Document:

Exhibit 4.2

                                                                     Exhibit B

                             THE COASTAL CORPORATION
                      Notice and Election to Participate in
                    Deferred Compensation Plan for Directors
                         and Designation of Beneficiary

     1. Percentage Deferred. Pursuant to The Coastal Corporation Deferred
Compensation Plan for Directors (the "Plan"), I hereby elect to defer, as
provided in the Plan, the receipt of _____% of the Director's fees payable in
cash and earned by me in connection with the performance of my services as a
member of the Board of Directors of The Coastal Corporation beginning
________________, 199___. (Note: Changes may be made effective only as of
January 1 of a subsequent year, unless an exception described in Section 2 of
the Plan applies.)

     2. Deferral Account. Of the amounts I have elected to defer in Section 1
above, I elect to have such amounts credited to my Account(s) as follows:

        (a)         %    Account #1 (Interest Fixed Account) to be credited
                         with interest as provided in Section 3(a) of the Plan.

        (b)         %    Account #2 (Phantom Stock Account) to be credited in
                         the form of shares of Phantom Stock, and for each
                         share of Phantom Stock credited to my account at the
                         time of this deferral, I shall be granted an option to
                         purchase a share of Stock, as provided in Section 3(b)
                         of the Plan.

     3. Distribution Election. The proceeds of my Accounts under the Plan are to
be distributed following my termination of service as a member of the Board of
Directors of the Company as follows:

               As a single sum upon my termination of service;

               In two payments: 50% upon my termination of service, and the
               balance on the ____ day of __________________ in the calendar
               year following the calendar year of my termination of service;

     4. Beneficiary. I hereby designate ______________________________________
as my beneficiary to receive all amounts held for me under the Plan which have
not been paid to me in the event of my death. My Beneficiary's social security
number and address are as follows:

Beneficiary's Social Security Number

Beneficiary's Address

Participant                                                   Date

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                                                                    Exhibit 4.2

                             THE COASTAL CORPORATION

                            1997 DIRECTORS STOCK PLAN

                                        1

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                                                                    Exhibit 4.2

                             THE COASTAL CORPORATION

                            1997 DIRECTORS STOCK PLAN

                                TABLE OF CONTENTS

1    GENERAL......................................................    1
     1.1 Purpose..................................................    1
     1.2 Administration...........................................    1
     1.3 Shares Available Under the Plan..........................    1
     1.4 Authority to Grant Options...............................    1
     1.5 General Provisions of Options............................    2

2    ELIGIBILITY TO PARTICIPATE...................................    2

3    OPTIONS......................................................    2
     3.1 Option Term..............................................    2
     3.2 Vesting..................................................    3
     3.3 Option Price.............................................    3
     3.4 Exercise of Options......................................    3
     3.5 Payment of Option Price..................................    3
     3.6 Common Stock Certificates................................    4
     3.7 Nontransferability of Options............................    4
     3.8 No Rights as Shareholder.................................    4
     3.9 Tax Election.............................................    4

4    CHANGES IN THE COMPANY'S CAPITAL STRUCTURE...................    4

5    REQUIREMENTS OF LAW..........................................    6

6    AMENDMENT OR TERMINATION OF PLAN.............................    6

7    TAX WITHHOLDING..............................................    6

8    TENURE.......................................................    7

9    WRITTEN AGREEMENT............................................    7

10   INDEMNIFICATION OF COMMITTEE.................................    7

11   EFFECTIVE DATE OF PLAN.......................................    7

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                                                                     Exhibit 4.2

                             THE COASTAL CORPORATION

                            1997 DIRECTORS STOCK PLAN

1.   GENERAL

       1.1    Purpose. This 1997 Directors Stock Plan (the "Plan") of The
              Coastal Corporation (the "Company") for members of the board of
              directors (the "Board") of the Company who are not employees of
              the Company (i.e., nonemployee directors), is intended to advance
              the best interests of the Company by providing incentives which
              will attract, retain and reward nonemployee members of the Board
              by offering them an opportunity to have a greater proprietary
              interest which is more closely aligned with the Company and its
              shareholders' interest.

       1.2    Administration. The Plan shall be administered by a committee (the
              "Committee") consisting of not less than three members who shall
              be appointed from time to time by the Board. Members of the
              Committee shall be officers and/ or employees of the Company or
              any of its subsidiaries, none of whom shall be eligible to
              participate in the Plan. The Board shall have the power to add or
              remove members of the Committee from time to time, and to fill
              vacancies thereon arising by resignation, death, removal, or
              otherwise. The Committee shall designate a chairman from among its
              members, who shall preside at all of its meetings, and shall
              designate a secretary, without regard to whether that person is a
              member of the Committee, who shall keep the minutes of the
              proceedings and all records, documents, and data pertaining to its
              administration of the Plan. Meetings shall be held at such times
              and places as shall be determined by the Committee. A majority of
              the members of the Committee shall constitute a quorum for the
              transaction of business, and the vote of a majority of those
              members present at any meeting shall decide any question brought
              before that meeting. In addition, the Committee may take any
              action otherwise proper under the Plan by the affirmative vote,
              taken without a meeting, of a majority of its members. Any
              decision or determination reduced to writing and signed by a
              majority of the members shall be as effective as if it had been
              made by a majority vote at a meeting properly called and held. No
              member of the Committee shall be liable for any act or omission of
              any other member of the Committee or for any act or omission on
              his own part, including but not limited to the exercise of any
              power or discretion given to him under the Plan, except those
              resulting from his own gross negligence or willful misconduct. All
              questions of interpretation and application of the Plan, including
              those involving Options (as defined herein) shall be subject to
              the determination of the Committee. The actions of the Committee
              in exercising all of the rights, powers and authorities set out in
              this Plan, when performed in good faith and in its sole judgment,
              shall be final, conclusive, and binding on the parties.

       1.3    Shares Available Under the Plan. All shares available under the
              Plan for the grant of Options shall be shares of the Company's
              Common Stock, $ .33 1/3 par value (the "Common Stock"). The total
              number of shares of Common Stock available under the Plan shall
              not exceed in the aggregate 250,000 shares; provided, that the
              class and aggregate number of shares which may be subject to grant
              hereunder shall be subject to adjustment in accordance with the
              provisions of Section 4 hereof. Such shares may be treasury shares
              or authorized but unissued shares.

              In the event that any outstanding Option for any reason shall
              expire or terminate by reason of the death or retirement or
              termination from the Board of the Participant, the surrender of
              any Option, or any other

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                                                                     Exhibit 4.2

              cause, the shares of Common Stock allocable to the unexercised
              portion of that Option may again be available under the Plan.

       1.4    Authority to Grant Options. Subject to the provisions of the Plan,
              the Board shall grant to Participants (as defined herein) an
              option which is the number of whole shares of Common Stock which
              have an equivalent value of Twenty-Five Thousand Dollars ($25,000)
              on the date of the grant ("Option"). Options shall be granted on
              the date of adoption of the Plan and thereafter on the date of the
              Company's annual shareholder meeting, except that a director who
              is newly appointed to the Board after the date of the annual
              shareholder meeting shall be entitled to the grant of an Option on
              the effective date of his appointment to the Board and for former
              employee directors who become Participants (as defined below),
              Options shall be granted on the first day of the month following
              the next release of the Company's quarterly or annual earnings, as
              the case may be; provided, however, a Participant shall be granted
              only one Option in a calendar year. The value of the Option on the
              date of the grant shall be determined using the Black-Scholes
              option pricing model (as defined herein) and the number of shares
              to be granted in the Option shall be rounded up to the nearest
              whole share.

       1.5    General Provisions of Options. In addition to those specifically
              provided for under the Plan, Options under the Plan may also be
              subject to such other provisions as the Board determines
              appropriate, including without limitation, (i) provisions to
              comply with federal and state securities laws or (ii) any
              understanding as to a Participant's service on the Board.

              1.5.1        Whole Shares.  Fulfillment of any vesting
                           requirements of an Option shall be in whole shares
                           only and any shares which remain unvested due to
                           vesting of whole shares shall vest at the end of the
                           required vesting period.

              1.5.2        Fair Market Value. For all purposes of the Plan,
                           "Fair Market Value" of a share of Common Stock as of
                           any particular date shall mean the average of the
                           high and low sales price of a share of Common Stock
                           on that date as reported by the principal national
                           securities exchange on which the Common Stock is then
                           listed, if the Common Stock is then listed on a
                           national securities exchange, or the average of the
                           bid and asked price of a share of Common Stock on
                           that date as reported in the NASDAQ listing, if the
                           Common Stock is not then listed on a national
                           securities exchange, provided that if no closing
                           price or quotes are reported on that date or, if in
                           the discretion of the Committee, another means of
                           determining the fair market value of a share of
                           Common Stock at that date shall be necessary or
                           advisable, the Committee may provide for another
                           means of determining fair market value.

              1.5.3        Black-Scholes Option Pricing Model. For purposes of
                           the Plan, the "Black-Scholes option pricing model" is
                           a mathematical formula, first published in 1973,
                           which was developed as a means of determining a value
                           for publicly-traded options with very short terms
                           (relative to most executive options). The primary
                           inputs in the Black-Scholes method are stock price
                           volatility, dividend yield, the option term and the
                           risk-free rate.

              1.5.4        "Code" shall mean the Internal Revenue Code of 1986,
                           as amended from time to time, or such successor or
                           replacement statute.

2.     ELIGIBILITY TO PARTICIPATE.  Eligible participants shall include all
       members of the Board who are not employed by the Company or any of its
       subsidiaries ("nonemployee directors").  Additionally, directors who are
       former executives of the Company shall be eligible to participate as of
       the first day of the month following the next release of quarterly or
       annual earnings, as the case may be, after the termination of employment
       with the

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                                                                     Exhibit 4.2

       Company or any of its subsidiaries ("former employee directors"). The
       nonemployee directors and the former employee directors comprise the
       "Participants" under the Plan.

3.     OPTIONS.  The Options granted hereunder would be nonqualified stock
       options, subject to the general provisions of the Plan and the following
       specific rules:

       3.1    Option Term. The Options shall expire at the earliest of the end
              of (i) the five-year period commencing with the date of the grant,
              (ii) the three-year period commencing with the date of the
              Participant's retirement from the Board or termination of Board
              membership, or (iii) the one-year period commencing with the date
              of death of the Participant.

       3.2    Vesting. Each Participant shall be entitled to a nonforfeitable
              right of a thirty-three and one/third percent (331/3%) of his
              Option upon completion of each year of service on the Board,
              commencing on the date that is one year from the date of the grant
              of the Option (i.e., any Option shall be fully vested on the third
              anniversary of the date of the grant of the Option). Vesting shall
              cease upon a Participant's retirement from the Board or
              termination of Board membership.

       3.3    Option Price. The price at which shares may be purchased pursuant
              to an Option shall be 100 percent of the Fair Market Value of the
              shares of Common Stock on the date the Option is granted (the
              "Option Price").

       3.4    Exercise of Options. Upon completion of the vesting requirement, a
              Participant may exercise an Option by delivering to the Company a
              written notice stating (i) that the Participant wishes to exercise
              the Option on the date notice is delivered, (ii) the number of
              shares of Common Stock with respect to which the Option is to be
              exercised, (iii) the address to which the certificate representing
              the shares of Common Stock should be mailed, and (iv) the social
              security number of the Participant.

              In order to be effective, the written notice shall be accompanied
              by (i) payment of the Option Price and (ii) payment of an amount
              of money necessary to satisfy the withholding tax liability
              imposed on the Company, if any, that may result from the exercise
              of the Option.

       3.5    Payment of Option Price.

              3.5.1        Payment of Option Price. Payment for each exercise
                           shall be made (i) by cash or by check drawn on a
                           national banking association and payable to the order
                           of the Company in United States dollars, (ii) or to
                           the extent permitted by law, in Common Stock valued
                           at its Fair Market Value on the date of exercise, or
                           (iii) any other manner acceptable to the Committee.

                           Notwithstanding the provisions of this Section, the
                           Committee, in its sole discretion, may refuse to
                           accept shares of Common Stock in payment of the
                           Option Price of the shares of Common Stock with
                           respect to which the Option is to be exercised and,
                           in that event, any certificates representing shares
                           of Common Stock that were received by the Company
                           with written notice shall be returned to the
                           Participant, together with notice by the Company to
                           the Participant of the refusal of the Committee to
                           accept the shares of Common Stock. If, at the
                           expiration of seven business days after the delivery
                           to the Participant of written notice from the Company
                           that it will not accept shares of Common Stock in
                           payment of the Option Price, the Participant shall
                           not have delivered to the Company a check or money
                           order drawn on a national banking association and
                           payable to the order of the Company in an amount, in

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                                                                     Exhibit 4.2

                           United States dollars, equal to the Option Price of
                           the shares of Common Stock with respect to which such
                           Option is to be exercised, plus any applicable
                           withholding tax liability, the written notice from
                           the Participant to the Company shall be ineffective
                           to exercise the Option.

              3.5.2        Payment in Common Stock. Any payment made in Common
                           Stock, shall be accomplished by delivering to the
                           Company (i) certificates registered in the name of
                           the Participant that represent a number of shares of
                           Common Stock legally and beneficially owned by the
                           Participant (free of all liens, claims and
                           encumbrances of every kind) and having a Fair Market
                           Value, on the date of receipt by the Company of
                           written notice, that is not greater than the Option
                           Price of the shares of Common Stock with respect to
                           which the Option is to be exercised, the certificates
                           to be accompanied by stock powers duly endorsed in
                           blank by the record holder of the shares of Common
                           Stock represented by certificates (or in lieu of such
                           certificates, other arrangements for the transfer of
                           shares to the Company which are satisfactory to the
                           Company), and cash or a check drawn on a national
                           banking association and payable to the order of the
                           Company in an amount, in United States dollars, equal
                           to the amount of the difference between the Option
                           Price and the Fair Market Value, plus (ii) the amount
                           of money, in a form acceptable to the Committee,
                           necessary to satisfy the withholding tax liability
                           imposed on the Company, if any, that may result from
                           the exercise of the Option, unless the Participant
                           elects to satisfy such withholding tax liability
                           pursuant to Section 3.5.3.

              3.5.3        Withholding Tax. In lieu of requiring the Participant
                           to make a payment to the Company in an amount related
                           to the withholding tax requirement, the Committee
                           may, in its discretion, provide that, at the
                           Participant's election, the tax withholding
                           obligation imposed on the Company shall be satisfied
                           by the Participant's delivering to the Company shares
                           of Common Stock, the value of which is equal to the
                           tax withholding obligation, with such shares valued
                           at their Fair Market Value as of the date of delivery
                           of such shares by the Participant to the Company.

       3.6    Common Stock Certificates. As promptly as practicable after the
              receipt by the Company of (i) the written notice from the
              Participant of the exercise of the Option, (ii) payment of the
              Option Price of the shares of Common Stock with respect to which
              the Option is to be exercised, and (iii) payment of any
              withholding tax liability imposed on the Company that may result
              from the exercise of the Option, the Company shall deliver to the
              Participant a certificate representing the number of shares of
              Common Stock with respect to which the Option has been exercised.
              The certificate shall be registered in the name of the Participant
              and delivery shall be considered to have been made when the
              certificate shall have been mailed, postage prepaid, to the
              Participant at the address specified for that purpose in written
              notice from the Participant to the Company.

       3.7    Nontransferability of Options. Options shall not be transferable
              by the Participant other than by will or under the laws of descent
              and distribution, except for gifts to members of the Participant's
              family, and shall be exercisable, during the Participant's
              lifetime, only by the Participant or the family member to whom the
              Option has been transferred.

       3.8    No Rights as Shareholder. No Participant shall have rights as a
              shareholder with respect to shares covered by an Option until the
              date of issuance of a stock certificate for the shares; and,
              except as otherwise provided in Section 4, no adjustment for
              dividends, or otherwise, shall be made if the record date therefor
              is prior to the date of issuance of the certificate.

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                                                                     Exhibit 4.2

       3.9    Tax Election.  Any Participant shall provide prior written notice
              to the Company if the Participant makes an election pursuant to
              Section 83(b) of the Code.

4.     CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of outstanding
       Options shall not affect in any way the right or power of the Company or
       its shareholders to make or authorize any or all adjustments,
       recapitalizations, reorganizations or other changes in the Company's
       capital structure or its business, or any merger or consolidation of the
       Company, or any issue of bonds, debentures, preferred or prior preference
       stock ahead of or affecting the Common Stock or the rights thereof, or
       the dissolution or liquidation of the Company, or any sale or transfer of
       all or any part of its assets or business, or any other corporate act or
       proceeding, whether of a similar character or otherwise.

       If the Company shall effect a subdivision or consolidation of shares or
       other capital readjustment, the payment of a dividend in capital stock or
       other equity securities of the Company on its Common Stock or other
       increase or reduction of the number of shares of the Common Stock
       outstanding, without receiving consideration therefor in money, services,
       or property, or the reclassification of its Common Stock, in whole or in
       part, into other equity securities of the Company, then (a) the number,
       class and per share price of shares of Common Stock subject to
       outstanding Options hereunder shall be appropriately adjusted (or in the
       case of the issuance of other equity securities as a dividend on, or in a
       reclassification of, the Common Stock, the Options shall extend to such
       other securities) in a manner so as to entitle a Participant to receive,
       upon exercise of an Option, for the same aggregate cash consideration,
       the same total number and class or classes of shares (or in the case of a
       dividend of, or reclassification into, other equity securities, those
       other securities) he would have held after adjustment if he had exercised
       his Option immediately prior to the event requiring the adjustment, or,
       if applicable, the record date for determining shareholders to be
       affected by the adjustment; and (b) the number and class of shares then
       reserved for issuance under the Plan (or in the case of a dividend of, or
       reclassification into, other equity securities, those other securities)
       shall be adjusted by substituting for the total number and class of
       shares of stock then reserved, the number and class or classes of shares
       of stock (or in the case of a dividend of, or reclassification into,
       other equity securities, those other securities) that would have been
       received by the owner of an equal number of outstanding shares of Common
       Stock as a result of the event requiring the adjustment. Comparable
       rights shall accrue to each Participant in the event of successive
       subdivisions, consolidations, capital adjustments, dividends or
       reclassifications of the character described above.

       After a merger of one or more corporations into the Company, after any
       consolidation of the Company and any one or more corporations, or after
       any other corporate transaction described in Section 424(a) of the Code
       in which the Company shall be the surviving corporation, each
       Participant, at no additional cost, shall be entitled to receive (subject
       to any required action by shareholders), upon any exercise of his Option,
       in lieu of the number of shares as to which the Option shall then be
       exercisable, the number and class of shares of stock or other securities
       to which the holder would have been entitled pursuant to the terms of the
       agreement of merger or consolidation, if, immediately prior to such
       merger or consolidation, such holder had been the holder of a number of
       shares of Common Stock equal to the number of shares as to which the
       Option shall then be exercised and, if as a result of the merger,
       consolidation or other transaction, the holders of Common Stock are not
       entitled to receive any shares of Common Stock pursuant to the terms
       thereof, each Participant, at no additional cost, shall be entitled to
       receive, upon exercise of his Option, other assets and property,
       including cash, to which he would have been entitled if at the time of
       such merger, consolidation or other transaction he had been the holder of
       the number of shares of Common Stock equal to the number of shares as to
       which the Option shall then be exercised. Comparable rights shall accrue
       to each Participant in the event of successive mergers or consolidations
       of the character described above.

       If the Company is merged into or consolidated with another corporation
       under circumstances where the Company is not the surviving corporation,
       or if the Company is liquidated, or sells or otherwise disposes of
       substantially all its assets to another corporation while unexercised
       Options remain outstanding under the Plan, (i) subject to

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                                                                     Exhibit 4.2

       the provisions of clause (iii) below, after the effective date of such
       merger, consolidation or sale, as the case may be, each holder of an
       outstanding Option shall be entitled, upon exercise of such Option, to
       receive in lieu of shares of Common Stock, shares of such stock or other
       securities as the holders of shares of Common Stock received pursuant to
       the terms of the merger, consolidation or sale; (ii) the Board may waive
       any limitations set forth in or imposed pursuant to Section 3 hereof so
       that all Options from and after a date prior to the effective date of
       such merger, consolidation, liquidation or sale, as the case may be,
       specified by the Board shall be exercisable in full; and (iii) all
       outstanding Options may be canceled by the Board as of the effective date
       of any such merger, consolidation, liquidation or sale, provided that (a)
       notice of such cancellation shall be given to each holder of an Option
       and (b) each holder of an Option shall have the right to exercise such
       Option in full (without regard to any limitations set forth in or imposed
       pursuant to Section 3 hereof) during a 30-day period preceding the
       effective date of such merger, consolidation, liquidation, sale or
       acquisition.

       Except as hereinbefore expressly provided, the issue by the Company of
       shares of stock of any class, or securities convertible into shares of
       stock of any class, for cash or property, or for labor or services either
       upon direct sale or upon the exercise of rights or warrants to subscribe
       therefor, or upon conversion of shares or obligations of the Company
       convertible into such shares or other securities, shall not affect, and
       no adjustment by reason thereof shall be made with respect to, the number
       or price of shares of Common Stock then subject to outstanding Options.

5.     REQUIREMENTS OF LAW. The Company shall not be required to sell or issue
       any shares under any Option if the issuance of those shares would
       constitute a violation by the Participant or the Company of any
       provisions of any law or regulation of any governmental authority. Each
       Option granted under the Plan shall be subject to the requirements that,
       if at any time the Board or the Committee shall determine that the
       listing, registration or qualification of the shares subject thereto upon
       any securities exchange or under any state or federal law of the United
       States or of any other country or governmental subdivision thereof, or
       the consent or approval of any governmental regulatory body, or
       investment or other representations, are necessary or desirable in
       connection with the issue or purchase of shares subject thereto, no
       Option may be exercised in whole or in part, unless the listing,
       registration, qualification, consent, approval or representations shall
       have been effected or obtained free of any conditions not acceptable to
       the Board. If required at any time by the Board or the Committee, an
       Option may not be exercised until the Participant has delivered an
       investment letter to the Company. In addition, specifically in connection
       with the Securities Act of 1933, as currently in effect or as hereafter
       amended, (the "1933 Act"), upon exercise of any Option, the Company shall
       not be required to issue the underlying shares unless the Committee has
       received evidence satisfactory to it to the effect that the holder of the
       Option will not transfer the shares except pursuant to a registration
       statement in effect under the 1933 Act or unless an opinion of counsel
       satisfactory to the Committee has been received by the Company to the
       effect that registration is not required. Any determination in this
       connection by the Committee shall be final, binding and conclusive. In
       the event the shares issuable on exercise of an Option are not registered
       under the 1933 Act, the Company may imprint on the certificate for the
       shares the following legend or any other legend which counsel for the
       Company considers necessary or advisable to comply with the 1933 Act:

                  "The shares of stock represented by this certificate have not
                  been registered under the Securities Act of 1933 or under the
                  securities laws of any state and may not be sold or
                  transferred except upon such registration or upon receipt by
                  the Corporation of an opinion of counsel satisfactory to the
                  Corporation, in form and substance satisfactory to the
                  Corporation, that registration is not required for such sale
                  or transfer."

       The Company may, but shall not be obligated to, register any securities
       covered hereby pursuant to the 1933 Act and in the event any shares are
       registered, the Company may remove any legend on certificates
       representing such registered shares. The Company shall not be obligated
       to take any other affirmative action in order to cause the

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                                                                     Exhibit 4.2

       exercise of an Option or the issuance of shares pursuant thereto to
       comply with any law or regulation of any governmental authority.

6.     AMENDMENT OR TERMINATION OF PLAN. The Board may modify, revise or
       terminate the Plan at any time and from time to time; provided, however,
       that without the further approval by the affirmative vote of a majority
       of the votes cast attributable to shares present in person or by proxy
       and entitled to vote at a meeting of shareholders, or if the provisions
       of the corporate charter, by-laws or applicable state law prescribes a
       greater degree of shareholder approval for this action, without the
       degree of shareholder approval thus required, the Board may not (i)
       change the aggregate number of shares which may be issued under Options
       pursuant to the provisions of the Plan, (ii) extend the term during which
       an Option may be exercised or granted or the termination date of the
       Plan, (iii) change the eligibility to receive Options under the Plan, or
       (iv) reduce the Option Price, unless, in each such case, the Board shall
       obtain an opinion of legal counsel to the effect that shareholder
       approval of the amendment is not required (a) by law, (b) by the
       applicable rules and regulations of, or any agreement with, any national
       securities exchange on which the Common Stock is then listed or if the
       Common Stock is not so listed, the rules and regulations, or any
       agreement with, the National Association of Securities Dealers, Inc., and
       (c) in order to make available to the Participant with respect to any
       Option granted under the Plan, the benefits of Rule 16b-3 of the Rules
       and Regulations under the Exchange Act, or any similar or successor rule.

7.     TAX WITHHOLDING. To the extent not otherwise provided for herein, the
       Company shall be entitled to deduct from compensation payable to each
       Participant any sums required by federal, state, or local tax law to be
       withheld with respect to the grant, exercise, or vesting, as appropriate,
       of an Option. In the alternative, the Company may require the Participant
       (or other person exercising the Option) to pay the sum directly to the
       Company. The Company shall have no obligation upon exercise of any Option
       until payment has been received. The Company shall not be obligated to
       advise a Participant of the existence of the tax or the amount which the
       Company will be required to withhold.

8.     TENURE.  A Participant's right, if any to continue to serve on the Board
       shall not be enlarged or otherwise affected by his designation as a
       Participant under the Plan.

9.     WRITTEN AGREEMENT.  Each Option granted hereunder shall be embodied in a
       written agreement, which shall be subject to the terms and conditions
       prescribed herein, and shall be signed by the Participant and by an
       appropriate officer of the Company for and in the name and on behalf of
       the Company.

10.    INDEMNIFICATION OF COMMITTEE. The Company shall, to the fullest extent
       provided by law, indemnify each present and future member of the
       Committee against, and each member of the Committee shall be entitled
       without further act on his part to indemnity from the Company for all
       expenses (including the amount of judgments and the amount of approved
       settlements made with a view to the curtailment of costs of litigation,
       other than amounts paid to the Company itself) reasonably incurred by him
       in connection with or arising out of any action, suit or proceeding in
       which he may be involved by reason of his being or having been a member
       of the Committee, whether or not he continues to be a member of the
       Committee at the time of incurring such expenses; provided, however, that
       such indemnity shall not include any expenses incurred by any such member
       of the Committee (i) in respect of matters as to which he shall be
       finally adjudged in any such action, suit or proceeding to have been
       guilty of gross negligence or willful misconduct in the performance of
       his duty as such member of the Committee, or (ii) in respect of any
       matter in which any settlement is effected, to an amount in excess of the
       amount approved by the Company on the advice of its legal counsel; and
       provided further, that no right of indemnification under the provisions
       set forth herein shall be available to, or enforceable by, any such
       member of the Committee unless, within sixty (60) days after institution
       of any such action, suit or proceeding, he shall have offered the
       Company, in writing, the opportunity to handle and defend same at its
       own expense. The foregoing right of indemnification shall inure to the
       benefit of the heirs, executors or administrators of each

                                        7

<PAGE>

                                                                     Exhibit 4.2

       member of the Committee and shall be in addition to all other rights to
       which the member of the Committee may be entitled as a matter of law,
       contract, or otherwise.

11.    EFFECTIVE DATE OF PLAN.  The Plan shall become effective and shall be
       deemed to have been adopted on June 5 , 1997.  No Option shall be granted
       pursuant to the Plan after June 4, 2007.

                                        8MAGNUM HUNTER RESOURCES, INC.
                             STOCK OPTION AGREEMENT

     THIS EMPLOYEE STOCK OPTION  AGREEMENT (the  "Agreement")  is made as of the
11th day of December  1997,  between  Magnum  Hunter  Resources,  Inc., a Nevada
corporation   (hereinafter   referred  to  as  the  "Company"),   and  _________
(hereinafter referred to as "Optionee").

                                 R E C I T A L S
                             ---------------------

     (a) The Company  grants a stock option to key  employees  and  directors to
encourage  such  persons to continue to work for the Company and obtain a larger
ownership interest in the Company.

     (b) The Optionee is an employee  and/or a director of the Company,  and the
Company and the Optionee desire that Optionee be granted a stock option.

     Now,  Therefore,  for and in consideration of the foregoing  premises,  the
mutual   covenants   herein   contained,   and  for  other  good  and   valuable
consideration,  the receipt of which is hereby acknowledged, the Company and the
Optionee agree as follows:

     1. Grant of Option.  The  Company  hereby  grants to  Optionee an option to
purchase up to _____ shares (the "Shares") of the Company's Common Stock, $0.002
par  value  ("Common  Stock"),  at a  purchase  price  of $___  per  share  (the
"Option").

     2. Incentive Stock Option Status.

     (a) The Option granted hereby is intended to be an incentive  stock option.
Optionee  understands  that in order for the Option granted herein to qualify as
an incentive stock option, he must hold the shares acquired from the exercise of
such  Option  for a period of two years from the date of grant of the Option and
one year from the date of exercise of such Option.  Optionee further understands
that he must  continue  to be an employee or director of the Company or a parent
or  subsidiary  of the Company  until the earlier of (i) the date which is three
months before the date of exercise of the Option or (ii) the  termination of the
Option as provided in Section 3(d) or (e) below.

     (b) Optionee  shall notify the Company if he makes any  disposition  of any
shares acquired hereunder prior to the time specified by paragraph (a).

     3. Exercise of Option.

     (a) Subject to Section 4 below,  Optionee  shall have the right to purchase
any or all of the Shares at any time prior to  December  11,  2002,  unless this
Option is sooner terminated or expires as provided in this Agreement.

     (b) Subject to any required action by the  stockholders of the Company,  if
the Company shall be the surviving  corporation in any merger,  consolidation or
reorganization,  the Option granted  hereunder shall pertain to and apply to the
securities  to which a holder of the  number of shares of stock  subject  to the
Option would have been entitled.

     (c) If the Company  shall not be the surviving  corporation  in any merger,
consolidation or  reorganization,  then the Board of Directors of the Company or
the Board of  Directors  of any  corporation  assuming  the  obligations  of the
Company,  shall,  as  to  the  unexercised  portion  of  the  Option,  (i)  make
appropriate  provision for the protection of such Option by the  substitution on
an equitable basis of appropriate  securities of the Company,  or of the merged,
consolidated  or otherwise  reorganized  corporation,  which will be issuable in
respect of the unexercised  portion of the Option or (ii)  immediately  prior to
such merger,  consolidation or  reorganization,  the unexercised  portion of the
Option, whether or not exercisable, shall immediately be exercisable.

<PAGE>

     (d) Except as provided in paragraph (e) below,  this Option shall terminate
with  respect  to any  unexercised  portion  of the  Option and may no longer be
exercised on the date the  Optionee  ceases to be an employee or director of the
Company or any subsidiary or affiliate of the Company.

     (e) If the Optionee dies or becomes totally and permanently  disabled prior
to the  expiration  of this  Option,  the  Optionee  or his  representative,  as
applicable,  may exercise  the Option with respect to any shares which  Optionee
could have purchased on his date of death or total and permanent disability. The
exercise of this Option under this paragraph (e) must occur prior to the earlier
of  twelve  (12)  months  after  the  Optionee's  death or  disability  or,  the
expiration of the term of this Option under paragraph (a).

     4. Vesting of Options.  The Option granted  hereunder shall be fully vested
and exercisable  upon execution of this Agreement.  No part of the Option may be
exercised after the date set forth in Section 3.

     5. Manner of Exercise and Payment for Stock Upon  Exercise of Option.  Each
exercise  of this  Option  or a part of this  Option  shall be made by notice in
writing to the  Company,  specifying  the number of shares to be  purchased  and
accompanied by a certified or cashier's  check in payment in full for the shares
then being  purchased.  The Company shall cause  certificates  representing  the
shares  so  purchased  to be  issued  to the  Optionee  as soon  as  practicable
thereafter, subject to compliance with all laws which affect such issuance.

     6.  Nontransferability of Option. This Option may not be transferred either
voluntarily or involuntarily  except as provided in Section 3(e). The Option may
be exercised only by Optionee during his lifetime.

     7. No Rights Prior to Exercise of Option.  The Optionee shall not be deemed
to be a holder of any shares  pursuant  to the  exercise  of this  Option  until
payment of the option  price by him and delivery of a stock  certificate  to him
for such shares.  No adjustment  shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is delivered.

     8.  Restriction of Issuance of Shares.  This Option shall be subject to the
requirement  that if any  time the  Board  of  Directors  of the  Company  shall
determine,   in  its  sole  discretion,   that  the  listing,   registration  or
qualification of the Common Stock under any federal or state law, or the consent
or approval of any regulatory  agency,  is necessary or desirable as a condition
of, or in connection  with, the purchase or issuance of Common Stock  hereunder,
this  Option  may not be  exercised  in whole or in part  unless  such  listing,
registration,  qualification,  consent or approval  shall have been  effected or
obtained free of any conditions not acceptable to the Board of Directors.

     9. Registration. The Company shall endeavor, but shall not be obligated, to
register  the Common  Stock to be issued upon  exercise of the Option  under the
Securities Act of 1933, as amended, as well as any applicable state statutes. In
the event that the Common Stock to be issued upon  exercise of the Option is not
so registered,  the Company may, as a condition precedent to the exercise of the
Option,  require  from the  Optionee  (or, in the event of his death,  his legal
heirs, legatees or distributees) such written representations as, in the opinion
of counsel for the Company,  may be  necessary to ensure that such  exercise and
subsequent  disposition  will not involve a violation of the  Securities  Act of
1933, as amended, as well as any applicable state statutes.

     10. Amendment.  This Agreement may be amended only in a writing executed by
both  parties  hereto.  If  additional  options  are granted to  Optionee,  such
additional  options  may be made  subject to the terms of this  Agreement  by an
addendum  hereto.   Any  restrictions  on  shares  purchased  pursuant  to  such
additional options shall be effective beginning on the date of execution of such
addendum unless otherwise provided therein.

     11. Governing Law; Venue. This Agreement shall be governed by and construed
in  accordance  with  the laws of the  State of  Texas.  In the  event  that any
judicial proceedings are instituted concerning the interpretation or enforcement
of this Agreement,  exclusive venue over such proceedings shall be vested in the
Federal and State Courts located in Dallas County, Texas.

<PAGE>

     12. Binding Effect.  The provisions of this Agreement shall be binding upon
the  Optionee  and upon his heirs,  executors,  administrators,  successors  and
assigns.  The Board of Directors'  interpretation or resolution of any conflicts
or inconsistencies,  application of provisions and determination in the event of
omission, shall be binding and conclusive upon the Optionee.

     13. Notice. Any notices required or permitted to be given under this Option
by the Company or the Board of Directors  shall be deemed  delivered when placed
in the United States mails,  postage  prepaid,  in an envelope  addressed to the
last address of the  Optionee  which was  communicated  in writing to the person
giving the notice.

     14. Severability. In the event that any provisions of this Option shall for
any  reason be held to be  invalid,  such  holding  shall not  affect  any other
provision hereof, and the remaining provisions of this option shall be construed
as if such invalid provision had not been contained in the Option.

     15. Gender and Number.  As used in this  Agreement,  the  masculine  gender
shall  include the  feminine  gender and the singular  number shall  include the
plural number and vice versa.

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

                                           MAGNUM HUNTER RESOURCES, INC.

                                           By: _______________________________
                                               Gary C. Evans, President and CEO

                                           OPTIONEE:

                                           -----------------------------------
                                           Employee
<PAGE>
                                   EXHIBIT A
<TABLE>
<CAPTION>
<S>             <C>                     <C>             <C>             <C>             <C>
                                        Date of          Date of        Exercise
Year            Name                     Issue          Expiration       Price          Amount
------------------------------------------------------------------------------------------------
97              David Keglovits         12/11/97        12/11/02        3.75000         20,000
97              Frances Evans           12/11/97        12/11/02        3.75000         20,000
97              Ursula Kuehn            12/11/97        12/11/02        3.75000          7,000
97              Nickie Lutz             12/11/97        12/11/02        3.75000          2,500
97              Bobby Jackson           12/11/97        12/11/02        3.75000         10,000
97              Karen Ventrca           12/11/97        12/11/02        3.75000          3,000
97              Carl Adams              12/11/97        12/11/02        3.75000          5,000
97              Gayle Arnold            12/11/97        12/11/02        3.75000          7,500
97              Mark Caldwell           12/11/97        12/11/02        3.75000          3,000
97              Clifton Edwards         12/11/97        12/11/02        3.75000          3,000
97              Michael Little          12/11/97        12/11/02        3.75000          3,000
97              Jerry McCarty           12/11/97        12/11/02        3.75000         10,000
97              Johnny Noble            12/11/97        12/11/02        3.75000          3,000
97              Vanessa Perkins         12/11/97        12/11/02        3.75000          2,000
97              Rex Reid                12/11/97        12/11/02        3.75000          3,000
97              Reginald Reston         12/11/97        12/11/02        3.75000         10,000
97              Rhodna Sanders          12/11/97        12/11/02        3.75000          3,000
97              Ricky Shreffler         12/11/97        12/11/02        3.75000          3,000
97              Shaun Sanders           12/11/97        12/11/02        3.75000          3,000
97              Brandon Scott           12/11/97        12/11/02        3.75000          5,000
97              Russell Ward            12/11/97        12/11/02        3.75000          3,000
97              Dianne Calogero         12/11/97        12/11/02        3.75000          6,000
97              John Cain               12/11/97        12/11/02        3.75000          8,000
97              Dale Davis              12/11/97        12/11/02        3.75000          3,000
97              Britt Long              12/11/97        12/11/02        3.75000          5,000
97              Ronald Woodward         12/11/97        12/11/02        3.75000          3,000
97              Danny Emerson           12/11/97        12/11/02        3.75000          3,000
97              Jaime Johnson           12/11/97        12/11/02        3.75000          4,000
97              Zeno Farris             12/11/97        12/11/02        3.75000          4,000
97              Vaughn Johnson          12/11/97        12/11/02        3.75000          7,500
97              Serene Canettes         12/11/97        12/11/02        3.75000          1,000
97              Diane Smith             12/11/97        12/11/02        3.75000          2,500
97              Karen Burnap            12/11/97        12/11/02        3.75000          2,500
97              Jim Debock              12/11/97        12/11/02        3.75000          2,000
97              Pat Landry              12/11/97        12/11/02        3.75000          2,000
97              Kevin Legrand           12/11/97        12/11/02        3.75000          3,500
97              Susan Morse             12/11/97        12/11/02        3.75000          2,500
97              Annette Martinez        12/11/97        12/11/02        3.75000          3,500
97              Hen-Chen Lee            12/11/97        12/11/02        3.75000          8,000
</TABLE>

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