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                                                                   EXHIBIT 10.12

                              EMPLOYMENT AGREEMENT


                                   dated as of

                                  April 1, 2000

                                     between

                                COHO ENERGY, INC.


                                       and


                               MICHAEL Y. McGOVERN


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                              EMPLOYMENT AGREEMENT


                  EMPLOYMENT AGREEMENT, dated as of April 1, 2000 (this
"Agreement") by and among COHO ENERGY, INC., a Texas corporation (the
"Company"), and MICHAEL Y. McGOVERN (the "Executive").

                              W I T N E S S E T H:

                  WHEREAS, the Company is engaged in the exploration for and
production and transmission of crude oil and natural gas; and

                  WHEREAS, the Company desires to engage Executive as President
and Chief Executive Officer upon the terms and conditions contained in this
Agreement; and

                  WHEREAS, Executive desires to be so employed by the Company
from and after the Effective Date, as hereinafter defined, upon the terms and
conditions contained in this Agreement; and

                  WHEREAS, the parties hereto desire to enter this Agreement
upon the terms and conditions hereinafter set forth.

                  NOW, THEREFORE, in consideration of the foregoing, of the
mutual covenants and agreements herein contained and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties, intending legally to be bound, hereby agree as
follows:

                  1. Employment. The Company hereby employs Executive, and
Executive hereby accepts such employment, upon the terms and conditions
hereinafter set forth.

                     (a) Position. Executive shall be the President and Chief
Executive Officer of the Company. At all times during the term of this
Agreement, the Company shall cause Executive to be nominated as a member of the
Company's Board of Directors (the "Board").

                     (b) Duties. The Executive shall have full responsibility
for all the day-to-day activities of the Company and its affiliated companies
and over all officers and employees of the Company, including, but not limited
to, the power to hire and, subject to contractual commitments, fire employees,
and shall have responsibilities commensurate with those normally


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performed by a chief executive officer. In such capacity, the Executive shall
report solely and directly to the Board.

                     (c) Place of Employment. During the term of this Agreement,
the Executive shall perform the services required by this Agreement at the
principal executive office of the Company.

                     (d) Performance of Duties. The Executive agrees to devote
his full time and best efforts to the performance of his duties and to serve the
Company well and faithfully in conformity with the direction of the Board and
written policies of the Company. The foregoing shall not prevent Executive from
serving on the boards of directors of which he is a member as of the Effective
Date (which have been disclosed and approved prior to the execution hereof as
listed on Appendix B) so long as such service does not interfere or conflict
with the Executive's discharge of his duties under this Agreement.

                  2. Term.

                     (a) Effective Date. This Agreement shall become effective
on the effective date (the "Effective Date") of the Debtors' and Official
Committee of Unsecured Creditors' Joint Plan of Reorganization ("Plan").

                     (b) Termination Date. The term of employment under this
Agreement shall terminate upon the earliest to occur of the following events
(the date specified in each such event is referred to as the "Termination
Date"):

                         (i)   Two (2) years after the Effective Date; provided,
                  however, that the term of this Agreement shall automatically
                  be extended from day to day so that it always has a remaining
                  term of two (2) years, unless the Company or Executive gives
                  written notice to the other party that it does not wish to
                  continue to extend the term, in which event the term will
                  terminate two (2) years from the date of such notice;

                         (ii)  the date upon which the Company terminates the
                  Executive's employment by the Company for Cause or without
                  Cause (it being understood that the date of termination shall
                  be the date upon which the Company provides the Executive
                  written notice of such event);

                         (iii) the date of the Executive's death;

                         (iv)  the date upon which the Company terminates
                  Executive's employment by the Company as a result of
                  Executive's Disability;

                         (v)   the date upon which Executive effects a Voluntary
                  Termination with or without (it being understood that the date
                  of termination shall be the date upon which Executive provides
                  the Company written notice of such event); or

                         (vi)  the date of a Change of Control.


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                     (c) Performance of Duties During Notice Period. In the
event that either (i) the Company terminates the Executive's employment pursuant
to Section 2(b)(ii) hereof or (ii) Executive effects a Voluntary Termination
pursuant to Section 2(b)(v), Executive, if requested by the Company, shall
continue to render services hereunder to the Company for the 30-day notice
period (or if shorter, until the Termination Date), and shall, in such event, be
paid the compensation and benefits hereunder for the remainder of such period.

                  3. Compensation and Benefits.

                     (a) Base Salary.

                         (i)  The Company shall pay the Executive a base salary
                  at the annual rate of $350,000 per year ("Base Salary").

                         (ii) The Base Salary shall be paid in equal
                  installments, consistent with the manner in which other senior
                  executives of the Company are paid, and subject to all
                  applicable withholding and deductions, in accordance with the
                  usual payroll practices of the Company, but not less
                  frequently than monthly.

                     (b) Performance Bonus. The Company shall pay Executive a
performance bonus (the "Performance Bonus") in respect of each fiscal year of
the Company during the term of this Agreement in accordance with a management
performance plan which shall be implemented by the Board as soon as practicable
after the Effective Date.

                     (c) Benefits. During the term of this Agreement, the
Executive shall be entitled to all such employment benefits as may, from time to
time, be made generally available to employees and senior executives of the
Company, including, but not limited to, pension or other retirement plans,
medical plans, disability plans, incentive plans, stock plans, investment plans,
additional compensation plans and all other group and other insurance plans and
benefits to the extent that the Executive is, and remains, eligible to
participate therein and subject to eligibility provisions of such plans then in
effect.

                     (d) Business Expenses. The Company shall pay, either
directly or by reimbursement to the Executive, all documented expenses incurred
by the Executive, including travel and entertainment expenses, in the
performance of his duties upon submission of appropriate evidence thereof and on
a basis consistent with the Company's current policies on the date of this
Agreement.

                     (e) Vacation. For each year of this Agreement, the
Executive shall be entitled to paid vacation in accordance with the Company's
standard policy for the Company's executives.

                     (f) Stock Options. As soon as practical after the Effective
Date, the Board shall implement an Equity Participation Plan and shall grant to
Executive a nonqualified stock option for the number of shares and upon the
terms set forth in Appendix A (which option shall be incorporated into a Stock
Option Grant Agreement executed by the parties).


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                     (g) Standby Loan. Executive shall be entitled to purchase
at par value on the Effective Date, a 0.5% participation in the Standby loan as
such term is defined in the Plan.

                  4. Compensation Upon Termination of Employment.

                     (a) Expiration of Term. If Executive's employment by the
Company is terminated pursuant to Section 2(b)(i), whether due to the expiration
of the initial term or any renewal term, the Company shall pay Executive the
compensation and other benefits expressly provided under this Agreement through
the Termination Date, and any unpaid Performance Bonus for any prior fiscal
periods.

                     (b) Termination Upon Death. If Executive's employment by
the Company is terminated as a result of the occurrence of Executive's death
pursuant to Section 2(b)(iii), the Company shall be obligated to pay to the
Executive's estate any unpaid compensation and other benefits expressly provided
under this Agreement through the Termination Date, and any unpaid Performance
Bonus for any prior fiscal periods.

                     (c) Termination Because of Disability. If Executive's
employment by the Company is terminated by the Company as a result of the
occurrence of Executive's Disability pursuant to Section 2(b)(iv), the Company
shall pay Executive the compensation and other benefits expressly provided under
this Agreement through the Termination Date, and any unpaid Performance Bonus
for any prior fiscal periods.

                     (d) Termination by the Company for Cause. If Executive's
employment by the Company is terminated by the Company for Cause pursuant to
Section 2(b)(ii), Executive shall receive the compensation and other benefits
expressly provided under this Agreement through the Termination Date.

                     (e) Termination by the Company without Cause. If
Executive's employment by the Company is terminated by Executive without Cause
pursuant to Section 2(b)(ii), the Company shall pay Executive (i) the
compensation and other benefits expressly provided under this Agreement through
the Termination Date, (ii) any unpaid Performance Bonus for any prior fiscal
periods, and (iii) a lump sum payment equal to two (2) times the Base Salary.

                     (f) Termination Following Change of Control. A Change of
Control shall be treated as a termination of the Executive's employment under
Section 4(e).

                     (g) No Mitigation. If the Executive's employment described
herein is terminated, the Executive shall have no duty to mitigate his damages
or seek other employment, and the Company shall have no right to offset any
amounts which are paid to or earned by Executive from other employment obtained
by Executive (including self-employment) against any amounts which are payable
to Executive pursuant to this Agreement.

                     (h) Continuation of Health and Life Insurance Coverage. At
Executive's own expense, Executive and Executive's dependents shall also be
entitled to any continuation of health insurance coverage rights after the
Termination Date under any applicable


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law; provided, however, that in the event of the termination of Executive's
employment with the Company pursuant to Section 4(e), health and life insurance
coverage shall be provided at the Company's expense for two (2 ) years after the
Termination Date on the same basis as for other senior executives of the
Company, including the same employee contributions and co-payments which are
required for other employees.

                     (i) Effects of Termination; Payments.

                         (i)   Effective as of the Termination Date, the
                  Executive shall be deemed to have resigned from all offices
                  and directorships then held with the Company and its
                  subsidiaries.

                         (ii)  The covenants and agreements of the Executive
                  contained in Sections 5, 6 and 7 shall survive termination of
                  the Executive's employment by the Company and the termination
                  of this Agreement.

                         (iii) All payments due to Executive or his estate
                  pursuant to Section 4 shall be paid as soon as practicable
                  after the Termination Date, but in no event later than ten
                  (10) days thereafter, except in the case of the Performance
                  Bonus for any prior fiscal period which shall be paid as soon
                  as practicable after the end of such fiscal period, but not
                  later than sixty (60) days thereafter, and except for payments
                  pursuant to Section 4(h).

                  5. Confidentiality and Non-Disclosure. Executive recognizes
that he will occupy a position of trust with respect to the Company and agrees
to use all Confidential Information solely in connection with the performance of
services for or on behalf of the Company. Executive shall not, during the term
of this Agreement, or at any time after the termination of this Agreement, in
any manner, either directly or indirectly , (i) disseminate, disclose, use or
communicate any Confidential Information to any person or entity, regardless of
whether such Confidential Information is considered to be confidential by third
parties, or (ii) otherwise directly or indirectly misuse any Confidential
Information; provided, however, that (y) none of the provisions of this Section
5 shall apply to disclosures made for valid business purposes of the Company.

                  Executive hereby acknowledges and agrees that all personal
property and equipment, relating to the business of the Company, including,
without limitation, all books, manuals, records, reports, notes, contracts,
lists, blueprints, and other documents or materials, or copies thereof
(including computer files), and all other proprietary information relating to
the business of the Company, furnished to or prepared by Executive in the course
of or incident to Executive's employment, belongs to the Company and shall be
promptly returned to the Company within three (3) days after the Termination
Date. Following the Termination Date, Executive will not retain any written or
other tangible material containing any proprietary information of the Company.

                  6. Non-Solicitation. Executive hereby covenants and agrees
that, during the term of this Agreement and for a period of one (1) year
thereafter, Executive shall not, for himself or any third party, directly or
indirectly, (i) interfere with the contractual relationship


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between the Company and any of its vendors or suppliers or (ii) employ or
solicit for employment any officer or key employee who is employed by the
Company.

                  7. Enforcement. It is understood and agreed by the parties
that no amount of money would adequately compensate the Company for damages
which the parties acknowledge would be suffered as a result of a violation by
the Executive of the covenants contained in Sections 5 and 6 above, and that,
therefore, the Company shall be entitled, upon application to a court of
competent jurisdiction, to obtain injunctive relief (without the need to post
bond) to enforce the provisions of Sections 5 and 6, which injunctive relief
shall be in addition to any other rights or remedies available to the Company.
The provisions of this Section 8 shall survive the termination of this
Agreement.

                  8. Certain Defined Terms. For purposes of this Agreement the
following terms and phrases shall have the following meanings:

                     "Cause" shall mean: (i) the Executive shall have committed
an act of fraud, embezzlement or misappropriation against the Company or
committed a material breach of fiduciary duty owed to the Company; or (ii) the
Executive shall have been convicted by a court of competent jurisdiction (or
entered a plea of guilty or nolo contendere) of any felony or crime involving
moral turpitude or fraud (other than a traffic offense); or (iii) the Executive
shall have engaged in willful misconduct, material breach of his obligations
under this Agreement or the refusal or failure to perform his duties as required
by this Agreement (other than as a result of incapacity due to physical or
mental illness) which violations are not remedied within 15 days after receipt
of written notice from the Company specifying such violations.

                     "Change of Control" means (a) the sale, lease or other
transfer of all or substantially all of the assets of the Company to any person
or group (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")); (b) the adoption by the stockholders
of the Company of a plan relating to the liquidation or dissolution of the
Company; (c) the merger or consolidation of the Company with or into another
entity or the merger of another entity into the Company or any subsidiary
thereof with the effect that immediately after such transaction the stockholders
of the Company immediately prior to such transaction (or their affiliates) hold
less than fifty percent (50%) of the total voting power of all securities
generally entitled to vote in the election of directors, managers or trustees of
the entity surviving such merger or consolidation; or (d) the acquisition by any
person, entity or group, within the meaning of Section 13(d) or 14(d) of the
Exchange Act (other than PPM America, Inc., Appaloosa Management LP, Oaktree
Capital Management LLC, their respective affiliates or managed funds, or any
group consisting of any of them), of more than fifty percent (50%) of the voting
power of all securities of the Company generally entitled to vote in the
election of directors of the Company.

                     "Company" as used in this Agreement, the term "the Company"
includes the Company, any assignee or other successor of interest in the
Company, and any parent, subsidiary, or other corporation or partnership under
common ownership or control with the Company.


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                     "Confidential Information" means all software, trade
secrets, compilations of information, records, specifications, work products in
any form owned by the Company or any of its affiliates or created by Executive
for the Company or any of its affiliates, including but not limited to,
know-how, ideas, techniques, theories, discovery, formulas, plans, charts,
designs, drawings, whether patentable or not; lists of current or prospective
clients, business plans and proposals, current or prospective business
opportunities, financial records, research and development, marketing strategies
and programs and reports, including any documentation thereof; and all other
secrets and information of a confidential nature of the Company during the
Executive's employment with the Company.

                     "Disability" means an inability by the Executive to perform
a substantial portion of the Executive's duties by reason of physical or mental
incapacity or disability for a total of ninety (90) days or more in any
consecutive period of three hundred and sixty-five (365) days, as determined by
the reasonable judgment of a physician selected by the Executive and reasonably
acceptable to the Company.

                     "Voluntary Termination" shall mean the voluntary
termination by Executive of Executive's employment from the Company by voluntary
resignation or any other means(other than (i) death or Disability or (ii)
simultaneous with or following termination for Cause or an event which if known
to the Company at the time of such voluntary termination by Executive would
constitute Cause).

                  9. Miscellaneous Provisions.

                     (a) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, including the making, interpretation or breach
thereof, or the employment or termination of employment of Executive shall be
resolved by expedited arbitration in the City of the principal offices of the
Company in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof, and any
party to the arbitration may, if such party so elects, institute proceedings in
any court having jurisdiction for the specific performance of any such award.
The powers of the arbitrator(s) shall include, but not be limited to, the
awarding of injunctive relief. The arbitrator(s) shall include in any award in
which Executive is the prevailing party the amount of his reasonable attorneys'
fees and expenses and all other reasonable costs and expenses of the
arbitration. In the event the arbitrator(s) do not rule in favor of Executive in
respect to all of the material claims alleged by Executive, the arbitrator(s)
shall include in the award in favor of Executive the amount of Executive's
reasonable costs and expenses of the arbitration as the arbitrator(s) deem just
and equitable under the circumstances. Except as provided above, each party
shall bear his or its own attorneys' fees and expenses, and the parties shall
bear equally all other costs and expenses of the arbitration. The provisions of
this Section 9 shall survive the termination of this Agreement.

                     (b) Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements, and
understandings between the parties with respect to the subject matter hereof.


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                     (c) Modification. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties or in
the case of a waiver, by the party waiving compliance.

                     (d) Waiver. The failure of either party at any time or
times to require performance of any provision hereof in no manner shall affect
the right at a later time to enforce the same. No waiver by either party of a
breach of any term or covenant contained in this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be or construed
as a further or continuing waiver of any such breach or waiver of any other term
or covenant contained in this Agreement.

                     (e) Notices. Any and all notices or other communications
provided for herein shall be given in writing and shall be hand-delivered or
sent by United States mail, postage prepaid, registered or certified, return
receipt requested, addressed as follows:

                                    If  to the Company:

                                    Coho Energy, Inc.

                                    -------------------------------

                                    -------------------------------
                                    Attention:  Board of Directors

                                    With a copy to:

                                    Munger, Tolles & Olson LLP
                                    355 South Grand Avenue
                                    Los Angeles, California  90071
                                    Attention:  Thomas B. Walper

                                    If to Executive:

                                    Michael Y. McGovern

                                    -------------------------------

                                    -------------------------------

                                    With a copy to:

                                    -------------------------------

                                    -------------------------------

                                    -------------------------------

                                    -------------------------------

provided, however, that any of the parties may, from time to time, give notice
to the other parties of some other address to which notices or other
communications to such party shall be sent, in which event, notices or other
communications to such party shall be sent to such address. Any notice or other
communication shall be deemed to have been given and received hereunder as of


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the date the same is actually hand delivered or, if mailed, three days after
deposit in the United States mail, postage prepaid, registered or certified,
return receipt requested.

                     (f) Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Texas applicable to
contracts made and to be performed wholly within such state.

                     (g) Assignability. This Agreement, and the Executive's
rights and obligations hereunder, may not be assigned by the Executive. The
Company may assign its rights, together with its obligations hereunder, only to
a successor by merger or by the purchase of all or substantially all of the
assets and business of the Company and such rights and obligations shall inure
to, and be binding upon, any such successor.

                     (h) Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective legal
representatives, heirs, permitted successors and permitted assigns.

                     (i) Captions. Headings and titles in this Agreement are for
convenience of reference only and shall not control the construction or
interpretation of any provisions hereof. The words "herein," "hereof,"
"hereunder," and the words of similar import, when used anywhere in this
Agreement, refer to this Agreement as a whole and not merely to a subdivision in
which such words appear, unless the context otherwise requires. The singular
shall include the plural unless the context otherwise requires.

                     (j) Indemnification. The Company agrees that the Executive
shall be entitled to indemnification and payment or reimbursement of expenses
(including attorneys' fees and expenses) to the fullest extent provided in the
Company's Certificate of Incorporation, as in effect on the date hereof and as
it may be hereafter amended (but in no event on terms less favorable to the
Executive than those in effect on the date hereof), for all damages, losses and
expenses incurred by the Executive in connection with any claim, action, suit or
proceeding which arises from the Executive's services and/or activities as an
officer and/or employee of the Company or any affiliate thereof. This Section
shall survive any termination of the term of this Agreement.

                     (k) Separability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such validity or unenforceability
without rendering invalid or unenforceable the

                     (l) remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.


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

                                      THE COMPANY:

                                      COHO ENERGY, INC.

                                      By:
                                         --------------------------------------
                                      Name:
                                           ------------------------------------
                                      Title:
                                            -----------------------------------

                                      EXECUTIVE:


                                      -------------------------------------
                                      Michael Y. McGovern


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