Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 4.2

 NEITHER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
  NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED
  UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES
  ACT”) OR OTHER APPLICABLE SECURITIES LAWS. THESE SECURITIES HAVE BEEN
  ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY
  NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE
  WITH THE PROVISIONS OF REGULATIONS S, RULE 901 THROUGH RULE 905, AND PRELIMINARY
  NOTES UNDER THE U.S. SECURITIES ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION
  FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OR (3) PURSUANT
  TO AN EFFECTIVE REGISTRATION STATEMENT. HEDGING TRANSACTIONS INVOLVING THESE
  SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES
  ACT. 

  COMMON STOCK PURCHASE WARRANT 

	 Warrant No. A-[  ]
    	 [ ] shares  

 Original Issue Date: August 8, 2005 

 THIS CERTIFIES THAT, FOR VALUE RECEIVED, [ ]
  or its registered assigns ("Holder") is entitled to purchase, on the terms and
  conditions hereinafter set forth, up to [ ] ([ ]) shares of the Common
  Stock, $.001 par value (the "Common Stock"), of Terax Energy, Inc., a Nevada
  corporation (the "Issuer"), at a price of ONE DOLLAR AND SEVENTY-FIVE CENTS
  ($1.75) per share (the "Exercise Price"), such number of shares and
  Exercise Price being subject to adjustment upon the occurrence of the contingencies
  set forth in this Warrant. Each share of Common Stock as to which this Warrant
  is exercisable is a "Warrant Share" and all such shares are collectively referred
  to as the "Warrant Shares."

 THIS WARRANT MAY BE EXERCISED at any time or from time
  to time from the date hereof until 5:00 p.m., Central Time, on the date which
  is eighteen (18) month following the Original Issue Date set forth above, or
  if such date is not a day on which the Issuer (as hereinafter defined) is open
  for business, then the next succeeding day on which the Issuer is open for business,
  subject to acceleration as provide for in Section 3 hereof (such date being
  the "Expiration Date"), but not thereafter. THIS WARRANT IS VOID AND WILL
  HAVE NO FURTHER FORCE OR EFFECT AFTER THE EXPIRATION DATE. 

 - 2 - 

Section 1. Exercise of Warrant; Conversion of Warrant. 

	 	 (a)      	 This Warrant may, at the option of Holder, be exercised
        in whole or in part from time to time by delivery to the Issuer at its
        principal office, Attention: President, on or before 5:00 p.m., Central
        Time, on the Expiration Date, (i) a written notice of such Holder's election
        to exercise this Warrant (the "Exercise Notice"), which notice may be
        in the form of the Notice of Exercise attached hereto, properly executed
        and completed by Holder or an authorized officer thereof, (ii) a certified
        check or money order payable to the order of the Issuer, in an amount
        equal to the product of the Exercise Price multiplied by the number of
        Warrant Shares specified in the Exercise Notice, and (iii) this Warrant
        (the items specified in (i), (ii), and (iii) are collectively the "Exercise
        Materials"). 

	 
	 	 (b)      	 As promptly as practicable, and in any event within
        five (5) business days after its receipt of the Exercise Materials, Issuer
        shall execute or cause to be executed and delivered to Holder a certificate
        or certificates representing the number of Warrant Shares specified in
        the Exercise Notice, together with cash in lieu of any fraction of a share,
        and if this Warrant is partially exercised, a new warrant on the same
        terms for the unexercised balance of the Warrant Shares. The stock certificate
        or certificates shall be registered in the name of Holder or such other
        name or names as shall be designated in the Exercise Notice. The date
        on which the Warrant shall be deemed to have been exercised (the "Effective
        Date"), and the date the person in whose name any certificate evidencing
        the Common Stock issued upon the exercise hereof is issued shall be deemed
        to have become the holder of record of such shares, shall be the date
        the Issuer receives the Exercise Materials, irrespective of the date of
        delivery of a certificate or certificates evidencing the Common Stock
        issued upon the exercise or conversion hereof, provided, however, that
        if the Exercise Materials are received by the Issuer on a date on which
        the stock transfer books of the Issuer are closed, the Effective Date
        shall be the next succeeding date on which the stock transfer books are
        open. All shares of Common Stock issued upon the exercise or conversion
        of this Warrant will, upon issuance, be fully paid and nonassessable and
        free from all taxes, liens, and charges with respect thereto. 

Section 2. Adjustments to Warrant Shares.

                The
  number of Warrant Shares issuable upon the exercise hereof shall be subject
  to adjustment as follows: 

	 	 (a)      	 In the event the Issuer is a party to a consolidation,
        share exchange, or merger, or the sale of all or substantially all of
        the assets of the Issuer to, any person, or in the case of any consolidation
        or merger of another corporation into the Issuer in which the Issuer is
        the surviving corporation, and in which there is a reclassification or
        change of the shares of Common Stock of the Issuer, this Warrant shall
        after such consolidation, share exchange, merger, or sale be exercisable
        for the kind and number of securities or amount and kind of 

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 - 3 - 

	 	 	 property of the Issuer or the corporation or other
        entity resulting from such share exchange, merger, or consolidation, or
        to which such sale shall be made, as the case may be (the "Successor Issuer"),
        to which a holder of the number of shares of Common Stock deliverable
        upon the exercise (immediately prior to the time of such consolidation,
        share exchange, merger, or sale) of this Warrant would have been entitled
        upon such consolidation, share exchange, merger, or sale; and in any such
        case appropriate adjustments shall be made in the application of the provisions
        set forth herein with respect to the rights and interests of Holder, such
        that the provisions set forth herein shall thereafter correspondingly
        be made applicable, as nearly as may reasonably be, in relation to the
        number and kind of securities or the type and amount of property thereafter
        deliverable upon the exercise of this Warrant. The above provisions shall
        similarly apply to successive consolidations, share exchanges, mergers,
        and sales. Any adjustment required by this Section 2 (a) because of a
        consolidation, share exchange, merger, or sale shall be set forth in an
        undertaking delivered to Holder and executed by the Successor Issuer which
        provides that Holder shall have the right to exercise this Warrant for
        the kind and number of securities or amount and kind of property of the
        Successor Issuer or to which the holder of a number of shares of Common
        Stock deliverable upon exercise (immediately prior to the time of such
        consolidation, share exchange, merger, or sale) of this Warrant would
        have been entitled upon such consolidation, share exchange, merger, or
        sale. Such undertaking shall also provide for future adjustments to the
        number of Warrant Shares and the Exercise Price in accordance with the
        provisions set forth in Section 2 hereof. 

	 
	 	 (b)      	 In the event the Issuer should at any time, or from
        time to time after the Original Issue Date, fix a record date for the
        effectuation of a stock split or subdivision of the outstanding shares
        of Common Stock or the determination of holders of Common Stock entitled
        to receive a dividend or other distribution payable in additional shares
        of Common Stock, or securities or rights convertible into, or entitling
        the holder thereof to receive directly or indirectly, additional shares
        of Common Stock (hereinafter referred to as "Common Stock Equivalents")
        without payment of any consideration by such holder for the additional
        shares of Common Stock or the Common Stock Equivalents (including the
        additional shares of Common Stock issuable upon exercise or exercise thereof),
        then, as of such record date (or the date of such dividend, distribution,
        split, or subdivision if no record date is fixed), the number of Warrant
        Shares issuable upon the exercise hereof shall be proportionately increased
        and the Exercise Price shall be appropriately decreased by the same proportion
        as the increase in the number of outstanding Common Stock Equivalents
        of the Issuer resulting from the dividend, distribution, split, or subdivision.
        Notwithstanding the preceding sentence, no adjustment shall be made to
        decrease the Exercise Price below $.001 per Share. 

	 
	 	 (c)      	 In the event the Issuer should at any time or from
        time to time after the Original Issue Date, fix a record date for the
        effectuation of a reverse stock split, or a 

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 - 4 - 

	 	 	 transaction having a similar effect on the number
        of outstanding shares of Common Stock of the Issuer, then, as of such
        record date (or the date of such reverse stock split or similar transaction
        if no record date is fixed), the number of Warrant Shares issuable upon
        the exercise hereof shall be proportionately decreased and the Exercise
        Price shall be appropriately increased by the same proportion as the decrease
        of the number of outstanding Common Stock Equivalents resulting from the
        reverse stock split or similar transaction. 

	 
	 	 (d)      	 In the event the Issuer should at any time or from
        time to time after the Original Issue Date, fix a record date for a reclassification
        of its Common Stock, then, as of such record date (or the date of the
        reclassification if no record date is set), this Warrant shall thereafter
        be convertible into such number and kind of securities as would have been
        issuable as the result of such reclassification to a holder of a number
        of shares of Common Stock equal to the number of Warrant Shares issuable
        upon exercise of this Warrant immediately prior to such reclassification,
        and the Exercise Price shall be unchanged. 

	 
	 	 (e)      	 The Issuer will not, by amendment of its Certificate
        of Incorporation or through reorganization, consolidation, merger, dissolution,
        issue, or sale of securities, sale of assets or any other voluntary action,
        void or seek to avoid the observance or performance of any of the terms
        of the Warrant, but will at all times in good faith assist in the carrying
        out of all such terms and in the taking of all such actions as may be
        necessary or appropriate in order to protect the rights of Holder against
        dilution or other impairment. Without limiting the generality of the foregoing,
        the Issuer (x) will not create a par value of any share of stock receivable
        upon the exercise of the Warrant above the amount payable therefor upon
        such exercise, and (y) will take all such action as may be necessary or
        appropriate in order that the Issuer may validly and legally issue fully
        paid and non-assessable shares upon the exercise of the Warrant. 

	 
	 	 (f)      	 When any adjustment is required to be made in the
        number or kind of shares purchasable upon exercise of the Warrant, or
        in the Exercise Price, the Issuer shall promptly notify Holder of such
        event and of the number of shares of Common Stock or other securities
        or property thereafter purchasable upon exercise of the Warrants and of
        the Exercise Price, together with the computation resulting in such adjustment.
      

	 
	 	 (g)      	 The Issuer covenants and agrees that all Warrant
        Shares which may be issued will, upon issuance, be validly issued, fully
        paid, and non-assessable. The Issuer further covenants and agrees that
        the Issuer will at all times have authorized and reserved, free from preemptive
        rights, a sufficient number of shares of its Common Stock to provide for
        the exercise of the Warrant in full. 

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 - 5 - 

Section 3. Acceleration of Expiry Date. 

	 	 (a)      	 In the event that the average closing price of the
        shares of the Issuer’s Common Stock on the OTCBB or other, more
        senior exchange for the twenty previous trading days exceeds $2.25,
        and provided that an effective registration statement registering the
        resale of the Warrant Shares is then in effect, the Issuer may, by written
        notice (the “Acceleration Notice”), accelerate the Expiry
        Date of the Warrants (the “Accelerated Expiry Date”) to thirty
        (30) days after the date of such Acceleration Notice. 

	 
	 	 (b)      	 Acceleration Notices shall be sent to each of the
        registered Holders of the Warrants by first class mail, postage prepaid,
        not later than the thirtieth (30th) day before the Accelerated Expiry
        Date, at their last address as shall appear on the records of the Issuer.
        Any notice mailed in the manner provided herein shall be conclusively
        presumed to have been duly given whether or not the Holder receives such
        notice. 

	 
	 	 (c)      	 The Acceleration Notice shall specify (i) the average
        closing price of the shares of the Issuer’s Common Stock for the
        twenty trading days preceding the date of the Acceleration Notice, and
        (ii) the Accelerated Expiry Date. No failure to mail such notice nor any
        defect therein or in the mailing thereof shall affect the validity of
        the Acceleration Notice except as to a Holder (a) to whom notice was not
        mailed or (b) whose notice was defective. An affidavit of the Secretary
        or other officer of the Issuer that Acceleration Notice was mailed shall,
        in the absence of fraud, be prima facie evidence of the facts stated therein.
      

	 
	 	 (d)      	 On and after the Accelerated Expiry Date, this Warrant
        will be of no further force or effect and Holders of unexercised Warrants
        shall have no further rights. 

Section 4. No Stockholder Rights. 

                This
  Warrant shall not entitle Holder hereof to any voting rights or other rights
  as a stockholder of the Issuer. 

Section 5. Transfer of Securities. 

	 	 (a)      	 This Warrant and the Warrant Shares and any shares
        of capital stock received in respect thereof, whether by reason of a stock
        split or share reclassification thereof, a stock dividend thereon, or
        otherwise, shall not be transferable except upon compliance with the provisions
        of the Securities Act of 1933, as amended (the "Securities Act") and applicable
        state securities laws with respect to the transfer of such securities.
        The Holder, by acceptance of this Warrant, agrees to be bound by the provisions
        of this Section 5 and to indemnify and hold harmless the Issuer against
        any loss or liability arising from the disposition of this Warrant or
        the Warrant Shares issuable upon exercise hereof or any interest in either
        thereof in violation of the provisions of this Warrant. 

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 - 6 - 

	 	 (b)      	 Each certificate for the Warrant Shares and any
        shares of capital stock received in respect thereof, whether by reason
        of a stock split or share reclassification thereof, a stock dividend thereon
        or otherwise, and each certificate for any such securities issued to subsequent
        transferees of any such certificate shall (unless otherwise permitted
        by the provisions hereof) be stamped or otherwise imprinted with a legend
        in substantially the following form: 

  
    
      
         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
          NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
          (THE “U.S. SECURITIES ACT”) OR OTHER APPLICABLE SECURITIES
          LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
          A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE OFFERED, SOLD, PLEDGED
          OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS
          OF REGULATIONS S, RULE 901 THROUGH RULE 905, AND PRELIMINARY NOTES UNDER
          THE U.S. SECURITIES ACT OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
          THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OR (3) PURSUANT
          TO AN EFFECTIVE REGISTRATION STATEMENT. HEDGING TRANSACTIONS INVOLVING
          THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
          U.S. SECURITIES ACT. 

      

    

  

Section 6. Registration. 

                All
  Warrant Shares are subject to the rights and privileges granted to the participants
  in the private placement offering pursuant to which this Warrant was issued.

Section 7. Miscellaneous. 

	 	 (a)      	 The terms of this Warrant shall be binding upon
        and shall inure to the benefit of any successors or permitted assigns
        of the Issuer and Holder. 

	 
	 	 (b)      	 Except as otherwise provided herein, this Warrant
        and all rights hereunder are transferable by the registered holder hereof
        in person or by duly authorized attorney on the books of the Issuer upon
        surrender of this Warrant, properly endorsed, to the Issuer. The Issuer
        may deem and treat the registered holder of this Warrant at any time as
        the absolute owner hereof for all purposes and shall not be affected by
        any notice to the contrary. 

	 
	 	 (c)      	 Notwithstanding any provision herein to the contrary,
        Holder may not exercise, sell, transfer, or otherwise assign this Warrant
        unless the Issuer is provided with an opinion of counsel satisfactory
        in form and substance to the Issuer, to the 

	 Warrant No. A-[ ]  
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      8, 2005  	

 - 7 - 

	 	 	 effect that such exercise, sale, transfer, or assignment
        would not violate the Securities Act or applicable state securities laws.
      

	 
	 	 (d)      	 This Warrant may be divided into separate warrants
        covering one share of Common Stock or any whole multiple thereof, for
        the total number of shares of Common Stock then subject to this Warrant
        at any time, or from time to time, upon the request of the registered
        holder of this Warrant and the surrender of the same to the Issuer for
        such purpose. Such subdivided Warrants shall be issued promptly by the
        Issuer following any such request and shall be of the same form and tenor
        as this Warrant, except for any requested change in the name of the registered
        holder stated herein. 

	 
	 	 (e)      	 Unless otherwise provided for herein, any notices,
        consents, waivers, or other communications required or permitted to be
        given under the terms of this Warrant must be in writing and will be deemed
        to have been delivered (a) upon receipt, when delivered personally, (b)
        upon receipt, when sent by facsimile, provided a copy is mailed by U.S.
        certified mail, return receipt requested, (c) three (3) days after being
        sent by U.S. certified mail, return receipt requested, or (d) one (1)
        day after deposit with a nationally recognized overnight delivery service,
        in each case properly addressed to the party to receive the same. If to
        Holder, to the registered address of Holder appearing on the books of
        the Issuer. 

	 
	 	 	 Each party shall provide five (5) days prior written
        notice to the other party of any change in address, which change shall
        not be effective until actual receipt thereof. 

	 
	 	 (f)      	 The corporate laws of the State of Nevada shall
        govern all issues concerning the relative rights of the Issuer and its
        stockholders. All other questions concerning the construction, validity,
        enforcement and interpretation of this Warrant shall be governed by the
        internal laws of the State of Texas, without giving effect to any choice
        of law or conflict of law provision or rule (whether of the State of Texas
        or any other jurisdictions) that would cause the application of the laws
        of any jurisdictions other than the State of Texas. Each party hereby
        irrevocably submits to the non-exclusive jurisdiction of the state and
        federal courts sitting in the City of Austin, for the adjudication of
        any dispute hereunder or in connection herewith or with any transaction
        contemplated hereby or discussed herein, and hereby irrevocably waives,
        and agrees not to assert in any suit, action or proceeding, any claim
        that it is not personally subject to the jurisdiction of any such court,
        that such suit, action or proceeding is brought in an inconvenient forum
        or that the venue of such suit, action or proceeding is improper. Each
        party hereby irrevocably waives personal service of process and consents
        to process being served in any such suit, action or proceeding by mailing
        a copy thereof to such party at the address for such notices to it under
        this Warrant and agrees that such service shall constitute good and sufficient
        service of process and notice thereof. Nothing contained herein shall
        be deemed to limit in any way any right to serve process in any manner
        permitted by law. 

	 
	 	 	 If any provision of this Warrant shall be invalid
        or unenforceable in any 

	 Warrant No. A-[ ]  
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      8, 2005  	

 - 8 - 

	 	 	jurisdiction, such invalidity or unenforceability
        shall not affect the validity or enforceability of the remainder of this
        Warrant in that jurisdiction or the validity or enforceability of any
        provision of this Warrant in any other jurisdiction.

IN WITNESS WHEREOF, the Issuer, has caused this Warrant
  to be executed in its name by its duly authorized officer under seal, and to
  be dated as of the date first above written. 

 TERAX ENERGY, INC. 

 

	
By: 
		 

		 

	
	 

		
J. William Rhea, IV 
		 

	
	 

		
Chief Executive Officer 
		 

	
	 

		 

		
c/s 
	

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 

ASSIGNMENT 

 (To be Executed by the Registered Holder to effect a
  

  Transfer of the foregoing Warrant) 

 FOR VALUE RECEIVED, the undersigned hereby sells, and
  assigns and transfers unto__________________________________________

 ____________________________________________________________________________________________________________

  [Name of Assignee] 

of ___________________________________________________________________________________________________________

  [Address of Assignee] 

the attached Warrant and the rights represented thereto to
  purchase shares of Common Stock of TERAX ENERGY, INC. in accordance with
  terms and conditions thereof, and does hereby irrevocably constitute and appoint
  ______________________________________________

                                                                                                                                                                
                         
  [Name of Attorney] 

Attorney to transfer the said Warrant on the books of the Issuer,
  with full power of substitution. 

 Holder acknowledges that the Issuer may request a written
  opinion of counsel to the effect that the assignment of the Warrant is exempt
  from registration requirements of the U.S. Securities Act. 

 Signature of Holder: ____________________________________________________________

 Address: ____________________________________________________________________

 NOTICE: The signature above must correspond to the name as
  written upon the face of the within Warrant in every particular, without alteration
  or enlargement or any change whatsoever.

 Dated: __________________ , 20__. 

 (The Issuer may require that the signature above be guaranteed
  by an acceptable financial institution, in which event the following must be
  completed.) 

	 Signature of Warrant holder guaranteed by: 
    	  
	  	 (Signature)  
	 	 
	 	 
	  	 Name:  
	 	 
	 	 
	  	 (Authorized Signature Number)  

	 Warrant No. A-[ ]  
 August
      8, 2005  	

 

EXERCISE NOTICE 

 [To be signed only upon exercise of Warrant] 

TO: TERAX ENERGY, INC. 

 The undersigned Holder of the attached Warrant hereby irrevocably
  elects to exercise the Warrant for, and to purchase thereunder, _____________________________________________
  shares of Common Stock of TERAX ENERGY, INC., issuable upon exercise
  of said Warrant and hereby surrenders said Warrant, together with a certified
  check or money order payable to the order of the Issuer on account of the exercise
  price. In connection with the exercise of the attached Warrant, the undersigned
  Holder represents as follows: (Please check the ONE box applicable): 

	  ̈	 1.              The
        representations and warranties made to the Issuer in connection with the
        acquisition of the Warrants remain true and correct on the date of this
        Exercise Notice. 

	  ̈
    	 2.              The
        undersigned is delivering a written opinion of counsel to the effect that
        the Common Stock to be delivered upon exercise hereof is exempt from registration
        requirements of the U.S. Securities Act.

 The undersigned herewith requests that the certificates for
  such shares be issued in the name of, and delivered to the undersigned, whose
  address is

	 	 	 	 
	 	 	[Address]	 
	 	 	 	 
	 	 	 	 
	Signature of Holder: 	 	 
	 	 	 	 
	Address: 	 	 	 

NOTICE: The signature above must correspond to the name as
  written upon the face of the within Warrant in every particular, without alteration
  or enlargement or any change whatsoever.

 Dated: __________________ , 20__. 

 (The Issuer may require that the signature above be guaranteed
  by an acceptable financial institution, in which event the following must be
  completed.) 

	 Signature of Warrant holder guaranteed by: 
    	 
    
	  	 (Signature)  
	 	 
	 	 
	  	 Name:  
	 	 
	 	 
	  	 (Authorized Signature Number) 
    

	 Warrant No. A-[ ]  
 August
      8, 2005Filed by Automated Filing Services Inc. (604) 609-0244 - Terax Energy, Inc. - Exhibit 10.7

Exhibit 10.5 

 EXECUTIVE EMPLOYMENT AGREEMENT

                THIS
  EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made as
  of the May 27, 2005 but effective the 1st day of June, 2005 (the
  “Effective Date”) by and between Terax Energy, Inc. (the "Company")
  and J. William Rhea, IV (the "Executive"). 

                WHEREAS,
  the Company desires to employ the Executive in an executive capacity, and Executive
  desires to accept such employment, upon the terms, conditions and for the consideration
  hereinafter set forth. 

                NOW
  THEREFORE, in consideration of theses premises and the mutual covenants
  and obligations contained herein, the Company and the Executive agree as follows:

                1.       
  Employment Period. The Company hereby agrees to employ the Executive,
  and the Executive hereby agrees to become an employee of the Company, subject
  to the terms and conditions of this Agreement, for the period commencing on
  the Effective Date and ending on the second anniversary of such date (the "Employment
  Period").

                2.       
  Terms of Employment. (a) Position and Duties. (i) During the Employment
  Period, the Executive shall be employed as the senior officer of the Company,
  and hold the position of Chief Executive Officer of the Company, reporting only
  to the Board of Directors (the “Board”) of the Company. The Executive
  will also hold such additional positions as determined by the Board, provided
  such determination is consistent with the Company’s then current financial
  situation. In addition, at all times during the Employment Period the Company
  shall cause the Executive to be nominated to serve on the Board as full member
  thereof.

                (ii)       
  During the Employment Period, excluding any periods of vacation, sick leave
  and other time-off to which the Executive is entitled under this Agreement or
  applicable Company policies, the Executive agrees to devote substantially all
  of his attention and time to the business and affairs of the Company and, to
  the extent necessary to discharge the responsibilities of the Executive, use
  the Executive’s reasonable best efforts to perform faithfully and efficiently
  such responsibilities. It shall not be a violation of this Agreement during
  the Employment Period for the Executive, and the Executive is expressly permitted,
  to spend a reasonable amount of time during normal business hours of the Company
  (including out-of-town travel) (A) serving on or with corporate, civic or charitable
  boards, committees and groups, and (B) delivering lectures, accepting and fulfilling
  speaking engagements, teaching at educational institutions and seminars, and
  writing or publishing papers, articles or books, provided that such services
  are consistent with the interests of the Company and do not interfere with the
  Executive’s obligations to the Company hereunder. 

                (iii)      
  During the Employment Period, except for out-of-town travel and meetings, the
  Executive's duties shall be performed primarily at the location of the Company’s
  principal corporate office which is to be located in Austin, Texas. 

                (b)       
  Salary. During the Employment Period, the Executive shall receive an
  annual salary (the "Annual Salary"), which shall be paid in equal installments
  in accordance with the Company's standard policy regarding payment of compensation
  to executives, but no less frequently than monthly. The amount of the Annual
  Salary shall be Two Hundred and Seventy-Five Thousand United States Dollars
  ($275,000). 

	
Terax Energy, Inc. 
		
J. William Rhea, IV 
	
	 

		
Employment Agreement 
	

                (c)       
  Bonuses. In addition to Annual Salary, the Executive may be awarded for
  each fiscal year of the Employment Period an annual bonus (the "Annual Bonus")
  of up Eighty-Two Thousand Five Hundred United States Dollars ($82,500) as
  determined either by: (i) the unanimous consent of the Board; or (ii) the consent
  of a majority of the Board and based upon the written recommendation of a professional
  compensation consultant as selected by the Board with due consideration being
  given to whether the Company has met the Performance Milestones as those terms
  are defined in the Management Stock Pool Agreement to be entered into between
  the Company and its senior management (such determination, by unanimous or majority
  consent, being referred to herein as the “Compensation Determination Method”).
  For greater certainly, the Executive must abstain from voting on any of the
  preceding resolutions. The Annual Bonus shall be determined and awarded each
  year within thirty (30) days of the filing of the Company’s Annual Report
  with the Securities and Exchange Commission. 

                (d)       
  Election. The Executive may, in his sole discretion, elect (the “Bonus
  Election”) to be paid the Annual Bonus in cash or in shares of the Company’s
  Common Stock (or a combination thereof), provided that the Executive has given
  notice of the Bonus Election not less than ten (10) and not more that twenty
  (20) days after the date on which the Annual Bonus is determined and awarded.
  In the event that the Executive does not make any Bonus Election the Annual
  Bonus shall be paid in cash. The number of shares of the Company’s Common
  Stock to be issued to the Executive shall be equal to the amount of the Annual
  Bonus to be paid in Common Stock divided by seventy-five percent (75%) of the
  average closing price of the Company’s Common Stock (on the most senior
  exchange on which the Common Stock is quoted) for the thirty (30) day period
  prior to the receipt by the Company of notice of the Bonus Election. 

                (e)       
  Benefits. During the Employment Period, the Executive and/or the Executive's
  family, as the case may be, shall be eligible for participation in and shall
  receive all benefits and privileges under any benefit, welfare, savings and
  retirement, plans, practices, policies and programs provided by the Company
  and its affiliated companies (including, without limitation, medical, prescription,
  dental, disability, salary continuance, employee life, group life, accidental
  death and travel accident insurance, 401k and other plans and programs). 

                (f)       
  Expenses. During the Employment Period the Executive shall be entitled
  to receive prompt reimbursement for all reasonable expenses and costs incurred
  by the Executive in accordance with the Company’s standard policies, practices
  and procedures.

                (g)       
  Vacation. During the Employment Period the Executive shall be entitled
  to paid vacation (“Vacation”) each calendar year of twenty (20)
  days beginning with the year of the Effective Date. 

                3.       
  Termination of Employment. (a) Death. The Executive’s employment
  shall terminate automatically upon the Death of the Executive during the Employment
  Period. For purposes of this Agreement, “Death” shall be deemed
  to have occurred on the date the Executive is certified to be dead by the government
  agency or person having competent jurisdiction over such certification, unless
  the Executive’s legal representative shall contest the certification through
  a court proceeding, in which case the court’s determination shall control.

                (b)       
  Disability. If the Company determines in good faith that the Disability
  of the Executive has occurred during the Employment Period (pursuant to the
  definition of Disability set forth below), it may give to the Executive written
  notice of its intention to terminate the Executive's employment. In such event,
  the Executive's employment with the Company shall terminate effective on the
  30th day after receipt of such notice by the Executive or his legal representative
  (the "Disability Effective 

	
Terax Energy, Inc. 
		 2	
J. William Rhea, IV 
	
	 

		 

		
Employment Agreement 
	

 Date"), unless within the 30 days after such receipt, the
  Executive shall have begun performance of the Executive's duties. For purposes
  of this Agreement, “Disability” shall mean the Executive has discontinued
  performing his duties for 60 consecutive business days due to incapacity due
  to mental or physical illness. 

                (c)       
  Cause. The Company may terminate the Executive's employment during the
  Employment Period for Cause. "Cause" shall include: 

                (i)       
  the Executive becoming charged with a felony offence; 

                (ii)      
  the Board being presented with substantive evidence of drug, alcohol or substance
  abuse by the Executive; and 

                (iii)     
  any breach by the Executive of his duties or obligations hereunder, provided
  that if such breach is “cureable” the Company shall be required
  to give the Executive notice of such breach and the Executive shall be required,
  within fourteen (14) days following delivery of such notice, to cure such breach
  or commence proceedings to cure such breach by appropriate performance and the
  breach must be cured without undue delay. 

                For
  the purposes of this Section 3(b) a “cureable” breach shall not
  include any breach of this Agreement resulting from: 

                (i)
         fraud by the Executive against the
  Company; 

                (ii)
        a breach by the Executive of the provisions
  of Section 6 of this Agreement; 

                (iii)     
  the intentional misappropriation of a corporate opportunity of the Company by
  the Executive for his direct or indirect personal benefit; or 

                (iv)
        willful or intentional failure to obey the
  instructions of the Board consistent with his duties hereunder. 

                (d)       
  Good Reason. The Executive's employment may be terminated by the Executive
  for Good Reason. For the sole and exclusive purposes of this Agreement, "Good
  Reason" shall mean: 

                (i)       
  the alteration or diminution of the Executive's position which results in a
  violation or diminution of the rights of the Executive under Section 2(a) of
  this Agreement, excluding any acts or omissions that are isolated, insubstantial
  or inadvertent and which are remedied by the Company promptly after receipt
  of notice thereof given by the Executive; or 

                (ii)      
  any failure by the Company to pay the amounts required under or otherwise comply
  with any of the provisions of Sections 2(b), 2(c) or 2(f) of this Agreement
  (provided that the Company has sufficient funds available to make such payments),
  other than an isolated, insubstantial or inadvertent failure which is remedied
  by the Company promptly after receipt of notice thereof given by the Executive.

                (e)       
  Expiration. The Executive's employment shall terminate at the end of
  the Employment Period. 

                (f)       
  Notice of Termination. Any termination of employment by the Company or
  by the Executive shall be communicated by Notice of Termination to the other
  party hereto. For purposes of 

	 Terax Energy, Inc.  	 3	 J. William Rhea, IV  
	  	  	 Employment Agreement  

 this Agreement, a "Notice of Termination" means a written
  notice which (i) indicates the specific termination provision in this Agreement
  relied upon, (ii) to the extent applicable, sets forth in reasonable detail
  the facts and circumstances claimed to provide a basis for termination of the
  Executive's employment under the provision so indicated, and (iii) if the Date
  of Termination (as defined below) is other than the date of receipt of such
  notice, specifies the termination date (which date shall be not more than thirty
  days after the giving of such notice). The failure by the Executive or the Company
  to set forth in the Notice of Termination any fact or circumstance which contributes
  to a showing of Good Reason or Cause shall not waive any rights of the Executive
  or the Company, respectively, hereunder or preclude the Executive or the Company,
  respectively, from asserting such fact or circumstance in enforcing the Executive's
  or the Company's rights hereunder. 

                (g)       
  Date of Termination. For purposes of this Agreement, “Date of Termination”
  means (i) if the Executive’s employment is terminated by the Company or
  by the Executive, the date of receipt of the Notice of Termination or any later
  date specified therein, as the case may be, (ii) if the Executive's employment
  is terminated by reason of Death or Disability, the Date of Termination shall
  be the date of Death of the Executive or the Disability Effective Date, as the
  case may be, and (iii) if the Executive's employment is terminated by reason
  of the expiration of the Employment Period, the Date of Termination shall be
  the last day of the Employment Period. 

                4.       
  Obligations Upon Termination. (a) Good Reason; Other Than for Cause,
  Death, Disability or Expiration. If, during the Employment Period,
  the Company shall terminate the Executive's employment other than for: (i) Cause,
  (ii) Death, (iii) Disability, or (iv) the expiration of the Employment Period;
  or if the Executive shall terminate his employment for Good Reason, the Company
  shall pay to the Executive the following amounts: 

                (i)       
  the sum of (1) the Annual Salary through the Date of Termination to the extent
  not theretofore paid, (2) any compensation previously deferred by the Executive
  (together with any accrued interest or earnings thereon), and (3) the prorata
  amount of the Annual Salary applied to any accrued but unused Vacation days
  of the Executive through the Date of Termination; in each case to the extent
  not theretofore paid (the sum of the amounts described in the foregoing clauses
  (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”);
  and 

                (ii)      
  the lesser of (X) the Annual Salary, prorated for a three (3) month period,
  and (Y) the amount of the Annual Salary from the Date of Termination to the
  end of the Employment Period (the “Severance Payment”), in both
  cases paid monthly over the period (the “Severance Period”) provided
  that, in the event that the Executive secures other employment or office during
  the Severance Period, the Executive agrees to remit to the Company the difference
  (if any) between the Severance Payment and the compensation received by the
  Executive from that other office or employment. Notwithstanding the preceding,
  the Executive agrees that, during the Severance Period, he will not, directly
  or indirectly, compete with the Company unless he notifies the Company of this
  fact, in which case the Company may cease to pay the Severance Payment to the
  Executive; 

                (iii)     
  all unvested contributions to any savings, retirement or other plans or programs
  benefiting the Executive and/or his family shall immediately become 100% vested,
  and all such plans and programs applicable to the Executive shall be automatically
  amended and reformed as, and the Company shall take all actions which are, necessary,
  appropriate or reasonable to accommodate and give effect to this clause; and

                (iv)      
  to the extent applicable and not theretofore paid or provided, the Company shall
  timely pay or provide to the Executive any other amounts or benefits that have
  accrued or which are required 

	 Terax Energy, Inc.  	 4	 J. William Rhea, IV  
	  	  	 Employment Agreement  

 to be paid or provided or which the Executive and/or his family
  is eligible to receive under Section 2(e) hereof, or any applicable plan, program,
  policy or practice or contract or agreement of the Company and its affiliated
  companies (such benefits shall be hereinafter referred to as the “Other
  Benefits”); 

                (b)       
  Death or Disability. If the Executive's employment is terminated by reason
  of the Executive's Death or Disability during the Employment Period, this Agreement
  shall terminate without further obligations to the Executive's estate or legal
  representatives under this Agreement, except that (i) the Company shall pay
  all Accrued Obligations in a lump sum in cash within 30 days of the Date of
  Termination, (ii) the Company shall timely pay and provide the Other Benefits
  to the extent applicable or theretofore unpaid. 

                (c)       
  Cause or Other than for Good Reason. If the Executive's employment shall
  be terminated for Cause during the Employment Period, or if the Executive resigns
  or voluntarily terminates his employment during the Employment Period, excluding
  a termination for Good Reason: (I) this Agreement shall terminate without further
  obligations to the Executive, except that the Company shall pay to the Executive
  the following amounts: 

                (i)       
  the Accrued Obligations through the Date of Termination to the extent not theretofore
  paid; and 

                (ii)       
  the Company shall timely pay and provide the Other Benefits to the extent applicable
  or theretofore unpaid. 

                (d)       
  Change of Control. In the event of a Change of Control (as hereinafter
  defined), the Executive shall have the option (but not the obligation) to terminate
  this Agreement, and upon the exercise of such option by the Executive the Company
  shall pay to the Executive the following amounts: 

                (i)       
  the Accrued Obligations through the date of the Change of Control to the extent
  not theretofore paid; and 

                (ii)      
  an amount equal to the Annual Salary (the “Change of Control Payment”)
  paid monthly over the twelve month period following the Change of Control provided
  that, in the event that the Executive secures other employment or office during
  such twelve month period, the Executive agrees to remit to the Company the difference
  (if any) between the Change of Control Payment and the compensation received
  by the Executive from that other office or employment. Notwithstanding the preceding,
  the Executive agrees that, during such twelve month period, he will not, directly
  or indirectly, compete with the Company unless he notifies the Company of this
  fact, in which case the Company may cease to pay the Change of Control Payment
  to the Executive; 

                (iii)     
  all unvested contributions to any savings, retirement or other plans or programs
  benefiting the Executive and/or his family shall immediately become 100% vested,
  and all such plans and programs applicable to the Executive shall be automatically
  amended and reformed as, and the Company shall take all actions which are, necessary,
  appropriate or reasonable to accommodate and give effect to this clause; and

                (iv)      
  to the extent applicable and not theretofore paid or provided, the Company shall
  timely pay or provide to the Executive any Other Benefits; 

	 Terax Energy, Inc.  	 5	 J. William Rhea, IV  
	  	  	 Employment Agreement  

        For the purposes
  of this Section 4(d), “Change of Control” means:

                (i)       
  The acquisition 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 (the
  "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
  Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i)
  the then outstanding shares of common stock of the Company (the “Outstanding
  Company 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 Company Voting Securities"); provided,
  however, that the following acquisitions shall not constitute a Change of Control:
  (i) any acquisition directly from the Company, (ii) any acquisition by the Company,
  (iii) any acquisition by any employee benefit plan (or related trust) sponsored
  or maintained by the Company or any corporation controlled by the Company, or
  (iv) any acquisition by any corporation pursuant to a transaction which complies
  with the following clause (ii); or 

                (ii)
        The approval by the shareholders of the
  Company of a reorganization, merger, share exchange or consolidation (a "Business
  Combination"), in each case, unless, following such Business Combination, all
  or substantially all of the individuals and entities who were the beneficial
  owners, respectively, of the Outstanding Company Common Stock and Outstanding
  Company Voting Securities immediately prior to such Business Combination beneficially
  own, directly or indirectly, more than 50% of, respectively, the then outstanding
  shares of common stock and the combined voting power of the then outstanding
  voting securities entitled to vote generally in the election of directors, as
  the case may be, of the corporation resulting from such Business Combination
  (including, without limitation, a corporation which as a result of such transaction
  owns the Company through one or more subsidiaries); or 

                (iii)
       The approval by the shareholders of the Company
  of (i) a complete liquidation or dissolution of the Company, or (ii) the sale
  or other disposition of all or substantially all of the assets of the Company
  unless, following such sale or other disposition more than 50% of, respectively,
  the then outstanding shares of common stock of such corporation and the combined
  voting power of the then outstanding voting securities of such corporation entitled
  to vote generally in the election of directors is then beneficially owned, directly
  or indirectly, by all or substantially all of the individuals and entities who
  were the beneficial owners, respectively, of the Outstanding Company Common
  Stock and Outstanding Company Voting Securities immediately prior to such sale
  or other disposition.

                (e)       
  Expiration of the Employment Period. If the Executive's employment is
  terminated by reason of the expiration of the Employment Period, this Agreement
  shall terminate without further obligations to the Executive.

                5.       
  Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
  limit the Executive's continuing or future participation in any plan, program,
  policy or practice provided by the Company or any of its affiliated companies
  for which the Executive may qualify, nor shall anything herein limit or otherwise
  affect such rights as the Executive may have under any contract or agreement
  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,
  policy, practice or program of or any contract or agreement with the Company
  or any of its affiliated companies at or subsequent to the Date of Termination
  shall be payable in accordance with such plan, policy, practice or program or
  contract or agreement except as explicitly modified by this Agreement. 

                6.       
  Confidential Information. The Executive shall hold in a fiduciary capacity
  for the benefit of the Company all secret or confidential information, knowledge
  or data relating to the Company or 

	 Terax Energy, Inc.  	 6	 J. William Rhea, IV  
	  	  	 Employment Agreement  

 any of its affiliated companies, and their respective businesses,
  which shall have been obtained by the Executive during the Executive's employment
  by the Company or any of its affiliated companies and which shall not be or
  become public knowledge (other than by acts by the Executive or representatives
  of the Executive in violation of this Agreement). After termination of the Executive's
  employment with the Company, the Executive shall not, without the prior written
  consent of the Company or as may otherwise be required by law or legal process,
  communicate or divulge any such information, knowledge or data to anyone other
  than the Company and those designated by it.

                7.       
  Successors. (a) This Agreement is personal to the Executive and without
  the prior written consent of the Company shall not be assignable by the Executive
  otherwise than by will or the laws of descent and distribution. This Agreement
  shall inure to the benefit of and be enforceable by the Executive’s estate,
  heirs, beneficiaries and legal representatives. 

                (b)       
  This Agreement shall inure to the benefit of and be binding upon the Company
  and its successors and assigns. 

                8.       
  Miscellaneous. (a) This Agreement shall be governed by and construed
  in accordance with the laws of the State of Texas, without reference to principles
  of conflict of laws. The captions of this Agreement are not part of the provisions
  hereof and shall have no force or effect. This Agreement contains the complete
  and entire agreement between the parties hereto with respect to the matters
  contained herein, and may not be amended or modified otherwise than by a written
  agreement executed by the parties hereto or their respective successors and
  legal representatives expressly written and executed for such purpose. 

                (b)
         All notices and other communications
  required hereunder to be in writing shall be given by two or more of the following
  methods: (i) hand delivery to the other party, (ii) commercial courier or mail
  service, or (iii) registered or certified US mail, return receipt requested,
  postage prepaid; and in the case of the Company shall be addressed to the Company’s
  Registered Agent and the Company’s Secretary at the Company’s principal
  corporate office, and in the case of the Executive shall be addressed to the
  Executive’s office at the Company and the Executive’s latest primary
  residence as identified in the records of the Company, or to such other address
  as either party shall have furnished to the other in writing in accordance herewith.
  Notice and communications hereunder shall be effective, when delivered on a
  businesses day on the date of delivery, and when delivered on a day other than
  a business day on the next following business day. 

                (c)       The
  invalidity or unenforceability of any provision of this Agreement shall not
  affect the validity or enforceability of any other provision of this Agreement.

                (d)
         The Company may withhold from any
  amounts payable under this Agreement such Federal, state, local or foreign taxes
  as shall be required to be withheld pursuant to any applicable law or regulation.

                (e)
  The Executive's or the Company's failure to insist upon strict compliance with
  any provision hereof or any other provision of this Agreement or the failure
  to assert any right the Executive or the Company may have hereunder shall not
  be deemed to be a waiver of such provision or right or any other provision or
  right of this Agreement. 

	 Terax Energy, Inc.  	 7	 J. William Rhea, IV  
	  	  	 Employment Agreement  

                IN
  WITNESS WHEREOF, the parties have executed this Agreement to be effective
  as of the 1st day of June, 2005. 

TERAX ENERGY, INC. 

	By: 	 /s/ Bill Chester  	 /s/ J. William Rhea, IV  
	 	 Bill Chester, President  	 J. William Rhea, IV  

 Execution Date: May 27, 2005 

 

 

	 Terax Energy, Inc.  	 8	 J. William Rhea, IV  
	  	  	 Employment Agreement

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