Document:

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                                                                   Exhibit 10.20

                     PLAINS EXPLORATION & PRODUCTION COMPANY
                        RESTRICTED STOCK AWARD AGREEMENT

     This Restricted Stock Award Agreement (the "Agreement"), executed as of the
25th day of September, 2002, by and between Plains Exploration & Production
Company (the "Company") and Timothy T. Stephens (the "Grantee"), evidences the
grant by the Company of a stock award (the "Award") of restricted shares of
common stock, $.01 par value, of the Company (the "Shares") to the Grantee, to
be effective on the effective date of the initial public offering of the
Company's common stock in the public securities market (the "Grant Date"), and
the Grantee's acceptance of the Award in accordance with the provisions of the
Company's 2002 Stock Incentive Plan, as amended or restated from time to time
(the "Plan"). The Company and the Grantee agree as follows:

     1.   Basis for Award. This Award is made under the Plan pursuant to Section
9 thereof for services to be rendered to the Company by the Grantee and for
consideration the Company received as a result of Grantee entering into an
employment agreement with the Company.

     2.   Stock Awarded.

          (a)  The Company hereby awards to the Grantee, in the aggregate,
30,000 Shares ("Restricted Stock"), which shall be subject to the restrictions
and conditions set forth in the Plan and in this Agreement.

          (b)  Each certificate issued in respect of the Restricted Stock shall
be registered in the Grantee's name and deposited by him, together with a share
power endorsed in blank, with the Company and shall bear the following (or a
similar) legend:

          "THE TRANSFERABILITY OF THIS CERTIFICATE AND THE COMMON
          STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
          CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE
          RESTRICTED STOCK AWARD AGREEMENT EXECUTED ON SEPTEMBER __,
          2002, ENTERED INTO BETWEEN THE REGISTERED OWNER AND PLAINS
          EXPLORATION & PRODUCTION COMPANY"

At the expiration of the restrictions, the Company shall redeliver to the
Grantee (or his legal representative, beneficiary or heir) certificates for the
Shares deposited with it without any legend except as otherwise provided by the
Plan, this Agreement or as otherwise required by applicable law. The Grantee
shall have the right to receive dividends on and to vote the Restricted Stock
while it is held in custody except as otherwise provided by the Plan.
Notwithstanding the foregoing, 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.

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          (c)  Except as provided in the Plan or this Agreement, the Restricted
Stock shall be forfeited by the Grantee and all of the Grantee's rights to such
stock shall immediately terminate without any payment or consideration by the
Company in the event of any sale, assignment, transfer, hypothecation, pledge or
other alienation of such Restricted Stock made or attempted by or on behalf of
the Grantee, whether voluntary or involuntary, and if involuntary whether by
process of law in any civil or criminal suit, action or proceeding, whether in
the nature of an insolvency or bankruptcy proceeding or otherwise, without the
written consent of the Committee, excluding the Grantee if he so serves on the
Committee.

     3.   Vesting. The restrictions described in Section 2 of this Agreement
will lapse with respect to one-third (1/3) of the Restricted Stock on the first
anniversary of the Grant Date and with respect to an additional one-third (1/3)
of the Restricted Stock on each of the second and third anniversaries of the
Grant Date, provided the Grantee is still employed by the Company (or any Parent
or Subsidiary) on such vesting dates. All restrictions will lapse with respect
to 100% of the Restricted Stock upon (a) Grantee's death, separation from
service due to Disability, termination of employment by the Company without
Cause, or termination of employment by the Grantee for Good Reason provided that
the Grantee's employment agreement with the Company provides for a termination
of employment by the Grantee for Good Reason (as defined in such employment
agreement), or (b) a Change in Control of the Company. If the Grantee ceases to
be employed by the Company (or any Parent or Subsidiary) for any other reason at
any time prior to the vesting dates, the unvested Restricted Stock shall
automatically be forfeited upon such cessation of service.

     4.   Compliance with Laws and Regulations. The issuance and transfer of
Shares shall be subject to compliance by the Company and the Grantee with all
applicable requirements of securities laws and with all applicable requirements
of any stock exchange on which the Shares may be listed at the time of such
issuance or transfer. The Grantee understands that the Company is under no
obligation to register or qualify the Shares with the Securities and Exchange
Commission ("SEC"), any state securities commission or any stock exchange to
effect such compliance.

     5.   Tax Withholding.

          (a)  The Grantee agrees that, subject to clause 5(b) below, no later
than the date as of which the restrictions on the Restricted Stock shall lapse
with respect to all or any of the Restricted Stock covered by this Agreement,
the Grantee shall pay to the Company (in cash or to the extent permitted by the
Committee, Shares held by the Grantee whose Fair Market Value on the day
preceding the date the Restricted Stock vests is equal to the amount of the
Grantee's tax withholding liability) any federal, state or local taxes of any
kind required by law to be withheld, if any, with respect to the Restricted
Stock for which the restrictions shall lapse. The Company or its affiliates
shall, to the extent permitted by law, have the right to deduct from any payment
of any kind otherwise due to the Grantee any federal, state or local taxes of
any kind required by law to be withheld with respect to the Shares of Restricted
Stock.

          (b)  If the Grantee properly elects, within thirty (30) days of the
Grant Date, to include in gross income for federal income tax purposes an amount
equal to the Fair Market

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Value as of the Grant Date of the Restricted Stock granted hereunder pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended, the Grantee
shall pay to the Company, or make other arrangements satisfactory to the
Committee to pay to the Company in the year of such grant, any federal, state or
local taxes required to be withheld with respect to such Shares. If the Grantee
fails to make such payments, the Company or its affiliates shall, to the extent
permitted by law, have the right to deduct from any payment of any kind
otherwise due to the Grantee any federal, state or local taxes of any kind
required by law to be withheld with respect to such Shares.

     6.   No Right to Continued Employment. Nothing in this Agreement shall be
deemed by implication or otherwise to impose any limitation on any right of the
Company or any of its affiliates to terminate the Grantee's employment at any
time, in the absence of a specific written agreement to the contrary.

     7.   Representations and Warranties of Grantee. The Grantee represents and
warrants to the Company that:

          (a) Agrees to Terms of the Plan. The Grantee has received a copy of
the Plan and has read and understands the terms of the Plan and this Agreement,
and agrees to be bound by their terms and conditions. The Grantee acknowledges
that there may be adverse tax consequences upon the vesting of Restricted Stock
or disposition of the Shares once vested, and that the Grantee should consult a
tax adviser prior to such time.

          (b) Cooperation. The Grantee agrees to sign such additional
documentation as may reasonably be required from time to time by the Company.

     8.   Adjustment Upon Changes in Capitalization. In the event of a Change in
Capitalization, the Committee may make appropriate adjustments to the number and
class of Shares relating to Restricted Stock as it deems appropriate, in its
sole discretion, to preserve the value of this Award. The Committee's adjustment
shall be made in accordance with the provisions of Section 13 of the Plan and
shall be effective and final, binding and conclusive for all purposes of the
Plan and this Agreement.

     9.   Governing Law; Modification. This Agreement shall be governed by the
laws of the State of Delaware without regard to the conflict of law principles.
The Agreement may not be modified except in writing signed by both parties.

     10.  Defined Terms. Except as otherwise provided herein, or unless the
context clearly indicates otherwise, capitalized terms used but not defined
herein have the definitions as provided in the Plan. The terms and provisions of
the Plan are incorporated herein by reference, and the Grantee hereby
acknowledges receiving a copy of the Plan. In the event of a conflict or
inconsistency between the discretionary terms and provisions of the Plan and the
provisions of this Agreement, this Agreement shall govern and control.

     11.  Miscellaneous. The masculine pronoun shall be deemed to include the
feminine, and the singular number shall be deemed to include the plural unless a
different meaning is plainly required by the context.

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

                                PLAINS EXPLORATION & PRODUCTION
                                COMPANY

                                    /s/ James C. Flores
                                By:________________________________________
                                Name: James C. Flores
                                Title: Chairman of the Board and Chief Executive
                                       Officer

                                /s/ Timothy T. Stephens
                                ________________________________________
                                Timothy T. Stephens

                                       S-1<PAGE>

                                                                   EXHIBIT 10.21

                     PLAINS EXPLORATION & PRODUCTION COMPANY

                            2002 STOCK INCENTIVE PLAN

                         (As Adopted September 18, 2002)

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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.

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     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 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

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     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 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

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          (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

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     ability to perform substantially his or her duties for a period of one
     hundred eighty (180) consecutive days.

     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.

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     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.

     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 and 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.

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     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 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

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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 7,000,000; provided, however, that in the
aggregate, not more than 7,000,000 of the allotted Shares may be made the
subject of Restricted Stock Awards

                                       8

<PAGE>

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 1,000,000 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 7,000,000 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

                                       9

<PAGE>

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.

     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.

                                       10

<PAGE>

     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 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

                                       11

<PAGE>

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

                                       12

<PAGE>

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.

     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.

                                       13

<PAGE>

     8.6 Modification or Substitution. Subject to the terms of the Plan, the
Committee may modify outstanding Awards of SARs or accept the surrender of
outstanding Awards of SARs (to the extent not exercised) and grant new Awards in
substitution for them. In its sole discretion, the Committee may substitute for
an Award of SARS, an Option that covers the same number of Shares; provided,
however, that such Option shall be subject to the same exercise price, vesting
schedule, termination schedule and other material terms as the Award of SARs. No
modification of an Award shall adversely alter or impair any rights or
obligations under the Agreement without the Grantee's consent.

     8.7 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.

     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

                                       14

<PAGE>

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 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.

                                       15

<PAGE>

     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.

                                       16

<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

                                       17

<PAGE>

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 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

                                       18

<PAGE>

     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 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:

                                       19

<PAGE>

          (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 with respect to which Options or Awards may be granted under the
     Plan, (ii) the maximum number, exercise price and class of Shares or

                                       20

<PAGE>

     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:

                                       21

<PAGE>

          (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.

     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:

                                       22

<PAGE>

          (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.

     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

                                       23

<PAGE>

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 or convert 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,
the distribution of Shares by Plains Resources, Inc. or any other corporate
action or transaction that the Committee deems appropriate for such substitution
or conversion. The number of Shares covered by such substitute or converted
Options or Awards shall be subtracted from the aggregate number of

                                       24

<PAGE>

Shares available for grant under the Plan; provided, however, that they shall
not be subject to the other limitations set forth in Section 4.1 unless required
by applicable law.

     21.4 Effective Date. The effective date of this Plan shall be as determined
by the Board; provided, however, that no Incentive Stock Options may be granted
hereunder unless and until the Plan is approved by the Company's Stockholders
within twelve (12) months of its adoption by the Board.

                                       25

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