Document:

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                                                                    Exhibit 10.8

                              TAX SHARING AGREEMENT

            THIS TAX SHARING AGREEMENT made as of the 1st day of January, 2001,
by and among International Specialty Products Inc., a Delaware corporation
("ISP"), Newco Holdings Inc., a Delaware corporation ("Holdings") and ISP Chemco
Inc. (formerly known as ISP OPCO Holdings, Inc.), a Delaware corporation
("CHEMCO").

            WHEREAS, ISP is the common parent of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and each of Holdings and CHEMCO is a member of
said affiliated group;

            WHEREAS, the ISP Group (as hereinafter defined) files consolidated
federal income tax returns;

            WHEREAS, predecessors to several of the parties hereto are parties
to a Tax Sharing Agreement dated as of January 1, 1997 (the "Old Tax Sharing
Agreement");

            WHEREAS, CHEMCO is wholly-owned by Holdings; and

            WHEREAS, Holdings and CHEMCO wish to provide for a new allocation
among them of their shares of the consolidated federal income tax liability of
said affiliated group and certain related matters;

            NOW, THEREFORE, in consideration of the foregoing premises and of
the mutual covenants contained herein, it is agreed as follows:
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            1.    DEFINITIONS

                  a.    Where applicable, terms used in this Agreement shall
have the meanings ascribed to them in, and shall be interpreted in accordance
with, the Code, and the regulations and rulings issued thereunder, as in effect
from time to time.

                  b.    For purposes of this Agreement, the terms set forth
below shall be defined as follows:

                        (i)   ISP Group -- ISP, Holdings, CHEMCO and all
corporations (whether now existing or hereafter formed or acquired) that at the
time join with ISP (or any successor common parent corporation) in filing a
consolidated federal income tax return.

                        (ii)  Parent -- ISP, or any successor common parent
corporation of the ISP Group.

                        (iii) Base Rate -- the interest rate applicable from
time to time under the Credit Agreement.

                        (iv)  CHEMCO -- CHEMCO, or any successor corporation.

                        (v)   CHEMCO Group -- CHEMCO and any subsidiary
corporation (whether now existing or hereafter formed or acquired) which (1)
would be included in the affiliated group of corporations (as defined in Section
1504(a) of the Code) of which CHEMCO would be the common parent but for the
inclusion of CHEMCO in the ISP Group and (2) is either a "Borrower" or a
"Restricted Subsidiary" under the Credit Agreement.

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                        (vi)  Credit Agreement -- the Credit Agreement dated as
of June 27, 2001 among CHEMCO, individually and as lead borrower, several of its
Subsidiaries, The Chase Manhattan Bank, as Administrative Agent, and various
lenders.

                        (vii) Holdings -- Holdings, or any successor
corporation.

                        (viii) ISP Group Actual Tax Liability -- The
consolidated federal income tax liability reported on the consolidated federal
income tax return filed by the ISP Group for the taxable year.

                        (ix)  CHEMCO Group Tax Liability -- The hypothetical
consolidated federal income tax liability, determined at the end of the taxable
year, of the CHEMCO Group computed as if the CHEMCO Group had filed its own
consolidated federal income tax return for such taxable year and all prior
taxable years beginning January 1, 2001 or thereafter during the term of this
Agreement; provided, that an item which was not taken into account in
calculating the CHEMCO Group Tax Liability in any such prior year by reason of
the limitations set forth in this definition shall be carried forward to the
subsequent year (if the carryforward of such item shall not have expired under
applicable provisions of the Code) and shall be taken into account in computing
the CHEMCO Group Tax Liability in such subsequent year, subject to the
limitations set forth in this definition: (1) subject to the modifications
specified in Treas. Reg. Sec. 1.1552-1(a)(2)(ii), other than the modifications
specified in Treas. Reg. Sec. 1.1552-1(a)(2)(ii)(a) and Treas. Reg. Sec.
1.1552-1(a)(2)(ii)(b); (2) using the highest marginal federal income tax
corporate rate applicable to such taxable year; (3) using the same elections and
methods of accounting as are used with respect to the CHEMCO Group in the
determination of the ISP Group Actual Tax Liability; (4) except in the case of
foreign

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tax credits, using an amount of the CHEMCO Group deduction, loss or credit
(whether currently or as a carryback or carryforward) to offset the CHEMCO
Group's hypothetical consolidated federal taxable income (or, in the case of
credits against tax, liability for tax) only when and to the extent such
deduction, loss or credit reduces the ISP Group Actual Tax Liability or reduces
the ISP Group actual consolidated federal taxable income for such year during
the term of this Agreement (taking any carryback or carryforward of such
deduction, loss or credit into account on a pro rata basis with those of all
members of the ISP Group other than the CHEMCO Group); provided, that the
limitation in this clause (4) shall not apply to those items ("CHEMCO Group
Excepted Items") of deduction, loss or credit for the taxable year or those
items comprising the net operating loss deduction, in both cases to the extent
such items are not subject to a specific limitation under the Code (e.g., in the
case of an CHEMCO Group capital loss, the limitation in this clause (4) shall
apply (i.e., it can be used only when and to the extent such loss reduces the
ISP Group Actual Tax Liability or reduces the ISP Group actual consolidated
federal taxable income for such year during the term of this Agreement) and in
the case of an ordinary and necessary business expense of the CHEMCO Group the
limitation in this clause (4) shall not apply); (5) using an amount of the
CHEMCO Group foreign tax credit in any taxable year to offset the CHEMCO Group's
hypothetical consolidated federal tax liability for such year as follows: (A) if
the ISP Group Actual Tax Liability for such taxable year (determined without
regard to the CHEMCO Group's foreign tax credit for such year) does not exceed
$12,000,000, using an amount of the CHEMCO Group's foreign tax credit generated
in such taxable year not to exceed $12,000,000; provided, if the ISP Group
Actual Tax Liability for such taxable year

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exceeds zero by reason of income attributable to CHEMCO, the amount of CHEMCO's
foreign tax credit utilized in such taxable year would be reduced by the amount
of such excess; (B) if the ISP Group Actual Tax Liability for such taxable year
(determined without regard to the CHEMCO Group's foreign tax credit for such
year) exceeds $12,000,000, using an amount of the CHEMCO Group's foreign tax
credit generated in such taxable year not to exceed the amount of foreign tax
credit actually utilized by Parent to reduce the ISP Group Actual Tax Liability
for such taxable year (taking such credit into account on a pro rata basis with
those of all members of the ISP Group other than the CHEMCO Group for such
taxable year, but prior to taking into account any carryforward of credits
generated in prior taxable years); and (C) using an amount of carryback and
carryforward of the CHEMCO Group's foreign tax credit only when and to the
extent such credit reduces the ISP Group Actual Tax Liability during the term of
this Agreement (taking such carryforward or carryback into account on a pro rata
basis with those of all members of the ISP Group other than the CHEMCO Group);
and (6) treating all tax attributes of any member of the ISP Group for any
taxable year beginning before January 1, 2001 as belonging to the ISP Group
(other than the CHEMCO Group). The CHEMCO Group Tax Liability shall be
determined each taxable year by Holdings in its sole discretion.

                        (x)   CHEMCO Group Estimated Tax Liability -- CHEMCO
Group's Tax Liability, determined through the end of each period for which
estimated federal income tax payments on a consolidated basis are due. The
CHEMCO Group Estimated Tax Liability shall be determined each taxable year by
Holdings in its sole discretion, in accordance with the principles of
subparagraph 1(b)(ix) hereof.

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                        (xi)  CHEMCO Group Tax Refund -- The hypothetical
consolidated federal income tax refund for any year to which the CHEMCO Group
would be entitled, determined in accordance with the principles of subparagraph
1(b)(ix) and using an amount of carryback of CHEMCO Group Excepted Items only
when and to the extent such deduction, loss or credit reduces the ISP Group
Actual Tax Liability or reduces the ISP Group actual consolidated federal
taxable income for such year during the term of this Agreement (taking such
deduction, loss or credit into account on a pro rata basis with those of all
members of the ISP Group other than the CHEMCO Group); provided, such loss,
deduction or credit has not been previously utilized to reduce the CHEMCO Group
Tax Liability or the CHEMCO Group hypothetical consolidated federal taxable
income. The CHEMCO Group Tax Refund shall be determined each taxable year by
Parent in its sole discretion.

                        (xii) R.P. Tax Case -- the tax litigation that includes
Rhone-Poulenc Surfactants and Specialties L.P. v. Commissioner (Tax Court Docket
No. 2125-98) and GAF Corporation and Subsidiaries v. Commissioner (Tax Court
Docket No. 23682-97).

                        (xiii) tax -- regular corporate income tax or corporate
alternative minimum tax and environmental tax together with any and all
interest, additions to tax, fines and penalties payable with respect thereto.

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            2.    PAYMENTS OF CONSOLIDATED FEDERAL INCOME
                  TAX LIABILITY; FILING OF RETURNS

                  a.    Tax Payments by Parent; Filing of Returns

                        Parent shall file consolidated federal income tax
returns and estimated tax returns for each taxable year during the term of this
Agreement, which returns shall include the CHEMCO Group, and shall pay in full
any tax shown on such returns.

                  b.    Payment of CHEMCO Group Tax Liability

                        For each taxable year or portion thereof during which
CHEMCO is included in a consolidated federal income tax return with Parent,
CHEMCO will pay to Holdings an amount equal to the CHEMCO Group Tax Liability.
To the extent that the obligation to pay such amount has not been fully
satisfied pursuant to paragraph 2(c), CHEMCO shall pay any such remaining amount
to Holdings no later than five (5) days prior to the due date for the filing by
Parent of the consolidated federal income tax return for the ISP Group (without
regard to extensions).

                  c.    Estimated Payments

                        On any date on which Parent is to make an estimated
federal income tax payment of the ISP Group on a consolidated basis, CHEMCO will
make an estimated payment to Holdings in an amount equal to the CHEMCO Group
Estimated Tax Liability (reduced by all prior payments required to be made by
CHEMCO under this paragraph 2(c) with respect to the same taxable year). If the
total of such estimated payments made by CHEMCO to Holdings with respect to a
taxable year shall be in excess of the liability of CHEMCO to Holdings pursuant
to paragraph 2(b) for such taxable year, Holdings shall pay the amount of such
excess to CHEMCO, (x) to the

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extent that such excess (or part thereof) represents all or part of a tax refund
to be received by the ISP Group, no later than five (5) days after the receipt
of such refund with an allocable share of interest received thereon (net of tax;
provided, such interest shall not be treated as an item of income of the CHEMCO
Group under this Agreement); (y) to the extent such excess (or part thereof)
represents all or part of a credit against the ISP Group's estimated tax for a
succeeding taxable year, no later than five (5) days after such estimated tax
payments against which such excess is credited is to be paid by the Parent; or
(z) to the extent (x) and (y) do not apply to such excess (or part thereof), no
later than the date on which Parent files the consolidated federal income tax
return for the ISP Group.

                  d.    Tax Refunds

                        (i)   Holdings shall pay to CHEMCO the amount of any
CHEMCO Group Tax Refund for each taxable year ending after the date hereof.

                        (ii)  The payments described in this paragraph 2(d)
shall be made no later than (i) in the case of an actual refund to which the ISP
Group is entitled, five (5) days after such refund is received by Parent on
behalf of the ISP Group or (ii) otherwise, five (5) days after the date on which
Parent files the consolidated federal income tax return for the ISP Group.

            3.    CHANGES IN TAX LIABILITY

                  a.    If any of the ISP Group consolidated federal income tax
returns for taxable years of ISP ending on or after January 1, 2001 is changed
or otherwise adjusted (including, without limitation, by reason of the filing of
an amended return, a "final determination" as defined in Section 1313(a) of the
Code or any of the

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events specified in Section 6213(b) or (d) of the Code), then the amount of the
payment required (1) from CHEMCO to Holdings under paragraph 2(b) or (2) from
Holdings to CHEMCO under paragraph 2(d), as the case may be, shall be recomputed
by substituting the amount of the ISP Group Actual Tax Liability (or the ISP
Group actual consolidated federal taxable income), the CHEMCO Group Tax
Liability (or the CHEMCO Group hypothetical consolidated federal taxable
income), or the CHEMCO Group Tax Refund after the adjustments described above in
place of the ISP Group Actual Tax Liability (or the ISP Group actual
consolidated federal taxable income), the CHEMCO Group Tax Liability (or the
CHEMCO Group hypothetical consolidated federal taxable income), or the CHEMCO
Group Tax Refund as previously computed. Not later than (i) five (5) days prior
to the due date for any additional payment of tax by the ISP Group or five (5)
days after the receipt of a refund or (ii) five (5) days after the event giving
rise to the recomputation if such event will not result in the payment of
additional tax or the receipt of a refund, CHEMCO shall pay to Holdings, or
Holdings shall pay to CHEMCO, as the case may be, the difference between the new
CHEMCO Group Tax Liability (or Refund) and the amounts previously paid. The
parties recognize that such new liability (or Refund) for any taxable year is
not necessarily the ISP Group's or the CHEMCO Group's final liability for that
taxable year, and may be recomputed in accordance with this paragraph 3(a) more
than once.

                  b.    If any of the ISP Group consolidated federal income tax
returns for taxable years of ISP ending on or before January 1, 2001 is changed
or otherwise adjusted (including, without limitation, by reason of the filing of
an amended return, a "final determination" as defined in Section 1313 (a) of the
Code or any of the

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events specified in Section 6213(b) or (d) of the Code), then CHEMCO shall pay
to Holdings an amount equal to any tax that would be payable by it by reason of
any such change or adjustment pursuant to the Old Tax Sharing Agreement. The
parties recognize that such payment for any taxable year is not necessarily the
CHEMCO Group's final liability under this paragraph 3(b) for that taxable year,
and may be recomputed in accordance with this paragraph 3(b) more than once.

                  c.    Payments made pursuant to paragraph (a) shall include an
allocable portion of any interest paid or credited by the Internal Revenue
Service (net of tax; provided, such interest shall not be treated as an item of
income of the CHEMCO Group); payments made pursuant to paragraphs (a) and (b)
shall not themselves bear interest.

            4.    NEW MEMBERS

                  If sufficient stock of any corporation is acquired hereafter
by any member of the CHEMCO Group so that the corporation becomes a member of
the CHEMCO Group ("New Member"), the New Member shall become a party to this
Agreement by delivering to the Parent a written instrument to such effect.
CHEMCO shall use its best efforts, if so requested by ISP, to cause the delivery
of such written instrument and the execution of Form 1122, Authorization and
Consent of Subsidiary Corporation to be Included in a Consolidated Income Tax
Return. The parties hereto hereby agree to the inclusion of any such New Member
as a party to this Agreement.

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            5.    ALLOCATION OF STATE AND LOCAL INCOME TAX
                  LIABILITY

                  a.    In the event that (i) any member of the CHEMCO Group and
(ii) at least one member of the ISP Group not including any member of the CHEMCO
Group elect or are required to file consolidated, combined or unitary state or
local income tax returns or otherwise become liable for state or local income
taxes determined on a consolidated, combined or unitary basis, principles
analogous to those set forth herein for the payment of consolidated federal
income tax liability and refunds thereof shall be used to determine the
respective shares of such taxes and the amount of any payments due CHEMCO from
Holdings on behalf of all members of the ISP Group other than the CHEMCO Group
and the amount and timing of payments to be made in respect thereof.

                  b.    If the ISP Group consolidated, combined or unitary state
or local income tax returns or the separate state or local income tax returns of
ISP or any member of the ISP Group, in both cases for taxable years of ISP
ending on or before January 1, 2001 are changed or otherwise adjusted
(including, without limitation, by reason of the filing of an amended return, a
"final determination" as defined in Section 1313(a) of the Code or any of the
events specified in Section 6213(b) or (d) of the Code), then CHEMCO shall pay
to Holdings an amount equal to any tax that would be payable by it by reason of
any such change or adjustment pursuant to the Old Tax Sharing Agreement. The
parties recognize that such payment for any taxable year is not necessarily the
CHEMCO Group's final liability under this paragraph 5(b) for that taxable year,
and may be recomputed in accordance with this paragraph 5(b) more than once.
Payments made pursuant to this paragraph (b) shall not themselves bear interest.

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            6.    PAYMENT

                  a.    Any payment required by CHEMCO to Holdings under
paragraph 2(b), paragraph 2(c), paragraph 5(a), paragraph 5(b), paragraph 9(c)
or paragraph 9(d) shall (i) with respect to the taxable year beginning January
1, 2001, first be reduced by the amount of any payments made by CHEMCO to ISP
with respect to such taxable year under the Old Tax Sharing Agreement; and (ii)
then be made (1) first, by reducing the amount of any account payable of
Holdings to the CHEMCO Group created under paragraph 6(b) (but not below zero)
and (2) thereafter in cash.

                  b.    Any payment required by Holdings to CHEMCO pursuant to
paragraph 2(d) shall be made at the option of Holdings (i) in cash or (ii) by
entering or increasing an account payable of Holdings to CHEMCO on the books of
account of Holdings; provided that Holdings shall pay to CHEMCO the amount of
any CHEMCO Group Tax Refund for a taxable year ending after the date hereof in
cash if and to the extent that the ISP Group receives a refund from a taxing
authority for such taxable year, together with an allocable share of any
interest received with respect thereto (net of tax; provided, such interest
shall not be treated as an item of income of the CHEMCO Group under this
Agreement); and provided, further, that Holdings shall not pay to CHEMCO an
amount greater than the amount of refund with interest actually received thereon
(net of tax; provided, such interest shall not be treated as an item of income
of the CHEMCO Group under this Agreement) received from the taxing authority.

                  c.    Any account payable created under this paragraph 6 from
Holdings to CHEMCO shall be due on the earlier of (i) such date as Holdings no
longer owns (directly or indirectly) more than 50% of the outstanding stock of
CHEMCO or (ii) the dates of the filing of federal income tax returns of CHEMCO
for taxable years of

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CHEMCO following the last taxable year in which it was a member of the ISP Group
to the extent each such return reflects a tax liability which would have reduced
the account payable under paragraph 6(a) were CHEMCO still a member of the ISP
Group and subject to the terms of this Agreement.

            7.    SPECIAL PROVISIONS REGARDING CHEMCO
                  GROUP'S FOREIGN TAX CREDIT

                  a.    At the end of each taxable year, Holdings shall enter or
increase an account payable of Holdings to CHEMCO in an amount equal to the
excess, if any, of the CHEMCO Group's foreign tax credits for such year (subject
to the foreign tax credits being allowed under CHEMCO Group's separate foreign
tax credit limitation, taking into account carrybacks and carryforwards under
Section 904 of the Code) over the CHEMCO Group's foreign tax credits taken into
account under subparagraph 1(b)(ix)(5)(A) or subparagraph 1(b)(ix)(5)(B) (such
excess being referred to as "Excess Foreign Tax Credits").

                  b.    Such account payable shall be reduced (i) at the end of
each taxable year of CHEMCO during the term of this Agreement to the extent that
Excess Foreign Tax Credits are utilized under subparagraph 1(b)(ix)(5)(C) and
(ii) at the end of each taxable year of CHEMCO following the last taxable year
in which it was a member of the ISP Group to the extent the federal income tax
return of CHEMCO for such taxable year reflects a tax liability which is reduced
by such Excess Foreign Tax Credits (taking such Excess Foreign Tax Credits into
account prior to those of CHEMCO and all other members of the CHEMCO Group).

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                  c.    The balance of such account payable, if any, shall be
paid from time to time on the date that is thirty (30) days following the
expiration of the statute of limitations on assessment of tax for the last year
to which such Excess Foreign Tax Credits or item thereof may be carried forward.

            8.    PROCEDURAL MATTERS

                  Parent shall prepare and file the consolidated federal income
tax returns, consolidated, combined or unitary state or local income tax returns
and any other returns, documents or statements required to be filed with respect
to the determination of the consolidated, combined or unitary federal, state or
local income tax liability of the ISP Group or members thereof for all taxable
years of the ISP Group or members thereof (including taxable years ending prior
to or including the date hereof). In its sole discretion, Parent shall have the
right to make all decisions with respect to such returns and all matters
relating to the federal, state or local income tax liability of the ISP Group
and members thereof for all taxable years of the ISP Group or members thereof
(including taxable years ending prior to or including the date hereof)
including, without limitation, the right (a) to determine (i) the manner in
which such returns, documents or statements shall be prepared and filed,
including, without limitation, the manner in which any item of income, gain,
loss, deduction or credit shall be reported and whether any amended returns
shall be filed, (ii) whether any filing extensions may be requested and (iii)
the elections that will be made by any member, (b) to contest, compromise or
settle any adjustment or deficiency proposed, asserted or assessed as a result
of any audit of such returns, (c) to file, prosecute, compromise or settle any
claim for refund and (d) to determine whether any refunds, to which the ISP
Group may be entitled, shall be paid by

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way of refund or credited against the tax liability for the affiliated group.
Each member of the ISP Group hereby irrevocably appoints Parent as its agent and
attorney-in-fact to take such action (including the execution of documents) as
Parent may deem appropriate to effect the foregoing.

            9.    TERMINATION OF AFFILIATION

                  a.    In the event that any member of the CHEMCO Group ceases
to be included in the ISP Group ("Former Member"), the Parent and the Former
Member shall furnish each other with information required to prepare (i) the
consolidated federal income tax return of the ISP Group for the last taxable
year in which the Former Member had been included in the ISP Group and (ii) the
federal income tax returns for all taxable years thereafter of the Former Member
(and its predecessors and subsidiaries) and the Parent, respectively, in which
the tax liability of either may be affected by their former affiliation
(including, for example, the apportionment of any consolidated net operating or
capital loss or investment or foreign tax credit carryover to the Former
Member). The Former Member shall not, without the prior written consent of the
Parent (which may be withheld by Parent in its sole discretion), file an
application for a carryback adjustment of the tax, for a taxable year in which
the Former Member was included in the ISP Group and a consolidated federal
income tax return was filed, by reason of a net operating loss deduction. The
Former Member may file an application for a carryback adjustment of the tax for
a taxable year in which the Former Member was included in the ISP Group and a
consolidated federal income tax return was filed by reason of a capital loss or
tax credit carryback and shall be entitled to that portion of the actual refund
that is attributable to the Former Member under the consolidated return

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regulations; provided, however, that the Former Member shall not be entitled to
any portion of such refund to the extent the items giving rise to such carryback
have been previously utilized to reduce the CHEMCO Group Tax Liability (or the
CHEMCO Group hypothetical consolidated federal taxable income) or gave rise to
an CHEMCO Group Tax Refund.

                  b.    The Parent and its subsidiaries and the Former Member
shall also furnish each other with all information in their hands as may be
reasonably requested by the other and relates to a taxable year in which the
Former Member had been included in the ISP Group.

                  c.    If the Former Member has a carryforward of a deduction,
loss or credit to a taxable year following the last taxable year in which it
joined in the filing of a consolidated federal income tax return with the ISP
Group which has reduced the CHEMCO Group Tax Liability (or the CHEMCO Group
hypothetical consolidated federal taxable income) or gave rise to an CHEMCO
Group Tax Refund, then CHEMCO shall pay to Holdings, at the time such
carryforward is actually utilized, an amount equal to the benefit derived
therefrom.

                  d.    If the Former Member, in a taxable year following the
last taxable year in which it joined in the filing of a consolidated federal
income tax return with the ISP Group, realizes any tax benefit by reason of any
change or adjustment to the tax attributes, including basis in assets, of any
member of the ISP Group arising from the transactions relating to the formation
of the CHEMCO Group, then CHEMCO shall pay to Holdings at the time such benefits
are actually utilized the amount of benefit derived therefrom.

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                  e. Payments which would have been required under paragraphs 2,
3 or 5 to or by a Former Member, were the Former Member still a member of the
ISP Group, and with respect to taxable year(s) for which the Former Member was a
member of the ISP Group, shall be made in accordance with principles analogous
to those set forth in such paragraph(s) and at the time(s) set forth therein.

            10.   DETERMINATIONS

                  In the case of a dispute, all determinations required
hereunder for each taxable year shall be made by the independent public
accountants regularly employed by Parent at the time the return is filed for
such taxable year. Such determination shall be binding and conclusive upon the
parties for the purposes hereof.

            11.   EFFECTS OF AGREEMENT

                  a.    With respect to the CHEMCO Group, the provisions of this
Agreement shall supercede the Old Tax Sharing Agreement for taxable years
beginning on or after January 1, 2001. As among Holdings and the CHEMCO Group,
the Agreement shall fix the liability of each to the other as to the matters
covered hereunder, even if such provisions are not controlling for tax or other
purposes (including, but not limited to, the computation of earnings and profits
for federal income tax purposes), and even if Holdings and other corporations
which now are, or which from time to time may become, members of the ISP Group
enter into other arrangements for the allocation of the portion of the total tax
liability of the ISP Group which is allocable to them.

                  b.    Except as otherwise provided in paragraph 13(c), this
Agreement shall be effective as of January 1, 2001 and shall remain in effect
for each

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taxable year ending after the date hereof during which CHEMCO or any of its
domestic subsidiaries, as the case may be, is included in a consolidated federal
income tax return filed by the Parent; provided, however, that the provisions of
paragraphs 2, 3, 5, 6, 7, 9, 12 and 13 shall survive until thirty (30) days
after the expiration of the statute of limitations on assessment of tax for the
last year in which CHEMCO or any of its domestic subsidiaries, as the case may
be, was a member of the ISP Group.

            12.   GUARANTY

                  a.    Parent agrees that, to the extent Holdings shall fail to
make any payment required by it to CHEMCO, it will make a payment directly to
CHEMCO within five (5) days after such failure by Holdings.

                  b.    Holdings, in turn, agrees to treat any such payment by
Parent to CHEMCO as a demand loan bearing interest at the Base Rate plus two (2)
percentage points.

            13.   INDEMNITY

                  a.    Each member of the CHEMCO Group agrees, jointly and
severally, to indemnify Parent, Holdings and each other member of the ISP Group
(other than another member of the CHEMCO Group) for the amount of any tax paid
by Parent or such other member which constitutes any unpaid CHEMCO Group Tax
Liability with respect to taxable periods beginning on or after January 1, 2001.

                  b.    Parent and Holdings each agrees, jointly and severally,
to indemnify the CHEMCO Group and each member thereof for the amount of any tax
paid by the CHEMCO Group or any member thereof with respect to taxable periods
beginning

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on or after January 1, 2001 that is in excess of the amount which constitutes
any CHEMCO Group Tax Liability.

                  c.    Parent and Holdings each agrees, jointly and severally,
to indemnify the CHEMCO Group and each member thereof for one hundred percent
(100%) of any tax paid by the CHEMCO Group or any member thereof with respect to
any taxable period by reason of a decision in or settlement of the R.P. Tax
Case.

                  d.    Any indemnity payable pursuant to paragraph 13(a), 13(b)
or 13(c) hereof shall be payable on demand by the indemnitor(s) immediately
after the indemnitee pays such indemnified liability and provides proof of
payment to the indemnitor.

                  If an indemnity is not paid within five (5) business days
following a demand, the amount owed shall bear interest at the Base Rate plus
two (2) percentage points.

            14.   MISCELLANEOUS PROVISIONS

                  a.    This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter contained herein. No
alteration, amendment or modification of any of the terms of this Agreement
shall be valid unless made by an instrument signed in writing by an authorized
officer of each party.

                  b.    This Agreement has been made in and shall be construed
and enforced in accordance with the laws of the State of Delaware from time to
time obtaining.

                  c.    This Agreement shall be binding upon and inure to the
benefit of each party hereto and its respective successors and assigns.

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                  d.    All notices and other communications hereunder shall be
deemed to have been duly given if delivered by hand or mailed, certified or
registered mail, with postage prepaid addressed to the party to which the notice
or other communication is given at 1361 Alps Road, Wayne, New Jersey 07470.

                  e.    This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                  f.    The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.

                              INTERNATIONAL SPECIALTY PRODUCTS
                              INC.

                              By:   /s/ Richard A. Weinberg
                                  --------------------------
                              Its:
                                  --------------------------

                              NEWCO HOLDINGS INC.

                              By:   /s/ Richard A. Weinberg
                                  --------------------------
                              Its:
                                  --------------------------

                              ISP CHEMCO INC.

                              By:   /s/ Richard A. Weinberg
                                  --------------------------
                              Its:
                                  --------------------------

                                       20<PAGE>

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is dated as of July 16,
2001 (the "EFFECTIVE DATE"), and is entered into by and between THE HOUSTON
EXPLORATION COMPANY, a Delaware corporation (the "COMPANY"), and Tracy Price
(the "EXECUTIVE").

                                   WITNESSETH:

         WHEREAS, the Company desires to employ the Executive upon the terms and
conditions and in the capacities set forth herein; and

         WHEREAS, the Company and the Executive desire to enter into this
Agreement according to the terms and conditions contained herein.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Executive hereby agree as follows:

         1. EMPLOYMENT AND TERM OF EMPLOYMENT. Subject to the terms and
conditions of this Agreement, the Company hereby agrees to employ the Executive,
and the Executive hereby agrees to serve the Company as Senior Vice
President-Land for a term (the "TERM OF EMPLOYMENT") beginning on the Effective
Date and ending on the Expiration Date (defined below). As used herein,
"EXPIRATION DATE" means the third anniversary of the Effective Date, provided
that on the first anniversary of the Effective Date and on each subsequent
anniversary of the Effective Date (such first anniversary date and each such
subsequent anniversary date being referred to as a "RENEWAL DATE"), the
Expiration Date shall be automatically extended one additional year unless, not
less than ninety (90) days prior to the relevant Renewal Date, (i) either party
shall have given written notice to the other that no such automatic extension
shall occur after the date of such notice or (ii) either party shall have given
a Notice of Termination to the other pursuant to Section 7 hereof.
Notwithstanding the foregoing, if either party gives a valid Notice of
Termination pursuant to Section 7 hereof, the Term of Employment shall not
extend beyond the termination date specified in such Notice of Termination.

         2. SCOPE OF EMPLOYMENT.

                  (a) During the Term of Employment, the Executive agrees to (i)
         serve as Senior Vice President-Land of the Company and shall have and
         may exercise all the powers, duties and functions as are normal and
         customary to such positions and that are consistent with the
         responsibilities set forth with respect to such positions in the
         Company's by-laws and (ii) perform such other duties not inconsistent
         with his position as are assigned to him, from time to time, by the
         Board of Directors of the Company (the "BOARD"). During the Term of
         Employment, the Executive shall devote substantially all of his
         business time, attention, skill and efforts to the faithful performance
         of his duties hereunder. Subject to Section 6, the foregoing shall not
         be construed to prevent the

                                       -1-
<PAGE>

         Executive from making investments in businesses or enterprises so long
         as such investments do not require any services on the part of the
         Executive in the operation of such business or enterprises of a nature
         or magnitude that would interfere materially with the performance of
         his duties hereunder.

                  (b) During the Term of Employment, the Executive agrees to
         serve, if elected, as an officer or director of any subsidiary or
         affiliate of the Company so long as such service is commensurate with
         the Executive's duties and responsibilities to the Company.

                  (c) The Executive's place of employment hereunder shall be at
         the Company's principal executive offices in the greater Houston, Texas
         metropolitan area. Moreover, the Company agrees that it will provide
         immunity and indemnity for the Executive to the fullest extent allowed
         by law, that if necessary it will amend its certificate of
         incorporation and bylaws to so provide, and that it will obtain errors
         and omissions insurance in the amount of no less than Ten Million
         Dollars ($10,000,000) naming the Executive as an additional insured.

         3. COMPENSATION. During the Term of Employment, in consideration of the
Executive's services hereunder, including, without limitation, service as an
officer or director of the Company or of any subsidiary or affiliate thereof,
and in consideration of the Executive's covenants regarding confidentiality in
Section 5 hereof and noncompetition in Section 6 hereof, the Executive shall
receive a salary at the rate of One Hundred Eighty-Five Thousand Dollars
($185,000) per year (payable at such regular intervals as other employees of the
Company are compensated in accordance with the Company's employment practices),
which amount shall be subject to review annually by the Board and may be
adjusted at its discretion, provided that such salary may not be reduced at any
time. In addition, the Executive shall be entitled to participate in such bonus,
incentive compensation or other programs as are created or approved by the Board
from time to time, including, but not limited to, the benefits described on
EXHIBIT A attached hereto.

         4. ADDITIONAL COMPENSATION AND BENEFITS.

                  (a) As additional compensation for the Executive's services
         under this Agreement, the Executive's covenants regarding
         confidentiality in Section 5 hereof and noncompetition in Section 6
         hereof, during the Term of Employment, the Company agrees to provide
         the Executive with the non-cash benefits being provided by the Company
         to its other officers and key employees as they may exist from time to
         time, including, but not limited to, the benefits described on EXHIBIT
         A attached hereto. Such benefits shall include leave or vacation time
         (not less than five (5) weeks per year), medical and dental insurance,
         life insurance and other health care benefits, retirement and
         disability benefits as may hereafter be provided by the Company in
         accordance with its policies as well as any stock option plan or
         similar employee benefit program for which key executives are or shall
         become eligible. The Executive's participation in each employee benefit
         plan or program provided to officers or other senior executives of the
         Company in general shall be at least as favorable to the Executive as
         the most highly benefited employee thereunder.

                                      -2-
<PAGE>

                  (b) The Executive is authorized to incur reasonable business
         expenses for promoting the business and reputation of the Company,
         including (without limitation) reasonable expenditures for travel,
         lodging, club memberships, meals and client, patron, customer and/or
         business associate entertainment. The Company shall reimburse within
         thirty (30) days the Executive for reasonable expenses incurred by the
         Executive in furtherance of the Company's business, provided that such
         expenses are incurred in accordance with the Company's policies and
         upon presentation of documentation in accordance with expense
         reimbursement policies of the Company as they may exist from time to
         time, and submission to the Company of adequate documentation in
         accordance with federal income tax regulations and administrative
         pronouncements.

                  (c) During the Term of Employment, the Company shall pay to
         the Executive an automobile allowance of Seven Hundred Dollars ($700)
         per month. The Board shall review the amount of such monthly allowance
         at least annually and may increase the same at any time as the Board
         deems appropriate.

         5. CONFIDENTIALITY AND OTHER MATTERS.

                  (a) Confidentiality. The Executive shall hold in a fiduciary
         capacity for the benefit of the Company all maps, data, reports,
         including results of exploration, drilling, drill cores, cuttings, and
         other samples, and other information relating to the business of the
         Company which comes into the possession of the Executive during the
         Term of Employment (such information being collectively referred to
         herein as the "CONFIDENTIAL INFORMATION"). During the Term of
         Employment and after termination of the Executive's employment
         hereunder, the Executive agrees: (i) to take all such precautions as
         may be reasonably necessary to prevent the disclosure to any third
         party of any of the Confidential Information; (ii) not to use for the
         Executive's own benefit any of the Confidential Information; and (iii)
         not to aid any other person or entity in the use of the Confidential
         Information in competition with the Company, provided that nothing in
         this Agreement shall prohibit the Executive from disclosing or using
         any Confidential Information (A) in the performance of his duties
         hereunder, (B) as required by applicable law, (C) in connection with
         the enforcement of his rights under this Agreement or any other
         agreement with the Company, (D) in connection with the defense or
         settlement of any claim, suit or action brought or threatened against
         the Executive by or in the right of the Company or (E) with the prior
         written consent of the Board. Notwithstanding any provision contained
         herein to the contrary, the term "CONFIDENTIAL INFORMATION" shall not
         be deemed to include any general knowledge, skills or experience
         acquired by the Executive or any knowledge or information known or
         available to the public in general. The Executive further agrees that,
         if requested by the Company in writing at any time within ninety (90)
         days after termination of his employment for any reason, he will
         surrender to the Company all Confidential Information, and any copies
         thereof, in his possession and agrees that all such materials, and
         copies thereof, are at all times the property of the Company.
         Notwithstanding the foregoing, the Executive shall be permitted to
         retain copies of, or have access to, all such Confidential Information
         relating to any disagreement, dispute or litigation (pending or
         threatened) involving the Executive.

                                      -3-
<PAGE>

                  (b) Remedies. For purposes of this Section 5, the "COMPANY"
         shall be defined as the Company and its affiliated companies including
         (without limitation) its successors and assigns and its subsidiaries
         and each of their respective successors and assigns. In the event of a
         breach or threatened breach by the Executive of the provisions of this
         Section 5, the Company shall be entitled to an injunction restraining
         the Executive from violating such provisions without the necessity of
         posting a bond therefor. Nothing herein shall be construed as
         prohibiting the Company from pursuing any other remedies available to
         it at law or in equity. Except as specifically set forth herein, the
         parties agree that the provisions of this Section 5 shall survive the
         earlier termination of the Executive's employment with the Company, as
         the continuation of this covenant is necessary for the protection of
         the Company.

         6. NONCOMPETITION.

                  (a) Noncompetition Activities. The Executive acknowledges that
         the nature of the employment under this Agreement is such as will bring
         the Executive in personal contact with patrons or customers of the
         Company and will enable him to acquire valuable information as to the
         nature and character of the business of the Company, thereby enabling
         him, by engaging in a competing business in his own behalf, or for
         another, to take advantage of such knowledge and thereby gain an unfair
         advantage. Accordingly, the Executive covenants and agrees that he will
         not, without the prior written consent of the Company during the Term
         of Employment, engage directly or indirectly for himself, or as an
         agent, representative, officer, director or employee of others, in the
         exploration for or production of hydrocarbons in waters offshore from
         the States of Texas and Louisiana, provided that the foregoing
         restriction shall not apply at any time if the Executive's employment
         is terminated during the Term of Employment by the Executive for Good
         Reason (defined in Section 7 hereof) or by the Company for any reason
         other than Cause (defined in Section 7 hereof) and, provided further,
         that nothing in this Agreement shall prohibit the Executive from
         acquiring or holding any issue of stock or securities of any entity
         registered under Section 12 of the Securities and Exchange Act of 1934
         (as amended), listed on a national securities exchange or quoted on the
         automated quotation system of the National Association of Securities
         Dealers, Inc. so long as the Executive is not deemed to be an
         "affiliate" of such entity as such term is used in paragraphs (c) and
         (d) of Rule 145 under the Securities Act of 1933 (as amended).

                  (b) Scope. In the event that the provisions of this Section 6
         should ever be deemed to exceed the time, geographic or activity
         related limitations permitted by applicable law, then such provisions
         shall be reformed to the maximum time, geographic or activity related
         limitations permitted by applicable law. In the event of a breach or
         threatened breach by the Executive of the provisions of this Section 6,
         the Company shall be entitled to an injunction restraining the
         Executive from violating such provisions without the necessity of
         posting a bond therefor. Nothing herein shall be construed as
         prohibiting the Company from pursuing any other remedies available to
         it at law or in equity. Except as specifically set forth herein, the
         parties agree that this Section 6 shall remain in effect for its full
         term notwithstanding the earlier termination of the Executive's
         employment with the Company, as the continuation of this covenant is

                                      -4-
<PAGE>

         necessary for the protection of the Company. For purposes of this
         Section 6, the "COMPANY" shall be defined as the Company and its
         affiliated companies, including (without limitation) its successors and
         assigns and its subsidiaries and each of their respective successors
         and assigns.

         7. TERMINATION.

                  (a) General. The Executive's employment hereunder shall
         automatically terminate on the earlier of his death or the Expiration
         Date. The Executive may, at any time prior to the Expiration Date,
         terminate his employment hereunder for any reason by delivering a
         Notice of Termination (defined below) to the Board. The Company may, at
         any time prior to the Expiration Date, terminate the Executive's
         employment hereunder for any reason by delivering a Notice of
         Termination to the Executive, provided that in no event shall the
         Company be entitled to terminate the Executive's employment prior to
         the Expiration Date unless the Board shall duly adopt, by the
         affirmative vote of a least a majority of the entire membership of the
         Board, a resolution authorizing such termination and stating whether
         such termination is for Cause (defined below). The giving of a notice
         pursuant to clause (i) of the proviso contained in the penultimate
         sentence of Section 1 hereof shall not be deemed a termination of the
         Executive's employment by the party giving such notice. As used in this
         Agreement, "NOTICE OF TERMINATION" means a notice in writing purporting
         to terminate the Executive's employment in accordance with this Section
         7, which notice shall (i) specify the effective date of such
         termination (not prior to the date of such notice) and (ii) in the case
         of a termination by the Company for Cause or Disability or a
         termination by the Executive for Good Reason or Disability, set forth
         in reasonable detail the reason for such termination and the facts and
         circumstances claimed to provide a basis for such termination.

                  (b) Automatic Termination on Expiration Date. In the event the
         Executive's employment hereunder shall automatically terminate on the
         Expiration Date for any reason other than death, the Executive shall
         only be entitled to receive (i) all unpaid compensation accrued as of
         the termination date pursuant to Section 3 hereof, (ii) all unused
         vacation time accrued by the Executive as of the termination date,
         (iii) all amounts owing to the Executive under Sections 4(b) and 4(c)
         hereof and (iv) those benefits under Section 4 which are required under
         the Employee Retirement Income Security Act of 1974, as amended
         ("ERISA"), or other laws. The amounts described in clauses (i), (ii)
         and (iii) of the foregoing sentence shall be paid to the Executive in a
         lump sum payment promptly after the Expiration Date.

                  (c) Termination by Company for Cause. If the Company
         terminates the Executive's employment for Cause, the Executive shall
         only be entitled to receive the compensation and other payments
         described in paragraph (b) above, such compensation and other payments
         to be paid as if the Executive's employment had automatically
         terminated without the giving of any Notice of Termination. As used in
         this Agreement, "CAUSE" shall mean (i) any material failure of the
         Executive to perform his duties specified in Section 2 of this
         Agreement (other than any such failure resulting from the Executive's
         incapacity due to illness or other disability) after written notice of
         such failure has been given to the Executive by the Board and such
         failure shall have

                                      -5-
<PAGE>

         continued for thirty (30) days after receipt of such notice, (ii) gross
         or willful negligence or intentional wrongdoing or misconduct, (iii) a
         material breach by the Executive of Sections 5 or 6 of this Agreement,
         or (iv) conviction of the Executive of a felony offense involving moral
         turpitude, any of which has or have a material adverse effect on the
         Executive's ability to perform the duties of his position or on the
         financial condition or profitability of the Company.

                  (d) Death or Disability. To provide for the event the
         Executive's employment is automatically terminated on account of his
         death or is terminated by either the Company or the Executive on
         account of Disability (defined below), the Company shall purchase and
         provide for the Executive life insurance in the amount of one times
         annual salary and shall purchase and provide for the Executive
         supplemental executive long-term disability benefits (to the extent
         necessary to provide the total benefits described herein, net of the
         Company's existing group long-term disability plan) to provide salary
         replacement in the amount of sixty percent (60%) of annual salary at
         the date of disability (to continue until at least age sixty-five (65),
         or for life if reasonably practicable). As used herein, "DISABILITY"
         means any physical or mental condition of the Executive that (i)
         prevents the Executive from being able to perform the services required
         under this Agreement, (ii) has continued for at least one hundred
         eighty (180) consecutive days during any twelve (12)-month period and
         (iii) is reasonably expected to continue. The Company's obligation to
         provide to the Executive long-term disability benefits hereunder shall
         be defined by the long-term disability benefits contract it is able to
         procure from an unrelated third party. For that purpose, the definition
         of disability shall be as stated in the contract. The Company and the
         Executive recognize that the definition of Disability hereunder may
         differ from the contract definition and the benefits payable shall be
         those as stated in the contract. The Company, however, agrees to obtain
         a contract with a definition of disability as similar as possible to
         the definition stated hereunder. Moreover, the Company and the
         Executive agree that for purposes of the other provisions of this
         Agreement, the definition of Disability as stated herein shall control.

                  (e) Termination by Company Without Cause or by the Executive
         with Good Reason. If either the Company terminates the Executive's
         employment for any reason other than for Cause or on account of
         Disability or the Executive terminates his employment for Good Reason
         (as hereinafter defined), the Company shall:

                           (i) pay to the Executive, within thirty (30) days
                  after the date of such termination, a lump sum cash payment
                  equal to 2.99 times the Executive's then current annual rate
                  of Total Compensation;

                           (ii) pay the Executive any accrued but unpaid
                  compensation as of the date of the termination of employment;
                  and

                           (iii) continue until the first anniversary of the
                  termination of the Executive's employment, or such longer
                  period as any plan, program or policy or ERISA or other laws
                  may provide, benefits to the Executive as set forth in Section
                  7(f) below.

                                      -6-
<PAGE>

         As used in this Agreement, "GOOD REASON" shall mean: (A) the failure by
         the Company to elect or re-elect or to appoint or re-appoint the
         Executive to the office of Senior Vice President-Land of the Company
         without Cause; (B) a material change in the powers, duties,
         responsibilities or functions of the Executive as described in Section
         2 hereof, including (without limitation) any change which would alter
         the Executive's reporting responsibilities or cause the Executive's
         position with the Company to be of less dignity, responsibility,
         importance or scope than the position (and attributes thereof) of
         Senior Vice President-Land of the Company, (C) without the Executive's
         prior written consent, the relocation of the Company's principal
         executive offices outside the greater Houston, Texas metropolitan area
         or requiring the Executive to be based other than at such principal
         executive offices, (D) the failure of the Company to obtain any
         assumption agreement required by Section 16 hereof, (E) the failure by
         the Company to pay the Executive within ten (10) days after a written
         demand therefor any installment of any previous award of or deferred
         compensation, if any, under any employee benefit plan or any deferred
         compensation program in effect in which the Executive may have
         participated, (F) any other material breach of this Agreement by the
         Company, or (G) the occurrence of a Change of Control.

         As used in this Agreement, a "CHANGE OF CONTROL" shall mean:

                           (i) the acquisition after the Effective Date by any
                  individual, entity or group (within the meaning of Section
                  13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
                  as amended) (a "PERSON") of beneficial ownership of twenty
                  percent (20%) or more of either (i) the then outstanding
                  shares of common stock of the Company (the "OUTSTANDING COMMON
                  STOCK") or (ii) the combined voting power of the then
                  outstanding voting securities of the Company entitled to vote
                  generally in the election of directors (the "OUTSTANDING
                  VOTING SECURITIES"), provided that for purposes of this
                  subsection (i), the following acquisitions shall not
                  constitute a Change of Control: (A) any acquisition directly
                  from the Company, (B) any acquisition by the Company, (C) any
                  acquisition by any employee benefit plan (or related trust)
                  sponsored or maintained by the Company or any corporation
                  controlled by the Company, or (D) any acquisition by any
                  corporation pursuant to a transaction which complies with
                  clauses (A), (B) and (C) of subsection (iii) hereof; or

                           (ii) individuals, who, as of the Effective Date,
                  constitute the Board (the "INCUMBENT BOARD") cease for any
                  reason to constitute at least a majority of the Board,
                  provided that any individual becoming a director subsequent to
                  the Effective Date whose election, or nomination for election
                  by the Company's shareholders, was approved by a vote of at
                  least a majority of the directors then comprising the
                  Incumbent Board shall be considered as though such individual
                  was a member of the Incumbent Board, but excluding, for this
                  purpose, any such individual whose initial assumption of
                  office occurs as a result of an actual or threatened election
                  contest with respect to the election or removal of directors
                  or other actual or threatened solicitation of proxies or
                  consents by or on behalf of a Person other than the Board; or

                                      -7-
<PAGE>

                           (iii) consummation after the Effective Date of a
                  reorganization, merger or consolidation or sale or other
                  disposition of all or substantially all of the assets of the
                  Company (a "CORPORATE TRANSACTION") in each case, unless,
                  following such Corporate Transaction, (A) (1) all or
                  substantially all of the persons who were the beneficial
                  owners of the Outstanding Common Stock immediately prior to
                  such Corporate Transaction beneficially own, directly or
                  indirectly, more than sixty percent (60%) of the then
                  outstanding shares of common stock of the corporation
                  resulting from such Corporate Transaction, and (2) all or
                  substantially all of the persons who were the beneficial
                  owners of the Outstanding Voting Securities immediately prior
                  to such Corporate Transaction beneficially own, directly or
                  indirectly, more than sixty percent (60%) of the combined
                  voting power of the then outstanding voting securities
                  entitled to vote generally in the election of directors of the
                  corporation resulting from such Corporate Transaction
                  (including, without limitation, a corporation which as a
                  result of such transaction owns the Company or all or
                  substantially all of the Company's assets either directly or
                  through one or more subsidiaries) in substantially the same
                  proportions as their ownership of the Outstanding Common Stock
                  and the Outstanding Voting Securities immediately prior to
                  such Corporate Transaction, as the case may be, (B) no Person
                  (excluding (l) any corporation resulting from such Corporate
                  Transaction or any employee benefit plan (or related trust) of
                  the Company or such corporation resulting from such Corporate
                  Transaction and (2) any Person approved by the Incumbent
                  Board) beneficially owns, directly or indirectly, twenty
                  percent (20%) or more of the then outstanding shares of common
                  stock of the corporation resulting from such Corporate
                  Transaction or the combined voting power of the then
                  outstanding voting securities of such corporation except to
                  the extent that such ownership existed prior to such Corporate
                  Transaction and (C) at least a majority of the members of the
                  board of directors of the corporation resulting from such
                  Corporate Transaction were members of the Incumbent Board at
                  the time of the execution of the initial agreement or of the
                  action of the Board providing for such Corporate Transaction.

         As used in this Agreement, the term "TOTAL COMPENSATION" shall mean the
         sum of the following:

                           (i) the current annual salary of the Executive
                  referenced in Section 3;

                           (ii) the current car allowance provided by the
                  Company to the Executive referenced in Section 4(c); and

                           (iii) the Executive's annual bonus, calculated as
                  though the Company's financial targets had been met at one
                  hundred percent (100%), referenced in Section 3 and EXHIBIT A.

                  (f) Insurance and Other Special Benefits. To the extent the
         Executive is eligible thereunder, for a period of twelve (12) months
         following termination pursuant to Section 7(e) hereof, the Executive
         shall continue to be provided life insurance policies provided to the
         Executive on the date hereof or such successor policies in effect at
         the

                                      -8-
<PAGE>

         time of the Executive's termination, and shall also continue to be
         covered for the applicable period by each other insurance, health or
         other benefit program, plan or policy (excluding long-term disability)
         by which he was covered at the time of the Executive's termination. In
         the event the Executive is ineligible to continue to be so covered
         under the terms of any such life insurance, health or other benefit
         program, plan or policy, the Company shall provide to the Executive
         through other sources such benefits (excluding long-term disability),
         including such additional benefits, as may be necessary to make the
         benefits applicable to the Executive substantially equivalent to those
         in effect immediately prior to such termination, provided that if
         during such period the Executive should enter into the employ of
         another company or firm which provides to the Executive substantially
         similar benefit coverage, the Executive's participation in the
         comparable benefits provided by the Company, either directly or through
         such other sources, shall cease. Nothing contained in this paragraph
         shall be deemed to require or permit termination or restriction of any
         of the Executive's coverage under any plan or program of the Company or
         any of its subsidiaries or any successor plan or program thereto to
         which the Executive is entitled under the terms of such plan or
         program, whether at the end of the aforementioned twelve (12)-month
         period or at any other time. Upon termination of the Executive's
         employment under Section 7(d) or 7(e) hereof, any vesting, lapse of
         time or similar requirement under any stock option plan, restricted
         stock plan or other employee benefit or deferred compensation plan or
         program in which the Executive may participate shall be accelerated to
         the date of such termination and any conditions to the Executive's
         entitlement to any benefits under any of such plans or programs shall
         be deemed to have been satisfied.

                  (g) Certain Additional Payments by the Company. Anything in
         this Agreement to the contrary notwithstanding, in the event it shall
         be determined that any payment or distribution by the Company to or for
         the benefit of the Executive, whether paid or payable or distributed or
         distributable pursuant to the terms of this Agreement or otherwise (a
         "PAYMENT"), would be subject to the excise tax imposed by Section 4999
         of the Code or any interest or penalties with respect to such excise
         tax (such excise tax, together with any such interest and penalties,
         are hereinafter collectively referred to as the "EXCISE TAX"), then the
         Executive shall be entitled to receive an additional payment (a
         "GROSS-UP PAYMENT") in an amount such that after payment by the
         Executive of all taxes (including any interest or penalties imposed
         with respect to such taxes), including any Excise Tax imposed upon the
         Gross-Up Payment, the Executive retains an amount of the Gross-Up
         Payment equal to the Excise Tax imposed upon the Payments. Subject to
         the provisions of this Section 7(g), all determinations required to be
         made hereunder, including whether a Gross-Up Payment is required and
         the amount of such Gross-Up Payment, shall be made by Arthur Andersen
         L.L.P. or such other accounting firm which at the time audits the
         financial statements of the Company (the "ACCOUNTING FIRM") at the sole
         expense of the Company, which shall provide detailed supporting
         calculations both to the Company and the Executive within fifteen (15)
         business days of the date of termination of the Executive's employment
         under this Agreement, if applicable, or such earlier time as is
         requested by the Company. If the Accounting Firm determines that no
         Excise Tax is payable by the Executive, the Accounting Firm shall
         furnish the Executive with an opinion that he has substantial authority
         not to report any Excise Tax on his federal income tax return. Any
         determination by the Accounting Firm shall be binding

                                      -9-
<PAGE>

         upon the Company and the Executive. As a result of the uncertainty in
         the application of Section 4999 of the Code at the time of the initial
         determination by the Accounting Firm hereunder, it is possible that
         Gross-Up Payments, which will not have been made by the Company should
         have been made (an "UNDERPAYMENT"), consistent with the calculations
         required to be made hereunder. If the Company exhausts its remedies
         pursuant hereto and the Executive thereafter is required to make a
         payment of any Excise Tax, the Accounting Firm shall determine the
         amount of the Underpayment that has occurred and any such Underpayment
         shall be promptly paid by the Company to or for the benefit of the
         Executive.

                  The Executive shall notify the Company in writing of any claim
         by the Internal Revenue Service that, if successful, would require the
         payment by the Company of the Gross-Up Payment. Such notification shall
         be given as soon as practicable but no later than ten (10) business
         days after the Executive knows of such claim and shall apprise the
         Company of the nature of such claim and the date on which such claim is
         requested to be paid. The Executive shall not pay such claim prior to
         the expiration of the thirty (30)-day period following the date on
         which it gives such notice to the Company (or such shorter period
         ending on the date that any payment of taxes with respect to such claim
         is due). If the Company notifies the Executive in writing prior to the
         expiration of such period that it desires to contest such claim, the
         Executive shall:

                           (i) give the Company any information reasonably
                  requested by the Company relating to such claim,

                           (ii) take such action in connection with contesting
                  such claim as the Company shall reasonably request in writing
                  from time to time, including (without limitation) accepting
                  legal representation with respect to such claim by an attorney
                  reasonably selected by the Company,

                           (iii) cooperate with the Company in good faith to
                  effectively contest such claim, and

                           (iv) permit the Company to participate in any
                  proceedings relating to such claim;

         provided that the Company shall bear and pay directly all costs and
         expenses (including additional interest and penalties) incurred in
         connection with such contest and shall indemnify and hold the Executive
         harmless, on an after-tax basis, for any Excise Tax or income tax,
         including interest and penalties with respect thereto, imposed as a
         result of such representation and payment of costs and expenses.
         Without limitation on the foregoing provisions hereof the Company shall
         control all proceedings taken in connection with such contest and, at
         its sole option, may pursue or forego any and all administrative
         appeals, proceedings, hearings and conferences with the taxing
         authority in respect of such claim and may, at its sole option, either
         direct the Executive to pay the tax claimed and sue for a refund or
         contest the claim in any permissible manner, and the Executive agrees
         to prosecute such contest to a determination before any administrative
         tribunal, in a court of initial jurisdiction and in one or more
         appellate courts, as the

                                      -10-
<PAGE>

         Company shall determine, provided that if the Company directs the
         Executive to pay such claim and sue for a refund, the Company shall
         advance the amount of such payment to the Executive, on an
         interest-free basis and shall indemnify and hold the Executive
         harmless, on an after-tax basis, from any Excise Tax or income tax,
         including interest or penalties with respect thereto, imposed with
         respect to such advance or with respect to any imputed income with
         respect to such advance, and further provided that any extension of the
         statute of limitations relating to payment of taxes for the taxable
         year of the Executive with respect to which such contested amount is
         claimed to be due is limited solely to such contested amount.
         Furthermore, the Company's control of the contest shall be limited to
         issues with respect to which a Gross-Up Payment would be payable
         hereunder and the Executive shall be entitled to settle or contest, as
         the case may be, any other issue raised by the Internal Revenue Service
         or any other taxing authority.

                  If, after the receipt by the Executive of an amount advanced
         by the Company pursuant hereto, the Executive becomes entitled to
         receive any refund with respect to such claim, the Executive shall
         (subject to the Company's complying with the requirements hereof)
         promptly pay to the Company the amount of such refund (together with
         any interest paid or credited thereon after taxes applicable thereto).
         If, after the receipt by the Executive of an amount advanced by the
         Company pursuant hereto, a determination is made that the Executive
         shall not be entitled to any refund with respect to such claim and the
         Company does not notify the Executive in writing of its intent to
         contest such denial of refund prior to the expiration of thirty (30)
         days after such determination, then such advance shall be forgiven and
         shall not be required to be repaid and the amount of such advance shall
         offset, to the extent thereof, the amount of Gross-Up Payment required
         to be paid.

                  (h) Either party may, within fifteen (15) days after receipt
         of a Notice of Termination from the other party, provide notice to the
         other party that a dispute exists concerning the termination, in which
         event the dispute shall be resolved in accordance with Section 9
         hereof. Notwithstanding the pendency of any such dispute and
         notwithstanding any provision of this Agreement to the contrary, the
         Company will (i) continue to pay the Executive the annual base salary
         described in Section 3 hereof and (ii) continue the Executive as a
         participant in all compensation and benefit plans in which the
         Executive was participating when the relevant Notice of Termination was
         given, until the dispute is finally resolved or, with respect to a
         Notice of Termination given by the Executive, the date of termination
         specified in such Notice of Termination if earlier, but, in each case,
         not past the Expiration Date. If (i) the Company gives a Notice of
         Termination to the Executive, (ii) the Executive disputes the
         termination as contemplated by this paragraph (h) and (iii) such
         dispute is finally in favor of the Company in accordance with Section 9
         hereof, the Executive shall be required to refund to the Company any
         amounts paid to the Executive under this paragraph (h) but only if, and
         then only to the extent, the Executive is not otherwise entitled to
         receive such amounts under this Agreement.

         8. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company or any of its
affiliated companies and for which the

                                      -11-
<PAGE>

Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreements with
the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan
or program of the Company or any of its affiliated companies at or subsequent to
the date of termination of the Executive's employment under this Agreement shall
be payable in accordance with such plan or program.

         9. RESOLUTION OF DISPUTES.

                  (a) Negotiation. The parties shall attempt in good faith to
         resolve any dispute arising out of or relating to this Agreement
         promptly by negotiations between the Executive and an executive officer
         of the Company who has authority to settle the controversy. Any party
         may give the other party written notice of any dispute not resolved in
         the normal course of business. Within ten (10) days after the effective
         date of such notice, the Executive and an executive officer of the
         Company shall meet at a mutually acceptable time and place within the
         Houston, Texas metropolitan area, and thereafter as often as they
         reasonably deem necessary, to exchange relevant information and to
         attempt to resolve the dispute. If the matter has not been resolved
         within thirty (30) days of the disputing party's notice, or if the
         parties fail to meet within ten (10) days, either party may initiate
         arbitration of the controversy or claim as provided hereinafter. If a
         negotiator intends to be accompanied at a meeting by an attorney, the
         other negotiator shall be given at least three (3) business days'
         notice of such intention and may also be accompanied by an attorney.
         All negotiations pursuant to this Section 9(a) shall be treated as
         compromise and settlement negotiations for the purposes of the federal
         and state rules of evidence and procedure.

                  (b) Arbitration. Any dispute arising out of or relating to
         this Agreement or the breach, termination or validity thereof, which
         has not been resolved by non-binding means as provided in Section 9(a)
         within sixty (60) days of the initiation of such procedure, shall be
         finally settled by arbitration conducted expeditiously in accordance
         with the Center for Public Resources, Inc. ("CPR") Rules for
         Non-Administered Arbitration of Business Disputes by three (3)
         independent and impartial arbitrators, of whom each party shall appoint
         one, provided that if one party has requested the other to participate
         in a non-binding procedure and the other has failed to participate, the
         requesting party may initiate arbitration before the expiration of such
         period. Any such arbitration shall take place in Harris County, Texas.
         Any arbitrator not appointed by a party shall be appointed from the CPR
         Panels of Neutrals. The arbitration shall be governed by the United
         States Arbitration Act and any judgment upon the award decided upon by
         the arbitrators may be entered by any court having jurisdiction
         thereof. Each party hereby acknowledges that compensatory damages
         include (without limitation) any benefit or right of indemnification
         given by another party to the other under this Agreement.

         10. EXPENSES. The Company shall promptly pay or reimburse the Executive
for all costs and expenses, including, without limitation, court costs and
attorneys' fees, incurred by the Executive as a result of any claim, action or
proceeding (including, without limitation a claim

                                      -12-
<PAGE>

action or proceeding by the Executive against the Company) arising out of, or
challenging the validity or enforceability of, this Agreement or any provision
hereof.

         11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Texas. Venue and jurisdiction
of any act on relating to this agreement shall lie in Harris County, Texas.

         12. NOTICE. Any notice, payment, demand or communication required or
permitted to be given by this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered personally or if sent
by registered or certified mall, return receipt requested, postage prepaid,
addressed to such party at its address set forth below such party's signature to
this Agreement or to such other address as shall have been furnished in writing
by such party for whom the communication is intended. Any such notice shall be
deemed to be given on the date so delivered.

         13. SEVERABILITY. In the event any provisions hereof shall he modified
or held ineffective by any court, such adjudication shall not invalidate or
render ineffective the balance of the provisions hereof.

         14. ENTIRE AGREEMENT. This Agreement constitutes the sole agreement
between the parties with respect to the employment of the Executive by the
Company and supersedes any and all other agreements, oral or written, between
the parties.

         15. AMENDMENT AND WAIVER. This Agreement may not be modified or amended
except by a writing signed by the parties. Any waiver or breach of any of the
terms of this Agreement shall not operate as a waiver of any other breach of
such terms or conditions, or any other terms or conditions, nor shall any
failure to enforce any provisions hereof operate as a waiver of such provision
or any other provision hereof.

         16. ASSIGNMENT. This Agreement is a personal employment contract and
the rights and interests of the Executive hereunder may not be sold,
transferred, assigned or pledged. The Company may assign its rights under this
Agreement to (i) any entity into or with which the Company is merged or
consolidated or to which the Company transfers all or substantially all of its
assets or (ii) any entity, which at the time of such assignment, controls, is
under common control with, or is controlled by the Company, provided that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company, by agreement in form and substance reasonably
acceptable to the Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if not such succession had taken place.

         17. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Executive and his heirs, executors, administrators and legal
representatives. This Agreement shall be binding upon and inure to the benefit
of the Company and its successors and assigns.

         18. SECTION HEADINGS. The section headings in this Agreement have been
inserted for convenience and shall not be used for interpretive purposes or to
otherwise construe this Agreement.

                                      -13-
<PAGE>

         19. NO MITIGATION OR SET-OFF. The provisions of this Agreement are not
intended to, nor shall they be construed to, require that the Executive mitigate
the amount of any payment provided for in this Agreement by seeking or accepting
other employment, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by the Executive as a result of
his employment by another employer or otherwise. The Company's obligations to
make the payments to the Executive required under this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set off,
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against the Executive.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above and intend that this Agreement have the effect
of a sealed instrument.

                                   /s/ Tracy Price
                                   ---------------------------------------------
                                   Tracy Price

                                   THE HOUSTON EXPLORATION COMPANY

                                   /s/ William G. Hargett
                                   ---------------------------------------------
                                   William G. Hargett
                                   President and Chief Executive Officer

                                      -14-
<PAGE>

                                    EXHIBIT A

ANNUAL INCENTIVE PLAN

         The Executive will participate in the Company's annual incentive bonus
plan which will be based on a target measure of profitability to be determined
by the Board of Directors from year to year ("TARGET"). If the Company reaches
100% of Target, the Executive would earn 100% of his target bonus. The target
bonus will be determined as a percentage of the Executive's annual salary. The
percentage for the annual bonus for the Executive will be:

<Table>
<Caption>
                                                                              Percentage of Salary
                                                                             for Target Annual Bonus
                                                                             -----------------------
<S>                                                                          <C>
         Tracy Price, Senior Vice President - Land                                     55%
</Table>

Moreover, if the Company performs better or worse than the target earnings, the
bonus will be directly affected. A schedule of target earnings and target bonus
will be as follows:

<Table>
<Caption>
                         Percentage of                                     Percentage of Target Annual
                   Target Earned by Company                                  Incentive Bonus Earned
                   ------------------------                                ---------------------------
<S>                                                                        <C>
                         Less than 70%                                                  0%

                              70%                                                      40%
                              80%                                                      60%
                              90%                                                      80%
                             100%                                                     100%
                             110%                                                     120%
                             120%                                                     140%
                             130%                                                     160%
                             140%                                                     180%
                             150% and more                                            200%
</Table>

As an example, if (1) the Target is $4,500,000, (2) an executive's annual salary
is $250,000, (3) the target annual bonus percentage is 45%, and (4) actual
results achieved reaches $4,500,000, the executive's target bonus would be
$112,500. Since actual results achieved equaled 100% of Target, he would earn
$112,500. If actual results achieved were $5,220,000 (116%), he would be
entitled to 132% of his target bonus, or $148,500.

                                      A-1
<PAGE>

LONG TERM INCENTIVE PLAN

         The Executive will participate in the Company's 1996 Stock Option Plan.
The 1996 Stock Option Plan shall be paid in Company stock options under a plan
providing for qualified incentive stock options (for federal income tax
purposes) to the extent possible and a non-qualified stock options for the
remainder.

         All options granted will have a term of ten (10) years and will vest in
one-fifth (1/5) increments over five (5) years beginning on the first
anniversary of the date granted; provided, however, that such options shall be
deemed fully vested (i) on the death of the Executive or other employee, (ii) on
the termination of the Executive's or other employee's employment on the
Disability of the Executive or other employee after the Executive or other
employee had already vested sixty percent (60%) or more of the option grant, or
(iii) on the termination of the Executive's or other employee's employment by
the Company without Cause or by the Executive or other employee for Good Reason,
or after the third anniversary of the date granted for any reason by the Company
other than for Cause.

         During the Term of Employment, each year on the anniversary of the
Initial Public Offering of the Company, the Executive shall be eligible for an
additional option grant for that number of shares equal to a percentage of the
Executive's annual salary divided by a per share option value determined under
the Black-Scholes model. The percentage of the annual Long Term Incentive grant
for the Executive will be:

<Table>
<Caption>
                                               Target Percentage of Base Salary
                                               --------------------------------
<S>                                            <C>
                  Tracy Price                                  50
</Table>

                                      A-2

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