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                                                                     EXHIBIT 4.5


                            HARVEST NATURAL RESOURCES
                          2004 LONG TERM INCENTIVE PLAN

                                    ARTICLE I

PURPOSE

The purpose of the Harvest Natural Resources 2004 Long Term Incentive Plan (the
"Plan") is to provide incentive opportunities for Non-Employee Directors, key
Employees and key Consultants, and to align their personal financial interest
with the Company's stockholders. The Plan includes provisions for stock options,
restricted stock and performance related awards.

                                   ARTICLE II

DEFINITIONS

(a)      "BOARD" OR "BOARD OF DIRECTORS" shall mean the Board of Directors of
the Company.

(b)      "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

(c)      "COMPANY" shall mean Harvest Natural Resources, Inc. and any successor
corporation by merger or otherwise.

(d)      "COMMITTEE" shall mean a committee of two (2) or more members of the
Board appointed by the Board of Directors to administer the Plan pursuant to
Article III herein. A person may serve on the Committee only if he or she is a
"Non-Employee Director" for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and satisfies the requirements of an "outside director"
for purposes of Code section 162(m).

(e)      "CONSULTANT" shall mean a person hired by the Company or a Subsidiary
as an independent contractor, leased employee, consultant or a person otherwise
designated by the Committee as eligible to participate in the Plan who is not an
Employee or Non-Employee Director.

(f)      "EMPLOYEE" shall mean any person employed by the Company or a
Subsidiary on a full-time salaried basis, including Officers and Non-Employee
Directors thereof. The term "Employee" shall not include a person hired as an
independent contractor, leased employee, consultant or a person otherwise
designated by the Company at the time of hire as not eligible to participate in
the Plan, even if such person is determined to be an "employee" by any
governmental or judicial authority.

(g)      "FAIR MARKET VALUE" of Stock shall mean the average of the highest
price and the lowest price at which Stock shall have been sold on the applicable
date as reported in the Wall Street Journal as New York Stock Exchange Composite
Transactions for that date. In the event that the applicable date is a date on
which there were no such sales of Stock, the Fair Market

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Value of Stock on such date shall be the mean of the highest price and the
lowest price at which Stock shall have been sold on the last trading day
preceding such date.

(h)      "INCENTIVE STOCK OPTION" or "ISO" shall mean an Option grant which
meets or complies with the terms and conditions set forth in Section 422 of the
Code and applicable regulations.

(i)      "INDICATORS OF PERFORMANCE" shall mean the criteria used by the
Committee to evaluate the Company's performance with respect to Restricted Stock
granted as performance-based compensation under Article VIII, Section 8.1 and
each Performance Period for cash awards as described in Article IX, Section 9.2,
including: the Company's Pretax Income, Net Income, Earnings Per Share, Revenue,
Expenses, Return on Assets, Return on Equity, Return on Investment, Net Profit
Margin, Operating Profit Margin, Discretionary Cash Flow (net cash provided by
operating activities, less estimated total changes in operating assets and
liabilities), Total Stockholder Return, Lease Operating Expenses, EBITDA,
Capitalization, Liquidity, Reserve Adds or Replacement, Finding and Development
Costs, Production Volumes, Results of Customer Satisfaction Surveys and other
measures of Quality, Safety, Productivity, Cost Management or Process
Improvement or other measures the Committee approves. The Committee shall have
the discretion to select the particular indicators of performance to be utilized
in determining awards, and such indicators of performance may vary between
Performance Periods and different awards. In addition, such indicators of
performance may be determined solely by reference to the performance of the
Company, a Subsidiary, or a division or unit of any of the foregoing, or based
upon comparisons of any of the performance measures relative to other companies.
In establishing a performance indicator, the Committee may exclude the impact of
any event or occurrence which the Committee determines should appropriately be
excluded such as, for example, a restructuring or other nonrecurring charge, an
event either not directly related to the operations of the Company or not within
the reasonable control of the Company's management, or a change in accounting
standards required by U.S. generally accepted accounting principles.

(j)      "NON-EMPLOYEE DIRECTOR" shall mean any person duly elected a director
of Harvest Natural Resources, Inc. who is not an employee of the Company.

(k)      "OPTION" or "STOCK OPTION" shall mean a right granted under the Plan to
an Optionee to purchase a stated number of shares of Stock at a stated exercise
price.

(l)      "OPTIONEE" shall mean an Employee, Consultant or Non-Employee Director
who has received a Stock Option granted under the Plan.

(m)      "PERFORMANCE PERIOD" shall mean a period established by the Committee
of not less than one year, at the conclusion of which performance-based
compensation, subject to the terms of the Performance Award, will become vested
and non-forfeitable or settlement will be made with a Performance Award
Participant with respect to the Performance Award.

(n)      "PERFORMANCE AWARD" shall mean an award established by the Committee
pursuant to Article IX.

(o)      "PERFORMANCE AWARD PARTICIPANT" shall mean any eligible Employee or
Consultant so designated by the Committee.


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(p)      "RESTRICTED STOCK" shall mean Stock which is issued pursuant to Article
VIII of the Plan.

(q)      "RESTRICTION PERIOD" shall mean that period of time of not less than
thirty-six months as determined by the Committee during which Restricted Stock
is subject to such terms, conditions and restrictions as shall be assigned by
the Committee.

(r)      "STOCK" shall mean the common stock of the Company.

(s)      "STOCK APPRECIATION RIGHT" or "SAR" shall mean a right, granted in
connection with an Option in accordance with Article VII of the Plan, to receive
a payment equal to the excess of the Fair Market Value of Stock over the
exercise price of the related Option.

(t)      "SUBSIDIARY" shall mean any corporation or similar legal entity (other
than the Company) in which the Company or a Subsidiary of the Company owns fifty
percent (50%) or more of the total combined voting power of all classes of
stock, provided that, with regard to Incentive Stock Options, "Subsidiary" shall
have the meaning provided under section 424(f) of the Code.

(u)      "TOTAL DISABILITY" and "TOTALLY DISABLED" shall normally have such
meaning as that defined under the Company's group insurance plan covering total
disability and determinations of Total Disability normally shall be made by the
insurance company providing such coverage on the date on which the Employee,
whether or not eligible for benefits under such insurance plan, becomes Totally
Disabled. In the absence of such insurance plan or in the event the individual
is a Non-Employee Director or Consultant, the Committee shall make such
determination.

                                   ARTICLE III

ADMINISTRATION

         3.1      THE COMMITTEE. The Plan shall be administered by a Committee
which shall be the Human Resources Committee of the Board so long as it meets
the definition of "Committee" set forth above. Subject to such approvals and
other authority as the Board may reserve to itself from time to time, the
Committee shall, consistent with the provisions of the Plan, from time to time
establish such rules and regulations and appoint such agents as it deems
appropriate for the proper administration of the Plan, and make such
determinations under, and such interpretations of, and take such steps in
connection with the Plan or the Options or SARs or the Restricted Stock Plan or
Performance Awards as it deems necessary or advisable.

         3.2      AUTHORITY OF THE COMMITTEE. Subject to the provisions herein,
the Committee shall have the full power to determine the size and types of
Options, SARs and Restricted Stock grants and Performance Awards, to determine
the terms and conditions of such grants and Performance Awards in a manner
consistent with the Plan, to construe and interpret the Plan and any agreement
or instrument entered into under the Plan, to establish, amend or waive rules
and regulations for the Plan's administration, and to amend the terms and
conditions of any outstanding Options, SARs or Restricted Stock grant or
Performance Awards to the extent such terms and conditions are within the sole
discretion of the Committee as provided in the Plan and subject to the
limitations and restrictions otherwise applicable under the Plan including those


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contained in Article XIII. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan. As permitted by law, the Committee may delegate its authority hereunder.
The Committee may take any action consistent with the terms of the Plan which
the Committee deems necessary to comply with any government laws or regulatory
requirements of a foreign country, including, but not limited to, modifying the
terms and conditions governing any Options, SARs, Restricted Stocks or
Performance Awards, or establishing any local country plans as sub-plans to this
Plan, each of which may be attached as an appendix hereto.

         3.3      DECISIONS BINDING. All determinations and decisions of the
Committee as to any disputed question arising under the Plan, including
questions of construction and interpretation, shall be final, binding and
conclusive upon all parties.

                                   ARTICLE IV

ELIGIBILITY

Those Employees and Consultants who, in the judgment of the Committee, may make
key contributions to the profitability and growth of the Company shall be
eligible to receive Options, SARs, grants of Restricted Stock and Performance
Awards under the Plan. All Non-Employee directors shall be eligible to receive
Options, SARs and grants of Restricted Stock under the plan.

                                    ARTICLE V

MAXIMUM SHARES AVAILABLE

The Stock to be distributed under the Plan may be either authorized and issued
shares or unissued shares of the Company, including but not limited to shares
held as treasury shares. The maximum amount of Stock which may be issued under
the Plan in satisfaction of exercised Options or SARs issued as Restricted Stock
shall not exceed, in the aggregate, one million seven hundred and fifty thousand
(1,750,000) shares, of which no more than 438,000 shares may be granted as
Restricted Stock.

Under the Plan, no Employee, Consultant or Non-Employee Director shall be
awarded, during the term of the Plan, Restricted Stock covering more than
110,000 shares of Stock. No more than 438,000 Options may be granted to a single
Employee, Consultant or Non-Employee Director during the term of this Plan.

Stock subject to an Option which for any reason is cancelled or terminated
without having been exercised, or Stock awarded as Restricted Stock which is
forfeited, shall again be available for grants under the Plan. Stock not issued
because the holder of any Option exercises the accompanying SAR shall not again
be subject to award by the Committee.


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                                   ARTICLE VI

STOCK OPTIONS

         6.1      GRANT OF OPTIONS.

                  (a)      The Committee may, at any time and from time to time
prior to May 20, 2014, grant Options under the Plan to eligible Employees,
Consultants or Non-Employee Directors, for such numbers of shares and having
such terms as the Committee shall designate, subject however, to the provisions
of the Plan. The Committee will also determine the type of Option granted (e.g.,
ISO, nonstatutory, other statutory Options as from time to time may be permitted
by the Code) or a combination of various types of Options. Options designated as
ISOs shall comply with all the provisions of Section 422 of the Code and
applicable regulations. The aggregate Fair Market Value (determined at the time
the Option is granted) of Stock with respect to which ISOs are exercisable for
the first time by an individual during a calendar year under all plans of the
Company, any Subsidiary shall not exceed $100,000. The date on which an Option
shall be granted shall be the date of the Committee's authorization of such
grant. Any individual at any one time and from time to time may hold more than
one Option granted under the Plan or under any other Stock plan of the Company.

                  (b)      Each Option shall be evidenced by a Stock Option
Agreement in such form and containing such provisions consistent with the
provisions of the Plan as the Committee from time to time shall approve.

         6.2      EXERCISE PRICE. The price at which shares of Stock may be
purchased under an Option shall not be less than 100% of the Fair Market Value
of the Stock on the date the Option is granted.

         6.3      OPTION PERIOD. The period during which an Option may be
exercised shall be determined by the Committee, provided that such period will
not be less than one year from the date on which the Option is granted and will
not be longer than ten years from the date on which the Option is granted in the
case of ISOs, and ten years and one day in the case of other Options.

         6.4      VESTING OF OPTIONS. The date or dates on which installment
portions of an Option shall vest and may be exercised during the term of an
Option shall be determined by the Committee and may vary from Option to Option,
provided that no more than one-third of the shares subject to an Option may vest
in any one year. Subject to the provisions of this Plan, including the preceding
sentence, the Committee may also determine to accelerate the time at which
installment portion(s) of an outstanding Option may be exercised.

         6.5      TERMINATION OF SERVICE. An Option shall terminate and may no
longer be exercised three months after the Optionee ceases to be an Employee,
Consultant or Non-Employee Director for any reason other than Total Disability
or death. If an Employee's, Consultant's or Non-Employee Director's employment
or service is terminated by reason of Total Disability, all Options will vest
and may be exercised within the period not to exceed the lesser of twelve months
following such termination or the remaining term of the Option award. An
Employee, Consultant or Non-Employee Director of the Company who dies while in
the employ or service of the Company, a Subsidiary, or within three months after
the termination of such employment or service, the vesting provisions will lapse
and such Option may, within the


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lesser of twelve months after the Optionee's death or the remaining term of the
Option award, be exercised by the legal representative of the Optionee's estate,
or if it has been distributed as part of the estate, by the person or persons to
whom the Optionee's rights under the Option shall pass by will or by the
applicable laws of descent and distribution. In no event may an Option be
exercised to any extent by anyone after the expiration or termination of the
Option. Except as provided in Article XIII, the Committee may elect to extend
the period of Option exercise and vesting provisions for an Employee, Consultant
or Non-Employee Director whose employment or service terminates for any reason.

         6.6      PAYMENT FOR SHARES.

                  (a)      The exercise price of an Option shall be paid to the
Company in full at the time of exercise at the election of the Optionee (1) in
cash, (2) in shares of Stock having a Fair Market Value equal to the aggregate
exercise price of the Option and satisfying such other requirements as may be
imposed by the Committee, (3) in shares of Restricted Stock (including
restricted stock granted under a similar plan of the Company) having a Fair
Market Value equal to the aggregate exercise price of the Option and satisfying
such other requirements as may be imposed by the Committee, (4) partly in cash
and partly in such shares of Stock or Restricted Stock (including restricted
stock granted under a similar plan of the Company), (5) to the extent permitted
by the Committee, through the withholding of shares of Stock (which would
otherwise be delivered to the Optionee) with an aggregate Fair Market Value on
the exercise date equal to the aggregate exercise price of the Option or (6)
through the delivery of irrevocable instructions to a broker to deliver promptly
to the Company an amount equal to the aggregate exercise price of the Option.
The Committee may limit the extent to which shares of Stock or shares of
Restricted Stock may be used in exercising Options. No Optionee shall have any
rights to dividends or other rights of a stockholder with respect to shares of
Stock subject to an Option until the Optionee has given written notice of
exercise of the Option, paid in full for such shares of Stock and, if
applicable, has satisfied any other conditions imposed by the Committee pursuant
to the Plan.

                  (b)      If shares of Restricted Stock are used to pay the
exercise price of an Option, an equal number of shares of Stock delivered to the
Optionee upon exercise of an Option, shall be subject to the same restrictions
for the remainder of the Restriction Period.

                                   ARTICLE VII

STOCK APPRECIATION RIGHTS

         7.1      GRANT. The Committee may affix SARs to an Option, either at
the time of its initial granting to the Optionee or at a later date. The
addition of such SARs must be accomplished prior to the completion of the period
during which the Option may be exercised and such exercise period may not be
extended beyond that which was initially established. The Committee may
establish SAR terms and conditions at the time such SAR is established.

         7.2      EXERCISE.

                  (a)      A SAR shall be exercisable at such time as may be
determined by the Committee and a SAR shall be exercisable only to the extent
that the related Option could be exercised. Upon the exercise of a SAR, that
portion of the Option underlying the SAR will be


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considered as having been surrendered. A SAR shall be automatically exercised at
the end of the last business day prior to the stated expiration date of the
unexercised portion of the related Option if on such date the Fair Market Value
of Stock exceeds the Option exercise price per share.

                  (b)      The Committee may impose any other conditions upon
the exercise of a SAR, consistent with the Plan, which it deems appropriate.
Such rules and regulations may govern the right to exercise SARs granted prior
to the adoption or amendment of such rules and regulations as well as SARs
granted thereafter.

                  (c)      Upon the exercise of a SAR, the Company shall give to
an Optionee an amount (less any applicable withholding taxes) equivalent to the
excess of the Fair Market Value of the shares of Stock for which the right is
exercised on the date of such exercise over the exercise price of such shares
under the related Option. Such amount shall be paid to the Optionee either in
cash or in shares of Stock or both as the Committee shall determine. Such
determination may be made at the time of the granting of the SAR and may be
changed at any time thereafter. No fractional shares of Stock shall be issued
and the Committee shall determine whether cash shall be given in lieu of such
fractional share or whether such fractional share shall be eliminated.

         7.3      EXPIRATION OR TERMINATION.

                  (a)      Subject to Article VII, Section 7.3(b), each SAR and
all rights and obligations thereunder shall expire on a date to be determined by
the Committee.

                  (b)      A SAR shall terminate and may no longer be exercised
upon the exercise, termination, cancellation or expiration of the related
Option.

                                  ARTICLE VIII

RESTRICTED STOCK

         8.1      TERMS OF GRANT. At the time of making a grant of Restricted
Stock to an Employee, Consultant or Non-Employee Director, the Committee shall
establish a Restriction Period of not less than thirty-six months and assign
such terms, conditions and other restrictions to the Restricted Stock as it
shall determine applicable to the Restricted Stock to be issued in settlement of
such grant. The Committee may designate whether Restricted Stock granted to an
Employee is "performance-based compensation" as that term is used in section
162(m) of the Code. The vesting of any such Restricted Stock may be conditioned
on the achievement of Indicators of Performance during a Performance Period
established by the Committee.

         8.2      RESTRICTED STOCK - RIGHTS. Restricted Stock will be
represented by a Stock certificate registered in the name of the Restricted
Stock recipient. Such certificate, accompanied by a separate duly-endorsed stock
power, shall be deposited with the Company. The recipient shall be entitled to
receive dividends during the Restriction Period and shall have the right to vote
such Restricted Stock and all other stockholder's rights, with the exception
that (i) the recipient will not be entitled to delivery of the Stock certificate
during the Restriction Period, (ii) the Company will retain custody of the
Restricted Stock during the Restriction Period and (iii) a breach of the terms
and conditions established by the Committee pursuant to the grant


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will cause a forfeiture of the Restricted Stock. Subject to Article VI, Section
6.6, Restricted Stock may be used to exercise Options. The Committee may, in
addition, prescribe additional restrictions, terms and conditions upon or to the
Restricted Stock.

         8.3      TERMINATION OF SERVICE. The Committee may establish such rules
concerning the termination of service of a recipient of Restricted Stock prior
to the expiration of the applicable Restriction Period as it may deem
appropriate from time to time provided, if an Employee, Consultant or
Non-Employee Director terminates service by reason of Total Disability or death,
the Restriction Period will continue and applicable restrictions will lapse as
if such Employee, Consultant or Non-Employee Director had continued in service
of the Company.

         8.4      RESTRICTED STOCK AGREEMENT. Each grant of Restricted Stock
shall be evidenced by a Restricted Stock Agreement in such form and containing
such terms and conditions not inconsistent with the provisions of the Plan as
the Committee from time to time shall approve.

                                   ARTICLE IX

PERFORMANCE AWARDS

         9.1      PERFORMANCE AWARDS. Performance Awards pursuant to this
Article IX are based upon achieving established Indicators of Performance over a
Performance Period. At the time of making a Performance Award, the Committee
shall establish such terms and conditions as it shall determine applicable to
such Performance Award. Performance Awards may only be paid out in cash.
Recipients of Performance Awards are not required to provide consideration other
than the rendering of service. For avoidance of doubt, a Performance Award under
this Article IX is not in lieu of any annual bonus plan established and approved
by the Board of Directors from time to time.

         9.2      ADMINISTRATIVE PROCEDURE. The Committee shall designate
Employees and Consultants as Performance Award Participants to become eligible
to receive Performance Awards and shall establish Performance Periods, provided
that, as calculated by the Committee, (1) the cash covered by all Awards granted
under the Plan during a calendar year shall not exceed five million dollars, and
(2) the cash covered by all awards granted to an individual under the Plan
during a calendar year shall not exceed two million, five hundred thousand
dollars.

         9.3      INDICATORS OF PERFORMANCE. The Committee shall establish
Indicators of Performance applicable to the Performance Period. Indicators of
Performance are utilized to determine amount and timing of Performance Awards,
and may vary between Performance Periods and different Performance Awards.

         9.4      AWARD ADJUSTMENT. Subject to the terms of the Performance
Award, the Committee may make downward adjustments in Awards to Performance
Award Participants.

         9.5      PARTIAL PERFORMANCE PERIOD PARTICIPATION. Subject to
applicable restrictions under section 162(m) of the Code, the Committee shall
determine the extent to which an Employee or Consultant shall participate in a
partial Performance Period because of becoming eligible to be a Performance
Award Participant after the beginning of such Performance Period. In the event a
Performance Award Participant is involuntarily terminated without cause or


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terminates employment or service due to death or Total Disability, after
completing at least 50% of the Performance Period for a Performance Award, such
Performance Award Participant shall be entitled to a pro rata portion of the
Performance Award if the Indicators of Performance are met, payable in
accordance with procedures established by the Committee.

                                    ARTICLE X

ADJUSTMENT UPON CHANGES IN STOCK

The number of shares of Stock which may be issued pursuant to this Plan, the
number of shares covered by each outstanding Option, the Option exercise price
per share and the number of shares granted as Restricted Stock, shall be
adjusted proportionately, and any other appropriate adjustments shall be made,
for any increase or decrease in the total number of issued and outstanding Stock
(or change in kind) resulting from any change in the Stock or Options through a
merger, consolidation, reorganization, recapitalization, subdivision or
consolidation of shares or other capital adjustment or the payment of a Stock
Dividend or other increase or decrease (or change in kind) in such shares. In
the event of any such adjustment, fractional shares shall be eliminated.
Appropriate adjustment shall also be made by the Committee in the terms of SARs
to reflect the foregoing changes. Except as otherwise determined by the
Committee, no change shall be made to an Incentive Stock Option under this
Article X to the extent it would constitute a "modification" under section
424(h)(3) of the Code.

                                   ARTICLE XI

CHANGE IN CONTROL

Notwithstanding anything to the contrary in the Plan, in the event of a Change
in Control:

         (i)      If during a Restriction Period(s) applicable to Restricted
Stock issued under the Plan, all restrictions imposed hereunder on such
Restricted Stock shall lapse effective as of the date of the Change in Control;

         (ii)     If during a Performance Period(s) applicable to an award
granted under the Plan, a Participant shall earn no less than the award of cash
which the participant would have earned if applicable Indicator(s) of
Performance had been achieved and the Performance Period(s) had terminated as of
the date of the Change in Control; or

         (iii)    Any outstanding Options or SAR that are not exercisable shall
become exercisable effective as of the date of a Change in Control. If an
Optionee's employment is terminated within 730 days after the effective date of
a Change in Control, to the extent that any Option was exercisable at the time
of the Optionee's termination of employment, such Option may be exercised within
twelve months following the date of termination of employment.

For purposes of the Plan, a "Change in Control" means the occurrence of any of
the following:

         (a)      The acquisition by any individual, entity or group (within the
                  meaning of Section 13(d)(3) or 14(d)(2) of the Securities
                  Exchange Act of 1934) (a "Covered Person") of beneficial
                  ownership (within the meaning of rule 13d-3 promulgated under
                  the Securities Exchange Act of 1934) of 50 percent or more of
                  the combined voting power of the then outstanding voting
                  securities of the Company


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                  entitled to vote generally in the election of directors (the
                  "Voting Securities"); provided, however, that for purposes of
                  this subsection (a) of this Article 9 the following
                  acquisitions shall not constitute a Change in Control: (i) any
                  acquisition by the Company, (ii) any acquisition by any
                  employee benefit plan (or related trust) sponsored or
                  maintained by the Company or any entity controlled by the
                  Company, or (iii) any acquisition by any entity pursuant to a
                  transaction which complied with clauses (i), (ii) and (iii) of
                  subsection (c) of this Article 9; or

         (b)      Individuals who, as of the date of the Plan, constitute the
                  board of directors of the Company (the "Incumbent Board")
                  cease for any reason to constitute at least a majority of the
                  board of directors of the Company; provided, however, that any
                  individual becoming a director after the date of the Plan
                  whose election, or nomination for election by the Company's
                  stockholders, 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 occurs as a
                  result of an actual or threatened election contest with
                  respect to the election or removal of directors; or

         (c)      The consummation of a reorganization, merger or consolidation
                  or sale of the Company, or a disposition of at least 50
                  percent of the assets of the Company including goodwill (a
                  "Business Combination"), provided, however, that for purposes
                  of this subsection (c), a Business Combination will not
                  constitute a change in control if the following three
                  requirements are satisfied:

                      following such Business Combination, (i) all or
                      substantially all of the individuals and entities who were
                      the beneficial owners, respectively, of the Company's
                      voting securities immediately prior to such Business
                      Combination beneficially own, directly or indirectly, more
                      than 50 percent of the ownership interests of the entity
                      resulting from such Business Combination (including,
                      without limitation, an entity which as a result of such
                      transaction owns the Company or all or substantially all
                      of the Company's assets either directly or through one or
                      more subsidiaries or other affiliated entities) in
                      substantially the same proportions as their ownership
                      immediately prior to such Business Combination, (ii) no
                      Covered Person (excluding any employee benefit plan [or
                      related trust] of the Company or such entity resulting
                      from such Business Combination) beneficially owns,
                      directly or indirectly, 50 percent or more of,
                      respectively, the ownership interests in the entity
                      resulting from such Business Combination, except to the
                      extent that such ownership existed prior to the Business
                      Combination, and (iii) at least a majority of the members
                      of the board of directors of the entity resulting from
                      such Business Combination were members of the Incumbent
                      Board at the time of the execution of the initial
                      agreement, or of the action of the board of directors of
                      the Company, providing for such Business Combination. For
                      this purpose any individual who becomes a director after
                      the date of the Plan, and whose election or nomination for
                      election by the Company's stockholders, was approved


<PAGE>

                      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 occurs as a
                      result of an actual or threatened election contest with
                      respect to the election or removal of directors.

                                   ARTICLE XII

MISCELLANEOUS

         12.1     EFFECT ON OTHER PLANS. Except as otherwise required by law, no
action taken under the Plan shall be taken into account in determining any
benefits under any pension, retirement, thrift, profit sharing, group insurance
or other benefit plan maintained by the Company or any Subsidiaries, unless such
other plan specifically provides for such inclusion.

         12.2     TRANSFER RESTRICTIONS. Except as provided in Article XII,
Section 12.3, no Option or SAR, grant of Restricted Stock or Performance Award
under this Plan shall be transferable other than by will or the laws of descent
and distribution. Any Option or SAR shall be exercisable (i) during the lifetime
of an Optionee, only by the Optionee or, to the extent permitted by the Code, by
an appointed guardian or legal representative of the Optionee, and (ii) after
death of the Optionee, only by the Optionee's legal representative or by the
person who acquired the right to exercise such Option or SAR by bequest or
inheritance or by reason of the death of the Optionee.

         12.3     TRANSFER OF OPTIONS. The Committee may, in its discretion,
authorize all or a portion of the Options to be granted to an Optionee to be on
terms which permit transfer by such Optionee to an immediate family member of
the Optionee who acquires the options from the Optionee through a gift or a
domestic relations order. For purposes of this Article XII, Section 12.3,
"family member" includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, trusts for the exclusive benefit of these persons and any other
entity owned solely by these persons, provided that the Stock Option Agreement
pursuant to which such Options are granted must be approved by the Committee and
must expressly provide for transferability in a manner consistent with this
Section and provided further that subsequent transfers of transferred options
shall be prohibited except those in accordance with Article XII, Section 12.2.
Following transfer, any such options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer. The
events of termination of employment of Article VI, Section 6.4 hereof shall
continue to be applied with respect to the original Optionee, following which
the options shall be exercisable by the Transferee only to the extent and for
the periods specified in Article VI, Section 6.4.

         12.4     WITHHOLDING TAXES. The Company shall have the right to
withhold from any settlement hereunder any federal, state, or local taxes
required by law to be withheld, or require payment in the amount of such
withholding. If settlement hereunder is in the form of Stock, such withholding
may be satisfied by the withholding of shares of Stock by the Company, unless
the Optionee shall pay to the Company an amount sufficient to cover the amount
of taxes


<PAGE>

required to be withheld, and such withholding of shares does not violate any
applicable laws, rules or regulations of federal, state or local authorities.

         12.5     TRANSFER OF EMPLOYMENT. Transfer of employment or consulting
assignment between the Company or a Subsidiary, or between Limited Liability
Companies and Subsidiaries shall not constitute termination of employment or
service for the purpose of the Plan. Whether any leave of absence shall
constitute termination of employment for the purposes of the Plan shall be
determined in each case by the Committee.

         12.6     ADMINISTRATIVE EXPENSES. All administrative expenses
associated with the administration of the Plan shall be borne by the Company.

         12.7     TITLES AND HEADINGS. The titles and headings of the articles
in this Plan are for convenience of reference only and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.

         12.8     NO GUARANTEE OF CONTINUED EMPLOYMENT OR SERVICE. No grant or
award to an Employee under the Plan or any provisions thereof shall constitute
any agreement for or guarantee of continued employment by the Company and no
grant or award to a Non-Employee Director or Consultant shall constitute any
agreement for or guarantee of continuing as a Non-Employee Director or
Consultant.

         12.9     COMMITTEE DUTIES AND POWERS. The Committee shall have such
duties and powers as may be necessary to discharge its responsibilities under
this Plan, including, but not limited to, the ability to construe and interpret
the Plan and resolve any ambiguities with respect to any of the terms and
provisions hereof as written and as applied to the operation of the Plan.

         12.10    PROCEEDS. The proceeds received by the Company from the sale
of Stock under the Plan shall be added to the general funds of the Company and
shall be used for corporate purposes as the Board shall direct.

         12.11    GOVERNING LAW. The Plan shall be governed and construed in
accordance with the laws of Texas, except to the extent that federal law
applies.

                                  ARTICLE XIII

AMENDMENT AND TERMINATION

The Board may at any time terminate or amend this Plan in such respect as it
shall deem advisable, provided, the Board may not, without further approval of
the stockholders of the Company, amend the Plan to (i) increase the number of
shares of Stock which may be issued under the Plan, except as provided for in
Article X; (ii) change Plan provisions relating to establishment of the exercise
prices under Options granted; (iii) extend the duration of the Plan beyond the
date approved by the stockholders; (iv) reprice, replace or regrant Options
through cancellation, or by lowering the exercise price of a previously granted
Option; (v) make any change to the Plan considered material under the listing
requirements of the New York Stock Exchange or any other exchange on which the
Company's Stock is listed; or (vi) increase the maximum dollar amount of ISOs
which an individual Optionee may exercise during any calendar year beyond that
permitted in the Code and applicable rules and regulations of the


<PAGE>

Treasury Department. No amendment or termination of the Plan shall, without the
consent of the Optionee or Plan participant, alter or impair any of the rights
or obligations under any Options or other rights theretofore granted such person
under the Plan.

                                   ARTICLE XIV

DURATION OF THE PLAN

The effective date of this Plan shall be May 21, 2004. If not sooner terminated
by the Board, this Plan shall terminate on May 20, 2014, but Options and other
rights theretofore granted and any Restriction Period may extend beyond that
date, and the terms of the Plan shall continue to apply.