Document:

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                                                                   EXHIBIT 10.18

                            AMENDMENT NUMBER FIVE TO
                      AMENDED AND RESTATED CREDIT AGREEMENT
                             AND CONSENT AND WAIVER

                  This AMENDMENT NUMBER FIVE TO AMENDED AND RESTATED CREDIT
AGREEMENT AND CONSENT AND WAIVER (this "Amendment") is entered into as of
January 31, 2001, among DEVX ENERGY, INC., formerly known as Queen Sand
Resources, Inc., a corporation formed under the laws of the State of Delaware
("DEVX"); DEVX ENERGY, INC., formerly known as Queen Sand Resources, Inc., a
corporation formed under the laws of the State of Nevada ("Borrower"); each of
the lenders that is a signatory hereto (individually, a "Lender" and,
collectively, the "Lenders"); FOOTHILL CAPITAL CORPORATION, as administrative
agent for the Lenders (in such capacity, "Administrative Agent"); and ABLECO
FINANCE LLC, as collateral agent for the Lenders (in such capacity, "Collateral
Agent"), with reference to the following facts:

                  A. DEVX, Borrower, the Lenders signatory thereto,
                  Administrative Agent and Collateral Agent, heretofore have
                  entered into that certain Amended and Restated Credit
                  Agreement, dated as of October 22, 1999, as amended by that
                  certain Amendment Number One to Loan and Security Agreement,
                  dated as of May 23, 2000, as further amended by that certain
                  Amendment Number Two and Waiver and Consent to Loan and
                  Security Agreement, dated as of June 30, 2000, as further
                  amended by that certain Amendment Number Three to Amended and
                  Restated Credit Agreement, dated as of September 19, 2000, as
                  further amended by that certain Amendment Number Four and
                  Waiver and Consent to Loan and Security Agreement, dated as of
                  October 24, 2000 (as heretofore amended, supplemented, or
                  otherwise modified, the "Agreement").

                  B. Each of DEVX and Borrower has requested that the Lenders
                  (i) amend the Agreement to extend the Maturity Date from
                  October 22, 2001 to April 22, 2003; (ii) amend the Agreement
                  to modify the Applicable Margin; (iii) amend the Agreement to
                  modify the definition of Triggering Event; (iv) amend Section
                  8.11 of the Agreement to modify the hedging covenant; (v)
                  amend Section 9.07 of the Agreement to increase the non-oil &
                  gas lease payments limit and the oil & gas field operations
                  lease payments limit; (vi) amend Section 9.14 of the Agreement
                  to modify the asset disposition limit contained therein; (vii)
                  amend Section 9.22 of the Agreement to modify the capital
                  expenditures limits; and (xiii) consent to the sale of certain
                  properties, as described in more detail below and waive any
                  Event of Default that may be occasioned solely as a result of
                  such sale and release Collateral Agent's security interests in
                  such properties, as described in more detail below.

                  C. The Lenders, Collateral Agent, and Administrative Agent are
                  willing to (i) amend the Agreement to extend the Maturity Date
                  from October 22, 2001 to April 22, 2003; (ii) amend the
                  Agreement to modify the Applicable Margin; (iii) amend the
                  Agreement to modify the definition of Triggering Event, (iv)
                  amend Section

<PAGE>   2

                  8.11 of the Agreement to modify the hedging covenant; (v)
                  amend Section 9.07 of the Agreement to increase the non-oil &
                  gas lease payments limit and the oil & gas field operations
                  lease payments limit; (vi) amend Section 9.14 of the Agreement
                  to modify the asset disposition limit contained therein; (vii)
                  amend Section 9.22 of the Agreement to modify the capital
                  expenditures limits; and (xiii) consent to the sale of certain
                  properties, as described in more detail below and waive any
                  Event of Default that may be occasioned solely as a result of
                  such sale and release the Collateral Agent's security
                  interests in such properties, as described in more detail
                  below, all in accordance with the terms and conditions set
                  forth in this Amendment.

                  D. All capitalized terms used herein and not defined herein
                  shall have the meanings ascribed to them in the Agreement, as
                  amended hereby.

                  NOW, THEREFORE, in consideration of the above recitals and the
mutual premises contained herein, the Lenders signatory hereto, Administrative
Agent, Collateral Agent, DEVX, and Borrower hereby agree as follows:

                  1. AMENDMENTS TO THE AGREEMENT.

                           a. The following definitions contained in Section
1.02 of the Agreement are amended and restated in their entirety to read as
follows:

                  "Applicable Margin" shall mean, for each day a Loan is
         outstanding, 2.00% per annum; provided, however, that, as of any date
         of determination, in the event that (i) the Revolving Facility Usage is
         equal to or greater than $30,000,000 and (ii) the ratio of (A) the
         Dollar valuation of that component of the Borrowing Base determination
         made under clause (b) of the definition thereof to (B) the Revolving
         Facility Usage is less than 1.50 to 1:00, Applicable Margin shall mean
         3.50%.

                  "Maturity Date" shall mean, unless the Aggregate Maximum
         Credit Amounts are sooner terminated under Section 2.03(b) or the
         Indebtedness is sooner accelerated under Section 10.02 hereof, April
         22, 2003.

                  "Triggering Event" shall mean the occurrence of one or more of
         the following: (a) a Default or an Event of Default, or (b) in the
         event that the ratio of (1) the Dollar valuation of that component of
         the Borrowing Base determination made under clause (b) of the
         definition thereof to (2) the Revolving Facility Usage is equal to or
         greater than 1.50 to 1:00, the sum of Excess Availability plus the
         undrawn amount of uncancelled Letters of Credit supporting obligations
         of any Obligor under Risk Management Agreements is less than
         $5,000,000, or (c) in the event that the ratio of (1) the Dollar
         valuation of that component of the Borrowing Base determination made
         under clause (b) of the definition thereof to (2) the Revolving
         Facility Usage is less than 1.50 to 1:00, Excess Availability is less
         than $5,000,000, or (d) a Material Adverse Effect.

                  b. The definition of "Consolidated Net Income" contained in
Section 1.02 of the Agreement is amended by amending and restating clause (iv)
thereof, in its entirety, to read as follows:

                                       2
<PAGE>   3

                  (iv) any extraordinary gains, including gains attributable to
                  Property sales not in the ordinary course of business and any
                  gains or losses attributable to the termination or liquidation
                  of, or resulting from the application of Statement No. 133 of
                  the Financial Accounting Standards Board to, Risk Management
                  Agreements;

                  c. Section 8.01(k) of the Agreement is hereby amended and
restated, in its entirety, to read as follows:

                  (k) Intentionally Omitted.

                  d. Section 8.01(m) of the Agreement is hereby amended by
replacing the phrase "June 30th Reserve Report" contained therein with the
phrase "December 31 Reserve Report".

                  e. Section 8.11 of the Agreement is amended by deleting the
text "fifty percent (50%)" appearing twice in such Section and inserting the
text "forty percent (40%)" in lieu thereof.

                  f. Section 9.07 of the Agreement is amended by (i) deleting
the text "$500,000" appearing in said Section and inserting the text
"$1,000,000" in lieu thereof; and (ii) deleting the text "$4,000,000" appearing
in said Section and inserting the text "$8,000,000" in lieu thereof.

                  g. Section 9.12(a) of the Agreement is amended by adding the
text "and with respect to both clauses (i) and (ii), without giving effect to
the impact, if any, of Statement No. 133 of the Financial Accounting Standards
Board" immediately after the text "(excluding current maturities of the
Indebtedness)" appearing in said Section.

                  h. Section 9.14 of the Agreement is amended by deleting the
text "$1,000,000" appearing in said Section and inserting the text "$2,000,000"
in lieu thereof.

                  i. Section 9.22 of the Agreement is amended and restated in
its entirety to read as follows:

                  Section 9.22. Limitations on Capital Expenditures. DEVX and
         the Borrower shall not, and shall not permit any Subsidiaries to, make
         or pay any capital expenditures (other than maintenance and emergency
         capital expenditures and capital expenditures constituting Permitted
         Acquisitions) if, after giving effect thereto, (i) the aggregate of all
         such capital expenditures made or paid during the twelve month period
         ending as of each of the dates set forth below, exceeds the relevant
         amount set forth in the following table:

                                       3
<PAGE>   4

<TABLE>
<CAPTION>
Period Ending                                     Amount
-------------                                     ------
<S>                                            <C>

January 31, 2001                                $18,000,000

February 28, 2001                               $19,000,000

March 31, 2001                                  $20,000,000

April 30, 2001                                  $23,000,000

May 31, 2001                                    $24,000,000

June 30, 2001                                   $25,000,000

July 31, 2001                                   $28,000,000

August 31, 2001                                 $28,000,000

September 30, 2001                              $29,000,000

October 31, 2001 and the last day of each       $30,000,000
successive month thereafter
</TABLE>

         (ii) the aggregate of all such capital expenditures made or paid during
         the period from January 1, 2001 through and including April 22, 2003,
         to exceed, in the aggregate, $70,000,000; or (iii) the aggregate of all
         such capital expenditures made or paid during any calendar quarter, to
         exceed 133% of the amount for capital expenditures for the applicable
         quarter as set forth in the current budget delivered to each Agent
         pursuant to Section 8.01(m).

                  2. CONSENT AND WAIVER.

                  The Lenders hereby consent to the sale by Borrower of those
properties commonly known as (1) the Melvin Field, Clarke County, Mississippi,
(2) the West Cap Field, Chaves County, New Mexico, (3) the Ramos Field, St. Mary
Parish, Louisiana, and (4) the wells in Martin County, Texas, all as more
particularly described on Exhibit B hereto (collectively, the "Properties"), and
hereby waive any Event of Default that may be occasioned solely as a result of
such sale. In addition, the Lenders hereby release their Liens in the
Properties, and shall promptly execute and deliver such other documents,
instruments and other agreements as may be reasonably requested by Borrower to
fully effect the release of such Liens.

                  3. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
                     AMENDMENT.

                  The effectiveness of this Amendment is subject to the
fulfillment, to the satisfaction of Agents and their counsel, of each of the
following conditions:

         a. Collateral Agent shall have received each of the following
documents, in form and substance satisfactory to Collateral Agent and its
counsel, duly executed, and each such document shall be in full force and
effect:

                  (i) this Amendment; and

                                       4
<PAGE>   5

                  (ii) the Reaffirmation and Consent (as hereinafter defined).

         b. Administrative Agent shall have received, for the ratable benefit of
the Lenders, an amendment, consent, and waiver fee of $125,000, which fee is
earned in full by the Lenders, due and payable by Borrower to the Lenders on the
date hereof, and non-refundable when paid;

         c. The representations and warranties in Section 4 of this Amendment,
the Agreement as amended by Section 1 of this Amendment, and the other Loan
Documents shall be true and correct in all material respects on and as of the
date hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);

         d. After giving effect hereto, no Event of Default or event which with
the giving of notice or passage of time would constitute an Event of Default
shall have occurred and be continuing on the date hereof, nor shall result from
the amendments herein;

         e. No material adverse change shall have occurred in the financial
condition of DEVX, Borrower, any Subsidiary Guarantor, or in the value of the
Collateral; and

         f. All other documents and legal matters in connection with the
transactions contemplated by this Amendment shall have been delivered or
executed or recorded and shall be in form and substance reasonably satisfactory
to Collateral Agent and its counsel.

                  4. REPRESENTATIONS AND WARRANTIES. Each of DEVX and the
Borrower hereby represents and warrants to the Agents and the Lenders that: (a)
the execution, delivery, and performance of this Amendment and of the Agreement,
as amended by this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to which it is a party
or by which any of its properties may be bound or affected; and (b) this
Amendment and the Agreement, as amended by this Amendment, constitute the legal,
valid, and binding obligation of each of DEVX and the Borrower, enforceable
against each of DEVX and the Borrower in accordance with their respective terms.

                  5. REAFFIRMATION AND CONSENT. Concurrently herewith, DEVX and
the Borrower shall cause each current Subsidiary Guarantor to execute and
deliver to the Agents the Reaffirmation and Consent attached hereto as Exhibit A
(the "Reaffirmation and Consent").

                  6. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. Section 12.13
of the Agreement is incorporated herein by this reference as though fully set
forth herein.

                  7. MISCELLANEOUS.

         a. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of like
import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.

         b. Upon the effectiveness of this Amendment, each reference in the Loan
Documents to the "Agreement", "thereunder", "therein", "thereof" or words of
like import referring to the Agreement shall mean and refer to the Agreement as
amended by this Amendment.

                                       5
<PAGE>   6

         c. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of a manually executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver a manually executed counterpart of this
Amendment but the failure to deliver a manually executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.

                  [Remainder of page intentionally left blank.]

                                       6
<PAGE>   7

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

DEVX:                                    DEVX ENERGY, INC., formerly known as
                                         Queen Sand Resources, Inc., a Delaware
                                         corporation

                                         By: /s/ William W. Lesikar
                                             -------------------------------
                                             William W. Lesikar
                                             Vice President

BORROWER:                                DEVX ENERGY, INC., formerly known as
                                         Queen Sand Resources, Inc., a Nevada
                                         corporation

                                         By: /s/ William W. Lesikar
                                             -------------------------------
                                             William W. Lesikar
                                             Vice President

                                         Address for Notices for DEVX and the
                                         Borrower:

                                         DevX Energy, Inc., formerly known as
                                         Queen Sand Resources, Inc.
                                         13760 Noel Road, Suite 1030
                                         Dallas, Texas 75240
                                         Attention: Mr. William W. Lesikar
                                         Telephone: (972) 233-9906
                                         Facsimile: (972) 233-9575

                                         with a copy to:

                                         DevX Energy, Inc., formerly known as
                                         Queen Sand Resources, Inc.
                                         30 Metcalfe Street
                                         Ottawa, Canada KIP 5L4
                                         Attention: Mr. Brian J. Barr
                                         Telephone: (613) 230-7211
                                         Facsimile: (613) 230-6055

                                         And

                                         Haynes & Boone LLP
                                         1600 North Collins Street, Suite 2000
                                         Richardson, Texas 75080
                                         Attention: Mr. William L. Boeing
                                         Telephone: (972) 580-7553
                                         Facsimile: (972) 692-9053

                                       7
<PAGE>   8

COLLATERAL AGENT:                          ABLECO FINANCE LLC, as Collateral
                                           Agent

                                           By: /s/ Kevin P. Genda
                                               -------------------------
                                               Kevin P. Genda
                                               Senior Vice President and
                                               Chief Credit Officer

                                           Address for Notices:

                                           450 Park Avenue.
                                           New York, New York 10022
                                           Attention: Kevin P. Genda
                                           Telephone: (212) 891-2117
                                           Facsimile: (212) 755-3009

                                           with a copy to:

                                           BROBECK PHLEGER & HARRISON LLP
                                           550 South Hope Street, Suite 2100
                                           Los Angeles, California 90071
                                           Attention: John Francis Hilson, Esq.
                                           Telephone: (213) 489-4060
                                           Facsimile: (213) 745-3345

                                       8
<PAGE>   9

ADMINISTRATIVE AGENT:               FOOTHILL CAPITAL CORPORATION

                                    By: /s/ Authorized Signatory
                                        ----------------------------------------

                                        ----------------------------------------

                                        ----------------------------------------

                                    Address for Notices:

                                    2450 Colorado Avenue
                                    Suite 3000 West
                                    Santa Monica, California 90404
                                    Attention: Business Finance Division Manager
                                    Telephone: (310) 453-7300
                                    Facsimile: (310) 478-9788

                                       9
<PAGE>   10

LENDER:                             ABLECO FINANCE LLC

                                    By: /s/ Kevin P. Genda
                                        ---------------------------
                                        Kevin P. Genda
                                        Senior Vice President and
                                        Chief Credit Officer

LENDER:                             FOOTHILL CAPITAL CORPORATION

                                    By: /s/ Authorized Signatory
                                        ----------------------------------------

                                        ----------------------------------------

                                        ----------------------------------------

                                       10
<PAGE>   11

                                    EXHIBIT A

                            REAFFIRMATION AND CONSENT

         All capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in that certain Amendment Number Five
to Amended and Restated Credit Agreement and Consent and Waiver, dated as of
January 31, 2001 (the "Amendment"). Each of the undersigned hereby (a)
represents and warrants to the Agents and the Lenders that the execution,
delivery, and performance of this Reaffirmation and Consent are within its
corporate powers, have been duly authorized by all necessary corporate action,
and are not in contravention of any law, rule, or regulation, or any order,
judgment, decree, writ, injunction, or award of any arbitrator, court, or
governmental authority, or of the terms of its charter or bylaws, or of any
contract or undertaking to which it is a party or by which any of its properties
may be bound or affected; (b) consents to the amendment of the Agreement by the
Amendment; (c) acknowledges and reaffirms its obligations owing to the Agents
and the Lenders under its respective Second Amended and Restated Guaranty
Agreement dated as of October 22, 1999 (each a "Guaranty", and collectively, the
"Guaranties") and any other Loan Documents to which it is party; and (d) agrees
that the Guaranty and any other Loan Documents to which it is a party is and
shall remain in full force and effect. Although each of the undersigned has been
informed of the matters set forth herein and has acknowledged and agreed to
same, it understands that the Agents and the Lenders have no obligation to
inform it of such matters in the future or to seek its acknowledgement or
agreement to future amendments, and nothing herein shall create such a duty.
This Reaffirmation and Consent may be executed in any number of counterparts and
by different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Reaffirmation and Consent.
Delivery of an executed counterpart of this Reaffirmation and Consent by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Reaffirmation and Consent. Any party delivering an executed
counterpart of this Reaffirmation and Consent by telefacsimile also shall
deliver an original executed counterpart of this Reaffirmation and Consent but
the failure to deliver an original executed counterpart shall not affect the
validity, enforceability, and binding effect of this Reaffirmation and Consent.
This Reaffirmation and Consent shall be governed by internal laws of the State
of New York as more fully set forth in Section 5.04 of the Guaranties.

                                      DEVX ENERGY, INC., formerly known as
                                      Queen Sand Resources, Inc., a Delaware
                                      corporation

                                      By: /s/ William W. Lesikar
                                          -------------------------------
                                          William W. Lesikar
                                          Vice President

                                       11
<PAGE>   12

                                      DEVX OPERATING COMPANY, formerly
                                      known as Queen Sand Operating Co., a
                                      Nevada corporation

                                      By: /s/ William W. Lesikar
                                          --------------------------------------
                                          William W. Lesikar
                                          Vice President

                                      CORRIDA RESOURCES, INC.,
                                      a Nevada corporation

                                      By: /s/ William W. Lesikar
                                          --------------------------------------
                                          William W. Lesikar
                                          Vice President

                                       12<PAGE>   1
                                                                   EXHIBIT 10.19

                              EMPLOYMENT AGREEMENT

                                 BY AND BETWEEN

                                DEVX ENERGY, INC.

                                       AND

                               JOSEPH T. WILLIAMS

                                 OCTOBER 6, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                           Page
<S>                                                                        <C>
1.  Employment................................................................1

2.  Employment Term...........................................................1

3.  Positions and Duties......................................................1

4.  Compensation and Related Matters..........................................3
    (a)  Base Salary..........................................................3
    (b)  Annual Bonus.........................................................3
    (c)  Stock Options........................................................3
    (d)  Employee Benefits....................................................4
         (i)      Incentive, Savings, and Retirement Plans....................4
         (ii)     Welfare Benefit Plans.......................................4
    (e)  Expenses.............................................................4
    (f)  Fringe Benefits......................................................5
    (g)  Vacation.............................................................5

5.  Termination of Employment.................................................5
    (a)  Death................................................................5
    (b)  Disability...........................................................5
    (c)  Termination by Company...............................................5
    (d)  Termination by Executive.............................................6
    (e)  Notice of Termination................................................7
    (f)  Date of Termination..................................................7

6.  Obligations of the Company Upon Termination...............................7
    (a)  Good Reason; Other Than for Cause, Death, or Disability..............7
    (b)  Death...............................................................10
    (c)  Disability..........................................................10
    (d)  Cause; Other Than for Good Reason or During the Window Period.......10

7.  Certain Additional Payments by the Company...............................11

8.  Representations and Warranties...........................................13

9.  Confidential Information.................................................13

10. Certain Definitions......................................................14
    (a)  Effective Date......................................................14
    (b)  Change of Control Period............................................14
    (c)  Change of Control...................................................14
</TABLE>

                                        i

<PAGE>   3

<TABLE>

<S>                                                                         <C>
11. Full Settlement..........................................................15

12. No Effect on Other Contractual Rights....................................16

13. Indemnification; Directors and Officers Insurance........................16

14. Injunctive Relief........................................................17

15. Governing Law............................................................17

16. Notices..................................................................17

17. Binding Effect; No Third Party Benefit...................................17

18. Miscellaneous............................................................18
    (a)      Amendment.......................................................18
    (b)      Waiver..........................................................18
    (c)      Withholding Taxes...............................................18
    (d)      Nonalienation of Benefits.......................................18
    (e)      Severability....................................................18
    (f)      Entire Agreement................................................18
    (g)      Captions........................................................18
    (h)      References......................................................18
</TABLE>

                                       ii

<PAGE>   4

                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of October 6,
2000, by and between DEVX ENERGY, INC.., a Delaware corporation (the "COMPANY"),
and JOSEPH T. WILLIAMS (the "EXECUTIVE");

                                   WITNESSETH:

         WHEREAS, the Board of Directors of the Company (the "BOARD") has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat, or occurrence of a Change of Control
(as defined in Paragraph 10(c)) of the Company; and

         WHEREAS, the Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any pending or threatened Change of Control, and to provide the
Executive with assurance that the compensation and benefits expectations of the
Executive will be satisfied and will be competitive with those of other
corporations; and

         WHEREAS, in order to accomplish these objectives, the Board has caused
the Company to enter into this Agreement;

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and the Executive hereby agree as follows:

         1. Employment. The Company agrees to employ the Executive, and the
Executive agrees to enter the employ of the Company, for the period set forth in
Paragraph 2(a), in the positions and with the duties and responsibilities set
forth in Paragraph 3, and upon the other terms and conditions herein provided.

         2. Employment Term. The employment of the Executive by the Company as
provided in Paragraph 1 shall be for the period commencing on October 6, 2000
through and ending on the second anniversary of such date (the "EMPLOYMENT
TERM"); provided, however, that beginning on the first anniversary date of this
Agreement and on each annual anniversary of such date (such date and each annual
anniversary thereof herein referred to as the "RESET DATE"), the Employment Term
shall be automatically extended so as to terminate two years after such Reset
Date, unless at least 60 days prior to the Reset Date the Company shall give
notice to the Executive that the Employment Term shall not be so extended; and
provided further, however, that following the occurrence of a Change of Control
(as defined in Paragraph 10(c) hereof), the term "EMPLOYMENT TERM" as used
herein shall thereafter mean and refer to the Change of Control Period (as
defined in Paragraph 10(b) hereof).

         3. Positions and Duties.

         (a) During the Employment Term, the Executive's position shall be
Chairman of the Board. As such, the Executive's responsibilities will include,
but not be limited to (i) establishing and directing corporate strategies with
the advice and counsel of the Chief Executive Officer and the Board of
Directors, (ii) being involved with the overall management of the Company's
business, including, without limitation, operations,

<PAGE>   5

finance and administration, by providing senior level counsel and direction,
(iii) along with the Chief Executive Officer, where appropriate, representing
the Company in relationships and business dealings with the oil and gas industry
and the investment banking community, and (iv) managing the activities of the
Board of Directors in keeping with the Company's status as a publicly held
corporation.

         (b) During the Employment Term, the Executive shall devote reasonable
time and attention during normal business hours to the business and affairs of
the Company, and in furtherance of the business and affairs of its affiliated
companies (as defined below), and shall utilize Executive's reasonable best
efforts to discharge faithfully and efficiently the duties and responsibilities
delegated and assigned to the Executive herein or pursuant hereto, except for
usual, ordinary, and customary periods of vacation and absence due to illness or
other disability; provided, however, that the Executive may (i) serve on
industry-related, civic or charitable boards or committees, (ii) with the
approval of the Board, serve on corporate boards or committees, (iii) deliver
lectures, fulfill speaking engagements, or teach at educational institutions,
and (iv) manage the Executive's personal investments, so long as such activities
do not significantly interfere with the performance and fulfillment of the
Executive's duties and responsibilities as an employee of the Company in
accordance with this Agreement and, in the case of the activities described in
clause (ii) of this proviso, will not, in the good faith judgment of the Board,
constitute an actual or potential conflict of interest with the business of the
Company or an affiliated company. As used in this Agreement, the term
"AFFILIATED COMPANY" shall include any company controlled by, controlling, or
under common control with the Company.

         (c) In connection with the Executive's employment hereunder, the
Executive shall be primarily based at the Company's existing headquarters
located in Dallas, Texas or any office which is the headquarters of the Company
and is less than 10 miles from such location, subject, however, to normal and
customary travel on the business of the Company. It is expressly understood and
agreed that the Executive will maintain a secondary office at his home in
Colorado form which his duties and responsibilities may be conducted on behalf
of the Company primarily during the summer months and from time to time during
the calendar year. The Company agrees to furnish such office equipment and
supplies as the Executive may reasonably require and to pay all expenses
attributable to the Company's business associated therewith.

         (d) All services that the Executive may render to the Company or any of
its affiliated companies in any capacity during the Employment Term shall be
deemed to be services required by this Agreement and consideration for the
compensation provided for herein.

                                        2

<PAGE>   6

         4. Compensation and Related Matters.

         (a) Base Salary. During the Employment Term, the Executive shall
receive an annual base salary ("BASE SALARY") of Two Hundred Fifty Thousand
Dollars ($250,000.00). The Base Salary shall be payable in installments in
accordance with the general payroll practices of the Company in effect at the
time such payment is made, but in no event less frequently than monthly, or as
otherwise mutually agreed upon. During the Employment Term, the Executive's Base
Salary shall be subject to such increases (but not decreases) as may be
determined from time to time by the Board in its sole discretion; provided,
however, that the Executive's Base Salary (i) shall be reviewed by the Board at
least annually, with a view to making such upward adjustment, if any, as the
Board deems appropriate, and (ii) shall be increased at any time and from time
to time as shall be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to the Executive's peer
executives of the Company or any of its affiliated companies. Base Salary shall
not be reduced after any such increase. The term Base Salary as used in this
Agreement shall refer to the Base Salary as so increased. Payments of Base
Salary to the Executive shall not be deemed exclusive and shall not prevent the
Executive from participating in any employee benefit plans, programs, or
arrangements of the Company and its affiliated companies in which the Executive
is entitled to participate. Payments of Base Salary to the Executive shall not
in any way limit or reduce any other obligation of the Company hereunder, and no
other compensation, benefit, or payment to the Executive hereunder shall in any
way limit or reduce the obligation of the Company regarding the Executive's Base
Salary hereunder.

         (b) Annual Bonus. Subject to proration as set forth below for calendar
year 2000, for each calendar year during the term of this Agreement, the
Executive shall be entitled to earn an annual cash bonus (the "ANNUAL BONUS") of
between 20% and 120% of the Executive's Base Salary for such year upon attaining
goals established yearly by the Board of Directors of the Company. The goals
shall be established by the Board of Directors, after consultation with the
Executive, consistent with the Company's standards, and shall be established to
produce a reasonable expectation that the Executive will receive a target bonus
(the " TARGET BONUS") for each year at least equal to 60% of the Executive's
Base Salary for such year. In recognition of the fact that the remainder of
calendar year 2000 is a transition year for the Company and the Executive, the
Executive's bonus for calendar year 2000 shall be the amount calculated under
the following formula: (i) 60% of (ii) the Executive's Base Salary for 2000,
multiplied by (iii) a fraction the numerator of which is the number of days
remaining in 2000 after the date hereof and the denominator of which is 365.

         (c) Stock Options.

                  (i) Concurrent with the closing of the Company's secondary
         public offering anticipated to occur on or before October 31, 2000, the
         Company shall grant to the Executive an option to acquire 250,000 or
         more shares of the Common Stock of the Company pursuant to its 1997
         Incentive Equity Plan or elect in lieu thereof to take the action in
         (ii) below. The exercise price pe share under such option shall be the
         fair market value of the stock as of the date of the grant of such
         option. The options granted to the Executive shall be incentive stock
         options, shall vest immediately as to 20,000 of such shares with the
         remaining shares vesting in equal amounts on the first and second
         anniversary

                                        3

<PAGE>   7

         hereof, and shall be pursuant to, and conditioned upon the execution by
         the Executive of, a Stock Option Agreement substantially in the form
         attached hereto as Exhibit A. The Executive shall be eligible to
         receive additional grants of stock options as shall be determined by
         the Board of Directors from time to time during the Employment Term.
         The Company shall cause its currently effective registration statement
         on form S-8 (or comparable successor form) covering all shares subject
         to options granted to the Executive to remain effective until sixty
         (60) days after the later of exercise or termination of all options
         granted to the Executive.

                  (ii) In the event the Company does not grant the options
         described above, or in the event the options are granted but all
         required approvals (including stockholder approval) have not been
         timely obtained (as determined by the Executive), then the Company will
         pay to the Executive an amount in cash equal to the amount the
         Executive would have received if the options had been granted with all
         requisite approvals, and the Executive sells all of the Common Stock
         subject to option at the closing price thereof on the NASDAQ on the
         date or dates selected by the Executive. The Executive shall notify the
         Company of the date or dates of sale, with payment to be made by the
         Company within three (3) business days after receipt of such
         notification from Executive.

         (d) Employee Benefits.

                  (i) Incentive, Savings, and Retirement Plans. During the
         Employment Term, the Executive shall be entitled to participate in all
         incentive, savings, and retirement plans, programs, and arrangements
         applicable generally to the Executive's peer executives of the Company
         and its affiliated companies, but in no event shall such plans,
         programs, and arrangements provide the Executive with incentive
         opportunities (measured with respect to both regular and special
         incentive opportunities, to the extent, if any, that such distinction
         is applicable), savings opportunities, and retirement benefit
         opportunities, in each case, less favorable, in the aggregate, than the
         most favorable of those provided by the Company and its affiliated
         companies under such plans, programs, and arrangements to the
         Executive's peer executives of the Company and its affiliated companies
         at any time during the 120-day period immediately preceding the date
         hereof or, if more favorable to the Executive, as in effect generally
         at any time after the date hereof with respect to the Executive's peer
         executives of the Company and its affiliated companies.

                  (ii) Welfare Benefit Plans. During the Employment Term, the
         Executive and/or the Executive's family, as the case may be, shall be
         eligible to participate in and shall receive all benefits under all
         welfare benefits plans, programs, and arrangements provided by the
         Company and its affiliated companies (including, without limitation,
         medical, prescription, dental, disability, salary continuance, employee
         life, group life, accidental death, and travel accident insurance
         plans, programs, and arrangements) to the extent applicable generally
         to the Executive's peer executives of the Company and its affiliated
         companies, but in no event shall such plans, programs, and arrangements
         provide the Executive with welfare benefits that are less favorable, in
         the aggregate, than the most favorable of such plans, programs, and
         arrangements as in effect for the Executive's peer executives of the
         Company at any time during the 120-day period immediately preceding the
         date hereof or, if more favorable to the Executive, as in effect
         generally at any time after the date hereof with respect to the
         Executive's peer executives of the Company and its affiliated
         companies.

         (e) Expenses. During the Employment Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in performing the Executive's duties and responsibilities
hereunder including, without limitation, all costs and expenses associated with
the Executive's

                                        4

<PAGE>   8

secondary office in Colorado (including air travel to and from such secondary
office), in accordance with the most favorable policies, practices, and
procedures of the Company and its affiliated companies as in effect for the
Executive's peer executives of the Company and its affiliated companies at any
time during the 120-day period immediately preceding the date hereof or, if more
favorable to the Executive, as in effect generally at any time after the date
hereof with respect to the Executive's peer executives of the Company and its
affiliated companies.

         (f) Fringe Benefits. During the Employment Term, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial
planning services, payment of club fees and assessment, including Dallas
Petroleum Club and Northwood Club, and use of an appropriate automobile and
payment of related expenses, in accordance with the most favorable policies,
practices, and procedures of the Company and its affiliated companies as in
effect for the Executive's peer executives of the Company at any time during the
120-day period immediately preceding the date hereof or, if more favorable to
the Executive, as in effect generally at any time after the date hereof with
respect to the Executive's peer executives of the Company and its affiliated
companies.

         (g) Vacation. During the Employment Term, the Executive shall be
entitled to paid vacation and such other paid absences, whether for holidays,
illness, personal time, or any similar purposes, in accordance with the most
favorable policies, practices, and procedures of the Company and its affiliated
companies as in effect for the Executive's peer executives of the Company at any
time during the 120-day period immediately preceding the date hereof or, if more
favorable to the Executive, as in effect generally at any time after the date
hereof with respect to the Executive's peer executives of the Company and its
affiliated companies.

         5. Termination of Employment.

         (a) Death. The Executive's employment shall terminate automatically
upon the Executive's death during the Employment Term.

         (b) Disability. If the Company determines in good faith that the
Disability (as defined below) of the Executive has occurred during the
Employment Term, the Company may give the Executive notice of its intention to
terminate the Executive's employment. In such event, the Executive's employment
hereunder shall terminate effective on the 30th day after receipt of such notice
by the Executive (the "DISABILITY EFFECTIVE DATE"), provided that, within the
30-day period after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
hereunder on a full-time basis for an aggregate of 180 days within any given
period of 270 consecutive days (in addition to any statutorily required leave of
absence and any leave of absence approved by the Company), as a result of
incapacity of the Executive, despite any reasonable accommodation required by
law, due to bodily injury or disease or any other mental or physical illness,
which will, in the opinion of a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal
representative, be permanent and continuous during the remainder of the
Executive's life.

         (c) Termination by Company. The Company may terminate the Executive's
employment hereunder for Cause (as defined below). For purposes of this
Agreement, "Cause" shall mean:

                  (i) the willful and continued failure of the Executive to
         perform substantially the Executive's duties hereunder (other than any
         such failure resulting from bodily injury or disease or any other
         incapacity due to mental or physical illness), after a written demand
         for substantial performance

                                        5

<PAGE>   9
         is delivered to the Executive by the Board of the Company which
         specifically identifies the manner in which the Board believes the
         Executive has not substantially performed the Executive's duties; or

                  (ii) the willful engaging by the Executive in illegal conduct
         or gross misconduct that is materially and demonstrably detrimental to
         the Company, monetarily or otherwise.

For purposes of this provision, no act, or failure to act, on the part of the
Executive shall be considered "willful" unless done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the Executive's
action or omission was in the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board or based upon the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in good faith and
in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board then in office at a meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive and the Executive is given
an opportunity, together with counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive is guilty of the
conduct described in subparagraph (i) or (ii) above, and specifying the
particulars thereof in detail.

         (d) Termination by Executive. The Executive may terminate the
Executive's employment hereunder (i) at any time during the Employment Term for
Good Reason (as defined below) or (ii) during the Window Period (as defined
below) without any reason.

For purposes of this Agreement, the "Window Period" shall mean the 30-day period
immediately following the first anniversary of the Effective Date as defined in
Paragraph 10(a) hereof, and "Good Reason" shall mean any of the following
(without the Executive's express written consent):

                  (i) the assignment to the Executive of any duties inconsistent
         in any respect with the Executive's position (including status,
         offices, titles, and reporting requirements), duties, functions,
         responsibilities, or authority as contemplated by Paragraph 3(a) of
         this Agreement, or any other action by the Company that results in a
         diminution in such position, duties, functions, responsibilities, or
         authority, excluding for this purpose an isolated, insubstantial, and
         inadvertent action not taken in bad faith and which is remedies by the
         Company promptly after receipt of notice thereof given by the
         Executive;

                  (ii) any failure by the Company to comply with any of the
         provisions of Paragraph 4 of this Agreement, other than an isolated,
         insubstantial, and inadvertent action not taken in bad faith and which
         is remedied by the Company promptly after receipt of notice thereof
         given by the Executive;

                  (iii) the Company's requiring the Executive to be based at any
         office or location other than as provided in Paragraph 3(c) of this
         Agreement or the Company's requiring the Executive to travel on Company
         business to a substantially greater extent that during any period
         preceding the Effective Date;

                  (iv) any failure by the Company to comply with and satisfy
         Paragraph 17(c) of this Agreement; or

                                        6

<PAGE>   10

                  (v) any purported termination by the Company of the
         Executive's employment hereunder otherwise than as expressly permitted
         by this Agreement, and for purposes of this Agreement, no such
         purported termination shall be effective.

For purposes of this Paragraph 5(d), any good faith determination of "Good
Reason" made by the Executive shall be conclusive, absent manifest error.

         (e) Notice of Termination. Any termination of the Executive's
employment hereunder by the Company or by the Executive (other than a
termination pursuant to Paragraph 5(a)) shall be communicated by a Notice of
Termination (as defined below) to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) in the case
of a termination for Disability, Cause, or Good Reason, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (iii) specifies
the Date of Termination (as defined in Paragraph 5(f) below); provided, however,
that, notwithstanding any provision of this Agreement to the contrary, a Notice
of Termination given in connection with a termination for Good Reason shall be
given by the Executive within a reasonable period of time, not to exceed 120
days, following the occurrence of the event giving rise to such right of
termination. The failure by the Company or the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Disability, Cause, or Good Reason shall not waive any right of the Company or
the Executive hereunder or preclude the Company or the Executive from asserting
such fact or circumstance in enforcing the Company's or the Executive's rights
hereunder.

         (f) Date of Termination. For purposes of this Agreement, the "Date of
Termination" shall mean the effective date of termination of the Executive's
employment hereunder, which date shall be (i) if the Executive's employment is
terminated by the Executive's death, the date of the Executive's death, (ii) if
the Executive's employment is terminated because of the Executive's Disability,
the Disability Effective Date, (iii) if the Executive's employment is terminated
by the Company for Cause or by the Executive for Good Reason, the date on which
the Notice of Termination is given, (iv) if the Executive's employment is
terminated pursuant to Paragraph 2 after the occurrence of the Effective Date,
the date on which the Employment Term ends pursuant to Paragraph 2 due to a
party's delivery of a Notice of Termination thereunder, and (v) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination, which date shall in no event be earlier than the date
such notice is given; provided, however, that if within 30 days after any Notice
of Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties or by a final judgment, order, or
decree of court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).

         6. Obligations of the Company Upon Termination.

         (a) Good Reason; Other Than for Cause, Death, or Disability. If, during
the Employment Term and prior to the Effective Date, the Company shall terminate
the Executive's employment hereunder other than for Cause or Disability or the
Executive shall terminate the Executive's employment for Good Reason:

                  (i) the Company shall pay to the Executive in a lump sum in
         cash within 30 days after the Date of Termination the aggregate of the
         following amounts:

                                        7

<PAGE>   11

                           (A) the sum of (1) the Executive's Base Salary
                  through the Date of Termination to the extent not theretofore
                  paid, (2) the product of (x) the greater of (I) the Target
                  Bonus for the current fiscal year of the Company and (II) the
                  Annual Bonus paid or payable, including by reason of any
                  deferral, to the Executive (and annualized for any fiscal year
                  consisting of less than 12 full months or for which the
                  Executive has been employed by the Company for less than 12
                  full months) in respect of the most recently completed fiscal
                  year of the Company during the Employment Term, if any (such
                  greater amount hereinafter referred to as the "HIGHEST ANNUAL
                  BONUS"), and (y) a fraction, the numerator of which is the
                  number of days in the current fiscal year through the Date of
                  Termination, and the denominator of which is 365, and (3) any
                  compensation previously deferred by the Executive (together
                  with any accrued interest or earnings thereon) and any accrued
                  vacation pay, in each case to the extent not theretofore paid
                  (the sum of the amounts described in clauses (1), (2) and (3)
                  are hereinafter referred to as the "ACCRUED OBLIGATIONS"); and

                           (B) an amount (such amount is hereinafter referred to
                  as the "SEVERANCE AMOUNT") equal to the sum of (1) the
                  Executive's Base Salary and (2) the Highest Annual Bonus;
                  provided, however, that if the Executive's employment
                  hereunder is terminated during the Employment Term, following
                  the occurrence of the Effective Date (as defined in Paragraph
                  10(a) hereof) by the Company other than for Cause or
                  Disability or the Executive shall terminate the Executive's
                  employment either for Good Reason or without any reason during
                  the Window Period, the Company shall pay to the Executive in a
                  lump sum in cash within 30 days after the Date of Termination
                  an amount equal to the product of (1) three and (2) the sum of
                  (x) the Executive's Base Salary and (y) the Highest Annual
                  Bonus; and

                           (C) a separate lump-sum supplemental retirement
                  benefit (the amount of such benefit hereinafter referred to as
                  the "SUPPLEMENTAL RETIREMENT AMOUNT") equal to the difference
                  between (1) the actuarial equivalent (utilizing for this
                  purpose the actuarial assumptions utilized with respect to the
                  qualified benefit retirement plan of the Company and its
                  affiliated companies in which the Executive is eligible to
                  participate (or any successor plan thereto) (the "RETIREMENT
                  PLAN") during the 120-day period immediately preceding the
                  Effective Date) of the benefit payable under the Retirement
                  Plan and any supplemental and/or excess retirement plan of the
                  Company and its affiliated companies providing benefits for
                  the Executive (the "SERP") which the Executive would receive
                  if the Executive's employment continued at the compensation
                  level provided for in Paragraphs 4(a) and 4(b)(i) for the
                  remainder of the Employment Term, assuming for this purpose
                  that all accrued benefits are fully vested and that benefit
                  accrual formulas are no less advantageous to the Executive
                  than those in effect during the 120-day period immediately
                  preceding the Effective Date, and (2) the actuarial equivalent
                  (utilizing for this purpose the actuarial assumptions utilized
                  with respect to the Retirement Plan during the 120-day period
                  immediately preceding the Effective Date) of the Executive's
                  actual benefit (paid or payable), if any, under the Retirement
                  Plan or the SERP; and

                  (ii) for three years after the Executive's Date of
         Termination, or such longer period as any plan, program, or arrangement
         may provide, the Company shall continue benefits to the Executive
         and/or the Executive's family at least equal to those that would have
         been provided to them in accordance with the plans, programs, and
         arrangements described in Paragraph 4(c)(ii) if the Executive's
         employment had not been terminated, in accordance with the most
         favorable plans,

                                        8

<PAGE>   12

         programs, and arrangements of the Company as in effect and applicable
         generally to the Executive's peer executives of the Company and its
         affiliated companies and their families during the 120-day period
         immediately preceding the Effective Date or, if more favorable to the
         Executive, as in effect generally at any time thereafter with respect
         to the Executive's peer executives of the Company and its affiliated
         companies and their families; provided, however, that if the Executive
         becomes reemployed with another employer and is eligible to receive
         medical or other welfare benefits under another employer provided plan,
         the medical and other welfare benefits described herein shall be
         secondary to those provided under such other plan during such
         applicable period of eligibility (such continuation of such benefits
         for the applicable period herein set forth is hereinafter referred to
         as "WELFARE BENEFIT CONTINUATION") (for purposes of determining
         eligibility of the Executive for retiree benefits pursuant to such
         plans, programs, and arrangements, the Executive shall be considered to
         have remained employed until three years after the Date of Termination
         and to have retired on the last da of such period); and

                  (iii) the Company shall, at its sole expense as incurred,
         provide the Executive with outplacement services the scope and provider
         of which shall be selected by the Executive in the Executive's sole
         discretion; and

                  (iv) with respect to all options to purchase Common Stock held
         by the Executive pursuant to a Company stock option plan on or prior to
         the Date of Termination, irrespective of whether such options are then
         exercisable, the Executive shall have the right, during the 60-day
         period after the Date of Termination, to elect to surrender all or part
         of such options in exchange for a cash payment by the Company to the
         Executive in an amount equal to the number of shares of Common Stock
         subject to the Executive's option multiplied by the excess of (x) over
         (y), where (x) equals the highest reported sale price of a share of
         Common Stock in any transaction reported on the NASDAQ during the
         60-day period prior to and including the Executive's Date of
         Termination and (y) equals the purchase price per share covered by the
         option. Such cash payments shall be made within 30 days after the date
         of the Executive's election; provided, however, that if the Executive's
         Date of Termination is within six months after the date of a grant of a
         particular option held by the Executive and the Executive is subject to
         a Section 16(b) of the Securities Exchange Act of 1934, as amended (the
         "EXCHANGE ACT"), any cash payments related thereto shall be made on the
         date which is six months and one day after imposition of the
         disgorgement provisions under Section 16(b). Notwithstanding the
         foregoing, if any right granted pursuant to the foregoing would make
         any change of control transaction ineligible for pooling of interests
         accounting treatment under APB No. 16 that but for this Section
         6(a)(iv) would otherwise be eligible for such accounting treatment, the
         Executive shall receive shares of Common Stock with a fair market value
         equal to the cash that would otherwise be payable hereunder in
         substitution for the cash, provided that any such shares of Common
         Stock so delivered to the Executive shall be registered under the
         Securities Act of 1933, as amended; any options outstanding as of the
         Date of Termination and not then exercisable shall become fully
         exercisable as of the Executive's Date of Termination, and to the
         extent the Executive does not elect to surrender same for a cash
         payment (or the equivalent number of shares of Common Stock) as
         provided above, such options shall remain exercisable after the
         Executive's Date of Termination in accordance with the terms thereof;
         and restrictions applicable to any shares of Common Stock awarded to
         the Executive by the Company shall lapse, as of the date of the
         Executive's Date of Termination; and

                  (v) all club memberships and other memberships that the
         Company was providing for the Executive's use at the time Notice of
         Termination is given shall, to the extent possible, be transferred

                                        9

<PAGE>   13

         and assigned to the Executive at no cost to the Executive (other than
         income taxes owed), the cost of transfer, if any, to be borne by the
         Company; and

                  (vi) all benefits under the Company's [1997 Incentive Equity
         Plan] and any other similar plans, including any stock options or
         restricted stock held by the Executive, not already vested shall be
         100% vested, to the extent such vesting is permitted under the Code;
         and

                  (vii) to the extent not theretofore paid or provided, the
         Company shall timely pay or provide to the Executive any other amounts
         or benefits required to be paid or provided or which the Executive is
         eligible to receive any plan, program, policy, practice, or arrangement
         or contract or agreement of the Company and its affiliated companies
         (such other amounts and benefits hereinafter referred to as the "OTHER
         BENEFITS").

         (b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Tern, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for (i) payment of Accrued Obligations (which shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and the Other Benefits and (ii)
payment to the Executive's estate or beneficiaries, as applicable, in a lump sum
in cash within 30 days of Date of Termination of an amount equal to the sum of
the Severance Amount and the Supplemental Retirement Amount. With respect to the
provision of Other Benefits, the term Other Benefits as used in this Section
6(b) shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices, and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
date hereof or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.

         (c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Term, this Agreement shall
terminate without further obligations to the Executive, other than for (i)
payment of Accrued Obligations (which shall be paid to the Executive in a lump
sum in cash with 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation and the Other Benefits and (ii)
payment to the Executive in a lump sum in cash within 30 days of the Date of
Termination of an amount equal to the sum of the Severance Amount and the
Supplemental Retirement Amount. With respect to the provision of Other Benefits,
the term Other Benefits as used in this Section 6(c) shall include, without
limitation, and the Executive shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices, and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the date hereof or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.

         (d) Cause; Other Than for Good Reason or During the Window Period. If
the Executive's employment is terminated for Cause during the Employment Term,
this Agreement shall terminate without

                                       10

<PAGE>   14

further obligations to the Executive other than the obligation to pay to the
Executive Base Salary through the Date of Termination plus the amount of any
compensation previously deferred by the Executive, in each case to the extent
theretofore unpaid. If the Executive voluntarily terminates the Executive's
employment during the Employment Term, excluding a termination either for Good
Reason or without any reason during the Window Period, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of the Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination subject to applicable laws and
regulations.

         7. Certain Additional Payments by the Company.

         (a) Notwithstanding any provision in this Agreement to the contrary and
except as set forth below, if it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required pursuant to this Paragraph 7) (a "PAYMENT") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "EXCISE TAX"), then the Executive shall be entitled to
receive an additional payment (a "GROSS-UP PAYMENT") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Paragraph 7(a), if it shall be determined that the Executive
is entitled to a Gross-Up Payment, but that the Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $25,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to the Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the Payments, in
the aggregate, to an amount (the "REDUCED AMOUNT") such that the receipt of
payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.

         (b) Subject to the provisions of Paragraph 7(c), all determinations
required to be made pursuant to this Paragraph 7, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen & Co. (the "ACCOUNTING FIRM") or, as provided below, sch other
certified public accounting form as may be designated by the Executive, which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. If the Accounting Firm is serving as accountant or auditor for the
individual, entity, or group effecting the Change of Control, the Executive
shall have the option, in the Executive's sole discretion, to appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Paragraph 7, shall be paid by the Company to the Executive within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be

                                       11

<PAGE>   15

binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross- Up
Payments that will not have been made by the Company should have been made
("UNDERPAYMENT"), consistent with the calculations required to be made
hereunder. If the Company exhausts its remedies pursuant to Paragraph 7(c) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

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

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

                  (ii) take such action in connection with contesting such claim
         as the Company shall reasonably request in writing from time to time,
         including the acceptance of legal representation with respect to such
         claim by an attorney reasonably selected by the Company;

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

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

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions of
this Paragraph 7(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings, and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction, and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and h
old the Executive harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income tax with respect to such
advance; and provided further that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and

                                       12

<PAGE>   16

the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.

         (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Paragraph 7(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Paragraph 7(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Paragraph 7(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

         8. Representations and Warranties.

         (a) The Company represents and warrants to the Executive that the
execution, delivery, and performance by the Company of this Agreement have been
duly authorized by all necessary corporate action of the Company and do not and
will not conflict with or result in a violation of any provision of, or
constitute a default under, any contract, agreement, instrument, or obligation
to which the Company is a party or by which it is bound.

         (b) The Executive represents and warrants to the Company that the
execution, delivery, and performance by the Executive of this Agreement do not
and will not conflict with or result in a violation of any provision of, or
constitute a default under, any contract, agreement, instrument, or obligation
to which the Executive is a party or by which the Executive is bound.

         9. Confidential Information. The Executive recognizes and acknowledges
that the Company's trade secrets and other confidential or proprietary
information, as they may exist from time to time, are valuable, special, and
unique assets of the Company's business, access to and knowledge of which are
essential to the performance of the Executive's duties hereunder. The Executive
confirms that all such trade secrets and other information constitute the
exclusive property of the Company. During the Employment Term and thereafter
without limitation of time, the Executive shall hold in strict confidence and
shall not, directly or indirectly, disclose or reveal to any person, or sue for
the Executive's own personal benefit or for the benefit of anyone else, any
trade secrets, confidential dealings, or other confidential or proprietary
information of any kind, nature, or description (whether or not acquired,
learned, obtained, or developed by the Executive alone or in conjunction with
others) belonging to or concerning the Company or any of its affiliated
companies, except (i) with the prior written consent of the Company duly
authorized by the Board, (ii) in the course of the proper performance of the
Executive's duties hereunder, (iii) for information (x) that becomes generally
available to the public other than as a result of unauthorized disclosure by the
Executive or the Executive's affiliates or (y) other than the Company or its
affiliated companies who is not bound by a duty of confidentiality, or other
contractual, legal, or fiduciary obligation, to the Company, or (iv) as required
by applicable law or legal process. The provisions of this Paragraph 9 shall
continue in effect notwithstanding termination of the Executive's employment
hereunder for any reason.

                                       13

<PAGE>   17

         10. Certain Definitions.

         (a) Effective Date. The "EFFECTIVE DATE" shall mean the first date
during the Change of Control Period (as defined in Paragraph 10(b)) on which a
Change of Control occurs. Notwithstanding anything in this Agreement to the
contrary, if a Change of Control occurs and if the Executive's employment with
the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii) otherwise
arise in connection with or anticipation of a Change of Control, then for all
purposes of this Agreement, the "EFFECTIVE DATE" shall mean the date immediately
prior to the date of such termination of employment.

         (b) Change of Control Period. The "CHANGE OF CONTROL" shall mean the
period commencing on the date on which a Change of Control occurs and ending on
the second anniversary of such date; provided, however, that commencing on the
date one year after the Effective Date, and on each annual anniversary of such
date (such date and each annual anniversary thereof herein referred to as the
"RENEWAL DATE"), the Change of Control Period shall be automatically extended so
as to terminate two years after such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the Executive that the
Change of Control Period shall not be so extended.

         (c) Change of Control. For purposes of this Agreement, a "CHANGE OF
CONTROL" shall mean:

                  (i) the acquisition by any individual, entity, or group
         (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
         Act) (a "PERSON") of beneficial ownership (within the meaning of Rule
         13d-3 promulgated under the Exchange Act) of 15% or more of either (A)
         the then outstanding shares of common stock of the Company (the
         "OUTSTANDING COMPANY COMMON STOCK") or (B) the combined voting power of
         the then outstanding voting securities of the Company entitled to vote
         generally in the election of directors (the "OUTSTANDING COMPANY VOTING
         SECURITIES"); provided, however, that for purposes of this subparagraph
         (c)(i), consummation of the transactions contemplated by the Company's
         Registration Statement on Form S-2 filed with the Securities and
         Exchange Commission on July 21, 2000, and the following acquisitions
         shall not constitute a Change of Control: (w) any acquisition directly
         from the Company (excluding an acquisition by virtue of the exercise of
         a conversion privilege), (x) any acquisition by the Company, (y) any
         acquisition by any employee benefit plan (or related trust) sponsored
         or maintained by the Company or any corporation controlled by the
         Company, or (z) any acquisition by any corporation pursuant to a
         reorganization, merger, or consolidation, if, following such
         reorganization, merger, or consolidation, the conditions described in
         clauses (A), (B), and (C) of subparagraph (iii) of this Paragraph 10(c)
         are satisfied; or

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

                  (iii) consummation of a reorganization, merger, or
         consolidation of the Company, with or without approval by the
         stockholders of the Company, in each case, unless, following such
         reorganization, merger, or consolidation, (A) more than 50% of,
         respectively, the then outstanding

                                       14

<PAGE>   18

         shares of common stock of the corporation resulting from such
         reorganization, merger, or consolidation and the combined voting power
         of the then outstanding voting securities of such corporation entitled
         to vote generally in the election of directors is then beneficially
         owned, directly or indirectly, by all or substantially all of the
         individuals and entities who were the beneficial owners, respectively,
         of the Outstanding Company Common Stock and Outstanding Company Voting
         Securities immediately prior to such reorganization, merger, or
         consolidation in substantially the same proportions as their ownership,
         immediately prior to such reorganization, merger, or consolidation, of
         the Outstanding Company Common Stock and Outstanding Company Voting
         Securities, as the case may be, (B) no Person (excluding the Company,
         any employee benefit plan (or related trust) of the Company or such
         corporation resulting from such reorganization, merger, or
         consolidation, and any Person beneficially owning, immediately prior to
         such reorganization, merger, or consolidation, directly or indirectly,
         15% or more of the Outstanding Company Common Stock or Outstanding
         Company Voting Securities, as the case may be) beneficially owns,
         directly or indirectly, 15% or more of, respectively, the then
         outstanding shares of common stock of the corporation resulting from
         such reorganization, merger, or consolidation ora the combined voting
         power of the then outstanding voting securities of such corporation
         entitled to vote generally in the election of directors, and (C) a
         majority of the members of the board of directors of the corporation
         resulting from such reorganization, merger, or consolidation where
         members of the Incumbent Board at the time of the execution of the
         initial agreement providing for such reorganization, merger, or
         consolidation; or

                  (iv) consummation of a sale or other disposition of all or
         substantially all the assets of the Company, with or without approval
         by the stockholders of the Company, other than to a corporation, with
         respect to which following such sale or other disposition, (A) more
         than 50% of, respectively, the then outstanding shares of common stock
         of such corporation and the combined voting power of the then
         outstanding voting securities of such corporation entitled to vote
         generally in the election of directors is then beneficially owned,
         directly or indirectly, by all or substantially all the individuals and
         entities who were the beneficial owners, respectively, of the
         Outstanding Company Common Stock and Outstanding Company Voting
         Securities immediately prior to such sale or other disposition in
         substantially the same proportion as their ownership, immediately prior
         to such sale or other disposition, of the Outstanding Company Common
         Stock and Outstanding Company Voting Securities, as the case may be,
         (B) no Person (excluding the Company, any employee benefit plan (or
         related trust) of the Company or such corporation, and any Person
         beneficially owning, immediately prior to such sale or other
         disposition, directly or indirectly, 15% or more of the Outstanding
         Company Common Stock or Outstanding Company Voting Securities, as the
         case may be) beneficially owns, directly or indirectly, 15% or more of,
         respectively, the then outstanding shares of common stock of such
         corporation or the combined voting power of the then outstanding voting
         securities of such corporation entitled to vote generally in the
         election of directors, and (C) a majority of the members of the board
         of directors of such corporation were members of the Incumbent Board at
         the time of the execution of the initial agreement or action of the
         Board providing for such sale or other disposition of assets of the
         Company; and

                  (v) approval by the stockholders of the Company of a complete
         liquidation or dissolution of the Company.

         11. Full Settlement.

                                       15

<PAGE>   19

         (a) There shall be no right of set off or counterclaim against, or
delay in, any payments to the Executive, or to the Executive's heirs or legal
representatives, provided for in this Agreement, in respect of any claim against
or debt or other obligation of the Executive or others, whether arising
hereunder or otherwise.

         (b) In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment.

         (c) The Company agrees to pay as incurred, to the full extent permitted
by law, all costs and expenses (including attorneys' fees) that the Executive,
or the Executive's heirs or legal representatives, may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the Company, the
Executive, or others of the validity or enforceability of, or liability under,
any provision of this Agreement, or any guarantee of performance thereof,
(including as a result of any contest by the Executive, or the Executive's heirs
or legal representatives, about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.

         12. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not reduce any amounts
otherwise payable to the Executive, or in any way diminish the Executive's
rights as an employee of the Company, whether existing at the date of this
Agreement or hereafter, under any employee benefit plan, program, or arrangement
or other contract or agreement of the Company providing benefits to the
Executive.

         13. Indemnification; Directors and Officers Insurance. The Company
shall (a) during the Employment Term and thereafter without limitation of time,
indemnify and advance expenses to the Executive to the fullest extent permitted
by the laws of the State of Delaware from time to time in effect and (b) during
the Employment Term, acquire and maintain directors and offices liability
insurance covering the Executive (and to the extent the Company desires, other
directors and offices of the Company and its affiliated companies) to the extent
it is available at commercially reasonable rates as determined by the Board;
provided, however, that in no event shall the Executive be entitled to
indemnification or advancement of expenses under this Paragraph 13 with respect
to any proceeding, or matter therein, brought or made by the Executive against
the Company other than one initiated by the Executive to enforce the Executive's
advancement of expenses as provided in this Paragraph 13 shall not be deemed
exclusive of any other rights to which the Executive may at any time be entitled
under applicable law, the certificate of incorporation or bylaws of the Company,
any agreement, a vote of stockholders, a resolution of the Board, or otherwise.
The provisions of this Paragraph 13 shall continue in effect notwithstanding
termination of the Executive's employment hereunder for any reason, including,
without limitation, Executive's voluntary termination. In furtherance thereof,
and not by way of limitation, the Company shall reimburse Executive for all
reasonable legal fees and expenses incurred by Executive (i) in the preparation
of this Agreement, and (ii) in connection with Executive's obtaining and
enforcing any right or benefit provided by this Agreement. The reimbursement of
such legal fees and expenses shall be made within 30 days after Executive's
request for payment accompanied by evidence of the fees and expenses incurred.
For a period of ten years after the termination, for any reason, of Executive's
employment with the Company, the Company shall indemnify, hold harmless and
defend Executive, to the fullest extent permitted by applicable law, from and
against any loss, cost or expense related to or arising out of any action or
claim with respect to (i) the Company or its affiliated companies or (ii) any
action taken or omitted bhy the Executive (INCLUDING, BUT NOT LIMITED TO,
MATTERS THAT CONSTITUTE NEGLIGENCE OF THE EXECUTIVE) for or on behalf of the
Company or its affiliated companies, whether, in either case, such action or
claim, or the facts and circumstances giving rise thereto, occurred or accrued
before or after such termination of employment.

                                       16

<PAGE>   20

         14. Injunctive Relief. In recognition of the fact that a breach by the
Executive of any of the provisions of Paragraph 9 will cause irreparable damage
to the Company for which monetary damages alone will not constitute an adequate
remedy, the Company shall be entitled as a matter of right (without being
required to prove damages or furnish any bond or other security) to obtain a
restraining order, an injunction, an order of specific performance, or other
equitable or extraordinary relief from any court of competent jurisdiction
restraining any further violation of such provisions by the Executive or
requiring the Executive to perform the Executive's obligations hereunder. Such
right to equitable or extraordinary relief shall not be exclusive but shall be
in addition to all other rights and remedies to which the Company may be
entitled at lw or in equity, including without limitation the right to recover
monetary damages for the breach by the Executive of any of the provisions of
this Agreement.

         15. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas, without regard
to the principles of conflicts of law thereof.

         16. Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by either party hereto shall
be in writing and shall be deemed to have been duly given or made (i) when
delivered, or (ii) five days after being deposited in the United States mail,
first class registered or certified mail, postage prepaid, return receipt
requested, to the party for which intended at the following addresses (or at
such other addresses as shall be specified by the parties by like notice, except
that notice of change of address shall be effective only upon receipt):

       If to the Company, at:       DevX Energy, Inc.
                                    13760 Noel Road, Suite 1030
                                    Dallas, Texas 75240-7336
                                    Attention: Chief Executive Officer

       If to the Executive, at:     Joseph T. Williams
                                    6239 Stefani Drive
                                    Dallas, Texas 75225

         17. Binding Effect; No Third Party Benefit.

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

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

         (c) The Company shall require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all the business and/or assets of the Company, by agreement in
writing in form and substance reasonably satisfactory to the Executive,
expressly, absolutely, and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession or assignment had taken place. As
used in this Agreement, the "COMPANY" shall mean the Company as hereinabove
defined and any successor or assign to its business and/or assets as aforesaid
which executes and delivers this Agreement provided for

                                       17

<PAGE>   21

in this Paragraph 17(c) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.

         (d) Nothing in this Agreement, express or implied, is intended to or
shall confer upon any person other than the parties hereto, and their respective
heirs, legal representatives, successors, and permitted assigns, any rights,
benefits, or remedies of any nature whatsoever under or by reason of this
Agreement.

         18. Miscellaneous.

         (a) Amendment. This Agreement may not be modified or amended in any
respect except by an instrument in writing signed by the party against whom such
modification or amendment is sought to be enforced. No person, other than
pursuant to a resolution of the Board of a committee thereof, shall have
authority on behalf of the Company to agree to modify, amend, or waive any
provision of this Agreement or anything in reference thereto.

         (b) Waiver. Any term or condition of this Agreement may be waived at
any time by the party hereto which is entitled to have the benefit thereof, but
such waiver shall only be effective if evidenced by a writing signed by such
party, and a waiver on one occasion shall not be deemed to be a waiver of the
same or any other type of breach on a future occasion. No failure or delay by a
party hereto in exercising any right or power hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right or power.

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

         (d) Nonalienation of Benefits. The Executive shall not have any right
to pledge, hypothecate, anticipate, or in any way create a lien upon any
payments or other benefits provided under this Agreement; and no benefits
payable hereunder shall be assignable in anticipation of payment either by
voluntary or involuntary acts, or by operation of law, except by will or
pursuant to the laws of decent and distribution.

         (e) Severability. If any provision of this Agreement is held to be
invalid or unenforceable, (a) this Agreement shall be considered divisible, (b)
such provision shall be deemed inoperative to the extent it is deemed invalid or
unenforceable, and (c) in all other respects this Agreement shall remain full
force and effect; provided, however, that if any such provision may be made
valid or enforceable by limitation thereof, then such provision shall be deemed
to be so limited and shall be valid and/or enforceable to the maximum extent
permitted by applicable law.

         (f) Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto concerning the subject matter hereof, and from and
after the date of this Agreement, this Agreement shall supersede any other prior
agreement or understanding, both written and oral, between the parties with
respect to such subject matter.

         (g) Captions. The captions herein are inserted for convenience of
reference only, do not constitute a part of this Agreement, and shall not affect
in any manner the meaning or interpretation of this Agreement.

         (h) References. All references in this Agreement to Paragraphs,
subparagraphs, and other subdivisions refer to the Paragraphs, subparagraphs,
and other subdivisions of this Agreement unless expressly

                                       18

<PAGE>   22

provided otherwise. The words "this Agreement", " herein", "hereof",
"hereunder", and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited. Whenever the
words "include", "includes", and "including" are used in this Agreement, such
words shall be deemed to be followed by the words "without limitation". Words in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Executive has
executed this Agreement, as of the date first above set forth.

                            DEVX ENERGY, INC.

                            By: /s/ Edward J. Munden
                               ------------------------------------------------
                                Name:    Edward J. Munden
                                Title:   President and Chief Executive Officer

                                                                       "COMPANY"

                                /s/ Joseph T. Williams
                            ---------------------------------------------------
                            Joseph T. Williams

                                                                     "EXECUTIVE"

                                       19

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