Document:

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                                                                   EXHIBIT 10.40

                            ALON USA OPERATING, INC.
                        INCENTIVE STOCK OPTION AGREEMENT

      THIS AGREEMENT (this "Agreement"), effective as of July 31, 2000, is made
and entered into by and between Alon USA Operating, Inc., a Delaware corporation
(the "Corporation"), and Jeff D. Morris (the "Participant").

                                   WITNESSETH:

      WHEREAS, the Corporation has implemented the Alon USA Operating Inc. 2000
Stock Option Plan (the "Plan"), which was adopted by the Corporation's Board of
Directors (the "Board"), and which provides for the grant of stock options to
certain selected officers, directors, employees, consultants and independent
contractors of the Corporation or its subsidiaries with respect to shares of
common stock, $.01 par value, of the Corporation (the "Common Stock");

      WHEREAS, the Plan provides that certain options granted pursuant to the
Plan are intended to qualify as "incentive stock options" pursuant to Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), while certain
other options granted under the Plan will constitute non-qualified options;

      WHEREAS, the committee appointed by the Board to administer the Plan (the
"Committee") has selected the Participant to participate in the Plan and has
awarded the incentive stock option described in this Agreement (the "Option") to
the Participant;

      WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Option.

      NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements herein contained, and as an inducement to the
Participant to continue as an employee, director, consultant or independent
contractor of the Corporation or its subsidiaries and to promote the success of
the business of the Corporation and its subsidiaries, the parties hereby agree
as follows:

      1. Grant of Option. The Corporation hereby grants to the Participant, upon
the terms and subject to the conditions, limitations and restrictions set forth
in the Plan and in this Agreement, the Option to acquire 3033.4 shares of Common
Stock, at an exercise price per share of $100, effective as of the date of this
Agreement (the "Award Date"). The Participant hereby accepts the Option from the
Corporation.

      2. Vesting; Section 422 Treatment. The Option shall vest thirty (30) days
prior to the tenth anniversary date of the date of this Option Agreement (the
"Final Vesting Date") unless the vesting has been accelerated in accordance with
the provisions of Exhibit A hereto ("Accelerated Vested Shares"). The
Corporation will provide Participant written notice of the vesting of
Accelerated Vested Shares (a "Vesting

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Notice"). Participant will have ninety (90) days after the date of the Vesting
Notice in which to exercise the Accelerated Vested Share options described in
that notice, except to the extent that exercisability is delayed as provided in
Exhibit A; if not exercised within that time period, the right to exercise
options with respect to such shares will lapse and no longer be exercisable.

      The Participant is aware that the Option will be treated as an incentive
stock option (an "ISO") subject to Section 422 of the Code only if the Common
Stock obtained upon exercise of the Option is held for a period of one year
following exercise of the Option and two years following the date the Option is
granted. In addition, to the extent that the portion of the Option that first
becomes exercisable during a calendar year has an aggregate fair market value
that exceeds $100,000, ISO treatment under section 422 of the Code is available
only with respect to the first $100,000. The value of an Option for this purpose
is determined at the time the Option is granted. The Participant is aware that
if these conditions are not met, a portion of the Option will be considered to
be a non-qualified stock option and exercise will result in the recognition by
the Participant of ordinary income equal in amount to the difference between the
exercise price of the Option and the fair market value of the Common Stock
received as of the date of exercise.

            3. Exercise; Bonus Payment of Exercise Price. In order to exercise
any vested portion of the Option the Participant shall provide written notice to
the Corporation at its principal executive office. At the time of exercise, the
Participant shall pay to the Corporation the exercise price per share set forth
in Section 1 times the number of vested shares as to which the Option is being
exercised. If the Option is exercised in full, the Participant shall surrender
this Agreement to the Corporation for cancellation. If the Option is exercised
in part, the Participant shall surrender this Agreement to the Corporation so
that the Corporation may make appropriate notation hereon or cancel this
Agreement and issue a new agreement representing the unexercised portion of the
Option.

      In order to provide funding for the exercise of the Option, the
Corporation agrees that immediately upon exercise of any portion of the Option
that constitutes an ISO, the Corporation will make a bonus payment to the
Participant in an amount sufficient, on an after-tax basis, to pay the full
exercise price of such Option (the "Bonus Payment"), subject to the terms and
conditions of this Section 3. If any portion of the Bonus Payment is subject to
any federal, state and local income tax, including FICA, the Corporation shall
pay or cause to be paid to the Participant at the same time an additional amount
(the "Gross-up Payment") such that the net amount retained by the Participant,
after deduction of any federal, state and local income tax, and any FICA tax
upon the Bonus Payment and the Gross-up Payment provided for in this subsection,
shall be equal to the Bonus Payment.

      Upon the exercise by the Participant of any portion of the Option deemed
to be non-qualified, the Corporation will make a Bonus Payment to the
Participant in an amount sufficient on an after-tax-basis, to pay (i) the full
exercise price for such portion

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of the Option, (ii) an additional Bonus Payment equal to one-half the taxes
payable on the amount includible in income by the Participant as a result of his
exercise of the non-qualified portion of the Option and (iii) a Gross-up
Payment, such that the net amount retained by the Participant, after deduction
of any federal, state and local income tax, and any FICA tax upon such Bonus
Payments and the Gross-up Payment shall be equal to the sum of the Bonus
Payments. In addition, the Corporation shall at the same time lend to the
Participant (an "Option Exercise Loan"), without the payment of any interest,
the other one-half of the taxes payable with respect to the amount includible in
income as a result of such exercise. The Option Exercise Loan shall be secured
by a pledge of the Common Stock received upon exercise of the Option (the
"Pledged Shares") and shall contain customary terms and conditions assuring the
repayment of the Option Exercise Loan from any proceeds of the sale of the
Pledged Shares.

      4. Who May Exercise. The Option is exercisable during the lifetime of the
Participant only by the Participant. To the extent exercisable after the
Participant's death, the Option may be exercised only by the Participant's
representatives, executors, successors or beneficiaries.

      5. Expiration of Option. The Option will expire, and will not be
exercisable with respect to any vested portion as to which the Option has not
been exercised, on the first to occur of: (a) the tenth anniversary of the Award
Date; (b) the later of 90 days after any termination of the Participant's
employment with the Corporation for any reason other than death; or (c) or 180
days after the Participant's death. The Option will expire, and will not be
exercisable, with respect to any unvested portion, immediately upon the
termination of the Participant's employment with the Corporation for any reason,
including death. Options that vest on the Participant's termination of
employment pursuant to his employment agreement shall not be considered
"unvested" for this purpose.

      6. Tax Withholding. Any provision of this Agreement to the contrary
notwithstanding, the Corporation may take such steps as it deems necessary or
desirable for the withholding of any taxes that it is required by law or
regulation of any governmental authority, federal, state or local, domestic or
foreign, to withhold in connection with any of the shares of Common Stock
subject hereto.

      7. Dilution.

            (a) In the event that the outstanding shares of Common Stock (other
than shares held by dissenting stockholders) are changed into or exchanged for a
different number or kind of shares of stock of the Corporation or of another
corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, split-up, combination of shares or otherwise), or in the event
a stock split or stock dividend has occurred, the Corporation or its successor
will substitute for each share of Common Stock then subject to the Option the
consideration provided pursuant to Section 17 of the Plan.

                                       3

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            (b) Options to purchase up to 6,066.2 shares of Common Stock have
been issued to a group of senior executives of the Corporation that includes
Participant ("Executive Options"). To the extent that Executive Options vest and
are exercised, Participant will be issued an additional option under this
Agreement, which will be immediately exercisable, to purchase a number of
additional shares of Common Stock on the terms and conditions set forth in this
Agreement equal to the following amount: (Number of Executive Options Vested /
..97) - (Number of Executive Options Vested), rounded up to the nearest 1/10 of
one share.

      8. Transfer of Option or Shares. The Participant may not, directly or
indirectly, sell, transfer, pledge, encumber or hypothecate ("Transfer") any
unvested portion of the Option or the rights and privileges pertaining thereto.
In addition, the Participant may not, directly or indirectly, Transfer any
vested portion of the Option or any shares of Common Stock acquired upon
exercise of the Option other than (i) with the prior written consent of the
Corporation, (ii) by will or the laws of descent and distribution, (iii) with
respect to shares of Common Stock issued upon exercise of the Option, pursuant
to an effective registration statement filed under applicable federal and state
securities laws or an exemption from the registration requirements thereunder.
Any permitted transferee to whom the Participant Transfers the Option must agree
to be bound by this Agreement. Neither the Option nor the underlying shares of
Common Stock are liable for or subject to, in whole or in part, the debts,
contracts, liabilities or torts of the Participant, nor are they subject to
garnishment, attachment, execution, levy or other legal or equitable process.

      9. Certain Legal Restrictions. The Corporation is not obligated to sell or
issue any shares of Common Stock upon the exercise of the Option or otherwise
unless the issuance and delivery of such shares complies with all relevant
provisions of law and other legal requirements including, without limitation,
any applicable federal or state securities laws and the requirements of any
stock exchange upon which shares of the Common Stock may then be listed. As a
condition to the exercise of the Option or the sale by the Corporation of any
additional shares of Common Stock to the Participant, the Corporation may
require the Participant to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration
requirements of applicable federal or state securities laws. The Corporation
will not be liable for refusing to sell or issue any shares if the Corporation
cannot obtain authority from the appropriate regulatory bodies deemed by the
Corporation to be necessary to lawfully sell or issue such shares. In addition,
the Corporation has no obligation to the Participant, express or implied, to
list, register or otherwise qualify any of the Participant's shares of Common
Stock. The certificate evidencing shares of Common Stock issued to the
Participant may be legended as follows:

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF
ANY STATE OR OTHER JURISDICTION AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED OR
PLEDGED EXCEPT

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IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE APPLICABLE SECURITIES
LAWS OF ANY STATE OR OTHER JURISDICTION.

      10. Plan Incorporated. The Participant accepts the Option and this
Agreement subject to all the provisions of the Plan, which are incorporated into
this Agreement, including the provisions that authorize the Committee to
administer and interpret the Plan and which provide that the Committee's
decisions, determinations and interpretations with respect to the Plan are final
and conclusive on all persons affected thereby. Except as otherwise set forth in
this Agreement, terms defined in the Plan have the same meanings herein.

      11. Miscellaneous.

            (a) The Option is intended to be an incentive stock option under
Section 422 of the Code; provided, however, that neither the Corporation, its
directors, officers, employees or the Committee, nor any subsidiary which is in
existence or hereafter comes into existence, will be liable to the Participant
or any other person or entity if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that the Option does not
qualify for tax treatment as an incentive stock option under Section 422 of the
Code.

            (b) The rights and obligations arising under this Agreement are not
intended to and do not affect the employment relationship that otherwise exists
between the Corporation and the Participant, whether such employment
relationship is at will or defined by an employment contract. Nothing contained
in this Agreement affects any right of the Corporation to terminate the
Participant at any time, with or without cause, nor creates any rights to
employment on the part of the Participant. This Agreement is not intended to and
does not amend any existing employment contract between the Corporation and the
Participant; to the extent there is a conflict between this Agreement and such
an employment contract, the employment contract shall govern and take priority.

            (c) Neither the Participant nor any person claiming under or through
the Participant will have any of the rights or privileges of a stockholder of
the Corporation in respect of any of the shares issuable upon the exercise of
the Option unless and until certificates representing such shares have been
issued and delivered to the Participant or such Participant's agent.

            (d) All notices that are required or may be given pursuant to the
terms of this Agreement must be in writing and will be sufficient in all
respects if given in writing and delivered personally or by a recognized courier
service or by registered or certified mail, postage prepaid, to the Corporation
at its principal executive offices or to the Participant at the address set
forth below his signature hereto (or to the attention of such other person or to
such other address as either party provides to the other party by notice in
accordance with this Section). Any such notice or other communication will be

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deemed to have been given on the day it is personally delivered or delivered by
a recognized courier service as aforesaid or, if mailed, on the fifth day after
it is mailed.

            (e) Subject to the limitations in this Agreement on the
transferability by the Participant of the Option and any shares of Common Stock,
this Agreement is binding upon and inures to the benefit of the representatives,
executors, successors or beneficiaries of the parties hereto.

            (f) If any provision of this Agreement is determined to be invalid,
illegal or unenforceable, in whole or in part, then the parties will be relieved
of all obligations arising under such provision to the extent it is invalid,
illegal or unenforceable, and such provision will be reformed to the extent
necessary to make it legal and enforceable while preserving its intent or, if
that is not possible, by substituting therefor another provision that is legal
and enforceable and achieves the same objectives.

            (g) All section titles and captions in this Agreement are for
convenience only, are not part of this Agreement and in no way define, limit,
extend or describe the scope or intent of any provisions of this Agreement.

            (h) The parties shall execute all documents, provide all information
and take all such actions as may be reasonably necessary or appropriate to
achieve the purposes of this Agreement and to accomplish the transactions
contemplated hereby.

            (i) This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings relating to the subject matter hereof. This
Agreement cannot be modified or amended except in writing signed by the party
against whom enforcement is sought. No waiver by a party of any of the
provisions of this Agreement will constitute a waiver of any other provision of
this Agreement, nor will any such waiver constitute a continuing waiver.

            (j) This Agreement may be executed in multiple counterparts, all of
which together constitute one agreement binding on the parties hereto,
notwithstanding that the parties are not signatories to the same counterpart.

            (k) In addition to all other rights or remedies available at law or
in equity, the Corporation is entitled to injunctive and other equitable relief
to prevent or enjoin any violation of the provisions of this Agreement by the
Participant.

            (l) THIS AGREEMENT IS GOVERNED BY AND IS TO BE CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE AND THE UNITED
STATES, AS APPLICABLE, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAWS PROVISIONS
THAT MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

            (m) At any time and from time to time the Committee may execute an
instrument modifying, extending or renewing the Option, provided that no such

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modification, extension or renewal shall impair the Option in any respect
without the consent of the Participant.

            (n) The Participant's spouse joins this Agreement for the purpose of
agreeing to and accepting the terms of this Agreement and to bind any community
property interest he or she has or may have in the Option, any vested or
unvested portion of the Option, any shares of Common Stock acquired upon
exercise of the Option and any other shares of Common Stock held by the
Participant.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                                  ALON USA OPERATING, INC.

                                                  By: /s/ David Wiessman
                                                     ---------------------------
                                                  Name: David Wiessman
                                                       -------------------------
                                                  Title:  Chairman
                                                         -----------------------

                                                  PARTICIPANT:

                                                  /s/ Jeff D. Morris
                                                  ------------------------------
                                                  Name: Jeff D. Morris
                                                  Address:  310 W. Glade
                                                           ---------------------
                                                           Colleyville, TX 76034
                                                  ------------------------------
                                                  ------------------------------

                                                  PARTICIPANT'S SPOUSE:

                                                  /s/ Karen Morris
                                                  ------------------------------
                                                  Name: Karen Morris
                                                        ------------------------

                                       7

<PAGE>

                                    EXHIBIT A

VESTING SCHEDULE

Vesting of the Option will be accelerated from the stated Final Vesting Date in
accordance with the following terms:

Covered Entities. The Corporation's objectives which will determine the
accelerated vesting of the Option will be based upon the consolidated results of
the Corporation and each of its affiliates that are operating the Southwest
Business Unit and marketing assets of the Southeast Business Unit acquired from
FINA Oil and Chemical Company (the "Alon USA Group").

Financial Performance. The Option as to 303.3 shares of Common Stock will vest
on an accelerated basis with respect to each fiscal year of the Corporation (the
"Annual Vesting Amount") (prorated for the number of whole months in any partial
fiscal year) commencing with August 1, 2000 and ending July 31, 2006 (a total of
1819.8 shares) to the extent that the Actual Cash Flow of the Alon USA Group for
such fiscal year exceeds the Annual Target Amount for that fiscal year:

<TABLE>
<CAPTION>
                           Minimum Target
                          Amount (millions)         Annual Target Amount     Annual Plan
    Year Ending         (Actual debt service         (millions) (85% of         Amount
    December 31,              required)                 Annual Plan)          (millions)
----------------        --------------------        --------------------     -----------
<S>                     <C>                         <C>                      <C>
       2000                  $   2.8                    $   5.78               $  6.8
       2001                      6.7                       14.36                 16.9
       2002                      7.8                       15.56                 18.3
       2003                      9.3                       17.08                 20.1
       2004                      9.3                       18.62                 21.9
       2005                      9.3                       20.23                 23.8
2006 (for 7 mos.)                9.3                       12.50                 14.7
</TABLE>

Acceleration of vesting will be effective as of the last day of each year. To
the extent that any Annual Vesting Amount is not accelerated because the Annual
Target Amount has not been met for that year (a "Missed Year"), vesting of that
amount may be accelerated in the next succeeding year if, as of the end of the
next succeeding year, the total amount of Actual Cash Flow of the Corporation
for the Missed Year plus the next succeeding year exceeds the sum of the Annual
Plan Amounts for the Missed Year and the next succeeding year, provided that if
the Actual Cash Flow for any year is less than the Minimum Target Amount, then
the Annual Vesting Amount for that year will lapse and will not be available for
future vesting pursuant to this Agreement. Any Annual Vesting amount for a
Missed Year that does not vest in the next succeeding year as provided above
will lapse and will not be available for future vesting pursuant to this
Agreement unless the Board of Directors of the Corporation, in its sole
discretion, makes other provision

                                      A-1

<PAGE>

For purposes of this Agreement, "Actual Cash Flow" means an amount equal to the
Alon USA Group's consolidated net income for the fiscal year, increased by the
amount of amortization, depreciation and other non-cash charges included in
determining consolidated net income, and reduced by the greater of (i) the
actual capital expenditures of the Alon USA Group for the fiscal year or (ii)
the Planned Capital Expenditures for that year as set forth in the following
table:

<TABLE>
<CAPTION>
                                Planned Capital Expenditures
Year Ending December 31                (in millions)
-----------------------     --------------------------------
<S>                         <C>
         2000               $  1.0 (last 5 months of year)
         2001                 12.0
         2002                 16.2
         2003                 16.5
         2004                  3.2
         2005                  5.2
         2006                 15.2
         2007                  5.2 (first 7 months of year)
</TABLE>

Any amount of the anticipated $17.4 million payment to Fina with respect to the
acquisition of the Southeast Business Unit that is recorded as an expense will
also be added back to consolidated net income to determine the Actual Cash Flow.

Return of Start-Up Capital. The willingness of Alon Israel Oil Company, Ltd. and
other investors (the "Start-Up Investors") to provide the start-up capital of
the Alon USA Group is premised on the objective of returning the Corporation's
start-up capital that exceeds $10 million (the "Target Return Capital") to the
Start-Up Investors as rapidly as is possible given the Corporation's continuing
capital investment requirements and restrictions imposed by the Alon USA Group's
debt covenants. The Target Return Capital provided by the Start-Up Investors may
be provided as Common Stock, Preferred Stock or as loans subordinated to the
debt provided by the senior secured lender to the Corporation and its
Affiliates. The Target Return Capital consists of a total of [$_____] of capital
stock and [$_____] of subordinated debt.

In order to provide an incentive to the Participant to operate the Corporation
in a manner that is consistent with the objective of returning the Target Return
Capital to the Start-Up Investors, the Option as to 1213.6 shares of Common
Stock will vest (the "Target Return Capital Amount") on an accelerated basis on
the last day of the year in which occurs any of the following: (a) the date on
which the Target Return Capital is repaid in full (with pro-rata acceleration of
vesting to occur to the extent a portion of the Start-Up Capital is returned in
any year) or (b) with respect to the period beginning August 1, 2006, and ending
December 31, 2006, 252.8 shares; with respect to the calendar year 2007, 606.6
shares; and with respect to the period beginning January 1, 2008, and ending
August 1, 2008, 353.8 shares of the Target Return Capital will vest on an
accelerated basis to the extent that the Alon USA Group's Actual Cash Flow for
such year exceeds the following target amounts:

                                      A-2

<PAGE>

<TABLE>
<CAPTION>
Year Ending                  Actual Cash Flow
December 31                       Target
-----------                  ----------------
<S>                          <C>
   2006                        $  4,166,167
   2007                        $ 10,000,000
   2008                        $  5,833,333
</TABLE>

If the Actual Cash Flow Target is not met for 2006, the shares as to which
vesting does not occur in that year will be carried over to 2007 and may be
vested on an accelerated basis in that year if the total Actual Cash Flow for
2006 and 2007 combined exceeds the sum of the Actual Cash Flow Targets for 2006
and 2007 combined. If the Actual Cash Flow Target is not met for 2007, the
shares as to which vesting does not occur in that year will be carried over to
2008 and may be vested on an accelerated basis in that year if the total Actual
Cash Flow for 2007 and 2008 combined exceeds the sum of the Actual Cash Flow
Targets for 2007 and 2008 combined.

Notwithstanding the foregoing vesting provisions of Exhibit A, the Participant
shall not be entitled to exercise any vested portion of the Option during a
calendar year to the extent that the portion that first becomes exercisable in
such calendar year exceeds $100,000 in value, counting first any vested portion
of the Option carried forward from a preceding year pursuant to the following
sentence. To the extent that any vested portion of the Option is not exercisable
in a calendar year because of the $100,000 limitation, its exercisability shall
be carried forward to the next succeeding year in which it can be exercised
without exceeding the $100,000 limitation. In all events, however, any portion
of the Option that is vested or remains available for vesting shall become
exercisable thirty (30) days prior to the tenth anniversary of the date of this
Agreement, as provided in paragraph 2 of this Agreement.

Acceleration Upon Termination of Employment. If Participant's employment is
terminated without "Cause" or by the Participant for "Good Reason," as those
terms are defined in Participant's Employment Agreement, then any portion of the
Option that was previously vested but not exercisable will become immediately
exercisable on the date of Participant's termination of employment and the
vesting of any portion of the Option which as of the date of termination of
employment is available for vesting during the year of termination of employment
or in a subsequent year, will be accelerated to the date of termination of
employment according to the following schedule:

<TABLE>
<CAPTION>
 Date of Termination              Percentage Vesting
---------------------             ------------------
<S>                               <C>
  Prior to 7/31/2002                     25%
8/1/2002 to 7/31/2004                    50%
8/1/2004 to 7/31/2006                    75%
    After 8/1/2006                       90%
</TABLE>

                                      A-3

<PAGE>

                                  AMENDMENT TO
                            ALON USA OPERATING, INC.
                        INCENTIVE STOCK OPTION AGREEMENT

      This Amendment is made by and between Alon USA Operating, Inc. (the
"Corporation") and Jeff D. Morris (the "Participant") as of the 30th day of
June, 2002, effective as of July 31, 2000 (except as otherwise expressly
provided), with reference to the following facts:

      A. On July 31, 2000, the Corporation and the Participant entered into the
Alon USA Operating, Inc. Incentive Stock Option Agreement (the "Agreement")
pursuant to which the Participant was granted an option to purchase 3,033.4
shares of Common Stock of the Corporation pursuant to the Corporation's 2000
Stock Option Plan (the "Plan") on the terms and conditions set forth in the
Agreement.

      B. The Corporation intends to create a class of nonvoting common stock
designated as Class B Common Stock and has amended the Plan to provide for the
issuance of Class B Common Stock upon the exercise of options granted under the
Plan.

      C. The Corporation and the Participant wish to amend the Agreement to
reflect the Participant's acknowledgment and agreement that Class B Common Stock
will be issued upon the exercise of the option evidenced by the Agreement and to
effect the other matters set forth below.

      THEREFORE, the Agreement is amended as follows:

      1. The term "Common Stock" as used throughout the Agreement is amended to
mean the Class B Common Stock, $.01 par value per share, of the Corporation,
effective upon the filing by the Corporation of the Certificate of Amendment to
its Certificate of Incorporation that creates the nonvoting Class B Common
Stock, $.01 par value per share, of the Corporation.

      2. Section 3 of the Agreement ("Exercise; Bonus Payment of Exercise
Price") is amended by the addition of the following provision:

           For purposes of determining the amount of any Gross-Up Payment to the
       Participant under this Section, the Participant will be considered to pay
       federal, state and local income taxes at a total combined income tax rate
       of 35%.

      3. The second sentence of Section 7(b) of the Agreement ("Dilution") is
deleted from the Agreement.

      4. The paragraph in Exhibit A captioned "Financial Performance" is amended
in its entirety to read as follows:

      Financial Performance. The Option as to 303.3 shares of Common Stock will
      vest on an accelerated basis with respect to each fiscal year of the
      Corporation (the "Annual Vesting Amount") (prorated for the number of
      whole months in any partial fiscal year) commencing with August 1, 2000
      and ending July 31, 2006 (a

<PAGE>

      total of 1,819.8 shares) to the extent that the Actual Cash Flow of the
      Alon USA Group for such fiscal year exceeds the Annual Target Amount for
      that fiscal year:

      5. The paragraph in Exhibit A immediately following the table under the
caption "Financial Performance" is amended in its entirety to read as follows:

      Acceleration of vesting will be effective as of the last day of each year.
      To the extent that any Annual Vesting Amount is not accelerated because
      the Annual Target Amount has not been met for that year (a "Missed Year"),
      vesting of that amount may be accelerated in the next succeeding year if,
      as of the end of the next succeeding year, the total amount of Actual Cash
      Flow of the Corporation for the Missed Year plus the next succeeding year
      exceeds the sum of the Annual Plan Amounts for the Missed Year and the
      next succeeding year. Any Annual Vesting Amount for a Missed Year that
      does not vest in the next succeeding year as provided above will vest and
      become exercisable during the thirty (30) day period ending on the tenth
      anniversary of the date of this Agreement.

      6. The paragraph in Exhibit A captioned "Return of Start-Up Capital" and
the immediately following paragraph are amended in their entirety to read as
follows:

      Return of Start-Up Capital. The willingness of Alon Israel Oil Company,
      Ltd. and other investors (the "Start-Up Investors") to provide the
      start-up capital of the Alon USA Group is premised on the objective of
      returning the Alon USA Group's start-up capital that exceeds $10 million
      (the "Target Return Capital") to the Start-Up Investors as rapidly as is
      possible given the Corporation's continuing capital investment
      requirements and restrictions imposed by the Alon USA Group's debt
      covenants. The Target Return Capital provided by the Start-Up Investors
      may be provided as Common Stock, Preferred Stock or as loans subordinated
      to the debt provided by the senior secured lender to the Corporation and
      is Affiliates. The Target Return Capital consists of a total of $3,436,364
      of capital stock and $1,336,364 of subordinated debt.

      In order to provide an incentive to management to operate the Corporation
      in a manner that is consistent with the objective of returning the Target
      Return Capital to the Start-Up Investors, the Option as to 1,213.6 shares
      of Common Stock will vest (the "Target Return Capital Amount") on an
      accelerated basis on the last day of the year in which occurs any of the
      following: (a) the date on which the Target Return Capital is repaid in
      full (with pro-rata acceleration of vesting to occur to the extent a
      portion of the Start-Up Capital is returned in any year) or (b) with
      respect to the period beginning August 1, 2006, and ending December 31,
      2006, 252.8 shares; with respect to the calendar year 2007, 606.8 shares;
      and with respect to the period beginning January 1, 2008, and ending
      August 1, 2008, 354 shares will vest on an accelerated basis to the extent
      that the Alon USA Group's Actual Cash Flow for such year exceeds the
      following target amounts:

      IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.

                                      -2-

<PAGE>

                                                        ALON USA OPERATING, INC.

                                                        /s/ David Wiessman
                                                        ------------------------
                                                        David Wiessman

                                                        PARTICIPANT

                                                        /s/ Jeff Morris
                                                        ------------------------
                                                        Jeff Morris

                                                        PARTICIPANT'S SPOUSE

                                                        /s/ Karen Morris
                                                        ------------------------
                                                        Karen Morris

                                      -3-<PAGE>

                                                                   EXHIBIT 10.41

                       SHAREHOLDER AGREEMENT OPTION SHARES

      This Shareholder Agreement (the "Agreement") is dated as of July 31, 2000,
by and among Alon USA Operating, Inc., a Delaware corporation (the "Company"),
and Jeff D. Morris (the "Shareholder").

            WHEREAS, the Shareholder has been granted an option (the "Option")
to purchase common stock of the Company which may result in his purchase of
shares of the common stock of the Company (the "Option Shares");

            WHEREAS, it is a condition to the Company's willingness to grant the
Option to Shareholder that Shareholder enter into this Agreement to govern the
ownership of Shareholder's Option Shares;

      NOW, THEREFORE, the parties hereto agree as follows:

      1. Definitions. In addition to the definitions that appear elsewhere in
the Agreement, the following terms have the meanings specified:

            "Affiliate" of Shareholder means (i) a corporation, partnership or
other entity at least a majority of whose equity securities and voting rights
are owned (directly or indirectly) by Shareholder, Shareholder's spouse or
immediate family or a trust entirely for the benefit of Shareholder or his
spouse or immediate family, (ii) a corporation, partnership or other entity at
least a majority of whose directors or other governing body are elected or
designated by Shareholder, Shareholder's spouse or immediate family or a trust
entirely for the benefit of Shareholder or his spouse or immediate family, (iii)
a corporation, partnership or other entity whose management is otherwise
controlled by Shareholder, Shareholder's spouse or immediate family or a trust
entirely for the benefit of Shareholder or his spouse or immediate family or
(iv) a person that is controlled by, under common control with, or controls,
Shareholder.

            "Capital Stock" means common stock of the Company acquired by the
Shareholder pursuant to the exercise of the Option, and will also include any
other equity securities of the Company or any successor to the Company that the
Shareholder may receive in consideration of, or in exchange for, any Option
Shares.

            "Cost" as applied to Capital Stock means the amount actually paid by
Shareholder for such Capital Stock (including any Capital Stock from which it
may have been converted or exchanged), which will include with respect to the
purchase of Option Shares the exercise price paid to the Company by Shareholder
directly or constructively through the receipt of a cash bonus payment applied
to the payment of such exercise price.

            "Equity Value" as applied to Capital Stock means the stockholders'
equity of the Company allocable to a share of Common Stock, based on the last
regularly prepared quarterly balance sheet of the Company released prior to the
date that the Equity

<PAGE>

Value is required to be determined, adjusted by adding back (i) the amounts of
any dividends or distributions paid to holders of Capital Stock from the date of
organization of the Company to date of determination of Equity Value (excluding
any dividends or distributions as to which the Shareholder receives his
proportionate share) and (ii) the amount of any Shareholder Subordinated Debt.
Shareholder Subordinated Debt means debt of the Company owed to stockholders of
the Company that was created in connection with the acquisition by the Company
and its affiliates of the Southwest Business Unit and marketing assets of the
Southeast Business Unit from FINA Oil and Chemical Company to the extent that
the amount of such Shareholder Subordinated Debt plus the amount of equity
contributions made to the capital of the Company, combined with the equity
contributions and shareholder subordinated debt contributed to Alon Assets, Inc.
does not exceed $20 million.

            "Fair Market Value" of a share of the Company's Capital Stock means,
with respect to any purchase or sale of shares of Capital Stock owned by
Shareholder, any appraised value determined within the prior six months pursuant
to this Agreement or any comparable agreement with a member of the Company's
management, or if no such appraisal has been prepared, the fair market value of
such Capital Stock determined in good faith by agreement of Shareholder and the
Board of Directors of the Company within thirty (30) days after the occurrence
of the event requiring the valuation of Shareholder's Capital Stock (a
"Valuation Event"). If (i) the Board of Directors of the Company and Shareholder
are unable to determine the Fair Market Value of a share of Capital Stock within
thirty (30) days after the occurrence of the Valuation Event or (ii) the
Shareholder (or Interested Party) selling shares of Capital Stock pursuant to a
Valuation Event disagrees in good faith with the Fair Market Value set by the
Board of Directors as contemplated above (each of the foregoing (i) and (ii)
being referred to herein as a "Revaluation Event"), then for a period of 30 days
after notice of such Revaluation Event provided by any party to the proposed
purchase or sale of Capital Stock (the "Negotiation Period"), each party to such
proposed purchase or sale shall negotiate in good faith to reach agreement upon
the Fair Market Value of such securities or property, as of the date of the
Valuation Event. In the event that the parties are unable to agree upon the Fair
Market Value of such securities or other property by the end of the Negotiation
Period, then the Fair Market Value of such securities or property will be
determined for purposes of this Agreement by an independent regionally or
nationally recognized investment bank, accounting firm or business valuation
company agreed upon by the parties to the proposed purchase and sale (the
"Appraiser") and whose appraisal of the Fair Market Value of the Capital Stock
to be sold will be conclusive and binding on all parties to this Agreement. If
the parties to the proposed purchase and sale cannot agree upon an Appraiser,
then the sellers, as a group, and the Company, as the purchaser, shall each
select an independent nationally or regionally recognized Appraiser and the two
Appraisers so selected shall then select another nationally or regionally
recognized investment bank, accounting firm or business valuation company, which
shall serve as the Appraiser. Fair Market Value of each share of Capital Stock
at a time when (i) the Company is not a reporting company under the Securities
Exchange Act of 1934 and (ii) such common stock is not traded in the organized
securities markets, will, in all cases, be calculated by determining the Fair
Market Value of the entire Company taken as a whole

                                       2

<PAGE>

(including the assumed exercise of all options and other rights to acquire
common stock having an exercise price per share of common stock less than the
Fair Market Value thereof) and dividing that value by the sum of (x) the number
of shares of common stock then outstanding plus (y) the number of shares of
common stock then issuable upon exercise of outstanding options and other rights
to acquire common stock having an exercise price per share less than the Fair
Market Value thereof, without premium for control or liquidation preference or
discount for minority interests, illiquidity, or restrictions on transfer. The
costs of the Appraiser will be borne equally by the person requiring the
appraisal and by the Company. In the case of determinations of Fair Market Value
of securities convertible into common stock, such determination shall be made
based upon the Fair Market Value of the shares of common stock into which such
securities are convertible. For purposes of determining Fair Market Value under
this Agreement, subordinated loans made to the Company and its affiliates at the
time of closing of the Alon/Fina Transaction will be considered to be
shareholders' equity and not debt.

            "Implied Value" as applied to Capital Stock means the Cost of such
Capital Stock plus an implied 25% return on Cost, compounded annually, from the
date of payment by Shareholder of such Cost and ending on the date that Implied
Value is required to be determined.

            "Interested Party" means each Person who, as a result of an
Involuntary Transfer, has an interest in Capital Stock previously owned by
Shareholder, including (as applicable) the Shareholder's estate, personal
representative, former spouse or successor.

            "Involuntary Transfer" means any transfer of Capital Stock owned by
Shareholder that results from (a) the attachment, sequestration, garnishment or
other similar involuntary transfer resulting from a bankruptcy or similar
proceeding affecting Shareholder; (b) the involuntary dissolution of
Shareholder; or (c) a Marital Relationship Transfer.

            "Marital Relationship Transfer" means a transfer incident to the
divorce of the Shareholder or the death of the Shareholder's spouse under
circumstances in which the Shareholder does not succeed to the spouse's interest
(if any) in any Capital Stock.

            "Person" means any individual, corporation, partnership, trust or
other entity.

            "Voluntary Transfer" means any sale, pledge or other transfer of
Capital Stock by Shareholder, except (a) a transfer to Shareholder's spouse or
immediate family or a trust entirely for the benefit of Shareholder or his
spouse or immediate family; (b) a transfer to an Affiliate of Shareholder, but
only if and for so long as Shareholder retains all voting rights with respect to
such Capital Stock and such transferee continues to be an Affiliate of
Shareholder; and (c) an Involuntary Transfer. If a transfer is effected pursuant
to clause (b) of the preceding sentence, and the Shareholder loses his voting
rights or the transferee

                                       3

<PAGE>

ceases to be an Affiliate of such Shareholder, then an Involuntary Transfer will
be deemed to have occurred.

      2. Voluntary Transfers. If Shareholder intends to seek or effect a
Voluntary Transfer of Capital Stock, the Company will have the right to
participate in such sale or transfer on the following terms:

      (a) Notice of Sale. The Shareholder will deliver a written notice (the
"Notice of Sale") to the Company. The Notice of Sale will include (i) a
statement of the Shareholder's bona fide intention to sell or transfer Capital
Stock; (ii) the name and address of the proposed transferee (the "Buyer"), if
any Buyer has been identified; (iii) the type and number of shares of Capital
Stock to be sold or transferred (the "Offered Shares"); (iv) the per share
purchase price, which must be stated in cash; and (v) the other material terms
and conditions of the proposed sale.

      (b) Company's Option. The Notice of Sale will constitute an irrevocable
offer by the Shareholder to sell to the Company all or any portion of the
Offered Shares, on the same per share terms and conditions stated in the Notice
of Sale. The Company may elect to accept such offer in whole or in part only by
delivering to the Selling Shareholder written notice of its irrevocable election
to accept such offer within 30 days after delivery of the Notice of Sale (the
"Purchase Notice").

      (c) Closing. If the Company elects to purchase Offered Shares pursuant to
Section 2(b), the closing of the purchase and sale will occur on the 30th day
following the date of the Purchase Notice (or such earlier date as may be agreed
among the parties). At such closing, the Company will deliver (by wire transfer
or cashier's check, or as otherwise specified in the Notice of Sale) the
consideration payable to the order of the Shareholder, against delivery by the
Shareholder of certificates evidencing the Offered Shares being so purchased,
free and clear of all liens, claims and encumbrances (other than this
Shareholder Agreement) and endorsed in good form for transfer.

      3. Involuntary Transfers. Upon any Involuntary Transfer of Capital Stock
affecting Shareholder (the "Former Shareholder"), each Interested Party will
comply with the following provisions:

      (a) Notice of Involuntary Transfer. The Interested Party will deliver a
written notice (the "Notice of Involuntary Transfer") to the Company (and, in
the case of a Marital Relationship Transfer, to the Former Shareholder) no later
than 30 days after such Involuntary Transfer. The Notice of Involuntary Transfer
will include (i) a description of the circumstances resulting in the Involuntary
Transfer; (ii) the name and address of each Interested Party; and (iii) the type
and number of shares of Capital Stock subject to such Involuntary Transfer (the
"Subject Shares").

      (b) Former Shareholder's Option. In the case of a Marital Relationship
Transfer, the Notice of Involuntary Transfer will constitute an irrevocable
offer by the Interested Party to sell all or any portion of the Subject Shares
to the Former Shareholder, at a price

                                       4

<PAGE>

equal to the greater of Equity Value or Implied Value, if the Involuntary
Transfer occurs prior to August 1, 2010, and at Fair Market Value if the
Involuntary Transfer occurs thereafter. The Former Shareholder may elect to
accept such offer in whole or in part only by delivering to the Interested Party
and the Company written notice of its irrevocable election to accept such offer
within 30 days after delivery of the Notice of Involuntary Transfer. If the
Former Shareholder does not accept such offer within such 30-day period with
respect to all of the Subject Shares, then the Company will have the option,
pursuant to Section 3(c), to purchase any remaining Subject Shares.

      (c) Company's Option. The Notice of Involuntary Transfer will constitute
an irrevocable offer by the Interested Party to sell to the Company all or any
portion of the Subject Shares that is not purchased by the Former Shareholder
pursuant to Section 3(b), at a price equal to the greater of Equity Value or
Implied Value, if the Involuntary Transfer occurs prior to August 1, 2010, and
at Fair Market Value if the Involuntary Transfer occurs thereafter. The Company
may elect to accept such offer in whole or in part only by delivering to the
Interested Party written notice of its irrevocable election to accept such offer
within 60 days after delivery of the Notice of Involuntary Transfer. Any Former
Shareholder or Interested Party or affiliate thereof who is a member of the
Company's Board of Directors will abstain from voting on the proposed purchase
of the Subject Shares.

      (d) Closing. If the Former Shareholder or the Company elects to purchase
Capital Stock pursuant to this Section 3, the closing of the purchase and sale
will occur on the 90th day following delivery of the Notice of Involuntary
Transfer (or such earlier date as may be agreed among the parties). At the
closing, the Former Shareholder or the Company (as applicable) will deliver by
wire transfer or cashier's check the consideration payable to the order of the
Interested Party, against delivery by the Interested Party of certificates
evidencing the Subject Shares being so purchased, free and clear of all liens,
claims and encumbrances (other than this Shareholder Agreement) and endorsed in
good form for transfer.

      4. Call Option of the Company.

      (a) Initiation of Option. Beginning on the first date that the Shareholder
is no longer employed by any corporation, limited partnership, general
partnership, limited liability company or other business entity that is
controlled by Alon Israel Oil Company, Ltd., including, without limitation, Alon
USA Operating, Inc. and Alon Assets, Inc. (the "Separation Date"), the Company
will have the right to purchase (the "Call Right") any or all of the shares of
Capital Stock of the Shareholder in accordance with the terms and conditions of
this Section 4. The Company's Call Right may be exercised at any time within one
year following the Separation Date by delivering a written notice (the "Call
Notice") to the Shareholder, which will set forth the Company's irrevocable
undertaking to purchase the number of shares of Capital Stock stated in the Call
Notice at the Call Price per share stated therein, which shall be determined
pursuant to this Section 4, and setting forth the Company's calculation of the
Call Price together with supporting documentation of such calculation. The
Shareholder agrees to sell his Capital Stock to

                                       5

<PAGE>

the Company upon the delivery of a Call Notice on the terms and conditions set
forth in this Section 4.

      (b) Price of Capital Stock. The "Call Price" to be paid for the
Shareholder's Capital Stock will be determined as follows:

            (i) If the Shareholder's employment is terminated for "Cause" as
      defined in his Employment Agreement, or resigns, other than for "Good
      Reason" as defined in his Employment Agreement, the Call Price paid by the
      Company for the Capital Stock will be an amount equal to $1 per share.

            (ii) If the Shareholder's employment has terminated due to death or
      disability, the Call Price paid by the Company for the Capital Stock will
      be the greater of Implied Value or Equity Value.

            (iii) Prior to August 1, 2010, if the Shareholder's employment is
      terminated without "Cause" or by the Shareholder for "Good Reason," the
      Call Price paid by the Company for the Capital Stock will be the greater
      of Implied Value or Equity Value.

            (iv) After July 31, 2010, if the Shareholder's employment is
      terminated without "Cause" or by Shareholder for any reason, the Call
      Price paid by the Company for the Capital Stock will be Fair Market Value.

      (c) Closing. The closing of the purchase and sale contemplated by this
Section 4 will occur on the 30th day following delivery of the Call Notice (or
such earlier date as may be agreed among the parties). At such closing, the
Company will deliver the Call Price to the Shareholder in cash against delivery
by the Shareholder of certificates evidencing the Capital Stock being purchased,
free and clear of all liens, claims and encumbrances (other than this
Shareholder Agreement) and endorsed in good form for transfer.

      5. Put Option of the Shareholder.

      (a) Initiation of Option. After the Shareholders' Separation Date, the
Shareholder or the Shareholder's representative, in the event of the
Shareholder's death, will have the right to require the Company to purchase (the
"Put Right") any or all of the shares of Capital Stock of the Shareholder in
accordance with the terms and conditions of this Section 5. The Shareholder's
right to require the Company to purchase the Capital Stock may be exercised at
any time within one year following the Separation Date by delivering a written
notice (the "Put Notice") to the Company, which will set forth the Shareholder's
irrevocable undertaking to sell to the Company the number of shares of Capital
Stock stated in the Put Notice at the price per share determined as set forth in
this Section 5, and stating the Shareholder's calculation of the Put Price and
providing supporting documentation of such calculation. The Company agrees to
purchase Capital

                                       6

<PAGE>

Stock from the Shareholder upon the delivery of a Put Notice on the terms and
conditions set forth in this Section 5.

      (b) Price of Capital Stock. The "Put Price" to be paid for the
Shareholder's Capital Stock will be determined as follows:

            (i) If the Shareholder's employment is terminated for "Cause" as
      defined in his Employment Agreement, or resigns, other than for "Good
      Reason" as defined in his Employment Agreement, the Put Price paid by the
      Company for the Capital Stock will be an amount equal to $1 per share.

            (ii) If the Shareholder's employment has terminated due to death or
      disability, the Put Price paid by the Company for the Capital Stock will
      be the greater of Implied Value or Equity Value.

            (iii) Prior to August 1, 2010, if the Shareholder's employment is
      terminated without "Cause" or by the Shareholder for "Good Reason," the
      Put Price paid by the Company for the Capital Stock will be the greater of
      Implied Value or Equity Value.

            (iv) After July 31, 2010, if the Shareholder's employment is
      terminated without "Cause" or by Shareholder for any reason, the Put Price
      paid by the Company for the Capital Stock will be Fair Market Value.

      (c) Closing. The closing of the purchase and sale contemplated by this
Section 5 will occur on the 30th day following delivery of the Put Notice (or
such earlier date as may be agreed among the parties). At such closing, the
Company will deliver the Put Price to the Shareholder in cash, or if otherwise
provided below, by delivery of cash and a promissory note, against delivery by
the Shareholder of certificates evidencing the Capital Stock being purchased,
free and clear of all liens, claims and encumbrances (other than this
Shareholder Agreement) and endorsed in good form for transfer.

      If the Put Right is exercised:

      (i) after Shareholder's employment is terminated for "Cause" as defined in
his Employment Agreement, or Shareholder has resigned, other than for "Good
Reason" as defined in his Employment Agreement, or

      (ii) at a time at which the Company is in default under the terms of its
obligations to its senior secured lender or if the Company's payment of annual
cash bonuses under the Alon USA Annual Cash Bonus Plan for the preceding fiscal
year was less than 50% of Shareholder's Target Bonus Amount (as such terms are
defined in that plan) or it is determined by the Board of Directors of the
Company in good faith that it is reasonably likely that Shareholder's bonus for
the year of exercise of the Put Right would be less than 50% of Shareholder's
Target Bonus Amount,

                                       7

<PAGE>

then the Company may elect to pay the Put Price by delivering to Shareholder
cash equal to 25% of the Put Price and a promissory note of the Company payable
to the order of the Shareholder in a principal amount of 75% of the Put Price,
bearing interest at a rate of 8% per annum, payable quarterly, and payable in
three equal annual installments of principal on the first, second and third
anniversary dates of issuance.

            6. Take-Along Right.

      (a) Right to Include Shares. In the event that more than fifty percent
(50%) of the issued and outstanding shares of Capital Stock of the Company are
transferred by the shareholders of the Company for consideration to a third
party not affiliated with such shareholders, the Company will provide
Shareholder with the right (the "Take-Along Right") to require such third party
to purchase from Shareholder up to a percentage of the number of total shares of
Capital Stock held by Shareholder equal to the number derived by multiplying the
(x) total number of shares of Capital Stock of the Company that the third party
will acquire by (y) a fraction, the numerator of which shall be the total number
of shares of Capital Stock owned by Shareholder, and the denominator of which
shall be the total number of shares of Capital Stock owned by each shareholder
of the Company participating in such transaction. The Company shall deliver
written notice to Shareholder (the "Take-Along Notice"), which written notice
shall specify the price and the terms and conditions on which the proposed
transaction is to take place. Any shares of Capital Stock purchased from the
Executive pursuant to this Section 6 shall be at the same price per share and
upon the same terms and conditions as apply to each other shareholder of the
Company participating in such transaction (it being agreed that reasonable
compensation received or to be received by any stockholder pursuant to arms-
length negotiation in respect of services to be rendered by it shall not be
deemed direct payment for shares of Capital Stock sold by it).

      (b) Exercise of Right. The Take-Along Right may be exercised by
Shareholder by delivery of a written notice to the Company (the "Acceptance
Notice") within twenty (20) calendar days following the receipt of the
Take-Along Notice. The Acceptance Notice shall state the number of shares of
Capital Stock that the Executive proposes to include in such transfer to the
third party, determined as aforesaid, plus the number of additional shares of
Capital Stock, if any, that Shareholder would be willing to sell to the third
party. It shall be a condition precedent to the transfer of shares of Capital
Stock to the third party that it purchase from Shareholder the shares of Capital
Stock tendered by Shareholder on the same economic terms and conditions as it
purchases shares of Capital Stock from other shareholders of the Company.

      (c) Further Assurances. Notwithstanding anything to the contrary contained
herein, the exercise of the Take-Along Right shall be conditioned upon the
agreement by Shareholder to execute any customary agreement, certificate or
other document required to be executed in connection with such transfer;
provided, however, that Shareholder shall only be required to give
representations or warranties or make covenants with respect to the title,
ownership, and delivery of the shares of Capital Stock owned by Shareholder,
including the authority to transfer such shares of Capital Stock but in no

                                       8

<PAGE>

event shall Shareholder be required to make representations and warranties more
extensive than those given by other participating shareholders or to provide
indemnities (other than with respect to such limited representation and
warranties) disproportionate (based upon the percentage of sales proceeds to be
received) to those provided by other participating shareholders. Failure of
Shareholder to comply with the provisions of this Section 6(c) shall constitute
a breach of this Agreement and a waiver of the Take-Along Right hereunder.

      7. Restrictions on Transfer and Pledge. No sale, pledge or other transfer
of Capital Stock by Shareholder, whether voluntary or involuntary, will be valid
or effective (a) unless effected in compliance with the terms of this Agreement
and (b) until the transferee executes an addendum agreement substantially in the
form of Exhibit A hereto (an "Addendum Agreement"). The Company will not issue
or record the transfer of any Capital Stock unless the purchaser executes an
Addendum Agreement agreeing to be bound by the terms and conditions of this
Agreement applicable to the Shareholder. Shareholder hereby agrees with the
Company that each certificate representing Capital Stock will bear substantially
the following legend:

      THE TRANSFER OF ANY SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
      RESTRICTED BY THE TERMS OF A SHAREHOLDER AGREEMENT BETWEEN ALON USA
      OPERATING, INC. (THE "COMPANY") AND THE HOLDER OF THIS CERTIFICATE, A COPY
      OF WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE.

In addition, Capital Stock may not be sold, pledged or otherwise transferred in
the absence of an effective registration statement pertaining thereto under the
Securities Act of 1933, as amended, and all applicable regulations promulgated
thereunder (the "Federal Act"), and under any applicable state securities laws
and all applicable regulations promulgated thereunder (the "State Acts"), or an
exemption from the registration requirements of the Federal Act and all
applicable State Acts

            8. Miscellaneous

            (a) Termination of Agreement. This Agreement will terminate upon the
closing of an underwritten public offering of the Company's common stock.

            (b) Notices. All notices and other communications hereunder must be
in writing and will be deemed to have been duly given when delivered personally
or sent by overnight delivery service or facsimile transmission or five days
after being mailed by certified mail (return receipt requested) (i) to the
Company at its principal executive offices or (ii) to Shareholder at his address
set forth below his signature to this Agreement.

            (c) Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any applicable law, then provision will
be deemed to be modified to the extent necessary to render it legal, valid and
enforceable, and if no such modification will render it legal, valid and
enforceable, then this Agreement will be

                                       9

<PAGE>
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties will be construed and enforced accordingly.

            (d) CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF TEXAS.

            (e) Counterparts. This Agreement may be executed in any number of
counterparts, and all such counterparts will be deemed an original, will be
construed together and will constitute one and the same instrument.

            (f) Complete Agreement. This Agreement embodies the complete
agreement and understanding among the parties with respect to the subject matter
hereof and supersedes and preempts any prior written, or prior or
contemporaneous oral, understandings, agreements or representations by or among
any of the parties that may have related to the subject matter hereof in any
way.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.

                                              ALON USA OPERATING, INC.

                                              By: /s/ David Wiessman
                                                  ------------------------------
                                              Name: David Wiessman
                                                    ----------------------------
                                              Title: Chairman
                                                     ---------------------------
                                              SHAREHOLDER:

                                              /s/ Jeff D. Morris
                                              ----------------------------------
                                              Name:

                                              Address: 310 W. Glade
                                                       -------------------------
                                                       Colleyville, TX 76034
                                              ----------------------------------
                                              ----------------------------------

                                       10

<PAGE>

SPOUSAL CONSENT

      I acknowledge that I have read the foregoing Shareholder Agreement (the
"Agreement") between ALON USA Operating, Inc. (the "Company") and my spouse,
that I understand its provisions, that I consent thereto and that I agree to be
bound by its terms. I am aware that by its terms, among other things, my spouse
agrees to sell certain of his or her shares of the capital stock of the Company,
including my community property or other interest therein (if any), upon certain
other events and that transfer of such shares is otherwise restricted. 1 hereby
consent to such sale and to such restrictions, approve of the provisions of the
Agreement, and agree that if I pre-decease my spouse, the successors of my
community property or other interest (if any) in such shares will hold such
shares subject to the provisions of the Agreement. I am also aware of, and
hereby consent to, the rights granted to my spouse and the other parties to the
Agreement to purchase any shares of the Company's capital stock that I may
acquire by virtue of an Involuntary Transfer (as defined in the Agreement),
including without limitation any shares that may be awarded or distributed to me
in any dissolution, divorce, legal separation or other similar proceeding.

Dated: 8-12-00                                             /s/ Karen Morris
                                                           ---------------------
                                                           Signature of Spouse)

                                                           Karen Morris
                                                           ---------------------
                                                               (Printed Name)

                                       11

<PAGE>

Exhibit A

                    ADDENDUM TO BUY/SELL AND VOTING AGREEMENT

      Reference is made to the Shareholder Agreement, dated as
of__________________, 2000, between ALON USA Operating, Inc., a Delaware
corporation (the "Company"), and the Shareholder identified therein (the
"Agreement"). Capitalized terms used herein have the meanings assigned to such
terms in the Agreement.

      The undersigned hereby agrees to become a party to the Agreement and to be
bound by and to observe and perform all obligations of "Shareholder" thereunder
with respect to all Capital Stock now owned or hereafter acquired by the
undersigned. If the undersigned is a natural person who is married, the spouse
of the undersigned has also executed this Addendum in the space provided below.

      This Addendum will be attached to and become part of the Agreement and
will be binding upon and inure to the benefit of the Company and each other
Shareholder.

                                                   SHAREHOLDER:

                                                   /s/ Jeff D. Morris
                                                   -----------------------------
                                                   Name: Jeff Morris
                                                   Date: 8-10-00

      I acknowledge that I have read the foregoing Addendum and the Agreement,
that I understand its provisions, that I consent thereto and that I agree to be
bound by its terms. I am aware that by its terms, among other things, my spouse
agrees to sell certain of his or her shares of the capital stock of the Company,
including my community property or other interest therein (if any), upon certain
other events and that transfer of such shares is otherwise restricted. I hereby
consent to such sale and to such restrictions, approve of the provisions of the
Agreement, and agree that if I pre-decease my spouse, the successors of my
community property or other interest (if any) in such shares will hold such
shares subject to the provisions of the Agreement. I am also aware of, and
hereby consent to, the rights granted to my spouse and the other parties to the
Agreement to purchase any shares of the Company's capital stock that I may
acquire by virtue of an Involuntary Transfer (as defined in the Agreement),
including without limitation any shares that may be awarded or distributed to me
in any dissolution, divorce, legal separation or other similar proceeding.

Dated: 8-12-00                                             /s/ Karen Morris
                                                           ---------------------
                                                           Signature of Spouse)

                                                           Karen Morris
                                                           ---------------------
                                                               (Printed Name)

<PAGE>

                                  AMENDMENT TO
                              SHAREHOLDER AGREEMENT
                                  OPTION SHARES

      This Amendment is made as of June 30, 2002, by and among Alon USA
Operating, Inc., a Delaware corporation (the "Company"), and Jeff Morris (the
"Shareholder").

      WHEREAS, the Company and Shareholder entered into that certain Shareholder
Agreement - Option Shares dated as of July 31, 2000 (the "Shareholder
Agreement"), which set forth the rights and obligations of the Company and
Shareholder with respect to shares of common stock of the Company to be acquired
by Shareholder pursuant to the exercise of stock options; and

      WHEREAS, it is necessary to amend the Shareholder Agreement in order for
the Company to obtain favorable accounting treatment for such stock options.

      NOW, THEREFORE, the parties agree as follows:

      1. The first sentence of Section 2 of the Shareholder Agreement
("Voluntary Transfers") is deleted and replaced by the following three
sentences:

      Shareholder may not effect a Voluntary Transfer of Capital Stock until he
      has held the Capital Stock for a period of at least six months. No
      Voluntary Transfer of Capital Stock prior to the expiration of such
      six-month holding period will be made or recorded on the books of the
      Company, and any such Voluntary Transfer will be void and of no effect.
      If, following the expiration of such six-month holding period, Shareholder
      intends to seek or effect a Voluntary Transfer of Capital Stock, the
      Company will have the right to participate in such sale or transfer on the
      following terms:

      2. The first sentence of Section 4(a) of the Shareholder Agreement ("Call
Options of the Company - Initiation of Option") is amended in its entirety to
read as follows:

      Beginning on the first date that the Shareholder both (i) is no longer
      employed by any corporation, limited partnership, general partnership,
      limited liability company or other business entity that is controlled by
      Alon Israel Oil Company, Ltd., including, without limitation, Alon USA
      Operating, Inc. and Alon Assets, Inc. (the "Separation Date") and (ii) has
      held shares of Capital Stock for at least six months, the Company will
      have the right to purchase (the "Call Right") any or all of such shares of
      Capital Stock in

<PAGE>

      accordance with the terms and conditions of this Section 4; provided,
      however, that the Company will not have the right to initiate the purchase
      such shares of Capital Stock if the Shareholder's Separation Date is prior
      to August 1, 2010, and his employment is terminated by his employer
      without "Cause" as defined in his Employment Agreement or by the
      Shareholder for "Good Reason" as defined in his Employment Agreement.

      3. Paragraph (iii) of Section 4(b) of the Shareholder Agreement ("Call
Option of the Company - Price of Capital Stock") is deleted from the Shareholder
Agreement, and paragraph (iv) of such Section 4(b) is renumbered as paragraph
(iii).

      4. The first sentence of Section 5(a) of the Shareholder Agreement ("Put
Option of the Shareholder - Initiation of Option") is deleted from the
Shareholder Agreement and is replaced by the following two sentences:

      Except as provided in the immediately following sentence, after the
      Shareholders' Separation Date, the Shareholder or the Shareholder's
      representative, in the event of the Shareholder's death or disability,
      will have the right to require the Company to purchase (the "Put Right")
      any or all of the shares of Capital Stock of the Shareholder in accordance
      with the terms and conditions of this Section 5, provided the Shareholder
      (including the Shareholder's representative, if applicable) has held such
      shares of Capital Stock for at least six months. Notwithstanding the
      preceding sentence, the Shareholder will not have the right to require the
      Company to purchase any shares of Capital Stock if the Shareholder's
      Separation Date is prior to August 1, 2010, and his employment is
      terminated by his employer without "Cause" as defined in his Employment
      Agreement or by the Shareholder for any reason other than death or
      disability.

      5. Paragraph (i) of Section 5(b) of the Shareholder Agreement ("Put Option
of the Shareholder - Price of Capital Stock") is amended in its entirety to read
as follows:

            (i) If the Shareholder's employment is terminated for "Cause" as
      defined in his Employment Agreement, the Put Price paid by the Company for
      the Capital Stock will be an amount equal to $1 per share.

      6. Paragraph (iii) of Section 5(b) of the Shareholder Agreement ("Put
Option of the Shareholder - Price of Capital Stock") is deleted from the
Shareholder Agreement, and paragraph (iv) of such Section 5(b) is renumbered as
paragraph (iii).

                                       2

<PAGE>

      IN WITNESS WHEREOF, the parties have cause this Amendment to be executed
and delivered as of the date first written above.

                                                  ALON USA OPERATING, INC.

                                                  By /s/ David Wiessman
                                                     ---------------------------
                                                     Name: David Wiessman

                                                  SHAREHOLER

                                                  /s/ Jeff Morris
                                                  ------------------------------
                                                  Jeff Morris

                                       3

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