Document:

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                                                                   EXHIBIT 10.49

                             WASTE MANAGEMENT, INC.

                         2000 BROAD-BASED EMPLOYEE PLAN

                                FEBRUARY 28, 2000

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                                TABLE OF CONTENTS

                                                                     PAGE
                                                                     ----
ARTICLE I.  GENERAL...................................................1
      Section 1.1.   Purpose..........................................1
      Section 1.2.   Administration...................................1
      Section 1.3.   Eligibility for Participation....................2
      Section 1.4.   Types of Awards Under Plan.......................2
      Section 1.5.   Aggregate Limitation on Awards...................2
      Section 1.6.   Effective Date and Term of Plan..................3

ARTICLE II.  STOCK OPTIONS............................................4
      Section 2.1.   Award of Stock Options...........................4
      Section 2.2.   Stock Option Agreements..........................4
      Section 2.3.   Stock Option Price...............................4
      Section 2.4.   Term and Exercise................................4
      Section 2.5.   Manner of Payment................................4
      Section 2.6.   Delivery of Shares...............................5
      Section  2.7.  Death, Retirement and Termination of
                      Employment of Optionee..........................5
      Section 2.8.   Tax Election.....................................5
      Section 2.9.   Effect of Exercise...............................6

ARTICLE III.  INCENTIVE STOCK OPTIONS.................................6
      Section 3.1.   Award of Incentive Stock Options.................6
      Section 3.2.   Incentive Stock Option Agreements................6
      Section 3.3.   Incentive Stock Option Price.....................6
      Section 3.4.   Term and Exercise................................6
      Section 3.5.   Maximum Amount of Incentive Stock Option Grant...7
      Section 3.6.   Death of Optionee................................7
      Section 3.7.   Retirement or Disability.........................7
      Section 3.8.   Termination for Other Reasons....................7
      Section 3.9.   Applicability of Stock Options Sections..........7

ARTICLE IV.  RELOAD OPTIONS...........................................8
      Section 4.1.   Authorization of Reload Options..................8
      Section 4.2.   Reload Option Amendment..........................8
      Section 4.3.   Reload Option Price..............................8
      Section 4.4.   Term and Exercise................................8
      Section 4.5.   Termination of Employment........................8
      Section 4.6.   Applicability of Stock Options Sections..........9

ARTICLE V.  ALTERNATE APPRECIATION RIGHTS.............................9
      Section 5.1.   Award of Alternate Appreciation Rights...........9

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      Section 5.2.   Alternate Appreciation Rights Agreement..........9
      Section 5.3.   Exercise.........................................9
      Section 5.4.   Amount of Payment................................9
      Section 5.5.   Form of Payment..................................9
      Section 5.6.   Effect of Exercise...............................10
      Section 5.7.   Termination of Employment, Retirement,
                      Death or Disability.............................10

ARTICLE VI.  LIMITED RIGHTS...........................................10
      Section 6.1.   Award of Limited Rights..........................10
      Section 6.2.   Limited Rights Agreement.........................10
      Section 6.3.   Exercise Period..................................10
      Section 6.4.   Amount of Payment................................10
      Section 6.5.   Form of Payment..................................11
      Section 6.6.   Effect of Exercise...............................11
      Section 6.7.   Retirement or Disability.........................11
      Section 6.8.   Death of Optionee or Termination for
                      Other Reasons...................................11
      Section 6.9.   Termination Related to a Change in Control.......11

ARTICLE VII.  SUBSTITUTION AWARDS.....................................12

ARTICLE VIII.  BONUS STOCK AWARDS.....................................12
      Section 8.1.   Award of Bonus Stock.............................12
      Section 8.2.   Stock Bonus Agreements...........................12

ARTICLE IX.  MISCELLANEOUS............................................12
      Section 9.1.   General Restriction..............................12
      Section 9.2.   Non-Assignability................................13
      Section 9.3.   Withholding Taxes................................13
      Section 9.4.   Right to Terminate Employment....................13
      Section 9.5.   Non-Uniform Determination........................13
      Section 9.6.   Rights as a Shareholder..........................13
      Section 9.7.   Definitions......................................14
      Section 9.8.   Leaves of Absence................................15
      Section 9.9.   Newly Eligible Employees.........................15
      Section 9.10.  Adjustments......................................15
      Section 9.11.  Changes in the Company's Capital Structure.......16
      Section 9.12.  Change in Control................................17
      Section 9.13.  Amendment of the Plan............................18
      Section 9.14.  Effective Date...................................18

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                             WASTE MANAGEMENT, INC.

                         2000 BROAD-BASED EMPLOYEE PLAN

                               ARTICLE I. GENERAL

      Section 1.1. Purpose. The purposes of this Broad-Based Employee Plan (the
"Plan") are to: (1) closely associate the interests of the employees and
consultants of Waste Management, Inc. and its Subsidiaries and Affiliates
(collectively referred to as the "Company") with the shareholders to generate an
increased incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the benefit of its
stockholders; (2) provide employees and consultants with a proprietary ownership
interest in the Company commensurate with Company performance, as reflected in
increased shareholder value; (3) maintain competitive compensation levels
thereby attracting and retaining highly competent and talented employees and
consultants; and (4) provide an incentive to employees and consultants for
continuous employment with or services to the Company.

      Section 1.2. Administration.

      (a) The Plan shall be administered by a committee of non-employee
directors appointed by the Board of Directors of the Company (the "Committee"),
as constituted from time to time.

      (b) The Committee shall have the authority, in its sole discretion and
from time to time to:

            (i) designate the employees and consultants or classes of employees
      of and consultants to the Company eligible to participate in the Plan;

            (ii) grant awards ("Awards") provided in the Plan in such form and
      amount as the Committee shall determine;

            (iii) impose such limitations, restrictions, and conditions, not
      inconsistent with this Plan, upon any such Award as the Committee shall
      deem appropriate; and

            (iv) interpret the Plan and any agreement, instrument, or other
      document executed in connection with the Plan; adopt, amend, and rescind
      rules and regulations relating to the Plan; and make all other
      determinations and take all other action necessary or advisable for the
      implementation and administration of the Plan.

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      (c) Decisions and determinations of the Committee on all matters relating
to the Plan shall be in its sole discretion and shall be final, conclusive, and
binding upon all persons, including the Company, any participant, any
stockholder of the Company, and any employee or consultant. A majority of the
members of the Committee may determine its actions and fix the time and place of
its meetings. No member of the Committee shall be liable for any action taken or
decision made in good faith relating to the Plan or any Award thereunder.

      Section 1.3. Eligibility for Participation. Participants in the Plan
("Participants") shall be selected by the Committee from the employees of and
consultants to the Company who are responsible for or contribute to the
management, growth, success and profitability of the Company and who are not
officers of the Company. In making this selection and in determining the form
and amount of Awards, the Committee shall consider any factors deemed relevant,
including the individual's functions, responsibilities, value of services to the
Company, and past and potential contributions to the Company's profitability and
growth.

      Section 1.4. Types of Awards Under Plan. Awards under the Plan may be in
the form of any one or more of the following:

            (i)   Stock Options, as described in Article II;

            (ii)  Incentive Stock Options, as described in Article III;

            (iii) Reload Options, as described in Article IV;

            (iv)  Alternate Appreciation Rights, as described in Article V;

            (v)   Limited Rights, as described in Article VI;

            (vi)  Substitution Awards, as described in Article VII; and/or

            (vii) Stock Bonus Awards, as described in Article VIII.

Awards under the Plan shall be evidenced by an Award Agreement between the
Company and the recipient of the Award, in form and substance satisfactory to
the Committee, and not inconsistent with this Plan.

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      Section 1.5. Aggregate Limitation on Awards.

      (a) Shares of stock which may be issued under the Plan shall be authorized
and unissued or treasury shares of Common Stock $.01 par value, of the Company
("Common Stock"). Subject to the further provisions of this Section 1.5 and
Section 9.10, the maximum number of shares of Common Stock which may be issued
under the Plan shall be 3,000,000.

      (b) For purposes of calculating the maximum number of shares of Common
Stock that may be issued under the Plan:

            (i) all the shares issued (including the shares, if any, withheld
      for tax withholding requirements) shall be counted when cash is used as
      full payment for shares issued upon exercise of a Stock Option, Incentive
      Stock Option, or Reload Option;

            (ii) only the shares issued (including the shares, if any, withheld
      for tax withholding requirements) as a result of an exercise of Alternate
      Appreciation Rights shall be counted; and

            (iii) only the net shares issued (including the shares, if any,
      withheld for tax withholding requirements) shall be counted when shares of
      Common Stock or another Award under the Plan are used or withheld as full
      or partial payment for shares issued upon exercise of a Stock Option,
      Incentive Stock Option, or Reload Option;

provided, however, in all events the maximum number of shares of Common Stock
that may be issued pursuant to Incentive Stock Options is 3,000,000.

      (c) In addition to shares of Common Stock actually issued pursuant to the
exercise of Stock Options, Incentive Stock Options, Reload Options, or Alternate
Appreciation Rights, there shall be deemed to have been issued a number of
shares equal to the number of shares of Common Stock in respect of which Limited
Rights (as described in Article VI) shall have been exercised.

      (d) Shares tendered by a Participant or withheld as payment for shares
issued upon exercise of a Stock Option, Incentive Stock Option, or Reload Option
shall be available for issuance under the Plan. Any shares of Common Stock
subject to a Stock Option, Incentive Stock Option, or Reload Option that for any
reason is terminated unexercised or expires shall again be available for
issuance under the Plan, but shares subject to a Stock Option, Incentive Stock
Option, or Reload Option that are not issued as a result of the exercise of
Limited Rights shall not again be available for issuance under the Plan.

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      (e) The maximum number of shares of Common Stock with respect to which any
Participant may receive Awards in any calendar year is 500,000.

      Section 1.6. Effective Date and Term of Plan.

      (a) The Plan shall become effective on the date it is approved by the
Board of Directors of the Company.

      (b) No Awards shall be made under the Plan after the tenth anniversary of
the effective date of this Plan; provided, however, that the Plan and all Awards
made under the Plan prior to such date shall remain in effect until such Awards
have been satisfied or terminated in accordance with the Plan and the terms of
such Awards.

                            ARTICLE II. STOCK OPTIONS

      Section 2.1. Award of Stock Options. The Committee may from time to time,
and subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, grant to any Participant in the Plan one or more
options to purchase the number of shares of Common Stock ("Stock Options")
allotted by the Committee. The date a Stock Option is granted shall mean the
date selected by the Committee as of which the Committee allots a specific
number of shares to a Participant pursuant to the Plan.

      Section 2.2. Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Award Agreement, executed by the Company and the holder
of the Stock Option (the "Optionee"), stating the number of shares of Common
Stock subject to the Stock Option evidenced thereby, and in such form as the
Committee may from time to time determine.

      Section 2.3. Stock Option Price. The Option Price per share of Common
Stock deliverable upon the exercise of a Stock Option shall be an amount
selected by the Committee and shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date the Stock Option is granted.

      Section 2.4. Term and Exercise. A Stock Option shall not be exercisable
prior to six months from the date of its grant unless a shorter period is
provided by the Committee or by another Section of this Plan, and may be
exercised during the period established by the Committee, but not after ten
years from the date of grant thereof (the "Option Term"). No Stock Option shall
be exercisable after the expiration of its Option Term.

      Section 2.5. Manner of Payment. Each Award Agreement providing for Stock
Options shall set forth the procedure governing the exercise of the Stock Option
granted thereunder, and shall provide that, upon such exercise in respect of any
shares of

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Common Stock subject thereto, the Optionee shall pay to the Company, in full,
the Option Price for such shares with cash, which may be pursuant to a
"cashless-broker" exercise pursuant to procedures established by the Committee
from time to time, or with previously owned Common Stock, or at the discretion
of the Committee, in whole or in part with, the surrender of another Award under
the Plan, the withholding of shares of Common Stock issuable upon exercise of
such Stock Option, other property, or any combination thereof (each based on the
Fair Market Value of such Common Stock, Award or other property on the date the
Stock Option is exercised as determined by the Committee).

      Section 2.6. Delivery of Shares. As soon as practicable after receipt of
payment, the Committee shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.

      Section 2.7. Death, Retirement and Termination of Employment of Optionee.
Unless otherwise provided in an Award Agreement or otherwise agreed to by the
Committee:

      (a) Upon the death of the Optionee, any rights to the extent exercisable
by the Optionee on the date of termination of employment or consulting, as the
case may be, may be exercised by the Optionee's estate, or by a person who
acquires the right to exercise such Stock Option by bequest or inheritance or by
reason of the death of the Optionee, provided that such exercise occurs within
both the remaining effective term of the Stock Option and one year after the
Optionee's death. The provisions of this Section shall apply notwithstanding the
fact that the Optionee's employment may have terminated prior to death.

      (b) Upon termination of the Optionee's employment by reason of retirement
or permanent disability (as each is determined by the Committee), the Optionee
may, within 36 months from the date of termination, exercise any Stock Options
to the extent such Stock Options are exercisable on the date of such termination
of employment.

      (c) Except as provided in Subsections (a) and (b) of this Section 2.7, or
except as otherwise determined by the Committee, all Stock Options shall
terminate three months after the date of the termination of the Optionee's
employment or consulting, as the case may be, and shall be exercisable during
such period only to the extent exercisable on the date of termination of
employment or consulting.

      Section 2.8. Tax Election. Recipients of Stock Options who are directors
or executive officers of the Company or who own more than 10% of the Common
Stock of the Company ("Section 16(a) Option Holders") at the time of exercise of
a Stock Option may elect, in lieu of paying to the Company an amount required to
be withheld under

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applicable tax laws in connection with the exercise of a Stock Option in whole
or in part, to have the Company withhold shares of Common Stock having a fair
market value equal to the amount required to be withheld. Such election may not
be made prior to six months following the grant of the Stock Option, except in
the event of a Section 16(a) Option Holders's death or disability. The election
may be made at the time the Stock Option is exercised by notifying the Company
of the election, specifying the amount of such withholding and the date on which
the number of shares to be withheld is to be determined ("Tax Date"), which
shall be either (i) the date the Stock Option is exercised or (ii) a date six
months after the Stock Option was granted, if later. The number of shares of
Common Stock to be withheld to satisfy the tax obligation shall be the amount of
such tax liability divided by the fair market value of the Common Stock on the
Tax Date (or if not a business day, on the next closest business day). If the
Tax Date is not the exercise date, the Company may issue the full number of
shares of Common Stock to which the Section 16(a) Option Holders is entitled,
and such option holder shall be obligated to tender to the Company on the Tax
Date a number of such shares necessary to satisfy the withholding obligation.
Certificates representing such shares of Common Stock shall bear a legend
describing such Section 16(a) Option Holders obligation hereunder.

      Section 2.9. Effect of Exercise. The exercise of any Stock Option shall
cancel that number of related Alternate Appreciation Rights and/or Limited
Rights, if any, that is equal to the number of shares of Common Stock purchased
pursuant to said option unless otherwise agreed by the Committee in an Award
Agreement or otherwise.

                      ARTICLE III. INCENTIVE STOCK OPTIONS

      Section 3.1. Award of Incentive Stock Options. The Committee may, from
time to time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any employee of the Company
or a Subsidiary one or more "incentive stock options" (intended to qualify as
such under the provisions of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") ("Incentive Stock Options") to purchase the number of
shares of Common Stock allotted by the Committee. The date an Incentive Stock
Option is granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of shares to a participant pursuant to the
Plan.

      Section 3.2. Incentive Stock Option Agreements. The grant of an Incentive
Stock Option shall be evidenced by a written Award Agreement, executed by the
Company and the holder of an Incentive Stock Option (the "Optionee"), stating
the number of shares of Common Stock subject to the Incentive Stock Option
evidenced thereby, and in such form as the Committee may from time to time
determine.

      Section 3.3. Incentive Stock Option Price. The Option Price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall be
at

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least 100% of the Fair Market Value of a share of Common Stock on the date the
Incentive Stock Option is granted; provided, however, the Option Price per share
of Common Stock deliverable upon the exercise of an Incentive Stock Option
granted to any owner of 10% or more of the total combined voting power of all
classes of stock of the Company and its subsidiaries shall be at least 110% of
the fair market value of a share of Common Stock on the date the Incentive Stock
Option is granted.

      Section 3.4. Term and Exercise. Each Incentive Stock Option shall not be
exercisable prior to six months from the date of its grant unless a shorter
period is provided by the Committee or another Section of this Plan, and may be
exercised during the period established by the Committee, but not after ten
years from the date of grant thereof (the "Option Term"). No Incentive Stock
Option shall be exercisable after the expiration of its Option Term.

      Section 3.5. Maximum Amount of Incentive Stock Option Grant. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options granted are exercisable for the first time by an
individual during any calendar year under all incentive stock option plans of
the Company and its parent and subsidiary corporations exceeds $100,000, such
Incentive Stock Options shall be treated as Options which do not constitute
Incentive Stock Options.

      Section 3.6. Death of Optionee. Unless otherwise provided in an Award
Agreement:

      (a) Upon the death of the Optionee, any Incentive Stock Option exercisable
by the Optionee on the date of termination of employment may be exercised by the
Optionee's estate or by a person who acquires the right to exercise such
Incentive Stock Option by bequest or inheritance or by reason of the death of
the Optionee, provided that such exercise occurs within both the remaining
option term of the Incentive Stock Option and one year after the Optionee's
death.

      (b) The provisions of this Section shall apply notwithstanding the fact
that the Optionee's employment may have terminated prior to death.

      Section 3.7. Retirement or Disability. Unless otherwise provided in an
Award Agreement, upon the termination of the Optionee's employment by reason of
permanent disability or retirement (as each is determined by the Committee), the
Optionee may, within 36 months from the date of such termination of employment,
exercise any Incentive Stock Options to the extent such Incentive Stock Options
were exercisable at the date of such termination of employment. Notwithstanding
the foregoing, the tax treatment available pursuant to Section 422 of the Code
upon the exercise of an Incentive Stock Option will not be available to an
Optionee who exercises any Incentive Stock Options more than (i) 12 months after
the date of termination of employment due to

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permanent disability or (ii) three months after the date of termination of
employment due to retirement.

      Section 3.8. Termination for Other Reasons. Except as provided in Sections
3.6 and 3.7 or except as otherwise determined by the Committee, all Incentive
Stock Options shall terminate three months after the date of the termination of
the Optionee's employment and shall be exercisable during such period only to
the extent exercisable on the date of termination of employment.

      Section 3.9. Applicability of Stock Options Sections. Sections 2.5, Manner
of Payment; 2.6, Delivery of Shares; 2.8, Tax Elections and 2.9, Effect of
Exercise, applicable to Stock Options, shall apply equally to Incentive Stock
Options. Such Sections are incorporated by reference in this Article III as
though fully set forth herein.

                           ARTICLE IV. RELOAD OPTIONS

      Section 4.1. Authorization of Reload Options. Concurrently with or
subsequent to the award of Stock Options to any Participant in the Plan, the
Committee may authorize reload options ("Reload Options") to purchase shares of
Common Stock. The number of Reload Options shall equal (i) the number of shares
of Common Stock used to pay the exercise price of the underlying Stock Options
or Incentive Stock Options and (ii) to the extent authorized by the Committee,
the number of shares of Common Stock withheld by the Company in payment of the
exercise price underlying the Stock Option or Incentive Stock Option or used to
satisfy any tax withholding requirement incident to the exercise of the
underlying Stock Options or Incentive Stock Options. The grant of a Reload
Option will become effective upon the exercise of underlying Stock Options,
Incentive Stock Options, or Reload Options through the use of shares of Common
Stock held by the Optionee or the withholding of shares by the Company in
payment of the exercise price of the underlying Stock Option or Incentive Stock
Option held by the Optionee. Notwithstanding the fact that the underlying option
may be an Incentive Stock Option, a Reload Option is not intended to qualify as
an "incentive stock option" under Section 422 of the Code.

      Section 4.2. Reload Option Amendment. Each Award Agreement shall state
whether the Committee has authorized Reload Options with respect to the Stock
Options and/or Incentive Stock Options covered by such Award Agreement. Upon the
exercise of an underlying Stock Option, Incentive Stock Option, or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Award Agreement in such form as the Committee shall approve.

      Section 4.3. Reload Option Price. The Option Price per share of Common
Stock deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a share of Common Stock on the date the grant of the Reload Option
becomes effective.

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      Section 4.4. Term and Exercise. Each Reload Option is fully exercisable
six months from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Stock Option
and/or Incentive Stock Option.

      Section 4.5. Termination of Employment. Unless otherwise determined by the
Committee in an Award Agreement or otherwise, no additional Reload Options shall
be granted to Optionees when Stock Options, Incentive Stock Options, and/or
Reload Options are exercised pursuant to the terms of this Plan following
termination of the Optionee's employment.

      Section 4.6. Applicability of Stock Options Sections. Sections 2.5, Manner
of Payment; 2.6 Delivery of Shares; 2.7, Death, Retirement and Termination of
Employment of Optionee; 2.8, Tax Elections; and 2.9, Effect of Exercise,
applicable to Stock Options, shall apply equally to Reload Options. Such
Sections are incorporated by reference in this Article IV as though fully set
forth herein.

                   ARTICLE V. ALTERNATE APPRECIATION RIGHTS

      Section 5.1. Award of Alternate Appreciation Rights. Concurrently with or
subsequent to the award of any Stock Option, Incentive Stock Option, or Reload
Option to purchase one or more shares of Common Stock, the Committee may,
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the Optionee with respect to each share of
Common Stock covered by an Option, a related alternate appreciation right
permitting the Optionee to be paid the appreciation on the Option in lieu of
exercising the Option ("Alternate Appreciation Right").

      Section 5.2. Alternate Appreciation Rights Agreement. Alternate
Appreciation Rights shall be evidenced by written Award Agreements in such form
as the Committee may from time to time determine.

      Section 5.3. Exercise. An Optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an equal
number of Options, elect to exercise one or more Alternate Appreciation Rights
and thereby become entitled to receive from the Company payment in Common Stock
of the number of shares determined pursuant to Section 5.4 and 5.5. Alternate
Appreciation Rights shall be exercisable only to the same extent and subject to
the same conditions as the Options related thereto are exercisable, as provided
in this Plan. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any Alternate Appreciation Rights.

      Section 5.4. Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Alternate Appreciation Right shall
be equal to

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100% of the amount, if any, by which the Fair Market Value of a share of Common
Stock on the exercise date exceeds the Option Price per share on the Option
related to such Alternate Appreciation Right. A Section 16(a) Option Holder may
elect to withhold shares of Common Stock issued under this Section to pay taxes
as described in Section 2.8.

      Section 5.5. Form of Payment. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section 5.4
by the Fair Market Value of a share of Common Stock on the exercise date of such
Alternate Appreciation Rights. As soon as practicable after exercise, the
Company shall deliver to the Optionee a certificate or certificates for such
shares of Common Stock.

      Section 5.6. Effect of Exercise. Unless otherwise provided in an Award
Agreement or agreed to by the Committee, the exercise of any Alternate
Appreciation Rights shall cancel an equal number of Stock Options, Incentive
Stock Options, Reload Options, and Limited Rights, if any, related to said
Alternate Appreciation Rights.

      Section 5.7. Termination of Employment, Retirement, Death or Disability.
Unless otherwise provided in an Award Agreement or agreed to by the Committee:

            (a) Upon termination of the Optionee's employment (including
      employment as a director of the Company after an Optionee terminates
      employment as an employee of the Company) by reason of permanent
      disability or retirement (as each is determined by the Committee) or
      consulting, the Optionee may, within six months from the date of such
      termination, exercise any Alternate Appreciation Rights to the extent such
      Alternate Appreciation Rights are exercisable during such six-month
      period.

            (b) Except as provided in Section 5.7(a), all Alternate Appreciation
      Rights shall terminate three months after the date of the termination of
      the Optionee's employment, consulting or upon the death of the Optionee.

                           ARTICLE VI. LIMITED RIGHTS

      Section 6.1. Award of Limited Rights. Concurrently with or subsequent to
the award of any Stock Option, Incentive Stock Option, Reload Option, or
Alternate Appreciation Right, the Committee may, subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe,
award to the Optionee with respect to each share of Common Stock covered by an
Option, a related limited right permitting the Optionee, during a specified
limited time period, to be paid the appreciation on the Option in lieu of
exercising the Option ("Limited Right").

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      Section 6.2. Limited Rights Agreement. Limited Rights granted under the
Plan shall be evidenced by written Award Agreements in such form as the
Committee may from time to time determine.

      Section 6.3. Exercise Period. Limited Rights are exercisable in full for a
period of seven months following the date of a Change in Control of the Company
(the "Exercise Period"); provided, however, that Limited Rights may not be
exercised under any circumstances until the expiration of the six-month period
following the date of grant.

      Section 6.4. Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Limited Right shall be equal to 100%
of the amount, if any, which is equal to the difference between the Option Price
per share of Common Stock covered by the related Option and the Market Price of
a share of such Common Stock. "Market Price" is defined to be the greater of (i)
the highest price per share of the Company's Common Stock paid in connection
with any Change in Control and (ii) the highest price per share of the Company's
Common Stock reflected in the consolidated trading tables of The Wall Street
Journal (presently the New York Stock Exchange - Composite Transactions) during
the 60-day period prior to the Change in Control.

      Section 6.5. Form of Payment. Payment of the amount to which an Optionee
is entitled upon the exercise of Limited Rights, as determined pursuant to
Section 6.4, shall be made solely in cash.

      Section 6.6. Effect of Exercise. If Limited Rights are exercised, the
Stock Options, Incentive Stock Options, Reload Options, and Alternate
Appreciation Rights, if any, related to such Limited Rights shall cease to be
exercisable to the extent of the number of shares with respect to which the
Limited Rights were exercised. Upon the exercise or termination of the Stock
Options, Incentive Stock Options, Reload Options, and Alternate Appreciation
Rights, if any, related to such Limited Rights, the Limited Rights granted with
respect thereto terminate to the extent of the number of shares as to which the
related options and Alternate Appreciation Rights were exercised or terminated.

      Section 6.7. Retirement or Disability. Upon termination of the Optionee's
employment (including employment as a director of the Company after an Optionee
terminates employment as an employee of the Company) by reason of permanent
disability or retirement (as each is determined by the Committee) or consulting,
the Optionee may, within six months from the date of such termination, exercise
any Limited Right to the extent such Limited Right is exercisable during such
six-month period.

      Section 6.8. Death of Optionee or Termination for Other Reasons. Except as
provided in Sections 6.7 and 6.9, or except as otherwise determined by the
Committee, all

                                       11
<PAGE>   15
Limited Rights granted under the Plan shall terminate upon the termination of
the Optionee's employment, consulting or upon the death of the Optionee.

      Section 6.9. Termination Related to a Change in Control. The requirement
that an Optionee be terminated by reason of retirement or permanent disability
or be employed by the Company at the time of exercise pursuant to Sections 6.7
and 6.8, respectively, is waived during the Exercise Period as to an Optionee
who (i) was employed by the Company at the time of the Change in Control and
(ii) is subsequently terminated by the Company other than for just cause or who
voluntarily terminates if such termination was the result of a good faith
determination by the Optionee that as a result of the Change in Control he is
unable to effectively discharge his present duties or the duties of the position
which he occupied just prior to the Change in Control. As used herein "just
cause" shall mean willful misconduct or dishonesty or conviction of or failure
to contest prosecution for a felony, or excessive absenteeism unrelated to
illness.

                                       12
<PAGE>   16
                        ARTICLE VII. SUBSTITUTION AWARDS

      Section 7.1. Awards may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who
become employees of the Company as a result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company of the
assets of the employing corporation, or the acquisition by the Company of stock
of the employing corporation with the result that such employing corporation
becomes a Subsidiary or an Affiliate.

                        ARTICLE VIII. BONUS STOCK AWARDS

      Section 8.1. Award of Bonus Stock. The Committee may from time to time,
and subject to the provisions of this Plan and such other terms and conditions
as the Committee may prescribe, grant to any Participant in the Plan shares of
Common Stock ("Stock Bonus"). A Stock Bonus shall vest (i) in the case of
performance-based vesting criteria, no sooner than one year following the date
of the Stock Bonus grant, and (ii) in the case of time-based vesting criteria,
no sooner than one-third of the grant on each subsequent anniversary of the date
of grant. Notwithstanding the foregoing, the Committee may grant a fully vested
Stock Bonus in lieu of an earned cash bonus.

      Section 8.2. Stock Bonus Agreements. The grant of a Stock Bonus shall be
evidenced by a written Award Agreement, executed by the Company and the
recipient of a Stock Bonus, in such form as the Committee may from time to time
determine, providing for the terms of such grant, including any vesting
schedule, restrictions on the transfer of such Common Stock or other matters.

                            ARTICLE IX. MISCELLANEOUS

      Section 9.1. General Restriction. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration, or qualification of the shares of Common
Stock subject to or related thereto upon any securities exchange or under any
state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the grantee of an Award with respect
to the disposition of shares of Common Stock, is necessary or desirable as a
condition of, or in connection with, the granting of such Award or the issue or
purchase of shares of Common Stock thereunder, such Award may not be consummated
in whole or in part unless such listing, registration, qualification, consent,
approval or agreement shall have been effected or obtained free of any
conditions not acceptable to the Committee.

                                       13
<PAGE>   17
      Section 9.2. Non-Assignability. Except as provided below, no Award under
the Plan shall be assignable or transferable by the recipient thereof, except by
will or by the laws of descent and distribution, and during the life of the
recipient, such Award shall be exercisable only by such person or by such
person's guardian or legal representative.

       Notwithstanding the foregoing, as provided by the Committee in an Award
Agreement, Awards (other than Incentive Stock Options) may be transferred (in
whole or in part in a form approved by the Company) by a Participant to (i) the
spouse, children or grandchildren of the Participant ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of the Immediate
Family Members and, if applicable, the Participant, or (iii) a partnership in
which such Immediate Family Members and, if applicable, the Participant are the
only partners. Following any such transfer, the Award shall continue to be
subject to the same terms and conditions as were applicable to the Award
immediately prior to the transfer. A transferee of an Award may not transfer the
Award except to an Immediate Family Member or the Participant.

      Section 9.3. Withholding Taxes. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Company
shall have the right to require the grantee to remit to the Company an amount
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificates for such shares.
Alternatively, the Company may issue or transfer such shares of the Company net
of the number of shares sufficient to satisfy the withholding tax requirements.
For withholding tax purposes, the shares of Common Stock shall be valued on the
date the withholding obligation is incurred.

      Section 9.4. Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any Participant
the right to continue in the employment of, or consulting to, the Company or
effect any right which the Company may have to terminate the employment or
consulting relationship of such Participant.

      Section 9.5. Non-Uniform Determination. The Committee's determinations
under the Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.

      Section 9.6. Rights as a Shareholder. The recipient of any Award under the
Plan shall have no right as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to him.

                                       14
<PAGE>   18
      Section 9.7. Definitions. In this Plan the following definitions shall
apply:

            (a) "Subsidiary" means any corporation of which, at the time more
      than 50% of the shares entitled to vote generally in an election of
      directors are owned directly or indirectly by the Company or any
      subsidiary thereof.

            (b) "Affiliate" means any person or entity which directly, or
      indirectly through one or more intermediaries, controls, is controlled by,
      or is under common control with the Company.

            (c) "Fair Market Value" as of any date and in respect or any share
      of Common Stock means the lowest reported trading price on such date or on
      the next business day, if such date is not a business day, of a share of
      Common Stock reflected in the consolidated trading tables of The Wall
      Street Journal (presently the New York Stock Exchange - Composite
      Transactions) or any other publication selected by the Committee, provided
      that, if shares of Common Stock shall not have been quoted on the New York
      Stock Exchange for more than 10 days immediately preceding such date or if
      deemed appropriate by the Committee for any other reason, the fair market
      value of shares of Common Stock shall be as determined by the Committee in
      such other manner as it may deem appropriate. In no event shall the Fair
      Market Value of any share of Common Stock be less than its par value.

            (d)   "Option"  means Stock Option,  Incentive  Stock  Option,  or
      Reload Option.

            (e) "Option Price" means the purchase price per share of the Common
      Stock deliverable upon the exercise of a Stock Option, Incentive Stock
      Option, or Reload Option.

            (f) "Change in Control" means the occurrence, at any time during the
      specified term of an Option granted under the Plan, of any of the
      following events:

                  (i) The Company is merged or consolidated or reorganized into
            or with another corporation or other legal person (an "Acquiror")
            and as a result of such merger, consolidation or reorganization less
            than 75% of the outstanding voting securities or other capital
            interests of the surviving, resulting or acquiring corporation or
            other legal person are owned in the aggregate by the stockholders of
            the Company, directly or indirectly, immediately prior to such
            merger, consolidation or reorganization, other than the Acquiror or
            any corporation or other legal person controlling, controlled by or
            under common control with the Acquiror;

                                       15
<PAGE>   19
                  (ii) The Company sells all or substantially all of its
            business and/or assets to an Acquiror, of which less than 75% of the
            outstanding voting securities or other capital interests are owned
            in the aggregate by the stockholders of the Company, directly or
            indirectly, immediately prior to such sale, other than any
            corporation or other legal person controlling, controlled by or
            under common control with the Acquiror;

                  (iii) There is a report filed on Schedule 13D or Schedule
            14D-1 (or any successor schedule, form or report), each as
            promulgated pursuant to the Securities Exchange Act of 1934, as
            amended (the "Exchange Act"), disclosing that any person or group
            (as the terms "person" and "group" are used in Section 13(d)(3) or
            Section 14(d)(2) of the Exchange Act and the rules and regulations
            promulgated thereunder) has become the beneficial owner (as the term
            "beneficial owner") is defined under Rule 13d-3 or any successor
            rule or regulation promulgated under the Exchange Act) of 20% or
            more of the issued and outstanding shares of voting securities of
            the Company; or

                  (iv) During any period of two consecutive years, individuals
            who at the beginning of any such period constitute the directors of
            the Company cease for any reason to constitute at least a majority
            thereof unless the election, or the nomination for election by the
            Company's stockholders, of each new director of the Company was
            approved by a vote of at least two-thirds of such directors of the
            Company then still in office who were directors of the Company at
            the beginning of any such period.

      Section 9.8. Leaves of Absence. The Committee shall be entitled to make
such rules, regulations, and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any Award.
Without limiting the generality of the foregoing, the Committee shall be
entitled to determine (i) whether or not any such leave of absence shall
constitute a termination of employment within the meaning of the Plan and (ii)
the impact, if any, of any such leave of absence on Awards under the Plan
theretofore made to any recipient who takes such leave of absence.

      Section 9.9. Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan or
any portion thereof after the commencement of an award or incentive period.

      Section 9.10. Adjustments. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distributions, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may

                                       16
<PAGE>   20
appropriately adjust the number of shares of Common Stock that may be issued
under the Plan, the number of shares of Common Stock subject to Options
theretofore granted under the Plan, and any and all other matters deemed
appropriate by the Committee.

      Section 9.11. Changes in the Company's Capital Structure.

            (a) The existence of outstanding Options, Alternative Appreciation
      Rights, or Limited Rights shall not affect in any way the right or power
      of the Company or its stockholders to make or authorize any or all
      adjustments, recapitalizations, reorganizations, or other changes in the
      Company's capital structure or its business, or any merger or
      consolidation of the Company, or any issue of bonds, debentures, preferred
      or prior preference stock ahead of or affecting the Common Stock or the
      rights thereof, or the dissolution or liquidation of the Company, or any
      sale or transfer of all or any part of its assets or business, or any
      other corporate act or proceeding, whether of a similar character or
      otherwise.

            (b) If, while there are outstanding Options, the Company shall
      effect a subdivision or consolidation of shares or other increase or
      reduction of the number of shares of the Common Stock outstanding without
      receiving compensation therefor in money, services or property, then (i)
      in the event of an increase in the number of such shares outstanding, the
      number of shares of Common Stock then subject to Options hereunder shall
      be proportionately increased; and (ii) in the event of a decrease in the
      number of such shares outstanding the number of shares then available for
      Option hereunder shall be proportionately decreased.

            (c) After a merger of one or more corporations into the Company, or
      after a consolidation of the Company and one or more corporations in which
      the Company shall be the surviving corporation, each holder of an
      outstanding Option shall, at no additional cost, be entitled upon exercise
      of such Option to receive (subject to any required action by stockholders)
      in lieu of the number of shares as to which such Option shall then be so
      exercisable, the number and class of stock or other securities to which
      such holder would have been entitled to receive pursuant to the terms of
      the agreement of merger or consolidation if, immediately prior to such
      merger or consolidation, such holder had been the holder of record of a
      number of shares of the Company equal to the number of shares as to which
      such Option had been exercisable.

            (d) If the Company is merged into or consolidated with another
      corporation or other entity under circumstances where the Company is not
      the surviving corporation, or if the Company sells or otherwise disposes
      of substantially all of its assets to another corporation or other entity
      while unexercised Options remain outstanding, then the Committee may
      direct that any of the following shall occur:

                                       17
<PAGE>   21
                  (i) If the successor entity is willing to assume the
            obligation to deliver shares of stock or securities after the
            effective date of the merger, consolidation or sale of assets, as
            the case may be, each holder of an outstanding Option shall be
            entitled to receive, upon the exercise of such Option and payment of
            the Option Price, in lieu of shares of Common Stock, such shares of
            stock or other securities as the holder of such Option would have
            been entitled to receive had such Option been exercised immediately
            prior to the consummation of such merger, consolidation or sale, and
            any related Alternate Appreciation Right and Limited Right
            associated with such Option shall apply as nearly as practicable to
            the shares of stock or other securities purchasable upon exercise of
            the Option following such merger, consolidation or sale of assets.

                  (ii) The Committee may waive any limitations set forth in or
            imposed pursuant to this Plan or any Award Agreement with respect to
            such Option and any related Alternate Appreciation Right or Limited
            Option such that such Option and related Alternate Appreciation
            Right and Limited Right shall become exercisable prior to the record
            or effective date of such merger, consolidation or sale of assets.

                  (iii) The Committee may cancel all outstanding Options and
            Alternate Appreciation Rights (but not Limited Rights) as of the
            effective date of any such merger, consolidation, or sale of assets
            provided that prior notice of such cancellation shall be given to
            each holder of an Option at least 30 days prior to the effective
            date of such merger, consolidation, or sale of assets, and each
            holder of an Option shall have the right to exercise such Option and
            any related Alternate Appreciation Right in full during a period of
            not less than 30 days prior to the effective date of such merger,
            consolidation, or sale of assets. No action taken by the Committee
            under this subsection shall have the effect of terminating, and
            nothing in this subsection shall permit the Committee to terminate,
            any Limited Right held by an Optionee.

            (c) Except as herein provided, the issuance by the Company of Common
      Stock or any other shares of capital stock or services convertible into
      shares of capital stock, for cash property, labor done or other
      consideration, shall not affect, and no adjustment by reason thereof shall
      be made with respect to, the number or price of shares of Common Stock
      then subject to outstanding Options.

      Section 9.12. Change in Control. Any Award granted under the Plan prior to
the date of a Change in Control shall be immediately exercisable in full on such
date, without regard to any times of exercise established under its Award
Agreement; provided,

                                       18
<PAGE>   22
however, in no event shall Stock Options or Incentive Stock Options be
exerciseable after the tenth anniversary of their respective grant dates.

      Section 9.13.   Amendment of the Plan.

            (a) The Committee may without further action by the shareholders and
      without receiving further consideration from the Participants, amend this
      Plan or condition or modify Awards under this Plan in response to changes
      in securities or other laws or rules, regulations or regulatory
      interpretations thereof applicable to this Plan or to comply with stock
      exchange rules or requirements.

            (b) The Committee may at any time and from time to time terminate or
      modify or amend the Plan in any respect. The termination or any
      modification or amendment of the Plan, except as provided in subsection
      (a), shall not, without the consent of a Participant, affect his or her
      rights under an Award previously granted to him or her.

      Section 9.14. Effective Date. The Plan shall become effective as of
February 29, 2000.

                                       19<PAGE>   1
                                                                  EXHIBIT 10(V)

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between SEVEN SEAS
PETROLEUM INC. ("Company") and SIR MARK THOMSON, BT ("Executive") as of the 1st
day of August, 1999.

                             W I T N E S S E T H:

      WHEREAS, Company is desirous of employing Executive in an executive
capacity on the terms and conditions, and for the consideration, hereinafter set
forth and Executive is desirous of being employed by Company on such terms and
conditions and for such consideration;

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

ARTICLE 1:  EMPLOYMENT AND DUTIES

      1.1 EMPLOYMENT; EFFECTIVE DATE. Company agrees to employ Executive and
Executive agrees to be employed by Company, beginning as of the Effective Date
(as hereinafter defined) and continuing for the period of time set forth in
Article 2 of this Agreement, subject to the terms and conditions of this
Agreement. For purposes of this Agreement, the "Effective Date" shall be August
1, 1999.

      1.2 POSITIONS. From and after the Effective Date, Company shall employ
Executive in a senior executive position. Executive currently serves on the
Board of Directors of Company (the "Board of Directors") as a full member
thereof. During the term of this Agreement, Company shall continue to cause
Executive to be nominated to serve on the Board of Directors and will use
reasonable efforts to secure Executive's election to the Board of Directors. It
is the intention of the parties that Executive will be elected to and will serve
on the Board of Directors while serving hereunder as a senior executive of the
Company and may be elected to and may serve on the Board of Directors after the
expiration of the Term provided in paragraph 2.1 upon agreement of the Company
and Executive.

      1.3 DUTIES AND SERVICES. Executive agrees to serve in the positions
referred to in paragraph 1.2 and to perform diligently and to the best of his
abilities the duties and services appertaining to such offices, as well as such
additional duties and services appropriate to such offices which the parties
mutually may agree upon from time to time. Executive's employment shall also be
subject to the policies maintained and established by Company, as the same may
be amended from time to time.

      1.4 OTHER INTERESTS. Executive agrees, during the period of his employment
by Company, to devote his primary business time, energy and best efforts to the
business and affairs of Company and its affiliates and not to engage, directly
or indirectly, in any other business or businesses, whether or not similar to
that of Company, except with the consent of the Board of Directors. The
foregoing notwithstanding, the parties recognize and agree that Executive may
<PAGE>   2
engage in passive personal investments ant other business activities that do not
conflict with the business and affairs of Company or interfere with Executive's
performance of his duties hereunder.

      1.5 DUTY OF LOYALTY. Executive acknowledges and agrees that Executive owes
a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the
best interests of Company and to do no act which is intended to intentionally
injure the business, interests, or reputation of Company or any of its
subsidiaries or affiliates. In keeping with these duties, Executive shall make
full disclosure to Company of all business opportunities pertaining to Company's
business and shall not appropriate for Executive's own benefit business
opportunities concerning the subject matter of the fiduciary relationship.

ARTICLE 2:  TERM AND TERMINATION OF EMPLOYMENT

      2.1 TERM. Unless sooner terminated pursuant to other provisions hereof,
Company agrees to employ Executive for the period (the "Term") beginning on the
Effective Date and ending on October 31, 2000. Should Executive serve the full
Term and remain employed by Company beyond the expiration of the Term, such
employment shall convert to a month-to-month, at-will relationship. Such at-will
relationship may be terminated at any time by either Executive or Company for
any reason whatsoever, with or without cause, upon ten (10) days' prior written
notice to the other party.

      2.2 COMPANY'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 2.1, Company shall have the right to terminate Executive's employment
under this Agreement at any time for any of the following reasons:

            (i) upon Executive's death;

            (ii) upon Executive's becoming incapacitated by accident, sickness
      or other circumstance which renders him mentally or physically incapable
      of materially performing the duties and services required of him hereunder
      on a full-time basis for a period of at least 180 consecutive days;

            (iii) for cause, which for purposes of this Agreement shall mean
      Executive (A) has engaged in gross negligence or willful misconduct in the
      performance of the duties required of him hereunder, (B) has been
      convicted of a misdemeanor involving moral turpitude or convicted of a
      felony, (C) has willfully refused without proper legal reason to
      materially perform the duties and responsibilities required of him
      hereunder, (D) has materially breached any corporate policy or code of
      conduct established by Company, or (E) has willfully engaged in conduct
      that he knows or should know is materially injurious to Company or any of
      its affiliates;

            (iv) for Executive's material breach of any material provision of
      this Agreement which, if correctable, remains uncorrected for 30 days
      following written notice to Executive by Company of such breach; or

                                      -2-
<PAGE>   3
            (v) for any other reason whatsoever, in the sole discretion of the
      Board of Directors.

      2.3 EXECUTIVE'S RIGHT TO TERMINATE. Notwithstanding the provisions of
paragraph 2.1, Executive shall have the right to terminate his employment under
this Agreement for any of the following reasons:

            (i) within 60 days of and in connection with or based upon (A) a
      material breach by Company of any material provision of this Agreement,
      (B) a substantial and material reduction in the nature or scope of
      Executive's duties and responsibilities, (C) the assignment to Executive
      of duties and responsibilities that are materially inconsistent with the
      positions referred to in paragraph 1.2; (D) a loss of title, loss of
      office, loss of significant authority, power or control, or any removal of
      Executive from, or any failure to reappoint or reelect him to, the Board
      of Directors of the Company; provided, however, that, prior to Executive's
      termination of employment under this paragraph 2.3(i), Executive must give
      written notice to Company of any such breach, reduction or assignment and
      such breach, reduction or assignment must remain uncorrected for 30 days
      following such written notice;

            (ii) upon the death of any of Executive's dependent children or the
      mother of any of Executive's children;

            (iii) upon the incapacitation by accident, sickness or other
      circumstance which renders any of Executive's dependent children or the
      mother of any of Executive's children mentally or physically disabled; or

            (iv) at any time for any reason whatsoever, in the sole discretion
      of Executive.

      2.4 NOTICE OF TERMINATION. If Company or Executive desires to terminate
Executive's employment hereunder at any time prior to expiration of the Term
provided in paragraph 2.1, it or he shall do so by giving written notice to the
other party that it or he has elected to terminate Executive's employment
hereunder and stating the effective date and reason for such termination,
provided that no such action shall alter or amend any other provisions hereof or
rights arising hereunder, including, without limitation, the provisions of
Articles 4 and 5 hereof. Any notice of termination from Company to Executive
shall indicate the specific termination provision of this Agreement relied upon
and set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

                                      -3-
<PAGE>   4

ARTICLE 3:  COMPENSATION AND BENEFITS

      3.1 BASE SALARY. During the term of this Agreement, Executive shall
receive a minimum annual base salary of $450,000. Executive's annual base salary
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 twice monthly.

      3.2 BONUSES. Executive shall receive a signing bonus of $107,660 and such
other bonuses, if any, as the Compensation Committee of the Board of Directors
shall determine in its sole discretion.

      3.3 STOCK OPTION. Subject to this Agreement, the Executive has been
granted an option (the "Option") to purchase 350,000 shares of Company's common
stock ("Stock") pursuant to the 1997 Stock Option Plan (the "1997 Stock Option
Plan"). The purchase price for each share of Stock subject to the Option granted
is $4.21875, which is greater than the Fair Market Value (as such term is
defined in the 1997 Stock Option Plan) of a share of Stock on the Effective
Date, which date was the grant date of the Option. Subject to the terms of the
1997 Stock Option Plan and the agreements executed by Company and Executive
evidencing the options, (i) the Option shall have a term of 9 years and 7 months
(which term shall begin on the Effective Date), (ii) the options shall become
100% vested on the expiration of the Term (but not sooner except as provided in
paragraphs 6.2 and 6.3 hereof), (iii) the Option shall become vested and fully
exercisable by Executive upon the occurrence of a "Change in Control" (as such
term is defined in paragraph 3.5 hereof) while Executive is employed by Company,
and (iv) the Option shall constitute incentive stock options (within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended) to the maximum
extent permitted by law. Executive shall also be eligible to receive other stock
option grants at the discretion of the Company.

      3.4 OTHER PERQUISITES. During his employment hereunder, Executive shall be
afforded the following benefits as incidences of his employment:

            (i) BUSINESS AND ENTERTAINMENT EXPENSES -- Subject to Company's
      standard policies and procedures with respect to expense reimbursement as
      applied to its executive employees generally, Company shall reimburse
      Executive for, or pay on behalf of Executive, reasonable and appropriate
      expenses incurred by Executive for business related purposes, including
      dues and fees to industry and professional organizations and costs of
      entertainment and business development.

            (ii) VACATION -- Executive shall be allowed vacation leave
      aggregating twelve (12) weeks during the Term provided in paragraph 2.1,
      any part or parts of which may be taken consecutively.

            (iii) AIRLINE TICKETS -Executive shall be furnished, at the
      Company's expense, four (4) economy class round trip tickets from Houston,
      Texas to the United

                                      -4-
<PAGE>   5
      Kingdom, during the term of this Agreement. The Company shall also provide
      each of Executive's dependent children four (4) economy class round trip
      tickets from the United Kingdom to anywhere in the continental United
      States during the term of this Agreement.

            (iv) TAX RETURNS - The Company will, at its cost, cause the
      Company's tax advisors to prepare Executive's United States income tax
      returns for any year that includes the term of his employment hereunder.

            (v) CLUB MEMBERSHIP -Executive may obtain membership in the
      Houstonian Health Club in Houston, Texas and Company shall reimburse
      Executive the $7,577 membership cost and shall pay Executive his
      reasonable business expenses associated with the membership.

            (vi) OTHER COMPANY BENEFITS - Executive and his dependents shall be
      allowed to participate in all benefits, plans and programs, including
      improvements or modifications of the same, which are now, or may hereafter
      be, generally available to other executive employees of Company. Such
      benefits, plans and programs may include, without limitation, profit
      sharing plan, thrift plan, health insurance or health care plan, life
      insurance, disability insurance, pension plan, supplemental retirement
      plans, sick leave benefits, and the like. Company shall not, however, by
      reason of this paragraph be obligated to institute, maintain, or refrain
      from changing, amending, or discontinuing, any such benefit plan or
      program, so long as such changes are similarly applicable to executive
      employees generally.

      3.5 CHANGE IN CONTROL BENEFITS. Upon the occurrence of a Change in Control
(as such term is hereafter defined) prior to expiration of the Term provided in
paragraph 2.1 , the Company shall (i) promptly pay Executive a single lump sum
cash bonus payment in an amount equal to the aggregate base salary that would be
payable by Company to Executive for the unexpired portion of the Term based upon
Executive's base salary in effect pursuant to paragraph 3.1 immediately prior to
such Change in Control without any present value reduction and (ii) cause all
outstanding stock options granted by Company to Executive (including, without
limitation, the Option) to become vested and immediately exercisable in full for
a period of 18 months following the Change in Control. For purposes of this
Agreement, the term "Change in Control" shall mean (1) any merger,
consolidation, or reorganization in which Company is not the surviving entity
(or survives only as a subsidiary of an entity), (2) any sale, lease, exchange,
or other transfer of (or agreement to sell, lease, exchange, or otherwise
transfer) all or substantially all of the assets of Company to any other person
or entity (in one transaction or a series of related transactions), (3)
dissolution or liquidation of Company, (4) when any person or entity, including
a "group" as contemplated by Section 13(d) of the Securities Exchange Act of
1934, as amended, acquires or gains ownership or control (including, without
limitation, power to vote) of more than 45% of the outstanding shares of
Company's voting stock (based upon voting power), or (5) as a result of or in
connection with a contested election of directors the persons who were directors
of Company before such election cease to constitute a majority of the Board of
Directors; provided, however, that the term "Change in Control" shall not
include any reorganization, merger, consolidation, sale, lease, exchange, or

                                      -5-
<PAGE>   6
similar transaction involving solely Company and one or more previously
wholly-owned subsidiaries of Company.

ARTICLE 4:  PROTECTION OF INFORMATION

      4.1 DISCLOSURE TO EXECUTIVE. Company shall disclose to Executive, or place
Executive in a position to have access to or develop, trade secrets or
confidential information of Company or its affiliates; and/or shall entrust
Executive with business opportunities of Company or its affiliates; and/or shall
place Executive in a position to develop business good will on behalf of Company
or its affiliates.

      4.2 DISCLOSURE TO AND PROPERTY OR COMPANY. All information, ideas,
concepts, improvements, discoveries, and inventions, whether patentable or not,
which are conceived, made, developed, or acquired by Executive, individually or
in conjunction with others, during Executive's employment by Company (whether
during business hours or otherwise and whether on Company's premises or
otherwise) which relate to Company's business, products, or services (including,
without limitation, all such information relating to corporate opportunities,
research, financial and sales data, pricing terms, evaluations, opinions,
interpretations, acquisitions prospects, the identity of customers or their
requirements, the identity of key contacts within the customer's organizations
or within the organization of acquisition prospects, or marketing and
merchandising techniques, prospective names, and marks) shall be disclosed to
Company and are and shall be the sole and exclusive property of Company.
Moreover, all documents, drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, E-mail,
voice mail, electronic databases, maps, and all other writings or materials of
any type embodying any of such information, ideas, concepts, improvements,
discoveries, and inventions are and shall be the sole and exclusive property of
Company. Upon termination of Executive's employment by Company, for any reason,
Executive promptly shall deliver the same, and all copies thereof, to Company.

      4.3 NO UNAUTHORIZED USE OR DISCLOSURE. Executive will not, at any time
during or after Executive's employment by Company, make any unauthorized
disclosure of any confidential business information or trade secrets of Company
or its affiliates, or make any use thereof, except in the carrying out of
Executive's employment responsibilities hereunder Affiliates of the Company
shall be third party beneficiaries of Executive's obligations under this
paragraph. As a result of Executive's employment by Company, Executive may also
from time to time have access to, or knowledge of, confidential business
information or trade secrets of third parties, such as customers, suppliers,
partners, joint venturers, and the like, of Company and its affiliates.
Executive also agrees to preserve and protect the confidentiality of such third
party confidential information and trade secrets to the same extent, and on the
same basis, as Company's confidential business information and trade secrets.

      4.4 OWNERSHIP BY COMPANY. If, during Executive's employment by Company,
Executive creates any work of authorship fixed in any tangible medium of
expression which is the subject matter of copyright (such as videotapes, written
presentations, or acquisitions, computer programs, E-mail, voice mail,
electronic databases, drawings, maps, architectural renditions,

                                      -6-
<PAGE>   7
models, manuals, brochures, or the like) relating to Company's business,
products, or services, whether such work is created solely by Executive or
jointly with others (whether during business hours or otherwise and whether on
Company's premises or otherwise), Company shall be deemed the author of such
work if the work is prepared by Executive in the scope of Executive's
employment; or, if the work is not prepared by Executive within the scope of
Executive's employment but is specially ordered by Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work as a compilation, or as an instructional
text, then the work shall be considered to be work made for hire and Company
shall be the author of the work. If such work is neither prepared by Executive
within the scope of Executive's employment nor a work specially ordered that is
deemed to be a work made for hire then Executive hereby agrees to assign, and by
these presents does assign, to Company all of Executive's worldwide right,
title, and interest in and to such work and all rights of copyright therein.

      4.5 ASSISTANCE BY EXECUTIVE. Both during the period of Executive's
employment by Company and thereafter, Executive shall assist Company and its
nominee, at any time, in the protection of Company's worldwide right, title, and
interest in and to information, ideas, concepts, improvements, discoveries, and
inventions, and its copyrighted works, including without limitation, the
execution of all formal assignment documents requested by Company or its nominee
and the execution of all lawful oaths and applications for patents and
registration of copyright in the United States ant foreign countries.

      4.6 REMEDIES. Executive acknowledges that money damages would not be
sufficient remedy for any breach of this Article by Executive, and Company shall
be entitled to enforce the provisions of this Article by specific performance
and injunctive relief as remedies for such breach or any threatened breach such
remedies shall not be deemed the exclusive remedies for a breach of this
Article, but shall be in addition to all remedies available at law or in equity
to Company, including the recovery of damages (pound)rom Executive and his
agents involved in such breach and remedies available to Company pursuant to
other agreements with Executive.

ARTICLE 5:  STATEMENTS CONCERNING COMPANY

      5.1 IN GENERAL. Executive shall refrain, both during the employment
relationship and after the employment relationship terminates, from publishing
any oral or written statements about Company, any of its affiliates, or any of
such entities' officers, employees, agents or representatives that are intended
by Executive to be slanderous, libelous, or defamatory, or that disclose private
or confidential information about Company, any of its affiliates, or any of such
entities' business affairs, officers, employees, agents, or representatives; or
that place Company, any of its affiliates, or any of such entities' officers,
employees, agents, or representatives in a false light before the public; or
that constitute a misappropriation of the name or likeness of Company, any of
its affiliates, or any of such entities' officers, employees, agents, or
representatives. A violation or threatened violation of this prohibition may be
enjoined by the courts. The rights afforded Company and its affiliates under
this provision are in addition to any and all rights and remedies otherwise
afforded by law.

                                      -7-
<PAGE>   8
ARTICLE 6:  EFFECT OF TERMINATION ON COMPENSATION

      6.1 BY EXPIRATION. If Executive's employment hereunder shall terminate
upon expiration of the Term provided in paragraph 2.1 hereof, then, except as
specifically provided herein, all unaccrued compensation and all benefits to
Executive hereunder shall terminate contemporaneously with termination of his
employment. Upon any termination of the employment relationship by either
Executive or Company after the expiration of the Term provided in paragraph 2.1,
Executive shall be entitled to pro-rata salary through the date of such
termination and any and all other compensation to which Executive is entitled
under this Agreement shall cease and terminate.

      6.2 BY COMPANY. If Executive's employment hereunder shall be terminated by
Company pursuant to paragraph 2.2 prior to expiration of the Term provided in
paragraph 2.1, then, upon such termination, all unaccrued compensation and
benefits to Executive hereunder shall terminate contemporaneously with the
termination of such employment; provided, however, if the employment is
terminated pursuant to clauses (i), (ii) or (v) of paragraph 2.2, the Option
shall become vested in an amount proportional to the length of Executive's
employment and the Term provided in paragraph 2.1.

      6.3 BY EXECUTIVE. If Executive's employment hereunder shall be terminated
by Executive prior to the expiration of the Term provided in paragraph 2.1,
then, upon such termination, regardless of the reason therefor, all unaccrued
compensation and benefits to Executive hereunder shall terminate
contemporaneously with the termination of such employment; provided, however,
that if Executive's employment hereunder shall be terminated by Executive
pursuant to paragraph 2.3(ii) or (iii), Executive's Option to purchase stock
granted in paragraph 3.3 shall become vested in an amount proportional to the
length of Executive's employment and the Term provided in paragraph 2.1.

      6.4 NO DUTY TO MITIGATE LOSSES. Executive shall have no duty to find new
employment following the termination of his employment under circumstances which
require Company to pay any amount to Executive pursuant to this Article 6. Any
salary or remuneration received by Executive from a third party for the
providing of personal services (whether by employment or by functioning as an
independent contractor) following the termination of his employment under
circumstances pursuant to which this Article 6 apply shall not reduce Company's
obligation to make a payment to Executive (or the amount of such payment)
pursuant to the terms of this Article 6.

      6.5 LIQUIDATED DAMAGES. In light of the difficulties in estimating the
damages for an ear}y termination of this Agreement, Company and Executive hereby
agree that the payments, if any, to be received by Executive pursuant to this
Article 6 shall be received by Executive as liquidated damages.

                                      -8-
<PAGE>   9
      6.6 INCENTIVE AND DEFERRED COMPENSATION. This Agreement governs the rights
and obligations of Executive and Company with respect to Executive's base salary
and certain perquisites of employment. Executive's rights and obligations both
during the term of his employment and thereafter with respect to stock options,
restricted stock, incentive and deferred compensation, life insurance policies
insuring the life of Executive, and other benefits under the plans and programs
maintained by Company shall be governed by the separate agreements, plans and
other documents and instruments governing such matters except to the extent
expressly set forth herein.

ARTICLE 7:  MISCELLANEOUS

      7.1 NOTICES. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

      IF TO COMPANY TO:       Seven Seas Petroleum Inc.
                              5555 San Felipe, Suite 1700
                              Houston, Texas 77056
                              Attention: Robert A. Hefner, III, Chairman

      IF TO EXECUTIVE TO:     Sir Mark Thomson, Bt
                              Seven Seas Petroleum Inc.
                              5555 San Felipe, Suite 1700
                              Houston, Texas 77056

or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.

      7.2 APPLICABLE LAW. This Agreement is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas without regard to
its conflicts of law principles.

      7.3 NO WAIVER. No failure by either party hereto at any time to give
notice of any breach by the other party of, or to require compliance with, any
condition or provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.

      7.4 SEVERABILITY. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.

                                      -9-
<PAGE>   10
      7.5 COUNTERPART. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.

      7.6 WITHHOLDING OF TAXES AND OTHER EMPLOYEE DEDUCTIONS. Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law or
governmental regulation or ruling and all other normal employee deductions made
with respect to Company's employees generally.

      7.7 HEADINGS. The paragraph headings have been inserted for purposes of
convenience and shall not be used for interpretive purposes.

      7.8 GENDER AND PLURALS. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.

      7.9 AFFILIATE. As used in this Agreement, the term "affiliate" shall mean
any entity which owns or controls, is owned or controlled by, or is under common
ownership or control with, Company.

      7.10 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of Company and any successor of Company, by merger or otherwise. Except
as provided in the preceding sentence, this Agreement, and the rights and
obligations of the parties hereunder, are personal and neither this Agreement,
nor any right, benefit, or obligation of either party hereto, shall be object to
voluntary or involuntary assignment, alienation or transfer, whether by
operation of law or otherwise, without the prior written consent of the other
party.

      7.11 TERM. This Agreement has a term co-extensive with the term of
employment provided in paragraph 2.1. Termination shall not affect any right or
obligation of any party which is accrued or vested prior to such termination.
Without limiting the scope of the preceding sentence, the provisions of Articles
4 and 5 shall survive any termination of the employment relationship and/or of
this Agreement.

      7.12 ENTIRE AGREEMENT. Except as provided in (i) the written benefit plans
and programs referenced in paragraph 3.4(iii), and (ii) any signed written
agreement contemporaneously or hereafter executed by Company and Executive, this
Agreement constitutes the entire agreement of the parties with regard to the
subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
employment of Executive by Company. Without limiting the scope of the preceding
sentence, all prior understandings and agreements among the parties hereto
relating to the subject matter hereof are hereby null and void and of no further
force and effect. Any modification of this Agreement will be effective only if
it is in writing and signed by the party to be charged.

                                      -10-
<PAGE>   11
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written, to be effective as of the Effective Date.

                                          SEVEN SEAS PETROLEUM INC.

                                          ______________________________________
                                          Robert A. Hefner III
                                          Chairman
                                                                       "COMPANY"

                                          ______________________________________
                                          Sir Mark Thomson, Bt
                                                                     "EXECUTIVE"

                                      -11-

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