Document:

NATURAL GAS SYSTEMS, INC.

                              EMPLOYMENT AGREEMENT

      THIS AGREEMENT  ("Agreement")  is entered into as of April 4, 2005, by and
between STERLING  MCDONALD (the  "Executive")  and NATURAL GAS SYSTEMS,  INC., a
Nevada corporation (the "Company").  The Agreement  supercedes any and all prior
agreements,  written or oral, including but not limited to the Executive's prior
employment  agreement with the Company and its predecessor in interest,  Natural
Gas Systems, a Delaware corporation,  other than the stock options granted under
the Company's 2003 Stock Option Plan of Natural Gas Systems, Delaware, which was
assumed by the Company.

            1.    DUTIES AND SCOPE OF EMPLOYMENT.

            (a) POSITION.  For the term of his  employment  under this Agreement
      (the  "Employment"),  the Company  agrees to employ the  Executive  in the
      position of Chief  Financial  Officer.  The Executive  shall report to the
      Company's  CEO and  Board of  Directors,  or to such  other  person as the
      Company subsequently may determine.

            (b) OBLIGATIONS TO THE COMPANY.  During the term of employment under
      this Agreement,  Executive shall devote his/her full business  efforts and
      time to the Company.  The foregoing  shall not preclude the Executive from
      engaging in appropriate civic,  charitable or religious activities or from
      devoting  a  reasonable  amount  of time to  private  investments  or from
      serving  on the boards of  directors  of other  entities,  as long as such
      activities  and/or  services do not  interfere  or conflict  with  his/her
      responsibilities  to the Company.  Executive may provide material work for
      companies  or third  parties,  if and only if such  work is  disclosed  in
      writing  and  Executive  receives  consent  from the Board at a  duly-held
      meeting  of the  Board of  Directors  of the  Company  or if such  work is
      described  in  Exhibit D  hereto.  The  Executive  shall  comply  with the
      Company's  policies and rules,  as they may be in effect from time to time
      during his Employment.

            (c)  NO  CONFLICTING  OBLIGATIONS.   The  Executive  represents  and
      warrants to the Company that he is under no  obligations  or  commitments,
      whether   contractual  or  otherwise,   that  are  inconsistent  with  his
      obligations under this Agreement.

            2.  CASH  AND  INCENTIVE  COMPENSATION.  For  clarification,  it  is
understood  by all parties that other than as specified  herein,  the Company is
not  obligated  to award any  future  grants of stock  options  or other form of
equity compensation to Executive during Executive's employment with the Company.

            (a) SALARY.  The Company shall pay the Executive as compensation for
      his  services  a base  salary  at a  gross  annual  rate  of  $150,000.00,
      effective January 1, 2005, which may be increased annually at the election
      and sole  discretion  of the  board of  directors.  Such  salary  shall be
      payable in accordance with the Company's standard payroll procedures.  The
      annual  compensation  specified in this Subsection (a),  together with any
      increases  in such  compensation  that the  Company may grant from time to
      time, is referred to in this Agreement as "Base Salary.")

            (b)  INCENTIVE  BONUSES.  The  Executive  shall  be  eligible  to be
      considered for an annual incentive bonus of up to 75% of base salary based
      on objective or subjective criteria  established by the Company's Board of
      Directors (the "Board") or the  Compensation  Committee of the Board.  The
      determinations of the Board or its Compensation  Committee with respect to
      such bonus, if any, shall be final and binding. The Executive shall not be
      entitled to an incentive bonus if he is not employed by the Company on the
      date when such bonus is payable.

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            (c)  STOCK  OPTIONS.  In  addition  to  the  250,000  stock  options
      previously  granted to the Executive under the Company's 2003 Stock Option
      Plan,  an  subject  to the  approval  of  the  Board  or the  Compensation
      Committee  of the Board,  the Company  shall  grant the  Executive a stock
      option  covering an  additional  Three Hundred  Fifty  Thousand  (350,000)
      shares of the Company's Common Stock. Such option shall be granted as soon
      as reasonably  practicable after the date of this Agreement.  The exercise
      price of such option shall be equal to the fair market value of such stock
      on the date of grant or this  agreement.  The term of such option shall be
      10 years, subject to earlier expiration in the event of the termination of
      the Executive's Employment.  The Executive shall vest in the option shares
      in equal  quarterly  installments of 1/16th per quarter over the next four
      years of continuous service.  The grant of such option shall be subject to
      the other terms and  conditions set forth in the Company's 2004 Stock Plan
      and in the Stock Option  Agreement,  attached  hereto as EXHIBITS A AND B,
      respectively.

            3. VACATION AND EXECUTIVE  BENEFITS.  Executive shall be entitled to
fifteen (15) days of vacation and five (5) personal  days per year,  to be taken
in such amounts and at such times as shall be mutually  convenient for Executive
and the  Company.  Any  vacation  days  exceeding  five (5)  days  not  taken by
Executive in one year shall be forfeited  and not carried  forward to subsequent
years. During his Employment,  the Executive shall be eligible to participate in
the employee  benefit plans  maintained by the Company,  subject in each case to
the generally applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.

            4. BUSINESS EXPENSES. During his Employment,  the Executive shall be
authorized to incur  necessary and reasonable  travel,  entertainment  and other
business  expenses in connection  with his duties  hereunder.  The Company shall
reimburse  the Executive  for such  expenses  upon  presentation  of an itemized
account and  appropriate  supporting  documentation,  all in accordance with the
Company's generally applicable policies.

            5. TERM OF EMPLOYMENT.

            (a)  TERMINATION  OF  EMPLOYMENT.  The  Company  may  terminate  the
      Executive's  Employment at any time and for any reason (or no reason), and
      with or  without  Cause,  by giving  the  Executive  ten  day's  notice in
      writing.  The Executive may terminate his Employment by giving the Company
      ten days' advance  notice in writing.  The  Executive's  Employment  shall
      terminate  automatically in the event of his death. The termination of the
      Executive's Employment shall not limit or otherwise affect his obligations
      under Section 7.

            (b) EMPLOYMENT AT WILL. The Executive's  Employment with the Company
      shall be "at will," meaning that either the Executive or the Company shall
      be entitled to terminate  the  Executive's  Employment at any time and for
      any reason, with or without Cause. Any contrary  representations  that may
      have been made to the Executive  shall be  superseded  by this  Agreement.
      This Agreement shall  constitute the full and complete  agreement  between
      the Executive  and the Company on the "at will" nature of the  Executive's
      Employment,  which may only be  changed in an  express  written  agreement
      signed by the Executive and a duly authorized officer of the Company.

            (c) CONSTRUCTIVE  TERMINATION.  The term "CONSTRUCTIVE  TERMINATION"
      shall  mean any of the  following:  (i) any  breach by the  Company of any
      material provision of this Agreement,  including,  without limitation, the
      assignment  to the  Executive  of duties  inconsistent  with his  position

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      specified  in Section  1(a)  hereof or any  breach by the  Company of such
      Section, which is not cured within 45 days after written notice of same by
      Executive (except that such cure period shall be fifteen days with respect
      to any breach of Section  10(h)  hereof  unless  such breach is due to the
      actions or inactions of the  Executive),  describing  in detail the breach
      asserted and stating that it constitutes  notice  pursuant to this Section
      5(c); or (ii) relocation of Executive's offices in excess of 20 miles from
      its  current   location;   or  (iii)  a   substantial   reduction  of  the
      responsibilities, authority or scope of work of Executive.

            (d) RIGHTS UPON TERMINATION. Except as expressly provided in Section
      6, upon the termination of the Executive's Employment, the Executive shall
      only be entitled to the compensation,  benefits and expense reimbursements
      that the  Executive has earned under this  Agreement  before the effective
      date of the  termination.  The payments under this  Agreement  shall fully
      discharge all responsibilities of the Company to the Executive.

            6. TERMINATION BENEFITS.

            (a)  GENERAL   RELEASE.   Any  other  provision  of  this  Agreement
      notwithstanding,  Subsections (b) and (c) below shall not apply unless the
      Executive  (i) has  executed  a general  release  of all claims (in a form
      prescribed  by the  Company)  and (ii) has  returned  all  property of the
      Company in the Executive's possession.

            (b)  SEVERANCE  PAY.  If  the  Company  terminates  the  Executive's
      Employment for any reason other than Cause or Permanent Disability,  or if
      the  Executive  subject to a  Constructive  Termination,  then the Company
      shall pay the  Executive  his Base Salary and maintain and pay his medical
      benefit and long-term  disability  coverage for a period of six (6) months
      following the termination of his Employment (the  "Continuation  Period").
      Such  Base  Salary  shall be paid at the rate in effect at the time of the
      termination  of Employment and in accordance  with the Company's  standard
      payroll procedures.

            (c)  DEFINITION OF "CAUSE." For all purposes  under this  Agreement,
      "Cause" shall mean:

            (i) An  unauthorized  use or  disclosure  by  the  Executive  of the
      Company's  confidential   information  or  trade  secrets,  which  use  or
      disclosure causes material harm to the Company;

            (ii) A material breach by the Executive of any agreement between the
      Executive and the Company;

            (iii) A  material  failure  by the  Executive  to  comply  with  the
      Company's written policies or rules;

            (iv) The  Executive's  conviction  of,  or plea of  "guilty"  or "no
      contest"  to, a felony  under the laws of the  United  States or any state
      thereof;

            (v) The Executive's gross negligence or willful misconduct; or

            (vi) A continued failure by the Executive to perform assigned duties
      after  receiving  written  notification  of such failure from the Board of
      Directors.

            (d)  DEFINITION OF "PERMANENT  DISABILITY."  For all purposes  under
      this  Agreement,   "Permanent   Disability"  shall  mean  the  Executive's

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      inability to perform the essential functions of the Executive's  position,
      with or  without  reasonable  accommodation,  for a period  of at least 90
      consecutive days because of a physical or mental impairment.

            (e) CHANGE IN CONTROL.  In the event that a Change in Control of the
      Company  occurs as a result of a sale or  merger  of the  Company  and the
      Executive is terminated or is subject to a Constructive Termination within
      one  year  following  such  event,  then  the  Executive  shall be paid an
      additional  severance payment equal to six months of Base Salary,  paid in
      monthly  increments,  (the "CHANGE IN CONTROL PAYMENT"),  provided that if
      the Executive obtains similar employment before the end of the six months,
      then the remaining amount of the Change in Control Payment will be reduced
      by half.  "Change in Control" shall mean: (1) The consummation of a merger
      or  consolidation  of the Company with or into another entity or any other
      corporate reorganization, if persons who were not controlling stockholders
      of the Company  immediately  prior to such merger,  consolidation or other
      reorganization  own immediately after such merger,  consolidation or other
      reorganization  50%  or  more  of the  voting  power  of  the  outstanding
      securities of each of (A) the  continuing or surviving  entity and (B) any
      direct or indirect  parent  corporation  of such  continuing  or surviving
      entity;  OR  (2)The  sale,   transfer  or  other  disposition  of  all  or
      substantially  all of the Company's  assets. A Change in Control shall not
      occur  if its  sole  purpose  is to  change  the  state  of the  Company's
      incorporation  or to  create  a  holding  company  that  will be  owned in
      substantially  the same  proportions by the persons who held the Company's
      securities immediately before such transaction.

            7. NON-SOLICITATION AND CONFIDENTIAL INFORMATION.

            (a)  NON-SOLICITATION.  During the period  commencing on the date of
      this Agreement and continuing until the first anniversary of the date when
      the Executive's  Employment terminated for any reason, the Executive shall
      not  directly or  indirectly,  personally  or through  others,  solicit or
      attempt  to  solicit  (on the  Executive's  own behalf or on behalf of any
      other  person or entity)  either (i) the  employment  of any  employee  or
      consultant of the Company or any of the  Company's  affiliates or (ii) the
      business of any current or recent  customer  or working  interest  partner
      with whom the  Company is engaged in one or more  documented  projects  or
      relationships.

            (b) CONFIDENTIAL  INFORMATION.  During Executive's Employment and at
      all times  thereafter,  Executive  shall not,  without  the prior  express
      written consent of the Board (except as may be required in connection with
      any  judicial or  administrative  proceeding  or inquiry)  disclose to any
      person,  other than an officer or  director  of the Company or a person to
      whom disclosure is reasonably  necessary or appropriate in connection with
      the  performance  by  Executive  of his  duties as CFO,  any  Confidential
      Information  (defined  below) with  respect to the business and affairs of
      the Company or any of its subsidiaries,  unless such disclosure is subject
      to a  confidentiality  agreement or the confidential  information has been
      previously disclosed through no fault of Executive. Executive acknowledges
      that he has  and  will  have  access  to  proprietary  information,  trade
      secrets,  and  confidential  material  (including  lists of key personnel,
      customers,  clients, vendors,  suppliers,  distributors or consultants) of
      the Company (the "CONFIDENTIAL  INFORMATION").  Executive agrees,  without
      limitation  in time or until such  information  shall become  public other
      than  by  the  Executive's  unauthorized   disclosure,   to  maintain  the
      confidentiality   of  the   Confidential   Information  and  refrain  from
      divulging,  disclosing, or otherwise using in any respect the Confidential
      Information  to the detriment of the Company and any of its  subsidiaries,
      affiliates, successors or assigns, or for any other purpose or no purpose,
      unless such disclosure is subject to a  confidentiality  agreement or such
      Confidential  Information  is  previously  disclosed  through  no fault of
      Executive  or unless  such  Confidential  Information  is  required  to be
      released by law.

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            8. SUCCESSORS.

            (a) COMPANY'S  SUCCESSORS.  This Agreement shall be binding upon any
      successor  (whether  direct or indirect  and whether by  purchase,  lease,
      merger,  consolidation,  liquidation or otherwise) to all or substantially
      all of the Company's  business and/or assets.  For all purposes under this
      Agreement, the term "Company" shall include any successor to the Company's
      business and/or assets that becomes bound by this Agreement.

            (e)  EXECUTIVE'S  SUCCESSORS.  This  Agreement and all rights of the
      Executive  hereunder shall inure to the benefit of, and be enforceable by,
      the   Executive's   personal   or   legal   representatives,    executors,
      administrators, successors, heirs, distributees, devisees and legatees.

            9. ARBITRATION.

            (a) SCOPE OF ARBITRATION REQUIREMENT. The parties hereby waive their
      rights to a trial before a judge or jury and agree to  arbitrate  before a
      neutral  arbitrator  any and all claims or  disputes  arising  out of this
      Agreement  and  any  and  all  claims  arising  from  or  relating  to the
      Executive's Employment,  including (but not limited to) claims against any
      current or former  employee,  director or agent of the Company,  claims of
      wrongful termination, retaliation,  discrimination,  harassment, breach of
      contract,  breach  of  the  covenant  of  good  faith  and  fair  dealing,
      defamation,  invasion of privacy, fraud,  misrepresentation,  constructive
      discharge  or failure to provide a leave of absence,  or claims  regarding
      commissions, stock options or bonuses, infliction of emotional distress or
      unfair business practices.

            (b) PROCEDURE.  The arbitrator's decision shall be written and shall
      include  the  findings  of fact and law that  support  the  decision.  The
      arbitrator's  decision shall be final and binding on both parties,  except
      to the extent  applicable  law allows for judicial  review of  arbitration
      awards.  The  arbitrator  may award any remedies  that would  otherwise be
      available  to the parties if they were to bring the dispute in court.  The
      arbitration  shall be conducted in accordance  with the National Rules for
      the  Resolution  of  Employment  Disputes  of  the  American   Arbitration
      Association. The arbitration shall take place in Houston, Texas.

            (c) COSTS. The parties shall share the costs of arbitration equally.
      Both the  Company and the  Executive  shall be  responsible  for their own
      attorneys' fees.  Notwithstanding the forgoing,  the non-prevailing  party
      shall reimburse the prevailing party for arbitration  costs and reasonable
      attorney's fees.

            (d)  APPLICABILITY.  This  Section 9 shall not apply to (i) workers'
      compensation or unemployment  insurance  claims or (ii) claims  concerning
      the validity,  infringement or enforceability of any trade secret,  patent
      right,  copyright  or any other trade secret or  Confidential  Information
      held or sought by either the Executive or the Company.

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            10. MISCELLANEOUS PROVISIONS.

            (a) NOTICE.  Notices and all other  communications  contemplated  by
      this  Agreement  shall be in writing and shall be deemed to have been duly
      given when  personally  delivered  or when  mailed by U.S.  registered  or
      certified mail, return receipt requested and postage prepaid.  In the case
      of the  Executive,  mailed  notices  shall be addressed to him at the home
      address that he most recently  communicated to the Company in writing.  In
      the  case  of the  Company,  mailed  notices  shall  be  addressed  to its
      corporate headquarters, and all notices shall be directed to the attention
      of its Secretary.

            (b) MODIFICATIONS AND WAIVERS.  No provision of this Agreement shall
      be  modified,  waived or  discharged  unless the  modification,  waiver or
      discharge  is agreed to in writing and signed by the  Executive  and by an
      authorized officer of the Company (other than the Executive). No waiver by
      either party of any breach of, or of  compliance  with,  any  condition or
      provision  of this  Agreement  by the other  party shall be  considered  a
      waiver of any other  condition or  provision  or of the same  condition or
      provision at another time.

            (c) WHOLE  AGREEMENT.  This Agreement  supersedes any previous offer
      letter or employment  agreement.  No other agreements,  representations or
      understandings  (whether  oral or written and whether  express or implied)
      which  are not  expressly  set forth in this  Agreement  have been made or
      entered into by either party with  respect to the subject  matter  hereof.
      This Agreement and the exhibits and agreements  referenced  herein contain
      the entire understanding of the parties with respect to the subject matter
      hereof.

            (d) WITHHOLDING  TAXES. All payments made under this Agreement shall
      be subject to reduction to reflect taxes or other  charges  required to be
      withheld by law.

            (e)  CHOICE  OF  LAW  AND  SEVERABILITY.  This  Agreement  shall  be
      interpreted  in  accordance  with the laws of the  State of Texas  (except
      their  provisions  governing  the choice of law). If any provision of this
      Agreement  becomes or is deemed invalid,  illegal or  unenforceable in any
      applicable  jurisdiction by reason of the scope, extent or duration of its
      coverage,  then such  provision  shall be deemed  amended  to the  minimum
      extent  necessary  to  conform  to  applicable  law so as to be valid  and
      enforceable or, if such provision cannot be so amended without  materially
      altering  the  intention  of the  parties,  then such  provision  shall be
      stricken and the remainder of this Agreement  shall continue in full force
      and effect.  If any provision of this Agreement is rendered illegal by any
      present or future statute, law, ordinance or regulation  (collectively the
      "Law"),  then such  provision  shall be  curtailed  or limited only to the
      minimum extent  necessary to bring such provision into compliance with the
      Law. All the other terms and provisions of this  Agreement  shall continue
      in full force and effect without impairment or limitation.

            (f) NO ASSIGNMENT.  This Agreement and all rights and obligations of
      the  Executive  hereunder  are  personal to the  Executive  and may not be
      transferred  or assigned  by the  Executive  at any time.  The Company may
      assign its rights  under this  Agreement  to any entity  that  assumes the
      Company's obligations hereunder in connection with any sale or transfer of
      all or a substantial portion of the Company's assets to such entity.

            (g)  COUNTERPARTS.  This  Agreement  may be  executed 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.

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            (h) INDEMNIFICATION. As an officer of the Company, Executive will be
      protected  by  the  indemnification  provisions  of  Article  VIII  of the
      Company's  Certificate  of  Incorporation.  In  addition,  the Company has
      purchased and currently  maintains  insurance  protecting its officers and
      directors  against  certain  losses  arising  out of actual or  threatened
      actions,  suits  or  proceedings  to  which  such  persons  may be made or
      threatened or be made parties ("D&O INSURANCE").  The Company covenants to
      continue  D&O  Insurance  coverage at current  levels for the  duration of
      Executive's service and for two (2) years thereafter.

      IN WITNESS  WHEREOF,  each of the parties  has  executed  this  employment
Agreement,  in the case of the Company by its duly authorized officer, as of the
day and year first above written.

                                    ----------------------------
                                    Sterling H. McDonald

                                    NATURAL GAS SYSTEMS, INC.

                                    ------------------------------
                                    By  Robert S. Herlin
                                    Title: CEO and President

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                                    EXHIBIT A
                                STOCK OPTION PLAN

                                    EXHIBIT B
                             STOCK OPTION AGREEMENT

                                     8 of 8NATURAL GAS SYSTEMS, INC.
                                 2004 STOCK PLAN

                             STOCK OPTION AGREEMENT

Name of Optionee:                   Sterling H. McDonald

Optioned Shares:                    350,000 shares of common stock, $0.001 par
                                    value, of Natural Gas Systems, Inc.

Type of Option:                     INCENTIVE STOCK OPTION

Exercise Price Per Share:           $1.80

Option Grant Date:                  April 4, 2005

Vesting Commencement Date           April 4, 2005

Date Option Becomes Exercisable:    This Option may be exercised with respect to
                                    an 1/16TH of the total Optioned Shares
                                    subject to this option when the Optionee
                                    completes each three months of continuous
                                    employment starting from the Vesting
                                    Commencement Date. This option may become
                                    exercisable on an accelerated basis under
                                    Section 8 of this Stock Option Agreement.

Expiration Date of Option:          April 4, 2015 This Option expires earlier if
                                    the Optionee's employment terminates
                                    earlier, as provided in Section 11 of the
                                    Plan.

<PAGE>

         This Stock Option Agreement (this "Agreement") is executed and
delivered as of April 4, 2005 by and between Natural Gas Systems, Inc., a Nevada
corporation (the "Company") and the Sterling H. McDonald. The Optionee and the
Company hereby agree as follows:

1.       The Company, pursuant to the Natural Gas Systems, Inc. 2004 Stock Plan
         (the "Plan"), which is incorporated herein by reference, and subject to
         the terms and conditions thereof, hereby grants to the Optionee an
         option to purchase the Optioned Shares at the Exercise Price Per Share.

2.       The option granted hereby ("Option") shall be treated as an incentive
         stock option under the Internal Revenue Code.

3.       The Option granted hereby shall terminate, subject to the provisions of
         the Plan, no later than at the close of business on the Expiration
         Date.

4.       The Optionee shall comply with and be bound by all the terms and
         conditions contained in the Plan, as incorporated by reference herein.

5.       Options granted hereby shall not be transferable except by will or the
         laws of descent and distribution. During the lifetime of the Optionee,
         the Option may be exercised only by the Optionee, the guardian or legal
         representative of the Optionee.

6.       The obligation of the Company to sell and deliver any stock under this
         Option is specifically subject to all provisions of the Plan and all
         applicable laws, rules, regulations and governmental and stockholder
         approvals.

7.       Any notice by the Optionee to the Company hereunder shall be in writing
         and shall be deemed duly given only upon receipt thereof by the Company
         at its principal offices. Any notice by the Company to the Optionee
         shall be in writing and shall be deemed duly given if mailed to the
         Optionee at the address last specified to the Company by the Optionee.

8.       In addition to the change of control provisions specified under Section
         14(e) of the Plan and the other conditions set forth in this Agreement,
         the Company hereby agrees that all or part of this Option may be
         exercised prior to its expiration at the time or times set forth below:

                  (a) If the Company is subject to a Change in Control (as
         defined in below in this Agreement and not as defined in the Plan)
         before the Optionee's employment terminates, this Option shall become
         exercisable in full if and only if (i) this Option does not remain
         outstanding following the Change in Control; (ii) this Option is not
         assumed by the surviving corporation or its parent; (iii) the surviving
         corporation or its parent does not substitute an option with
         substantially the same terms for this Option; OR (iv) the full value of
         the vested shares under this Option is not settled in cash or cash
         equivalents.

                  (b) If the Option is not exercisable in full under Paragraph
         (a) above, AND if the Optionee is subject to an Involuntary Termination
         (defined below) within 12 months after the Change in Control, then this
         Option shall become exercisable in full. However, in the case of an

                                      -1-
<PAGE>

         employee incentive stock option described in Section 422(b) of the
         Code, the acceleration of exercisability shall not occur without the
         Optionee's written consent.

                  (c) If the Option is not exercisable in full under Paragraph
         (a) above, AND if the Company is subject to a Change of Control, then
         fifty percent (50%) of the remaining options shall become exercisable
         in full, and the remaining options shall become exercisable at the rate
         set forth herein, reduced by the accelerated Optioned Shares. All other
         terms and conditions shall remain unchanged.

                  (d) Definitions:

                           (i) "Change in Control" shall mean: (1)The
                  consummation of a merger or consolidation of the Company with
                  or into another entity or any other corporate reorganization,
                  if persons who were not controlling stockholders of the
                  Company immediately prior to such merger, consolidation or
                  other reorganization own immediately after such merger,
                  consolidation or other reorganization 50% or more of the
                  voting power of the outstanding securities of each of (A) the
                  continuing or surviving entity and (B) any direct or indirect
                  parent corporation of such continuing or surviving entity; OR
                  (2) The sale, transfer or other disposition of all or
                  substantially all of the Company's assets.

                  A transaction shall not constitute a Change in Control if its
                  sole purpose is to change the state of the Company's
                  incorporation or to create a holding company that will be
                  owned in substantially the same proportions by the persons who
                  held the Company's securities immediately before such
                  transaction.

                           (ii) "Involuntary Termination" shall mean the
         termination of the Optionee's employment by reason of: (1) The
         involuntary discharge of the Optionee by the Company for reasons other
         than Cause (as defined in Optionee's employment agreement with the
         Company, of even date herewith); or (2) The voluntary resignation of
         the Optionee following a reduction in the Optionee's base salary, a
         substantial reduction of the responsibilities, authority or scope of
         work of Executive, or receipt of notice that the Optionee's principal
         workplace will be relocated more than 20 miles.

9. The validity and construction of this Agreement shall be governed by the laws
of the State of Nevada.

THIS AGREEMENT IS MADE UNDER AND SUBJECT TO THE PROVISIONS OF THE PLAN, AND ALL
OF THE PROVISIONS OF THE PLAN ARE ALSO PROVISIONS OF THIS AGREEMENT. IF THERE IS
A DIFFERENCE OR CONFLICT BETWEEN THE PROVISIONS OF THIS AGREEMENT AND THE
PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN WILL GOVERN; PROVIDED,
HOWEVER, THE THE ACCELERATION OF THE OPTIONED SHARES DESCRIBED IN SECTION 8
ABOVE SHALL GOVERN IN THE EVENT OF ANY CONFLICT WITH THE PLAN. BY SIGNING THIS
AGREEMENT, THE OPTIONEE ACCEPTS AND AGREES TO ALL OF THE FOREGOING TERMS AND
PROVISIONS AND TO ALL OF THE TERMS AND PROVISIONS OF THE PLAN INCORPORATED
HEREIN BY REFERENCE AND CONFIRMS THAT HE OR SHE HAS RECEIVED A COPY OF THE PLAN.

                                      -2-

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized representative and the Optionee has hereunto set
his hand as of the date here above first written.

                                             NATURAL GAS SYSTEMS, INC.:

                                             By:
                                                 -----------------------------
                                                  Name:   Robert S. Herlin
                                                  Title:  President

                                             ---------------------------------
                                             Optionee:    Sterling H. McDonald

                                      -3-

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