Document:

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                                                                   EXHIBIT 10.4

                          SECOND AMENDED AND RESTATED

                           TAX ALLOCATION AGREEMENT

                                by and between

                             PLAINS RESOURCES INC.

                                      and

                    PLAINS EXPLORATION & PRODUCTION COMPANY

                               November 20, 2002

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                               TABLE OF CONTENTS

<TABLE>
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                                                                                    Page
                                                                                    ----
<C> <S>                                                                             <C>
 1. Spinco Group...................................................................   1
 2. Tax Returns....................................................................   2
 3. Obligation for Payment of Taxes................................................   2
 4. No Plains Tax Payments.........................................................   3
 5. Spinco Tax Payments............................................................   3
 6. Tax Benefits Before Spin-Off; Deferred Intercompany Gains......................   4
 7. Spinco Tax Benefits After Spin-Off; No Payment by Spinco.......................   4
 8. Allocation of Expenses for Plains Options and Spinco Stock Appreciation Rights.   4
 9. Tax Audits.....................................................................   4
10. Proposed Adjustments...........................................................   5
11. Notice of Settlement or Compromise.............................................   5
12. Spinco's Right to Contest......................................................   5
13. Subsequent Adjustments or Refunds..............................................   5
14. Spinco Spin-Off Tax Indemnity..................................................   6
15. Future Actions.................................................................   6
16. Combined, Consolidated or Unitary Basis Returns................................   6
17. Earnings and Profits Information...............................................   7
18. Tax Interpretation.............................................................   7
19. Consistent Tax Treatment.......................................................   7
20. Retention of Records...........................................................   7
21. Post Spin-Off Period Taxes.....................................................   7
22. Expenses.......................................................................   7
23. Definitions....................................................................   8
    (a)  "After-Tax Basis".........................................................   8
    (b)  "Agreed Rate".............................................................   8
    (c)  "Code"....................................................................   8
    (d)  "Distribution Agreement"..................................................   8
    (e)   "Items of Loss or Tax Benefit"...........................................   8
    (f)   "Interim Period".........................................................   8
    (g)  "Plains"..................................................................   8
    (h)   "Plains Group"...........................................................   8
    (i)    "Returns"...............................................................   8
    (j)    "Ruling"................................................................   8
    (k)  "Short Period"............................................................   8
    (l)   "Spinco".................................................................   8
    (m)  "Spinco Group"............................................................   8
    (n)  "Spin-Off"................................................................   8
    (o)  "Spin-Off Date"...........................................................   8
    (p)  "Spin-Off Tax"............................................................   8
    (q)  "Tax Authority"...........................................................   8
    (r)   "Taxes"..................................................................   8
    (s)  "Transfer Tax"............................................................   9
24. Notices........................................................................   9
25. Binding Effect; Successors.....................................................   9
26. Severability...................................................................   9
27. Entire Agreement...............................................................   9
28. Governing Law..................................................................  10
29. Arbitration....................................................................  10
</TABLE>

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                          SECOND AMENDED AND RESTATED
                           TAX ALLOCATION AGREEMENT

   THIS SECOND AMENDED AND RESTATED TAX ALLOCATION AGREEMENT, made and entered
into as of the 20th day of November, 2002, by and between Plains Resources
Inc., a Delaware corporation ("Plains"), and Plains Exploration & Production
Company, a Delaware corporation ("Spinco").

                                  WITNESSETH:

   WHEREAS, Plains is the common parent of an affiliated group of corporations
(hereinafter referred to as the "Plains Group") within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
members of the Plains Group have heretofore joined in filing consolidated
Federal income Tax Returns;

   WHEREAS, on or about July 3, 2002, certain assets associated with the
upstream business conducted by the Plains Group, including the stock of certain
subsidiaries included in the Plains Group and engaged in the upstream business,
were contributed to the capital of Spinco or otherwise acquired by Spinco or
one or more of its subsidiaries;

   WHEREAS, on September 18, 2002, Spinco (1) converted from a California
limited partnership to a Delaware limited partnership and immediately
thereafter (2) converted from a Delaware limited partnership to a Delaware
corporation;

   WHEREAS, Plains, on a date to be determined by Plains (the "Spin-Off Date"),
will distribute to its stockholders all of the outstanding stock of Spinco that
it then holds (the "Spin-Off"), and thereafter Spinco and its subsidiaries will
no longer be members of the Plains Group for Federal income Tax purposes;

   WHEREAS, on July 3, 2002, the parties entered into the Tax Allocation
Agreement to provide for the sharing of the Federal, state, local and foreign
income Tax liabilities and benefits accrued prior to the Spin-Off between
Plains and its subsidiaries and Spinco and its subsidiaries;

   WHEREAS, on October 2, 2002, the parties entered into the Amended and
Restated Tax Allocation Agreement to determine Spinco's potential liability to
Plains for Spinco's use of the Tax benefits of the Plains Group prior to the
Spin-Off; and

   WHEREAS, the parties now desire to amend and restate the Amended and
Restated Tax Allocation Agreement to allocate the expenses related to the
Plains employee stock options, Plains restricted stock, Spinco restricted
stock, and Spinco employee stock appreciation rights that are exercised or
which vest after the Spin-Off.

   NOW, THEREFORE, the parties hereto agree as follows:

   1.  Spinco Group.  For purposes of this Agreement, the "Spinco Group" shall
mean (i) Spinco, (ii) Spinco's subsidiaries, and (iii) those corporations and
other entities whose stock or ownership interests will be contributed to Spinco
prior to the Spin-Off Date, all of such subsidiaries of Spinco and such
corporations and other entities being listed on Exhibit A attached hereto.
Unless otherwise specified, whenever Items of Loss or Tax Benefit (as defined
below) of Spinco are referred to in this Agreement the reference shall be to
the collective amounts of such items for the Spinco Group. For purposes of this
Agreement, items of income, gain, loss, deduction, credit, or other Tax
attributes on or prior to the Spin-Off Date are referred to as "Items of Loss
or Tax Benefit".

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   2.  Tax Returns.  Plains shall prepare and file or cause to be prepared and
filed timely all appropriate Returns in respect of Spinco and the other members
of the Spinco Group that (i) are required to be filed on or before the Spin-Off
Date; or (ii) are required to be filed after the Spin-Off Date that (A) are
required to include, on a consolidated, combined or unitary basis, the
operations of Spinco or any other member of the Spinco Group for any Tax period
or portion thereof ending on or before the Spin-Off Date; or (B) are required
to be filed by Spinco or any other member of the Spinco Group on a separate
return basis for any Tax period ending on or before the Spin-Off Date. To the
extent requested by Plains, Spinco shall participate in the filing of and shall
file any required Returns with respect to any Tax period that ends on or before
the Spin-Off Date. Spinco shall prepare or cause to be prepared the schedules
in respect of Spinco and other members of the Spinco Group containing the
information necessary for Plains to prepare any consolidated, combined or
unitary Returns. If Plains, after consulting with Spinco, files any such
consolidated, combined or unitary Return using information with respect to
Spinco and the other members of the Spinco Group that is different from the
information prepared and furnished by Spinco, and Plains and Spinco thereafter
are unable to resolve such difference, such difference shall constitute a claim
for purposes of Paragraph 29 this Agreement. Spinco shall also prepare or cause
to be prepared and shall file or cause to be filed all other Returns required
of Spinco or any other members of the Spinco Group, or in respect of its or any
of their activities, for any Tax period ending after the Spin-Off Date that
includes the operations of Spinco or any other member of the Spinco Group prior
to the Spin-Off Date. The parties hereto will, to the extent permitted by
applicable law, elect with the relevant Tax Authority to treat for all purposes
the Spin-Off Date as the last day of a Tax period of Spinco and the other
members of the Spinco Group, and such period shall be treated as a "Short
Period" for purposes of this Agreement. In any case where applicable law does
not permit Spinco to treat the Spin-Off Date as the last day of a Short Period,
then for purposes of this Agreement, the portion of such Taxes that is
attributable to the operations of Spinco and the other members of the Spinco
Group for such Interim Period (as defined below) shall be (i) in the case of
Taxes that are not based in whole or in part on income or gross receipts, the
total amount of such Taxes for the period in question multiplied by a fraction,
the numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in the entire period in
question, and (ii) in the case of Taxes that are based in whole or in part on
income or gross receipts, the Taxes that would be due with respect to the
Interim Period, if such Interim Period were a Short Period. "Interim Period"
means with respect to any Taxes imposed on Spinco or any other members of the
Spinco Group for which the Spin-Off Date is not the last day of a Short Period,
the period of time beginning on the first day of the actual Tax period that
includes (but does not end on) the Spin-Off Date and ending on and including
the Spin-Off Date. Any franchise Tax shall be allocated to the Tax period or
portion thereof during which the right to do business obtained by the payment
of such franchise Tax relates, regardless of whether such franchise Tax is
measured by income, operations, assets or capital relating to another Tax
period.

   3.  Obligation for Payment of Taxes.  Plains shall be entitled to receive
from Spinco amounts calculated in accordance with Paragraphs 2, 3, 5, 13 and
14. Except as otherwise provided in Paragraph 5, the amounts, if any, that
Spinco shall be obligated to pay Plains pursuant to Paragraph 5, with respect
to Tax periods of the Plains Group ending on or prior to the Spin-Off Date,
shall be paid (i) within 30 days after the Spin-Off Date where the Taxes were
paid by Plains on or before the Spin-Off Date and shall include interest
thereon calculated for the period from the Spin-Off Date to the date of payment
at a per annum rate of interest (computed on the basis of the actual number of
days elapsed (including the Spin-Off Date but excluding the payment date) over
a year of 365 or 366 days, as the case may be) equal to the underpayment rate
under Section 6601 of the Code, or (ii) within 30 days after the date of
payment where the Taxes are paid by Plains after the Spin-Off Date. This
initial settlement shall be based on the Returns as they have been filed and
shall include any amendments of or adjustments to such Returns that have been
finally settled. Except as otherwise provided in Paragraph 5, any amounts that
Spinco shall be obligated to pay Plains pursuant to Paragraph 5 with respect to
Tax periods of the Plains Group ending after the Spin-Off Date shall be paid
within 30 days after filing of the Returns for such Tax periods. In the event
of an adjustment to the amount of payment for any Tax period as determined
under Paragraph 13, Plains shall be entitled to receive from Spinco such
payment within 30 days after payment of a deficiency to or receipt of a refund
from the Tax Authority. In the event of an adjustment under Paragraph 13
resulting in no additional payment to or no receipt of a refund from the Tax
Authority, settlement between the parties hereto shall be made within 30 days
after filing of the amended Return or final settlement of the

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adjustment. In the event that Spinco is delinquent in paying to Plains any
amount due pursuant to this Paragraph 3, including any interest accrued thereon
pursuant to this Paragraph 3, such unpaid amount shall bear interest from the
original due date until paid at a per annum rate equal to the lesser of (a) 18
percent and (b) the maximum lawful non-usurious rate of interest, if any, which
under applicable law Plains is permitted to charge Spinco thereon from time to
time.

   4.  No Plains Tax Payments.  Notwithstanding any other provision of this
Agreement to the contrary, Plains shall not be obligated to pay Spinco for any
Items of Loss or Tax Benefit of the Spinco Group used by the Plains Group to
reduce its Federal income Tax liability or Federal taxable income for any Tax
period ending on or before the Spin-Off Date. For purposes of these
computations, the allocation of Tax attributes to the Spinco Group and
absorption thereof by the Plains Group for each Tax period shall be determined
in accordance with the Treasury Regulations under (S) 1502 of the Code, applied
in a manner consistent with practices and methods followed in reporting the
Federal income Tax liability of the Plains Group for such Tax periods. In any
instance where a Tax attribute must be characterized, the characterization
prescribed by the aforementioned Treasury Regulations will control.

     5. Spinco Tax Payments. For each Tax period included in a consolidated
Federal income Tax return of the Plains Group which includes income of the
Spinco Group, Spinco shall be obligated to pay Plains an amount equal to the
product of (i) the net taxable income of the Spinco Group included in the
consolidated Federal income Tax Return of the Plains Group for such period,
multiplied by (ii) the highest marginal statutory Federal corporate income Tax
rate applicable to such income for such period; provided, however, that no
payment shall be required pursuant to this Paragraph 5 to the extent such
payments have previously been made by the Spinco Group to members of the Plains
Group other than the Spinco Group under any Tax sharing agreement or arrangement
(whether written or oral) or any other similar system of payments with respect
to Federal income Taxes of the Plains Group in existence prior to the Spin-Off
Date, including, but not limited to, any estimated Tax payments. For purposes of
these computations, the allocation of Tax attributes to the Plains Group and
absorption thereof by the Spinco Group for each Tax period shall be determined
in accordance with the Treasury Regulations under (S) 1502 of the Code, applied
in a manner consistent with practices and methods followed in reporting the
Federal income Tax liability of the Plains Group for such Tax periods. In any
instance where a Tax attribute must be characterized, the characterization
prescribed by the aforementioned Treasury Regulations will control. To the
extent, if any, that the amount of Taxes Plains is required to pay for a Tax
period that includes any net taxable income of the Spinco Group is less than the
amount calculated as owed by Spinco to Plains under this Paragraph 5, the amount
owed by Spinco to Plains shall be (i) reduced to the extent that such difference
is attributable to Items of Loss or Tax Benefit of the Plains Group used which
would have otherwise expired unused but for the fact that the Spinco Group had
net taxable income for such Tax period, or (ii) deferred to the extent such
difference is attributable to Items of Loss or Tax Benefit of the Plains Group
used which would have otherwise carried forward to a subsequent year or years of
the Plains Group but for the fact that the Spinco Group had net taxable income
for such Tax period. In the event an amount otherwise payable by Spinco to
Plains is deferred pursuant to clause (ii) of the immediately preceding
sentence, such amount shall be paid by Spinco to Plains within 30 days after the
filing of the Tax Return for the Tax period in which such Items of Loss or Tax
Benefit of the Plains Group previously used by the Spinco Group would have been
used by the Plains Group. Any amount payable by Spinco to Plains pursuant to the
immediately preceding sentence shall not be greater than the amount of Tax paid
by Plains as a consequence of the Tax benefits of the Plains Group previously
having been used to offset taxable income of the Spinco Group, and in no event
shall the aggregate amounts payable by Spinco to Plains pursuant to the
immediately preceding sentence (including the aggregate amounts of any state,
local or foreign Taxes similarly deferred) exceed $3 million. Any interest that
would otherwise be added to any such amount pursuant to Paragraph 3 or otherwise
shall be added to such amounts notwithstanding that such addition causes the
aggregate amounts to exceed $3 million.

   The parties acknowledge that certain state, local or foreign income Tax
Returns may be filed on a combined, consolidated, separate or unitary basis. In
any such event, the parties intend that the required calculations for
determining which party owes Taxes to the other with respect thereto be made in
accordance with the principles referred to in Paragraph 16.

   The parties further acknowledge that all Taxes shown on any Tax Return
prepared and filed on a separate return basis (notwithstanding who may be
obligated to prepare and file any such Tax Return under this Agreement) shall
be the sole liability of, and shall be paid by, the entity reflected as the
taxpayer thereon.

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   6.  Tax Benefits Before Spin-Off; Deferred Intercompany Gains.  For purposes
of the calculations under Paragraphs 5, 13 and 14 of this Agreement, any loss
of or decrease in any Items of Loss or Tax Benefit of the Plains Group
resulting from or attributable to the transfer of assets to Spinco or any other
member of the Spinco Group in connection with the Spin-Off (under the Treasury
Regulations governing Federal consolidated returns) shall be ignored and all
calculations shall be made as though all such Items of Loss or Tax Benefit were
available for use by the Plains Group. In the event any deferred intercompany
gain attributable to assets transferred to Spinco or any other members of the
Spinco Group by other members of the Plains Group is recognized by the Plains
Group by reason of the Spin-Off, such deferred intercompany gain, if any, shall
be deemed to be a gain of the Spinco Group for its taxable year ending on the
Spin-Off Date for purposes of all calculations under this Agreement, including
the calculation of Taxes owed by Spinco to Plains pursuant to Paragraphs 2, 3,
5, 13 and 14 hereof. Notwithstanding anything in this Agreement to the
contrary, with respect to any items of income or gain resulting from an
acceleration of an excess loss account prior to or on the Spin-Off Date, Spinco
shall not be liable to Plains for Taxes or the use of Items of Loss or Tax
Benefit resulting from those items of income or gain.

   7.  Spinco Tax Benefits After Spin-Off; No Payment by
Spinco.  Notwithstanding anything in this Agreement to the contrary, with
respect to Items of Loss or Tax Benefit apportioned to and carried over by the
Spinco Group after the Spin-Off (under the Treasury Regulations governing
Federal consolidated income Tax Returns) and regardless of whether such Items
of Loss or Tax Benefit (x) are used by the Spinco Group to reduce its Federal
income Tax liability after the Spin-Off or (y) expire unused by the Spinco
Group, Spinco shall not have any obligation to pay Plains for any such Items of
Loss or Tax Benefit.

   8.  Allocation of Expenses for Plains Options, Plains Restricted Stock,
Spinco Restricted Stock, and Spinco Stock Appreciation Rights.

   To the extent that Plains employee stock options outstanding as of the
Spin-Off are exercised subsequent to the Spin-Off by Plains employees, Spinco
employees who were transferred from Plains to Spinco prior to or at the time of
the Spin-Off, or Spinco employees, those Plains employee stock options will be
treated as attributable to services performed for Plains prior to the Spin-Off.
To the extent that shares of Plains restricted stock outstanding as of the
Spin-Off become vested and no longer subject to a substantial risk of
forfeiture subsequent to the Spin-Off in favor of Plains employees, Spinco
employees who were transferred from Plains to Spinco prior to or at the time of
the Spin-Off, or Spinco employees, those shares of Plains restricted stock will
be treated as attributable to services performed for Plains prior to the
Spin-Off. To the extent that shares of Spinco restricted stock outstanding as
of the Spin-Off become vested and no longer subject to a substantial risk of
forfeiture subsequent to the Spin-Off in favor of Spinco employees, Plains
employees who were transferred from Plains to Spinco prior to or at the time of
the Spin-Off, or Plains employees, those shares of Spinco restricted stock will
be treated as attributable to services performed for Spinco prior to the
Spin-Off. To the extent that Spinco employee stock appreciation rights are
exercised subsequent to the Spin-Off by Plains employees, Spinco employees who
were transferred from Plains to Spinco prior to or at the time of the Spin-Off,
or Spinco employees, those stock appreciation rights will be treated as
attributable to services performed for Spinco prior to the Spin-Off. Similarly,
the entity for which the services are to be treated as attributable (Plains or
Spinco, as the case may be) shall be responsible for and undertake the
reporting of compensation, the withholding of taxes, and the payment of taxes
required with respect thereto. The parties agree to report the treatment of
such exercised Plains employee stock options, Plains restricted stock, Spinco
restricted stock and Spinco stock appreciation rights consistently with the
provisions of this Paragraph 8. In the event of an audit by a Tax Authority of
a Return in which any of these items are included or any other change which the
parties agree is appropriate notwithstanding the provisions of this Paragraph
8, the party against which any additional Taxes are assessed or imposed shall
pay such Taxes in accordance with Paragraph 21 hereof, there shall be no
payment required between the parties with respect to any such items
notwithstanding Paragraph 18 hereof, and any constructive transfer or payment
shall be treated for Tax purposes as a dividend or capital contribution, as the
case may be, immediately before the Spin-Off.

   9.  Tax Audits.  In the event of an audit by any Tax Authority of a Return
filed by Plains, for any Tax period ending prior to or on the Spin-Off Date
which includes income of the Spinco Group (or any Tax period

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thereafter in which a carryforward of the Spinco Group's Items of Loss or Tax
Benefit is used), Plains shall give Spinco timely and reasonable notice of such
audit proceedings, and Spinco shall have the right to participate in any such
audit; provided, however, that Plains shall have the full power and authority
to control such audit. In connection with any such audit, Spinco will provide
all necessary information and other assistance reasonably requested by Plains
with respect to issues concerning the activities of the Spinco Group. All
communications with any such Tax Authority and its employees concerning any
such audit will be made by Plains unless otherwise agreed between the parties
hereto. In connection with its participation in any audit, Spinco shall be
given reasonable notice of all material meetings, investigations, field
examinations and similar events and copies of all relevant material
correspondence between the Tax Authority conducting the audit and Plains.

   10.  Proposed Adjustments.  Plains shall give prompt notice to Spinco of any
adjustment or adjustments proposed by any Tax Authority relating to the
activities of the Spinco Group for any Tax period ending prior to or on the
Spin-Off Date. After consulting with Spinco, Plains shall determine in its sole
discretion the nature of all action to be taken to contest such proposed
adjustment, including whether any such action shall initially be contested by
way of judicial or administrative proceedings, or both, whether any such
proposed adjustment shall be contested by resisting payment thereof or by
paying the same and seeking a refund thereof, and if Plains shall undertake to
contest such proposed adjustment, the court or other judicial body before which
such action will be commenced. Plains shall have full control over any contest
or administrative proceeding pursuant to this Paragraph, but Spinco, at its
expense and subject to approval by Plains, which approval shall not be
unreasonably withheld, may participate in any proceedings contesting any
proposed adjustment relating to the activities of the Spinco Group.

   11.  Notice of Settlement or Compromise.  Plains shall give prompt notice to
Spinco of any proposal made to it at the time of an audit or otherwise, to
settle or compromise issues relating to the Tax liabilities of the Spinco Group
for any Tax period ending prior to or on the Spin-Off Date. Plains will not
accept or offer any settlement or compromise of such issues without the consent
of Spinco, and such consent shall not be unreasonably withheld. If, in Plains'
opinion, Spinco unreasonably withholds such consent, Plains shall have the
right to settle or compromise such issues on the basis contained in the notice
to Spinco. If Spinco thereafter desires to dispute such settlement or
compromise, Spinco's claim with respect thereto shall constitute a claim for
purposes of Paragraph 29 of this Agreement.

   12.  Spinco's Right to Contest.  Should Plains decline or cease to contest
any proposed adjustment relating to the activities of the Spinco Group for any
Tax period ending prior to or on the Spin-Off Date, Plains shall so notify
Spinco. Spinco, at its expense and upon providing reasonable assurances to
Plains of Spinco's ability to pay any Taxes resulting from any such proposed
adjustment, may contest such proposed adjustment; but in no event shall Spinco
be permitted to accept or offer any settlement or compromise that would require
the settlement or compromise of issues relating to the Tax liabilities of
members of the Plains Group other than the Spinco Group.

   13.  Subsequent Adjustments or Refunds.  With respect to any Tax period of
the Plains Group after December 31, 2001, for which Plains received (or would
be entitled to receive) from Spinco a payment pursuant to Paragraph 5 or this
Paragraph 13, if the filing of an amended income Tax Return, final
determination of any adjustment made by any Tax Authority or the receipt of a
refund by Plains occurs with respect to such period and such event would cause
a difference in the amount of payment required for such period as previously
calculated pursuant to Paragraph 5 or this Paragraph 13, Plains shall give
Spinco prompt notice of such difference and Plains shall be obligated to pay or
entitled to receive from Spinco the amount of such difference. Any amount
required to be paid pursuant to this Paragraph 13 shall include any interest
imposed by or received from the Tax Authority if the adjustment results in the
payment of Tax to or receipt of Tax from the Tax Authority.

   In addition, Plains and Spinco acknowledge and agree that the tax sharing
agreement in effect for the Plains Group as of December 31, 2001, shall be
negated and canceled as of the Spin-Off Date. Plains and Spinco further agree
that there are no claims or causes of action under such tax sharing agreement
as of December 31, 2001, for

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periods ending on or before December 31, 2001, by either of them or any member
of their respective group against the other or any member of the other's group,
and they release each other from any and all such claims. With respect to Taxes
for periods ending after December 31, 2001, Plains and Spinco agree that this
Agreement shall control. Spinco agrees that it will have no right to request
that Plains file an amended return or a claim for refund for any reason, unless
Spinco agrees to pay any Tax liability shown thereon or therein and Plains, in
its absolute discretion (which may be withheld for any reason), agrees. In the
event Spinco generates net operating losses or other Items of Loss or Tax
Benefit after the Spin-Off Date that may otherwise be carried back to the
taxable income or Tax liability of the Plains Group prior to the Spin-Off Date,
Spinco agrees to relinquish the entire carry back period with respect to each
such net operating loss or other Items of Loss or Tax Benefit under Section
172(b)(3) or other appropriate sections and to carry forward any such losses
and other items.

   14.  Spinco Spin-Off Tax Indemnity.  Notwithstanding any other provision of
this Agreement to the contrary, Spinco shall be liable for, shall pay and shall
indemnify and hold Plains and the other members of the Plains Group harmless,
on an After-Tax Basis, against (A) any Transfer Taxes and other Taxes which may
be imposed or assessed as a result of the contribution by Plains to the capital
of Spinco or the acquisition (by sale or purchase or otherwise) by Spinco or
one or more of the other members of the Spinco Group of assets associated with
the upstream business conducted by the Plains Group, including the stock of
certain subsidiaries included in the Plains Group and engaged in the
exploration and production business, (B) any Taxes resulting from the
recognition of deferred intercompany gains as contemplated by Paragraph 6
hereof, and (C) any Spin-Off Tax. In determining the amount of, and the time of
payment of, any such Transfer Taxes, other Taxes or Spin-Off Tax owed by Spinco
to Plains, the principles set forth in Paragraph 5 shall apply.

   In addition, Spinco shall be liable, and shall indemnify Plains, for 50
percent of any Tax to which Plains or any member of the Plains Group is subject
as a result of the application of any provision of the Code to the Spin-Off,
including without limitation, Section 311(b), Section 355(c)(2), Section 355(e)
or Section 361(c)(2) of the Code (or any corresponding or similar provision of
state, local or foreign law), other than (i) any Spin-Off Tax, which is
provided for in the immediately preceding paragraph, or (ii) any such Tax which
results (x) solely from the fact that one or more persons acquire after the
Spin-Off Date directly or indirectly stock representing a 50-percent or greater
interest in Plains and such acquisition is subject to Section 355(e) of the
Code, (y) from the failure of Plains or any other member of the Plains Group
(other than Spinco or any other member of the Spinco Group) to comply with the
covenants, agreements and representations in the Ruling, except to the extent
that any of the covenants, agreements or representations require compliance by
Spinco or any other member of the Spinco Group after the Spin-Off, or (z) from
any action by, or failure to take an action on the part of, Plains or any other
member of the Plains Group (other than Spinco or any other member of the Spinco
Group).

   15.  Future Actions.  Spinco agrees that, during the three-year period
following the Spin-Off, it will not engage in any transaction that could
adversely affect the tax treatment of the Spin-Off without the prior written
consent of Plains, which consent may be withheld only if reasonable, unless (i)
Spinco delivers to Plains a supplemental ruling from the Internal Revenue
Service or a tax opinion acceptable to Plains of nationally recognized tax
counsel to the effect that the proposed transaction would not adversely affect
the tax treatment of the Spin-Off, or (ii) Spinco or another person or entity
acceptable to Plains provides to, or for the benefit of, Plains a cash escrow,
letter of credit or other comparable security acceptable to Plains in an amount
equal to the Taxes and accrued interest thereon (which accrued interest shall
be increased over time until such Taxes are paid or determined not to be
payable) that Plains reasonably calculates would be payable if the Spin-Off
were determined to be a taxable event for Tax purposes, with the terms and
conditions of any such cash escrow, letter of credit or other security being
mutually acceptable to Plains and Spinco or such other person or entity, as the
case may be. Plains agrees to cooperate with and provide reasonable assistance
to Spinco in the event that Spinco requests a supplemental ruling from the
Internal Revenue Service.

   16.  Combined, Consolidated or Unitary Basis Returns.  The parties
acknowledge that certain state, local or foreign Tax Authorities may require,
or one of the parties may desire, to file amended or original state, local or
foreign income Tax Returns on a combined, consolidated or unitary basis. In
this regard, Spinco agrees that it

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will have no right to request that Plains file an amended return or a claim for
refund for any reason, unless Spinco agrees to pay any Tax liability shown
thereon or therein and Plains, in its absolute discretion (which may be
withheld for any reason), agrees. Such filing may result in an aggregate
decrease in the state, local or foreign income Tax of both parties; however,
one party may suffer a Tax increase compared to its state, local or foreign
income Tax liability calculated on a separate company basis, while the other
party enjoys a Tax decrease, or both parties may suffer a Tax increase. In any
such event, the parties intend that the required calculations for determining
which party owes Taxes to the other with respect thereto be made by utilizing
the principles set forth in Paragraphs 2, 3, 5, 13 and 14 hereof.

   17.  Earnings and Profits Information.  The parties agree to share such
information as is necessary to allocate properly the earnings and profits of
the Plains Group among the remaining Plains Group and the Spinco Group in
accordance with the Code and Treasury Regulations for Tax periods prior to or
ending on the Spin-Off Date. After the Spin-Off, Plains agrees to provide
Spinco and Spinco's independent auditors with such information as is necessary
to verify amounts received or receivable or paid or payable by Spinco under
this Agreement. Spinco agrees to make available to Plains, upon request, all
Federal, state, local and foreign Tax Returns, work papers and other documents
pertaining to the activities of the Spinco Group prior to the Spin-Off.

   18.  Tax Interpretation.  For all Tax purposes and notwithstanding any other
provision of this Agreement, to the extent permitted by applicable law, the
parties hereto shall treat any payment made pursuant to this Agreement as a
capital contribution or dividend distribution, as the case may be, immediately
prior to the Spin-Off Date and, accordingly, as not includable in the taxable
income of the recipient. If it is finally determined that the receipt or
accrual of any payment made under this Agreement is taxable to the recipient,
the payor shall pay to the recipient, on an After-Tax Basis, an amount equal to
any increase in the Taxes of the recipient as a result of receiving the payment
from the payor.

   19.  Consistent Tax Treatment.  To the extent that assets are assigned,
sold, transferred or conveyed by a member of the Plains Group to Spinco or
another member of the Spinco Group in contemplation of the Separation (as
defined in the Distribution Agreement) or the Spin-Off and any such transaction
is treated as a sale for Tax purposes, the aggregate purchase price shall be
allocated among the assets assigned, sold, transferred or conveyed as
determined by Plains in its sole discretion. Each of Plains and Spinco agrees
to report and, where applicable, to cause the members of their respective
groups to report, the purchase prices of such assets as determined by Plains.

   20.  Retention of Records.  Each party hereto agrees, to the extent
potentially relevant to the other party, to (1) retain, in accordance with
Plains' record retention policies in effect on the date of this Agreement, all
records, documents, accounting and other information (including computer data)
necessary for the preparation and filing of all Returns or the audit of such
Returns, and (2) give to the other party reasonable access to such records,
documents, accounting data, Returns and related books and records and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for purposes of the review or audit of such Returns
to the extent relevant to an obligation or liability of a party under this
Agreement.

   21.  Post Spin-Off Period Taxes.  Except as otherwise provided to the
contrary in this Agreement, (i) Plains and the other members of the Plains
Group (which, for this purpose, shall not include Spinco and the other members
of the Spinco Group) shall be solely responsible for all Taxes of the Plains
Group (which, for this purpose, shall not include Spinco and the other members
of the Spinco Group) arising in Tax periods beginning after the Spin-Off Date,
and (ii) Spinco and the other members of the Spinco Group shall be solely
responsible for all Taxes of the Spinco Group arising in Tax periods beginning
after the Spin-Off Date.

   22.  Expenses.  Each party will bear its own expenses in complying with this
Agreement, including but not limited to the cost of employee work hours. The
sharing of fees and expenses of nonemployees and independent contractors
mutually engaged by the parties shall be agreed upon before such persons are
engaged.

                                      7

<PAGE>

   23.  Definitions.

      (a)  "After-Tax Basis" means, with respect to any payment, an amount
   calculated by taking into account the Tax consequences of the receipt of
   such payment, as well as any Tax benefit associated with the liability
   giving rise to the payment, in each case calculated on a present value basis
   using the Agreed Rate.

      (b)  "Agreed Rate" means the annual rate of interest quoted, from time to
   time, by JPMorgan Chase Bank in Houston, Texas as its prime rate of interest
   for the purpose of determining the interest rates charged by it for United
   States dollar commercial loans made in the United States.

      (c)  "Code" has the meaning set forth in the first recital hereof.

      (d)  "Distribution Agreement" means that certain Master Separation
   Agreement dated as of the date hereof, by and between Plains and Spinco, as
   the same may be amended or otherwise modified from time to time pursuant to
   the terms thereof.

      (e)  "Items of Loss or Tax Benefit" has the meaning set forth in
   Paragraph 1 hereof.

      (f)  "Interim Period" has the meaning set forth in Paragraph 2 hereof.

      (g)  "Plains" has the meaning set forth in the preamble hereto.

      (h)  "Plains Group" has the meaning set forth in the first recital hereto.

      (i)  "Returns" means all returns, declarations, reports, statements and
   other documents required to be filed in respect of Taxes, and the term
   "Return" means any one of the foregoing Returns.

      (j)  "Ruling" means that certain private letter ruling issued by the
   Internal Revenue Service on May 22, 2002, as supplemented by letter dated
   November 5, 2002, with respect to the Spin-Off and relating to the tax
   consequences associated with the distribution of all outstanding shares of
   Spinco common stock, as the same may be amended, supplemented or otherwise
   modified or added to by the Internal Revenue Service on or before the
   Spin-Off Date.

      (k)  "Short Period" has the meaning set forth in Paragraph 2 hereof

      (l)  "Spinco" has the meaning set forth in the preamble hereof.

      (m)  "Spinco Group" has the meaning set forth in Paragraph 1 hereof.

      (n)  "Spin-Off" has the meaning set forth in the fourth recital hereof.

      (o)  "Spin-Off Date" has the meaning set forth in the fourth recital
   hereof.

      (p)  "Spin-Off Tax" means any Tax to which Plains or any member of the
   Plains Group is subject as a result of the application of any provision of
   the Code to the Spin-Off, including without limitation, Section 311(b),
   Section 355(c)(2), Section 355(e) or Section 361(c)(2) of the Code (or any
   corresponding or similar provision of state, local or foreign law), which
   results (i) solely from the fact that one or more persons acquire after the
   Spin-Off Date directly or indirectly stock representing a 50-percent or
   greater interest in Spinco and such acquisition is subject to Section 355(e)
   of the Code; (ii) from the failure of Spinco or any other member of the
   Spinco Group to comply with the covenants, agreements and representations in
   the Ruling; (iii) from any action by, or failure to take an action on the
   part of, Spinco or any other member of the Spinco Group, or (iv) from any
   combination of (i) through (iii) above.

      (q)  "Tax Authority" means the United States Internal Revenue Service or
   any other comparable state, local or foreign governmental authority.

      (r)  "Taxes" means all federal, state, local, foreign and other taxes,
   duties, levies, imposts, customs or other assessments, including, without
   limitation, all net income, alternative minimum, gross income, gross
   receipts, sales, use, ad valorem, transfer, franchise, profits, profit
   share, license, value added, withholding,

                                      8

<PAGE>

   payroll, employment, excise, estimated, severance, stamp, occupation,
   premium, property, windfall profits, or other taxes, of any kind whatsoever,
   together with any interest, penalties, additions to tax, fines or other
   additional amounts imposed thereon or related thereto, and the term "Tax"
   means any one of the foregoing Taxes.

      (s)  "Transfer Tax" means any excise, sales, use, transfer, documentary,
   filing, recordation or other similar tax or fee, together with any interest,
   additions or penalties with respect thereto and any interest in respect of
   such additions or penalties.

   24.  Notices.  All notices and other communications to be given or made
hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set out below (or at such
other address as it may have provided notification for the purposes hereof to
the other party hereto in accordance with this Section).

          If to Spinco:               Plains Exploration & Production Company
                                      500 Dallas Street, Suite 700
                                      Houston, Texas 77002
                                      Fax number: 713-654-4915
                                      Attention:  General Counsel

          If to Plains:               Plains Resources Inc.
                                      500 Dallas Street, Suite 700
                                      Houston, Texas 77002
                                      Fax number: (713) 654-4915
                                      Attention:  Chief Executive Officer

   25.  Binding Effect; Successors.  This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and any
successor, by merger, acquisition of substantially all of a party's assets or
otherwise, to either of the parties hereto (including but not limited to any
successor of Plains or Spinco succeeding to the Tax attributes of Plains or
Spinco under Section 381 of the Code), to the same extent as if such successor
had been an original party to this Agreement. In addition, in the event of an
acquisition of substantially all of the assets of Spinco in which gain or loss
is not recognized, in whole or in part, for Federal income Tax purposes, Spinco
shall ensure that any purchaser of such assets shall assume the obligations set
forth in this Agreement.

   26.  Severability.  Any provision of this Agreement that is determined by
arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.

   27.  Entire Agreement.  This Agreement, including the exhibit and other
writings referred to herein or delivered pursuant hereto and the Distribution
Agreement, as well as the other agreements entered into by and between Plains
and Spinco in connection with the transactions contemplated by the Distribution
Agreement, constitutes the entire agreement between Plains and Spinco with
respect to the subject matter hereof and supersedes all other agreements,
representations, warranties, statements, promises and undertakings, whether
oral or written, with respect to the subject matter hereof, including, without
limitation, any and all Tax sharing agreements or arrangements (whether oral or
written) between Plains and the other members of the Plains Group (other than
the Spinco Group) on the one hand and Spinco and the other members of the
Spinco Group on the other hand, that require payments or indemnities to be made
with respect to Taxes. This Agreement may not be amended, altered or modified
except by a writing signed by duly authorized officers of Plains and Spinco.

                                      9

<PAGE>

   28.  Governing Law.  All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internal laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.

   29.  Arbitration.  The parties agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Article VIII of the
Distribution Agreement.

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

                                       PLAINS RESOURCES INC.

                                              /s/  JOHN T. RAYMOND
                                       By:_____________________________________
                                                   John T. Raymond
                                                     President

                                       PLAINS EXPLORATION & PRODUCTION
                                         COMPANY

                                              /s/  JAMES C. FLORES
                                       By: ____________________________________
                                                   James C. Flores
                                           Chairman and Chief Executive Officer

                                      10

<PAGE>

                                                                      EXHIBIT A

                          MEMBERS OF THE SPINCO GROUP

<TABLE>
<CAPTION>
                                                Incorporation
                                                or Formation      %
                         Name                   Jurisdiction  Controlled
                         ----                   ------------- ----------
        <S>                                     <C>           <C>
        Arguello Inc...........................   Delaware        100%
        Plains Illinois Inc....................   Delaware        100%
        PMCT Inc...............................   Delaware        100%
        Plains Resources International Inc.....   Delaware        100%
        Plains E & P Company...................   Delaware        100%
        Gaviota Gas Plant Company..............   None           26.5%*
        Point Arguello Natural Gas Line Company   None           26.5%*
        Point Arguello Pipeline Company........   None           26.5%*
        Point Arguello Terminal Company........   None           26.5%*
</TABLE>
--------
*  Managing General Partnership Interest

                                      11<PAGE>

                                                                  EXHIBIT 10.21

                    PLAINS EXPLORATION & PRODUCTION COMPANY

                           2002 STOCK INCENTIVE PLAN

                        (As Adopted November 20, 2002)

<PAGE>

   1.  Purpose.

   The purpose of this Plan is to strengthen Plains Exploration & Production
Company, a Delaware corporation (the "Company"), by providing an incentive to
its employees, officers, consultants and directors and thereby encouraging them
to devote their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
employees (including future employees who have received a formal written offer
of employment), officers, consultants and directors of the Company and its
Subsidiaries and Affiliates an added long-term incentive for high levels of
performance and unusual efforts through the grant of Incentive Stock Options,
Nonqualified Stock Options, SARs, Performance Units and Performance Shares,
Share Awards, Restricted Stock and Restricted Stock Units (as each term is
herein defined).

   2.  Definitions.

   For purposes of the Plan:

      2.1  "Adjusted Appreciation Value" means, in the event of a Change in
   Control, the appreciation in the Adjusted Fair Market Value of a Share for
   purposes of determining payments to be made to a Grantee, and shall be
   measured by determining the amount equal to the Adjusted Fair Market Value
   of a Share on the exercise date minus the exercise price of the SAR being
   exercised.

      2.2  "Adjusted Fair Market Value" means, in the event of a Change in
   Control, the greater of (a) the highest price per Share paid to holders of
   the Shares in any transaction (or series of transactions) constituting or
   resulting in a Change in Control or (b) the highest Fair Market Value of a
   Share during the ninety (90) day period ending on the date of a Change in
   Control.

      2.3  "Affiliate" means any entity, directly or indirectly, controlled by,
   controlling or under common control with the Company or any corporation or
   other entity acquiring, directly or indirectly, all or substantially all the
   assets and business of the Company, whether by operation of law or otherwise.

      2.4  "Agreement" means the written agreement between the Company and an
   Optionee or Grantee evidencing the grant of an Option or Award and setting
   forth the terms and conditions thereof.

      2.5  "Appreciation Value" means the appreciation in the Fair Market Value
   of a Share for purposes of determining payments to be made to a Grantee, and
   shall be measured by determining the amount equal to the Fair Market Value
   of a Share on the exercise date minus the exercise price of the SAR being
   exercised.

      2.6  "Award" means a grant of SARs, Restricted Stock or Restricted Stock
   Units, a Performance Award, a Share Award or any or all of them.

      2.7  "Board" means the Board of Directors of the Company.

      2.8  "Cause" means:

          (a)  for purposes of Section 6.4, the commission of an act of fraud
       or intentional misrepresentation or an act of embezzlement,
       misappropriation or conversion of assets or opportunities of the Company
       or any of its Subsidiaries; and

          (b)  in the case of an Optionee or Grantee whose employment with the
       Company, Subsidiary or Affiliate is subject to the terms of an
       employment agreement between such Optionee or Grantee and the Company,
       Subsidiary or Affiliate, which employment agreement includes a
       definition of "Cause", the term "Cause" as used in this Plan or any
       Agreement shall have the meaning set forth in such employment agreement
       during the period that such employment agreement remains in effect; and

          (c)  in all other cases, (i) intentional failure to perform
       reasonably assigned duties, (ii) dishonesty or willful misconduct in the
       performance of duties, (iii) involvement in a transaction in connection
       with

                                      1

<PAGE>

       the performance of duties to the Company or any of its Subsidiaries or
       Affiliates which transaction is adverse to the interests of the Company
       or any of its Subsidiaries or Affiliates and which is engaged in for
       personal profit or (iv) willful violation of any law, rule or regulation
       in connection with the performance of duties (other than traffic
       violations or similar minor offenses) provided, however, that following
       a Change in Control clause (i) of this Section 2.8(c) shall not
       constitute "Cause."

   2.9  "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, in the case of
a spin-off, dividend or other distribution in respect of Shares, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of
a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.

   2.10  A "Change in Control" shall mean the occurrence of any of the
following:

      (a)  The acquisition by any "Person" (as the term person is used for
   purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934,
   as amended (the "1934 Act")) of "Beneficial Ownership" (within the meaning
   of Rule 13d-3 promulgated under the 1934 Act) of any securities of the
   Company which generally entitles the holder thereof to vote for the election
   of directors of the Company (the "Voting Securities") which, when added to
   the Voting Securities then "Beneficially Owned" by such Person, would result
   in such Person either "Beneficially Owning" fifty percent (50%) or more of
   the combined voting power of the Company's then outstanding Voting
   Securities or having the ability to elect fifty percent (50%) or more of the
   Company's directors; provided, however, that for purposes of this paragraph
   (a) of Section 2.10, a Person shall not be deemed to have made an
   acquisition of Voting Securities if such Person; (i) becomes the Beneficial
   Owner of more than the permitted percentage of Voting Securities solely as a
   result of open market acquisition of Voting Securities by the Company which,
   by reducing the number of Voting Securities outstanding, increases the
   proportional number of shares Beneficially Owned by such Person; (ii) is the
   Company or any corporation or other Person of which a majority of its voting
   power or its equity securities or equity interest is owned directly or
   indirectly by the Company (a "Controlled Entity"); (iii) acquires Voting
   Securities in connection with a "Non-Control Transaction" (as defined in
   paragraph (c) of this Section 2.10); or (iv) becomes the Beneficial Owner of
   more than the permitted percentage of Voting Securities as a result of a
   transaction approved by a majority of the Incumbent Board (as defined in
   paragraph (b) below); or

      (b)  The individuals who, as of the Effective Date, are members of the
   Board (the "Incumbent Board"), cease for any reason to constitute at least a
   majority of the Board; provided, however, that if either the election of any
   new director or the nomination for election of any new director by the
   Company's stockholders was approved by a vote of at least a majority of the
   Incumbent Board, such new director shall be considered as a member of the
   Incumbent Board; provided further, however, that no individual shall be
   considered a member of the Incumbent Board if such individual initially
   assumed office as a result of either an actual or threatened "Election
   Contest" (as described in Rule 14a-11 promulgated under the 1934 Act) or
   other actual or threatened solicitation of proxies or consents by or on
   behalf of a Person other than the Board (a "Proxy Contest") including by
   reason of any agreement intended to avoid or settle any Election Contest or
   Proxy Contest; or

      (c)  The consummation of a merger, consolidation or reorganization
   involving the Company (a "Business Combination"), unless (i) the
   stockholders of the Company, immediately before the Business Combination,
   own, directly or indirectly immediately following the Business Combination,
   at least fifty percent (50%) of the combined voting power of the outstanding
   voting securities of the corporation resulting from the Business Combination
   (the "Surviving Corporation") in substantially the same proportion as their
   ownership of the Voting Securities immediately before the Business
   Combination, and (ii) the individuals who were members of the Incumbent
   Board immediately prior to the execution of the agreement providing

                                      2

<PAGE>

   for the Business Combination constitute at least a majority of the members
   of the Board of Directors of the Surviving Corporation, and (iii) no Person
   (other than (x) the Company or any Controlled Entity, (y) a trustee or other
   fiduciary holding securities under one or more employee benefit plans or
   arrangements (or any trust forming a part thereof) maintained by the
   Company, the Surviving Corporation or any Controlled Entity, or (z) any
   Person who, immediately prior to the Business Combination, had Beneficial
   Ownership of fifty percent (50%) or more of the then outstanding Voting
   Securities) has Beneficial Ownership of fifty percent (50%) or more of the
   combined voting power of the Surviving Corporation's then outstanding voting
   securities (a Business Combination described in clauses (i), (ii) and (iii)
   of this paragraph shall be referred to as a "Non-Control Transaction");

      (d)  A complete liquidation or dissolution of the Company; or

      (e)  The sale or other disposition of all or substantially all of the
   assets of the Company to any Person (other than a transfer to a Controlled
   Entity).

      Notwithstanding the foregoing, if Optionee's or Grantee's employment is
   terminated and Optionee or Grantee reasonably demonstrates that such
   termination (x) was at the request of a third party who has indicated an
   intention or has taken steps reasonably calculated to effect a Change in
   Control and who effectuates a Change in Control or (y) otherwise occurred in
   connection with, or in anticipation of, a Change in Control which actually
   occurs, then for all purposes hereof, the date of a Change in Control with
   respect to Optionee or Grantee shall mean the date immediately prior to the
   date of such termination of employment.

   A Change in Control shall not be deemed to occur solely because (A) fifty
percent (50%) or more of the then outstanding Voting Securities is Beneficially
Owned by (x) a trustee or other fiduciary holding securities under one or more
employee benefit plans or arrangements (or any trust forming a part thereof)
maintained by the Company or any Controlled Entity or (y) any corporation
which, immediately prior to its acquisition of such interest, is owned directly
or indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock in the Company immediately prior to such
acquisition or (B) Plains Resources Inc. distributes to its stockholders all of
the capital stock of the Company then held by it.

   2.11  "Code" means the Internal Revenue Code of 1986, as amended.

   2.12  "Committee" means a committee, as described in Section 3.1, appointed
by the Board from time to time to administer the Plan and to perform the
functions set forth herein.

   2.13  "Company" means Plains Exploration and Production Company.

   2.14  "Director" means a director of the Company.

   2.15  "Disability" means:

      (a)  in the case of an Optionee or Grantee whose employment with the
   Company or a Subsidiary is subject to the terms of an employment agreement
   between such Optionee or Grantee and the Company or Subsidiary, which
   employment agreement includes a definition of "Disability", the term
   "Disability" as used in this Plan or any Agreement shall have the meaning
   set forth in such employment agreement during the period that such
   employment agreement remains in effect; or

      (b)  the term "Disability" as used in the Company's long-term disability
   plan, if any; or

      (c)  in all other cases, the term "Disability" as used in this Plan or
   any Agreement shall mean a physical or mental infirmity which impairs the
   Optionee's or Grantee's ability to perform substantially his or her duties
   for a period of one hundred eighty (180) consecutive days.

                                      3

<PAGE>

   2.16  "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.

   2.17  "Eligible Individual" means any of the following individuals who is
designated by the Committee as eligible to receive Options or Awards subject to
the conditions set forth herein: (a) any director, officer or employee of the
Company, Subsidiary or Affiliate, (b) any individual to whom the Company or
Subsidiary or Affiliate has extended a formal, written offer of employment, or
(c) any consultant or advisor of the Company, Subsidiary or Affiliate.

   2.18  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

   2.19  "Fair Market Value" on any date means the closing sales prices of the
Shares (i) on the day before such date, or (ii) on such date if an Agreement so
provides, on the principal national securities exchange on which such Shares
are listed or admitted to trading, or, if such Shares are not so listed or
admitted to trading, the average of the per Share closing bid price and per
Share closing asked price on such date as quoted on the National Association of
Securities Dealers Automated Quotation System or such other market in which
such prices are regularly quoted, or, if there have been no published bid or
asked quotations with respect to Shares on such date, the Fair Market Value
shall be the value established by the Board in good faith and, in the case of
an Incentive Stock Option, in accordance with Section 422 of the Code.

   2.20  Intentionally deleted.

   2.21  "Grantee" means a person to whom an Award has been granted under the
Plan.

   2.22  "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee as an Incentive
Stock Option.

   2.23  "Initial Public Offering" means the consummation of the first public
offering of Shares pursuant to a registration statement (other than on Form S-8
or successor forms) filed with, and declared effective by, the Securities and
Exchange Commission.

   2.24  "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.

   2.25  "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.

   2.26  "Option" means a Nonqualified Stock Option, an Incentive Stock Option,
a Formula Option, or any or all of them.

   2.27  "Optionee" means a person to whom an Option has been granted under the
Plan.

   2.28  "Outside Director" means a director of the Company who is an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.

   2.29  "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.

   2.30  "Performance Awards" means Performance Units, Performance Shares or
either or both of them.

   2.31  "Performance-Based Compensation" means any Option or Award that is
intended to constitute "performance based compensation" within the meaning of
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.

                                      4

<PAGE>

   2.32  "Performance Cycle" means the time period specified by the Committee
at the time Performance Awards are granted during which the performance of the
Company, or a Subsidiary Affiliate or Division will be measured.

   2.33  "Performance Objectives" has the meaning set forth in Section 11.

   2.34  "Performance Shares" means Shares issued or transferred to an Eligible
Individual under Section 11.

   2.35  "Performance Units" means Performance Units granted to an Eligible
Individual under Section 11.

   2.36  "Plan" means the Plains Exploration & Production Company 2002 Stock
Incentive Plan, as amended and restated from time to time.

   2.37  "Retained Distribution" means any securities or other property (other
than regular cash dividends) distributed by the Company in respect of
Restricted Stock during any Restricted Period.

   2.38  "Restricted Period" means the period designated by the Committee
during which Restricted Stock may not be sold, assigned, pledged or otherwise
encumbered.

   2.39  "Restricted Stock" means Shares issued or transferred to an Eligible
Individual pursuant to Section 9.

   2.40  "Restricted Stock Unit" means a right to receive one Share or a cash
amount equal to the Fair Market Value of one Share or a combination thereof, as
determined by the Committee in its sole discretion, subject to the terms of the
Plan and the applicable Agreement.

   2.41  "SAR" means a right to receive the Appreciation Value of a Share.

   2.42  "Share Award" means an Award of Shares granted pursuant to Section 11.

   2.43  "Shares" means the common stock, par value $.01 per share, of the
Company and any other securities into which such shares are changed or for
which such shares are exchanged.

   2.44  "Subsidiary" means (i) except as provided in subsection (ii) below,
any corporation which is a subsidiary corporation within the meaning of Section
424(f) of the Code with respect to the Company, and (ii) in relation to the
eligibility to receive Options or Awards other than Incentive Stock Options and
continued employment for purposes of Options and Awards (unless the Committee
determines otherwise), any entity, whether or not incorporated, in which the
Company directly or indirectly owns 50% or more of the outstanding equity or
other ownership interests.

   2.45  "Ten-Percent Stockholder" means an Eligible Individual, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent, Subsidiary or Affiliate.

   3.  Administration.

   3.1  The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall be a
majority of the members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by all of the members of the Committee shall be as fully effective as if
made by a vote at a meeting duly called and held. The Committee shall consist
of one (1) or more Directors and may consist of the entire Board. If the
Committee consists of less than the entire Board, then with

                                      5

<PAGE>

respect to any Option or Award to an individual who is subject to Section 16 of
the Exchange Act, the Committee shall consist of at least two (2) Directors
each of whom shall be a Nonemployee Director and to the extent necessary for
any award under the Plan to qualify as performance-based compensation for the
purposes of Section 162(m) of the Code, the Committee shall consist of at least
two (2) Directors each of whom shall be an Outside Director. For purposes of
the preceding sentence, if one or more members of the Committee is not a
Nonemployee Director and an Outside Director but recuses himself or herself or
abstains from voting with respect to a particular action taken by the
Committee, then the Committee, with respect to that action, shall be deemed to
consist only of the members of the Committee who have not recused themselves or
abstained from voting. Subject to applicable law, the Committee may delegate
its authority under the Plan to any other person or persons.

   3.2  No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder. The Company hereby agrees to indemnify each
member of the Committee for all costs and expenses and, to the extent permitted
by applicable law, any liability incurred in connection with defending against,
responding to, negotiating for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization
to any transaction hereunder.

   3.3  Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:

      (a)  determine those Eligible Individuals to whom Options shall be
   granted under the Plan and the number of such Options to be granted and to
   prescribe the terms and conditions (which need not be identical) of each
   such Option, including the exercise price per Share, the vesting schedule
   and the duration of each Option, and make any amendment or modification to
   any Option Agreement consistent with the terms of the Plan;

      (b)  select those Eligible Individuals to whom Awards shall be granted
   under the Plan and to determine the number of Shares in respect of which
   each Award is granted, the terms and conditions (which need not be
   identical) of each such Award, and make any amendment or modification to any
   Award Agreement consistent with the terms of the Plan;

      (c)   to construe and interpret the Plan and the Options and Awards
   granted hereunder and to establish, amend and revoke rules and regulations
   for the administration of the Plan, including, but not limited to,
   correcting any defect or supplying any omission, or reconciling any
   inconsistency in the Plan or in any Agreement, in the manner and to the
   extent it shall deem necessary or advisable, including so that the Plan and
   the operation of the Plan complies with Rule 16b-3 under the Exchange Act,
   the Code to the extent applicable and other applicable law, and otherwise to
   make the Plan fully effective. All decisions and determinations by the
   Committee in the exercise of this power shall be final, binding and
   conclusive upon the Company, its Subsidiaries, the Optionees and Grantees,
   and all other persons having any interest therein;

      (d)  to determine the duration and purposes for leaves of absence which
   may be granted to an Optionee or Grantee on an individual basis without
   constituting a termination of employment or service for purposes of the Plan;

      (e)  to exercise its discretion with respect to the powers and rights
   granted to it as set forth in the Plan; and

      (f)  generally, to exercise such powers and to perform such acts as are
   deemed necessary or advisable to promote the best interests of the Company
   with respect to the Plan.
   4.  Stock Subject to the Plan; Grant Limitations.

   4.1  The maximum number of Shares that may be made the subject of Options
and Awards granted under the Plan is 500,000; provided, however, that in the
aggregate, not more than 500,000 of the allotted Shares may

                                      6

<PAGE>

be made the subject of Restricted Stock Awards or Restricted Stock Units under
Sections 9 and 10 of the Plan respectively (other than Shares of Restricted
Stock made in settlement of Performance Units pursuant to Section 11.1(b)). The
maximum number of Shares that may be the subject of Options and Awards granted
to an Eligible Individual in any one calendar year period may not exceed
300,000 Shares. The maximum dollar amount of cash or the Fair Market Value of
Shares that any Eligible Individual may receive in any calendar year in respect
of Performance Units denominated in dollars may not exceed $1,000,000. The
Company shall reserve for the purposes of the Plan, out of its authorized but
unissued Shares or out of Shares held in the Company's treasury, or partly out
of each, such number of Shares as shall be determined by the Board.

   4.2  In connection with the grant of an Option or an Award (other than the
grant of a Performance Unit denominated in dollars), the number of Shares shall
be reduced by the number of Shares in respect of which the Option or Award is
granted or denominated; provided, however, that if any Option is exercised by
tendering Shares, either actually or by attestation, as full or partial payment
of the exercise price, the maximum number of Shares available under Section 4.1
shall be increased by the number of Shares so tendered. In connection with the
exercise of an Award of SARs, the maximum number of Shares available under
Section 4.1 shall be increased by the number of Shares equal to the number of
SARs being exercised minus the number of Shares that are issued upon such
exercise, provided that if the number of Shares issued is greater than the
number of SARs being exercised, the amount equal to the difference between
those numbers shall be subtracted from the maximum number of Shares available
under the Plan.

   4.3  Whenever any outstanding Option or Award or portion thereof expires, is
canceled, is settled in cash (including the settlement of tax withholding
obligations using Shares) or is otherwise terminated for any reason without
having been exercised or payment having been made in respect of the entire
Option or Award, the Shares allocable to the expired, canceled, settled or
otherwise terminated portion of the Option or Award may again be the subject of
Options or Awards granted hereunder.

   4.4  In no event may more than 500,000 Shares be issued upon the exercise of
Incentive Stock Options granted under the Plan.

   5.  Option Grants for Eligible Individuals.

   5.1  Authority of Committee.  Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Options, and the terms and conditions of the grant
to such Eligible Individuals shall be set forth in an Agreement. Subject to
applicable law and regulations, Incentive Stock Options may be granted only to
Eligible Individuals who are employees of the Company or any Subsidiary or
Affiliate.

   5.2  Exercise Price.  The purchase price or the manner in which the exercise
price is to be determined for Shares under each Option shall be determined by
the Committee and set forth in the Agreement; provided, however, that the
exercise price per Share under each Option shall not be less than 100% of the
Fair Market Value of a Share on the date the Option is granted (110% in the
case of an Incentive Stock Option granted to a Ten-Percent Stockholder).

   5.3  Maximum Duration.  Options granted hereunder shall be for such term as
the Committee shall determine, provided that an Incentive Stock Option shall
not be exercisable after the expiration of ten (10) years from the date it is
granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted;
provided, however, that unless the Committee provides otherwise an Option
(other than an Incentive Stock Option) may, upon the death of the Optionee
prior to the expiration of the Option, be exercised for up to one (1) year
following the date of the Optionee's death even if such period extends beyond
ten (10) years from the date the Option is granted. The Committee may,
subsequent to the granting of any Option, extend the term thereof, but in no
event shall the term as so extended exceed the maximum term provided for in the
preceding sentence.

                                      7

<PAGE>

   5.4  Vesting.  Subject to Section 7.4, each Option shall become exercisable
in such installments (which need not be equal) and at such times as may be
designated by the Committee and set forth in the Agreement. To the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, at any time after becoming exercisable, but not later than the date the
Option expires. The Committee may accelerate the exercisability of any Option
or portion thereof at any time.

   5.5  Limitations on Incentive Stock Options.  The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with the
provisions of Section 422 of the Code, including but not limited to the
requirement that no Incentive Stock Option shall be granted more than ten years
after the effective date of the Plan. An Option shall be treated as an
Incentive Stock Option only to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares with respect to
which all Incentive Stock Options held by an Optionee (under the Plan and all
other plans of the Company, its Parent or any Subsidiary), become exercisable
for the first time during any calendar year does not exceed $100,000. This
limitation shall be applied by taking Options into account in the order in
which they were granted. To the extent this limitation is exceeded, an Option
shall be treated as a Nonqualified Stock Option regardless of its designation
as an Incentive Stock Option. Should any Incentive Stock Option remain
exercisable after three months after employment terminates for any reason other
than Disability or death, or after one year if employment terminates due to
Disability, the Option shall immediately be converted to a Nonqualified Stock
Option. In order to obtain the benefits of an Incentive Stock Option under the
Code, no sale or other disposition may be made of any shares upon exercise of
such Option until the later of one year from the date of issuance of the shares
acquired pursuant to the exercise of the Option, or two years from the grant
date of the Option. The Company shall have no liability in the event it is
determined that any Option intended to be an Incentive Stock Option fails to
qualify as such, whether such failure is a result of a disqualifying
disposition or the terms of this Plan or any governing Agreement.

   6.  Grants for Nonemployee Directors and Outside Directors.

   6.1  Grant.  In its discretion, the Committee may elect to grant Options
(and other Awards) to Nonemployee Directors or Outside Directors under any
terms or conditions it deems reasonable.
   7.  Terms and Conditions Applicable to All Options.

   7.1  Non-Transferability.  No Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and distribution or, in the
case of an Option other than an Incentive Stock Option, pursuant to a domestic
relations order (within the meaning of Rule 16a-12 promulgated under the
Exchange Act), and an Option shall be exercisable during the lifetime of such
Optionee only by the Optionee or his or her guardian or legal representative.
Notwithstanding the foregoing, the Committee may set forth in the Agreement
evidencing an Option (other than an Incentive Stock Option) at the time of
grant or thereafter, that the Option may be transferred to members of the
Optionee's immediate family, to trusts solely for the benefit of such immediate
family members and to partnerships in which such family members and/or trusts
are the only partners, and for purposes of this Plan, a transferee of an Option
shall be deemed to be the Optionee. For this purpose, immediate family means
the Optionee's spouse, parents, children, stepchildren and grandchildren and
the spouses of such parents, children, stepchildren and grandchildren. The
terms of an Option shall be final, binding and conclusive upon the
beneficiaries, executors, administrators, heirs and successors of the Optionee.

   7.2  Method of Exercise.  The exercise of an Option shall be made only by a
written notice delivered in person or by mail or telecopy to the Secretary of
the Company at the Company's principal executive office (or through such other
notification method that the Committee may adopt), specifying the number of
Shares to be exercised and, to the extent applicable, accompanied by payment
therefor and otherwise in accordance with the Agreement pursuant to which the
Option was granted. The exercise price for any Shares purchased pursuant to the
exercise of an Option shall be paid, in either of the following forms (or any
combination thereof): (a) cash or (b) the transfer, either actually or by
attestation, to the Company of Shares that have been held by the Optionee for
at least six (6) months (or such lesser period as may be permitted by the
Committee) prior to the exercise of

                                      8

<PAGE>

the Option, such transfer to be upon such terms and conditions as determined by
the Committee or (c) a combination of cash and the transfer of Shares;
provided, however, that the Committee may determine that the exercise price
shall be paid only in cash. In addition, Options may be exercised through a
registered broker-dealer pursuant to such cashless exercise procedures which
are, from time to time, deemed acceptable by the Committee. Any Shares
transferred to the Company as payment of the exercise price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Agreement evidencing the Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued
upon exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.
Notwithstanding the foregoing, to the extent that the Committee determines that
a cashless exercise or other method of exercise hereunder by an Optionee would
be deemed under applicable law, regulation or exchange requirement, to be an
impermissible extension of credit or arrangement of credit by the Company for
the benefit of an officer, or to be prohibited for any other reason, such
method of exercise shall not be permitted with respect to such Optionee.

   7.3  Rights of Optionees.  No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (a) the Option
shall have been exercised pursuant to the terms thereof, (b) the Company shall
have issued and delivered Shares to the Optionee, and (c) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such Shares, subject to such terms and conditions as may
be set forth in the applicable Agreement.

   7.4  Effect of Change in Control.  In the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In addition, to the extent set forth in an
Agreement evidencing the grant of an Option, an Optionee will be permitted to
surrender to the Company for cancellation within ninety (90) days after such
Change in Control any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (a) (i) in the case of a Nonqualified
Stock Option, the greater of (A) the Fair Market Value, on the day preceding
the date of surrender, of the Shares subject to the Option or portion thereof
surrendered or (B) the Adjusted Fair Market Value of the Shares subject to the
Option or portion thereof surrendered or (ii) in the case of an Incentive Stock
Option, the Fair Market Value, on the day preceding the date of surrender, of
the Shares subject to the Option or portion thereof surrendered, over (b) the
aggregate exercise price for such Shares under the Option or portion thereof
surrendered. The Committee has the discretion to modify an Option to include
the provision set forth in the preceding sentence. In the event that the
Committee requires exercise of Options at the time of such Change in Control,
they shall be cancelled effective as of the Change in Control. The Committee
may require cancellation of Options in the Agreement evidencing the Options or
by resolution at the time of a Change in Control. Notwithstanding any other
provision of this Plan or any Agreement, the Committee may require such
cancellation without an Optionee's consent even if the cancellation is a
modification of the terms of an Option. In the event an Optionee's employment
or service with the Company and its Subsidiaries terminates following a Change
in Control, each Option held by the Optionee that remains outstanding after the
Change in Control and that was exercisable as of the date of termination of the
Optionee's employment or service shall, notwithstanding any shorter period set
forth in the Agreement evidencing the Option, remain exercisable for a period
ending not before the earlier of (x) the first anniversary of the termination
of the Optionee's employment or service or (y) the expiration of the stated
term of the Option.

   8.  SARs.

   8.1  Grant.  The Committee may in its discretion, either alone or in
connection with the grant of an Option, grant SARs to Eligible Individuals in
accordance with the Plan, the terms and conditions of which shall be set forth
in an Agreement. If granted in connection with an Option, a SAR shall cover the
same Shares covered by the Option (or such lesser number of Shares as the
Committee may determine) and shall, except as provided in this Section 8, be
subject to the same terms and conditions as the related Option. A SAR may be
granted (i) at any time if unrelated to an Option, or (ii) if related to an
Option, at the time of grant.

                                      9

<PAGE>

   8.2  SAR Related to an Option.

   (a)  Exercise.  A SAR granted in connection with an Option shall be
exercisable at such time or times and only to the extent that the related
Options are exercisable, and will not be transferable except to the extent the
related Option may be transferable. A SAR granted in connection with an Option
shall be exercisable only if the Fair Market Value of a Share on the date of
exercise exceeds the purchase price specified in the related Option Agreement.

   (b)  Amount Payable.  Upon the exercise of SARs related to an Option, the
Grantee shall be entitled to receive an amount determined by multiplying (A)
the Appreciation Value of a Share, by (B) the number of SARs being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any SAR by including such a limit in the Agreement
evidencing the SAR at the time it is granted.

   (c)  Treatment of Related Options and SARs Upon Exercise.  Upon the exercise
of a SAR granted in connection with an Option, the Option shall be canceled to
the extent of the number of Shares as to which the SAR is exercised, and upon
the exercise of an Option granted in connection with a SAR, the SAR shall be
canceled to the extent of the number of Shares as to which the Option is
exercised or surrendered.

   8.3  SAR Unrelated to an Option.  The Committee may grant SARs unrelated to
Options. SARs unrelated to Options shall contain such terms and conditions as
to exercisability (subject to Section 8.7), vesting and duration as the
Committee shall determine, but in no event shall they have a term of greater
than ten (10) years. Upon exercise of a SAR unrelated to an Option, the Grantee
shall be entitled to receive an amount determined by multiplying (A) the
Appreciation Value of a Share, by (B) number of SARs being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any SAR by including such a limit in the Agreement
evidencing the SAR at the time it is granted.

   8.4  Method of Exercise.  The exercise of an Award of SARs shall be made
only by a written notice delivered in person or by mail or telecopy to the
Secretary of the Company at the Company's principal executive office (or
through such other notification method that the Committee may adopt),
specifying the number of SARs with respect to which the Award is being
exercised. If requested by the Committee, the Grantee shall deliver the
Agreement evidencing the SARs being exercised and the Agreement evidencing any
related Option to the Secretary of the Company who shall endorse thereon a
notation of such exercise and return such Agreement to the Grantee.

   8.5  Form of Payment.  Payment of the amount determined under Sections
8.2(b) or 8.3 shall be made solely in cash.

   8.6  Effect of Change in Control.  In the event of a Change in Control, all
outstanding SARs shall become immediately and fully exercisable. In addition,
to the extent set forth in an Agreement evidencing the grant of a SAR unrelated
to an Option (including as such Agreement may be amended in the Committee's
sole discretion prior the Change in Control), a Grantee will be entitled to
receive a payment from the Company in cash (provided that the SARs have any
Appreciation Value), as the Committee shall determine, with a value equal to
(A) the greater of (x) the aggregate Appreciation Value, on the date of
exercise, of the unexercised SARS and (y) the aggregate Adjusted Fair Market
Value, on the date of exercise, of the unexercised SARs. In the event that the
Committee requires exercise of SARs at the time of such Change in Control (even
if they have no Appreciation Value), they shall be cancelled effective as of
the Change in Control. The Committee may require cancellation of SARs in the
Agreement evidencing the SARs or by resolution at the time of a Change in
Control. Notwithstanding any other provision of this Plan or any Agreement, the
Committee may require such cancellation without a Grantee's consent even if the
cancellation is a modification of the terms of the SARs. In the event a
Grantee's employment or other service with the Company terminates following a
Change in Control and any SARs remain outstanding after the Change in Control,
each SAR held by the Grantee that was exercisable as of the date of termination
of the Grantee's employment or other service shall remain exercisable for a
period ending not before the earlier of the first anniversary of (A) the
termination of the Grantee's employment or (B) the expiration of the stated
term of the SAR.

                                      10

<PAGE>

   8.7  Non-Transferability.  No SARs shall be transferable by the Grantee
otherwise than by will or by the laws of descent and distribution or pursuant
to a domestic relations order (within the meaning of Rule 16a-12 promulgated
under the Exchange Act), and SARs shall be exercisable during the lifetime of
such Grantee only by the Grantee or his or her guardian or legal
representative. Notwithstanding the foregoing, the Committee may set forth in
the Agreement evidencing an Award of SARs at the time of grant or thereafter,
that the SARs may be transferred to members of the Grantee's immediate family,
to trusts solely for the benefit of such immediate family members and to
partnerships in which such family members and/or trusts are the only partners,
and for purposes of this Plan, a transferee of an Award of SARs shall be deemed
to be the Grantee. For this purpose, immediate family means the Grantee's
spouse, parents, children, stepchildren and grandchildren and the spouses of
such parents, children, stepchildren and grandchildren. The terms of an Award
shall be final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Grantee.

   9.  Restricted Stock.

   9.1  Grant.  The Committee may grant Awards to Eligible Individuals of
Restricted Stock, which shall be evidenced by an Agreement between the Company
and the Grantee. Each Agreement shall contain such restrictions, terms and
conditions as the Committee may, in its discretion, determine and (without
limiting the generality of the foregoing) such Agreements may require that an
appropriate legend be placed on Share certificates. Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 9.

   9.2  Rights of Grantee.  Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted provided that the Grantee has
executed an Agreement evidencing the Award, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of
such Shares. If a Grantee shall fail to execute the Agreement evidencing a
Restricted Stock Award, or any documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the discretion of the Committee, Shares
issued in connection with a Restricted Stock Award shall be deposited together
with the stock powers with an escrow agent (which may be the Company)
designated by the Committee. Unless the Committee determines otherwise and as
set forth in the Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have all of the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares (other than
Retained Distributions). The Company shall retain custody of all Retained
Distributions made or declared with respect to the Restricted Stock and such
Retained Distributions shall be subject to the same restrictions on terms and
conditions as are applicable to the Restricted Stock.

   9.3  Non-transferability.  Until all restrictions upon the Shares of
Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth
in Section 9.4, such Shares and Retained Distribution shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated.

   9.4  Lapse of Restrictions.

   (a)  Generally.  Restrictions upon Shares of Restricted Stock awarded
hereunder shall lapse at such time or times and on such terms and conditions as
the Committee may determine (the "Restricted Period"). The Agreement evidencing
the Award shall set forth any such restrictions.

   (b)  Effect of Change in Control.  Unless the Committee shall determine
otherwise at the time of the grant of an Award of Restricted Stock, the
restrictions upon Shares of Restricted Stock shall lapse upon a Change in
Control. The Agreement evidencing the Award shall set forth any such provisions.

   9.5  Treatment of Dividends.  At the time an Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion

                                      11

<PAGE>

thereof, declared or paid on such Shares by the Company shall be (a) deferred
until the lapsing of the restrictions imposed upon such Shares and (b) held by
the Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Shares of Restricted Stock) or held in cash. If deferred dividends are to be
held in cash, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the year at
a rate per annum as the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Shares of Restricted Stock (whether held in
cash or as additional Shares of Restricted Stock), together with interest
accrued thereon, if any, shall be made upon the lapsing of restrictions imposed
on the Shares in respect of which the deferred dividends were paid, and any
dividends deferred (together with any interest accrued thereon) in respect of
any Shares of Restricted Stock shall be forfeited upon the forfeiture of such
Shares.

   9.6  Delivery of Shares.  Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions hereunder.

   10.  Restricted Stock Units.

   10.1  Grant.  The Committee may grant Awards of Restricted Stock Units to
Eligible Individuals, which shall be evidenced by an Agreement between the
Company and the Grantee. Each Agreement shall contain such restrictions, terms
and conditions as the Committee may, in its discretion, determine, subject to
the terms and provisions set forth below in this Section 10.

   10.2  Rights of Grantees.  Until all restrictions upon the Restricted Stock
Units awarded to a Grantee shall have lapsed in the manner set forth in Section
10.5, the Grantee shall not be a shareholder of the Company, nor have any of
the rights or privileges of a shareholder of the Company, including, without
limitation, rights to receive dividends and voting rights.

   10.3  Restricted Stock Unit Account.  The Company shall establish and
maintain a separate account ("Restricted Stock Unit Account") for each Grantee
who has received a grant of Restricted Stock Units, and such account shall be
credited for the number of Restricted Stock Units granted to such Grantee.
Unless otherwise provided in an applicable Restricted Stock Unit Agreement, a
Grantee's Restricted Stock Unit Account shall be credited for any securities or
other property (including regular cash dividends) distributed by the Company in
respect of its Shares. Any such property shall be subject to the same vesting
schedule as the Restricted Stock Units to which they relate.

   10.4  Non-transferability.  Until all restrictions upon the Restricted Stock
Units awarded to a Grantee shall have lapsed in the manner set forth in Section
10.5, such Restricted Stock Units and any related securities, cash dividends or
other property credited to a Restricted Stock Unit Account shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated.

   10.5  Vesting.

   (a)  Generally.  Restricted Stock Units awarded hereunder and any related
securities, cash dividends or other property credited to the Restricted Stock
Unit Account shall vest at such time or times and on such terms and conditions
as the Committee may determine. The Agreement evidencing the Award of
Restricted Stock Units shall set forth any such terms and conditions.

   (b)  Effect of Change in Control.  Unless the Committee shall determine
otherwise at the time of the grant of an Award of Restricted Stock Units, the
Restricted Stock Units and any related securities, cash dividends or other
property credited to the Restricted Stock Unit Account shall vest upon a Change
in Control. The Agreement evidencing the Award of Restricted Stock Units shall
set forth any such provisions.

                                      12

<PAGE>

   10.6  Payment or Delivery of Shares and Other Property.  As soon as
practicable after each vesting date of an Award of Restricted Stock Units,
payment shall be made in Shares or in cash or in a combination thereof (based
upon the Fair Market Value of the Shares on the day all restrictions lapse), as
determined by the Committee in its sole discretion. If payment is made in
Shares, the Committee shall cause a stock certificate to be delivered to the
Grantee with respect to such Shares free of all restrictions hereunder. Any
securities, cash dividends or other property credited to a Restricted Stock
Unit Account other than Restricted Stock Units shall be paid in kind, or, in
the discretion of the Committee, in cash.

   11.  Performance Awards.

   11.1  Performance Units.  The Committee, in its discretion, may grant Awards
of Performance Units to Eligible Individuals, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount
and, contingent upon the attainment of specified Performance Objectives within
the Performance Cycle, represent the right to receive payment as provided in
Section 11.3(c) of (i) in the case of Share-denominated Performance Units, the
Fair Market Value of a Share on the date the Performance Unit was granted, the
date the Performance Unit became vested or any other date specified by the
Committee, (ii) in the case of dollar-denominated Performance Units, the
specified dollar amount or (iii) a percentage (which may be more than 100%) of
the amount described in clause (i) or (ii) depending on the level of
Performance Objective attainment; provided, however, that, the Committee may at
the time a Performance Unit is granted specify a maximum amount payable in
respect of a vested Performance Unit. Each Agreement shall specify the number
of Performance Units to which it relates, the Performance Objectives which must
be satisfied in order for the Performance Units to vest and the Performance
Cycle within which such Performance Objectives must be satisfied.

   (a)  Vesting and Forfeiture.  Subject to Sections 11.3(c) and 11.4, a
Grantee shall become vested with respect to the Performance Units to the extent
that the Performance Objectives set forth in the Agreement are satisfied for
the Performance Cycle.

   (b)  Payment of Awards.  Subject to Section 11.3(c), payment to Grantees in
respect of vested Performance Units shall be made as soon as practicable after
the last day of the Performance Cycle to which such Award relates unless the
Agreement evidencing the Award provides for the deferral of payment, in which
event the terms and conditions of the deferral shall be set forth in the
Agreement. Subject to Section 11.4, such payments may be made entirely in
Shares valued at their Fair Market Value, entirely in cash, or in such
combination of Shares and cash as the Committee in its discretion shall
determine at any time prior to such payment; provided, however, that if the
Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the
extent to which such payment will be in Shares of Restricted Stock and the
terms of such Restricted Stock at the time the Award is granted.

   11.2  Performance Shares.  The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Individuals, the terms and conditions
of which shall be set forth in an Agreement between the Company and the
Grantee. Each Agreement may require that an appropriate legend be placed on
Share certificates. Awards of Performance Shares shall be subject to the
following terms and provisions:

      (a)  Rights of Grantee.  The Committee shall provide at the time an Award
   of Performance Shares is made the time or times at which the actual Shares
   represented by such Award shall be issued in the name of the Grantee;
   provided, however, that no Performance Shares shall be issued until the
   Grantee has executed an Agreement evidencing the Award, the appropriate
   blank stock powers and, in the discretion of the Committee, an escrow
   agreement and any other documents which the Committee may require as a
   condition to the issuance of such Performance Shares. If a Grantee shall
   fail to execute the Agreement evidencing an Award of Performance Shares, the
   appropriate blank stock powers and, in the discretion of the Committee, an
   escrow agreement and any other documents which the Committee may require
   within the time period prescribed by the Committee at the time the Award is
   granted, the Award shall be null and void. At the discretion of the
   Committee, Shares issued in connection with an Award of Performance Shares
   shall be

                                      13

<PAGE>

   deposited together with the stock powers with an escrow agent (which may be
   the Company) designated by the Committee. Except as restricted by the terms
   of the Agreement, upon delivery of the Shares to the escrow agent, the
   Grantee shall have, in the discretion of the Committee, all of the rights of
   a stockholder with respect to such Shares, including the right to vote the
   Shares and to receive all dividends or other distributions paid or made with
   respect to the Shares.

      (b)  Non-transferability.  Until any restrictions upon the Performance
   Shares awarded to a Grantee shall have lapsed in the manner set forth in
   Sections 11.2(c) or 11.4, such Performance Shares shall not be sold,
   transferred or otherwise disposed of and shall not be pledged or otherwise
   hypothecated, nor shall they be delivered to the Grantee. The Committee may
   also impose such other restrictions and conditions on the Performance
   Shares, if any, as it deems appropriate.

      (c)  Lapse of Restrictions.  Subject to Sections 11.3(c) and 11.4,
   restrictions upon Performance Shares awarded hereunder shall lapse and such
   Performance Shares shall become vested at such time or times and on such
   terms, conditions and satisfaction of Performance Objectives as the
   Committee may, in its discretion, determine at the time an Award is granted.

      (d)  Treatment of Dividends.  At the time the Award of Performance Shares
   is granted, the Committee may, in its discretion, determine that the payment
   to the Grantee of dividends, or a specified portion thereof, declared or
   paid on Shares represented by such Award which have been issued by the
   Company to the Grantee shall be (i) deferred until the lapsing of the
   restrictions imposed upon such Performance Shares and (ii) held by the
   Company for the account of the Grantee until such time. In the event that
   dividends are to be deferred, the Committee shall determine whether such
   dividends are to be reinvested in shares of Stock (which shall be held as
   additional Performance Shares) or held in cash. If deferred dividends are to
   be held in cash, there may be credited at the end of each year (or portion
   thereof) interest on the amount of the account at the beginning of the year
   at a rate per annum as the Committee, in its discretion, may determine.
   Payment of deferred dividends in respect of Performance Shares (whether held
   in cash or in additional Performance Shares), together with interest accrued
   thereon, if any, shall be made upon the lapsing of restrictions imposed on
   the Performance Shares in respect of which the deferred dividends were paid,
   and any dividends deferred (together with any interest accrued thereon) in
   respect of any Performance Shares shall be forfeited upon the forfeiture of
   such Performance Shares.

      (e)  Delivery of Shares.  Upon the lapse of the restrictions on
   Performance Shares awarded hereunder, the Committee shall cause a stock
   certificate to be delivered to the Grantee with respect to such Shares, free
   of all restrictions hereunder.

   11.3  Performance Objectives.

   (a)  Establishment.  Performance Objectives for Performance Awards may be
expressed in terms of (i) revenue, (ii) net income, (iii) operating income;
(iv) earnings per Share, (v) Share price, (vi) pre-tax profits, (vii) net
earnings, (viii) return on equity or assets, (ix) sales, (x) market share, (xi)
total Shareholder return, (xii) total Shareholder return relative to peers or
(xiii) any combination of the foregoing. Performance Objectives may be in
respect of the performance of the Company, any of its Subsidiaries or
Affiliates, any of its Divisions or segments or any combination thereof.
Performance Objectives may be absolute or relative (to prior performance of the
Company or to the performance of one or more other entities or external
indices) and may be expressed in terms of a progression within a specified
range. The Performance Objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (x) the date on which
a quarter of the Performance Cycle has elapsed or (y) the date which is ninety
(90) days after the commencement of the Performance Cycle, and in any event
while the performance relating to the Performance Objectives remain
substantially uncertain.

   (b)  Effect of Certain Events.  At the time of the granting of a Performance
Award, or at any time thereafter, in either case to the extent permitted under
Section 162(m) of the Code and the regulations thereunder without adversely
affecting the treatment of the Performance Award as Performance-Based
Compensation, the Committee may provide for the manner in which performance
will be measured against the Performance

                                      14

<PAGE>

Objectives (or may adjust the Performance Objectives), include or exclude items
to measure specific objectives, such as losses from discontinued operations,
extraordinary, unusual or nonrecurring gains and losses, the cumulative effect
of accounting changes, acquisitions or divestitures or other corporate
transactions, core process redesigns, structural changes/outsourcing, and
foreign exchange impacts.

   (c)  Determination of Performance.  Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance Award
that is intended to constitute Performance-Based Compensation made to a Grantee
who is subject to Section 162(m) of the Code, the Committee shall certify in
writing that the applicable Performance Objectives have been satisfied to the
extent necessary for such Award to qualify as Performance Based Compensation.

   11.4  Effect of Change in Control.  In the event of a Change in Control,
unless otherwise determined by the Committee and set forth in the Agreement
evidencing the Award:

      (a)  With respect to Performance Units, the Grantee shall (i) become
   vested in all outstanding of the Performance Units as if all Performance
   Objectives had been satisfied at the maximum level and (ii) be entitled to
   receive in respect of all Performance Units which become vested as a result
   of a Change in Control a cash payment within ten (10) days after such Change
   in Control.

      (b)  With respect to Performance Shares, all restrictions shall lapse
   immediately on all outstanding Performance Shares as if all Performance
   Objectives had been satisfied at the maximum level.

      (c)  The Agreements evidencing Performance Shares and Performance Units
   shall provide for the treatment of such Awards (or portions thereof), if
   any, which do not become vested as the result of a Change in Control,
   including, but not limited to, provisions for the adjustment of applicable
   Performance Objectives.

   11.5  Non-transferability.  Until the vesting of Performance Units or the
lapsing of any restrictions on Performance Shares, as the case may be, such
Performance Units or Performance Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated.

   12.  Other Share Based Awards.

   The Committee may grant a Share Award to any Eligible Individual on such
terms and conditions as the Committee may determine in its sole discretion.
Share Awards may be made as additional compensation for services rendered by
the Eligible Individual or may be in lieu of cash or other compensation to
which the Eligible Individual is entitled from the Company.

   13.  Effect of a Termination of Employment.

   Unless set forth in this Plan, the Agreement evidencing the grant of each
Option and each Award shall set forth the terms and conditions applicable to
such Option or Award upon a termination or change in the status of the
employment of the Optionee or Grantee by the Company, or a Subsidiary,
Affiliate or Division (including a termination or change by reason of the sale
of a Subsidiary, Affiliate or Division), which shall be as the Committee may,
in its discretion, determine at the time the Option or Award is granted or
thereafter. Notwithstanding the foregoing, if the terms of any employment
agreement require that Options or Awards granted to an individual receive a
specific treatment upon termination of employment, such terms shall be deemed
to have been included in the Optionee's or Grantee's Agreement evidencing the
Option or Award as of the date of grant of such Option or Award provided that
such terms do not conflict with any of the terms of the Plan.

   14.  Adjustment Upon Changes in Capitalization.

   (a)  In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the maximum
number, exercise price and class of Shares or other stock or securities

                                      15

<PAGE>

with respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number, exercise price and class of Shares or other stock or securities
that may be issued upon exercise of Incentive Stock Options, (iii) the maximum
number, exercise price and class of Shares or other stock or securities with
respect to which Options or Awards may be granted to any Eligible Individual in
any one calendar year period, (iv) the number, exercise price and class of
Shares or other stock or securities which are subject to outstanding Options or
Awards granted under the Plan and (v) the Performance Objectives. As
appropriate, such adjustment may include substituting stock or securities of
another Company for the Shares covered by the original Option or Award.

   (b)  Any such adjustment in the Shares or other stock or securities subject
to: (i) outstanding Options or Awards that are intended to qualify as
Performance-Based Compensation shall be made in such a manner as not to
adversely affect the treatment of the Options or Awards as Performance-Based
Compensation, or (ii) outstanding Incentive Stock Options (including any
adjustments in the exercise price) shall be made, to the extent possible, in
such manner as not to constitute a modification as defined by Section 424(h)(3)
of the Code and as permitted by Sections 422 and 424 of the Code.

   (c)  If, by reason of a Change in Capitalization, a Grantee of an Award
shall be entitled to, or an Optionee shall be entitled to exercise an Option
with respect to, new, additional or different shares of stock or securities of
the Company or any other corporation, such new, additional or different shares
shall thereupon be subject to all of the conditions, restrictions and
performance criteria which were applicable to the Shares subject to the Award
or Option, as the case may be, prior to such Change in Capitalization.

   15.  Effect of Certain Transactions.

   Subject to Sections 7.4, 8.7, 9.4(b), 10.5(b) and 11.4 or as otherwise
provided in an Agreement, in the event of (a) the liquidation or dissolution of
the Company or (b) a merger or consolidation of the Company (a "Transaction"),
the Plan and the Options and Awards issued hereunder shall continue in effect
in accordance with their respective terms, except that following a Transaction
either (i) each outstanding Option or Award shall be treated as provided for in
the agreement entered into in connection with the Transaction or (ii) if not so
provided in such agreement, each Optionee and Grantee shall be entitled to
receive in respect of each Share subject to any outstanding Options or Awards,
as the case may be, upon exercise of any Option or payment or transfer in
respect of any Award, the same number and kind of stock, securities, cash,
property or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; provided, however, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Options and Awards prior to such Transaction. The treatment
of any Option or Award as provided in this Section 15 shall be conclusively
presumed to be appropriate for purposes of Section 11.

   16.  Interpretation.

   Following the required registration of any equity security of the Company
pursuant to Section 12 of the Exchange Act:

      (a)  The Plan is intended to comply with Rule 16b-3 promulgated under the
   Exchange Act and the Committee shall interpret and administer the provisions
   of the Plan or any Agreement in a manner consistent therewith. Any
   provisions inconsistent with such Rule shall be inoperative and shall not
   affect the validity of the Plan.

      (b)  Unless otherwise expressly stated in the relevant Agreement, each
   Option, and Performance Award granted under the Plan is intended to be
   Performance-Based Compensation. The Committee shall not be entitled to
   exercise any discretion otherwise authorized hereunder with respect to such
   Options or Awards if the ability to exercise such discretion or the exercise
   of such discretion itself would cause the compensation attributable to such
   Options or Awards to fail to qualify as Performance-Based Compensation.

                                      16

<PAGE>

17. Termination and Amendment of the Plan or Modification of Options and Awards.

   The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option or Award may be granted
thereafter; provided, however, that no Option or Award may be granted after the
first stockholders meeting after the Initial Public Offering unless the
stockholders have approved the Plan at such meeting. The Board may sooner
terminate the Plan and the Board may at any time and from time to time amend,
modify or suspend the Plan or any Agreement hereunder; provided, however, that:

      (a)  no such amendment, modification, suspension or termination shall:
   (i) impair or adversely alter any Options or Awards theretofore granted
   under the Plan, except with the consent of the Optionee or Grantee (unless
   expressly provided for and only to the extent provided for in Sections 7.4,
   8.7, 14(b)(ii), or 15, (ii) deprive any Optionee or Grantee of any Shares
   which he or she may have acquired through or as a result of the Plan, or
   (iii) constitute a repricing of any Option or substitute a new Option for a
   previous Option which substitution would constitute a repricing, and

      (b)  to the extent necessary under any applicable law, regulation or
   exchange requirement, no amendment shall be effective unless approved by the
   stockholders of the Company in accordance with applicable law, regulation or
   exchange requirement.

   18.  Non-Exclusivity of the Plan.

   The adoption of the Plan by the Board shall not be construed as amending,
modifying or rescinding any previously approved incentive arrangement or as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.

   19.  Limitation of Liability.

   As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:

      (a)  give any person any right to be granted an Option or Award other
   than at the sole discretion of the Committee;

      (b)  give any person any rights whatsoever with respect to Shares except
   as specifically provided in the Plan;

      (c)  limit in any way the right of the Company or any Subsidiary or
   Affiliate to terminate the employment of any person at any time; or

      (d)  be evidence of any agreement or understanding, expressed or implied,
   that the Company will employ any person at any particular rate of
   compensation or for any particular period of time.

   20.  Regulations and Other Approvals; Governing Law.

   20.1  Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of Delaware without giving effect to conflicts of laws
principles thereof.

   20.2  The obligation of the Company to sell or deliver Shares with respect
to Options and Awards granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.

   20.3  The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Individuals granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.

                                      17

<PAGE>

   20.4  Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or
payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.

   20.5  Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option or Award granted under the Plan, as a condition precedent to
receipt of such Shares, to represent and warrant to the Company in writing that
the Shares acquired by such individual are acquired without a view to any
distribution thereof and will not be sold or transferred other than pursuant to
an effective registration thereof under said Act or pursuant to an exemption
applicable under the Securities Act or the rules and regulations promulgated
thereunder. The certificates evidencing any of such Shares shall be
appropriately amended or have an appropriate legend placed thereon to reflect
their status as restricted securities as aforesaid.

   21.  Miscellaneous.

   21.1  Multiple Agreements.  The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same time, or at
some other time. The Committee may also grant more than one Option or Award to
a given Eligible Individual during the term of the Plan, either in addition to,
or in substitution for, one or more Options or Awards previously granted to
that Eligible Individual unless such substitution would constitute a repricing.

   21.2  Withholding of Taxes.

   (a)  At such times as an Optionee or Grantee recognizes taxable income in
connection with the receipt of Shares or cash hereunder (a "Taxable Event"),
the Optionee or Grantee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld by the Company in connection with the Taxable Event (the
"Withholding Taxes") prior to the issuance, or release from escrow, of such
Shares or the payment of such cash. The Company shall have the right to deduct
from any payment of cash to an Optionee or Grantee an amount equal to the
Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes.
The Committee may provide in the Agreement at the time of grant, or at any time
thereafter, that the Optionee or Grantee, in satisfaction of the obligation to
pay Withholding Taxes to the Company, may elect to have withheld a portion of
the Shares then issuable to him or her having an aggregate Fair Market Value
equal to the Withholding Taxes.

   (b)  If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and the regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal
executive office.

   21.3  Substitute Options and Awards.

   The Committee shall have the authority to substitute Options and Awards
under this Plan for any options and awards that are transferred to the Company
or an Affiliate whether such transfer occurs due to a Change in Control or any
other corporate action or transaction that the Committee deems appropriate for
such substitution. The number of Shares covered by such substitute Options or
Awards shall not reduce the aggregate number of

                                      18

<PAGE>

Shares available for grant under the Plan; and shall not be subject to the
other limitations set forth in Section 4.1 unless required by applicable law.
The date of grant of any replacement Option or Award shall relate back to the
initial option or award being assumed or replaced, and service with the
acquired business shall constitute service with the Company or its Affiliates
the date it was adopted.

   21.4  Effective Date.  The effective date of this Plan shall be the date it
was adopted by the Board; provided, however, that no Options or Awards shall be
granted hereunder unless and until the Company's stockholders have approved the
Plan, and no Incentive Stock Options may be granted hereunder unless approval
by the Company's Stockholders occurs within twelve (12) months of adoption of
the Plan by the Board.

                                      19

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