Dale "Mac" McKussic (Mel Gibson) is a former drug dealer trying to go straight. His close friend Nick Frescia (Kurt Russell) is a Detective Lieutenant with the Los Angeles County Sheriff's Department who, in spite of their long-term relationship going back to high school, is duty-bound to bring Mac to justice if he is selling drugs again, as DEA Agent Hal Maguire (J. T. Walsh) believes to be the case.
Mac is attracted to stylish restaurant owner Jo Ann Vallenari (Michelle Pfeiffer). Nick becomes acquainted with Jo Ann while attempting to learn more about Mac's activities, in particular his relationship with the Mexican drug kingpin Carlos, whom the DEA agents and Mexican federal police commandante' Escalante (Raul Julia) believe is coming to town. Mac has a legitimate business and is raising a son, trying to distance himself from his former drug smuggling ways. But he tries to help his lawyer (Arye Gross) sell some cocaine, and feels indebted to his old friend Carlos, who is pressuring Mac to do one last job.
Jo Ann succumbs to Nick's charms and a love affair begins. Nick genuinely cares for Jo Ann, but she becomes angry when Mac accuses her of spying on him on Nick's behalf. During a meeting at Jo Ann's restaurant with Maguire and Escalante to discuss Mac and Carlos, Escalante gives Nick a ceremonial pistol as a gesture of good faith. Jo Ann then accuses Nick of using her to gather information on Mac because he often eats at her restaurant, and hired her to cater his son's birthday party. Nick admits he is investigating Mac and that he originally approached her because of that. But he truthfully admits that he really has fallen in love with her. Jo Ann ends her relationship with Nick for his initial deception after catching him trying to listen in on a private telephone conversation. Meanwhile, Maguire and his associates set a trap for Mac and the mysterious Carlos, whose face none of them, except Mac, has ever seen.
In time, Jo Ann realizes that Mac is in love with her and that she has fallen for him. Nick figures out that Mac's cousin Gregg (Arliss Howard) is an informer for the DEA. Nick also realizes that Maguire has become dangerously obsessed with catching Mac, willing to use any means necessary. Mac and Jo Ann make love at his house. Jo Ann is called to her restaurant on business. Nick meets her there, gives her a pistol (the same ceremonial pistol he was given by Escalante) for protection, and tells her to stay in her restaurant until a deputy sheriff arrives to guard her, because Carlos is expected to arrive at Mac's home later that night. She does not heed Nick's warning and returns to Mac's house, where she discovers that Escalante is, in fact, Carlos.
Carlos relieves her of Nick's pistol, recognizing it, and then takes her to his yacht at the marina. He knows that Gregg is the informer and has him killed, leaving his body next to a shipment of gasoline contaminated cocaine. Maguire and Nick find Gregg's body and the cocaine at the beach. Nick meets with Mac to warn him that Jo Ann is in danger. Mac pulls a gun on Nick and rushes to the marina. Carlos pressures him to kill Jo Ann because she now knows too much. Mac refuses, threatens Carlos at gunpoint and gets Jo Ann to safety on a speedboat. Mac nevertheless promises Carlos that he will be at the rendezvous site as arranged to conclude their business. Nick explains to Maguire that Escalante is actually Carlos and heads for the marina. Mac arrives first and is double-crossed by Carlos, whereupon a fight ensues between them. As they struggle over the pistol, it fatally discharges into Carlos's abdomen. Carlos dies in Mac's arms.
Maguire shows up and begins shooting, hitting an already dead Carlos in the face, and then at Mac as he is raising his hands to surrender. The gunfire causes the boat's fuel tank to catch fire, just as Mac jumps in the water. Nick arrives at the marina. He hears the gunfire, draws his weapon and orders Maguire to cease fire, but Maguire continues shooting, forcing Nick to shoot him in the back, killing him. The fire causes the boat to explode, and with it the millions of dollars on board.
The story ends with Nick asking Jo Ann to meet him at the beach. She arrives to instead find Mac, running to embrace him in the waves. A pleased Nick watches from a distance.
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