Document:

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                                                                    EXHIBIT 10.4

                         S T A T E  O F  M I C H I G A N

                  BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

                                    * * * * *

In the matter of the application of            )
THE DETROIT EDISON COMPANY                     )            Case No. U-12478
for a financing order.                         )
                                               )
-----------------------------------------------

     At the January 4, 2001 meeting of the Michigan Public Service Commission in
Lansing, Michigan.

                PRESENT: Hon. John G. Strand, Chairman
                         Hon. David A. Svanda, Commissioner
                         Hon. Robert B. Nelson, Commissioner

                                OPINION AND ORDER

     On November 2, 2000, the Commission issued its order in this case (referred
to as the financing order) authorizing The Detroit Edison Company (Detroit
Edison) to securitize up to $1,774,202,000 of its after-tax qualified costs,
pursuant to certain terms and conditions. Among other things, that order, issued
pursuant to the Customer Choice and Electricity Reliability Act, 2000 PA 141
(Act 141) and 2000 PA 142 (Act 142), allowed the utility to (1) create one or
more special purpose entities for use in issuing its securitization bonds, (2)
apply appropriate accounting and amortization methodologies, (3) implement and
collect securitization and tax charges, and (4) use the cost savings from
securitization to reduce the rates charged to its bundled sales and retail open
access (ROA) customers, among other purposes. Furthermore, it required Detroit

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Edison to file its "express written acceptance of all conditions and limitations
that the order places on the utility." Financing order, p. 56.

     On November 22, 2000, Detroit Edison filed a petition for rehearing seeking
clarification of certain issues. It says that a clarification is needed to
prevent serious unintended consequences resulting from compliance with the
order. On December 12, 2000, Attorney General Jennifer M. Granholm (Attorney
General) filed a response. On December 13, 2000, the Association of Businesses
Advocating Tariff Equity (ABATE), Energy Michigan, the Michigan Chamber of
Commerce, and Unicom Energy, Inc., filed responses to the petition.(1)

     Rule 403 of the Commission's Rules of Practice and Procedure, 1992 AACS, R
460.17403, provides that a petition for rehearing may be based on claims of
error, newly discovered evidence, facts or circumstances arising after the
hearing, or unintended consequences resulting from compliance with the order. A
petition for rehearing is not merely another opportunity for a party to argue a
position or to express disagreement with the Commission's decision. Unless a
party can show the decision to be incorrect or improper because of errors, newly
discovered evidence, or unintended consequences of the decision, the Commission
will not grant a rehearing.

--------

         (1) In addition to addressing the requests set forth in Detroit
Edison's petition, some of these responses effectively seek rehearing of other
issues discussed in the financing order. However, MCL 460.10i(7); MSA
22.13(10i)(7), which was adopted as part of Act 142, specifically precludes any
party other than "the applicant for securitization"-Detroit Edison, in this
case-from requesting rehearing of a financing order. The Commission is therefore
prohibited from addressing any issues beyond those raised in Detroit Edison's
petition, and has thus disregarded all discussions set forth in the responses
that concern other issues. The Commission is further prohibited from addressing
the issue of the constitutionality of Section 10i(7) of Act 142, an issue raised
by the Attorney General and ABATE. See, Universal Am-Can Limited v Attorney
General, 197 Mich App 34, 37-38; 494 NW2d 787 (1992).

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U-12478
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"Proceeds" and Savings

     Detroit Edison says that it believes that the references in the order to
"proceeds" in the context of the use of securitization savings is intended to
refer to the savings that result from securitization and not to the proceeds
from the issuance of the bonds. Detroit Edison is correct.

     Detroit Edison asks the Commission to clarify that all reductions in rates
mandated by the order must come from and be limited to the amount of the savings
produced by securitization of approved qualified costs. Detroit Edison is
correct.

The Mandatory 5% Residential Rate Cut

     Section 10d of Act 141 required Detroit Edison and Consumers Energy Company
to reduce by 5% the rates in effect for their residential rate classes as of May
1, 2000. It also provided those utilities an opportunity to use at least a
portion of any savings arising from securitization to offset that 5% residential
rate reduction. However, noting that a significant amount of time would likely
elapse between the implementation of that rate cut (during the summer of 2000)
and the issuance of its securitization bonds (which the utility estimated would
not occur before the start of 2001), Detroit Edison requested authority to treat
the cost of the 5% residential rate cut as a qualified cost that could be
securitized or as a regulatory asset that could be recovered at another time.

     Detroit Edison says that it believes that ordering paragraph R of the order
correctly states the intent of the Legislature that securitization savings be
applied first to the recovery of the residential rate reduction beginning with
the date of the order and that any remaining savings be used as the order
specifies. It says that it therefore accepts the limitation on the effective
date for creation of the regulatory asset to the period beginning with the date
of the order until the securitization bonds are issued, provided (1) the cost of
the rate reduction will be recovered from the annual savings

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generated by securitization and (2) if the issuance of securitization bonds is
delayed beyond March 31, 2001, the cost of the rate reduction from November 2,
2000 through the date of securitization will be deemed a qualified cost that may
be securitized.

     The Commission finds that Detroit Edison has correctly interpreted the
intent of the financing order. It is the Commission's intention that Detroit
Edison have an opportunity to recover from its securitization savings the full
cost of the residential rate reduction beginning with the date that the
financing order was issued (namely, November 2, 2000). To rule otherwise, and
thus forever preclude recovery for rate reductions provided prior to the actual
issuance of the utility's securitization bonds, would merely give the other
parties to this case an incentive to delay-through unwarranted appeals and other
means-the initiation of Detroit Edison's securitization program. Any such delays
would conflict with the Legislature's intent that securitization be implemented
in whatever reasonable manner provides the maximum cost savings. Furthermore,
delay in the initiation of Detroit Edison's securitization program will result
in a reduction in the amount to be securitized, primarily because Detroit Edison
will continue to amortize the Fermi 2 plant in the meantime. The reduction in
the amount to be securitized will, in turn reduce the amount of the savings to
be achieved. Delay-whether through unwarranted appeals or other means-could
reduce or fully eliminate funding for the low-income and energy efficiency fund
and even reduce or eliminate potential rate reductions for commercial and
industrial customers, contrary to the Legislature's intent.

     The Commission therefore confirms Detroit Edison's understanding that the
utility is authorized to recover, through its securitization program, all
reductions in its revenues beginning November 2, 2000. Nevertheless, the
Commission finds no compelling reason at this time to formally declare those
lost revenues a regulatory asset. Moreover, the Commission rejects Detroit

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Edison's request to treat the cost of the reduction after March 31, 2001 as a
qualified cost that may be securitized. It is sufficient to provide recovery
through the securitization savings.

Equalization Adjustment

     The Commission's order noted that retail open access would be less
competitive if ROA customers did not receive the same reduction in dollars per
kilowatt-hour (kWh) as bundled sales customers. The order therefore required an
equalization adjustment. Detroit Edison says that it understands the intent to
be that ROA customers are to receive the same benefit from securitization that
they would have received if they had remained bundled sales customers. It says
that this intent can be implemented before the securitization bonds are issued
by reducing residential ROA customers' bid transition charge by 0.46(cent) per
kWh, the average reduction for residential bundled sales customers. After the
bonds are issued and before January 1, 2002, it proposes to split the bid
transition charge for all customer classes into two components, one equal to the
securitization and tax charge and the second equal to the difference between the
bid transition charge and the securitization and tax charge. It would reduce the
second charge by the same 0.46(cent) per kWh for residential ROA customers, by
the average reduction in bundled commercial rates for commercial ROA customers
(which it expects to be 0.48(cent) per kWh), and by the average reduction in
bundled industrial rates for industrial ROA customers (which it expects to be
0.28(cent) per kWh).(2) As of January 1, 2002, Detroit Edison says that ROA
customers will pay a uniform transition charge set by the Commission, that the
amount will be set in Case No. U-12639 or a related case and will

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         (2)The Commission understands that these average reductions are
estimates and that actual average reductions will be computed and reflected in
customers' bills after the securitization bonds are issued.

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presumably provide the equal benefit envisioned by the order, and that the
equalization charge will therefore be eliminated or set at zero.

     The Commission agrees with Detroit Edison's understanding of the purpose
and implementation of the equalization adjustment. The Commission therefore
approves the implementation of that adjustment as described in Detroit Edison's
petition for rehearing.(3)

Offsets for All Securitization and Tax Charges

     Detroit Edison notes that on page 29 of the financing order, the Commission
required the utility to reflect an offset-equal to the sum of each customer's
securitization and tax charges for the billing period in question-on the bills
of its bundled sales and ROA customers alike. It interprets this as acceptance
of its proposal that bundled rates not be increased but as rejection of its
proposed treatment of ROA customers. It nevertheless accepts the Commission's
order, implemented as follows: For bundled customers, the securitization and tax
charge will appear as a separate charge, the base energy charge will be reduced
by an equal amount, and any change in the securitization and tax charge will
result in an additional surcharge or credit factor as necessary to maintain the
rate freeze required by Act 141. For ROA customers, the bid transition charge
will be split into two components, one equal to the securitization and tax
charge and the second equal to the difference between the bid transition charge
and the securitization and tax charge (with customers thus paying, on a net
basis, the bid transition charge) and the Commission-approved transition charge
will be set to achieve the same effect.

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         (3)In the event that a uniform transition charge is not established by
January 1, 2002, the reductions then in effect will be continued until such a
charge is approved.

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     The Commission agrees that Detroit Edison correctly understands the purpose
and implementation of the securitization and tax charge offset. In issuing the
financing order, the Commission assumed (as it still does) that the offset for
ROA customers would become unnecessary beginning January 1, 2002. This
assumption is based on the Commission's belief that, before that date, an order
will be issued in Case No. U-12639 from which a transition charge can be derived
that recognizes the effect of securitization on Detroit Edison's total stranded
costs. However, in the event that no such transition charge is in place for
Detroit Edison by January 1, 2002, the Commission will impose a temporary
transition charge equal to the sum of the then-effective securitization and tax
charges. The offset would continue to be applied to this charge to ensure
equality between bundled sales and ROA customers until such time as a revised
transition charge is adopted. This will ensure the collection of all revenue
necessary to pay the securitization bond holders and should, in turn, enhance
the marketability of the bonds.

Corrections

     Paragraph K of the financing order, at page 53, should have stated that the
annual servicing fee will be based on "the initial principal balance of the
securitization bonds" rather than "the principal amount of all outstanding
securitization bonds."

     The order should have also stated that:

               Consistent with Section 10m(1) of Act 142, the Commission affirms
         that a valid and enforceable lien and security interest in
         securitization property may be created only by a financing order and
         the execution and delivery of a security agreement with a financing
         party in connection with the issuance of securitization bonds. Thus,
         following Detroit Edison's submission of an unconditional acceptance
         letter, the utility will be deemed to have satisfied all state-imposed
         prerequisites to the execution of a security agreement, and, pursuant
         to Act 142, a valid and enforceable lien and security interest in the
         securitization property will be created following the execution and
         delivery of the applicable security agreement.

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     The Commission FINDS that:

     a. Jurisdiction is pursuant to 1909 PA 106, as amended, MCL 460.551 et
seq.; MSA 22.151 et seq.; 1919 PA 419, as amended, MCL 460.51 et seq.; MSA 22.1
et seq.; 1939 PA 3, as amended, MCL 460.1 et seq.; MSA 22.13(1) et seq.; 1969 PA
306, as amended, MCL 24.201 et seq.; MSA 3.560(101) et seq.; and the
Commission's Rules of Practice and Procedure, as amended, 1992 AACS, R 460.17101
et seq.

     b. Detroit Edison's petition for rehearing should be granted in part and
denied in part, as discussed in this order.

     c. The order should be corrected as discussed in this order.

     THEREFORE, IT IS ORDERED that:

     A. The Detroit Edison Company's November 22, 2000 petition for rehearing is
granted in part and denied in part, and the order is corrected, as discussed in
this order.

     B. If The Detroit Edison Company desires to undertake securitization, it
shall file, within 7 days following issuance of this order, a document
expressing its unconditional acceptance of all conditions and limitations
imposed on the utility by this order and the November 2, 2000 financing order.

     C. All amortization, accounting, and ratemaking approvals, as well as all
other authorizations, provided for in the Commission's November 2, 2000
financing order and clarified in this order shall be tolled pending The Detroit
Edison Company's unconditional acceptance of all conditions and limitations that
those orders place on the utility.

     D. Following The Detroit Edison Company's unconditional acceptance of all
conditions and limitations established by the Commission's November 2, 2000
financing order and clarified in

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this order, these orders-and each of their terms-shall be irrevocable. The
Detroit Edison Company's acceptance likewise shall be irrevocable and,
therefore, shall survive bankruptcy or any other changes in the utility's legal
structure.

     E. This order and its anticipated unconditional acceptance by The Detroit
Edison Company shall be incorporated by reference into the Commission's November
2, 2000 financing order, shall be deemed to relate back to the date of issuance
of that financing order, and shall be treated as being in full force and effect
as of that date.

     Any party desiring to appeal this order must do so in the appropriate court
within 30 days after issuance and notice of this order, pursuant to MCL 462.26;
MSA 22.45.

                                 MICHIGAN PUBLIC SERVICE COMMISSION

                                 /s/ John G. Strand
                                 -----------------------------------------------
                                 Chairman

     ( S E A L )

                                 /s/ David A. Svanda
                                 -----------------------------------------------
                                 Commissioner

                                 /s/ Robert B. Nelson
                                 -----------------------------------------------
                                 Commissioner, concurring in a separate opinion.

By its action of January 4, 2001.

/s/ Dorothy Wideman
------------------------------
Its Executive Secretary

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this order, these orders-and each of their terms-shall be irrevocable. The
Detroit Edison Company's acceptance likewise shall be irrevocable and,
therefore, shall survive bankruptcy or any other changes in the utility's legal
structure.

     E. This order and its anticipated unconditional acceptance by The Detroit
Edison Company shall be incorporated by reference into the Commission's November
2, 2000 financing order, shall be deemed to relate back to the date of issuance
of that financing order, and shall be treated as being in full force and effect
as of that date.

     Any party desiring to appeal this order must do so in the appropriate court
within 30 days after issuance and notice of this order, pursuant to MCL 462.26;
MSA 22.45.

                                 MICHIGAN PUBLIC SERVICE COMMISSION

                                 -----------------------------------------------
                                 Chairman

                                 -----------------------------------------------
                                 Commissioner

                                 -----------------------------------------------
                                 Commissioner, concurring in a separate opinion.

By its action of January 4, 2001.

------------------------------
Its Executive Secretary

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In the matter of the application of            )
THE DETROIT EDISON COMPANY                     )            Case No. U-12478
for a financing order.                         )
                                               )
-----------------------------------------------

Suggested Minute:

               "Adopt and issue order dated January 4, 2001 granting in part and
               denying in part the petition for rehearing filed by The Detroit
               Edison Company and clarifying the November 2, 2000 order, as set
               forth in the order."

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                         S T A T E  O F  M I C H I G A N

                  BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

                                    * * * * *

In the matter of the application of            )
THE DETROIT EDISON COMPANY                     )            Case No. U-12478
for a financing order.                         )
                                               )
-----------------------------------------------

               CONCURRING OPINION OF COMMISSIONER ROBERT B. NELSON
      (Submitted on January 4, 2001 concerning order issued on same date.)

     I issued a separate opinion when the Commission approved Detroit Edison's
financing order on November 2. The rehearing petition does not address the
differences between me and my colleagues outlined in the separate opinion, so I
am able to concur in the Commission's order on rehearing. I believe it is
imperative that the adjustments adopted on November 2 to equalize the rate
reductions between bundled and retail access customers and to offset the
securitization and tax charges on all customer bills continue until a transition
charge is established which maintains the Commission's desire not to "unfairly
disadvantage" retail access customers.

     I also concur in the decisions not to approve a regulatory asset for the
residential rate reduction at this time or to treat the rate reduction as a
qualified cost on March 31, 2001. Although I believe it is Detroit Edison's
intent to move expeditiously toward the issuance of securitization bonds, the
granting of these requests would substantially reduce any incentive to do so.

                                       MICHIGAN PUBLIC SERVICE COMMISSION

                                       ----------------------------------------
                                       Robert B. Nelson, Commissioner<PAGE>   1
                                                                   EXHIBIT 10.12

                             POWELL INDUSTRIES, INC.

                  2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

<PAGE>   2

                             POWELL INDUSTRIES, INC.

                  2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
1.       Purpose................................................................................................-1-
2.       Effective Date of Plan.................................................................................-1-
3.       Administration.........................................................................................-1-
4.       Dedicated Shares.......................................................................................-1-
5.       Grant of Options.......................................................................................-1-
6.       Eligibility............................................................................................-1-
7.       Option Grant Size and Grant Dates......................................................................-1-
8.       Option Price; Fair Market Value........................................................................-2-
9.       Duration of Options....................................................................................-2-
10.      Amount Exercisable.....................................................................................-2-
11.      Exercise of Options....................................................................................-2-
12.      Non-Transferability of Options.........................................................................-3-
13.      Termination of Directorship of Optionee................................................................-3-
14.      Requirements of Law....................................................................................-3-
15.      No Rights as Stockholder...............................................................................-4-
16.      No Obligation to Retain Optionee.......................................................................-4-
17.      Changes in the Company's Capital Structure.............................................................-4-
18.      Termination and Amendment of Plan......................................................................-6-
19.      Written Agreement......................................................................................-7-
20.      Indemnification of Board...............................................................................-7-
21.      Forfeitures............................................................................................-7-
22.      Gender.................................................................................................-7-
23.      Headings...............................................................................................-7-
24.      Governing Law..........................................................................................-8-
</TABLE>

<PAGE>   3

                             POWELL INDUSTRIES, INC.

                  2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         1. PURPOSE. The Powell Industries, Inc. 2000 Non-Employee Director
Stock Option Plan (the "Plan") of Powell Industries, Inc. (the "Company") is for
the benefit of members of the Board of Directors of the Company (the Board")
who, at the time of their service, are not employees of the Company or any of
its affiliates, by providing them an opportunity to become owners of the Common
Stock of the Company (the "Stock"), thereby advancing the best interests of the
Company by increasing their proprietary interest in the success of the Company
and encouraging them to continue in their present capacity.

         2. EFFECTIVE DATE OF PLAN. The Plan is effective June 25, 2000, having
been approved by the Board of Directors.

         3. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board"). Subject to the terms of the Plan, the
Board shall have the power to construe the provisions of the Plan, Options, and
Stock issued hereunder, to determine all questions arising hereunder, and to
adopt and amend such rules and regulations for administering the Plan as the
Board deems desirable.

         4. DEDICATED SHARES. The total number of shares of Stock with respect
to which Initial Grants and Annual Grants (collectively, the "Options") may be
granted under this Plan shall not exceed, in the aggregate, 24,000 shares;
provided, that the class and aggregate number of shares of Stock which may be
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 17. The shares of Stock may be treasury shares or
authorized but unissued shares of Stock. In the event that any outstanding
Option shall expire or is terminated or canceled for any reason, the shares of
Stock allocable to the unexercised portion of that Option may again be subject
to an Option or Options under the Plan.

         5. GRANT OF OPTIONS. All Options granted under the Plan shall be
Nonqualified Options which are not intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended.

         6. ELIGIBILITY. The individuals who shall be eligible to receive
Options under the Plan shall be each member of the Board of the Company who is
not an employee of the Company or any affiliate of the Company ("Eligible
Director").

         7. OPTION GRANT SIZE AND GRANT DATES.

         ANNUAL GRANTS -- On the day of each June Board meeting (or the next
regular meeting of the Board, if there is no June meeting), each Eligible
Director who is continuing to serve as a director, shall receive a grant of an
Option to purchase the 2000 shares of Stock at the Fair Market Value of the
Stock on the date of grant (an "Annual Grant").

<PAGE>   4

         INITIAL GRANTS -- If an Eligible Director is first elected or appointed
to the Board (whichever is applicable), other than at a June meeting, the
Eligible Director shall be granted an Option to purchase the number of shares of
Stock (rounded to the nearest whole share) which is determined my multiplying
2,000 shares by a fraction, the numerator of which is the number of months until
the next June meeting and the denominator of which is 12. The exercise price of
such Stock shall be the Fair Market Value on the date of grant (an "Initial
Grant"). The intent of this Initial Grant is to provide the new Director with a
prorated Option for the partial year served before the Annual Grant.

         If the General Counsel of the Company determines, in his sole
discretion, that the Company is in possession of material, nonpublic information
about the Company or any of its subsidiaries, he may suspend granting of the
Initial Grant and Annual Grant to each Eligible Director until the second
trading day after public dissemination of that information, and the
determination by the General Counsel that issuance of the Options is then
appropriate.

         8. OPTION PRICE; FAIR MARKET VALUE. The price at which shares of Stock
may be purchased by each Eligible Director (the "Optionee") pursuant to his
Initial Grant and each Annual Grant, respectively, shall be 100% of the "Fair
Market Value" of the shares of Stock on the date of grant of the Initial Grant
and each Annual Grant, as applicable.

         For all purposes of this Plan, the "Fair Market Value" of the Stock as
of any date means (a) the average of the high and low sale prices of the Stock
on that date on the principal securities exchange on which the Stock is listed;
(b) if the Stock is not listed on a securities exchange, the average of the high
and low sale prices of the Stock on that date as reported on the NASDAQ National
Market System; (c) if the Stock is not listed on the NASDAQ National Market
System, the average of the high and low bid quotations for the Stock on that
date as reported by the National Quotation Bureau Incorporated; or (d) if none
of the foregoing is applicable, the average between the closing bid and ask
prices per share of stock on the last preceding date on which those prices were
reported or that amount as determined by the Board.

         9. DURATION OF OPTIONS. The term of each Option shall be seven (7)
years from the date of grant. No Option shall be exercisable after the
expiration of seven (7) years from the date the Option is granted.

         10. AMOUNT EXERCISABLE. Each Option granted hereunder shall be
exercisable in full after the first anniversary of the grant of the Option.

         11. EXERCISE OF OPTIONS. Options shall be exercised by the delivery of
written notice to the Company setting forth the number of shares with respect to
which the Option is to be exercised, together with: (a) cash, certified check,
bank draft, or postal or express money order payable to the order of the Company
for an amount equal to the option price of the shares, (b) Stock (held by
Optionee for at least six months) at its Fair Market Value on the date of
exercise, and/or (c) any other form of payment which is acceptable to the Board,
and specifying the address to which the certificates for the shares are to be
mailed. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Eligible Director certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Eligible Director's name. If shares of Stock are used in payment, the Fair
Market Value of the shares of

                                      -2-
<PAGE>   5

Stock tendered must be less than the option price of the shares being purchased,
and the difference must be paid by check. Delivery shall be deemed effected for
all purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the Eligible Director, at
the address specified by the Eligible Director.

         Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally and
beneficially owned by the Optionee, free of all liens, claims, and encumbrances
of every kind, accompanied by stock powers duly endorsed in blank by the record
holder of the shares represented by the certificates, (with signature guaranteed
by a commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon the
exercise of Options is subject to the condition that the person exercising the
Option provide the Company with the information the Company might reasonably
request pertaining to exercise, sale or other disposition.

         12. NON-TRANSFERABILITY OF OPTIONS. Options shall not be transferable
by the Optionee other than by will or under the laws of descent and
distribution, and shall be exercisable, during the Optionee's lifetime, only by
him.

         13. TERMINATION OF DIRECTORSHIP OF OPTIONEE. If, before the date of
expiration of the Option, the Optionee shall cease to be a director of the
Company, the Option shall terminate on the earlier of the date of expiration or
one (1) year after the date of ceasing to serve as a director. In this event,
the Optionee shall have the right, prior to the termination of the Option, to
exercise the Option if he was entitled to exercise the Option immediately prior
to ceasing to serve as a director; however, in the event that the Optionee has
ceased to serve as a director on or after attaining the age of seventy (70)
years, the Optionee shall be entitled to exercise all or any part of such Option
without regard to any limitations imposed pursuant to Paragraph 10, provided
that in no event shall the Option be exercisable within six months after the
date of grant.

         Upon the death of the Optionee while serving as a director, his
executors, administrators, or any person or persons to whom his Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to the earlier of the date of expiration of the Option
or one (1) year following the date of his death, to exercise the Option, in
whole or in part without regard to any limitations imposed pursuant to Paragraph
10, provided that in no event shall the Option be exercisable within six months
after the date of grant.

         14. REQUIREMENTS OF LAW. The Company shall not be required to sell or
issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Company has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the Company
on this matter shall be final, binding and conclusive. The Company may, but
shall in no event be obligated to, register any Stock covered by this Plan
pursuant

                                      -3-
<PAGE>   6

to applicable securities laws of any country or any political subdivision. In
the event the Stock issuable on exercise of an Option is not registered, the
Company may imprint on the certificate evidencing the Stock any legend that
counsel for the Company considers necessary or advisable to comply with
applicable law. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option, or the issuance of shares
under it, to comply with any law or regulation of any governmental authority.

         15. NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by any Option until the date a stock
certificate is issued for the Stock, and, except as otherwise provided in
Paragraph 17 hereof, no adjustment for dividends, or otherwise, shall be made if
the record date thereof is prior to the date of issuance of such certificate.

         16. NO OBLIGATION TO RETAIN OPTIONEE. The granting of any Option shall
not impose upon the Company or its stockholders any obligation to retain or
continue to retain any Optionee or nominate any Optionee for election to
continue in his capacity as a director of the Company. The right of the Company,
the Board of Directors, and the Stockholders to terminate the service of any
Optionee as a director shall not be diminished or affected by reason of the fact
that one or more Options have been or would be granted to him.

         17. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options or Stock Awards shall not affect in any way the right or
power of the Company or its stockholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Stock or its rights, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

                  If the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Employee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares he
would have received had he exercised his Option in full immediately prior to the
event requiring the adjustment; and (b) the number and class of shares of Stock
then reserved to be issued under the Plan shall be adjusted by substituting for
the total number and class of shares of Stock then reserved, that number and
class of shares of Stock that would have been received by the owner of an equal
number of outstanding shares of each class of Stock as the result of the event
requiring the adjustment.

                  If while unexercised Options remain outstanding under the Plan
(i) the Company shall not be the surviving entity in any merger, consolidation
or other reorganization (or survives only as a subsidiary of an entity other
than an entity that was wholly-owned by the Company immediately prior to such
merger, consolidation or other reorganization), (ii) the Company sells, leases
or exchanges or agrees to sell, lease or exchange all or substantially all of
its assets to any

                                      -4-
<PAGE>   7

other person or entity (other than an entity wholly-owned by the Company), (iii)
the Company is to be dissolved, or (iv) the Company is a party to any other
corporate transaction (as defined under Section 424(a) of the Code and
applicable Treasury Regulations) that is not described in clauses (i), (ii) or
(iii) of this sentence (each such event is referred to herein as a "Corporate
Change"), then (x) except as otherwise provided in an Option Agreement or as a
result of the Board's effectuation of one or more of the alternatives described
below, there shall be no acceleration of the time at which any Option then
outstanding may be exercised, and (y) no later than ten (10) days after the
approval by the stockholders of the Company of such Corporate Change, the Board,
acting in its sole and absolute discretion without the consent or approval of
any Optionee, shall act to effect one or more of the following alternatives,
which may vary among individual Optionees and which may vary among Options held
by any individual Optionee:

                  (1) accelerate the time at which some or all of the Options
         then outstanding may be exercised so that such Options may be exercised
         in full for a limited period of time on or before a specified date
         (before or after such Corporate Change) fixed by the Board, after which
         specified date all such Options that remain unexercised and all rights
         of Optionees thereunder shall terminate,

                  (2) require the mandatory surrender to the Company by all or
         selected Optionees of some or all of the then outstanding Options held
         by such Optionees (irrespective of whether such Options are then
         exercisable under the provisions of this Plan or the Option Agreements
         evidencing such Options) as of a date, before or after such Corporate
         Change, specified by the Board, in which event the Board shall
         thereupon cancel such Options and the Company shall pay to each such
         Optionee an amount of cash per share equal to the excess, if any, of
         the per share price offered to stockholders of the Company in
         connection with such Corporate Change over the exercise price(s) under
         such Options for such shares,

                  (3) with respect to all or selected Optionees, have some or
         all of their then outstanding Options (whether vested or unvested)
         assumed or have a new Option substituted for some or all of their then
         outstanding Options (whether vested or unvested) by an entity which is
         a party to the transaction resulting in such Corporate Change and which
         is then employing him, or a parent or subsidiary of such entity,
         provided that (A) such assumption or substitution is on a basis where
         the excess of the aggregate fair market value of the shares subject to
         the Option immediately after the assumption or substitution over the
         aggregate exercise price of such shares is equal to the excess of the
         aggregate fair market value of all shares subject to the Option
         immediately before such assumption or substitution over the aggregate
         exercise price of such shares, and (B) the assumed rights under such
         existing Option or the substituted rights under such new Option as the
         case may be will have the same terms and conditions as the rights under
         the existing Option assumed or substituted for, as the case may be,

                  (4) provide that the number and class of shares of Stock
         covered by an Option (whether vested or unvested) theretofore granted
         shall be adjusted so that such Option when exercised shall thereafter
         cover the number and class of shares of stock or other securities or
         property (including, without limitation, cash) to which the

                                      -5-
<PAGE>   8

         Optionee would have been entitled pursuant to the terms of the
         agreement and/or plan relating to such Corporate Change if, immediately
         prior to such Corporate Change, the Optionee had been the holder of
         record of the number of shares of Stock then covered by such Option, or

                  (5) make such adjustments to Options then outstanding as the
         Board deems appropriate to reflect such Corporate Change (provided,
         however, that the Board may determine in its sole and absolute
         discretion that no such adjustment is necessary)."

                  In effecting one or more of alternatives (3), (4) or (5)
         above, and except as otherwise may be provided in an Option Agreement,
         the Board, in its sole and absolute discretion and without the consent
         or approval of any Optionee, may accelerate the time at which some or
         all Options then outstanding may be exercised.

                  In the event of changes in the outstanding Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Option and not otherwise provided for by this Section 17,
any outstanding Options and any agreements evidencing such Options shall be
subject to adjustment by the Board in its sole and absolute discretion as to the
number and price of shares of stock or other consideration subject to such
Options. In the event of any such change in the outstanding Stock, the aggregate
number of shares available under this Plan may be appropriately adjusted by the
Board, whose determination shall be conclusive.

                  After a merger of one or more corporations into the Company or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each Employee shall be entitled to
have his Restricted Stock appropriately adjusted based on the manner the Stock
was adjusted under the terms of the agreement of merger or consolidation.

                  The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options
or Stock Awards.

         18. TERMINATION AND AMENDMENT OF PLAN. The Board of Directors of the
Company may amend, terminate or suspend the Plan at any time, in its sole and
absolute discretion; provided, however, to the extent required to qualify the
Plan under Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended, no amendment shall be made more than once every six
months that would change the amount, price or timing of the Initial and Annual
Grants, other than to comport with changes in the Internal Revenue Code of 1986,
as amended, the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder; and provided, further, to the extent
required to qualify the Plan under Rule 16b-3, no amendment that would (a)
materially increase the number of shares of the Stock that may be issued under
the Plan,

                                      -6-
<PAGE>   9

(b) materially modify the requirements as to eligibility for participation in
the Plan, or (c) otherwise materially increase the benefits accruing to
participants under the Plan, shall be made without the approval of the Company's
stockholders.

         19. WRITTEN AGREEMENT. Each Option granted hereunder shall be embodied
in a written agreement, which shall be subject to the terms and conditions of
this Plan and shall be signed by the Optionee and by the Chairman of the Board,
the Vice Chairman, the President or any Vice President of the Company for and in
the name and on behalf of the Company.

         20. INDEMNIFICATION OF BOARD. With respect to administration of the
Plan, the Company shall indemnify each present and future member of the Board of
Directors against, and each member of the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Board of Directors, whether or not he
continues to be a member of the Board of Directors at the time of incurring the
expenses. However, this indemnity shall not include any expenses incurred by any
member of the Board of Directors (a) in respect of matters as to which he shall
be finally adjudged in any action, suit or proceeding to have been guilty of
gross negligence or willful misconduct in the performance of his duty as a
member of the Board of Directors, or (b) in respect of any matter in which any
settlement is effected, to an amount in excess of the amount approved by the
Company on the advice of its legal counsel. In addition, no right of
indemnification under this Plan shall be available to or enforceable by any
member of the Board of Directors unless, within 60 days after institution of any
action, suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Board of Directors and shall be in addition
to all other rights to which a member of the Board of Directors may be entitled
as a matter of law, contract, or otherwise.

         21. FORFEITURES. Notwithstanding any other provision of this Plan, if,
before or after termination of the Optionee's capacity as a director of the
Company, there is an adjudication by a court of competent jurisdiction that the
Optionee committed fraud, embezzlement, theft, commission of felony, or proven
dishonesty in the course of his advisory relationship to the Company and its
affiliates which conduct materially damaged the Company or its affiliates, or
disclosed trade secrets of the Company or its affiliates, then any outstanding
options which have not been exercised by Optionee shall be forfeited. In order
to provide the Company with an opportunity to enforce this Section, an Option
may not be exercised if a lawsuit alleging that an action described in the
preceding sentence has taken place until a final resolution of the lawsuit
favorable to the Optionee.

         22. GENDER. If the context requires, words of one gender when used in
this Plan shall include the others and words used in the singular or plural
shall include the other.

         23. HEADINGS. Headings are included for convenience of reference only
and do not constitute part of the Plan and shall not be used in construing the
terms of the Plan.

                                      -7-
<PAGE>   10

         24. GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.

                                      -8-

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