<PAGE>   1
                                                                   EXHIBIT 10.32

                                PROMISSORY NOTE


U.S. $384,948.00                 Houston, Texas               December 17, 1998


         William L. Transier ("Maker"), whose address is 2423 Locke Lane,
Houston, Texas 77019, for value received, promises to pay to the order of
SEAGULL ENERGY CORPORATION, a Texas corporation ("Payee"), at its headquarters
at 1700 First City Tower, 1001 Fannin Street, Houston, Texas 77002, the
principal sum of THREE HUNDRED EIGHTY-FOUR THOUSAND NINE HUNDRED FORTY-EIGHT
and 00/100s U.S. DOLLARS (U.S. $384,948.00), together with interest thereon at
the rate of four and four-fifths percent (4.8%) per annum (but in no event to
exceed the maximum rate of interest allowed by law), payable as hereinafter
provided.

         THIS NOTE is due and payable in full on December 17, 2002, including
all accrued interest thereon; provided, however, that to the extent that any of
the shares of Payee's common stock, par value $0.10 per share ("Common Stock")
acquired by Maker pursuant to the Expiring Option (as defined below) or any of
the securities, property or other rights received by Maker in respect of such
shares or as a dividend or distribution thereon are sold, transferred or
otherwise disposed of by Maker (which sales, transfers or dispositions shall be
subject to the provisions of the Security Agreement described below), then
Maker shall, within five business days after each such sale, transfer or
disposition, prepay the principal and accrued interest then owing under this
Note to the extent of the amount of cash proceeds (net of brokerage commissions
and any tax liability of Maker as a result of such sale) resulting therefrom.

         ALL SUMS paid hereon (whether at maturity or pursuant to any mandatory
or voluntary prepayment) shall apply first to the satisfaction of accrued
interest and the balance to the unpaid principal. All past due principal and
interest on this Note shall bear interest at the maximum rate permitted by law
from maturity until paid. All sums called for, payable or to be paid hereunder
shall be paid in lawful money of the United States of America which at the time
of payment is legal tender for the payment of public and private debts therein.

         MAKER AGREES to use the proceeds from the loan evidenced hereby solely
for the purposes of exercising his option to purchase Sixty Thousand Nine
Hundred Eighty-Two (60,982) shares of Common Stock pursuant to the option that
expires December 18, 1998 (the "Expiring Option"), and to pay any applicable
taxes imposed on Maker by reason of the exercise of the Expiring Option. The
Expiring Option is a non-statutory stock option granted to Maker on December
17, 1998, under the Seagull Energy Corporation 1998 Omnibus Stock Plan,
covering 60,982 shares at an exercise price of $6.3125. The Seagull Energy
Corporation 1998 Omnibus Stock Plan was approved by the shareholders of Payee
on May 13, 1998.

         MAKER HEREBY waives presentment and demand for payment, notice of
intent to accelerate maturity, notice of acceleration of maturity, protest or
notice of protest and non-payment, bringing of suit



                              (Page 1 of 3 Pages)
<PAGE>   2

U.S. $384,948.00                 Houston, Texas               December 17, 1998


and diligence in taking any action to collect any sums owing hereunder and in
proceeding against any of the rights and properties securing payment hereof,
and agrees that its liability on this Note shall not be affected by any release
of or change in any security for the payment of this Note.

         IN THE EVENT of (i) a default in the payment of any installment of
either principal or interest as provided for herein or in the performance of
any agreement or covenant contained in any instrument securing payment hereof
or (ii) the voluntary termination of Maker's employment with Payee or the
involuntary termination of Maker's employment with Payee for cause, then,
without the giving of any notice of any kind, the holder of this Note shall
have the right and option, to declare the unpaid balance of principal and
accrued interest on this Note at once due and payable and to foreclose or
require foreclosure of any and all liens securing payment hereof, and to
exercise any and all other rights and remedies it may have. Failure to exercise
this option upon any default or event as described above shall not constitute a
waiver of the right to exercise it in the event of any such subsequent default
or event.

         IN ADDITION to the mandatory prepayment obligations described above,
Maker reserves the option of prepaying the principal of this note, in whole or
in part, at any time after the date hereof without penalty. Accrued and unpaid
interest with respect to such principal amount prepaid is due and payable on
the date of such prepayment.

         IN THE EVENT of Maker's death or disability or an "involuntary
termination" subsequent to a "change in control," a portion of the original
principal amount of this Note may be forgiven and a schedule for repayment of
this Note may be established all in accordance with and pursuant to the terms
of the Equity Ownership Plan as adopted by the Compensation Committee of the
Board of Directors of Payee, as modified or amended by such Committee from time
to time (the "EOP"). For purposes of this paragraph, the terms "involuntary
termination" and "change in control" shall have the meanings given such terms
in that certain Severance Agreement between Maker and Payee in effect as of the
date of this Note. The terms and provisions of the EOP are hereby incorporated
into this Note by reference.

         IN ADDITION to any loan forgiveness made in connection with the events
described above, the original principal amount of this Note may be further
forgiven in accordance with and pursuant to the terms of the EOP based on
Maker's continued employment with Payee from the date of this Note and on
Payee's performance expressed by the relative ranking of Payee's "total
shareholder return" for any applicable period as ranked against the "total
shareholder return" of the other members of the "peer group" established for
such purpose as set forth in the EOP. For purposes of this paragraph, the terms
"total shareholder return" and "peer group" have the meanings ascribed to such
terms as set forth in the EOP.

         THIS NOTE is issued in connection with the terms of EOP, and is
entitled to the benefits and security afforded by a Security Agreement dated as
of December 17, 1998, between Maker and Payee (the "Security Agreement").



                              (Page 2 of 3 Pages)
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U.S. $384,948.00                 Houston, Texas               December 17, 1998


         THIS NOTE is and shall be construed and governed under the laws of the
State of Texas.

         IT IS EXPRESSLY stipulated and agreed to be the intent of Maker and
Payee to at all times comply with the usury and other laws applicable to this
Note and the Security Agreement and any subsequent revisions, repeals, or
judicial interpretations thereof, to the extent any of the same are applicable
hereto. If such laws are ever revised, repealed, or judicially interpreted so
as to render usurious any amount called for under this Note or under the
Security Agreement, or contracted for, charged, or received with respect to the
indebtedness evidenced by this Note, or if Payee's exercise of the option
herein contained to accelerate the maturity of this Note or if any prepayment
by Maker results in Maker having paid any interest in excess of that permitted
by law, then it is Maker's and Payee's express intent that all excess amounts
theretofore collected by Payee be credited on the principal balance of this
Note (or, if the Note has been paid in full, refunded to Maker), and the
provisions of this Note and the Security Agreement immediately be deemed
reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder.

         AT MATURITY, HOWEVER SUCH MATURITY COMES ABOUT, SUBJECT TO THE TERMS
AND CONDITIONS OF THE EOP, MAKER MUST REPAY THE ENTIRE OUTSTANDING PRINCIPAL
AMOUNT AND ALL UNPAID INTEREST ACCRUED UNDER THIS NOTE. PAYEE IS UNDER NO
OBLIGATION TO REFINANCE OR RENEW THIS NOTE AT THAT TIME. MAKER, THEREFORE, WILL
BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THAT MAKER MAY OWN OR WILL HAVE
TO FIND ANOTHER LENDER WILLING TO LEND MAKER THE FUNDS TO MAKE THE PAYMENT ON
THIS NOTE.



                                        -------------------------------
                                             WILLIAM L. TRANSIER


                              (Page 3 of 3 Pages)
<PAGE>   4
                               SECURITY AGREEMENT

                  (Common Stock of Seagull Energy Corporation)



                                  Executed by

                              WILLIAM L. TRANSIER

                                  in favor of

                           SEAGULL ENERGY CORPORATION

                                  dated as of

                               December 17, 1998

<PAGE>   5

                               SECURITY AGREEMENT

                   Common Stock of Seagull Energy Corporation

         THIS SECURITY AGREEMENT (this "Agreement") is made as of December 17,
1998, by WILLIAM L. TRANSIER, a natural person, who resides at 2423 Locke Lane,
Houston, Texas 77019 ("Pledgor") in favor of SEAGULL ENERGY CORPORATION, a
Texas corporation, with offices at 1700 First City Tower, 1001 Fannin Street,
Houston, Texas 77002 ("Secured Party").

         A. WHEREAS, Secured Party has granted Pledgor an option to purchase
60,982 shares of the common stock of Secured Party that expires as of December
18, 1998 (the "Expiring Option"), in connection with Secured Party's Equity
Ownership Program adopted by the Compensation Committee of the Board of
Directors of Secured Party (such program, as may from time to time be amended
or supplemented, being hereinafter called the "EOP").

         B. WHEREAS, Pledgor has elected to purchase shares of the common stock
of Secured Party pursuant to the Expiring Option described above.

         C. WHEREAS, Secured Party has provided a loan to Pledgor for the
purchase price of the common stock of Secured Party to be purchased by Pledgor
pursuant to the Expiring Option.

         D. WHEREAS, Secured Party has conditioned its obligations to provide
such loan to Pledgor upon the execution and delivery by Pledgor of this
Agreement, and Pledgor has agreed to enter into this Agreement.

         C. THEREFORE, in order to comply with the terms and conditions of the
EOP, to secure the Obligations as hereinafter defined, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees with Secured Party as follows:

         Section 1. Pledge. Pledgor hereby pledges, assigns and grants to
Secured Party a security interest in and right of set-off against the assets
referred to in Section 2 (the "Collateral") to secure the prompt payment and
performance of the "Obligations" (as herein defined) and the performance by
Pledgor of this Agreement.

         Section 2. Collateral. The Collateral consists of the following types
or items of property:

                  (A) The following securities: Sixty Thousand Nine Hundred
         Eighty-Two (60,982) shares of the Common Stock of Seagull Energy
         Corporation ("Seagull Common Stock") represented by Certificate No.
         _____________________ as delivered herewith and each such share having
         a par value of $0.10.

                  (B) (i) the certificates or instruments, if any, representing
         such securities, (ii) all dividends (cash, stock or otherwise), cash,
         securities, instruments, rights to subscribe, purchase or sell and all
         other rights and property from time to time received, receivable or
         otherwise distributed in respect of or in exchange for any or all of
         such securities, (iii) all replacements, additions to and
         substitutions for any of the property referred to in this Section 2,
         including, without limitation, claims against third parties and
         including without limitation pursuant to any merger, conversion, share
         exchange, recapitalization or

<PAGE>   6

         other transaction, and (iv) the proceeds, interest, profits and other
         income of or on any of the property referred to in this Section 2.

         It is expressly contemplated that additional securities or other
property may from time to time be pledged, assigned or granted to Secured Party
as additional security for the Obligations, and the term "Collateral" as used
herein shall be deemed for all purposes hereof to include all such additional
securities and property, together with all other property of the types
described above related thereto.

         Section 3. Transfer of Collateral. All certificates or instruments
representing or evidencing the Pledged Securities shall be delivered to and
held pursuant hereto by Secured Party or a person or entity designated by
Secured Party and shall be in suitable form for transfer by delivery, or shall
be accompanied by duly executed instruments of transfer or assignment in blank.

         Section 4. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:

                  "Agreement" means this Security Agreement, as the same may
         from time to time be amended or supplemented.

                  "Code" means the Uniform Commercial Code as presently in
         effect in the State of Texas, Business and Commerce Code, Chapters 1
         through 9. Unless otherwise indicated by the context herein, all
         uncapitalized terms (or terms that are otherwise uncapitalized in this
         Agreement but are capitalized at the beginning of a sentence) which
         are defined in the Code shall have their respective meanings as used
         in Chapters 8 and 9 of the Code.

                  "Event of Default" means any event specified in Section 15.

                  "Highest Lawful Rate" means the maximum rate of nonusurious
         interest allowed from time to time by applicable law.

                  "Obligations" means the promissory note of Pledgor dated
         December 17, 1998, payable to the order of Seagull Energy Corporation
         in the principal amount of Three Hundred Eighty-Four Thousand Nine
         Hundred Forty-Eight and 00/100 Dollars ($384,948.00), and any and all
         renewals, extensions for any period, rearrangements or enlargements.
         The Obligations shall also include all interest and any other sums
         payable by Pledgor to Secured Party in connection with the execution,
         administration or enforcement of Secured Party's rights and remedies
         hereunder or any other agreement with Pledgor.

                  "Pledged Securities" means all of the securities and other
         property (whether or not the same constitutes a "security" under the
         Code) referred to in Section 2 and all additional securities (as that
         term is defined in the Code), if any, constituting Collateral under
         this Agreement.

         Section 5. Representations. In order to induce Secured Party to accept
this Agreement, Pledgor represents and warrants to Secured Party (which
representations and warranties will survive the creation and payment of the
Obligations) that:



                                     - 2 -
<PAGE>   7

                  (A) Ownership of Collateral; Encumbrances; Valid and Binding
         Agreement. Pledgor is the legal and beneficial owner of the Collateral
         free and clear of any adverse claim, lien, security interest, option
         or other charge or encumbrance except for the security interest
         created by this Agreement, and Pledgor has full right, power and
         authority to pledge, assign and grant a security interest in the
         Collateral to Secured Party. This Agreement and the Obligations
         constitute legal, valid and binding obligations of Pledgor enforceable
         against Pledgor in accordance with their respective terms. The
         execution, delivery and performance of this Agreement or the
         Obligations will not violate the terms of any contract, agreement,
         law, regulation, order, injunction, judgment, decree or writ to which
         Pledgor is subject and do not require the consent or approval of any
         other person or entity.

                  (B) The pledge of Pledged Securities pursuant to this
         Agreement creates a valid and perfected first priority security
         interest in the Collateral, enforceable against Pledgor and all third
         parties and securing payment of the Obligations.

         Section 6. Covenants and Agreement. Pledgor will at all times comply
with the covenants and agreements contained in this Section 6, from the date
hereof and for so long as any part of the Obligations are outstanding.

                  (A) Sale, Disposition or Encumbrance of Collateral. Pledgor
         will not in any way encumber any of the Collateral (or permit or
         suffer any of the Collateral to be encumbered) or sell, pledge,
         assign, lend or otherwise dispose of or transfer any of the Collateral
         to or in favor of any person or entity other than Secured Party.
         Notwithstanding the foregoing, Pledgor may sell shares of Seagull
         Energy Corporation Common Stock that constitute Pledged Securities in
         open market brokerage transactions for cash but only if and to the
         extent that the cash proceeds (net of brokerage commissions and any
         tax liability of Pledgor as a result of such sale) are used to satisfy
         the mandatory prepayment obligations in accordance with the terms of
         the promissory note comprising the Obligations and any applicable
         terms of the EOP.

                  (B) Dividends, Distributions, Merger and Recapitalizations.
         Any and all dividends and interest paid in respect of the Collateral
         (as well as any other cash, securities, properties, rights or other
         assets constituting Collateral) shall be, and shall be forthwith
         delivered to Secured Party to hold as, Collateral and shall, if
         received by Pledgor, be received in trust for the benefit of Secured
         Party, be segregated from the other property or funds of Pledgor, and
         be forthwith delivered to Secured Party as Collateral in the same form
         as so received (with any necessary endorsement).

                  (C) Payment of Taxes and Liens. Pledgor will pay prior to
         delinquency all taxes, charges, liens and assessments against the
         Collateral.

                  (D) Further Assurances; Stock Powers. Upon the request of
         Secured Party, Pledgor shall (at Pledgor's expense) execute and
         deliver all such documents, including, without limitation, all
         documents necessary to comply with federal regulations relating to
         margin lending against securities, assignments, certificates,
         instruments, securities, financing statements, notifications to
         financial intermediaries or other third parties or other documents and
         give further assurances and do all other acts and things as Secured
         Party may reasonably request to perfect Secured Party's interest in
         the Collateral or to protect, enforce or otherwise effect Secured
         Party's rights and remedies hereunder. Pledgor shall also furnish



                                     - 3 -
<PAGE>   8

         to Secured Party such stock powers and other instruments as may be
         required by Secured Party to assure the transferability of the
         Collateral when and as often as may be requested by Secured Party.

                  (E) Voting and Other Consensual Rights. Except to the extent
         otherwise provided in Section 18(D), Pledgor shall be entitled to
         exercise any and all voting and other consensual rights pertaining to
         the Collateral or any part thereof for any purpose not inconsistent
         with the terms of this Agreement; provided however, that Pledgor shall
         not exercise or refrain from exercising any such right if such action
         would have a material adverse effect on the value of the Collateral or
         any part thereof, and, provided, further, that upon request of Secured
         Party at any time or from time to time, Pledgor shall give Secured
         Party prompt written notice of the manner in which Pledgor has
         exercised, or the reasons for refraining from exercising, any such
         right.

                  (F) Performance of Obligations. Pledgor will promptly and
         properly perform all of his obligations under this Agreement and any
         other agreement or contract of any kind now or hereafter existing as
         security for or in connection with the payment of the Obligations.

         Section 7. Non-judicial Enforcement. Secured Party may enforce its
rights with respect to the Collateral without prior judicial process or
judicial hearing, and to the extent permitted by law Pledgor expressly waives
any and all legal rights which might otherwise require Secured Party to enforce
its rights with respect to the Collateral by judicial process.

         Section 8. Attorney-in-Fact. Pledgor hereby irrevocably appoints
Secured Party as Pledgor's attorney-in-fact, with full authority in the place
and stead of Pledgor and in the name of Pledgor or otherwise, from time to time
in Secured Party's discretion, but at Pledgor's cost and expense and without
notice to Pledgor, to take any action and to execute any assignment,
certificate, financing statement, stock power, notification, document or
instrument which Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, to receive,
endorse and collect all instruments made payable to Pledgor representing any
dividend, interest payment or other distribution in respect of the Collateral
or any part thereof and to give full discharge for the same.

         Section 9. Discharge Encumbrances. Secured Party may, at its option,
discharge any taxes, liens, security interests or other encumbrances at any
time levied or placed on the Collateral. Pledgor agrees to reimburse Secured
Party upon demand for any payment so made, plus interest thereon from the date
of Secured Party's demand at the Highest Lawful Rate.

         Section 10. Transfer of Collateral. Secured Party may transfer any or
all of the Obligations, and upon any such transfer Secured Party may transfer
its interest in any or all of the Collateral and shall be fully discharged
thereafter from all liability therefor. Any transferee of the Collateral shall
be vested with all rights, powers and remedies of Secured Party hereunder.

         Section 11. Cumulative and Other Rights. The rights, powers and
remedies of Secured Party hereunder are in addition to all rights, powers and
remedies given by law or in equity. The exercise by Secured Party of any one or
more of the rights, powers and remedies herein shall not be construed as a
waiver of any other rights, powers and remedies, including, without limitation,
any other rights of set-off.



                                     - 4 -
<PAGE>   9

         Section 12. Disclaimer of Certain Duties.

                  (A) The powers conferred upon Secured Party by this Agreement
         are to protect its interest in the Collateral and shall not impose any
         duty upon Secured Party to exercise any such powers. Pledgor hereby
         agrees that Secured Party shall not be liable for, nor shall the
         indebtedness evidenced by the Obligations be diminished by, Secured
         Party's commercially reasonable delay or failure to collect upon,
         foreclose, sell, take possession of or otherwise obtain value for the
         Collateral.

                  (B) Secured Party shall be under no duty whatsoever to make
         or give any presentment, notice of dishonor, protest, demand for
         performance, notice of non-performance, notice of intent to
         accelerate, notice of acceleration, or other notice or demand in
         connection with any Collateral or the Obligations, or to take any
         steps necessary to preserve any rights against any Obligor or other
         person or entity. Pledgor waives any right of marshaling in respect of
         any and all Collateral, and waives any right to require Secured Party
         to proceed against any Obligor or other person or entity or enforce
         any other remedy which Secured Party now has or may hereafter have
         against any Obligor or other person or entity.

         Section 13. Waiver of Notice; Demand and Presentment. Pledgor hereby
waives any demand, notice of default, notice of acceleration of the maturity of
the Obligations, notice of intention to accelerate the maturity of the
Obligations, presentment, protest and notice of dishonor as to any action taken
by Secured Party in connection with this Agreement, or any instrument or
document.

         Section 14. Custody and Preservation of the Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which comparable secured parties accord
comparable collateral, it being understood and agreed, however, that Secured
Party shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not Secured Party has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against persons or entities with respect to any Collateral.

         Section 15. Events of Default. Any of the following events shall
constitute an Event of Default under this Agreement:

                  (A) Payments - Pledgor defaults in any payment due and owing
         pursuant to the Obligations;

                  (B) Representations and Warranties - any representation or
         warranty made by Pledgor to Secured Party proves to have been
         incorrect in any material respect as of the date thereof;

                  (C) Covenants - material default is made by Pledgor in the
         performance of any covenant or agreement contained in this Agreement
         or in any of the Obligations or in any other document now or hereafter
         executed in connection with or as security for the Obligations;

                  (D) Insolvency, etc. - Pledgor shall: (i) become insolvent,
         (ii) have a custodian, receiver or agent appointed or authorized to
         take charge of his properties, (iii) make an assignment for the
         benefit



                                     - 5 -
<PAGE>   10

         of creditors or call a meeting of creditors for the composition of
         debts, or (iv) be subject to the commencement of any proceeding in
         bankruptcy or under other insolvency laws;

                  (E) Defaults on Other Obligations - (i) default by Pledgor in
         any payment of principal of or interest on any other indebtedness,
         guaranty or other obligation (whether to Secured Party or others)
         beyond any period of grace provided with respect thereto, or (ii) any
         material default by Pledgor in the performance of any other agreement,
         term or condition if the effect of such default is to cause such
         obligation to become due on demand or before its stated maturity or to
         permit the holder(s) of such obligation or the trustee(s) under any
         such agreement or instrument to cause such obligation to become due on
         demand or prior to its stated maturity, whether or not such default or
         failure to perform should be waived by the holder(s) of such
         obligation or such trustee(s); or

                  (F) Defaults Under the EOP - Pledgor shall fail to comply
         with or defaults is made with respect to the terms and conditions of
         the EOP regarding the Obligations or the Pledged Securities.

         Section 16. Remedies. Upon the occurrence and during the continuance
of any Event of Default, subject to the terms and provisions of the EOP,
Secured Party may take any or all of the following actions without notice
(except where expressly required below or as otherwise required by law) or
demand to Pledgor:

                  (A) Declare all or part of the indebtedness pursuant to the
         Obligations immediately due and payable and enforce payment of the
         same by Pledgor.

                  (B) Sell or otherwise dispose of any or all of the Collateral
         in any commercially reasonable manner as Secured Party may elect,
         pursuant to the provisions of the Code and other applicable law,
         including, without limitation, sell, in one or more sales and in one
         or more parcels, or otherwise dispose of any or all of the Collateral
         in any commercially reasonable manner as Secured Party may elect, in a
         public or private transaction, at any location as deemed reasonable by
         Secured Party either for cash or credit or for future delivery at such
         price as Secured Party may deem fair, and (unless prohibited by the
         Code, as adopted in any applicable jurisdiction) Secured Party may be
         the purchaser of any or all Collateral so sold and may apply upon the
         purchase price therefor any Obligations secured hereby. Any such sale
         or transfer by Secured Party either to itself or to any other person
         or entity shall be absolutely free from any claim or right by Pledgor,
         including any equity or right of redemption, stay or appraisal which
         Pledgor has or may have under any rule of law, regulation or statute
         now existing or hereafter adopted. Upon any such sale or transfer,
         Secured Party shall have the right to deliver, assign and transfer to
         the purchaser or transferee thereof the Collateral so sold or
         transferred. If Secured Party deems it advisable to do so, it may
         restrict the bidders or purchasers of any such sale or transfer to
         persons or entities who will represent and agree that they are
         purchasing the Collateral for their own account and not with the view
         to the distribution or resale of any of the Collateral. Secured Party
         may, at its discretion, provide for a public sale, and any such public
         sale shall be held at such time or times within ordinary business
         hours and at such place or places as Secured Party may fix in the
         notice of such sale. Secured Party shall not be obligated to make any
         sale pursuant to any such notice. Secured Party may, without notice or
         publication, adjourn any public or private sale by announcement at any
         time and place fixed for such sale, and such sale may be made at any
         time or place to which the same may be so adjourned. In the event any
         sale or transfer hereunder is not completed or is defective in the
         reasonable opinion of Secured Party, such sale or transfer shall not
         exhaust the rights of Secured Party hereunder,



                                     - 6 -
<PAGE>   11

         and Secured Party shall have the right to cause one or more subsequent
         sales or transfers to be made hereunder. If only part of the
         Collateral is sold or transferred such that the Obligations remain
         outstanding (in whole or in part), Secured Party's rights and remedies
         hereunder shall not be exhausted, waived or modified, and Secured
         Party is specifically empowered to make one or more successive sales
         or transfers until all the Collateral shall be sold or transferred and
         all the Obligations are paid. In the event that Secured Party elects
         not to sell the Collateral, Secured Party retains its rights to
         dispose of or utilize the Collateral or any part or parts thereof in
         any manner authorized or permitted by law or in equity, and to apply
         the proceeds of the same towards payment of the Obligations. Each and
         every method of disposition of the Collateral described in this
         subsection or in subsection (D) shall constitute disposition in a
         commercially reasonable manner.

                  (C) Apply proceeds of the disposition of the Collateral to
         the Obligations in any manner elected by Secured Party and permitted
         by the Code or otherwise permitted by law or in equity.

                  (D) Appoint any person or entity as agent to perform any act
         or acts necessary or incident to any sale or transfer by Secured Party
         of the Collateral.

                  (E) Exercise all other rights and remedies permitted by law
         or in equity.

         Section 17. Liability for Deficiency. Except as may be set forth in
the EOP with respect to the death or disability of Pledgor, if any sale or
other disposition of Collateral by Secured Party or any other action of Secured
Party hereunder results in reduction of the Obligations, such action will not
release Pledgor from its liability to Secured Party for any unpaid Obligations,
together with interest thereon, and the same shall be immediately due and
payable to Secured Party at Secured Party's address set forth in the opening
paragraph hereof.

         Section 18. Pledged Securities. Upon the occurrence and during the
continuance of an Event of Default:

                  (A) All rights of Pledgor to receive the dividends and
         interest payments which it would otherwise be authorized to receive
         and retain pursuant to Section 6(E) shall cease, and all such rights
         shall thereupon become vested in Secured Party who shall thereupon
         have the sole right to receive and hold as Collateral such dividends
         and interest payments, but Secured Party shall have no duty to receive
         and hold such dividends and interest payments and shall not be
         responsible for any failure to do so or delay in so doing.

                  (B) All dividends and interest payments which are received by
         Pledgor contrary to the provisions of this Section 18 shall be
         received in trust for the benefit of Secured Party, shall be
         segregated from other funds of Pledgor and shall be forthwith paid
         over to Secured Party as Collateral in the same form as so received
         (with any necessary indorsement).

                  (C) Secured Party may exercise any and all rights of
         conversion, exchange, subscription or any other rights, privileges or
         options pertaining to any of the Pledged Securities as if it were the
         absolute owner thereof, including without limitation, the right to
         exchange at its discretion, any and all of the Pledged Securities upon
         the merger, consolidation, reorganization, recapitalization or other
         readjustment of any issuer of such Pledged Securities or upon the
         exercise by any such issuer or Secured



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<PAGE>   12

         Party of any right, privilege or option pertaining to any of the
         Pledged Securities, and in connection therewith, to deposit and
         deliver any and all of the Pledged Securities with any committee,
         depositary, transfer agent, registrar or other designated agency upon
         such terms and conditions as it may determine, all without liability
         except to account for property actually received by it, but Secured
         Party shall have no duty to exercise any of the aforesaid rights,
         privileges or options and shall not be responsible for any failure to
         do so or delay in so doing.

                  (D) If the issuer of any Pledged Securities is the subject of
         bankruptcy, insolvency, receivership, custodianship or other
         proceedings under the supervision of any court or governmental agency
         or instrumentality, then all rights of Pledgor to exercise the voting
         and other consensual rights which Pledgor would otherwise be entitled
         to exercise pursuant to Section 6(E) with respect to the Pledged
         Securities issued by such issuer shall cease, and all such rights
         shall thereupon become vested in Secured Party who shall thereupon
         have the sole right to exercise such voting and other consensual
         rights, but Secured Party shall have no duty to exercise any such
         voting or other consensual rights and shall not be responsible for any
         failure to do so or delay in so doing.

         Section 19. Reasonable Notice. If any applicable provision of any law
requires Secured Party to give reasonable notice of any sale or disposition or
other action, Pledgor hereby agrees that five days' prior written notice shall
constitute reasonable notice thereof.

         Section 20. Notices. Any notice required or permitted to be given
under or in connection with this Agreement shall be in writing and shall be
mailed by first class or express mail, postage prepaid, or sent by telecopy or
other similar form of rapid written transmission or personally delivered to the
receiving party. All such communications shall be mailed, sent or delivered at
the address respectively indicated in the opening paragraph hereof or at such
other address as either party may have furnished the other party in writing.
Any communication so addressed and mailed shall be deemed to be given when so
mailed, any notice so sent by rapid written transmission shall be deemed to be
given when receipt of such transmission is acknowledged by the receiving
operator or equipment, and any communication so delivered in person shall be
deemed to be given when receipted for or actually received by Pledgor or
Secured Party, as the case may be.

         Section 21. Amendments and Waivers. Secured Party's acceptance of
partial or delinquent payments or any forbearance, failure or delay by Secured
Party in exercising any right, power or remedy hereunder shall not be deemed a
waiver of any obligation of Pledgor, or of any right, power or remedy of
Secured Party; and no partial exercise of any right, power or remedy shall
preclude any other or further exercise thereof. Secured Party may remedy any
Event of Default hereunder or in connection with the Obligations without
waiving the Event of Default so remedied. Pledgor hereby agrees that if Secured
Party agrees to a waiver of any provision hereunder, or an exchange of or
release of the Collateral, or the addition or release of any obligor or other
person or entity, any such action shall not constitute a waiver of any of
Secured Party's other rights or of Pledgor's obligations hereunder. This
Agreement may be amended only by an instrument in writing executed jointly by
Pledgor and Secured Party.

         Section 22. Interest. It is the intention of the parties hereto to
conform strictly to usury laws applicable to Secured Party. Accordingly, if the
transactions contemplated hereby would be usurious under applicable state or
federal law, then, notwithstanding anything to the contrary in this Agreement
or in any other agreement entered into in connection with or as security for
the Obligations, it is agreed as follows:



                                     - 8 -
<PAGE>   13

(i) the aggregate of all consideration which constitutes interest under law
applicable to Secured Party that is contracted for, taken, reserved, charged or
received under the Obligations, this Agreement or under any of such other
agreements or otherwise in connection with the Obligations shall under no
circumstances exceed the maximum amount allowed by such applicable law, (ii) in
the event that the maturity of the Obligations is accelerated for any reason,
or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to Secured Party
may never include more than such maximum amount, and (iii) excess interest, if
any, provided for in this Agreement or otherwise shall be canceled
automatically and, if theretofore paid, shall be credited by Secured Party on
the principal amount of the Obligations (or, to the extent that the principal
amount of the Obligations shall have been or would thereby be paid in full,
refunded by Secured Party to Pledgor). The right to accelerate the maturity of
the Obligations does not include the right to accelerate any interest which has
not otherwise accrued on the date of such acceleration, and Secured Party does
not intend to, and will not, collect any unearned interest in the event of
acceleration. All sums paid or agreed to be paid to Secured Party for the use,
forbearance or detention of sums included in the initial Obligations shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Obligations until payment in full so
that the rate or amount of interest on account of the initial Obligations does
not exceed the applicable usury ceiling, if any. To the extent that Article
5069-1.04 of the Texas Revised Civil Statutes is relevant to Secured Party for
the purpose of determining the Highest Lawful Rate, Secured Party hereby elects
to determine the applicable rate ceiling under such Article by the indicated
(weekly) rate ceiling from time to time in effect, subject to Secured Party's
right subsequently to change such method in accordance with applicable law.

         Section 23. Governing Law; Jurisdiction. This Agreement and the
security interest granted hereby shall be construed in accordance with and
governed by the laws of the State of Texas, without giving effect to principles
of conflict of laws (except to the extent that the laws of any other
jurisdiction govern the perfection and priority of the security interests
granted hereby). Pledgor consents to and submits to in personam jurisdiction
and venue in the state district and county courts of the county wherein Secured
Party's offices are located at the address specified in the opening paragraph
hereof, and in the Federal District Courts of the district wherein such offices
of Secured Party are located. This submission to jurisdiction is nonexclusive
and does not preclude Secured Party from obtaining jurisdiction over Pledgor or
the Collateral in any court otherwise having jurisdiction.

         Section 24. Subrogation. Until all indebtedness in connection with the
Obligations shall have been paid in full, Pledgor shall have no right to
subrogation or to enforce any remedy or participate in any Collateral or
security whatsoever now or hereafter held by Secured Party.

         Section 25. Continuing Security Agreement.

                  (A) This Agreement shall constitute a continuing security
         agreement, and all representations and warranties, covenants and
         agreements shall, as applicable, apply to all future as well as
         existing transactions. Provisions of this Agreement, unless by their
         terms exclusive, shall be in addition to other agreements between the
         parties.

                  (B) Except as may be expressly applicable pursuant to Section
         9.505 of the Code, no action taken or omission to act by Secured Party
         hereunder, including, without limitation, any exercise of voting or
         consensual rights pursuant to Section 6(D) or any other action taken
         or inaction pursuant to



                                     - 9 -
<PAGE>   14

         Section 16, shall be deemed to constitute a retention of the
         Collateral in satisfaction of the Obligations or otherwise to be in
         full satisfaction of the Obligations, and the Obligations shall remain
         in full force and effect, until Secured Party shall have applied
         payments (including, without limitation, collections from Collateral)
         towards the Obligations in the full amount then outstanding or until
         such subsequent time as is hereinafter provided in subsection (C)
         below.

                  (C) To the extent that any payments on the Obligations or
         proceeds of the Collateral are subsequently invalidated, declared to
         be fraudulent or preferential, set aside or required to be repaid to a
         trustee, debtor in possession, receiver or other person or entity
         under any bankruptcy law, common law or equitable cause, then to such
         extent the Obligations so satisfied shall be revived and continue as
         if such payment or proceeds had not been received by Secured Party,
         and Secured Party's security interests, rights, powers and remedies
         hereunder shall continue in full force and effect. In such event, this
         Agreement shall be automatically reinstated if it shall theretofore
         have been terminated pursuant to Section 28.

         Section 26. Redelivery of Collateral. If any sale or transfer of
Collateral by Secured Party results in full satisfaction of the Obligations,
and after such sale or transfer and discharge there remains a surplus of
proceeds, Secured Party will deliver to Pledgor such excess proceeds in a
commercially reasonable time; provided, however, that Secured Party shall not
be liable for any interest, cost or expense in connection with any reasonable
delay in delivering such proceeds to Pledgor.

         Section 27. Custody and Preservation of the Collateral. Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which comparable secured parties accord
comparable collateral, it being understood and agreed, however, that Secured
Party shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not Secured Party has or is deemed to
have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against persons or entities with respect to any Collateral.

         Section 28. Termination. The grant of a security interest hereunder
and all of Secured Party's rights, powers and remedies in connection therewith
shall remain in full force and effect until Secured Party has (i) retransferred
and delivered all Collateral in its possession to Pledgor, (ii) executed a
registration of release with respect to all Pledged Securities, if any, as to
which Secured Party held a registered pledge; and (iii) executed a written
release or termination statement and reassigned to Pledgor without recourse or
warranty any remaining Collateral and all rights conveyed hereby. Upon the
complete payment of the Obligations, the compliance by Pledgor with all
covenants and agreements hereof and the compliance by Pledgor of the terms and
conditions of the EOP, Secured Party, at the written request of Pledgor, will
release, reassign and transfer the Collateral to Pledgor and declare this
Agreement to be of no further force or effect. Notwithstanding the foregoing,
the provisions of subsection 25(C) shall survive the termination of this
Agreement.



                                     - 10 -
<PAGE>   15

         IN WITNESS WHEREOF, Pledgor has signed this Agreement as of the date
first written above.


PLEDGOR:
                              --------------------------------
                              WILLIAM L. TRANSIER




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