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                                                                   Exhibit 10.6

                  1999 MATADOR EMPLOYEE INCENTIVE LOAN PROGRAM

PURPOSE

         The purpose of the Program is to advance the interests of the Company
and increase shareholder value by providing additional incentive to enable
certain key employees to purchase Shares of the Company.

CERTAIN DEFINITIONS

"BOARD OF DIRECTORS" means the Board of Directors of the Company .

"COMPANY" means Matador Petroleum Corporation.

"COMPENSATION COMMITTEE" means the compensation committee of the Board of
Directors.

"ELIGIBLE EMPLOYEE(S)" means those management level employees that are deemed
eligible to participate in the Program by the Operating Committee and the
Compensation Committee.

"LOAN(S)" means the amounts advanced to Participating Employees pursuant to the
Program.

"OPERATING COMMITTEE" means the operating committee of the Company.

"PARTICIPATING EMPLOYEE(S)" means an Eligible Employee who has obtained a Loan
pursuant to the Program.

"PROGRAM" means the 1999 Matador Employee Incentive Loan Program.

"SHARES" means shares of $.10 par value common stock of the Company.

"TOTAL AVAILABLE LOAN AMOUNT" means $250,000, or such other amount agreed to by
the Board of Directors.

DESCRIPTION OF PROGRAM

         The Company has made available the minimum sum of $250,000 to be set
aside for Loans to Eligible Employees of the Company for purposes of purchasing
Shares offered by the Company pursuant to the Offering Memorandum dated July 1,
1999, promulgated by the Company, or to otherwise exercise outstanding, vested
stock options owned by such employees.

         The Program is available to all management-level employees, subject to
the approval of the Operating Committee and the Compensation Committee. In the
event the total amount of Loans subscribed to by the Eligible Employees exceeds
the Total Available Loan Amount, the Compensation Committee, in its sole
discretion, shall determine how Loan proceeds shall be allocated among the
Eligible Employees.

         In granting participation and level of participation, the Company shall
take into consideration the contribution the Eligible Employee has made or may
be reasonably expected to make the success of the Company and such other factors
as the Company shall determine. The


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Company shall also have the authority to consult with and receive
recommendations from officers and other personnel in the Company with regard
to these matters. The Company may, in grating participation, prescribe such
other terms and conditions concerning participation as it deems appropriate.

TERMS OF LOANS

         The Loans shall be for a two-year term, and shall be repaid in equal
semi-monthly installments through a payroll deduction. The Loans may be paid in
full at any time by the Participating Employees without penalty. All Loans shall
be recourse only to the Shares purchased pursuant to the Loan and to the extent
of the payroll deduction. The Participating Employee shall pay 25% of the
purchase price for the Shares in cash at the inception date of the Loan. The
Loans shall not bear interest.

SUBSCRIPTION PROCEDURE

         Employees desiring to participate should fill out the attached
subscription form and return it to the Company no later than September 1, 1999.
Eligible Employees will be notified by September 10, 1999 of the Loan amount
that will be available to them. At such time as the Loan amount is determined,
the Eligible Employee will execute a note in the amount of the Loan and a
security agreement pledging the Shares to the Company as collateral. The form of
note and security agreement are also attached. The Company shall retain
possession of the certificates representing the purchased Shares until such time
as the Loan has been repaid in full.

         As a condition of any issuance of the Shares, the Company may obtain
such agreements or undertakings if any as the Company may deem necessary or
advisable to assure compliance with any law or regulation including but not
limited to the following:

              i)  a representation, warranty or agreement by the
         Participating Employee to the Company at the time the Shares are
         transferred, that he or she is acquiring the Shares to be issued to
         him or her for investment purposes only and not with the view toward
         the distribution of any such Shares; and

              ii)  a representation, warranty or agreement to be bound by any
         legends that are in the opinion of the Company necessary or
         appropriate to comply with the provisions of any securities laws
         deemed by the Company to be applicable to the issuance of the Shares
         and are endorsed upon the share certificates.

RIGHT TO VOTE SHARES AND RECEIVE DIVIDENDS

         Participating Employees shall have the right to vote the Shares at any
meeting of shareholders beginning at the Loan inception date and shall have the
right to receive all dividends accruing and attributable thereto from such date.

TAX CONSEQUENCES OF PROGRAM

         The Participating Employee shall be responsible for any taxes related
to the Loan and the Company makes no representation nor does it offer any
opinion as to the income tax


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consequences of the Program, including the risk of potential tax liability to
the Participating Employee for imputed interest. All Eligible Employees are
advised to obtain independent tax counsel to answer any questions regarding
the tax consequences of the Program prior to their participation.

RELATIONSHIP TO EMPLOYMENT

         Participation in the Program is a condition of employment and based on
continued employment. The Program shall not confer upon any employee any right
with respect to continuation of employment by or consulting relationship with
the Company, nor shall it interfere in any way with the employee's right or the
Company's right to terminate his or her employment.

         Participation granted to an Eligible Employee shall be in addition to
regular salaries, pension, life insurance or other benefits related to their
service to the Company. Neither the Program nor any Loan made under the Program
shall confer upon any person any right to continuous employment with the
Company; and provided, further, that nothing herein shall be deemed to limit the
ability of the Company to enter into any compensation arrangements with any
employee.

TERMINATION OF EMPLOYMENT

         In the event a Participating Employee terminates his or her employment
with the Company either through resignation, termination for cause, retirement,
death, disability or other cause prior to the time that the Loan has been repaid
in full, the terminating employee shall receive the number of Shares, rounded to
the nearest Share, corresponding to the total amount repaid on the Loan through
the date of termination, divided by $33.

ADMINISTRATION OF THE PLAN

         The Program shall be administered by the Compensation Committee who
shall have all of the administrative powers under the Program.

         The Compensation Committee may, from time to time, adopt rules and
regulations for carrying out the purposes of the Program and, without
limitation, may delegate all of what, in its sole discretion, it determines to
be ministerial duties to any officer of the Company. The determination under,
and the interpretation of, any provision of the Program shall, in all cases, be
in the sole discretion of the Compensation Committee, and shall be final and
conclusive.

         Neither the Company, nor any officer, director, employee or other
affiliate of the Company shall be liable for any action taken or omitted to be
taken by him or her with respect to the Program, and to the extent of
liabilities not otherwise insured under a policy purchased by the Company, the
Company does hereby indemnify and agree to defend and save harmless any officer,
director, employee or other affiliate of the Company with respect to any
liabilities asserted or incurred in connection with the exercise and performance
of their powers and duties hereunder, unless such liabilities are judicially
determined to have arisen out of such person's gross negligence, fraud or bad
faith. Such indemnification shall include attorney's fees and all other costs
and expenses reasonably incurred in defense of any action arising from such act
of


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commission or omission. Nothing herein shall be deemed to limit the Company's
ability to insure itself with respect to its obligations hereunder.

         The Company shall have the authority to adopt, alter, and repeal such
rules, guidelines, and practices governing the Program as it shall, from time to
time, deem advisable, to interpret the terms and provisions of the Program (and
any instruments or other documents relating thereto); and to otherwise supervise
the administration of the Program; provided, however, that to the extent that
the Program otherwise requires the approval of the Board of Directors or the
shareholders of the Company, all administrative decisions shall be subject to
such Board of Director or shareholder approval.

GENERAL PROVISIONS

         If any provision of the Program is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead the
Program shall be construed and enforced as if such provision had never been
included therein.

         THE PROGRAM SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

         Headings contained in this document are for convenience only and shall
in no manner be construed as part of the Program.

         Any reference to the masculine, feminine, or neuter gender shall be a
reference to such other gender as is appropriate.

         Nothing contained in the Program shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to the
shareholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.

         Signed this ____ day of August, 1999.

                                       MATADOR PETROLEUM CORPORATION



                                       /s/ Joseph Wm. Foran
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                                       By:  Joseph Wm. Foran, Chairman and CEO






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