THE HOME-STAKE OIL & GAS COMPANY
                            1997 INCENTIVE STOCK PLAN


1.   Preamble.

     The Home-Stake Oil & Gas Company, an Oklahoma corporation ("HSOG"),  hereby
establishes  The  Home-Stake  Oil & Gas Company 1997  Incentive  Stock Plan (the
"Plan)  as a means  whereby  HSOG  may,  through  awards  of stock  options  and
restricted stock:

          (a) provide Officers, Directors and key employees who have substantial
     responsibilities   for  the  direction  and  management  of  HSOG  and  its
     Subsidiaries,  as well as consultants to HSOG, with additional incentive to
     promote the success of the businesses of HSOG and its Subsidiaries;

          (b) enable such employees to acquire equity interests in HSOG; and

          (c) enable  HSOG to attract and retain the  services of key  employees
     upon whose judgment and effort the successful  conduct of its operations is
     largely dependent.

     Except as specifically  provided herein,  the provisions of the Plan do not
apply to or affect any option,  stock appreciation right, or stock heretofore or
hereafter  granted  under any other  stock or stock  option  plan of HSOG or any
Subsidiary, and all such options, stock appreciation rights or stock continue to
be governed by and subject to the applicable provisions of the plan or agreement
under which they were granted.

2.   Definitions.

     2.01  "Administrator"  shall mean that person  designated by the Board from
     time to time to  administrator  the  Awards  made  under  the  Plan,  which
     designation shall be communicated to the Participants in writing.

     2.02  "Award"  shall  mean a grant of an Option or the award of  Restricted
     Stock under the Plan.

     2.03  "Award  Agreement"  shall  mean  an  agreement  between  HSOG  and  a
     Participant  which  evidences  the grant of an Option  and/or  the award of
     Restricted  Stock to a Participant  and sets forth the terms and conditions
     of such Option and/or Restricted Stock.

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     2.04 "Board" or "Board of Directors" means the board of directors of HSOG.


     2.05 "Change in Control"  means the  occurrence of any one of the following
     events:

          (a) Any  individual,  entity or group  (within  the meaning of Section
     13(d)(3) or 14(d)(7)  of the  Exchange  Act,  except the  Participant,  his
     affiliates and associates, HSOG, or any corporation,  partnership, trust or
     other entity controlled by HSOG (a  "Subsidiary"),  or any employee benefit
     plan of HSOG or of any Subsidiary  (each such  individual,  entity or group
     shall  hereinafter  be referred to as a  "Person"))becomes  the  beneficial
     owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
     of 20% or more of either (i) the then outstanding shares of common stock of
     HSOG (the  "Outstanding  Company Common Stock" or (ii) the combined  voting
     power of the then  outstanding  voting  securities of HSOG entitled to vote
     generally in the election of directors (the "Company  Voting  Securities"),
     in either case; or

          (b)  Individuals  who, as of the  beginning of any  twenty-four  month
     period,  constitute the Board (the "Incumbent  Board") cease for any reason
     to  constitute  at  least  a  majority  of the  Board,  provided  that  any
     individual  becoming a director  subsequent to the beginning of such period
     whose  election  or  nomination  for  election by HSOG's  shareholders  was
     approved by a vote of at least a majority of the directors then  comprising
     the Incumbent  Board shall be considered as though such  individual  were a
     member of the  Incumbent  Board,  but  excluding  for this purpose any such
     individual  whose initial  assumption  of office is in  connection  with an
     actual or  threatened  election  contest  relating  to the  election of the
     directors of HSOG (as such terms are used in Rule 14a-11 of Regulation  14A
     promulgated under the Exchange Act); or

          (c) Consummation by HSOG of a reorganization,  merger or consolidation
     (a  "Business  Combination"),  in each case,  with  respect to which all or
     substantially  all of the  individuals and entities who were the respective
     beneficial  owners of the  outstanding  Company  Common  Stock and  Company
     voting securities  immediately  prior to such Business  Combination do not,
     immediately following such Business Combination, beneficially own, directly
     or indirectly, more than 50% of, respectively,  the then outstanding shares
     of  common  stock and the  combined  voting  power of the then  outstanding
     voting securities  entitled to vote generally in the election of directors,
     as the  case  may be,  of the  corporation  resulting  from  such  Business
     Combination  in  substantially  the  same  proportion  as  their  ownership
     immediately prior to such Business  Combination of the Outstanding  Company
     Common Stock and Company Voting Securities, as the case may be; or


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          (d) (i) Consummation of a complete  liquidation or dissolution of HSOG
     or (ii) sale or other disposition of all or substantially all of the assets
     of HSOG other than to a corporation  with respect to which,  following such
     sale or disposition,  more than 50% of, respectively,  the then outstanding
     shares  of  common  stock  and  the  combined  voting  power  of  the  then
     outstanding voting securities entitled to vote generally in the election of
     directors  of such  corporation  is then owned  beneficially,  directly  or
     indirectly, by all or substantially all of the individuals and entities who
     were the beneficial owners, respectively, of the Outstanding Company Common
     Stock and Company Voting Securities,  as the case may be, immediately prior
     to such sale or disposition.

     2.06 "Code" means the Internal  Revenue Code of 1986,  as it exists now and
     as it may be amended from time to time.

     2.07  "Common  Stock"  means the common  stock of HSOG,  $.01 par value per
     share.

     2.08  "Company"  means  The  Home-Stake  Oil &  Gas  Company,  an  Oklahoma
     corporation, and any successor thereto.

     2.09 "Director(s)" means a member or members of the Board.

     2.10 "Disability"  means being unable to engage in any substantial  gainful
     activity  by  reason  of any  medically  determinable  physical  or  mental
     impairment  which can be expected to result in death or which has lasted or
     can be expected to last for a continuous period of not less than 12 months.

     2.11 "Exchange Act" means the Securities Exchange Act of 1934, as it exists
     now or from time to time may hereafter be amended.

     2.12 "Fair Market Value" means for the relevant day:

          (a) If shares  of Common  Stock are  listed or  admitted  to  unlisted
     trading  privileges on any national or regional  securities  exchange,  the
     last  reported  sale  price,  regular  way, on the  composite  tape of that
     exchange on the day Fair Market Value is to be determined;

          (b) If the Common Stock is not listed or admitted to unlisted  trading
     privileges as provided in paragraph  (a), and if sales prices for shares of
     Common  Stock are reported by the  National  Market  System of the National
     Association  of Securities  Dealers  Automated  Quotation  System  ("NASDAQ

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     System"),  then the last sale price for  Common  Stock  reported  as of the
     close of business on the day Fair Market Value is to be  determined,  or if
     no such sale takes  place on that day,  the average of the high bid and low
     asked  prices so  reported;  if Common Stock is not traded on that day, the
     next preceding day on which such stock was traded; or

          (c) If  trading  of the  Common  Stock is not  reported  by the NASDAQ
     System or on a stock exchange,  Fair Market Value will be determined by the
     Board in its discretion based upon the best available data.

     2.13  "Incentive  Stock Option" or "ISO" means an Option that complies with
     the  terms  and  conditions  set  forth in  Section  422 of the Code and is
     designated as an ISO at the time of its grant.

     2.14  "Officer"  means a  corporate  officer of HSOG or any  Subsidiary  or
     affiliate of HSOG.

     2.15  "Option"  means the right of a  Participant  to  purchase a specified
     number of shares of Common  Stock,  subject to the terms and  conditions of
     the Plan.

     2.16  "Option  Date"  means the date upon  which an Option is  granted,  or
     Restricted Stock is awarded, to a Participant under the Plan.

     2.17  "Option  Price"  means the price per share at which an Option  may be
     exercised.

     2.18  "Participant"  means an  individual,  or to the extent  permitted  as
     contemplated at Section 5 hereof, the account of an individual,  to whom an
     Option or Restricted Stock has been granted under the Plan.

     2.19 "Plan" means The  Home-Stake  Oil & Gas Company 1997  Incentive  Stock
     Plan herein and as from time to time amended.

     2.20  "Restricted  Stock"  means  Common  Stock  awarded  to a  Participant
     pursuant  to  the  Plan  and  subject  to  the  restrictions  contained  or
     authorized in Section 7 hereof.

     2.21 "Securities Act" means the Securities Act of 1933, as it exists now or
     from time to time may hereinafter be amended.


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     2.22 "Stock  Split means the 30-for-1  split of the issued and  outstanding
     shares of Common  Stock to be  effected  pursuant to  amendments  to HSOG's
     Certificate of  Incorporation in connection with the proposed merger of The
     Home-Stake Royalty Corporation into HSOG, which amendments also provide for
     an increase in the number of HSOG's authorized shares of Common Stock. Such
     merger has been approved by the Board of Directors on the same date as this
     Plan,  and such Stock Split and increase in  authorized  shares will become
     effective upon the effective date of such merger.

     2.23  "Subsidiary"  means  any  corporation  or other  entity  of which the
     majority voting power or equity interest is owned directly or indirectly by
     HSOG.

     2.24 "Termination of Employment" means:

          (a)  with  respect  to an  employee,  when the  employee's  employment
     relationship   with  HSOG  and  all  of  its  Subsidiaries  is  terminated,
     regardless  of any  severance  arrangements.  A  transfer  from  HSOG  to a
     Subsidiary  or  affiliate of HSOG or a  Subsidiary,  or vice versa is not a
     termination of employment for purposes of the Plan;

          (b) with respect to a  consultant,  when the  consultant's  consulting
     relationship  with HSOG is terminated  either due to the termination of any
     consulting  agreement,  or  otherwise,  regardless  of  the  fact  that  no
     employment relationship exists; or

          (c) with respect to an Officer or Director, when such individual is no
     longer  serving as an Officer or Director of HSOG,  as a  consultant  to or
     employee of HSOG and any of its Subsidiaries.

     2.25 Rules of Construction.

          (a)  Governing  Law. The  construction  and  operation of the Plan are
     governed by the laws of the State of Oklahoma.

          (b) Undefined Terms. Unless the context requires another meaning,  any
     term not  specifically  defined in the Plan has the meaning  given to it by
     the Code.

          (c) Headings.  All headings in the Plan are for reference only and are
     not to be utilized in construing the Plan.

          (d) Gender.  Unless  clearly  appropriate,  all nouns of either gender
     refer indifferently to persons of either gender.

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          (e) Singular and Plural. Unless clearly inappropriate,  singular terms
     refer also to the plural and vice versa.

          (f)  Severability.  If any  provision of the Plan is  determined to be
     illegal or invalid for any reason, the remaining  provisions shall continue
     in full force and  effect and shall be  construed  and  enforced  as if the
     illegal or invalid  provision did not exist,  unless the continuance of the
     Plan in such circumstances is not consistent with its purposes.

3.   Stock Subject to the Plan.

     Four Hundred  Fifty-One  Thousand  Seven Hundred and  Thirty-Six  (451,736)
shares of HSOG's  Common Stock (or such greater or lesser  number of shares that
equals ten percent  (10%) of the issued and  outstanding  shares of Common Stock
after giving effect to the Stock Split and the merger of The Home-Stake  Royalty
Corporation  with the Company) have been reserved for issuance  under this Plan.
Such  shares  of  Common  Stock may be newly  issued  shares or shares  from the
Company's  Treasury.  Such number of shares  available  under this Plan shall be
increased  automatically  without  further  action by the Board of  Directors or
shareholders  of the Company to that number  which,  when added to the number of
shares subject to Options granted under this Plan and any other stock plan(s) of
the Company  equals ten percent  (10%) of the issued and  outstanding  shares of
Common Stock at such time(s) after the effective  date of the Stock Split as the
Company  issues  additional  shares of Common Stock  (excluding  for purposes of
determining  the number of shares  available  under this Plan and the time(s) of
such automatic increases all shares of Common Stock issued pursuant to this Plan
and any other stock plan(s) of the Company and all shares of Common Stock in the
Company's  Treasury).  Options may be: (a) Incentive  Stock  Options,  (b) other
forms of statutory stock options, or (c) nonstatutory (non-qualified) options.

4.   Administration.

     The Plan shall be  administered  by the  Board.  In  addition  to any other
powers set forth in the Plan, the Board has the exclusive authority:

          (a) to construe and interpret the Plan, and to remedy any  ambiguities
     or inconsistencies therein;

          (b) to establish,  amend and rescind appropriate rules and regulations
     relating to the Plan;


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          (c) subject to the express  provisions  of the Plan,  to determine the
     individuals who will receive Awards of Options and/or Restricted Stock, the
     times when they will  receive  them,  the number of shares to be subject to
     each  Award and the  Option  Price,  payment  terms,  payment  method,  and
     expiration date applicable to each Award;

          (d) to contest on behalf of HSOG or  Participants,  at the  expense of
     HSOG,  any ruling or decision on any matter  relating to the Plan or to any
     Awards of Options and/or Restricted Stock;

          (e) generally,  to administer the Plan, and to take all such steps and
     make all such  determinations in connection with the Plan and the Awards of
     Options and/or Restricted Stock as it may deem necessary or advisable;

          (f) to determine the form in which tax withholding under Section 14 of
     the Plan will be made; and

          (g) to amend the Plan or any  Option or  Restricted  Stock  granted or
     awarded hereunder as may be necessary in order for any business combination
     involving HSOG to qualify for  pooling-of-interest  treatment under APB No.
     16.

5.   Eligible Participants.

     Subject to the provisions of the Plan, the persons who shall be eligible to
participate  in the Plan and be granted  Awards  shall be those  persons who are
Officers, Directors, key employees and consultants of HSOG or any Subsidiary who
shall be in a position,  in the opinion of the Board, to make  contributions  to
the growth, management, protection, and success of HSOG and its Subsidiaries. Of
those persons described in the preceding  sentence,  the Board may, from time to
time,  select  persons to be granted  Awards and shall  determine  the terms and
conditions with respect thereto. In making any such selection and in determining
the form of the Award,  the Board may give  consideration  to the  functions and
responsibilities  of the person,  to the person's  contributions to HSOG and its
Subsidiaries, the value of the individual's service to HSOG and its Subsidiaries
and such other  factors  deemed  relevant by the Board.  In the event and to the
extent  authorized by the United States  Departments of Treasury and Labor,  The
Home-Stake  Companies 401(k) Plan account of an employee of HSOG or a Subsidiary
may also be a  Participant,  the Board may grant Options to such account and, to
the extent such account is a  Participant,  the Options in such an account shall
be subject to all of the terms and  provisions of the Plan as if the Options had
been granted to the individual for whom the account is maintained.


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6.   Terms and Conditions of Options.

     The Board may, in its discretion,  grant Options to any  Participant  under
the Plan. Each Option shall be evidenced by a written agreement between HSOG and
the Participant.  Unless the Board at the time of grant specifically  designates
Options granted under the Plan as Incentive  Stock Options,  all Options granted
under the Plan shall be non-statutory  options.  Each Option agreement,  in such
form as is  approved  by the Board,  shall be subject to the  following  express
terms and conditions and to such other terms and  conditions,  not  inconsistent
with the Plan as the Board may deem appropriate:

          (a) Option  Period.  Each Option  granted  under the Plan shall be for
     such  period as is  established  by the Board,  except  that each ISO shall
     expire no later than ten years  after the Option  Date.  Where  Options are
     exercisable  in  installments,  the right to purchase  any shares  shall be
     cumulative, so that when the right to purchase any shares has matured, such
     shares may be purchased  thereafter until the expiration of the Option. The
     Board shall have the power to accelerate the exercisability of installments
     for any Option granted under the Plan.

          (b) Option  Price.  At the time when the Option is granted,  the Board
     will fix the Option  Price;  provided,  however,  that  except as  provided
     herein at Section 6(c)(i),  the Option Price shall be no less than the Fair
     Market Value on the Option Date.

          (c) Other Option Provisions. The form of Option authorized by the Plan
     may  contain  such  other  provisions  as the  Board  may from time to time
     determine, including:

               (i) "Discounted Options" which may be granted to any Participant.
               A  "Discounted  Option" is an Option  having an Option  Price per
               share  (i) less than the Fair  Market  Value at the  Option  Date
               provided such Option Price shall not be less than 50% of the Fair
               Market  Value  at  the  Option  Date,  or  (ii)  in the  case  of
               Directors,  equal to the Fair  Market  Value at the Option  Date,
               less the amount of salary or  Director's  fees  elected (at least
               six months before the commencement of the calendar or fiscal year
               with  respect to which such fees will be earned) by a Director to
               be  received  in the  form of  Options  (the  "deferred  amount")
               divided by the number of shares subject to the Option. Discounted
               Options shall not be forfeitable  under any provision of the Plan
               and  shall be  exercisable  until the  third  anniversary  of the
               Participant's Termination of Employment;

               (ii) "Reload  Options" which may be granted only to Directors and
               employees of HSOG or a Subsidiary. A "Reload Option" is an Option
               automatically  granted to a Participant  pursuant to the terms of
               an Award Agreement upon the delivery (actual,  constructive or by
               attestation)  of  shares  of  Common  Stock  to pay any  required



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               withholding  tax in respect  of the  exercise  of an Option  (the
               "delivered shares").  Such Reload Option entitles the Participant
               to purchase (at an option price equal to the Fair Market Value at
               the time of such  delivery)  a number of  shares of Common  Stock
               equal to the number of delivered shares.  Reload Options shall be
               subject  to all of the terms of the Plan and the Award  Agreement
               in respect to which they are granted, including the Option Period
               for the Option exercised by delivery of the delivered shares, and
               shall not be  exercisable  before  the  earlier of one year after
               their  grant or the day  before  the  expiration  of such  Option
               Period. In the discretion of the Board, Reload Options granted on
               the exercise of ISO's may be ISO's or non-qualified options.

          (d) Incentive Stock Options. ISO's may only be granted to employees of
     HSOG or of a Subsidiary. No more than Four Hundred Fifty-One Thousand Seven
     Hundred and Thirty-Six (451,736) shares of HSOG's Common Stock (as adjusted
     to  reflect  the Stock  Split)  may be issued  upon the  exercise  of ISO's
     granted  under this Plan and no ISO may be granted under the Plan after the
     tenth  anniversary of the date the Plan is approved by the  shareholders of
     HSOG. The aggregate Fair Market Value  (determined as of the Option Date of
     the ISO) of the  Common  Stock  with  respect  to  which  ISO's  are  first
     exercisable  by a Company or Subsidiary  employee  during any calendar year
     under all Option plans of HSOG shall not exceed $100,000. An ISO granted to
     an  employee  who,  at the  time  the ISO is  granted,  owns  Common  Stock
     possessing  more than ten percent (10%) of the total combined  voting power
     of all classes of capital stock of HSOG or a Subsidiary  thereof shall have
     an exercise  price  equal to not less than 110  percent  (110%) of the Fair
     Market Value on the Option  Date.  Notwithstanding  any other  provision of
     this Plan, an ISO shall not be transferable or assignable otherwise than by
     will or the laws of descent and distribution.  Any Participant who disposes
     of shares  acquired upon the exercise of an ISO either (i) within two years
     after the Option Date of the Option under which the shares were acquired or
     (ii) within one year after the acquisition of such shares shall notify HSOG
     of such disposition and of the amount realized. Failure by a Participant to
     so notify HSOG of such a disposition  of shares shall entitle HSOG to treat
     the shares of Common Stock issued to such  Participant as void ab initio or
     to  recover  from the  Participant  the  greater of the value of the shares
     disposed  of as of the  date of  disposition  or the  value  of the  shares
     disposed of as of the date HSOG learns of such disposition from either (ii)
     any  amounts due to such  Participant  from HSOG or a  Subsidiary,  or (ii)
     otherwise. HSOG may, at its discretion,  place a legend noting the possible
     consequences of a Participant's  failure to provide such disposition notice
     on shares of Common Stock delivered upon the exercise of an ISO.


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          (e) No person shall have any rights of a  shareholder  with respect to
     any shares to be  delivered  upon the exercise of an Option until such time
     as such Option is validly exercised.

7.   Terms and Conditions of Restricted Stock Awards.

     The Board, in its discretion, may grant Restricted Stock to any Participant
under the Plan,  the purchase  price of which shall be established by the Board,
which purchase price may be financed by HSOG on terms  established by the Board.
Each grant of Restricted Stock shall be evidenced by an Award Agreement  between
HSOG and the  Participant.  All shares of Common Stock  awarded to  Participants
under the Plan as  Restricted  Stock shall be subject to the  following  express
terms and conditions and to such other terms and  conditions,  not  inconsistent
with the Plan, as the Board shall deem appropriate:

          (a)  Restrictions on Transfer.  Shares of Restricted  Stock awarded to
     Participants  shall contain such  restrictions on transfer as the Board may
     determine in its sole  discretion.  Except as permitted under Section 12 of
     the Plan,  shares of Restricted  Stock awarded to  Participants  may not be
     sold or transferred  before such  restrictions on transfer  lapse,  and may
     only be pledged to HSOG or any Subsidiary to satisfy any  obligations  that
     the  Participant  may have to HSOG or the  Subsidiary  with  respect to the
     acquisition of such shares of Restricted  Stock.  Subject to the provisions
     of subparagraphs  (b) and (c) below and any other  restrictions  imposed by
     law, the  certificates  for any shares of Restricted Stock the restrictions
     on which have  lapsed will be  transferred  to the  Participant  or, in the
     event of his death,  to the  beneficiary  or  beneficiaries  designated  by
     writing  filed by the  Participant  with the Board for such  purpose or, if
     none, to his estate.  Delivery of shares in  accordance  with the preceding
     sentence  shall be made within the 30-day  period  after such  restrictions
     shall lapse.

          (b) Certificates  Deposited With Company.  Each certificate  issued in
     respect  of shares of  Restricted  Stock  awarded  under the Plan  shall be
     registered in the name of the  Participant  and deposited  with HSOG.  Each
     such certificate shall bear the following (or a similar) legend:

          "The  transferability  of this  certificate  and the  shares  of stock
          represented hereby are subject to the terms and conditions  (including
          forfeiture)  relating to Restricted  Stock contained in The Home-Stake
          Oil & Gas Company 1997 Incentive  Stock Plan and an agreement  entered
          into  between  the  registered  owner  and  The  Home-Stake  Oil & Gas
          Company.  Copies  of  such  Plan  and  agreement  are on  file  at the
          principal office of The Home-Stake Oil & Gas Company."


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          (c) Shareholder Rights.  Subject to the foregoing  restrictions,  each
     Participant  shall have all the rights of a shareholder with respect to his
     shares of Restricted Stock including, but not limited to, the right to vote
     such shares.

          (d)  Dividends.  On each Common  Stock  dividend  payment  date,  each
     Participant shall receive an amount equal to the dividend paid on that date
     on a  share  of  Common  Stock,  multiplied  by his  number  of  shares  of
     Restricted Stock.

8.   Manner of Exercise of Options; Deferral of Receipt of Shares.

          (a) To  exercise  an Option in whole or in part,  a  Participant  (or,
     after his  death,  his  executor  or  administrator)  or his  assignee  (as
     contemplated  at  Section  12  hereof)  must  give  written  notice  to the
     Administrator,  stating  the  number of  shares  with  respect  to which he
     intends to exercise the Option.  HSOG will issue the shares with respect to
     which the Option is exercised upon payment in full of the Option Price. The
     Option  Price may be paid (i) in cash,  (ii) in shares of Common Stock held
     by the Participant, his executor, administrator, or assignee, and having an
     aggregate  Fair Market Value,  as determined as of the close of business on
     the day on which such Option is exercised, equal to the Option Price, (iii)
     if  permitted by the Board,  a promissory  note in the amount of the Option
     Price,  which note shall provide for full  personal  liability of the maker
     and  shall  contain  such  other  terms  and  provisions  as the  Board may
     determine,  including  without  limitation  the  right  to  repay  the note
     partially or wholly with Common  Stock,  (iv) if authorized by the Board in
     the  Award  Agreement  for the  Option  being  exercised,  by  delivery  of
     irrevocable instructions to a broker to promptly deliver to HSOG the amount
     of sale or loan  proceeds  necessary to pay for all Common  Stock  acquired
     through such exercise and any tax  withholding  obligations  resulting from
     such  exercise,  (v) if authorized by the Board in the Award  Agreement for
     the Option  being  exercised,  by the  withholding  by HSOG,  pursuant to a
     written election delivered by the Participant, his executor, administrator,
     or assignee, to the Administrator on or prior to the date of exercise, from
     the shares of Common  Stock  issuable  upon any exercise of the Option that
     number of shares  having a Fair Market Value as of the close of business on
     the day on which such Option is exercised equal to such Option Price,  (vi)
     by constructive delivery  ("attestation") of shares of Common Stock held by
     the Participant,  his executor,  administrator,  or assignee, and having an
     aggregate  Fair Market Value,  as determined as of the close of business on
     the day of exercise,  equal to the Option Price effected through  providing
     HSOG with a notarized  statement on or before the day of exercise attesting
     to  the  number  of  shares  owned  by  the   Participant,   his  executor,

                                      -11-



<PAGE>



     administrator,  or assignee,  that will serve as the Option  Price  payment
     shares,  or (vii) as authorized by the Board in the Award Agreement for the
     Option being exercised,  by a combination of such methods. The Option Price
     may also be paid in shares of  Common  Stock  which  were  received  by the
     Participant, his executor, administrator, or assignee, upon the exercise of
     one or more  Options  or as an award of  Restricted  Stock  under the Plan;
     provided,  however,  that in the  event  shares  of  Restricted  Stock  are
     tendered as  consideration  for the exercise of an Option,  a number of the
     shares  issued  upon the  exercise of said  Option,  equal to the number of
     shares of Restricted Stock used as consideration therefor, shall be subject
     to the same  restrictions as the Restricted  Stock so submitted were at the
     time of their  submission  plus  any  additional  restrictions  that may be
     imposed by the Board.

          (b) A Participant  (but not his executor,  administrator  or assignee)
     may elect to defer the  receipt of a portion of the shares of Common  Stock
     (the "Deferred  Shares")  deliverable  upon the exercise of a non-qualified
     Option  provided  such  Participant  (i)  delivers  to the  Board a written
     election (a "Deferral  Election")  to defer the receipt of shares of Common
     Stock, in such form and with such terms as the Board  determines,  no later
     than six months  before the date of  exercise  of an Option as to which the
     receipt of a portion of the shares of Common Stock is to be deferred,  (ii)
     pays the  Option  Price  payable  upon such  exercise  by  delivery,  or by
     attestation,  to HSOG of shares of Common Stock as provided at Section 8(a)
     hereof,  and  (iii)  is  employed  by HSOG or a  Subsidiary  at the time of
     exercise of such Option.  Only the number of shares  otherwise  deliverable
     upon exercise of a  non-qualified  Option in excess of the number of shares
     of Common Stock  delivered in payment of the Option Price upon any exercise
     of such Option shall be Deferred Shares.  Any such Deferral  Election shall
     be revocable only upon the delivery of a superseding  Deferral Election for
     the shares subject to a Deferral  Election.  Upon the exercise of an Option
     subject  to a  Deferral  Election,  that  number of shares of Common  Stock
     which,  but for such  Deferral  Election,  would be  deliverable  upon such
     exercise  shall be issued to HSOG for the  benefit of the  Participant  and
     credited to a  bookkeeping  account (a "Unit  Account")  in the name of the
     Participant.  Each  Participant's  Unit Account  will be credited  with all
     non-cash  property  either  distributed in respect of any Deferred  Shares,
     credited to such account or into which any Deferred Shares credited to such
     Unit  Account  are  converted.   All  cash  distributed  in  respect  of  a
     Participant's Deferred Shares or into which a Participant's Deferred Shares
     are  converted  shall  be  delivered  to  such  Participant  as  soon as is
     reasonably practical after such distribution or conversion.  No Participant
     shall be entitled to vote the Deferred Shares and instead such shares shall
     be voted by the  Secretary  of HSOG on  behalf of such  Participant  on all
     matters on which the  holders of Common  Stock are  entitled to vote in the
     same manner as a majority of the shares of Common Stock are voted.



                                      -12-

<PAGE>



9.   Vesting.

     A Participant  may not exercise an Option until it has become  vested.  The
portion of an Option Award that is vested depends upon the vesting restrictions,
if any,  established  by the Board for such  Option at the time of its grant and
the period that has elapsed since the Option Date.

10.  Change in Control.

     Notwithstanding the provisions of Sections 6 and 7 or anything contained in
a Participant's agreement to the contrary, upon a Change in Control, all Options
and/or Restricted Stock shall be subject to the following:

          (a) The restrictions  and limitations  applicable to any Options shall
     lapse,  and such Options shall become free of all  restrictions  and become
     fully vested to the full extent of the original grant.

          (b) HSOG  shall  have the right to  acquire  from  Participants  their
     vested  Options  for which  the  value,  as  established  in the  Change in
     Control, of the Common Stock issuable upon exercise thereof is greater than
     the  Option  Price by payment of the amount by which the price per share of
     Common Stock,  as established in the Change in Control,  exceeds the Option
     Price; and

          (c) All Restricted  Stock shall become free of all restrictions and be
     fully vested and transferable.

11.  Adjustments to Reflect Changes in Capital Structure.

     If there is any change in the  corporate  structure or shares of HSOG,  the
Board of Directors may, in its  discretion,  make any  adjustments  necessary to
prevent  accretion,  or to protect against  dilution,  in the number and kind of
shares  authorized by the Plan and, with respect to  outstanding  Options and/or
Restricted  Stock,  in the number and kind of shares covered  thereby and in the
applicable  Option  Price.  For the purpose of this  Section 11, a change in the
corporate structure or shares of HSOG includes,  without limitation,  any change
resulting from a recapitalization,  stock split, stock dividend,  consolidation,
rights offering, spin-off, reorganization, or liquidation and any transaction in
which  shares of Common  Stock are  changed  into or  exchanged  for a different
number  or kind of  shares  of  stock  or other  securities  of HSOG or  another
corporation.

                                      -13-



<PAGE>




12.  Non-Transferability  of Options and Restricted Stock;  Limited Exception to
     Transfer Restrictions.

          (a)  Unless  otherwise  expressly  provided  in this  Section  12,  by
     applicable  law or by any  Award  Agreement,  as the same  may be  amended,
     evidencing  the grant or award of Restricted  Stock or Options:  Awards are
     non-transferable  and shall not be subject in any manner to sale, transfer,
     anticipation, alienation, assignment, pledge, encumbrance or charge; Awards
     shall be  exercised  only by the person to whom such Awards were granted or
     awarded (a "Recipient"); and amounts payable or shares issuable pursuant to
     Awards shall be delivered only to or for the account of a Recipient.

          (b) Except as  precluded by any  applicable  law, the Board may permit
     Awards to be transferred to and exercised by and paid to certain persons or
     entities related to the Recipient, including, but not limited to members of
     the  Recipient's   immediate  family  (parents,   grandparents,   children,
     grandchildren,  spouse,  siblings),  charitable institutions,  or trusts or
     other entities whose  beneficiaries or beneficial owners are members of the
     Recipient's  immediate family and/or  charitable  institutions,  or to such
     other persons or entities as may be approved by the Board, pursuant to such
     conditions  and  procedures  as the  Board  may  establish.  Any  permitted
     transfer shall be subject to the condition that the Board receive  evidence
     satisfactory  to it that the  transfer is being made for estate  and/or tax
     planning   purposes  on  a  gratuitous   or  donative   basis  and  without
     consideration other than nominal consideration.

          (c) The exercise and  transfer  restrictions  in this Section 12 shall
     not apply to:

               (i)  transfers to HSOG;

               (ii) the designation of a beneficiary to receive  benefits in the
          event  of the  Recipient's  death  or,  if  the  Recipient  has  died,
          transfers to or exercise by the  Recipient's  beneficiary,  or, in the
          absence of a validly designated beneficiary,  transfers by will or the
          laws of descent and distribution;

               (iii) transfers pursuant to a domestic relations order;

               (iv)  if the  Recipient  has  suffered  a  disability,  permitted
          transfers or exercises on behalf of the  Recipient by his or her legal
          representative; or

               (v)  the  authorization  by  the  Board  of  "cashless  exercise"
          procedures with third parties who provide financing for the purpose of
          (or who otherwise  facilitate) the exercise of Awards  consistent with
          applicable laws and the express authorization of the Board.


                                      -14-



<PAGE>



          (d) In the event of a transfer of an Award  pursuant to Subsection (b)
     or (c) of this Section 12, the  Recipient  will remain liable for any taxes
     (including  withholding  and  social  security  taxes)  due  upon  or  as a
     consequence of the exercise of or lapse of any  restrictions  in respect of
     an Award  and  neither  HSOG nor the Board  shall  have any  obligation  to
     provide notice to a transferee of any event or  information  that has, will
     or could in any way affect an Award or its exercise.

13.  Rights as Shareholder.

     No person  shall  have any rights of a  shareholder  as to shares of Common
Stock  subject to an Award under the Plan until,  after  proper  exercise of the
Award or other action  required,  such shares shall have been recorded on HSOG's
official shareholder records as having been issued or transferred. Upon exercise
of the Award or any portion thereof, HSOG will have thirty (30) days in which to
issue the shares,  and the Participant  will not be treated as a shareholder for
any purpose  whatsoever prior to such issuance.  No adjustment shall be made for
cash  dividends  or other  rights for which the record date is prior to the date
such shares are recorded as issued or transferred in HSOG's official shareholder
records, except as provided herein or in an Agreement.

14.  Withholding Tax.

     Upon the exercise of an Option,  or the lapse of restrictions on Restricted
Stock,  requiring tax  withholding,  the Participant  will be required to pay to
HSOG for remittance to the appropriate taxing authorities an amount necessary to
satisfy  the  employee's  portion of  federal,  state and local  taxes,  if any,
incurred  by  reason  of  the  exercise  of an  Option  or  the  lapse  of  such
restrictions.  A Participant  may elect to have any tax  withholding  obligation
incurred  upon the exercise of or lapse of  restrictions  in respect of an Award
satisfied  by payment of cash by the  Participant,  by the  withholding  of cash
otherwise  due  the  Participant,  or,  except  in the  case  of  ISO's,  by the
withholding of shares of Common Stock  issuable upon such  occurrence and having
an aggregate  Fair Market Value on the day prior to the day of exercise or lapse
sufficient to satisfy the  applicable  tax  withholding  requirement;  provided,
however,  that if the Participant elects to have shares of Common Stock withheld
from the  shares  deliverable  upon  such  exercise  or lapse,  a  Participant's
election  must be delivered to the  Administrator  in writing on or prior to the
date of  exercise  of the  Options  or lapse of  restrictions  with  respect  to
Restricted Stock.

15.  Termination of Employment.

     In the event of a  Participant's  Termination of Employment,  the following
rules shall apply:



                                      -15-



<PAGE>



          (a)  Resignation  in order to assume  employment,  approved  by HSOG's
     Chief Executive  Officer,  with a  governmental,  charitable or educational
     institution, or business entity affiliated with HSOG:

          When a Participant  resigns to assume  employment,  approved by HSOG's
     Chief Executive  Officer,  with a  governmental,  charitable or educational
     institution,  or business entity in which HSOG has an equity interest,  the
     Board may (i) authorize the  continuation  of Options granted or Restricted
     Stock  awarded  prior  to  termination  as if the  Participant  were  still
     employed by HSOG and (ii) permit the  exercise of such  Options or lapse of
     restrictions  in respect of  Restricted  Stock  during  periods  after such
     Termination of Employment,  but not beyond the original  expiration date of
     the Option.  Such actions will not be  authorized  to the extent they would
     cause  outstanding ISOs to be considered to have been modified for purposes
     of  Section  424(h) of the Code.  Unless  the Board  determines  otherwise,
     termination  of such approved  employment,  except to rejoin HSOG or accept
     other   employment  which  would  qualify  under  this  paragraph  (a),  or
     divestiture by HSOG of its equity interest in such business  entity,  shall
     be treated as a termination of employment pursuant to paragraph (b), (c) or
     (d) of this Section 15.

          (b)  Termination  of  Employment  for any  reason  other  than  death,
     disability or resignation for approved employment pursuant to paragraph (a)
     above:

          Any Option or  Restricted  Stock  shall  expire  forthwith;  provided,
     however,  that with the approval of the Board evidenced by a writing signed
     by an  executive  officer  of HSOG  other  than the  Participant,  unvested
     Options may be accelerated to vest immediately,  any Options exercisable at
     the time of such  termination  may be  exercised  up to a date  after  such
     termination  that is determined by the Board,  but not exceeding five years
     from the  date of such  termination  and not  beyond  the  date the  Option
     otherwise  would  have  expired  in  accordance  with the  Award  Agreement
     evidencing such Option and/or the  restrictions on Restricted  Stock may be
     eliminated so that such  Restricted  Stock is free of such  restrictions at
     the  time  of  Termination  of  Employment  and  not  forfeited  upon  such
     Termination of Employment.

          (c) Death of a Participant:

          A Participant's  estate or beneficiaries shall have a period up to the
     later of one year  after the  Participant's  death or the  expiration  date
     specified  in the Award  Agreement  within  which to  exercise  the Option;
     provided,  however,  in the case of  ISO's,  the  Participant's  estate  or
     beneficiaries  may  exercise  an  Option  only  until the  expiration  date
     specified in the Award Agreement.  Any Option may be immediately  exercised
     in full by the  Participant's  estate  or  beneficiaries.  In the event the
     Participant's  estate is closed with exercisable  Options then unexercised,
     the rights under this  paragraph  shall pass by will or the laws of descent
     and distribution. In the case of Restricted Stock, the restrictions on such
     Restricted  Stock  shall be deemed to have lapsed  immediately  before such
     Participant's death.

          (d) Disability of a Participant:

          In the event of a  Participant's  Disability  during  employment,  the
     Participant,  or his or her guardian or legal  representative  shall have a
     period up to the expiration  date specified in the Award  Agreement  within
     which to exercise the Option; provided,  however, in the case of ISO's, the
     Participant,  or his or her guardian or legal  representative  shall have a
     period  up to the  earlier  of the  expiration  date or one year  after the
     Participant's  Termination  of  Employment  within  which to  exercise  the
     Option.  In  the  case  of  Restricted  Stock,  the  restrictions  on  such
     Restricted  Stock  shall be deemed to have  lapsed  immediately  before the
     Termination of Employment of such Participant.


                                      -16-


<PAGE>




16.  Cancellation of Option Grants and Restricted Stock.

          (a) After  Termination  of  Employment.  If there is a Termination  of
     Employment  with respect to a Participant  for any reason other than death,
     and,  pursuant  to  paragraph  (a),  (b) or (d) of Section  15, one or more
     Options have not yet expired or the  restrictions  pertaining to Restricted
     Stock have not  lapsed,  the Board,  in its sole  discretion,  which may be
     delegated to the Chief Executive  Officer of HSOG or to the Chairman of the
     Board,  may  cancel  any such  Options  at any time  prior to the  exercise
     thereof or declare  forfeited any such Restricted  Stock before the related
     restrictions lapse unless the following conditions are met:

               (i)  The   Participant   shall  not  render   services   for  any
          organization  or engage  directly or indirectly in any business which,
          in the judgment of the Chief Executive  Officer of HSOG, is or becomes
          competitive with HSOG, or which is or becomes otherwise prejudicial to
          or in conflict with the  interests of HSOG.  The judgment of the Chief
          Executive  Officer shall be based on the  Participant's  positions and
          responsibilities   while   employed   by   HSOG,   the   Participant's
          post-employment   responsibilities   and   position   with  the  other
          organization  or business,  the extent of past,  current and potential
          competition  or conflict  between HSOG and the other  organization  or
          business, the effect on HSOG's customers, suppliers and competitors of
          the  Participant's  assuming the  post-employment  position,  and such
          other considerations as are deemed relevant given the applicable facts
          and  circum  stances.  The  Participant  shall  be free,  however,  to
          purchase as an investment or otherwise,  stock or other  securities of
          such  organization or business so long as such stock or securities are
          listed   upon   a   recognized    securities    exchange   or   traded
          over-the-counter, and such investment does not represent a substantial
          investment  to the  Participant  or a greater  than five  percent (5%)
          equity interest in the organization or business.

               (ii)  The   Participant   shall  not,   without   prior   written
          authorization  from HSOG,  disclose to anyone  outside HSOG, or use in
          other than HSOG's business,  any confidential  information or material
          relating to the business of HSOG,  acquired by the Participant  either
          prior to or after such Participant's Termination of Employment.

          (b)  Before  Termination  of  Employment.   The  Board,  in  its  sole
     discretion,  which may be delegated to the Chief Executive  Officer of HSOG
     or to the Chairman of the Board, may cancel any Options held by a person or
     reduce the number  thereof  at any time  prior to the  exercise  thereof or
     declare  forfeited a part or all of any shares of Restricted  Stock awarded
     to a Participant under the following circumstances:

               (i) The  Participant's  conduct either in connection  with his or
          her  employment  by  HSOG  or  otherwise  is  deemed  inimical  to the
          interests of HSOG.

               (ii) The Participant's employment  responsibilities with HSOG are
          reduced or altered and the Board determines that the Participant would
          not have been granted the Options or awarded the shares of  Restricted
          Stock,  or such number of Options or shares of Restricted  Stock,  had
          the Participant's  employment  responsibilities been at the reduced or
          altered  level at the time of the  grant or award of such  Options  or
          shares of Restricted Stock.


                                      -17-


<PAGE>
17.  No Right To Employment.

     Participation  in the Plan  will not  give  any  Participant  a right to be
retained as an employee of HSOG or any Subsidiary,  or any right or claim to any
benefit under the Plan, unless the right or claim has specifically accrued under
the Plan.

18.  Amendment of the Plan.

     Except as provided in this  Section 18, the Board of  Directors  may amend,
modify,  suspend or discontinue this Plan for the purpose of meeting any changes
in legal  requirements or for any other purpose permitted by law. Except for any
adjustments  pursuant to Section 11, the Board of Directors may not (a) increase
the maximum number of shares that may be issued under the Plan,  except with the
approval of the  shareholders  of HSOG,  (b) decrease  the  exercise  price with
respect to any Option previously  granted, or (c) delegate the administration of
this Plan to any  committee.The  Board may from time to time amend or revise the
terms of the Plan in whole or in part  and may  without  limitation,  adopt  any
amendment deemed necessary.

19.  Notice.

     Any written  notice to HSOG  required by any of the  provisions of the Plan
shall be  addressed to the  Administrator,  if so required  under the Plan,  and
otherwise  to the  Chairman  of the Board or to the Chief  Executive  Officer of
HSOG,  and shall  become  effective  when it is  received  by the office of such
Administrator, Chairman or the Chief Executive Officer.

20.  Company Benefit and Compensation Plans.

     Nothing contained in the Plan shall prevent any Participant prior to death,
or the Participant's  dependents or beneficiaries after the Participant's death,
from  receiving,  in addition to any Options or  Restricted  Stock  provided for
under the Plan,  any salary,  incentive or perfor  mance plan  Awards,  payments
under a Company  retirement plan or other benefits that may be otherwise payable
or  distributable to such  Participant,  or to the  Participant's  dependents or
beneficiaries under any other plan or policy of HSOG or otherwise. To the extent
permitted by law, grants of Options or awards of Restricted Stock under the Plan
may be made in  combination  with,  or as  alternatives  to,  grants,  awards or
payments under other Company plans.

21.  Representations and Warranties.

     No person shall at any time have a right to be selected as a Participant in
the Plan, nor having been selected as a Participant for one Award to be selected
as a Participant for any other Award,  and no person shall have any authority to
enter into any  agreement  assuring  such  selection  or making any  warranty or
representation  with respect thereto.  A Participant  shall have no rights to or
interest in any Option or Restricted Stock except as set forth herein.


                                      -18-



<PAGE>

22.  Unfunded Plan.

     Insofar  as it  provides  for grants of  Options  and awards of  Restricted
Stock,  the  Plan  shall  be  unfunded.  Although  bookkeeping  accounts  may be
established  with  respect to  Participants  who are or may become  entitled  to
Common  Stock  under  the  Plan,  any such  accounts  shall be used  merely as a
bookkeeping convenience. HSOG shall not be required to segregate any assets that
may at any time be represented by Common Stock,  nor shall the Plan be construed
as providing for such segregation,  nor shall HSOG nor the Board be deemed to be
a trustee  of any Common  Stock  issuable  or  deliverable  under the Plan.  Any
liability of HSOG to a  Participant  with respect to a grant of Options or award
of  Restricted  Stock under the Plan shall be based solely upon any  contractual
obligations  that may be  created  by the Plan or an  Award  Agreement;  no such
obligation  of HSOG  shall  be  deemed  to be  secured  by any  pledge  or other
encumbrance  on any  property  of  HSOG.  Neither  HSOG nor the  Board  shall be
required to give any security or bond for the performance of any obligation that
may be created by the Plan.

23.  Shareholder Approval.

     Continuance  of the  Plan,  and the  validity  of any  Options  granted  or
Restricted  Stock  awarded  under the Plan,  shall be subject to approval by the
shareholders  of HSOG of the Plan  within 12  months  after the date the Plan is
adopted by the Board.

24.  Conditions Upon Issuance of Shares.

     An Option  shall not be  exercisable,  a share of Common Stock shall not be
issued  pursuant to the exercise of an Option,  and  restrictions  on Restricted
Stock  awarded  shall not lapse until such time as the Plan has been approved by
the shareholders of HSOG and unless the Award of Restricted  Stock,  exercise of
such Option and the issuance and delivery of such share  pursuant  thereto shall
comply with all relevant provisions of law, including,  without limitation,  the
Securities  Act,  the  Exchange  Act,  the  rules  and  regulations  promulgated
thereunder,  and the requirements of any stock exchange upon which the shares of
Common Stock may then be listed, and shall be further subject to the approval of
counsel for HSOG with respect to such compliance. As a condition to the exercise
of an Option,  HSOG may require the person  exercising  such Option to represent
and  warrant at the time of any such  exercise  that the  Common  Stock is being
purchased  only for  investment  and without any  present  intention  to sell or
distribute  such  shares  if,  in  the  opinion  of  counsel  for  HSOG,  such a
representation is required by any of the aforementioned  relevant  provisions of
law.

25.  Effective Date and Termination of Plan.

     25.1  Effective  Date.  The Plan is  effective as of the of the date of its
adoption by the Board of Directors,  subject to its approval by the shareholders
of HSOG, pursuant to Section 23.



                                      -19-


<PAGE>


     25.2  Termination of the Plan. The Board may terminate the Plan at any time
with  respect to any shares that are not then  subject to Options or  Restricted
Stock. Termination of the Plan will not affect the rights and obligations of any
Participant   with  respect  to  Options  or  Restricted  Stock  awarded  before
termination.

                                                     * * * * *

     The undersigned,  being the duly elected  Secretary of The Home-Stake Oil &
Gas Company,  does hereby  certify that the foregoing The  Home-Stake  Oil & Gas
Company 1997  Incentive  Stock Plan was approved by the Board of Directors as of
August 14, 1997 and by the shareholders of HSOG on December 11, 1997.

                                   /s/ Chris K. Corcoran
                                   ---------------------------------------
                                   Secretary



                                      -20-
<PAGE>