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                                                                     EXHIBIT 4.5

                              AMENDED AND RESTATED
                           PATTERSON-UTI ENERGY, INC.
                     NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

    1. Purpose. This Amended and Restated Non-Employee Director Stock Option
Plan (the "Plan") amends and restates in its entirety the Patterson-UTI Energy,
Inc. (the "Company") Non-Employee Director Stock Option Plan to reflect the
three-for-one stock dividend paid to stockholders a predecessor of the Company
on September 5, 1997. The Plan was adopted for the benefit of the directors of
the Company who at the time of their service are not employees of the Company or
any of its subsidiaries ("Non-Employee Directors"), and is intended to advance
the interests of the Company by providing the Non- Employee Directors with
additional incentive to serve the Company by increasing their proprietary
interest in the success of the Company.

    2. Administration. The Plan shall be administered by a committee of the
Board of Directors of the Company (the "Committee"), the members of which shall
consist solely of directors who are employees of the Company. For the purposes
of the Plan, a majority of the members of the Committee shall constitute a
quorum for the transaction of business, and the vote of a majority of those
members present at any meeting shall decide any question brought before that
meeting. In addition, the Committee may take any action otherwise proper under
the Plan by the affirmative vote, taken without a meeting, of a majority of its
members. No member of the Committee shall be liable for any act or omission of
any other member of the Committee or for any act or omission on his own part,
including but not limited to the exercise of any power or discretion given to
him under the Plan, except those resulting from his own gross negligence or
willful misconduct. Except as otherwise expressly provided for herein, all
questions of interpretation and application of the Plan, or as to options
granted hereunder (the "Options"), shall be subject to the determination, which
shall be final and binding, of a majority of the whole Committee.
Notwithstanding the above, the selection of Non-Employee Directors to whom
Options are to be granted, the number of shares subject to any Option, the
exercise price of any Option and the term of any Option shall be as hereinafter
provided and the Committee shall have no discretion as to such matters.

    3. Option Shares. The stock subject to the Options and other provisions of
the Plan shall be shares of the Company's Common Stock, $.001 par value (or such
other par value as may be designated by act of the Company's stockholders) (the
"Common Stock"). The total amount of the Common Stock with respect to which
Options may be granted shall not exceed in the aggregate 300,000 shares;
provided, that the class and aggregate number of shares which may be subject to
the Options granted hereunder shall be subject to adjustment in accordance with
the provisions of Paragraph 12 hereof. Such shares may be treasury shares or
authorized but unissued shares.

    In the event that any outstanding Option for any reason shall expire or
terminate by reason of the death of the optionee or the fact that the optionee
ceases to be a director, the surrender of any

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such Option, or any other cause, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option under the
Plan.

    4. Grant of Options. Subject to the provisions of Paragraph 16 and the
availability under the Plan of a sufficient number of shares of Common Stock
that may be issuable upon the exercise of outstanding Options, there shall be
granted the following Options:

    (a) To each Non-Employee Director as of December 19, 1995, and each future
Non-Employee Director as the date he is first elected as a director of the
Company, an Option to purchase 7,500 shares, subject to adjustment as provided
in paragraph 12 hereof, of Common Stock at a purchase price per share of Common
Stock (the "Option Price") equal to the fair market value of the Common Stock as
defined in Paragraph 7 hereof as of the date of grant; and

    (b) Commencing on December 31, 1996, each Non-Employee Director who has
served as a non-employee director for a period of at least one year shall
receive on each December 31 on which such person is a Non-Employee Director], an
Option to purchase 3,750 shares, subject to adjustment as provided in Paragraph
12 hereof, of Common Stock at an Option Price equal to the fair market value of
the Common Stock as defined in Paragraph 7 hereof as of the date of grant.

No Option shall be granted pursuant to the Plan after December 18, 2005.

    5. Duration of Options. Each Option granted under the Plan shall be
exercisable for a term of five years from the date of grant, subject to earlier
termination as provided in Paragraph 9 hereof.

    6. Amount Exercisable. Each Option granted pursuant to the Plan shall not be
exercisable for a period of one year from the date of grant. After such time,
such Option shall be fully vested and exercisable throughout the term of the
Option. Notwithstanding the foregoing, no Option granted by virtue of the
amendments effected by this Plan shall be exercisable for a period of six months
following stockholder approval.

    7. Exercise of Options. An optionee may exercise such optionee's Option by
delivering to the Company a written notice stating (i) that such optionee wishes
to exercise such Option on the date such notice is so delivered, (ii) the number
of shares of stock with respect to which such Option is to be exercised, (iii)
the address to which the certificate representing such shares of stock should be
mailed, and (iv) the social security number of such optionee. In order to be
effective, such written notice shall be accompanied by (i) payment of the Option
Price of such shares of stock and (ii) if applicable, payment of an amount of
money necessary to satisfy any withholding tax liability that may result from
the exercise of such Option. Each such payment shall be made by check drawn on a
national banking association and payable to the order of the Company in United
States dollars.

    If, at the time of receipt by the Company of such written notice, (i) the
Company has unrestricted surplus in an amount not less than the Option Price of
such shares of stock, (ii) all accrued cumulative preferential dividends and
other current preferential dividends on all outstanding shares of preferred
stock of the Company have been fully paid, (iii) the acquisition by the Company
of its own shares of stock for the purpose of enabling such optionee to exercise

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such Option is otherwise permitted by applicable law and without any vote or
consent of any stockholder of the Company, and (iv) there shall have been
adopted, and there shall be in full force and effect, a resolution of the Board
of Directors of the Company authorizing the acquisition by the Company of its
own shares of stock for such purpose, then such optionee may deliver to the
Company, in payment of the Option Price of the shares of stock with respect to
which such Option is exercised, (x) certificates registered in the name of such
optionee that represent a number of shares of stock legally and beneficially
owned by such optionee (free of all liens, claims and encumbrances of every
kind) and having a fair market value on the date of receipt by the Company of
such written notice that is not greater than the Option Price of the shares of
stock with respect to which such Option is to be exercised, such certificates to
be accompanied by stock powers duly endorsed in blank by the record holder of
the shares of stock represented by such certificates, with the signature of such
record holder guaranteed by a national banking association (or, in lieu of such
certificates, other arrangements for the transfer of such shares to the Company
which are satisfactory to the Company) and (y) if the Option Price of the shares
of stock with respect to which such Options are to be exercised exceeds such
fair market value, a check drawn on a national banking association and payable
to the order of the Company in an amount, in United States dollars, equal to the
amount of such excess plus the amount of money necessary to satisfy any
withholding tax liability that may result from the exercise of such Option.
Notwithstanding the provisions of the immediately preceding sentence, the
Committee, in its sole discretion, may refuse to accept shares of stock in
payment of the Option Price of the shares of stock with respect to which such
Option is to be exercised and, in that event, any certificates representing
shares of stock that were received by the Company with such written notice shall
be returned to such optionee, together with notice by the Company to such
optionee of the refusal of the Committee to accept such shares of stock. The
Company may, at its option and upon approval by the Board of Directors of the
Company, retain shares of Common Stock which would otherwise be issued upon
exercise of an Option to satisfy any withholding tax liability that may result
from the exercise of such Option, which shares shall be valued for such purpose
at their then fair market value. If, at the expiration of seven business days
after the delivery to such optionee of such written notice from the Company,
such optionee shall not have delivered to the Company a check drawn on a
national banking association and payable to the order of the Company in an
amount, in United States dollars, equal to the Option Price of the shares of
stock with respect to which such Option is to be exercised, such written notice
from the optionee to the Company shall be ineffective to exercise such Option.

    As promptly as practicable after the receipt by the Company of (i) such
written notice from the optionee, (ii) payment, in the form required by the
foregoing provisions of this Paragraph 7, of the Option Price of the shares of
stock with respect to which such Option is to be exercised, and (iii) payment,
if required, in the form required by the foregoing provisions of this Paragraph
7, of an amount necessary to satisfy any withholding tax liability that may
result from the exercise of such Option, a certificate representing the number
of shares of stock with respect to which such Option has been so exercised,
reduced, to the extent applicable by the number of shares retained by the
Company to pay any required withholding tax, such certificate to be registered
in the name of such optionee, provided that such delivery shall be considered to
have been made when such certificate shall have been mailed, postage prepaid, to
such optionee at the address specified for such purpose in such written notice
from the optionee to the Company.

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    For purposes of this Paragraph 7, the "fair market value" of a share of
stock as of any particular date shall mean the closing sale price of a share of
Common Stock on that date as reported by the principal national securities
exchange on which the Common Stock is listed if the Common Stock is then listed
on a national securities exchange, or if the Common Stock is not so listed, the
average of the bid and asked price of a share of Common Stock on that date and
reported in the National Association of Securities Dealers Automated Quotation
system (the "NASDAQ System"); provided that if no such closing price or quotes
are so reported on that date or if in the discretion of the Committee another
means of determining the fair market value of a share of stock at such date
shall be necessary or advisable, the Committee may provide for another means for
determining such fair market value.

    8.  Transferability of Options. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his lifetime, only by him.

    9.  Termination. Except as may be otherwise expressly provided herein,
each Option, to the extent it shall not previously have been exercised, shall
terminate on the earlier of the following:

    (a) On the last day within the three month period commencing on the date on
        which the optionee ceases to be a member of the Company's Board of
        Directors, for any reason other than the death, disability or retirement
        of the optionee, during which period the optionee shall be entitled to
        exercise all Options fully vested as described in Paragraph 6 by the
        optionee on which the optionee ceased on the date on which the optionee
        ceased be a member of the Company's Board of Directors;

    (b) On the last day within the one year period commencing on the date on
        which the optionee ceases to be a member of the Company's Board of
        Directors because of permanent disability, during which period the
        optionee shall be entitled to exercise all Options fully vested as
        described in Paragraph 6 by the optionee on the date on which the
        optionee ceased to be a member of the Company's Board of Directors
        because of such disability;

    (c) On the last day within the one year period commencing on the date of the
        optionee's death while serving as a member of the Company's Board of
        Directors, during which period the executor or administrator of the
        optionee's estate or the person or persons to whom the optionee's Option
        shall have been transferred by will or the laws of descent or
        distribution, shall be entitled to exercise all Options in respect of
        the number of shares that the optionee would have been entitled to
        purchase had the optionee exercised such Options on the date of his
        death;

    (d) On the last day within the one year period commencing on the date an
        optionee who has had at least five years of service on the Board of
        Directors of the Company retires from the Board of Directors of the
        Company, during which period the optionee, or the executor or
        administrator of the optionee's estate or the person or persons to whom
        such Option shall have been transferred by the will or the laws of
        descent or distribution in the event of the optionee's death within such
        one year period, as the case may be, shall be entitled to exercise all
        Options in respect of the number of shares that the optionee would have
        been

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        entitled to purchase had the optionee exercised such Options on the
        date of such retirement; and

    (e) Ten years after the date of grant of such Option.

    10. Requirements of Law. The Company shall not be required to sell or issue
any shares under any Option if the issuance of such shares shall constitute a
violation by the optionee or the Company of any provisions of any law or
regulation of any governmental authority. Each Option granted under the Plan
shall be subject to the requirements that, if at any time the Board of Directors
of the Company or the Committee shall determine that the listing, registration
or qualification of the shares subject thereto upon any securities exchange or
under any state or federal law of the United States or of any other country or
governmental subdivision thereof, or the consent or approval of any governmental
regulatory body, or investment or other representations, are necessary or
desirable in connection with the issue or purchase of shares subject thereto, no
such Option may be exercised in whole or in part unless such listing,
registration, qualification, consent, approval or representation shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. If required at any time by the Board of Directors or the Committee,
an Option may not be exercised until the optionee has delivered an investment
letter to the Company. In addition, specifically in connection with the
Securities Act of 1933 (as now in effect or hereafter amended), upon exercise of
any Option, the Company shall not be required to issue the underlying shares
unless the Committee has received evidence satisfactory to it to the effect that
the holder of such Option will not transfer such shares except pursuant to a
registration statement in effect under such Act or unless an opinion of counsel
satisfactory to the Company has been received by the Committee to the effect
that such registration is not required. Any determination in this connection by
the Committee shall be final, binding and conclusive. In the event the shares
issuable on exercise of an Option are not registered under the Securities Act of
1933, the Company may imprint on the certificate for such shares the following
legend or any other legend which counsel for the Company considers necessary or
advisable to comply with the Securities Act of 1933:

    "The shares of stock represented by this certificate have not been
    registered under the Securities Act of 1933 or under the securities laws of
    any state and may not be sold or transferred except upon such registration
    or upon receipt by the Corporation of an opinion of counsel satisfactory, in
    form and substance to the Corporation, that registration is not required for
    such sale or transfer."

The Company may, but shall in no event be obligated to, register any securities
covered hereby pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) and, in the event any shares are so registered, the Company
may remove any legend on certificates representing such shares. 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 pursuant thereto to comply
with any law or regulation of any governmental authority.

    11. No Rights as Stockholder. No optionee shall have rights as a stockholder
with respect to shares covered by his Option until the date of issuance of a
stock certificate for such shares; and,

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except as otherwise provided in Paragraph 12 hereof, no adjustment for
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of issuance of such certificate.

    12. Changes in the Company's Capital Structure. The existence of outstanding
Options 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 Common
Stock or the rights thereof, 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 adjustment of, or the payment of a dividend in capital stock or
other equity securities of the Company on, its Common Stock, or other increase
or reduction of the number of shares of the Common Stock without receiving
consideration therefor in money, services, or property, or the reclassification
of its Common Stock, in whole or in part, into other equity securities of the
Company, then (a) the number, class and per share price of shares of stock
subject to outstanding Options hereunder shall be appropriately adjusted (or in
the case of the issuance of equity securities as a dividend on, or in a
reclassification of, the Common Stock, the Options shall extend to such other
securities) in such a manner as to entitle an optionee to receive, upon exercise
of an Option, for the same aggregate cash compensation, the same total number
and class or classes of shares (or in the case of a dividend of, or
reclassification into, other equity securities, such other securities) he would
have held after such adjustment if he had exercised his Option in full
immediately prior to the event requiring the adjustment, or, if applicable, the
record date for determining stockholders to be affected by such adjustment; and
(b) the number and class of shares then reserved for issuance under the Plan (or
in the case of a dividend of, or reclassification into, other equity securities,
such other securities) shall be adjusted by substituting for the total number
and class of shares of stock then received, the number and class or classes of
shares of stock (or in the case of a dividend of, or reclassification into,
other equity securities, such other securities) that would have been received by
the owner of an equal number of outstanding shares of Common Stock as the result
of the event requiring the adjustment. Comparable rights shall accrue to each
optionee in the event of successive subdivisions, consolidations, capital
adjustment, dividends or reclassifications of the character described above.

    If the Company shall distribute to all holders of its shares of Common Stock
(including any such distribution made to non-dissenting stockholders in
connection with a consolidation or merger in which the Company is the surviving
corporation and in which holders of shares of Common Stock continue to hold
shares of Common Stock after such merger or consolidation) evidences of
indebtedness or cash or other assets (other than cash dividends payable out of
consolidated retained earnings not in excess of, in any one year period, the
greater of (a) $.10 per share of Common Stock and (b) two times the aggregate
amount of dividends per share paid during the preceding calendar year and
dividends or distributions payable in shares of Common Stock or other equity
securities of the Company described in the immediately preceding paragraph),
then in each case the Option Price shall be adjusted by reducing the Option
Price in

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effect immediately prior to the record date for the determination of
stockholders entitled to receive such distribution by the fair market value, as
determined in good faith by the Board of Directors of the Company (whose
determination shall be described in a statement filed in the Company's corporate
records and be available for inspection by any holder of an Option) of the
portion of the evidence of indebtedness or cash or other assets so to be
distributed applicable to one share of Common Stock; provided that in no event
shall the Option Price be less than the par value of a share of Common Stock.
Such adjustment shall be made whenever any such distribution is made, and shall
become effective on the date of the distribution retroactive to the record date
for the determination of the stockholders entitled to receive such distribution.
Comparable adjustments shall be made in the event of successive distributions of
the character described above.

    After the Company shall make a tender offer for, or grant to all of its
holders of its shares of Common Stock the right to require the Company to
acquire from such stockholders shares of, Common Stock, at a price in excess of
the Current Market Price (a "Put Right") or the Company shall grant to all of
its holders of its shares of Common Stock the right to acquire shares of Common
Stock for less than the Current Market Price (a "Purchase Right") then, in the
case of a Put Right, the Option Price shall be adjusted by multiplying the
Option Price in effect immediately prior to the record date for the
determination of stockholders entitled to receive such Put Right by a fraction,
the numerator of which shall be the number of shares of Common Stock then
outstanding minus the number of shares of Common Stock which could be purchased
at the Current Market Price for the aggregate amount which would be paid if all
Put Rights are exercised and the denominator of which is the number of shares of
Common Stock which would be outstanding if all Put Rights are exercised; and, in
the case of a Purchase Right, the Option Price shall be adjusted by multiplying
the Option Price in effect immediately prior to the record date for the
determination of the stockholders entitled to receive such Purchase Right by a
fraction, the numerator of which shall be the number of shares of Common Stock
then outstanding plus the number of shares of Common Stock which could be
purchased at the Current Market Price for the aggregate amount which would be
paid if all Purchase Rights are exercised and the denominator of which is the
number of shares of Common Stock which would be outstanding if all Purchase
Rights are exercised. In addition, the number of shares subject to the Option
shall be increased by multiplying the number of shares then subject to the
Option by a fraction which is the inverse of the fraction used to adjust the
Option Price. Notwithstanding the foregoing if any such Put Rights or Purchase
Rights shall terminate without being exercised, the Option Price and number of
shares subject to Option shall be appropriately readjusted to reflect the Option
Price and number of shares subject to the Option which would have been in effect
if such unexercised Rights had never existed. Comparable adjustments shall be
made in the event of successive transactions of the character described above.

    After the merger of one or more corporations into the Company, after any
consolidation of the Company and one or more corporations, or after any other
corporate transaction described in Section 424(a) of the Internal Revenue Code
of 1986, as amended (the "Code") in which the Company shall be the surviving
corporation, each optionee, at no additional cost, shall be entitled to receive,
upon any exercise of his Option, in lieu of the number of shares as to which the
Option shall then be so exercised, the number and class of shares of stock or
other equity securities to which the optionee would have been entitled pursuant
to the terms of the agreement

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of merger or consolidation if at the time of such merger or consolidation such
optionee had been a holder of a number of shares of Common Stock equal to the
number of shares as to which the Option shall then be so exercised and, if as a
result of such merger, consolidation or other transaction, the holders of Common
Stock are not entitled to receive any shares of Common Stock pursuant to the
terms thereof, each optionee, at no additional cost, shall be entitled to
receive, upon exercise of his Option, such other assets and property, including
cash, to which he would have been entitled if at the time of such merger,
consolidation or other transaction he had been the holder of the number of
shares of Common Stock equal to the number of shares as to which the Option
shall then be so exercised. Comparable rights shall accrue to each optionee in
the event of successive mergers or consolidations of the character described
above.

    After a merger of the Company into one or more corporations, after any
consolidation of the Company and any one or more corporations, or after any
other corporate transaction described in Section 424(a) of the Code in which the
Company is not the surviving corporation, each optionee shall, at no additional
cost, be entitled at the option of the surviving corporation, (i) to have his
then existing Option assumed or to have a new option substituted for the
existing Option by the surviving corporation to the transaction which is then
employing him, or a parent or subsidiary of such corporation, on a basis where
the excess of the aggregate fair market value of the shares subject to the
option immediately after the substitution or assumption over the aggregate
option price of such option is equal to the excess of the aggregate fair market
value of all shares subject to the option immediately before such substitution
or assumption over the aggregate option price of such shares, provided that the
shares subject to the new option must be traded on the New York Stock Exchange
or the American Stock Exchange or quoted on the NASDAQ, or (ii) to receive upon
any exercise of his Option, in lieu of the number of shares as to which the
Option shall then be so exercised, the securities, property and other assets,
including cash, to which the Optionee would have been entitled pursuant to the
terms of the agreement of merger or consolidation or the agreement giving rise
to the other corporate transaction if at the time of such merger, consolidation
or other transaction such optionee had been the holder of the number of shares
of Common Stock equal to the number of shares as to which the Option shall then
be so exercised.

    If a corporate transaction described in Section 424(a) of the Code which
involves the Company is to take place and there is to be no surviving
corporation while an Option remains in whole or in part unexercised, it shall be
cancelled by the Board of Directors as of the effective date of any such
corporate transaction but before the date each optionee shall be provided with a
notice of such cancellation and each optionee shall have the right to exercise
such Option in full (without regard to any limitations set forth in or imposed
pursuant to Paragraph 9 of the Plan) to the extent it is then still unexercised
during a 30-day period preceding the effective date of such corporate
transaction.

    For purposes of this Paragraph 12, "Current Market Price per share of Common
Stock" shall mean the closing price of a share of Common Stock on the principal
national securities exchange on which the Common Stock is listed or, if the
Common Stock is not so listed, the average bid and asked price of a share of
Common Stock as reported in the NASDAQ System, in each case on the trading day
immediately preceding the first trading day on which, as a result of the
establishment of a record date or otherwise, the trading price reflects that an
acquiror of

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Common Stock in the public market will not participate in or receive the payment
of any applicable dividend or distribution.

    Except a hereinbefore expressly provided, the issue by the Company of shares
of Common 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 therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding Options.

    13. Amendment or Termination of Plan. The Board of Directors may modify,
revise or terminate the Plan at any time and from time to time; provided,
however, that without the further approval of the holders of a majority of the
shares of voting stock present in person or by proxy at a meeting of
stockholders, or if the provisions of the corporate charter, by-laws or
applicable state law prescribes a greater degree of stockholder approval for
this action, without the degree of stockholder approval thus required, the Board
of Directors may not (a) change the aggregate number of shares which may be
issued under Options pursuant to the provisions of the Plan; (b) reduce the
option price permitted for the Options; (c) extend the term during which an
option may be exercised or the termination date of the Plan; or (d) materially
increase any other benefits accruing to directors under the Plan or materially
modify the requirements as to eligibility for participation in the Plan unless,
in each such case, the Board of Directors of the Company shall have obtained an
opinion of legal counsel to the effect that stockholder approval of the
amendment is not required (i) by law, (ii) by the applicable rules and
regulations of, or any agreement with, any national securities exchange that the
Common Stock is then listed on or if the Common Stock is not so listed, the
rules and regulations, or any agreement with, the National Association of
Securities Dealers, Inc., and (iii) in order to make available to the optionee
with respect to any option granted under the Plan, the benefits of Rule 16b-3 of
the Rules and Regulations under the Securities Exchange Act of 1934, or any
similar or successor rule. In addition, the terms of the Plan relating to the
number of shares that may be subject to an Option, the times at which Options
shall be granted, and the means by which the Option Price for Options granted is
to be determined shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act or the rules thereunder.

    14. Written Agreement. Each Option granted hereunder shall be embodied in a
written option agreement, which shall be subject to the terms and conditions
prescribed above, and shall be signed by the optionee and by the appropriate
officer of the Company for and in the name and on behalf of the Company. Such an
option agreement shall contain such other provisions as the Committee in its
discretion shall deem advisable.

    15. Indemnification of Committee. The Company shall indemnify each present
and future member of the Committee against, and each member of the Committee
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

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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 Committee,
whether or not he continues to be such member of the Committee at the time of
incurring such expenses; provided, however, that such indemnity shall not
include any expenses incurred by any such member of the Committee (a) in respect
of matters as to which he shall be finally adjudged in any such action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his duty as such member of the Committee, 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; and provided
further, that no right of indemnification under the provisions set forth herein
shall be available to or enforceable by any such member of the Committee unless,
within sixty (60) days after institution of any such action, suit or proceeding,
he shall have offered the Company, in writing, the opportunity to handle and
defend same at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Committee and shall be in addition to all other rights to which
such member of the Committee may be entitled to as a matter of law, contract, or
otherwise. Nothing in this Section 15 shall be construed to limit or otherwise
affect any right to indemnification, or payment of expense, or any provisions
limiting the liability of any officer or director of the Company or any member
of the Committee, provided by law, the Certificate of Incorporation of the
Company or otherwise.

    16. Effective Date of Plan. The Plan shall be deemed to have been adopted
and effective on December 19, 1995.

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                                                                     EXHIBIT 4.4

                             1997 STOCK OPTION PLAN
                             OF DSI INDUSTRIES, INC.

1. Purpose, Types of Awards, Construction. The purpose of the 1997 Stock Option
Plan of DSI Industries, Inc. (the "Plan") is to afford an incentive to executive
officers, other employees and non-employee directors and consultants of DSI
Industries, Inc., a Delaware corporation (the "Company"), or any Subsidiary (as
defined below), to acquire a proprietary interest in the Company, to continue as
employees or non-employee directors (as the case may be), to increase their
efforts on behalf of the Company and to promote the success of the Company's
business. To further such purposes the Committee as deemed below may grant stock
options, stock appreciation rights and restricted stock. The provisions of the
Plan are intended to satisfy the requirements of Section 16(b) of the Securities
Exchange Act of 1934, and shall be interpreted in a manner consistent with the
requirements thereof, as now or hereafter construed, interpreted and applied by
regulations, rulings and cases.

2. Definitions. As used in this Plan, the following words and phrases shall have
the meanings indicated:

         (a) "Agreement" shall mean an agreement entered into between the
Company and a Grantee in connection with an award under the Plan.

         (b) "Board" shall mean the Board of Directors of the Company.

         (c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any reference to a section of the Code or regulation
promulgated thereunder shall also refer to any successor of such section or
regulation.

         (d) "Committee" shall mean a committee established by the Board to
administer the Plan, the composition of which shall at all times satisfy the
provisions of Rule 16b-3 under the Exchange Act.

         (e) "Common Stock" shall mean shares of common stock, par value $.01
per share, of the Company.

         (f) "Company" shall mean DSI Industries, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.

         (g) "Disability" shall mean a Grantee's inability to perform his duties
with the Company or any Subsidiary for more than six consecutive months by
reason of any medically determinable physical or mental impairment, as
determined by a physician selected by the Grantee and acceptable to the Company.

         (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings

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and cases, and any reference to a section of the Exchange Act or rule or
regulation promulgated thereunder shall also refer to any successor of such
section, rule or regulation.

         (i) "Fair Market Value" per share as of a particular date shall mean
(i) the average high and low trading prices per share of Common Stock on the
national securities exchange on which the Common Stock is principally traded for
the last preceding date on which there was a sale of such Common Stock on such
exchange, or (ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average high and low trading prices per share of
Common Stock in such over-the-counter market for the last preceding date on
which there was a sale of such Common Stock in such market, or (iii) if the
shares of Common Stock are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.

         (j) "Grantee" shall mean a person who receives a grant of Options,
Stock Appreciation Rights or Restricted Stock under the Plan.

         (k) "Incentive Stock Option" shall mean any option intended to be, and
designated as, an incentive stock option within the meaning of Section 422 of
the Code.

         (l) "Insider" shall mean a Grantee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.

         (m) "Option" or "Options" shall mean a grant to a Grantee of an option
or options to purchase shares of Common Stock. Options granted by the Committee
to an employee Grantee pursuant to the Plan shall constitute either Incentive
Stock Options or Nonqualified Stock Options. Options granted to any consultant
or non-employee director shall be Nonqualified Stock Options.

         (n) "Option Price" shall mean the exercise price of an Option per share
of Common Stock covered by the Option.

         (o) "Option Term" shall mean the period (determined at the Option's
grant) from its date of grant to the last date on which it can be exercised. The
Option Term of any Incentive Stock Option or any Option granted to any
consultant or non-employee director shall not be longer than ten (10) years. The
Option Term of any Incentive Stock Option granted to a Ten Percent Stockholder
shall not be longer than five (5) years.

         (p) "Plan" means this 1997 Stock Option Plan of DSI Industries, Inc.,
as amended from time to time.

         (q) "Retirement" shall mean a Grantee's retirement in accordance with
the terms of any pension or retirement plan adopted by the Company (or any
Subsidiary), if any, as the case may be, on the normal retirement date
prescribed from time to time by the Company or such Subsidiary.

         (r) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in effect,
promulgated by

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the Securities and Exchange Commission under Section 16 of the Exchange Act,
including any successor to such Rule.

         (s) "Stock Appreciation Right" shall mean the right, granted to a
Grantee under Section 9, to be paid an amount measured by the appreciation in
the Fair Market Value of Common Stock from the date of grant to the date of
exercise of the right, with payment to be made in cash or Common Stock as
specified in the award or determined by the Committee.

         (t) "Subsidiary" shall be as defined in Section 424(f) of the Code and
shall include a subsidiary of any subsidiary.

         (u) "Ten Percent Stockholder" shall mean an employee Grantee who, at
the time an Incentive Stock Option is granted to such Grantee, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the employer corporation or of its parent or subsidiary
corporation.

3. Administration. The Plan shall be administered by the Committee. The
Committee shall have the authority in its discretion, subject to and not
inconsistent with the express provisions of the Plan, to administer the Plan and
to exercise all the powers and authorities either specifically granted to it
under the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to grant Options, Stock
Appreciation Rights and Restricted Stock; to determine which Options shall
constitute Incentive Stock Options and which Options shall constitute
Nonqualified Stock Options; to determine the purchase price of the shares of
Common Stock covered by each Option; to determine the persons to whom, and the
time or times at which awards shall be granted; to determine the number of
shares to be covered by each award; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of the Agreements (which need not be identical) and to cancel or
suspend awards, as necessary; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.

         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. All decisions, determination
and interpretations of the Committee shall be final and binding on all Grantees
of any awards under this Plan. The Board shall fill all vacancies, however
caused, in the Committee. The Board may from time to time appoint additional
members to the Committee, and may at any time remove one or more Committee
members and substitute others. One member of the Committee shall be selected by
the Board as chairman. The Committee shall hold its meetings at such times and
places as it shall deem advisable. All determinations of the Committee shall be
made by a majority of its members either present in person or participating by
conference telephone at a meeting or by written consent. The Committee may
appoint a secretary and make such rules and regulations for the conduct of its
business as it shall deem advisable, and shall keep minutes of its meetings.

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         No member of the Board or Committee shall be liable for any action
taken or determination made in good faith with respect to the Plan or any award
granted hereunder.

4. Eligibility. Awards may be granted to executive officers and other key
employees, including officers and directors who are employees, and to
non-employee directors of and consultants to the Company, except as proscribed
by the Exchange Act or the Code. In determining the employees to whom awards
shall be granted and the number of shares to be covered by each award, the
Committee shall take into account the duties of the respective employees, their
present and potential contributions to the success of the Company and such other
factors as the Committee shall deem relevant in connection with accomplishing
the purpose of the Plan.

5. Stock. The maximum number of shares of Common Stock reserved for the grant of
awards under the Plan shall be 1,150,000 shares, subject to adjustment as
provided in Section 11 hereof. Such shares may, in whole or in part, be
authorized but unissued shares or shares that shall have been or may be
reacquired by the Company. For purposes of this Section 5, where the exercise
price of an Option is paid in Common Stock pursuant to Section 6(d) of the Plan,
only the net number of additional shares issued and which remain outstanding in
connection with such exercise shall be deemed "issued" for purposes of the Plan.

         If any outstanding award under the Plan should, for any reason expire,
be canceled or be forfeited (other than in connection with the exercise of a
Stock Appreciation Right), without having been exercised in full, the shares of
Common Stock allocable to the unexercised, canceled or terminated portion of
such award shall (unless the Plan shall have been terminated) become available
for subsequent grants of awards under the Plan; provided, however, that, in the
case of the cancellation or forfeiture of Restricted Stock with respect to which
dividends have been paid or accrued, the number of shares with respect to such
Restricted Stock shall not be available for subsequent grants hereunder unless,
in the case of shares with respect to which dividends were accrued by unpaid,
such dividends are also canceled or forfeited.

6. Terms and Conditions of Options. Each Option granted pursuant to the Plan
shall be evidenced by a written agreement between the Company and the Grantee
(the "Option Agreement"), in such form and containing such terms and conditions
as the Committee shall from time to time approve, which Option Agreement shall
comply with and be subject to the following terms and conditions, unless
otherwise specifically provided in such Option Agreement.

         (a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.

         (b) Type of Option. Each Option Agreement shall specifically state that
the Option constitutes an Incentive stock Option or a Nonqualified Stock Option.

         (c) Option Price. Each Option Agreement shall state the Option Price,
which, in the case of an Incentive Stock Option, shall not be less than one
hundred percent (100%) of the Fair Market Value of a share of Common Stock
covered by the Option on the date of grant, and in any case shall not be less
than the par value of a share of the Common Stock covered by the
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Option. The Option Price shall be subject to adjustment as provided in Section
11 hereof. The date as of which the Committee adopts a resolution expressly
granting an Option shall be considered the day on which such Option is granted.

         (d) Medium and Time of Payment. Payment of the Option Price may be made
(as determined by the Board) (i) in cash, (ii) by certified check or bank
cashier's check payable to the order of the Company in the amount of such Option
Price, or, if permitted by the Committee: (iii) by promissory note issued by the
Grantee in favor of the Company in an amount equal to such Option Price and
payable on terms prescribed by the Committee and which provides for the payment
of interest at a fair market rate, as determined by the Committee, (iv) by
delivery of capital stock to the Company having a Fair Market Value (determined
on the date of exercise) equal to the Option Price, (v) by agreeing with the
Company to cancel a portion of the exercisable Options issued hereunder to such
Grantee having a value (measured as the difference between the current Fair
Market Value (determined on the date of exercise) and the Option Price of the
Common Stock subject to such portion) equal to the Option Price; or (vi) by any
combination of the methods of payment described in (i) through (v) above.

         (e) Term and Exercisability of Options. Each Option Agreement shall
provide the exercise schedule for the Option as determined by the Committee;
provided, however, that the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such circumstances as it, in its
sole discretion, deems appropriate. Each Option Agreement shall provide an
Option Term which shall be ten (10) years from the date of the grant of the
Option, unless otherwise provided in Section 2 hereof or otherwise determined by
the Committee. The Option Term shall be subject to earlier expiration as
provided in Sections 6(f) and 6(g) hereof. An Option may be exercised, as to any
or all full shares of Common Stock as to which the Option has become
exercisable, by written notice delivered in person or by mail to the Secretary
of the Company, specifying the number of shares of Common Stock with respect to
which the Option is being exercised.

         (f) Termination of Employee Grantee. Except as provided in this Section
6(f) and in Section 6(g) hereof, an Option granted to an employee of the Company
or a Subsidiary thereof may be exercised only if the employee Grantee is then in
the employ of the Company or a Subsidiary thereof (or a corporation issuing or
assuming the Option in a transaction to which Section 424(a) of the Code applies
(or a parent or subsidiary corporation of such corporation)), and the Grantee
has remained continuously so employed since the date of grant of the Option. In
the event that the employment of an employee Grantee shall terminate (other than
by reason of death, Disability or Retirement), all options of such Grantee that
are exercisable on the date of such termination shall continue to be exercisable
for three months after the date of such termination (or such longer period as
the Committee shall prescribe in the case of Nonqualified Stock Options).
Notwithstanding the foregoing provisions of this Section 6(f), no Option may be
exercised later than the expiration of its Option Term. To the extent that any
Option is not exercisable on the date of such termination of employment, its
Option Term shall expire on such date.

         (g) Termination of Employee Grantee by Death, Disability or Retirement.
If an employee Grantee shall die while employed by the Company or a Subsidiary
thereof, or within three

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months after the date of termination of such Grantee's employment (or within
such longer period as the Committee may have provided for exercise of the
Grantee's Options after termination of the Grantee's employment pursuant to
Section 6(f) hereof, or if the employee Grantee's employment shall terminate by
reason of Disability, all Options theretofore granted to such Grantee (to the
extent such Options are exercisable on the date the Grantee's employment is
terminated by such death or Disability) may be exercised by the Grantee or by
the Grantee's estate or by a person who acquired the right to exercise such
Options by bequest of inheritance or otherwise by reason of death or Disability
of the Grantee, at any time within six months after the death or Disability of
the Grantee. In the event that an Option granted hereunder shall be exercised by
the legal representatives of a deceased or Disabled Grantee, written notice of
such exercise shall be accompanied by a certified copy of letters testamentary
or equivalent proof of the right of such legal representatives to exercise such
Option. In the event that the employment of an employee Grantee shall terminate
on account of such Grantee's Retirement, all Options of such Grantee (to the
extent such Options are exercisable on the date of the Grantee's retirement) may
be exercised at any time within three months after the date of such Retirement.
Notwithstanding the foregoing provisions of this Section 6(g), no Option may be
exercised later than the expiration of its Option Term. To the extent that any
Option is not exercisable on the date of such termination of employment by
reason of death, Disability or Retirement, its Option Term shall expire on such
date.

         (h) Other Provisions. The Option Agreement evidencing awards under the
Plan shall contain in such other terms and conditions not inconsistent with the
Plan as the Committee may determine.

7. Nonqualified Stock Options. Option granted pursuant to this Section 7 are
intended to constitute Nonqualified Stock Options and shall be subject only to
the general terms and conditions specified in Section 6 hereof. At the
discretion of the Committee, the early termination provisions contained in
Section 6 hereof may be waived by the Committee as evidenced by their exclusion
from any Option Agreement.

8. Incentive Stock Options. Options granted pursuant to this Section 8 are
intended to constitute Incentive Stock Options and shall be subject to the
following special terms and conditions, in addition to the general terms and
conditions specified in Section 6 hereof.

         (a) Value of Shares. The aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options granted under this Plan (and all
other plans of all employee Grantee's employer corporation and its parent and
subsidiary corporations) become exercisable for the first time by the Grantee
during any calendar year shall not exceed $100,000. To the extent that the grant
of an Option results in the aggregate Fair Market Value (determined at the time
of grant) of the Common Stock (or other capital stock of the Company or any
subsidiary) with respect to which Incentive Stock Options are exercisable for
the first time by a Grantee during any calendar year (under all plans of the
Company and subsidiary corporations) to exceed $100,000, such Option shall be
treated as a Nonqualified Stock Option to the extent of such excess. The
provisions of this subsection shall be construed and applied in accordance with
Section 422(d) of the Code and the regulations, if any, promulgated thereunder.
Nothing contained in the Plan shall

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be construed to limit the right of the Committee to grant an Incentive Stock
Option and a Nonqualified Stock Option concurrently under a single stock option
Agreement so long as each Option is clearly identified as to its status.

         (b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be less
than one-hundred-ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date of grant of such Incentive Stock Option, and (ii) the
Option Term shall not exceed five (5) years from the date of grant of such
Incentive Stock Option.

          (c) Disqualifying Dispositions of Incentive Stock Options. If Common
Stock acquired upon exercise of any Incentive Stock Option is disposed of in a
disposition that, under Section 422 of the Code, disqualifies the Grantee from
the application of Section 421(a) of the Code, the Grantee immediately before
such disposition of Common Stock shall comply with any requirements imposed by
the Company in order to enable the Company to secure the related income tax
deduction to which it is entitled in such event.

9. Stock Appreciation Rights. The Committee shall have authority to grant a
Stock Appreciation Right to the employee Grantee of any Option under the Plan
with respect to all or some of the shares of Common Stock covered by such
related Option. A Stock Appreciation Right shall, except as provided in this
Section 9, be subject to the same terms and conditions as the related Option.
Each Stock Appreciation Right granted pursuant to the Plan shall be evidenced by
a written Agreement between the Company and the Grantee in such form as the
Committee shall time to time approve.

         (a) Time of Grant. A Stock Appreciation Right may be granted either at
the time of grant, or at any time thereafter during the term of the Option;
provided, however, that Stock Appreciation Rights related to Incentive Stock
Options may only be granted at the time of grant of the related Option.

         (b) Payment. A Stock Appreciation Right shall entitle the holder,
thereof, upon exercise of the Stock Appreciation Right or any portion thereof,
to receive payment of an amount computed pursuant to Section 9(d).

         (c) Exercise. A Stock Appreciation Right shall be exercisable at such
time or times and only to the extent that the related Option is exercisable, and
will not be transferable except to the extent the related Option may be
transferable. A Stock Appreciation Right granted in connection with an Incentive
Stock Option shall be exercisable only if the Fair Market Value of a share of
Common Stock on the date of exercise exceeds the purchase price specified in the
related Incentive Stock Option.

         (d) Amount Payable. Upon the exercise of a Stock Appreciation Right,
the Grantee shall be entitled to receive an amount determined by multiplying (i)
the excess of the Fair Market Value of a share of Common Stock on the date of
exercise of such Stock Appreciation Right over the Option Price under the
related Option, by (ii) the number of shares of Common Stock as to which such
Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the

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Committee may limit in any manner the amount payable with respect to any Stock
Appreciation Right by including such a limit at the time it is granted.

         (e) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right, the related Option
shall be canceled to the extent of the number of shares of Common Stock as to
which the Stock Appreciation Right is exercised and upon the exercise of an
Option granted in connection with a Stock Appreciation Right, the Stock
Appreciation Right shall be canceled to the extent of the number of shares of
Common Stock as to which the Option is exercised or surrendered.

         (f) Method of Exercise. Stock Appreciation Rights shall be exercised by
a Grantee only by a written notice delivered in person or by mail to the
Secretary of the Company, specifying the number of shares of Common Stock with
respect to which the Stock Appreciation Right is being exercised. If requested
by the Committee, the Grantee shall deliver the Agreement evidencing the Stock
Appreciation Right being exercised and the Option Agreement evidencing any
related Option to the Secretary of the Company who shall endorse thereon a
notation of such exercise and return such Agreements to the Grantee.

         (g) Form of Payment. Payment of the amount determined under Section
9(d), may be made solely in whole shares of Common Stock in a number determined
based upon their Fair Market Value on the date of exercise of the Stock
Appreciation Right or, alternatively, at the sole discretion of the Committee,
solely in cash, or in a combination of cash and shares of Common Stock as the
Committee deems advisable. If the Committee decides to make full payment in
shares of Common Stock, and the amount payable results in a fractional share,
payment for the fractional share will be made in cash. Notwithstanding the
foregoing, to the extent required by Rule 16b-3 no payment in the form of cash
may be made upon the exercise of a Stock Appreciation Right pursuant to Section
9(d) to an Insider, unless the exercise of such Stock Appreciation Right is made
during the period beginning on the third business day and ending on the twelfth
business day following the date of release for publication of the Company's
quarterly or annual statements of earnings.

10. Restricted Stock. The Committee may award shares of Restricted Stock to any
eligible employee. Each award of Restricted Stock under the Plan shall be
evidenced by a written Agreement between the Company and the Grantee, in such
form as the Committee shall from time to time approve, and shall comply with the
following terms and conditions (and with such other terms and conditions not
inconsistent with the terms of this Plan as the Committee, in its discretion,
shall establish:

         (a) Number of Shares. Each Agreement shall state the number of shares
of Restricted Stock to be subject to an award.

         (b) Restrictions. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, for such period as the Committee shall
determine from the date on which the award is granted (the "Restricted Period").
The Committee may also impose such other restrictions and conditions on the
shares as it deems appropriate including the satisfaction of performance

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criteria. Certificates for shares of stock issued pursuant to Restricted Stock
awards shall bear an appropriate legend referring to such restrictions, and any
attempt to dispose of any such shares of stock in contravention of such
restrictions shall be null and void and without effect. During the Restricted
Period, such certificates shall be held in escrow by an escrow agent appointed
by the Committee. In determining the Restricted Period of an award, the
Committee may provide that the foregoing restrictions shall lapse with respect
to specified percentages of the awarded shares on successive anniversaries of
the date of such award.

         (c) Forfeiture. Subject to such exceptions as may be determined by the
Committee, if the Grantee's continuous employment with the Company or any
Subsidiary shall terminate for any reason prior to the expiration of the
Restricted Period of an award, any shares remaining subject to restrictions
(after taking into account the provisions of Section 10(e) hereof shall
thereupon be forfeited by the Grantee and transferred to, and reacquired by, the
Company or a Subsidiary at no cost to the Company or Subsidiary.

         (d) Ownership. During the Restricted Period the Grantee shall possess
all incidents of ownership of such shares, subject to Section 10(b) hereof,
including the right to receive dividends with respect to such shares and to vote
such shares.

         (e) Accelerated Lapse of Restrictions. The Committee shall have the
authority (and the Agreement may, but need not, so provide) to cancel all or any
portion of any outstanding restrictions prior to the expiration of the
Restricted Period with respect to any or all of the shares of Restricted Stock
awarded on such terms and conditions as the Committee shall deem appropriate.

11. Effect of Certain Changes. In the event of any extraordinary dividend, stock
dividend, recapitalization, merger, consolidation, stock split, warrant or
rights issuances, or combination or exchange of such shares, or other similar
transactions, the number of shares of Common Stock available for awards, the
number of such shares covered by outstanding awards, and the price per share of
Options or the applicable market value of Stock Appreciation Right shall be
equitably adjusted by the Committee to reflect such event and preserve the value
of such awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or subsequently all
of the assets of the Company shall be sold or exchanged, a Grantee shall at the
time of issuance of the stock under such a corporate event, be entitled to
receive upon the exercise of his award the same number and kind of shares of
stock or the same amount of property, cash or securities as he would have been
entitled to receive upon the occurrence of any such corporate event as if he had
been, immediately prior to such event, the holder of the number of shares
covered by his award and that his award shall have been fully vested at the time
of such event; provided, however, that in any of such events the Committee shall
have the discretionary power to take any action necessary or appropriate to
prevent Incentive Stock Options granted hereunder from being disqualified as
Incentive Stock Options. Any adjustment under this Section shall apply
proportionately to only the unexercised portion of any award granted hereunder.
If fractions of a share would result from any such adjustment, the adjustment
shall be revised to the next lower whole number of shares.

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12. Surrender and Exchange of Awards. The Committee may permit the voluntary
surrender of all or a portion of any Option granted under the Plan to an
employee or any option granted under any other plan, program or arrangement of
the Company or any Subsidiary ("Surrendered Option"), to be conditioned upon the
granting to the employee Grantee of a new Option for the same number of shares
of Common Stock as the Surrendered Option, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such Grantee.
Subject to the provisions of the Plan, such new Option may be an Incentive Stock
Option or a Nonqualified Stock Option and shall be exercisable at the price,
during such period and on such other terms and conditions as are specified by
the Committee at the time the new Option is granted. The Committee may also
grant Restricted Stock in exchange for Surrendered Options to any holder of such
Surrendered Option.

13. Period During Which Awards May be Granted. Awards may be granted pursuant to
the Plan from time to time within a period of ten (10) years from the date the
Plan is adopted by the Board, or the date the Plan is approved by the
stockholder of the Company, whichever is earlier.

14. Nontransferability of Awards. Awards may be granted under the Plan shall not
be transferable otherwise than by will or by the laws of descent and
distribution, and awards may be exercised or otherwise realized, during the
lifetime of the Grantee, only by the Grantee or by his guardian or legal
representative. No award granted under the Plan shall be subject to execution,
attachment or other process.

15. Approval of Shareholders. The Plan shall take effect as of the date
determined by the Board in its adoption of the Plan but the Plan (and any grants
of awards made prior to the shareholder approval described in this sentence
shall be subject to the approval of the holder(s) of a majority of the issued
and outstanding shares of voting securities of the Company entitled to vote,
which approval must occur within twelve months of the date the Plan is adopted
by the Board.

16. Agreement by Employee Grantee Regarding Withholding Taxes. If the Committee
shall so require, as a condition of exercise of an Option or Stock Appreciation
Right or the expiration of the Restricted Period (each a "Tax Event"), each
employee Grantee shall agree that, no later than the date of the Tax Event, the
Grantee will pay to the Company or make arrangement satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the Tax Event. Alternatively, the Committee
may provide that an employee Grantee may elect, to the extent permitted or
required by law, to have the Company deduct federal, state and local taxes of
any kind required by law to be withheld upon the Tax Event from any payment of
any kind due to the Grantee. The withholding obligation may be satisfied by the
withholding or delivery of Common Stock.

17. Amendment and Termination of the Plan.

         (a) The Board at any time and from time to time may suspend, terminate,
modify or amend the Plant; provided, however, that an amendment which requires
stockholder approval in order for the Plan to continue to comply with Rule 16b-3
or any other law, regulation or stock exchange requirement shall not be
effective unless approved by the requisite vote of stockholders. Except as
provided in Section 11 hereof, no suspension, termination, modification

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or amendment of the Plan my adversely affect any award previously granted,
unless the written consent of the Grantee is obtained.

         (b) The Plan may from time to time be terminated, modified or amended
by the affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present, or represented, and entitled to vote at a
meeting of stockholders duly held in accordance with applicable state law.

         (c) The Board of the Company may at any time terminate the Plan or from
time to time make such modifications or amendments of the Plan as it may deem
advisable; provided, however, that the Board shall not (i) modify or amend the
Plan in any way that would disqualify any Option issued pursuant to the Plan as
an Incentive Stock Option, or (ii) without approval by the affirmative vote of
the holders of a majority of the shares of the Company's Common Stock present,
or represented, and entitled to vote at a meeting of stockholders duly held in
accordance with applicable state law increase (except as provided by Section 11)
the maximum number of Common Shares as to which awards may be granted under the
Plan or change the class of persons eligible to receive award under the Plan.

         (d) No termination, modification or amendment of the Plan my adversely
affect the rights conferred by any awards without the consent of the Grantee
thereof.

18. Rights as a Shareholder. Except as provided in Section 10(d) hereof, a
Grantee of an award (or any individual acquiring rights under such award from
the Grantee) shall have no rights as a shareholder with respect to any shares
covered by the award until the date of the issuance of a stock certificate for
such shares to the Grantee (or such individual). No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distribution of other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in Section 11
hereof.

19. No Rights to Employment. Nothing in the Plan or in any award granted or
Agreement entered into pursuant hereto shall confer upon any Grantee the right
to continue in the employ of, or a consultant relationship with, the Company or
any Subsidiary or to be entitled to any remuneration or benefits not set forth
in the Plan or such Agreement or to interfere with or limit in any way the right
of the Company or any of such Subsidiary to terminate such Grantee's employment.
Awards granted under the Plan shall not be affected by any change in duties or
position of a Grantee as long as such Grantee continues to be employed by, or in
a consultant relationship with, the Company or any Subsidiary.

20. Beneficiary. A Grantee may file with the Committee a written designation of
a beneficiary on such form as may be prescribed by the Committee and may, from
time to time, amend or revoke such designation. If no designated beneficiary
survives the Grantee, the executor or administrator of the Grantee's estate
shall be deemed to be the Grantee's beneficiary.

21. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of Delaware.

                                       11

<PAGE>   12

22. Effective Date and Duration of the Plan. This Plan shall be effective as of
the date determined by the Company, subject to the approval of the Plan by the
stockholders of the Company, and shall terminate on the tenth anniversary of
such date, unless earlier terminated pursuant to Section 17 hereof. No awards
shall be granted after termination of the Plan.

23. Leave of Absence. For purposes of the Plan, an individual who is on military
or sick leave or other bona fide leave of absence (such as temporary employment
by the United States or any state government) shall be considered as remaining
in the employ of the Company or of a subsidiary corporation, if any, for 90 days
or such longer period as shall be determined by the Committee.

24. Further Conditions of Exercise.

         (a) Unless prior to the exercise of an award, the Common Stock issuable
upon such exercise are the subject of a registration statement filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), and there is then in effect a prospectus filed
as part of such registration statement meeting the requirements of Section
10(a)(3) of the Securities Act, the acceptance of such award and the notice of
exercise with respect to such award shall be accompanied by a representation or
agreement deemed hereunder to have been made by the Grantee to the Company to
the effect that such shares are being acquired for investment only and not with
a view to the resale or distribution thereof, or such other documentation as may
be required by the Company, unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to comply with
the Securities Act.

         (b) Anything in subsection (a) of this Section 24 to the contrary
notwithstanding, the Company shall not be obligated to issue or sell any Common
Stock until they have been listed on each securities exchange on which the
Common Stock may then be listed until and unless, in the opinion of counsel to
the Company, the Company may issue such shares pursuant to a qualification or an
effective registration statement, or an exemption from registration, under such
state and federal laws, rules or regulations as such counsel may deem
applicable. The Company shall use reasonable efforts to effect such listing,
qualification and registration, as the case may be.

                                       12

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