Document:

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                                                                    Exhibit 10.5

                             [LOGO OF PARADIGM BANK TEXAS]

                               EMPLOYMENT CONTRACT

      This Employment Contract (this "Agreement") is made as of the 1st day of
December, 2001 between Paradigm Bank Texas, a Texas banking association, having
a principal place of business at 2828 FM 1960, Houston, Texas 77273, hereinafter
referred to as the "Employer", and Jay W. Porter, Jr. who resides at 16323 Sr.
William Drive, Spring, Texas 77379 hereinafter referred to as the "Employee".

      WHEREAS, the Employee has considerable experience, expertise and training
in management related to banking in general, lending, deposit gathering, and
marketing, and other services offered by the Employer and or its subsidiaries;
and

      WHEREAS, the Employer desires and intends to employ the Employee as
President of the Houston Banking Division of the Employer pursuant to the terms
and conditions set forth in this Employment Agreement, and the Employer desires
to accept such employment pursuant to the terms and conditions set forth in this
Agreement; and

      WHEREAS, the Employer and the Employee have read and understood the terms
and provisions set forth in this Agreement.

      NOW THEREFORE, in consideration of the mutual promises and covenants set
forth in this Agreement, the Employer and Employee agree as follows:

                                   ARTICLE I
                               TERM OF EMPLOYMENT

      The Employer hereby employs the Employee and the Employee hereby accepts
employment with the Employer for a period of two (2) years beginning on the date
set forth in the first paragraph of this Agreement ("Effective Date"); however,
this Agreement may be terminated earlier as hereinafter provided. Employer and
Employee acknowledge and agree that, subsequent to the expiration of this
Agreement, the parties may agree to continue the employment relationship under
such terms as they may mutually agree upon. However, the parties acknowledge and
agree that, in the event they fail to agree upon terms for the continuation of
the Employee's employment subsequent to the expiration date, the employment may
terminate at the discretion of either of the parties without any additional
liability or obligation on the part of the parties except as otherwise specified
herein.
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                                   ARTICLE II
                               DUTIES OF EMPLOYEE

      1. Employment and Primary Duties. On the terms and subject to the
conditions of this Agreement, the Employer hereby employs Employee and engages
the Employee to serve as the President of the Houston Banking Division of the
Employer ("Office"), and Employee hereby accepts employment with the Employer
according to the terms set forth in this Agreement. Employee shall primarily be
responsible for the management of the Houston Division of the Employer and shall
perform such other work as may be assigned to him subject to the instructions,
directions, and control of the President and CEO of the Employer which shall be
consistent with the type and nature of work normally associated with the Office
in a bank having assets similar in nature and value to the assets of the
Employer.

      2. Location. Employee shall work at 3934 F. M. 1960 West, Suite 330,
Houston, Texas 77068 or at such other place or places as may be directed by the
President of the Employer and shall be furnished with an office and other
business facilities and services sufficient to carry out his duties of office.

                                  ARTICLE III
                        ENGAGING IN OTHER EMPLOYMENT AND
                             COVENANT NOT TO COMPETE

      1. Other Business During Term of Agreement. During the term of this
Agreement, the Employee shall devote substantially all of his productive time,
ability, and attention to the business of the Employer and its subsidiaries
during Employer's normal business hours, and Employee shall not directly or
indirectly render any services of a business, commercial, or professional nature
to any other person or organization, whether for compensation or otherwise,
without the prior written consent of the Employer.

      2. Covenant Not To Compete. If Employee's employment is terminated for any
reason during the term of this Agreement other than termination pursuant to
Article VIII Section (ii) where such termination is without Good Cause or is
after a Change of Control, Employee for a one-year period following the
termination of Employee's employment shall not, directly or indirectly, either
as an employee, employer, consultant, agent, greater than 10% stockholder,
officer, director or in any other individual or representative capacity (i)
solicit the banking business (loan, investment, deposit or otherwise) of any
then existing customers of Employer or its subsidiaries or affiliates, (ii)
engage or participate in any business that is in competition in any manner
whatever with the business of Employer or its subsidiaries or affiliates, or
(iii) solicit the employment of any person employed by Employer or its
subsidiaries or affiliates during the past twelve month's of Employee's
employment with the Employer, within Harris County or Liberty County, Texas.
This covenant, as it relates to employment with a competitor but not
solicitation of existing customers, shall be limited to the market area
currently defined as the Houston Division of Paradigm Bank Texas. It is
specifically provided that Employee's covenant contained in this Article III,
Section 2 shall survive the termination of this Agreement.

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                                   ARTICLE IV
                                  COMPENSATION

      1. Basic Compensation. As compensation for employment services rendered
under this Agreement, the Employee shall be entitled to receive from the
Employer an annual base salary of ONE HUNDRED-TWENTY THOUSAND AND NO/100 DOLLARS
($120,000) for the first year of this Agreement. Beginning on the anniversary of
this Agreement, the Employee will receive an increase in his base salary equal
to the increase in the consumer price index for the prior year.

      2. Payment of Basic Compensation. Payments of the base salary shall be
made in accordance with the Employer's payroll policies and procedures, subject
to payroll and withholding deductions as may be required by law and other
deductions applied generally to employees of the Employer for insurance or other
employee benefit plans.

                                   ARTICLE V
                  REIMBURSEMENT OF EMPLOYEE BUSINESS EXPENSES,
                    PARTICIPATION IN EMPLOYER BENEFIT PLANS,
                            BONUS AND OTHER BENEFITS

      1. Out of Pocket Expenses. The Employee is authorized to incur reasonable
business expenses for promoting the business of the Employer and its
subsidiaries, including expenditures for entertainment, travel, lodging and
meals, including, without limitation, trade association convention attendance,
country club dues, mobile telephone expense, and other similar business
expenses. The Employer will reimburse the Employee from time to time for all
such business expenses provided that the Employee presents the Employer with
appropriate documentation of such expenditures in accordance with the Employer's
established procedures relating to such reimbursements.

      2. Participation in Employer Benefit Plans. Until the termination of
Employee's employment, Employee will be eligible to participate in all employee
benefit plans generally available to the officers and employees of Employer in
accordance with the terms of such plans. After the termination of Employee,
Employer will use reasonable efforts to have Employee continue to be covered
under the Employer's health insurance plans at Employee's own expense. The
Employee acknowledges and agrees that any employee benefits provided to the
Employee incident to the Employee's employment are governed by the applicable
plan documents, summary plan descriptions or employment policies, and may be
modified, suspended, or revoked at any time in accordance with the terms and
provisions of the applicable documents.

      3. Service on Boards of Directors. While serving as a director of the
Employer, Employee shall receive the standard fee for attendance of meetings of
the Board of Directors of the Employer.

      4. Bonus Schedule. Within thirty days after December 31, 2001 and December
31, 2002 (or within 30 days after the end of the quarter in the event of a
termination of employment), the Employer shall pay the Employee an additional
bonus as a percentage of his base salary. The bonus shall be based on the return
on average assets of the Employer for the prior twelve months

                                      -3-
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("ROAA") according to the schedule set forth on Exhibit A hereto. ROAA shall be
determined prior to the payment of federal income taxes and shall be calculated
by the certified public accountants of the Employer.

      5. Automobile Allowance. During the term of this Agreement, the Employer
shall pay Employee an automobile allowance of $500.00 per month.

      6. Vacation. Employer shall give Employee four (4) weeks of vacation per
year, which vacation shall fully accrue as of the commencement of this Agreement
and all unused vacation will carry forward each year. Further more, the Employee
is entitled to receive salary in lieu of vacation for all or a portion of the
four week period each year at the Employee's sole discretion.

      7. Possible Adjustment. The Employer and the Employee acknowledge that,
during the term of employment of the Employee pursuant to this Agreement, the
Employee's compensation will be subject to an annual review and adjustment by
the Board of Directors of the Employer but, in no event, will the Employee's
salary, vacation, additional bonus compensation and other benefits be less than
the amounts set forth in Article IV and Sections 1,4,5, and 6 of Article V at
any time during this Agreement.

                                   ARTICLE VI
              EMPLOYEE'S OBLIGATIONS OTHER THAN TO PERFORM SERVICES

      1. Non-Competition by Employee. During the term of this Agreement, the
Employee shall not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any business that is in competition in any manner whatever with the business of
Employer or its subsidiaries.

      2. Duty of Loyalty. The Employee acknowledges and agrees that, during the
term of this Agreement, he has a fiduciary duty of loyalty to the Employer, and
that he will not engage in any activity during the term of this Agreement, which
will or could, in any significant way, harm the business, business interests, or
reputation of the Employer or its subsidiaries.

      3. Enforcement and Legal Remedies. The parties recognize the difficulty of
properly measuring the damages which reasonably would accrue by reason of a
breach of this covenant of non-competition and thereof agree that the party
suffering by reason of any breach of this Agreement shall be entitled to the
equitable remedy of injunctive relief.

                                  ARTICLE VII
                                 PROPERTY RIGHTS

      1. Trade Secrets and Confidentiality. The Employee acknowledges and agrees
that certain information concerning the Employer's (and its subsidiaries)
services, techniques, pricing, business projections, business plans and
strategies, financial data, records, marketing plans and studies, techniques,
assets, customer contacts, customer needs and prospective customers (i) are
owned by employee, (ii) are highly sensitive and confidential, and (iii) have
been obtained only through significant effort and expense to the Employer, and
that, as a result, the Employee agrees

                                      -4-
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to treat this information as highly confidential trade secret information at all
times during and after the term of this Agreement. The Employee acknowledges and
agrees that during the term of employment, the Employee will have access to and
become familiar with such trade secrets. The Employee shall not disclose any
such trade secrets, directly or indirectly, nor use them in any way, either
during the term of this Agreement or at any time thereafter, except as required
in the course of his employment with the Employer or its subsidiaries.
Notwithstanding anything in this Agreement to the contrary or seemingly
inconsistent herewith, the parties agree that all information referred to in
this Section shall not be deemed trade secrets or confidential information of
the Employer or its subsidiaries if such information is already available to
competitors of the Employer. All files, records, documents, drawings,
specification, equipment, and similar items relating to the business of the
Employer, whether or not prepared by the Employee, shall remain the exclusive
property of the Employer and shall not be removed from the premises of the
Employer under any circumstances without the prior written consent of the
Employer; provided, however, that Employee may remove such items for the purpose
of furthering the business of Employer. All items removed from the premises of
Employer and all copies or summaries thereof shall be returned to Employer upon
the termination of Employee.

      2. Processes and Improvements. The Employee agrees that he will promptly
from time to time fully inform and disclose to the Employer all inventions,
processes, designs, improvements and discoveries which he has developed or may
hereafter develop during the term of this Agreement which pertain or relate to
the business of the Employer or to any experimental work carried on by the
Employer, whether conceived by the Employee alone or with others and whether or
not conceived during regular working hours. All such inventions, processes,
designs, improvements, and discoveries shall be the exclusive property of the
Employer. The Employee shall assist the Employer in obtaining patents on all
such inventions, designs, improvements, and discoveries deemed patentable by the
Employer and shall execute all documents and do all things necessary to obtain
letters patent, vest the Employer with full and exclusive title thereto, and
protect the same against infringement by others. However; the Employer
acknowledges and agrees that the Employee brings to this employment relationship
over 30 years of experience in banking services, pricing, business projections,
business plans and strategies, marketing plans, techniques, assets and customer
contacts previously obtained by the Employee along with his reputation in the
community.

                                  ARTICLE VIII
                                   TERMINATION

      1. Termination of Agreement. Except as may otherwise be provided herein,
this Agreement may terminate prior to December 1, 2003 upon the occurrence of:

            (i) sixty (60) days after written notice of termination is given by
      Employee;

            (ii)  upon written notice of termination given by Employer;

            (iii) employee's death or, at the Employer's option, upon Employee's
      becoming Disabled (as defined in Article IX Section 3 hereof)

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Any notice of termination given by the Employer to Employee under Section 1(ii)
above shall specify whether such termination is with or without Good Cause (as
defined in Article IX Section 5 hereof).

                                   ARTICLE IX
                  OBLIGATIONS OF THE EMPLOYER UPON TERMINATION

      1. Termination by Employee; Termination for Good Cause. If the Employee
terminates this Agreement pursuant to Article VIII Section 1(i) above or if
Employer terminates this Agreement with Good Cause pursuant to Article VIII
Section 1(ii) above, this Agreement shall terminate without further obligations
to Employee, other than those obligations owing or accrued to, vested in, or
earned by Employee through the date of termination, including, but not limited
to:

            (i) to the extent not theretofore paid, Employee's annual salary in
      effect at the time of such termination through the date of termination;
      and

            (ii) in the case of compensation previously deferred by Employee,
      all amounts previously deferred (together with any accrued interest
      thereon) and not yet paid by the Employer and any accrued vacation pay not
      yet paid by the Employer; and

            (iii) all other amounts or benefits owing or accrued to, vested in,
      earned by Employee through the date of termination under (a) the then
      existing or applicable plans, programs, arrangements, and policies of
      Employer and (b) the bonus provisions of Article V Section 4 of this
      Agreement;

such obligations owing or accrued to, vested in, or earned by Employee through
the date of termination, including, but not limited to, such amounts and
benefits specified in clauses (i), (ii), and (iii) of this sentence, being
hereinafter collectively referred to as the "Accrued Obligations." The aggregate
amount of such obligations owing or accrued to, vested in, or earned by Employee
through the date of termination, including, but not limited to, the Accrued
Obligations, shall be paid by the Employer to Employee in cash in one lump sum
within thirty (30) days after the date of termination; provided, however that
the bonus payable pursuant to Article V Section 4 of this Agreement shall be
payable within thirty (30) days after the end of the quarter in which the
Employee's employment ends and shall be based on the ROAA for the prior twelve
months.

      2. Termination other than for Good Cause or After Change in Control. If
the Employer terminates this Agreement without Good Cause or after a Change in
Control pursuant to Article VIII Section 1(ii) hereof, the Employer shall pay to
Employee cash in one lump sum within thirty (30) days after the date of
termination (provided, however that the bonus payable pursuant to Article V
Section 4 of this Agreement shall be payable within thirty (30) days after the
end of the quarter in which the Employee's employment ends and shall be based on
the ROAA for the prior twelve months) the aggregate of the following amounts:

            (i) to the extent not theretofore paid, Employee's annual salary at
      the annual rate in effect at the time of such termination through the date
      of termination; and

                                      -6-
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            (ii) in the case of compensation previously deferred by Employee,
      all amounts previously deferred (together with any accrued interest
      thereon) and not yet paid by the Employer, and any accrued vacation pay
      not yet paid by the Employer; and

            (iii) all other amounts or benefits owing or accrued to, vested in,
      earned by Employee through the date of termination under (i) the then
      existing or applicable plans, programs, arrangements, and policies of
      Employer and (ii) the bonus provisions of Article V Section 4 of this
      Agreement;

            (iv) any and all other Accrued Obligations not otherwise described
      in clause (i), (ii) or (iii) of this Section 2;

            (v) an amount equal to (($120,000 (or then current salary) divided
      by twelve)) times the number of months remaining in the stated term of
      this Agreement, less statutory payroll deductions; provided, however, in
      no event shall the amount payable under this item (vi) be less than
      $120,000.

Additionally, Employer will use reasonable efforts to have Employee and his
dependents continue to be covered under the Employer's insurance benefit plans
(including death, disability, accident and health) for a period of twelve months
at Employee's own expense at the rate at the time of the Change in Control.

      3. Termination by Death or Disability. If Employee's employment is
terminated under Article VIII Section 1(iii) hereof by reason of Employee's
death or Disability, the Employer shall pay to Employee's legal representatives
cash in one lump sum within thirty (30) days after the date of Employee's death
or Disability the full amount of the obligations owing or accrued to, vested in,
or earned by Employee through the date of Employee's death or disability,
including, but not limited to, the Accrued Obligations. Anything in this
Agreement to the contrary notwithstanding, the Employee's legal representatives
or beneficiaries shall be entitled to receive benefits provided under the then
existing or applicable plans, programs, or arrangements and policies of the
Employer relating to death or disability. As used herein, "Disabled" shall have
the meaning as being disabled under the other benefit plans of the Employer or
if no such determination is made then such determination shall be made by the
Board of Directors of the Employer.

      4. Good Cause. As used in this Agreement, the term "Good Cause" means:

            (i) the Employee's violates any material provision of this Agreement
      or commits gross negligence, and fails to cure such violation or the
      effects of such gross negligence within thirty (30) days after written
      notice to the Employee by the Board of Directors of the Employer
      specifying in reasonable detail the alleged violation or gross negligence;

            (ii) the conviction of the Employee of a felony, or a misdemeanor
      involving moral turpitude; or

                                      -7-
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            (iii) the Employee engages in gross misconduct in the course and
      scope of his employment with the Employer or the Bank including indecency,
      immorality, dishonesty, unlawful harassment, use of illegal drugs or
      fighting.

      5. Change in Control. As used in this Agreement, "Change in Control" means
an event or series of events whereby the shareholders of the Employer as of the
Effective Date, the individuals related by blood or marriage to the shareholders
of the Employer as of the Effective Date with a relationship equal to or closer
than third cousin or any entity controlled by or for the benefit of such persons
ceases to own at least 51% of the voting stock of the Employer. For purposes of
determining the current shareholders of the Employer, a list of the shareholders
as of the Effective Date is attached hereto as Exhibit B.

                                    ARTICLE X
                                   ARBITRATION

      1. Any claim or controversy arising out of or relating to this Agreement,
or the breach of this Agreement, or any other dispute arising out of or relating
to the employment of the Executive by the Employer, shall be settled by final
and binding arbitration in the city of Houston, Texas in accordance with the
Employment Arbitration Rules of the American Arbitration Association in effect
on the date the claim or controversy arises. Either party must request
arbitration of any claims controversy within sixty (60) days of the date the
claim or controversy arises by giving written notice of the party's request for
arbitration by certified U.S. mail or personal delivery addressed to the other
party. Failure to give notice of any claim or controversy within sixty (60) days
shall constitute a waiver of the claim or controversy. 2. All claims or
controversies subject to arbitration shall be submitted to arbitration within
three (3) months from the date the written notice of a request for arbitration
is effective. All claims or controversies shall be resolved by a panel of three
(3) arbitrators who are licensed to practice law in the State of Texas and who
are experienced in the arbitration of labor and employment disputes. These
arbitrators shall be selected in accordance with the Rules of the American
Arbitration Association in effect at the time the claim or controversy arises.
Either party may request the arbitration proceeding be stenographically recorded
by a Certified Shorthand Reporter. The arbitrators shall issue a written
decision with respect to all claims or controversies within thirty (30) days
from the date the claims or controversies are submitted to arbitration. The
Employer will bear fifty percent (50%) of the actual cost of the arbitration
proceeding (exclusive of each party's own legal fees).

      3. The provisions of Article X may be specifically enforced by either
party, and submission to arbitration proceedings compelled, by any court of
competent jurisdiction. The decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.

      4. Nothing in this Agreement shall be construed to require arbitration of
any claim for worker's compensation or unemployment compensation.

                                      -8-
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                                   ARTICLE XI
                                 INDEMNIFICATION

      During the term of this Agreement, the Employer shall indemnify and agree
to hold the Employee harmless from and against any and all liabilities, losses,
costs, damages, obligations, expenses (including attorney's fees) resulting from
the fact the Employee was an officer, director or employee of the Employer to
the fullest extent permissible under the law, including, without limitation, the
Texas Finance Code and Article 2.02-1 of the Texas Business Corporation Act, and
may purchase such indemnification insurance as the Board of Directors may from
time to time determine. The Employer shall reimburse the Employee for any and
all expenses incurred by him as a party of any threatened, pending or completed
proceeding as such expenses are incurred, and in advance of the final
disposition of the proceeding; provided however, that the Employee shall provide
to the Employer a written affirmation of his good faith belief that he has met
the standard of conduct necessary for indemnification under applicable laws and
regulations, and an undertaking by the Employee to repay all amounts so
advanced, without interest, if it is ultimately determined by a final decision,
order or decree of a court of competent jurisdiction that the Employee has not
met these standards.

                                  ARTICLE XII
                               GENERAL PROVISIONS

      1. Notices. Any notices to be given hereunder by either party to the other
may be effected either by personal delivery in writing or by mail, registered or
certified, postage prepaid with return receipt requested. Mailed notices shall
be addressed to the parties at the addresses appearing in the introductory
paragraph of this Agreement, but each party may change his address by written
notice in accordance with this paragraph. Notices delivered personally shall be
deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as of three (3) days after mailing.

      2. Inclusion of Entire Agreement Herein. This Agreement supersedes any and
all other agreements, either oral or in writing, between the parties hereto with
respect to the employment of the Employee by the Employer and contains all of
the covenants and agreements between the parties with respect to such employment
in any manner whatsoever.

      3. Law Governing Agreement. The law of the State of Texas will govern the
validity, interpretation and effect of this Agreement, and any other dispute
relating to, or arising out of, the employment relationship between the Employer
and the Employee.

      4. Modification. (a) All parties acknowledge and agree that this Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Agreement based upon the express terms and provisions
set forth herein; that the parties have not relied on any representations, oral
or written, which are not set forth in this Agreement; that no previous
agreement, either oral or written, shall have any effect on the terms or
provisions of the Agreement; and that all previous agreements, either oral or
written, are expressly superseded and revoked by the Agreement.

                                      -9-
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      (b) All parties acknowledge and agree that the covenants and/or provisions
of this Agreement may not be modified by any subsequent agreement unless the
modifying agreement: (i) is in writing; (ii) contains an express provision
referencing this Agreement; (iii) is signed by the parties hereto; and (iv) is
approved by the Board of Directors of the Employer and the Bank.

      5. Failure to Enforce Not Waiver. Any failure or delay on the part of
either the Employer or the Employee to exercise any remedy or right under this
Agreement shall not operate as a waiver. The failure of either party to require
performance of any of the terms, covenants, or provisions of this Agreement by
other party shall not constitute a waiver of any of the rights under the
Agreement. No forbearance by either party to exercise any rights or privileges
under this Agreement shall be construed as a waiver, but all rights and
privileges shall continue in effect as if no forbearance had occurred. No
covenant or condition of this Agreement may be waived except by the written
consent of the waiving party. Any such written waiver of any term of this
Agreement shall be effective only in the specific instance and for the specific
purpose given.

      6. Partial Invalidity. If any provision of this Agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall remain in full force and effect, as if this Agreement
had been executed without any such invalid provisions having been included. Such
invalid provision shall be reformed in a manner that is both (i) legal and
enforceable, and (ii) most closely represents the parties original intent.

      7. Attorney's Fees and Costs. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs, and necessary
disbursements in addition to any other relief to which he may be entitled.

      8. Counterparts. This Agreement has been executed in duplicate, each of
which shall be deemed an original, but both of which shall constitute one and
the same instrument.

      9. Successors and Assigns. (a) The Employee acknowledges and agrees that
this Agreement may be assigned by the Employer to any successor-in-interest and
shall inure to the benefit of, and be fully enforceable by, any successor and/or
assignee;

      and this Agreement will be fully binding upon, and may be enforced by the
Employee against, any successor and/or assignee of the Employer.

      (b) The Employee acknowledges and agrees that his obligations, duties and
responsibilities under this Agreement are personal and shall not be assignable
and that this Agreement shall be enforceable by only the Employee or his legal
representatives. In the event of the Employee's death or disability, this
Agreement shall be enforceable by the Employee's estate, executors and/or legal
representatives.

                                      -10-
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          EXECUTED ON THIS 7th DAY OF DECEMBER, 2001 AT HOUSTON, TEXAS.

                                           EMPLOYEE:

                                           /s/ Jay W. Porter, Jr.
                                           -------------------------------------
                                           Jay W. Porter, Jr.

                                           PARADIGM BANK TEXAS

                                           By: /s/ Peter E. Fisher
                                               ---------------------------------
                                               Peter E. Fisher
                                               Chief Executive Officer

STATE OF TEXAS            ss.
                          ss.
COUNTY OF HARRIS          ss.

      This instrument was acknowledged before me on this ____ day of
________________, 2001 by Jay W. Porter, Jr.

                                           -------------------------------------
                                           Notary Public - State of Texas

                                           -------------------------------------
                                           Printed Name of Notary

                                           My Commission Expires:
                                                                  --------------

STATE OF TEXAS             ss.
                           ss.
COUNTY OF HARRIS           ss.

      This instrument was acknowledged before me on this ____ day of
________________, 2001 by Peter E. Fisher in the capacity stated.

                                           -------------------------------------
                                           Notary Public - State of Texas

                                           -------------------------------------
                                           Printed Name of Notary

                                           My Commission Expires:
                                                                  --------------

                                      -11-
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                                    EXHIBIT A

                                      BONUS

Pursuant to Article V Section 4 of this Agreement, the Employer shall pay the
Employee an additional bonus as a percentage of his base salary. The bonus shall
be based on the return on average assets of the Employer for the prior twelve
months ("ROAA") according to the schedule set forth below. ROAA shall be
determined prior to the payment of federal income taxes and shall be calculated
by the certified public accountants of the Employer.

                       ROAA (Pre-tax)                Bonus (% of Base Salary )
                       --------------                -------------------------
                       2.00% above                            25%
                       1.75% - 1.99%                          20%
                       1.50% -1.74%                           15%
                       1.25% -1.49%                           10%
                       1.00% -1.24%                            5%

                                      -12-
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                                    EXHIBIT B

                 LIST OF SHAREHOLDERS AS OF DECEMBER ____, 2001

                                      -13-<PAGE>

                              NUEVO ENERGY COMPANY
                                 JANET F. CLARK
                                STOCK OPTION PLAN

     THIS AGREEMENT is entered into this 5th day of December, 2001, between
Nuevo Energy Company, a Delaware corporation (herein called "Company"), and
Janet F. Clark (herein called "Grantee").

     Grantee has been offered employment with the Company in accordance with the
terms set forth more fully below. In connection with the offer of employment and
to induce Grantee to accept her offer of employment, the Compensation Committee
of the Board of Directors of the Company has this day authorized the grant of
the following options to Grantee.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties do hereby agree as follows:

     1. Grant of Options. Subject to all of the terms, conditions and provisions
of this Agreement, the Company hereby grants to Grantee options pursuant to
which Grantee shall have the right and option to purchase from the Company all
or any part of an aggregate of 150,000 shares of the common stock of the
Company, of the par value of one cent ($0.01) per share ("Common Stock"), which
shares shall consist of authorized but unissued shares or issued shares
reacquired by the Company. The option is not intended to constitute an
"incentive stock option" as that term is used in IRS Code Section 422.

     2. Option Price. The option or purchase price payable by Grantee to the
Company in exercise of this option shall be $12.00 dollars per share ("Option
Price"), being the fair market value of the Common Stock of the Company on
December 5, 2001 (the "Grant Date").

     3. Vesting. The options shall vest and become exercisable as to 50% of the
Common Stock covered hereby one year following the Grant Date and as to 100% of
the Common Stock covered hereby two years following the Grant Date.

Other terms and conditions upon which the options may be exercised are:

     (a) General. Except with respect to the death, disability, retirement or
voluntary or involuntary termination of employment of Grantee or as otherwise
agreed to in writing by the Board of Directors or the Compensation Committee of
the Board of Directors (the "Plan Administrator"), no option may be exercised at
any time unless Grantee has been continuously employed by the Company, or a
parent, subsidiary or affiliate of the Company, from the Grant Date until and
including the date on which the option is exercised.

     (b) Death. In the event of death of the Grantee, any options to the extent
vested and exercisable on the date of death may be exercised by the Grantee's
estate, or by a person who acquires the right to exercise the option by bequest
or inheritance or by reason of the death of the

                                       1
<PAGE>

Grantee prior to the sooner (i) of the expiration date provided in Section 7 and
(ii) the close of business on the last business day that occurs prior to one
year following the Grantee's death. This provision shall apply notwithstanding
the fact that the Grantee's employment may have terminated prior to death
(including by disability, retirement or voluntary or involuntary termination),
but only to the extent of any options that are vested and exercisable on the
date of death.

     (c) Disability and Retirement. In the event of termination of the Grantee's
employment by reason of retirement or permanent disability (as each is
determined by the Plan Administrator), any options to the extent vested and
exercisable on the date of retirement or disability may be exercised by Grantee,
Grantee's estate or by any person who acquires the right to exercise the option
as a conservator or guardian, prior to the sooner of (i) the expiration date
provided in Section 7 and (ii) the close of business on the last business day
that occurs prior to 180 days following such date of termination (in the case of
permanent disability) or 90 days following such date of termination (in the case
of retirement). This provision shall apply notwithstanding that fact that the
Grantee's employment may have terminated prior to disability by reason of
retirement or voluntary or involuntary termination of employment but only to the
extent of options that are vested and exercisable on the date of disability.

     (d) Termination of Employment. In the event of the voluntary or involuntary
termination of employment of Grantee for reason other than death, retirement or
permanent disability, any options to the extent vested and exercisable on the
date of termination of employment may be exercised by Grantee prior to the
sooner of (i) the expiration date provided in Section 7 and (ii) the close of
business on the last business day that occurs prior to 30 days following such
date of termination.

The options granted herein shall automatically vest upon the happening of the
following events:

     (a) Merger. In the event the Company has entered into an agreement to (i)
merge or consolidate with another entity in a transaction in which the Company
shall not survive or (ii) sell all or substantially all of the assets of the
Company, and the surviving corporation or purchaser does not agree to assume
this option as provided in Section 11 herein, then this option shall
automatically vest as to all shares, the Company shall give notice of such
agreement to the Grantee and such option shall be exercisable immediately prior
to the consummation of such transaction.

     (b) Change in Control. Upon a Change in Control this option shall
automatically vest as to all shares, the Company shall give notice of the Change
of Control to the Grantee and such option shall be immediately exercisable. The
term "Change in Control" means a change in the beneficial ownership of the
Company's voting stock or a change in the composition of the board which occurs
as follows:

          (i) Any "person" (as such term is used in Section 13(d) and 14(d)(2)
     of the Securities Exchange Act of 1934) is or becomes a beneficial owner,
     directly or

                                       2
<PAGE>

     indirectly, of stock of the Company representing 25% or more of the total
     voting power of the Company's then outstanding capital stock.

          (ii) A tender offer (for which a filing has been made with the SEC
     which purports to comply with the requirements of Section 14(d) of the
     Securities Exchange Act of 1934 and the corresponding SEC rules) is made
     for the stock of the Company. In case of a tender offer described in this
     paragraph (ii), the Change in Control will be deemed to have occurred upon
     the first to occur of (A) any time during the offer when the person (using
     the definition in (i) above) making the offer owns or has accepted for
     payment stock of the Company with 25% or more of the total voting power of
     the Company's outstanding stock or (B) three business days before the offer
     is to terminate unless the offer is withdrawn first, if the person making
     the offer could own, by the terms of the offer plus any shares owned by
     this person, stock with 50% or more of the total voting power of the
     Company's outstanding stock when the offer terminates.

          (iii) Individuals who were the board's nominees for election as
     directors of the Company immediately prior to a meeting of the stockholders
     of the Company involving a contest for the election of directors shall not
     constitute a majority of the board following the election.

     (c) Other Events. The Plan Administrator may declare any other event as an
event following which all or any portion of the options shall vest and be
exercisable, which may be subject to such terms and conditions as the Plan
Administrator may determine.

     4. Termination For Cause. Notwithstanding any other provision in this
Agreement, if the employment of Grantee is terminated "for cause," the option,
regardless of whether vested or unvested, shall immediately terminate and
Grantee shall have no rights with respect thereto. As used herein, cause means
(i) willful misconduct or intentional and continual neglect of duties which in
the business judgment of the Board of Directors of the Company (excluding the
Grantee if applicable) has materially adversely affected the Company or its
subsidiaries; provided, however, that the Grantee shall have first received
written notice from the Board of Directors advising of the acts or omissions
that constitute the misconduct or neglect of duties, and such misconduct or
neglect of duties continues after the Grantee shall have had a reasonable
opportunity to correct the same or (ii) theft or conviction of a felony or any
crime involving dishonesty or moral turpitude.

     5. Manner of Payment. The options granted herein may be exercised according
to the following methods:

     (a) Subject to the following provisions of this Section 5, upon the
exercise in respect of any shares of Common Stock, Grantee shall pay to the
Company, in full, the Option Price for such shares.

                                       3
<PAGE>

     (b) The Option Price shall be payable in cash or by tendering shares of
Common Stock in a manner reasonably acceptable to the Plan Administrator and
valued at fair market value as of the day of exercise of the option, or in any
combination thereof.

     (c) The Plan Administrator may permit Grantee to elect to pay the Option
Price upon the exercise of an option through a cashless exercise procedure
approved by the Plan Administrator by irrevocably authorizing a broker to sell
shares of Common Stock (or a sufficient portion of the shares) acquired upon
exercise of such option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Option Price and any tax withholding resulting
from such exercise.

     6. Issuance of Certificates. As soon as practicable after receipt of
payment, the Company shall deliver to the Grantee a certificate or certificates
for such shares of Common Stock unless such certificate or certificates have
been previously delivered to a broker pursuant to Section 5. The Grantee shall
become a stockholder 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 stockholder.

     7. Exercise Period. The option shall become first exercisable after they
vest according to the terms of Section 3 hereof. Any portion of the option which
remains unexercised after the Company's close of business on the last business
day that occurs prior to the tenth anniversary of the Grant Date shall expire.
The option may be exercised only if the Common Stock or other securities
issuable upon such exercise are duly registered under the Securities Act of 1933
and applicable state securities laws, or unless the issuance is exempt from such
registrations.

     8. No Employment Commitment. Grantee acknowledges that neither the grant of
options nor the execution of this Agreement by the Company shall be interpreted
or construed as imposing upon the Company an obligation to retain her services
for any stated period of time, which employment shall continue to be at the
pleasure of the Company at such compensation as it shall determine, unless
otherwise provided in a written employment agreement.

     9. Grantee's Agreement. Grantee expressly and specifically agrees that:

     (a) With respect to the calendar year in which such options are exercised,
the Grantee shall include in her gross income for federal income tax purposes
the amount, if any, by which the fair market value of the stock on the date of
exercise exceeds the Option Price; and

     (b) The grant of options is special incentive compensation which shall not
be taken into account as "wages" or "salary" in determining the amount of
payment or benefit to the Grantee under any pension, thrift, stock or deferred
compensation plan of the Company, as the case may be; and

                                       4
<PAGE>

     (c) On behalf of the Grantee's beneficiary, such grant shall not affect the
amount of any life insurance coverage available to such beneficiary under any
life insurance plan covering employees of the Company.

     10. Rights as a Stockholder. The Grantee shall have no rights as a
stockholder with respect thereto unless and until certificates for shares of
Common Stock are issued to her.

     11. Changes in the Company's Capital Structure.

     (a) The options 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 the options are outstanding, the Company shall effect a
subdivision or consolidation of shares or other increase or reduction in 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, Grantee shall, at no additional cost, be
entitled upon exercise of this option to receive (subject to any required action
by stockholders) in lieu of the number of shares as to which this option shall
then be so exercisable, the number and class of shares of stock, other
securities or consideration to which Grantee 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, Grantee had been the holder
of record of a number of shares of the Company equal to the number of shares as
to which this option had been exercisable.

     (d) If the Company is about to be merged into or consolidated with another
corporation or other entity under circumstances where the Company is not the
surviving corporation, or if the Company is about to sell or otherwise dispose
of substantially all of its assets to another corporation or other entity while
unexercised options remain outstanding, then the Plan Administrator may, at its
discretion, direct that any of the following shall occur:

          (i) If the successor entity is willing to assume the obligation to
     deliver shares of stock or other securities after the effective date of the
     merger, consolidation or sale of assets, as the case may be, Grantee shall
     be entitled to receive, upon the exercise of this option and payment of the
     Option Price, in lieu

                                       5
<PAGE>

     of shares of Common Stock, such shares of stock or other securities as
     Grantee would have been entitled to receive had this option been exercised
     immediately prior to the consummation of such merger, consolidation or
     sale, and the terms of this 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 Plan Administrator may waive any limitations set forth herein
     with respect to this option. This option shall become exercisable prior to
     the record or effective date of such merger, consolidation or sale of
     assets; and/or

          (iii) The Plan Administrator may cancel all outstanding options 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 Grantee
     at least 30 days prior to the effective date of such merger, consolidation
     or sale of assets, and Grantee shall have the right to exercise the option
     in full during a period of not less than 30 days prior to the effective
     date of such merger, consolidation or sale of assets.

     (e) Except as herein provided, the issuance by the Company of Common Stock
or any other shares of capital stock or securities 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.

     12. Administration; Amendment. The option grant shall be administered by
the Plan Administrator, which shall have authority to construe and apply the
provision hereof, and whose determinations shall be final and binding. Nothing
in this Agreement, however, shall give the Plan Administrator or any other
person the right, power or authority to change, amend, alter or repeal the terms
of this Agreement without the prior written consent of the Grantee.

     13. Non-Transferability. The options granted hereunder are not transferable
or assignable by Grantee except by will or the laws of descent and distribution
and during the life of Grantee shall only be exercisable by the Grantee or her
guardian or legal representative.

     IN WITNESS WHEREOF, this Agreement is executed and entered into effective
on the day and year first above expressed.

ATTEST:                                NUEVO ENERGY COMPANY

 /s/ Bruce K. Murchison                     By:  /s/ James L. Payne
-------------------------                      --------------------------------
Bruce K. Murchison                          Name:  James L. Payne
Secretary                                   Title: Chairman, President and
                                                   Chief Executive Officer

                                       6
<PAGE>

                                                   /s/ Janet F. Clark
                                                   -----------------------------
                                                   Janet F. Clark, Grantee

                                       7

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