No person  shall  have any claim to be  granted  any
Option under the Plan, and there is no obligation for uniformity of treatment of
Persons under the Plan. The terms and conditions of Options need not be the same
with respect to each Participant.

8.2 WITHHOLDING.  The amount, as determined by the Board, of any federal,  state
or local tax  required to be  withheld by the Company due to the  exercise of an
Option shall be  satisfied,  at the election of the  Participant,  either (a) by
payment by the  Participant  to the  Company  of the amount of such  withholding
obligation  in cash at the time of payment  for the Shares  purchased  under the
Option (the "Cash Method") or (6) through either the retention by the Company of
a number of Shares out of the Shares being acquired  through the exercise of the
Option or the delivery of already  owned Shares having a Fair Market Value equal
to the amount of the withholding  obligation (the "Share Retention Method"). The
cash  payment  or the  amount  equal to the Fair  Market  Value of the Shares so
withheld,  as  the  case  may  be,  shall  be  remitted  by the  Company  to the
appropriate taxing authorities. The Board shall determine the time and manner in
which a Participant may elect to satisfy a withholding  obligation by either the
Cash Method or Share Retention Method.


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8.3 CORRECTION OF DEPICTS, OMISSIONS AND INCONSISTENCIES.  The Board may correct
any defect,  supply any omission,  or reconcile any inconsistency in the Plan or
any  Option in the  manner  and to the  extent it shall  deem  desirable  in the
establishment or administration of the Plan.

8.4 NO LIMIT ON OTHER COMPENSATION  ARRANGEMENTS.  Nothing contained in the Plan
shall  prevent  the  Company  from  adopting or  continuing  in effect  other or
additional  compensation  arrangements  and  such  arrangements  may  be  either
generally applicable or applicable only in specific cases.

8.5 NO RIGHT TO  EMPLOYMENT.  The grant of an Option  shall not be  construed as
giving a Participant the right to be retained in the employ of the Company or to
remain on the Board of Directors of the Company. Further, the Company may at any
time dismiss a Participant  from employment or remove such  Participant from the
Board of  Directors  free from any  liability or any claim under the Plan unless
otherwise expressly provided in the Plan or in any Option Agreement.

8.6  GOVERNING  LAW. The validity,  construction  and effect of the Plan and any
rules and  regulations  relating to the Plan shall be  determined  in accordance
with applicable Federal law, and to the extent not preempted  thereby,  with the
laws of the State of Texas.

8.7  SEVERABILITY.  If any provisions of the Plan or any Option is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction,  or as to
any person or Option,  or would  disqualify the Plan or any Option under any law
deemed  applicable  by the Board,  such  provision  shall be construed or deemed
amended to conform to  applicable  laws.  If it cannot be So construed or deemed
amended  without,  in the  determination of the Board,  materially  altering the
intent of the Plan or the Option,  such  provision  shall be stricken as to such
jurisdiction,  Person  or  Option  and the  remainder  of the  Plan and any such
Options shall remain in full force and effect.

8.8 NO TRUST OR FUND CREATED. Neither the Plan nor any Option shall create or be
construed  to  create  a  trust  or  separate  fund  of any  kind  or  fiduciary
relationship  between the Company and a Participant or any other Person.  To the
extent that any Person acquires a right to receive  payments from the Company or
any  Affiliate  pursuant to an Option,  such right shall be no greater  than the
right of any unsecured general creditor of the Company.

8.9 NO  FRACTIONAL  SHARES.  No  fractional  Shares shall be issued or delivered
pursuant to the Plan or any Option,  and the Board shall determine whether cash,
other securities,  or other property shall be paid or transferred in lieu of any
fractional Shares, or whether such fractional Shares or any rights thereto shall
be canceled, terminated or otherwise eliminated.

8.10  HEADINGS.  Headings are given to the Sections and  subsections of the Plan
solely as a convenience  to  facilitate  reference.  Such headings  shall not be
deemed in any way material or relevant to the construction or  interpretation of
the Plan or any provision thereof.

8.11 NO  LIMITATION.  The  existence  of the Plan and the grants of Options made
hereunder  shall  not  affect  in any way the right or power of the Board or the
shareholders   of  the   Company   to  make   or   authorize   any   adjustment,
recapitalization,  reorganization  or other  change in the capital  structure or
business of the Company, any merger a consolidation of the Company, any issue of
debt or equity  securities ahead of or affecting Shares or the rights thereof or
pertaining thereto,  the dissolution or liquidation of the Shares at any Sale or
transfer  of all or any part of  Company's  Shares  or  business,  or any  other
corporate act or proceeding.

8.12 COMPLIANCE WITH SECURITIES LAWS.  Anything contained herein to the contrary
notwithstanding,  the Company shall not be obligated to sell or issue any Shares
under the Plan  unless  and until the  Company  is  satisfied  that such sale or
issuance complies with (i) all applicable  requirements of the exchange on which
the Shares are traded (or the governing  body of the  principal  market in which
such Shares are traded, if such Shares are not then listed on an exchange), (ii)
all  applicable  provisions  of the  1933  Act,  and  (iii)  all  other  laws or
regulations by which the Company is bound or to which the Company is subject.


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8.13  INVESTMENT  REPRESENTATION.  Unless the Shares subject to Options  granted
under the Plan have been registered under the Securities Act of 1933, as amended
(the "1933  Act"),  (and,  in the case of any  Participant  who may be deemed an
affiliate (for  securities  law purposes) of the Company,  such Shares have been
registered  under the 1933 Act for resale by such  Participant),  or the Company
has determined that an exemption from registration is available, the Company may
require  prior to and as a  condition  of the  issuance  of any Shares  that the
person  exercising  an  Option  hereunder  furnish  the  Company  with a written
representation  in a form prescribed by the Board to the effect that such person
is  acquiring  said Shares  solely with a view to  investment  for his a her own
account  and not with a view to the  resale or  distribution  of all or any part
thereof, and that such person will not dispose of any such Shares otherwise than
in  accordance  with the  provisions  of Rule 144 under the 1933 Act  unless and
until  either  the Shares are  registered  under the 1933 Act or the  Company is
satisfied that an exemption from such registration is available.

SECTION 9. EFFECTIVE DATE OF THE PLAN.

The Plan shall be effective  as of the date of its approval by the  shareholders
of the Company

SECTION 10. TERM OF THE PLAN

No Option shall be granted after ten years and one month from the effective date
of the Plan.  However,  unless otherwise expressly provided in the Plan or in an
applicable Option Agreement,  any Option  theretofore  granted may extend beyond
such date, and any authority of the Board to amend, alter, suspend,  discontinue
or terminate  any such Option,  or to waive any  conditions  or rights under any
such Option, shall extend beyond such date.

SECTION 11. DEFINITIONS

As used in the Plan,  the  following  terms  shall have the  meanings  set forth
below:

     (a) "Affiliate" shall mean the Company or any subsidiary of the Company.

     (b) "Change in Control" shall mean,  after the effective date of this Plan,
(i) the occurrence of an event of a nature that would be required to be reported
in  response  to Item 1 or Item 2 of a Form 8-K  Current  Report of the  Company
promulgated  pursuant  to  Section  13 and  15(d) of the 1934 Act,  as  amended;
provided that, without  limitation,  such a Change in Control shall be deemed to
have  occurred if (a) any "person",  as such term is used in Sections  13(d) and
14(d) of the 1934 Act (other than John Overzet, his estate, any of the member of
his family, or any affiliate of him, the Company, any trustee or other fiduciary
holding  securities  under any  employee  benefit  plan of the  Company,  or any
company owned,  directly or indirectly,  by the  shareholders  of the Company in
substantially  the same proportions as their ownership of stock of the Company),
is or becomes  the  "beneficial  owner" (as defined in Rule 13d-3 under the 1934
Act),  directly  or  indirectly,  of  securities  of  the  Company  representing
twenty-five  percent (25%) or more of the combined voting power of the Company's
then outstanding  securities or (b) during any period of two consecutive  years,
individuals  who at the beginning of such period  constitute the Board cease for
any reason to constitute at least a majority thereof, unless the election by the
Board or the nomination for election by the Company's  shareholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the two-year  period or whose election
or nomination for election was previously so approved;  (ii) the shareholders of
the Company  approve a merger or  consolidation  of the  Company  with any other
corporation,  other  than a merger or  consolidation  that  would  result in the
voting  securities  of  the  Company   outstanding   immediately  prior  thereto
continuing to represent  (either by remaining  outstanding or by being converted
into voting  securities of the surviving  entity) more than eighty percent (80%)
of the  combined  voting power of the voting  securities  of the Company or such
surviving entity  outstanding  immediately  after such merger or  consolidation;


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provided,  however,  that a merger or  consolidation  effected  to  implement  a
reorganization  or  recapitalization  of the Company,  or a similar  transaction
(collectively,  a  "Reorganization"),  in which no "person"  acquires  more than
twenty  percent  (20%)  of the  combined  voting  power  of the  Company's  then
outstanding  securities shall not constitute a Change in Control of the Company;
or (iii) the shareholders of the Company approve a plan of complete  liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.

     (c) "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from
time to time.

     (d)  "Director"  shall  mean any  member of the board of  directors  of the
Company.

     (e)  "Disability"  shall  mean  such  total  and  permanent  disability  as
qualifies  the   Participant  for  benefits  under  the  long-term  or  extended
disability plan of the Company covering the Participant at the time.

     (f) "Employee" shall mean any employee of the Company.

     (g) "Fair Market  Value"  shall mean with respect to the Shares,  as of any
date,  (i) the last  reported  sales  price  regular  way on the New York  Stock
Exchange or, if not reported for the New York Stock  Exchange,  on the Composite
Tape,  or, in case no such sale  takes  place on such day,  the  average  of the
reported closing bid and asked  quotations on the New York Stock Exchange;  (ii)
if the  Shares  are  not  listed  on the  New  York  Stock  Exchange  or no such
quotations  are  available,  the closing  price of the Shares as reported by the
National Market System, or similar  organization,  or, if no such quotations are
available,  the  average  of the  high  bid  and  low as ked  quotations  in the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated, or similar organization; or (iii) in the event that there shall be
no  public  market  for the  Shares,  the fair  market  value of the  Shares  as
determined (which determination shall be conclusive) in good faith by the Board,
based upon the value of the Company as a going  concern,  as if such Shares were
publically-owned  stock,  but  without  any  discount  with  respect to minority
ownership.

     (h) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

     (i) "Option"  shall mean a right granted under the Plan to purchase  Shares
under the Plan.

     (j)  "Participant'  shall mean an Employee  or  Director  granted an Option
under the Plan.

     (k)  "Person"  shall  mean  any   individual,   corporation,   partnership,
association,   joint-  stock  company,  trust,  unincorporated  organization  or
government or political subdivision thereof.

     (l)  "Reorganization"  shall have the  meaning  set forth in Section  11(a)
above.

     (m)  "Retirement"  shall  mean  with  respect  to a  Participant  who is an
Employee,  the  termination  of employment  with the Company  (other than due to
Termination  for Cause,  Disability or death) an or after (i) reaching age 65 or
(ii) with consent of the Board, reaching age 55.

     (n) "Shares shall mean shares of the Company's  common stock and any shares
of capital stock or other securities of the Company hereafter issued or issuable
upon, in respect of or in substitution or exchange for such Shares.


                                                                          Page 8

<PAGE>


     (o)  "Termination for Cause" shall mean with regard to a Participant who is
an Employee (i) the Participant's  gross negligence or willful misconduct in the
performance  of the duties and services  required of the  Participant;  (ii) the
Participant's  final conviction of a felony or of a misdemeanor  involving moral
turpitude;  (iii) the Participant's material breach of any material provision of
such  Participant's   employment  agreement  with  the  Company,  which  remains
uncorrected for thirty (30) days following  written notice to the Participant by
the Company, of such breach; or (iv) to the extent the Participant does not have
an employment  agreement with the Company,  such Participant's  involvement in a
conflict  of  interest  (as  defined  below)  for  which  the  Company  makes  a
determination to terminate the employment of such  Participant.  For purposes of
the  forgoing  sentence,  "conflict  of  interest"  shall  mean a breach  of the
fiduciary  duty of loyalty,  fidelity and  allegiance to act at all times in the
best interests of the Participant's employer and to do no act which would injure
the business interests or reputation of the Participant's employer. The decision
as to whether "cause" exists for  termination of the employment  relationship by
the  Participant's  employer is  delegated  to the Chairman of the Board and the
President of such employer for  determination  (unless the Participant holds one
of such  positions,  in which case the next highest ranking officer who is not a
Participant shall make such  determination).  If the Participant  disagrees with
the decision reached by the appropriate officers or the Participant's  employer,
the dispute will be limited to whether the  appropriate  officers  reached their
decision in good faith.

     (p) "Voluntary  Termination"  shall mean termination of employment with the
Company by the Participant who is an Employee for any reason  whatsoever,  other
than  (i) an  involuntary  termination,  as  defined  under  the  terms  of such
Participant's  employment agreement, if any or (ii) termination by reason of the
Participant's Retirement, Disability or death.

SECTION 12. STATUS OF OPTIONS

Options  granted  pursuant to this Plan arc not intended to qualify as Incentive
Stock  Option  within the meaning of Section  422 of the Code,  and the terms of
this  Plan  and  Options  granted  hereunder  shall be so  construed,  provided,
however,  that nothing in this Plan shall be  interpreted  as a  representation,
guarantee or other  undertaking an the part of the Company that Options  granted
pursuant to this Plan are not, or will not be,  determined to be Incentive Stock
Options, within the meaning or Section 422 of the Code.



                                                                          Page 8

<PAGE>


                NATIONAL ENTERPRISES, INC. 1994 STOCK OPTION PLAN
                              TERMS AND CONDITIONS

The terms and  conditions set forth below are hereby  incorporated  by reference
into  the  attached  award  agreement  ("Agreement")  by  and  between  National
Enterprises,   Inc.  (the   "Company")  and  the  employee  named  therein  (the
"Participant"). Terms defined in the plan are used herein with the same meaning.

1.  Participant has agreed to perform services for the Company or its Affiliates
and to accept the grant of the option  provided in the  Agreement  ("Option") in
accordance  with,  and subject to, the terms and  provisions of the Plan and the
Agreement.

2. Except for its earlier  termination as provided below,  the Option shall vest
and become exercisable six months after the Grant Date.

3. The Option shall not be exercisable following the date which is ten years and
one month  after its Grant  Date or the  earlier  lapse or  termination  of such
Option  as  provided  herein.  To the  extent  exercisable,  the  Option  may be
exercised in whole or in part.

4.  Participant  agrees  that the Company or its  Affiliates  may  withhold  any
federal state,  or local taxes upon the exercise or  cancellation of the Option,
at such time and upon such  terms and  conditions  as  required  by law,  and as
permitted by the Plan.  Notwithstanding  anything  herein to the  contrary,  the
Company shall not be obligated to deliver any Shares pursuant to the exercise or
the Option until Participant has satisfied such withholding  obligations or made
arrangements  for satisfying such obligations that are acceptable to the Company
and permitted in the Plan.

5. To the extent  exercisable  and subject to the  foregoing  restrictions,  the
Option  may be  exercised  from  time to time by a  notice  in  writing  of such
exercise, with states the Option Grant Number set forth in the Agreement and the
number of Shares in respect of which the Option is being exercised.  Such notice
shall be delivered to Edward J. Smith of the Company at the  Company's  offices,
1778 N. Plano Road, Suite 200, Richardson,  Texas 75081. An election to exercise
shall be  irrevocable.  The sate of  exercise  shall be the date the  notice  is
hand-delivered or mailed, whichever is applicable.

                                       1
<PAGE>



6. An election to exercise an Option shall be  accompanied  by the tender of the
full purchase price of the Shares for which the election is made.  Payment shall
be made in cash or by check acceptable to the Company.

7. The Option is not transferable by Participant, otherwise than by will or laws
of  descent  and  distribution,  and may be  exercised  during the  lifetime  of
Participant only by Participant, or in the event of Participant's legal guardian
or representative.

8. Upon occurrence of any of the events described in Section 7 of the Plan, 100%
of the Options outstanding on the date of such adoption, approval or termination
shall be vested pursuant to Section 7.

9. In the event Participant's  employment with the Company and its Affiliates is
terminated  by reason of  Termination  for Cause or Voluntary  Termination,  the
Option  outstanding on such date of termination  may not be exercised after such
termination of employment.

10.  Notwithstanding any other provision of the Agreement,  Participant will not
exercise  any  Options  and the Company  shall not be  obligated  to deliver any
Shares or make any cash  payments,  if counsel to the  Company  determines  such
exercise,  delivery  or  payment  would  violate  any law or  regulation  of any
governmental  authority or agreement with any national  securities exchange upon
which the Shares are listed.

11. In the event of a conflict between the terms of this Agreement and the Plan,
the Plan shall be the controlling  document.  Capitalized  terms used herein and
not otherwise defined shall have the meaning ascribed to them in the Plan.





                                       2
<PAGE>


                                    FORM OF
                        GRANT OF STOCK OPTIONS AGREEMENT


-------------------------------
-------------------------------
-------------------------------

I am pleased to inform you that the Board of Directors of National  Enterprises,
Inc.  (The  "Company")  has granted  you an option to purchase  from the Company
shares of common stock in the Company as follows:

                  Option Grant #                       --------------------
                  Grant Date                           --------------------
                  Option Price per Share               --------------------
                  Total Number of Shares Granted       --------------------

By signing  below,  you agree that this option is granted  under and governed by
the terms and conditions of the Company's 1994 Stock Option Plan (the "Plan"), a
copy of which has been  delivered  to you,  including  the Terms and  Conditions
attached hereto and  incorporated  hereby by reference,  and you acknowledge the
shares  that are  subject  to the  option  have not been  registered  under  the
Securities  Act of 1933.  This grant  shall be void and of no effect  unless you
execute and return this Agreement to the undersigned within 30 days of the above
date. The attached copy of this Agreement is for your records.

                                           NATIONAL ENTERPRISES, INC.



                                           By:
                                           Name:
                                           Title:

OPTIONEE:




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DATE: