Document:

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                                                                   EXHIBIT 10.3

                                   EXHIBIT "E"

                                 FORM OF WARRANT

NEITHER THIS WARRANT NOR ANY SECURITIES WHICH MAY BE ISSUED UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION. THIS WARRANT AND SUCH UNDERLYING SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, OFFERED, PLEDGED, HYPOTHECATED, RENOUNCED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH
APPLICABLE LAWS OF ANY FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH
FOREIGN JURISDICTION LAWS HAVE BEEN SATISFIED.

Warrant No. 001                                               September 22, 2000

                                     Warrant

                  EXCO Resources, Inc., a Texas corporation (the "Company"), for
value received, hereby certifies that Central Resources, Inc., a Colorado
corporation (the "Investor") or its registered assigns (collectively, the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, shares of the Company's common stock, par value $0.02
per share (the "Common Stock"), at an exercise price of Eleven Dollars ($11.00)
per share. This Warrant may be exercised at any time after the date hereof (the
"Original Issue Date") and on or before the Expiration Date (as defined in
Section 7 below). The shares purchasable upon exercise of this Warrant, and the
purchase price per share will be adjusted from time to time pursuant to the
provisions of this Warrant and are hereinafter referred to as the "Warrant
Stock" and the "Purchase Price," respectively.

                  This Warrant is issued pursuant to, and is subject to the
terms and conditions of that certain Purchase and Sale Agreement, dated August
31, 2000, by and between the Company and the Investor.

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                  1. Number of Shares. Subject to the terms and conditions
hereinafter set forth, the Registered Holder is entitled, upon surrender of this
Warrant, to purchase from the Company up to TWO HUNDRED THOUSAND (200,000)
shares of Common Stock (subject to adjustment as provided herein).

                  2.       Exercise.

                           (a) Manner of Exercise. This Warrant may be exercised
by the Registered Holder, in whole or in part, by surrendering this Warrant,
with the purchase form attached hereto as Exhibit 1 duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, or wire transfer.

                           (b) Effective Time of Exercise. Each exercise of this
Warrant will be deemed to have been effected immediately prior to the close of
business on the day on which this Warrant is surrendered to the Company as
provided in Section 2(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock is or are issuable upon such
exercise as provided in Section 2(c) below will be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.

                           (c) Delivery to Holder. As soon as practicable after
the exercise of this Warrant in whole or in part, and in any event within ten
(10) days thereafter, the Company at its expense shall cause to be issued in the
name of, and delivered to, the Registered Holder, or as such Registered Holder
(upon payment by such Registered Holder of any applicable transfer taxes) may
direct:

                                 (i) a certificate or certificates for the
number of shares of Warrant Stock to which such Registered Holder is entitled;
and

                                 (ii) in case such exercise is in part only, a
new warrant or warrants (dated the Original Issue Date) of like tenor, calling
in the aggregate on the face or faces thereof for the number of shares of
Warrant Stock equal to the number of such shares called for on the face of this
Warrant (without giving effect to any adjustment therein) minus the number of
such shares purchased by the Registered Holder upon such exercise as provided in
Section 2(a) above.

                           (d) No Fractional Shares. No fractional shares of
Common Stock shall be issued upon any exercise of this Warrant, but, in lieu
thereof, there shall be paid an amount in cash equal to the same fraction of the
closing price of a whole share of Common Stock of the Company on the business
day preceding the day of exercise.

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                  3.       Adjustments.

                           (a) Stock Splits and Dividends. If outstanding shares
of the Company's Common Stock are subdivided into a greater number of shares or
a dividend in Common Stock is paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend will simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock are combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination will,
simultaneously with the effectiveness of such combination, be proportionately
increased. When any adjustment is required to be made in the Purchase Price, the
number of shares of Warrant Stock purchasable upon the exercise of this Warrant
will be changed to the number determined by dividing (i) an amount equal to the
number of shares issuable upon the exercise of this Warrant immediately prior to
such adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after such
adjustment.

                           (b) Reclassification, Etc. In case there occurs any
reclassification or change in the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization on or after the Original Issue
Date, then and in each such case the Registered Holder, upon the exercise hereof
at any time after the consummation of such reclassification, change, or
reorganization will be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such Registered
Holder would have been entitled upon such consummation if such Registered Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment pursuant to the provisions of this Section 3.

                           (c) Adjustment Certificate. When any adjustment is
required to be made in the Warrant Stock or the Purchase Price pursuant to this
Section 3, the Company shall promptly mail to the Registered Holder a
certificate setting forth (i) a brief statement of the facts requiring such
adjustment, (ii) the Purchase Price after such adjustment and (iii) the kind and
amount of stock or other securities or property into which this Warrant will be
exercisable after such adjustment.

                    4.     Transfers.

                           (a) Unregistered Security. Each Registered Holder of
this Warrant acknowledges that this Warrant and the Warrant Stock of the Company
have not been registered under the Securities Act, and agrees not to sell,
pledge, distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Stock issued upon its exercise in the absence of (i) an
effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant

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or such Warrant Stock under any applicable U.S. federal or state securities law
then in effect, or (ii) an opinion of counsel, satisfactory to the Company, that
such registration and qualification are not required. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.

                           (b) Transferability. This Warrant is transferable by
the Registered Holder only with the consent of the Company and only upon
compliance with this Section 4(b). Prior to any proposed transfer or assignment
of this Warrant or the Warrant Stock the Registered Holder thereof shall give
written notice to the Company of such Holder's intention to effect a transfer or
assignment. Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied by (i) unless
there is in effect a registration statement under the Securities Act covering
the proposed transfer or the transaction is in compliance with Rule 144
promulgated under the Securities Act, if the Company so requests, a written
opinion of legal counsel satisfactory to the Company addressed to the Company
and satisfactory in form and substance to the Company's counsel to the effect
that the proposed transfer of the Warrant or Warrant Stock may be effected
without registration under the Securities Act, (ii) a duly executed form of
assignment, in the form of Exhibit 2 attached hereto, and (iii) payment of any
applicable transfer taxes. Each certificate evidencing the Warrant Stock
transferred as above provided shall bear the appropriate restrictive legend
except that such certificate shall not bear such restrictive legend if in the
opinion of counsel for the Company, such legend is not required in order to
establish compliance with any provisions of the Securities Act.

                           (c) Warrant Register. The Company or its designated
transfer agent will maintain a register containing the names and addresses of
the Registered Holders of this Warrant. Until any transfer of this Warrant is
made in the warrant register, the Company or its designated transfer agent may
treat the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
the Company or its designated transfer agent may (but is not required to) treat
the bearer hereof as the absolute owner hereof for all purposes, notwithstanding
any notice to the contrary. Any Registered Holder may change such Registered
Holder's address as shown on the warrant register by written notice to the
Company or its designated transfer agent requesting such change.

                  5. Representations of Holder. The Registered Holder of this
Warrant, by the acceptance hereof, represents that it is acquiring this Warrant
for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Warrant
Stock or other securities issuable upon the exercise thereof, and not with any
present intention of distributing any of the same. The Registered Holder of this
Warrant further represents, by acceptance hereof, that, as of this date, such
Registered Holder is an accredited investor (an "Accredited Investor") as such
term is defined in Rule 501(a) of Regulation D promulgated by the Securities and
Exchange Commission under the Securities Act. Upon exercise of this Warrant, the
Registered Holder shall, if requested by the Company, confirm in writing, in
form satisfactory to the Company, that the shares of Warrant Stock so purchased
are being acquired solely for the Registered Holder's own account and not

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as a nominee for any other party, for investment, and not with a view toward
distribution or resale other than pursuant to an effective registration
statement or an exemption under the Securities Act and that the Registered
Holder is an Accredited Investor. Notwithstanding the foregoing, by making the
representations herein, the Registered Holder does not agree to hold the Warrant
or the Warrant Stock for any minimum or other specified term and reserves the
right to dispose of the Warrant and the Warrant Stock at any time in accordance
with the provisions herein. If the Registered Holder cannot make such
representations because they would be factually incorrect, it shall be a
condition to the Registered Holder's exercise of the Warrant that the Company
receive such other representations as the Company considers reasonably necessary
to assure the Company that the issuance of its securities upon exercise of the
Warrant shall not violate any United States or state securities laws.

                  6. No Impairment. The Company shall not, by amendment of its
charter or through reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but shall at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Registered Holder of this Warrant against impairment.

                  7. Termination. This Warrant (and the right, if any, to
purchase securities upon exercise hereof) will terminate three (3) years after
the Original Issue Date.

                  8. Notices of Certain Transactions. In case of the occurrence
of any of the following events, the Company shall provide the Registered Holder
of this Warrant with written notice as specified below at least ten (10) days
prior to the record date or effective date for the event specified in such
notice or such earlier date as notice is given to or approval is sought from
shareholders generally:

                           (a) the Company takes a record of the holders of any
of its securities for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or

                           (b) any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or

                           (c) the voluntary or involuntary dissolution,
liquidation or winding-up of the Company, or

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                           (d) any redemption of any of the Company's securities
or mandatory conversion of any of the Company's securities into Common Stock of
the Company;

then, and in each such case, the Company shall mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of any of the Company's
securities (or such other stock or securities at the time deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation, winding-up, redemption or conversion) are to be determined.

                  9. Reservation of Stock. The Company shall at all times
reserve and keep available, solely for the issuance and delivery upon the
exercise of this Warrant, such shares of Warrant Stock and other stock,
securities and property, as from time to time will be issuable upon the exercise
of this Warrant.

                  10. Exchange of Warrants. Upon the surrender by the Registered
Holder of this Warrant, properly endorsed, to the Company at the principal
office of the Company, the Company shall, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Registered Holder, at the
Company's expense, a new Warrant of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
thereof for the number of shares of Warrant Stock called for on the face of the
Warrant so surrendered.

                  11. Replacement of Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or destruction) upon
delivery of an indemnity agreement (with surety if reasonably required) in an
amount reasonably satisfactory to the Company, or (in the case of mutilation)
upon surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.

                  12. Mailing of Notices. Any notice required or permitted
pursuant to this Warrant must be in writing and will be deemed sufficient upon
receipt, when delivered personally or sent by courier, overnight delivery
service or confirmed facsimile, or forty-eight (48) hours after being deposited
in the regular mail, as certified or registered mail (airmail if sent
internationally), with postage prepaid, addressed (a) if to the Registered
Holder, to the address of the Registered Holder most recently furnished in
writing to the Company and (b) if to the Company, to the address set forth below
or subsequently modified by written notice to the Registered Holder.

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                  13. No Rights as Shareholder. Until the exercise of this
Warrant, the Registered Holder of this Warrant will not have or exercise any
rights by virtue hereof as a shareholder of the Company.

                  14. Registration Rights Agreement. In connection with the
issuance of this Warrant, the Company agrees to grant to Investor certain
registration rights for the Warrant Stock upon the terms and conditions
contained in the Registration Rights Agreement attached hereto as Exhibit 3.

                  15. Amendment or Waiver. Any term of this Warrant may be
amended or waived upon written consent of the Company and Registered Holder of
this Warrant.

                  16. Headings. The headings in this Warrant are for purposes of
reference only and do not limit or otherwise affect the meaning of any provision
of this Warrant.

                  17. Governing Law. This Warrant will be governed, construed
and interpreted in accordance with the laws of the State of Texas without giving
effect to principles of conflicts of law.

                                      EXCO RESOURCES, INC.

                                      By: /s/ Richard E. Miller
                                      Name: Richard E. Miller
                                      Title: Vice President
                                      Address: 5735 Pineland Drive, Suite 235
                                               Dallas, Texas  75231

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                                    EXHIBIT 1

                                  PURCHASE FORM

To:                                               Dated:
   ----------------------------------                    -----------------------

                  The undersigned, pursuant to the provisions set forth in the
attached Warrant No.___, hereby irrevocably elects to purchase ___________
shares of the Common Stock covered by such Warrant and herewith makes payment of
$______________________, representing the full purchase price for such shares at
the price per share provided for in such Warrant.

                                        Signature:
                                                   -----------------------------
                                        Name (print):
                                                     ---------------------------
                                        Title (if applic.)
                                                           ---------------------
                                        Company (if applic.)
                                                            --------------------

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                                    EXHIBIT 2

                                 ASSIGNMENT FORM

         FOR VALUE RECEIVED, ___________________________________________________
hereby sells, assigns and transfers unto

Name:
      --------------------------------------------------------------------------
                    (please type or print in block letters)

Address:
         -----------------------------------------------------------------------

its rights to purchase ___ shares of the Common Stock of EXCO Resources, Inc. as
represented by this Warrant and does hereby irrevocably constitute and appoint
_______________________________, Attorney, to transfer the same on the books of
the Company, with full power of substitution in the premises.

Date                  ,
     -----------------

Name:
      ---------------------
Title:
       --------------------

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                                    EXHIBIT 3

                      FORM OF REGISTRATION RIGHTS AGREEMENT

                          REGISTRATION RIGHTS AGREEMENT

                  Registration Rights Agreement (this "Agreement") dated as of
September ___, 2000 among EXCO Resources, Inc. a Texas corporation (the
"Company) and Central Resources, Inc., a Colorado corporation (the "Investor").

                                    RECITALS

                  WHEREAS, as of August __, 2000, the Company and the Investor
executed a Purchase and Sale Agreement (the "Purchase Agreement");

                  WHEREAS, pursuant to the Purchase Agreement, the Investor has
rights to acquire up to 200,000 shares of the Company's Common Stock pursuant to
the terms of that certain warrant, dated September __, 2000, issued by the
Company to the Investor (the "Warrant");

                  WHEREAS, the parties hereto hereby desire to set forth the
Investor's rights and the Company's obligations to cause the registration of the
Registrable Securities (as defined herein) pursuant to the Securities Act (as
defined herein);

                  NOW, THEREFORE, in consideration of the purchase by the
Investor of the Warrant pursuant to the Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                  Section 1. Definitions and Usage.

                  As used in this Agreement:

                  1.1 Definitions.

                  "Agent" means the principal placement agent on an agented
placement of Registrable Securities.

                  "Commission" shall mean the Securities and Exchange
Commission.

                  "Common Stock" shall mean (i) the common stock, par value $.02
per share, of the Company, and (ii) shares of capital stock of the Company
issued by the Company in respect of or in exchange for shares of such common
stock in connection with any stock dividend or distribution,

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stock split-up, recapitalization, recombination or exchange by the Company
generally of shares of such common stock.

                  "Continuously Effective", with respect to a specified
registration statement, shall mean that it shall not cease to be effective and
available for Transfers of Registrable Securities thereunder for longer than
either (i) any ten (10) consecutive business days, or (ii) an aggregate of
fifteen (15) business days during the period specified in the relevant provision
of this Agreement.

                  "Demanding Holder" shall have the meaning set forth in Section
2.

                  "Demand Registration" shall have the meaning set forth in
Section 2.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934.

                  "Holders" shall mean the Investor and the transferees of the
Registrable Securities of the Investor, at such times as such Persons shall own
Registrable Securities.

                  "Majority Selling Holders" means those Selling Holders whose
Registrable Securities included in such registration represent a majority of the
Registrable Securities of all Selling Holders included therein.

                  "Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).

                  "Piggyback Registration" shall have the meaning set forth in
Section 3.

                  "Purchase Agreement" shall have the meaning set forth in the
recitals to this Agreement.

                  "Register", "registered", and "registration" shall refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering by the Commission of effectiveness of such registration statement or
document.

                  "Registrable Securities" shall mean the Shares; provided,
however, that Registrable Securities shall not include any Registrable
Securities which have theretofore been registered and sold pursuant to the
Securities Act or which have been sold to the public pursuant to Rule 144 or any
similar rule promulgated by the Commission pursuant to the Securities Act, and,
provided further, the Company shall have no obligation under Section 2 or
Section 3 to register any Registrable Securities of a Holder if the Company
shall deliver to the Holders requesting such registration an opinion of counsel
to the effect that the proposed sale or disposition of all of the Registrable

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Securities for which registration was requested does not require registration
under the Securities Act for a sale or disposition in a single public sale, and
offers to remove any and all legends restricting transfer from the certificates
evidencing such Registrable Securities. For purposes of this Agreement, a Person
will be deemed to be a holder and an owner of Registrable Securities whenever
such Person has the right to acquire such Registrable Securities (by conversion,
purchase or otherwise), whether or not such acquisition has actually been
effected and whether or not such right is currently exercisable.

                  "Registrable Securities then outstanding" shall mean, with
respect to a specified determination date, the Registrable Securities owned by
all Holders on such date.

                  "Securities Act" shall mean the Securities Act of 1933.

                  "Selling Holders" shall mean, with respect to a specified
registration pursuant to this Agreement, Holders whose Registrable Securities
are included in such registration.

                  "Shares" shall mean the shares of Common Stock issuable upon
the exercise of the Warrant.

                  "Transfer" shall mean and include the act of selling, giving,
transferring, creating a trust (voting or otherwise) and transferring title
thereto, assigning or otherwise disposing of (other than pledging, hypothecating
or otherwise transferring as security) (and correlative words shall have
correlative meanings); provided however, that any transfer or other disposition
upon foreclosure or other exercise of remedies of a secured creditor after an
event of default under or with respect to a pledge, hypothecation or other
transfer as security shall constitute a "Transfer".

                  "Underwriters' Representative" shall mean the managing
underwriter, or, in the case of a co-managed underwriting, the managing
underwriter designated as the Underwriters' Representative by the co-managers.

                  "Violation" shall have the meaning set forth in Section 7.1.

                  "Warrant" shall have the meaning set forth in the recitals to
this Agreement.

                  1.2 Usage.

                  (i) References to a Person are also references to its assigns
and successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).

                  (ii) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but which
are held of record in the name of a nominee, trustee, custodian, or other agent,
but shall exclude shares of Common Stock held by a Holder in a fiduciary
capacity for customers of such Person.

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                  (iii) References to a document are to it as amended, waived
and otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).

                  (iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.

                  (v) The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined.

                  (vi) The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.

                  (vii) The term "hereof" and similar terms refer to this
Agreement as a whole.

                  (viii) The "date of" any notice or request given pursuant to
this Agreement shall be determined in accordance with Section 11.

                  Section 2. Demand Registration.

                  2.1 Registration on Form S-3

                  (i) if one or more Holders that own an aggregate of 50% or
more of the Registrable Securities then outstanding shall make a written request
to the Company (the "Demanding Holders"), the Company shall cause there to be
filed with the Commission a resale registration statement on Form S-3 (or any
applicable replacement or successor form) (a "Demand Registration"). Each
Demanding Holder shall be entitled to have included therein all or such number
of such Demanding Holder's Registrable Securities as the Demanding Holder shall
request in writing. Any request made pursuant to this Section 2.1 shall be
addressed to the attention of the Secretary of the Company, and shall specify
the number of Registrable Securities to be registered, the intended methods of
disposition thereof and that the request is for a Demand Registration pursuant
to this Section 2.1(i).

                  (ii) The Company shall be entitled to postpone for up to 60
days the filing of any Demand Registration statement otherwise required to be
prepared and filed pursuant to this Section 2.1, if the board of directors of
the Company determines, in its good faith reasonable judgment, that such
registration and the Transfer of Registrable Securities contemplated thereby
would materially interfere with, or require premature disclosure of, any
financing, acquisition or reorganization involving the Company or any of its
wholly owned subsidiaries and the Company promptly gives the Demanding Holders
notice of such determination.

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<PAGE>   14

                  (iii) Whenever the Company shall have received a demand
pursuant to Section 2.1(i) to effect the registration of any Registrable
Securities, the Company shall promptly give written notice of such proposed
registration to all Holders. Any such Holder may, within ten (10) days after
receipt of such notice, request in writing that all of such Holder's Registrable
Securities, or any portion thereof designated by such Holder, be included in the
registration.

                  2.2 Following receipt of a request for a Demand Registration,
the Company shall:

                  (i) File the registration statement with the Commission as
promptly as practicable, and shall use the Company's commercially reasonable
efforts to have the registration statement declared effective under the
Securities Act as soon as reasonably practicable, in each instance giving due
regard to the need to prepare current financial statements, conduct due
diligence and complete other actions that are reasonably necessary to effect a
registered public offering.

                  (ii) Use the Company's reasonable best efforts to keep the
registration statement Continuously Effective for up to 180 days or until such
earlier date as of which all the Registrable Securities under the Demand
Registration statement shall have been disposed of in the manner described in
the registration statement. Notwithstanding the foregoing, if for any reason the
effectiveness of a registration pursuant to this Section 2 is suspended as
permitted by Section 4.2 or postponed as permitted by Section 2.1(ii), the
foregoing period shall be extended by the aggregate number of days of such
suspension or postponement.

                  2.3 The Company shall be obligated to effect no more than one
Demand Registration and shall not be obligated to file such Demand Registration
unless the rules and regulations of the Commission permit such filing. For
purposes hereof, a registration shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, (ii)
if after such registration statement has become effective, such registration or
the related offer, sale or distribution of Registrable Securities thereunder is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the Selling Holders and such interference is not thereafter
eliminated, or (iii) if the conditions to closing specified in the underwriting
agreement, if any (other than conditions of the type commonly referred to as
"market outs"), entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of the
Selling Holders. If the Company shall have complied with its obligations under
this Agreement, a right to demand a registration pursuant to this Section 2
shall be deemed to have been satisfied with respect to the Demand Registration
upon the earlier of (x) the date as of which all of the Registrable Securities
included therein shall have been disposed of pursuant to the Registration
Statement, or (y) the date as of which such Demand Registration shall have been
Continuously Effective for a period of 180 days.

                  Section 3. Piggyback Registration.

                  3.1 If at any time the Company proposes to register (including
for this purpose a registration effected by the Company for shareholders of the
Company other than the Holders)

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<PAGE>   15

equity securities under the Securities Act in connection with the public
offering solely for cash on Form S-1, S-2 or S-3 (or any applicable replacement
or successor forms), the Company shall promptly (and in no event less than 20
days prior to an initial filing of a registration statement with the Commission
with respect to such offering) give the Holders written notice of such
registration, including an offer to include in such registration the aggregate
number of shares of Registrable Securities as such Holder may request (a
"Piggyback Registration"). Upon the written request of each Holder given within
10 days following the date of receipt of such notice and offer, the Company
shall cause to be included in such registration statement and use its
commercially reasonable efforts to be registered under the Securities Act all
the Registrable Securities that each such Holder shall have requested to be
registered. The Company shall have the absolute right to withdraw or cease to
prepare or file any registration statement for any offering referred to in this
Section 3 without any obligation or liability to any Holder.

                  3.2 If the Underwriters' Representative or Agent shall advise
the Company that, in its opinion, the amount of Registrable Securities requested
to be included in such registration would materially adversely affect such
offering, or the timing thereof, then the Company will include in such
registration, to the extent of the amount which the Company is so advised can be
sold without such material adverse effect in such offering: First, all
securities proposed to be sold by the Company for its own account; second, the
Registrable Securities requested to be included in such registration by the
Holders pursuant to this Section 3 on a pro rata basis; and third, all other
securities requested to be included in such registration. For purposes of the
foregoing, a material adverse effect on an offering of primary shares by the
Company shall be deemed to exist if the Underwriters' Representative or Agent
advises the Company in writing that, in its opinion, the amount of securities
requested to be included in such offering exceeds the amount which can be sold
in such offering within a price range acceptable to the Company.

                  3.3 Each Holder shall be entitled to have its Registrable
Securities included in an unlimited number of Piggyback Registrations pursuant
to this Section 3.

                  Section 4. Registration Procedures. Whenever required under
Section 2 or Section 3 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as practicable:

                  4.1 Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use the Company's
commercially reasonable efforts to cause such registration statement to become
effective.

                  4.2 Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Company shall amend the
registration statement or supplement the prospectus whenever required by the
terms of the underwriting agreement entered into pursuant to Section 5.2. The
Company shall amend the registration statement or supplement the prospectus

                                      -6-
<PAGE>   16
so that it will remain current and in compliance with the requirements of the
Securities Act for the period during which this Agreement requires the
Registration Statement to remain Continuously Effective, and if during such
period any event or development occurs as a result of which the registration
statement or prospectus contains a misstatement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (including prospective events such as a
significant acquisition or disposition of other material assets), the Company
shall promptly notify the Holders and, as soon as practicable thereafter (and in
any event within 60 days of such notice), the Company shall amend the
registration statement or supplement the prospectus so that each will thereafter
comply with the Securities Act and furnish to each Selling Holder of Registrable
Securities such amended or supplemented prospectus, which each such Holder shall
thereafter use in the Transfer of Registrable Securities covered by such
registration statement. Pending such amendment or supplement, each such Holder
shall cease making offers or Transfers of Registrable Securities pursuant to the
prior prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Agreement remain unsold
at the end of the period during which the Company is obligated to use its
commercially reasonable efforts to maintain the effectiveness of such
registration statement, the Company may file a post-effective amendment to the
registration statement for the purpose of removing such Registrable Securities
from registered status.

                  4.3 Furnish to each Selling Holder of Registrable Securities,
without charge, such numbers of copies of the registration statement, any
pre-effective or post-effective amendment thereto, the prospectus, including
each preliminary prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act and the rules
thereunder, and such other related documents as any such Selling Holder may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by such Selling Holder.

                  4.4 Use the Company's commercially reasonable efforts (i) to
register and qualify the securities covered by such registration statement under
such other securities or blue sky laws of such states or jurisdictions as shall
be reasonably requested by the Underwriters' Representative or Agent (as
applicable, or if inapplicable, the Majority Selling Holders), and (ii) to
obtain the withdrawal of any order suspending the effectiveness of a
registration statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of the offer and transfer of any of the
Registrable Securities in any jurisdiction, at the earliest possible moment;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.

                  4.5 In the event of any underwritten or agented offering,
enter into and perform the Company's obligations under an underwriting or agency
agreement (including indemnification and contribution obligations of
underwriters or agents), in usual and customary form, with the managing
underwriter or underwriters of or agents for such offering. The Company shall
also cooperate with the Majority Selling Holders and the Underwriters'
Representative or Agent for such offering in the marketing of the Registrable
Securities, including making available the Company's officers, accountants,
counsel, premises, books and records for such purpose, but the Company shall not
be required to incur any material out-of-pocket expense pursuant to this
sentence.

                                      -7-
<PAGE>   17

                  4.6 Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission in connection therewith (and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered).

                  4.7 Make generally available to the Company's security holders
copies of all periodic reports, proxy statements, and an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act no later than
90 days following the end of the 12-month period beginning with the first month
of the Company's first fiscal quarter commencing after the effective date of
each registration statement filed pursuant to this Agreement.

                  4.8 Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide the Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and underwriter
the opportunity to discuss the business affairs of the Company with its
principal executives and independent public accountants who have certified the
audited financial statements included in such registration statement, in each
case all as necessary to enable them to exercise their due diligence
responsibility under the Securities Act; provided, however, that information
that the Company determines, in good faith, to be confidential and which the
Company advises such Person in writing, is confidential shall not be disclosed
unless such Person signs a confidentiality agreement reasonably satisfactory to
the Company or the related Selling Holder of Registrable Securities agrees to be
responsible for such Person's breach of confidentiality on terms reasonably
satisfactory to the Company.

                  4.9 Provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement.

                  4.10 Use all reasonable efforts to cause the Registrable
Securities covered by such registration statement (i) if the Common Stock is
then listed on a securities exchange or included for quotation in a recognized
trading market, to continue to be so listed or included for a reasonable period
of time after the offering, and (ii) to be registered with or approved by such
other United States or state governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
Selling Holders of Registrable Securities to consummate the disposition of such
Registrable Securities.

                  4.11 Use the Company's reasonable efforts to provide a CUSIP
number for the Registrable Securities prior to the effective date of the first
registration statement including Registrable Securities.

                  4.12 Take such other actions as are reasonably required in
order to facilitate the disposition of Registrable Securities included in each
such registration.

                                      -8-
<PAGE>   18

                  Section 5. Holders' Obligations. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Agreement with respect to the Registrable Securities of any Selling Holder of
Registrable Securities that such Selling Holder shall:

                  5.1 Furnish to the Company such information regarding such
Selling Holder, the number of the Registrable Securities owned by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Selling Holder's Registrable Securities, and to
cooperate with the Company in preparing such registration; and

                  5.2 Agree to sell their Registrable Securities to the
underwriters (if any) at the same price and on substantially the same terms and
conditions (including the execution of lock-up agreements) as the Company or the
other Persons on whose behalf the registration statement was being filed have
agreed to sell their securities, and to execute the underwriting agreement in a
customary form reasonably satisfactory to the Company.

                  Section 6. Expenses of Registration.

                  6.1 Each Selling Holder shall, on a pro rata basis, bear and
pay all expenses and fees incurred in connection with any Demand Registration
pursuant to Section 2.

                  6.2 The Company shall bear and pay all expenses and fees
incurred in connection with any Piggyback Registrations pursuant to Section 3
for each Selling Holder (which right may be Transferred to any Person to whom
Registrable Securities are Transferred as permitted by Section 8), but excluding
underwriting discounts and commissions relating to Registrable Securities (which
shall be paid on a pro rata basis by the Selling Holders) and fees and expenses
of counsel to the Selling Holders.

                  Section 7. Indemnification; Contribution. If any Registrable
Securities are included in a registration statement under this Agreement:

                  7.1 To the extent permitted by applicable law, the Company
shall indemnify and hold harmless each Selling Holder, each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, and each
officer, director, partner, and employee of such Selling Holder and such
controlling Person, against any and all losses, claims, damages, liabilities and
expenses (joint or several), including attorneys' fees and disbursements and
expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may become subject under the Securities Act, the Exchange Act
or other federal or state laws, insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):

                  (i) Any untrue statement or alleged untrue statement of a
         material fact contained in a registration statement filed in accordance
         herewith, including any

                                      -9-
<PAGE>   19

         preliminary prospectus or final prospectus contained therein, or any
         amendments or supplements thereto;

                  (ii) The omission or alleged omission to state therein a
         material fact required to be stated therein, or necessary to make the
         statements therein not misleading; or

                  (iii) Any violation or alleged violation by the Company of the
         Securities Act, the Exchange Act, any applicable state securities law
         or any rule or regulation promulgated under the Securities Act, the
         Exchange Act or any applicable state securities law;

provided, however, that the indemnification required by this Section 7.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or expense to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished to the Company by the indemnified party expressly for use in
connection with such registration; provided, further, that the indemnity
agreement contained in this Section 7 shall not apply to any underwriter to the
extent that any such loss is based on or arises out of an untrue statement or
alleged untrue statement of a material fact, or an omission or alleged omission
to state a material fact, contained in or omitted from any preliminary
prospectus if the final prospectus shall correct such untrue statement or
alleged untrue statement, or such omission or alleged omission, and a copy of
the final prospectus has not been sent or given to such person at or prior to
the confirmation of sale to such person if such underwriter was under an
obligation to deliver such final prospectus and failed to do so.

                  7.2 To the extent permitted by applicable law, each Selling
Holder shall (jointly and severally) indemnify and hold harmless the Company,
each of its directors, each of its officers who shall have signed the
registration statement, each Person, if any, who controls the Company within the
meaning of the Securities Act, against any and all losses, claims, damages,
liabilities and expenses (joint and several), including attorneys' fees and
disbursements and expenses of investigation, incurred by such party pursuant to
any actual or threatened action, suit, proceeding or investigation, or to which
any of the foregoing Persons may otherwise become subject under the Securities
Act, the Exchange Act or other federal or state laws, insofar as such losses,
claims, damages, liabilities and expenses arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Selling Holder expressly for use in connection with such
registration; provided, however, that the indemnification required by this
Section 7.2 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or expense if settlement is effected without the
consent of the relevant Selling Holder of Registrable Securities, which consent
shall not be unreasonably withheld.

                                      -10-
<PAGE>   20

                  7.3 Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 7, such indemnified party shall deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7 but shall not relieve the indemnifying party of any liability that it may have
to any indemnified party otherwise than pursuant to this Section 7. Any fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have the right to
employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim or
proceeding or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying party and
that the assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for all such indemnified parties, unless in the reasonable judgment of such
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such action,
claim or proceeding, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels). No
indemnifying party shall be liable to an indemnified party for any settlement of
any action, proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld.

                                      -11-
<PAGE>   21

                  7.4 If the indemnification required by this Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7:

                  (i) The indemnifying party, in lieu of indemnifying such
         indemnified party, shall contribute to the amount paid or payable by
         such indemnified party as a result of such losses, claims, damages,
         liabilities or expenses in such proportion as is appropriate to reflect
         the relative fault of the indemnifying party and indemnified parties in
         connection with the actions which resulted in such losses, claims,
         damages, liabilities or expenses, as well as any other relevant
         equitable considerations. The relative fault of such indemnifying party
         and indemnified parties shall be determined by reference to, among
         other things, whether any Violation has been committed by, or relates
         to information supplied by, such indemnifying party or indemnified
         parties, and the parties' relative intent, knowledge, access to
         information and opportunity to correct or prevent such Violation. The
         amount paid or payable by a party as a result of the losses, claims,
         damages, liabilities and expenses referred to above shall be deemed to
         include, subject to the limitations set forth in Section 7.1 and
         Section 7.2, any legal or other fees or expenses reasonably incurred by
         such party in connection with any investigation or proceeding.

                  (ii) The parties hereto agree that it would not be just and
         equitable if contribution pursuant to this Section 7.4 were determined
         by pro rata allocation or by any other method of allocation which does
         not take into account the equitable considerations referred to in
         Section 7.4(i). No Person guilty of fraudulent misrepresentation
         (within the meaning of Section 11(f) of the Securities Act) shall be
         entitled to contribution from any Person who was not guilty of such
         fraudulent misrepresentation.

                  7.5 If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.

                  7.6 The obligations of the Company and the Selling Holders of
Registrable Securities under this Section 7 shall survive the completion of any
offering of Registrable Securities pursuant to a registration statement under
this Agreement, and otherwise.

                  Section 8. Transfer of Registration Rights. The rights of a
Holder hereunder may be Transferred to (i) any affiliate (as defined in Rule
12b-2 under the Exchange Act) of a Holder or (ii) any other Person upon the
prior written consent of the Company; provided, however, that any such
Transferee that is not a party to this Agreement shall have executed and
delivered to the Secretary of the Company a properly completed agreement
substantially in the form of Exhibit A, and provided, further, that the
Transferor shall have delivered to the Secretary of the Company, no

                                      -12-
<PAGE>   22
later than 15 days following the date of the Transfer, written notification of
such Transfer setting forth the name of the Transferor, name and address of the
Transferee and the number of Registrable Securities which shall have been so
Transferred.

                  Section 9. Amendment, Modification and Waivers; Further
Assurances.

                  (i) This Agreement may be amended with the consent of the
Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company shall
have obtained the written consent of Holders owning Registrable Securities
possessing a majority in number of the Registrable Securities then outstanding
to such amendment, action or omission to act.

                   (ii) No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.

                  (iii) Each of the parties hereto shall execute all such
further instruments and documents and take all such further action as any other
party hereto may reasonably require in order to effectuate the terms and
purposes of this Agreement.

                  Section 10. Assignment; Benefit. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however, that except as specifically provided herein with
respect to certain matters, neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without the prior written consent of Holders owning Registrable Securities
possessing two-thirds in number of the Registrable Securities outstanding on the
date as of which such delegation or assignment is to become effective. A Holder
may Transfer its rights hereunder to a successor in interest to the Registrable
Securities owned by such assignor as permitted by Section 8.

                  Section 11. Miscellaneous.

                  11.1 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. EACH OF THE PARTIES HEREBY
SUBMITS TO PERSONAL JURISDICTION AND WAIVES ANY OBJECTION AS TO VENUE IN THE
COUNTY OF DALLAS, STATE OF TEXAS. THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY

                                      -13-
<PAGE>   23
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT.

                  11.2 Notices. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next business day delivery as follows: (a) if
to any Holder, at its last known address appearing on the books of the Company
maintained for such purpose or as set forth in the relevant agreement in the
form of Exhibit A whereby such party became bound by the provisions of this
Agreement; and (b) if to the Company, at 5735 Pineland Drive, Suite 235, Dallas,
Texas 75231, facsimile number (214) 368-2087; or at such other address or
facsimile number as may be substituted by notice given as herein provided.
Except as otherwise provided in this Agreement, the date of each such notice and
request shall be deemed to be, and the date on which each such notice and
request shall be deemed given shall be: at the time delivered, if personally
delivered or mailed; when receipt is acknowledged, if sent by facsimile; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.

                  11.3 Entire Agreement; Integration. This Agreement supersedes
all prior agreements between or among any of the parties hereto with respect to
the subject matter contained herein and therein, and this Agreement embodies the
entire understanding among the parties relating to such subject matter.

                  11.4 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.

                  11.5 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all of which
shall together constitute one and the same instrument. All signatures need not
be on the same counterpart.

                  11.6 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.

                  11.7 Filing. A copy of this Agreement and of all amendments
thereto shall be filed at the principal executive office of the Company with the
corporate recorder of the Company.

                  11.8 Termination. This Agreement may be terminated at any time
by a written instrument signed by the parties hereto. Unless sooner terminated
in accordance with the preceding sentence, this Agreement (other than Section 7
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Securities outstanding or issuable by the Company.

                  11.9 No Third Party Beneficiaries. Nothing herein expressed or
implied is intended to confer upon any Person, other than the parties hereto or
their respective permitted

                                      -14-
<PAGE>   24
assigns, successors, heirs and legal representatives, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

                  IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.

                                       EXCO RESOURCES, INC.
                                       By:
                                          -------------------------------------
                                           Name:
                                                 ------------------------------
                                           Title:
                                                 ------------------------------

                                       CENTRAL RESOURCES, INC.

                                       By:
                                          -------------------------------------
                                           Name:
                                                 ------------------------------
                                           Title:
                                                 ------------------------------

                                      -15-
<PAGE>   25

                                    EXHIBIT A
                                       to
                          Registration Rights Agreement

                              AGREEMENT TO BE BOUND
                      BY THE REGISTRATION RIGHTS AGREEMENT

                  The undersigned, being the transferee of [describe securities
received by transferee] of EXCO Resources, Inc., a Texas corporation (the
"Company"), as a condition to the receipt of such securities, acknowledges that
matters pertaining to the registration of [the Common Stock underlying the
transferred securities or such transferred securities, as the case may be] is
governed by the Registration Rights Agreement dated as of September ____, 2000
among the Company and Central Resources, Inc. (the "Agreement"), and the
undersigned hereby (1) acknowledges receipt of a copy of the Agreement, and (2)
agrees to be bound as a Holder by the terms of the Agreement, as the same has
been or may be amended from time to time.

                  Agreed to this __ day of ______________, ____________.

                                         ---------------------------------
                                                                          *
                                         ---------------------------------
                                                                          *
                                         ---------------------------------

*Include address for notices.

                                       A-1<PAGE>   1
                                                                   Exhibit 10.01

                          INSTINCTIVE TECHNOLOGY, INC.

                                 1996 STOCK PLAN

                    (AS AMENDED ON AUGUST 8, 1997, AUGUST 13, 1998, MARCH 3,
1999, SEPTEMBER 1, 1999 AND FEBRUARY 18, 2000)

      1. PURPOSE. The purpose of the Instinctive Technology, Inc. 1996 Stock
Plan (the "Plan") is to encourage key employees of Instinctive Technology, Inc.
(the "Company") and of any present or future parent or subsidiary of the Company
(collectively, "Related Corporations") and other individuals who render services
to the Company or a Related Corporation, by providing opportunities to
participate in the ownership of the Company and its future growth through (a)
the grant of options which qualify as "incentive stock options" ("ISOs") under
Section 422(b) of the Internal Revenue Code of 1986, as amended (the "Code");
(b) the grant of options which do not qualify as ISOs ("Non-Qualified Options");
(c) awards of stock in the Company ("Awards"); and (d) opportunities to make
direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option" and
collectively as "Options." Options, Awards and authorizations to make Purchases
are referred to hereafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.

    2. ADMINISTRATION OF THE PLAN.

      A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
    the Board of Directors of the Company (the "Board") or, subject to Paragraph
    2D (relating to compliance with Section 162(m) of the Code), by a committee
    appointed by the Board (the "Committee"). Hereinafter, all references in
    this Plan to the "Committee" shall mean the Board if no Committee has been
    appointed. Subject to ratification of the grant or authorization of each
    Stock Right by the Board (if so required by applicable state law), and
    subject to the terms of the Plan, the Committee shall have the authority to
    (i) determine to whom (from among the class of employees eligible under
    paragraph 3 to receive ISOs) ISOs shall be granted, and to whom (from among
    the class of individuals and entities eligible under paragraph 3 to receive
    Non-Qualified Options and Awards and to make Purchases) Non-Qualified
    Options, Awards and authorizations to make Purchases may be granted; (ii)
    determine the time or times at which Options or Awards shall be granted or
    Purchases made; (iii) determine the purchase price of shares subject to each
    Option or Purchase, which prices shall not be less than the minimum price
    specified in
<PAGE>   2
                                      -2-

    paragraph 6; (iv) determine whether each Option granted shall be an ISO or a
    Non-Qualified Option; (v) determine (subject to paragraph 7) the time or
    times when each Option shall become exercisable and the duration of the
    exercise period; (vi) extend the period during which outstanding Options may
    be exercised; (vii) determine whether restrictions such as repurchase
    options are to be imposed on shares subject to Options, Awards and Purchases
    and the nature of such restrictions, if any, and (viii) interpret the Plan
    and prescribe and rescind rules and regulations relating to it. If the
    Committee determines to issue a Non-Qualified Option, it shall take whatever
    actions it deems necessary, under Section 422 of the Code and the
    regulations promulgated thereunder, to ensure that such Option is not
    treated as an ISO. The interpretation and construction by the Committee of
    any provisions of the Plan or of any Stock Right granted under it shall be
    final unless otherwise determined by the Board. The Committee may from time
    to time adopt such rules and regulations for carrying out the Plan as it may
    deem advisable. No member of the Board or the Committee shall be liable for
    any action or determination made in good faith with respect to the Plan or
    any Stock Right granted under it.

      B. COMMITTEE ACTIONS. The Committee may select one of its members as its
    chairman, and shall hold meetings at such time and places as it may
    determine. A majority of the Committee shall constitute a quorum and acts of
    a majority of the members of the Committee at a meeting at which a quorum is
    present, or acts reduced to or approved in writing by all the members of the
    Committee (if consistent with applicable state law), shall be the valid acts
    of the Committee. From time to time the Board may increase the size of the
    Committee and appoint additional members thereof, remove members (with or
    without cause) and appoint new members in substitution therefor, fill
    vacancies however caused, or remove all members of the Committee and
    thereafter directly administer the Plan.

      C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to
    members of the Board. All grants of Stock Rights to members of the Board
    shall in all respects be made in accordance with the provisions of this Plan
    applicable to other eligible persons. Members of the Board who either (i)
    are eligible to receive grants of Stock Rights pursuant to the Plan or (ii)
    have been granted Stock Rights may vote on any matters affecting the
    administration of the Plan or the grant of any Stock Rights pursuant to the
    Plan, except that no such member shall act upon the granting to himself or
    herself of Stock Rights, but any such member may be counted in determining
    the existence of a quorum at any meeting of the Board during which action is
    taken with respect to the granting to such member of Stock Rights.

      D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
    such action as may be necessary to ensure that Stock Rights granted under
    the Plan qualify as "qualified performance-based compensation" within the
    meaning of Section 162(m) of the Code and applicable regulations promulgated
    thereunder ("Performance-Based Compensation"). Such action may include, in
    the Board's discretion, some or all of the following (i) if the Board
    determines that Stock Rights
<PAGE>   3
                                      -3-

    granted under the Plan generally shall constitute Performance-Based
    Compensation, the Plan shall be administered, to the extent required for
    such Stock Rights to constitute Performance-Based Compensation, by a
    Committee consisting solely of two or more "outside directors" (as defined
    in applicable regulations promulgated under Section 162(m) of the Code),
    (ii) if any Non-Qualified Options with an exercise price less than the fair
    market value per share of Common Stock are granted under the Plan and the
    Board determines that such Options should constitute Performance-Based
    Compensation, such options shall be made exercisable only upon the
    attainment of a pre-established, objective performance goal established by
    the Committee, and such grant shall be submitted for, and shall be
    contingent upon shareholder approval and (iii) Stock Rights granted under
    the Plan may be subject to such other terms and conditions as are necessary
    for compensation recognized in connection with the exercise or disposition
    of such Stock Right or the disposition of Common Stock acquired pursuant to
    such Stock Right, to constitute Performance-Based Compensation.

      3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees of
the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.

      4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 5,284,302, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.

      No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 1,196,511 of shares of Common
Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Common Stock deemed to have been granted to such employee under the Plan
<PAGE>   4
                                      -4-

      5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan at
any time on or after July 26, 1996 and prior to July 26, 2006. The date of grant
of a Stock Right under the Plan will be the date specified by the Committee at
the time it grants the Stock Right; provided, however, that such date shall not
be prior to the date on which the Committee acts to approve the grant.

      6. MINIMUM OPTION PRICE; ISO LIMITATIONS.

      A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. Subject to
    Paragraph 2D (relating to compliance with Section 162(m) of the Code), the
    exercise price per share specified in the agreement relating to each
    Non-Qualified Option granted, and the purchase price per share of stock
    granted in any Award or authorized as a Purchase, under the Plan may be less
    than the fair market value of the Common Stock of the Company on the date of
    grant; provided that, in no event shall such exercise price or such purchase
    price be less than the minimum legal consideration required therefor under
    the laws of any jurisdiction in which the Company or its successors in
    interest may be organized.

      B. PRICE FOR ISOS. The exercise price per share specified in the agreement
    relating to each ISO granted under the Plan shall not be less than the fair
    market value per share of Common Stock on the date of such grant. In the
    case of an ISO to be granted to an employee owning stock possessing more
    than ten percent (10%) of the total combined voting power of all classes of
    stock of the Company or any Related Corporation, the price per share
    specified in the agreement relating to such ISO shall not be less than one
    hundred ten percent (110%) of the fair market value per share of Common
    Stock on the date of grant. For purposes of determining stock ownership
    under this paragraph, the rules of Section 424(d) of the Code shall apply.
    The date of grant for purposes of this subparagraph shall mean the date that
    the Company or Related Corporation completes the corporate action
    constituting an offer of stock for sale to an individual.

      C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
    be granted Options treated as ISOs only to the extent that, in the aggregate
    under this Plan and all incentive stock option plans of the Company and any
    Related Corporation, ISOs do not become exercisable for the first time by
    such employee during any calendar year with respect to stock having a fair
    market value (determined at the time the ISOs were granted) in excess of
    $100,000. The Company intends to designate any Options granted in excess of
    such limitation as Non-Qualified Options, and the Company shall issue
    separate certificates to the optionee with respect to Options that are
    Non-Qualified Options and Options that are ISOs.

      D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
    granted under the Plan, the Company's Common Stock is publicly traded, "fair
    market value" shall be determined as of the date of grant or, if the prices
    or quotes
<PAGE>   5
                                      -5-

    discussed in this sentence are unavailable for such date, the last business
    day for which such prices or quotes are available prior to the date of grant
    and shall mean (i) the average (on that date) of the high and low prices of
    the Common Stock on the principal national securities exchange on which the
    Common Stock is traded, if the Common Stock is then traded on a national
    securities exchange; or (ii) the last reported sale price (on that date) of
    the Common Stock on the Nasdaq National Market, if the Common Stock is not
    then traded on a national securities exchange; or (iii) the closing bid
    price (or average of bid prices) last quoted (on that date) by an
    established quotation service for over-the-counter securities, if the Common
    Stock is not reported on the Nasdaq National Market. If the Common Stock is
    not publicly traded at the time an Option is granted under the Plan, "fair
    market value" shall mean the fair value of the Common Stock as determined by
    the Committee after taking into consideration all factors which it deems
    appropriate, including, without limitation, recent sale and offer prices of
    the Common Stock in private transactions negotiated at arm's length.

      7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.

    8. EXERCISE OF OPTION. Subject to the provisions of Paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:

      A. VESTING. The Option shall either be fully exercisable on the date of
    grant or shall become exercisable thereafter in such installments as the
    Committee may specify.

      B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable,
    it shall remain exercisable until expiration or termination of the Option,
    unless otherwise specified by the Committee.

      C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
    time or from time to time, in whole or in part, for up to the total number
    of shares with respect to which it is then exercisable.

      D. ACCELERATION OF VESTING. The Committee shall have the right to
    accelerate the date that any installment of any Option becomes exercisable;
    provided that the Committee shall not, without the consent of an optionee,
    accelerate the
<PAGE>   6
                                      -6-

    permitted exercise date of any installment of any Option granted to any
    employee as an ISO (and not previously converted into a Non-Qualified Option
    pursuant to paragraph 16) if such acceleration would violate the annual
    vesting limitation contained in Section 422(d) of the Code, as described in
    paragraph 6(C).

      9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the Company
and all Related Corporations other than by reason of death or disability as
defined in paragraph 10, no further installments of his or her ISOs shall become
exercisable, and his or her ISOs shall terminate on the earlier of (a) three
months after the date of termination of his or her employment, or (b) their
specified expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
paragraph 16. For purposes of this paragraph 9, employment shall be considered
as continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute or
by contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under this
paragraph 9, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the optionee
after the approved period of absence. ISOs granted under the Plan shall not be
affected by any change of employment within or among the Company and Related
Corporations, so long as the optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.

      10.  DEATH; DISABILITY.

      A. DEATH. If an ISO optionee ceases to be employed by the Company and all
    Related Corporations by reason of his or her death, any ISO owned by such
    optionee may be exercised, to the extent otherwise exercisable on the date
    of death, by the estate, personal representative or beneficiary who has
    acquired the ISO by will or by the laws of descent and distribution, until
    the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
    from the date of the optionee's death.

      B. DISABILITY. If an ISO optionee ceases to be employed by the Company and
    all Related Corporations by reason of his or her disability, such optionee
    shall have the right to exercise any ISO held by him or her on the date of
    termination of employment, for the number of shares for which he or she
    could have exercised it on that date, until the earlier of (i) the specified
    expiration date of the ISO or (ii) 180 days from the date of the termination
    of the optionee's employment. For the purposes of the Plan, the term
    "disability" shall mean "permanent and total disability" as defined in
    Section 22(e)(3) of the Code or any successor statute.
<PAGE>   7
                                      -7-

      11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.

      12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.

      13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:

         A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
    shall be subdivided or combined into a greater or smaller number of shares
    or if the Company shall issue any shares of Common Stock as a stock dividend
    on its outstanding Common Stock, the number of shares of Common Stock
    deliverable upon the exercise of Options shall be appropriately increased or
    decreased proportionately, and appropriate adjustments shall be made in the
    purchase price per share to reflect such subdivision, combination or stock
    dividend.

         B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
    or acquired by another entity in a merger or other reorganization in which
    the holders of the outstanding voting stock of the Company immediately
    preceding the consummation of such event, shall, immediately following such
    event, hold, as a group, less than a majority of the voting securities of
    the surviving or successor entity, or in the event of a sale of all or
    substantially all of the Company's assets or otherwise (each, an
    "Acquisition"), the Committee or the board of directors of any entity
    assuming the obligations of the Company hereunder (the "Successor Board"),
    shall, as to outstanding Options, either (i) make appropriate provision for
    the continuation of such Options by substituting on an equitable basis for
    the shares then subject to such Options either (a) the consideration payable
    with respect to the outstanding shares of Common Stock in connection with
    the Acquisition, (b) shares of stock of the surviving or successor
    corporation or (c) such other securities as the
<PAGE>   8
                                      -8-

    Successor Board deems appropriate, the fair market value of which shall not
    materially exceed the fair market value of the shares of Common Stock
    subject to such Options immediately preceding the Acquisition; or (ii) upon
    written notice to the optionees, provide that all Options must be exercised
    (provided that all such Options shall become exercisable in full as a result
    of the Acquisition, regardless of the terms of any vesting schedule set
    forth in the applicable option agreements, if no provision is made pursuant
    to clause (i) of this sentence) within a specified number of days of the
    date of such notice, at the end of which period the Options shall terminate.

      C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
    or reorganization of the Company (other than a transaction described in
    subparagraph B above) pursuant to which securities of the Company or of
    another corporation are issued with respect to the outstanding shares of
    Common Stock, an optionee upon exercising an Option shall be entitled to
    receive for the purchase price paid upon such exercise the securities he or
    she would have received if he or she had exercised such Option prior to such
    recapitalization or reorganization.

      D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
    made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
    only after the Committee, after consulting with counsel for the Company,
    determines whether such adjustments would constitute a "modification" of
    such ISOs (as that term is defined in Section 424 of the Code) or would
    cause any adverse tax consequences for the holders of such ISOs. If the
    Committee determines that such adjustments made with respect to ISOs would
    constitute a modification of such ISOs or would cause adverse tax
    consequences to the holders, it may refrain from making such adjustments.

      E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
    liquidation of the Company, each Option will terminate immediately prior to
    the consummation of such proposed action or at such other time and subject
    to such other conditions as shall be determined by the Committee.

      F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
    issuance by the Company of shares of stock of any class, or securities
    convertible into shares of stock of any class, shall affect, and no
    adjustment by reason thereof shall be made with respect to, the number or
    price of shares subject to Options. No adjustments shall be made for
    dividends paid in cash or in property other than securities of the Company.

      G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
    and the optionee shall receive from the Company cash in lieu of such
    fractional shares.
<PAGE>   9
                                      -9-

      H. ADJUSTMENTS. Upon the happening of any of the events described in
    subparagraphs A, B or C above, the class and aggregate number of shares set
    forth in paragraph 4 hereof that are subject to Stock Rights which
    previously have been or subsequently may be granted under the Plan shall
    also be appropriately adjusted to reflect the events described in such
    subparagraphs. The Committee or the Successor Board shall determine the
    specific adjustments to be made under this paragraph 13 and, subject to
    paragraph 2, its determination shall be conclusive.

      14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, nothwithstanding this
paragraph (b), optionee may not pay any part of the exercise price hereof by
transferring Common Stock to the Company unless such Common Stock has been owned
by the optionee free of any substantial risk of forfeiture for at least six
months, (c) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable Federal rate, as defined in Section
1274(d) of the Code, (d) at the discretion of the Committee and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of the Option and an authorization to the broker or selling agent
to pay that amount to the Company, which sale shall be at the participant's
direction at the time of exercise, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (b), (c), (d) or (e) of the preceding sentence,
such discretion shall be exercised in writing at the time of the grant of the
ISO in question. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.

      15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on July
26, 1996, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to July 26, 1997, any grants of ISOs under
the Plan made prior to that date will be rescinded. The Plan shall expire at the
end of the day on July 25, 2006 (except as to Options outstanding on that date).
Subject to the provisions of paragraph 5 above, Options may be granted under the
Plan prior to the date of stockholder approval of the
<PAGE>   10
                                      -10-

Plan. The Board may terminate or amend the Plan in any respect at any time,
except that, without the approval of the stockholders obtained within 12 months
before or after the Board adopts a resolution authorizing any of the following
actions: (a) the total number of shares that may be issued under the Plan may
not be increased (except by adjustment pursuant to paragraph 13); (b) the
provisions of paragraph 3 regarding eligibility for grants of ISOs may not be
modified; (c) the provisions of paragraph 6(B) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to paragraph 13); and (d) the expiration date of the Plan
may not be extended. Except as otherwise provided in this paragraph 15, in no
event may action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Stock Right previously
granted to such grantee.

      16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS.
Subject to Paragraph 13D, without the prior written consent of the holder of an
ISO, the Committee shall not alter the terms of such ISO (including the means of
exercising such ISO) if such alteration would constitute a modification (within
the meaning of Section 424(h)(3) of the Code). The Committee, at the written
request or with the written consent of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such ISOs. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. Upon the taking of such action, the
Company shall issue separate certificates to the optionee with respect to
Options that are Non-Qualified Options and Options that are ISOs.

      17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.

      18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
<PAGE>   11
                                      -11-

      19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an Option, (ii) the transfer of a Non-Qualified
Stock Option, (iii) the grant of an Award, (iv) the making of a Purchase of
Common Stock for less than its fair market value, or (v) the vesting or
transferability of restricted stock or securities acquired by exercising an
Option, on the grantee's making satisfactory arrangement for such withholding.
Such arrangement may include payment by the grantee in cash or by check of the
amount of the withholding taxes or, at the discretion of the Committee, by the
grantee's delivery of previously held shares of Common Stock or the withholding
from the shares of Common Stock otherwise deliverable upon exercise of a Option
shares having an aggregate fair market value equal to the amount of such
withholding taxes.

      20. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.

      Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.

      21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of State of
Delaware, or the laws of any jurisdiction in which the Company or its successors
in interest may be organized.

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