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                                                                    EXHIBIT 10.2









                                DEVX ENERGY, INC.

                          FORM OF AMENDED AND RESTATED

                              INCENTIVE EQUITY PLAN




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                                DEVX ENERGY, INC.

                          FORM OF AMENDED AND RESTATED
                              INCENTIVE EQUITY PLAN


                                TABLE OF CONTENTS


<TABLE>
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                                                                                                                 PAGE
                                                                                                                 ----

<S>               <C>                                                                                           <C>
ARTICLE 1         PURPOSE.........................................................................................1

ARTICLE 2         DEFINITIONS.....................................................................................1

ARTICLE 3         ADMINISTRATION..................................................................................4

ARTICLE 4         ELIGIBILITY.....................................................................................5

ARTICLE 5         SHARES SUBJECT TO PLAN..........................................................................5

ARTICLE 6         GRANT OF AWARDS.................................................................................6
                  6.1      In General.............................................................................6
                  6.2      Maximum ISO Grants.....................................................................6
                  6.3      SAR....................................................................................6
                  6.4      Maximum Individual Grants..............................................................6
                  6.5      Tandem Awards..........................................................................6

ARTICLE 7         OPTION PRICE; SAR PRICE.........................................................................7

ARTICLE 8         AWARD PERIOD; VESTING...........................................................................7
                  8.1      Award Period...........................................................................7
                  8.2      Vesting................................................................................7

ARTICLE 9         TERMINATION OF SERVICE..........................................................................7

ARTICLE 10        EXERCISE OF INCENTIVE...........................................................................7
                  10.1     In General.............................................................................7
                  10.2     Disqualifying Disposition of ISO.......................................................9

ARTICLE 11        AMENDMENT OR DISCONTINUANCE.....................................................................9

ARTICLE 12        TERM............................................................................................9

ARTICLE 13        CAPITAL ADJUSTMENTS.............................................................................9

ARTICLE 14        RECAPITALIZATION, MERGER AND CONSOLIDATION.....................................................10

ARTICLE 15        LIQUIDATION OR DISSOLUTION.....................................................................11
</TABLE>



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<TABLE>
<S>               <C>                                                                                           <C>
ARTICLE 16        INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED
                  BY OTHER CORPORATIONS..........................................................................11

ARTICLE 17        MISCELLANEOUS PROVISIONS.......................................................................11
                  17.1     Investment Intent.....................................................................11
                  17.2     No Right to Continued Employment......................................................12
                  17.3     Indemnification of Board and Committee................................................12
                  17.4     Effect of the Plan....................................................................12
                  17.5     Compliance With Other Laws and Regulations............................................12
                  17.6     Tax Requirements......................................................................12
                  17.7     Assignability.........................................................................12
                  17.8     Use of Proceeds.......................................................................13
</TABLE>



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                                DEVX ENERGY, INC.

                          FORM OF AMENDED AND RESTATED
                              INCENTIVE EQUITY PLAN


         The name of the plan is the AMENDED AND RESTATED INCENTIVE EQUITY PLAN
(the "PLAN") of DevX Energy, Inc., a Delaware corporation formerly known as
Queen Sand Resources, Inc. (the "COMPANY"). The 1997 Queen Sand Resources, Inc.
Incentive Equity Plan was originally adopted by the Board of Directors effective
as of July 1, 1997, and was approved by the Company's stockholders in 1997.
Effective January 1, 2001, the Board of Directors approved, subject to
stockholder approval, this Amended and Restated Incentive Equity Plan.

                                    ARTICLE 1
                                     PURPOSE

         The purpose of the Plan is to attract and retain the services of
Employees and Consultants of the Company and its Subsidiaries and to provide
such persons with a proprietary interest in the Company through the granting of
incentive stock options, non-qualified stock options, stock appreciation rights,
or whether granted singly, or in combination, or in tandem, that will

         (a)     increase the interest of such persons in the Company's welfare
                 and success;

         (b)     furnish an incentive to such persons to continue their services
                 for the Company; and

         (c)     provide a means through which the Company may attract able
                 persons as Employees and Consultants.

         With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 ACT"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.

                                    ARTICLE 2
                                   DEFINITIONS

         Unless the context requires otherwise, the following terms shall have
the meanings indicated:

         2.1 "AWARD" means the grant of any Incentive Stock Option,
Non-qualified Stock Option, or SAR whether granted singly, in combination or in
tandem (each individually referred to herein as an "INCENTIVE").

         2.2 "AWARD AGREEMENT" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.

         2.3 "AWARD PERIOD" means the period during which one or more Incentives
granted under an Award may be exercised.

         2.4 "BOARD" means the board of directors of the Company.

<PAGE>   5

         2.5 "CHANGE OF CONTROL" means any of the following: (i) any
consolidation, merger or share exchange of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property of another entity, other than a consolidation, merger or share exchange
of the Company in which the holders of the Company's Common Stock immediately
prior to such transaction have the same proportionate ownership of Common Stock
of the surviving entity immediately after such transaction; (ii) any sale,
lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; (iii) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company; (iv) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board by the individuals (the "CONTINUING
DIRECTORS") who (x) at the date of this Plan were directors or (y) become
directors after the date of this Plan and whose election or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors (1) then in office who were directors at the date of
this Plan or (2) whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the 1934 Act) of an aggregate of twenty percent (20%) of the
voting power of the Company's outstanding voting securities by any person or
group (as such term is used in Rule 13d-5 under the 1934 Act) who beneficially
owned less than fifteen percent (15%) of the voting power of the Company's
outstanding voting securities on the date of this Plan, or the acquisition of
beneficial ownership of an additional five percent (5%) of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least fifteen percent (15%) of the voting power of the
Company's outstanding voting securities on the date of this Plan, provided,
however, that notwithstanding the foregoing, an acquisition shall not constitute
a Change of Control hereunder if the acquiror is (x) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company and
acting in such capacity, (y) a Subsidiary of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of voting securities of the Company or (z)
any other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.

         2.6 "CODE" means the Internal Revenue Code of 1986, as amended, or any
successor legislation.

         2.7 "COMMITTEE" means the committee appointed or designated by the
Board to serve as the Compensation and Stock Option Committee (or a similarly
named Committee generally intended to administer and oversee employee
compensation plans such as the Plan) of the Board to administer the Plan in
accordance with ARTICLE 3 of this Plan.

         2.8 "COMMON STOCK" means the common stock, par value $0.234 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue.

         2.9 "COMPANY" means DEVX ENERGY, INC., a Delaware corporation, and any
successor entity.

         2.10 "CONSULTANT" means any person performing advisory or consulting
services for the Company or a Subsidiary, with or without compensation, to whom
the Company chooses to grant an Award in accordance with the Plan, provided that
bona fide services must be rendered by such person and such services shall not
be rendered in connection with the offer or sale of securities in a capital
raising transaction.



                                        2

<PAGE>   6

         2.11 "DATE OF GRANT" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.

         2.12 "EMPLOYEE" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.

         2.13 "FAIR MARKET VALUE" of a share of Common Stock is (i) the mean of
the highest and lowest prices per share on any exchange or stock quotation
system that reports daily high and low sales prices, (ii) the mean of the bid
and sale prices on any other stock quotation system, or (iii) if the common
stock is not then-traded on any organized system, the fair market value of a
share of Common Stock as determined in good faith by the Board, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.

         2.14 "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.

         2.15 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.

         2.16 "NON-QUALIFIED STOCK OPTION" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.

         2.17 "OPTION PRICE" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

         2.18 "PARTICIPANT" shall mean an Employee or a Consultant of the
Company or a Subsidiary to whom an Award is granted under this Plan.

         2.19 "PLAN" means this DEVX ENERGY, INC. AMENDED AND RESTATED INCENTIVE
EQUITY PLAN, as amended from time to time.

         2.20 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

         2.21 "RETIREMENT" means any Termination of Service solely due to
retirement upon attainment of age 62, or permitted early retirement as
determined by the Committee.

         2.22 "SAR" means the right to receive a payment, in cash and/or Common
Stock, equal to the excess of the Fair Market Value of a specified number of
shares of Common Stock on the date the SAR is exercised over the SAR Price for
such shares.

         2.23 "SAR PRICE" means the Fair Market Value of each share of Common
Stock covered by an SAR, determined on the Date of Grant of the SAR.



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<PAGE>   7

         2.24 "STOCK OPTION" means a Non-qualified Stock Option or an Incentive
Stock Option.

         2.25 "SUBSIDIARY" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "SUBSIDIARIES" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

         2.26 "TERMINATION OF SERVICE" occurs when a Participant who is an
Employee or a Consultant of the Company or any Subsidiary shall cease to serve
as an Employee or a Consultant of the Company and its Subsidiaries, for any
reason.

         2.27 "TOTAL AND PERMANENT DISABILITY" means a Participant is qualified
for long-term disability benefits under the Company's disability plan or
insurance policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under the
rules governing Incentive Stock Options under the Code.

                                    ARTICLE 3
                                 ADMINISTRATION

         The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.

         Membership on the Committee shall be limited to those members of the
Board who are Non- employee Directors as defined in Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, and who are "OUTSIDE DIRECTORS" under Section
162(m) of the Code. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.

         The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the Committee, but not inconsistent with the Plan. The Committee shall determine
whether an Award shall include one type of Incentive, two or more Incentives
granted in combination, or two or more Incentives granted in tandem (that is, a
joint grant where exercise of one Incentive results in cancellation of all or a
portion of the other Incentive).



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         The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.

         With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "APPLICABLE LAW"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.

                                    ARTICLE 4
                                   ELIGIBILITY

         Any Employee (including an Employee who is also a director or an
officer) or Consultant whose judgment, initiative, and efforts contributed or
may be expected to contribute to the successful performance of the Company is
eligible to participate in the Plan; provided that only Employees shall be
eligible to receive Incentive Stock Options. The Committee, upon its own action,
may grant, but shall not be required to grant, an Award to any Employee or
Consultant of the Company or any Subsidiary. Awards may be granted by the
Committee at any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees or Consultants, if any, are
to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among Employees and Consultants who
receive, or are eligible to receive, Awards under the Plan.

                                    ARTICLE 5
                             SHARES SUBJECT TO PLAN

         Subject to adjustment as provided in ARTICLES 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is (a) one million (1,000,000) shares; plus (b) shares of
Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (c) without duplication for
shares counted under the immediately preceding clause, a number of shares of
Common Stock equal to the number of shares repurchased by the Company in the
open market or otherwise and having an aggregate repurchase price no greater
than the amount of cash proceeds received by the Company from the sale of shares
of Common Stock under the Plan; plus (d) any shares of Common Stock surrendered
to the Company in payment of the exercise price of options issued under the
Plan.

         Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.



                                        5

<PAGE>   9

                                    ARTICLE 6
                                 GRANT OF AWARDS

         6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company's stockholders
for approval; however, the Committee may grant Awards under the Plan prior to
the time of stockholder approval. Any such Award granted prior to such
stockholder approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.

         6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option shall be a Non-qualified Stock Option.

         6.3 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.

         6.4 MAXIMUM INDIVIDUAL GRANTS. No participant may receive during any
calendar year of the Company Awards covering an aggregate of more than two
hundred fifty thousand (250,000) shares of Common Stock.

         6.5 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "TANDEM AWARD," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to one
hundred (100) shares of Common Stock, the right of the Participant to exercise
the related Stock Option shall be canceled to the extent of one hundred (100)
shares of Common Stock.



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<PAGE>   10

                                    ARTICLE 7
                             OPTION PRICE; SAR PRICE

         The Option Price for a Non-qualified Stock Option shall be such price
as determined by the Committee; provided, however, such Option Price shall not
be less than the par value per share of the Common Stock. The Option Price for
an Incentive Stock Option and the SAR Price for any share of Common Stock
subject to an SAR shall be at least one hundred percent (100%) of the Fair
Market Value of the share on the Date of Grant. If an Incentive Stock Option is
granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Company (or any parent
or Subsidiary), the Option Price shall be at least one hundred and ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant.

                                    ARTICLE 8
                              AWARD PERIOD; VESTING

         8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this ARTICLE 8 and ARTICLE 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.

         8.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.

                                    ARTICLE 9
                             TERMINATION OF SERVICE

         In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.

                                   ARTICLE 10
                              EXERCISE OF INCENTIVE

         10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in Article
9. A vested Incentive may be exercised at such times and in such amounts as
provided in this Plan and the applicable Award Agreement, subject to the terms,
conditions, and restrictions of the Plan.

         In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer



                                       7
<PAGE>   11

quotation system or any registration under state or federal securities laws
required under the circumstances has not been accomplished. No Incentive may be
exercised for a fractional share of Common Stock. The granting of an Incentive
shall impose no obligation upon the Participant to exercise that Incentive.

                  (a) STOCK OPTIONS. Subject to such administrative regulations
as the Committee may from time to time adopt, a Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be exercised
and the date of exercise thereof (the "EXERCISE DATE") which shall be at least
three (3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock owned by the Participant
on the Exercise Date, valued at its Fair Market Value on the Exercise Date and
which the Participant has not acquired from the Company within six (6) months
prior to the Exercise Date, (c) by delivery (including by FAX) to the Company or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion.

         Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system 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 Stock Option or the issuance or purchase of
shares of Common Stock thereunder, the Stock Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.

                  If the Participant fails to pay for any of the Common Stock
specified in such notice or fails to accept delivery thereof, the Participant's
right to purchase such Common Stock may be terminated by the Company.

                  (b) SARS. Subject to the conditions of this Section 10.1(b)
and such administrative regulations as the Committee may from time to time
adopt, an SAR may be exercised by the delivery (including by FAX) of written
notice to the Committee setting forth the number of shares of Common Stock with
respect to which the SAR is to be exercised and the date of exercise thereof
(the "EXERCISE DATE") which shall be at least three (3) days after giving such
notice unless an earlier time shall have been mutually agreed upon. On the
Exercise Date, the Participant shall receive from the Company in exchange
therefor cash in an amount equal to the excess (if any) of the Fair Market Value
(as of the date of the exercise of the SAR) per share of Common Stock over the
SAR Price per share specified in such SAR,



                                        8

<PAGE>   12

multiplied by the total number of shares of Common Stock of the SAR being
surrendered. In the discretion of the Committee, the Company may satisfy its
obligation upon exercise of an SAR by the distribution of that number of shares
of Common Stock having an aggregate Fair Market Value (as of the date of the
exercise of the SAR) equal to the amount of cash otherwise payable to the
Participant, with a cash settlement to be made for any fractional share
interests, or the Company may settle such obligation in part with shares of
Common Stock and in part with cash.

         10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

                                   ARTICLE 11
                           AMENDMENT OR DISCONTINUANCE

         Subject to the limitations set forth in this ARTICLE 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Section 162(m) of the Code, including any successors to such Section, shall
be effective unless such amendment shall be approved by the requisite vote of
the stockholders of the Company entitled to vote thereon. Any such amendment
shall, to the extent deemed necessary or advisable by the committee, be
applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any stock option agreement.
In the event of any such amendment to the Plan, the holder of any Incentive
outstanding under the Plan shall, upon request of the Committee and as a
condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless required
by law, no action contemplated or permitted by this ARTICLE 11 shall adversely
affect any rights of Participants or obligations of the Company to Participants
with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.

                                   ARTICLE 12
                                      TERM

         The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on January 1, 2011, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.

                                   ARTICLE 13
                               CAPITAL ADJUSTMENTS

         If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,



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<PAGE>   13



combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:

                  (i) An appropriate adjustment shall be made in the maximum
         number of shares of Common Stock then subject to being awarded under
         the Plan and in the maximum number of shares of Common Stock that may
         be awarded to a Participant to the end that the same proportion of the
         Company's issued and outstanding shares of Common Stock shall continue
         to be subject to being so awarded.

                  (ii) Appropriate adjustments shall be made in the number of
         shares of Common Stock and the Option Price thereof then subject to
         purchase pursuant to each such Stock Option previously granted and
         unexercised, to the end that the same proportion of the Company's
         issued and outstanding shares of Common Stock in each such instance
         shall remain subject to purchase at the same aggregate Option Price.

                  (iii) Appropriate adjustments shall be made in the number of
         SARs and the SAR Price thereof then subject to exercise pursuant to
         each such SAR previously granted and unexercised, to the end that the
         same proportion of the Company's issued and outstanding shares of
         Common Stock in each instance shall remain subject to exercise at the
         same aggregate SAR Price.

         Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, or (ii)
the number of or SAR Price or SARs then subject to outstanding SARs granted
under the Plan.

         Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

                                   ARTICLE 14
                   RECAPITALIZATION, MERGER AND CONSOLIDATION

         14.1 The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure and its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

         14.2 Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any reorganization, merger,
consolidation or share exchange, any Incentive granted hereunder shall pertain
to and apply to the securities or rights (including cash, property, or assets)
to which a holder of the number of shares of Common Stock subject to the
Incentive would have been entitled. Notwithstanding the foregoing, however, all
such Incentives may be canceled by the Company as



                                       10

<PAGE>   14



of the effective date of any such reorganization, merger, consolidation or share
exchange by giving notice to each holder thereof or his personal representative
of its intention to do so and by permitting the purchase during the thirty (30)
day period next preceding such effective date of all of the shares of Common
Stock subject to such outstanding Incentives.

         14.3 In the event of any reorganization, merger, consolidation or share
exchange pursuant to which the Company is not the surviving or resulting
corporation, there shall be substituted for each share of Common Stock subject
to the unexercised portions of such outstanding Incentives, that number of
shares of each class of stock or other securities or that amount of cash,
property, or assets of the surviving, resulting or consolidated company which
were distributed or distributable to the stockholders of the Company in respect
to each share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.

                                   ARTICLE 15
                           LIQUIDATION OR DISSOLUTION

         In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.

                                   ARTICLE 16
                         INCENTIVES IN SUBSTITUTION FOR
                    INCENTIVES GRANTED BY OTHER CORPORATIONS

         Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees of a corporation who
become or are about to become management Employees of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company or the acquisition by the Company of stock of the employing
corporation. The terms and conditions of the substitute Incentives so granted
may vary from the terms and conditions set forth in this Plan to such extent as
the Board at the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the Incentives in substitution for which they are
granted.

                                   ARTICLE 17
                            MISCELLANEOUS PROVISIONS

         17.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.



                                       11

<PAGE>   15


         17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

         17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.

         17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

         17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.

         17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 17.7, the Participant who assigns the
Non- qualified Stock Option or SAR shall remain subject to withholding taxes
upon exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated thereunder.
Such payments shall be required to be made prior to the delivery of any
certificate representing such shares of Common Stock. Such payment may be made
in cash, by check, or through the delivery of shares of Common Stock owned by
the Participant (which may be effected by the actual delivery of shares of
Common Stock by the Participant that the Participant has not acquired from the
Company within six (6) months prior to the Exercise Date, or by the Company's
withholding a number of shares to be issued upon the exercise of a Stock Option,
if applicable), which shares have an aggregate Fair Market Value equal to the
required minimum withholding payment, or any combination thereof.

         17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only



                                       12

<PAGE>   16


by the Participant or the Participant's legally authorized representative, and
each Award Agreement in respect of an Incentive Stock Option shall so provide.
The designation by a Participant of a beneficiary will not constitute a transfer
of the Stock Option. The Committee may waive or modify any limitation contained
in the preceding sentences of this Section 17.7 that is not required for
compliance with Section 422 of the Code. The Committee may, in its discretion,
authorize all or a portion of a Non-qualified Stock Option or SAR to be granted
to a Participant to be on terms which permit transfer by such Participant to (i)
the spouse, children or grandchildren of the Participant ("IMMEDIATE FAMILY
MEMBERS"), (ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family Members
are the only partners, (iv) an entity exempt from federal income tax pursuant to
Section 501(c)(3) of the Code or any successor provision, or (v) a split
interest trust or pooled income fund described in Section 2522(c)(2) of the Code
or any successor provision, provided that (x) there shall be no consideration
for any such transfer, (y) the Award Agreement pursuant to which such
Non-qualified Stock Option or SAR is granted must be approved by the Committee
and must expressly provided for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Non- qualified Stock
Options or SARs shall be prohibited except those by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act of 1974,
as amended. Following transfer, any such Non- qualified Stock Option and SAR
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of ARTICLES 10, 11,
13, 15 and 17 hereof the term "PARTICIPANT" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Non- qualified
Stock Options and SARs shall be exercisable by the transferee only to the extent
and for the periods specified in the Award Agreement. The Committee and the
Company shall have no obligation to inform any transferee of a Non-qualified
Stock Option or SAR of any expiration, termination, lapse or acceleration of
such Option. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Non-qualified Stock Option or SAR that has been transferred by a
Participant under this Section 17.7.

         17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

         A copy of this Plan shall be kept on file in the office of the Company
in Dallas, Texas or any successor location of the Company's principal executive
offices.


                                    * * * * *




                                       13

<PAGE>   17


         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized representative pursuant to prior action taken by
the Board.


                           DEVX ENERGY, INC.



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



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