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                                                                   EXHIBIT 10.14

                            THIRD AMENDMENT TO THE
                          COOPER CAMERON CORPORATION
                          COMPENSATION DEFERRAL PLAN

     WHEREAS, COOPER CAMERON CORPORATION (the "COMPANY") has heretofore adopted
the COOPER CAMERON CORPORATION COMPENSATION DEFERRAL PLAN (the "PLAN"); and

     WHEREAS, the Company desires to amend the Plan in certain respects;

     NOW, THEREFORE, the Plan shall be amended as follows; effective as of
January 1, 2000:

     1.  The term "Board" shall be deleted from Section 2.2 of the Plan and the
phrase "Chief Executive Officer of the Company" shall be substituted therefor.

     2.  Section 2.4 of the Plan shall be deleted and the following shall be
substituted therefor:

          "2.4  TIME OF MAKING ELECTIONS.  Any election which may be made by a
     Participant under this Article II must be made (i) as to Base Salary, not
     later than December 31 of the calendar year preceding the calendar year
     during which the Base Salary to which such election relates is earned, and
     (ii) as to Incentive Awards, not later than June 30 of the calendar year
     during which the Incentive Award to which such election relates is earned.
     Notwithstanding the foregoing, for any calendar year during which an
     employee first becomes eligible to participate in the Plan, (i) elections
     as to the Participant's Base Salary must be made within 30 days of such
     employee first becoming so eligible and shall apply to the first payroll
     period following such election, and (ii) elections as to the Participant's
     Incentive Awards must be made within 30 days of such employee first
     becoming so eligible or by June 30 of such calendar year, if later, and
     shall apply to the entire Incentive Award for such calendar year; provided,
     the amount of such Incentive Award is not reasonably ascertainable at the
     time of such initial eligibility following June 1.  All elections shall be
     made in the manner and form prescribed by the Company."

     3.  As amended hereby, the Plan is specifically ratified and reaffirmed.

     EXECUTED at Houston, Texas this ___ day of __________________, 19____.

                                    COOPER CAMERON CORPORATION

                                    By:
                                       -----------------------------------
                                       Name:
                                             ------------------------------
                                       Title:
                                             ------------------------------<PAGE>

                                                                   EXHIBIT 10.16

                                August 13, 1999

Mr. Sheldon R. Erikson
Chairman, President and
 Chief Executive Officer
Cooper Cameron Corporation
515 Post Oak Boulevard
Houston, Texas 77027

Dear Mr. Erikson:

     Cooper Cameron Corporation (the "Company") considers the establishment and
maintenance of a sound and vital management to be essential for the protection
and enhancement of the best interests of the Company and its shareholders. In
view of your experience and performance in the business of the Company and its
subsidiaries, the Company desires to secure your services for an extended
period. In addition, the Company recognizes that, as is the case with many
publicly-held corporations, the possibility of a change in control may arise and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders.

     Accordingly, the board of directors of the Company (the "Board") has
determined that appropriate steps should be taken to assure the Company of the
continuation of your services and to reinforce and encourage the attention and
dedication of members of the Company's management to their assigned duties
without distraction in circumstances arising from the possibility of a change in
control of the Company. In particular the Board believes it important, should
the Company or its shareholders receive a proposal for or notice of transfer of
control of the Company, that you be able to assess and advise the Board whether
such transfer would be or is in the best interests of the Company and its
shareholders, and to take such other action regarding such proposal or transfer
as the Board might determine to be appropriate without being influenced by the
uncertainties of your own situation.

     In order to induce you to remain in the employ of the Company, this letter
agreement (the "Agreement"), which has been approved by the Board and which
supersedes the previous letter agreement between you and the Company dated
November 30, 1995 in its entirety, sets forth the terms of your continued
employment by the Company and the compensation and severance benefits which the
Company agrees will be provided to you in the event of a change in control and
if your employment with the Company should be terminated under the circumstances
described below.

     Reference is made to Annex I hereto for definitions of certain terms used
in this Agreement, and such definitions are incorporated herein by such
reference with the same effect as if set forth herein. Certain capitalized terms
used in this Agreement in connection with the description of various Plans are
defined in the respective Plans, but if any conflicts with a definition herein
contained, the latter shall prevail.
<PAGE>

          1.    Term of Employment.  The Company hereby agrees to continue
     your employment and you hereby agree to serve the Company for an employment
     period commencing on the date hereof and initially ending the third
     anniversary from the date hereof; provided, however, that the employment
     period shall automatically be extended for one additional month at the end
     of each month of this Agreement (with the date to which the employment
     period has most recently been so extended being hereinafter referred to as
     the "Expiration Date" and the period commencing the date hereof and ending
     on the Expiration Date being hereinafter referred to as the "Employment
     Period"), subject to prior termination of the Employment Period pursuant to
     Section 4 of this Agreement.

          2.    Duties.

          (a)   During the Employment Period, you shall serve the Company as its
Chairman, President and Chief Executive Officer and perform your duties and
responsibilities diligently, faithfully and loyally and devote such time to the
Company's affairs as may be necessary to the end of achieving the proper,
efficient and successful operation of the Company's business. In such capacities
you shall (i) generally have the duties of such offices as specified in the
Bylaws, (ii) report directly to the Board and (iii) have general executive
supervision and management of the business and affairs of the Company, subject
to the direction of the Board or any Committee thereof. The foregoing shall not,
however, be deemed to restrict you from attending to matters or engaging in
activities not directly related to the business of the Company, if reasonable in
scope and time commitment and not otherwise in violation of this Agreement.

          (b)   If during the Employment Period, (i) a tender offer or exchange
offer is made for 20% or more of the Company's outstanding Voting Securities or
(ii) a transaction is proposed which, if consummated, would result in a Change
of Control, you agree that you will not leave your employment with the Company
(other than as a result of Disability or upon Retirement) and will also render
the services contemplated in the introductory paragraphs of this Agreement until
such time as such tender offer, exchange offer or proposed transaction is
abandoned or terminated or a Change of Control has occurred.

          3.    Compensation.

          (a)   Base Salary.  As compensation for your services, the Company
agrees to pay you basic compensation at the rate of $525,000 per annum through
December 31, 1999 ("Base Salary"), payable on a current basis in equal
installments not less frequently than monthly, subject only to such payroll and
withholding deductions as may be required by law or the terms of Plans in which
you are a participant. For periods subsequent to December 31, 1999, your Base
Salary shall be established annually by the Compensation Committee of the Board
and paid on the same basis as for the prior year, but no such adjustment shall
result in a Base Salary for any year of less than the highest annual rate so
authorized by the Committee to be paid to you during any previous calendar
year(s) of the Company ended during the Employment Period, except upon your
prior written consent. The Company's obligations to you hereunder shall remain
unaffected by any election (such as that made for the twelve month period ending
December 31, 1999) by you to receive your Base Salary in other than cash, and
for all purposes of this Agreement, such election shall apply only to the period
for which it is made by written agreement between the Company and you.
<PAGE>

          (b)   Plans.  In addition to your Base Salary, you will participate
in the Bonus Plan, Defined Benefit Plan and LTIP Plan, and be eligible to
participate in the Defined Contribution Plan, Purchase Plan and Other Plans,
including the Perquisites, for each year during the Employment Period.

          (c)   Other.  The Company shall reimburse you for all expenses paid or
incurred by you in the performance of your duties under this Agreement in
accordance with the Company's normal expense reimbursement policies applicable
to senior executives.

          4.    Termination.  Upon compliance by the initiating party with any
     applicable procedures set forth in Section 5 hereof, your employment with
     the Company:

          (a)   shall terminate automatically upon your death or Retirement;

          (b)   may be terminated prior to the Expiration Date at the discretion
     of the Board upon your Disability;

          (c)   may be terminated prior to the Expiration Date at the discretion
     of the Board for Cause;

          (d)   may be terminated prior to the Expiration Date at your
     discretion, other than for Good Reason;

          (e)   may be terminated prior to the Expiration Date at the discretion
     of the Board prior to a Change of Control without Cause;

          (f)   may be terminated prior to the Expiration Date at the discretion
     of the Board at or after a Change of Control without Cause;

          (g)   may be terminated prior to the Expiration Date at your
     discretion for Good Reason prior to a Change of Control; or

          (h)   may be terminated prior to the Expiration Date at your
     discretion for Good Reason at or after a Change of Control.

          5.    Procedures for Termination.  If it is intended that your
     employment be terminated:

          (a)   pursuant to Section 4(b), the Company shall transmit to you
     written notice setting forth the particulars upon which the Company bases
     its determination that a Disability exists, together with a Board
     resolution adopted by at least two-thirds of the members of the Board
     requiring that you resume your duties within 30 days following the date
     thereof, failing which a "final discharge" shall then occur;

          (b)   pursuant to Section 4(c), the Company shall transmit to you
     written notice setting forth the Cause for which you are proposed to be
     dismissed in sufficient detail to permit a reasonable assessment of the
     bona fides thereof, and setting a meeting of the Board not less than 30
     days following the date of such notice at which the Board shall consider
     your termination and at which you and your counsel shall have the
     opportunity to be heard, following which the Board shall either by
     resolution withdraw the notice, or if it so finds in its good faith
     opinion, issue its report within ten days thereafter that Cause
<PAGE>

     exists and specifying the particulars of its findings, in which latter
     event a "final discharge" shall occur. After receipt of a notice of
     intended termination for Cause, you shall not have any authority to incur
     any obligation of any kind whatsoever on behalf of the Company pending
     withdrawal of such notice or "final discharge;"

          (c)   pursuant to Section 4(d), you shall transmit to the Company
     written notice specifying that your resignation is other than for Good
     Reason;

          (d)   pursuant to Section 4(e) or 4(f) the Company shall transmit to
     you written notice specifying that your termination is without Cause;

          (e)   pursuant to Section 4(g) or 4(h), you shall transmit to the
     Company written notice setting forth the particulars upon which you base
     your determination that Good Reason exists and, only if the stated basis
     therefor is capable of being cured, requesting a cure within 10 days,
     failing which a "final separation" shall then occur, and if such stated
     basis is not capable of cure by the Company, "final separation" shall occur
     co-extensive with delivery of the notice.

     For purposes of this Agreement, a "Termination Date" shall be deemed to
have occurred upon (i) the happening of any event contemplated by Section 4(a)
[death or Retirement], (ii) the date of "final discharge" in the case of
termination initiated under Sections 5(a) [Disability] or 5(b)[Cause], (iii) the
date of "final separation" in the case of a termination initiated under Section
5(e) [Good Reason], or (iv) the 30th day following the date of any notice
contemplated by Sections 5(c) [resignation without Good Reason] or 5(d)
[discharge without Cause]; provided, that any proceeding initiated pursuant to
Section 11 hereof within 15 days after the giving of any notice under this
Section 5 shall (anything else in this Agreement to the contrary
notwithstanding) automatically toll the effectiveness of any Termination Date
until final resolution of such proceeding. Each notice which complies with the
requirements of this Section 5 is hereinafter referred to as a "Termination
Notice".

          6.    Effect of Termination.  If your employment is terminated:

          (a)   pursuant to Sections 4(a) [death or Retirement], 4(b)
     [Disability], 4(c) [Cause], or 4(d) [resignation without Good Reason], then
     you shall be entitled to receive (i) payment when due of your Base Salary
     through the end of the first monthly pay period ended after the Termination
     Date and (ii) all benefits under the Plans in which you are at the time a
     participant, to the extent the same are vested under the terms thereof at
     the Termination Date, and (except as otherwise provided herein) all other
     obligations of the Company under this Agreement shall thereupon cease; or

          (b)   pursuant to Sections 4(e) [discharge without Cause prior to
     Change of Control], 4(f) [discharge without Cause after a Change of
     Control], 4(g) [resignation for Good Reason prior to Change of Control], or
     4(h) [resignation for Good Reason after a Change of Control], then you
     shall become entitled to all benefits conferred upon you by the Severance
     Package, and (except as otherwise provided herein) all other obligations of
     the Company under this Agreement shall thereupon cease.

     You shall not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment, nor shall the amount of any
payment provided for in this Agreement be reduced by any compensation earned by
you as the result of employment by another employer after any Effective Date or
Termination Date.
<PAGE>

          7.    LTIP Benefit Acceleration at Effective Date.  Immediately upon
     any Effective Date, all contingent compensation rights issued to you under
     the LTIP Plan (including an option granted under the options in lieu of pay
     program) which are then outstanding shall become vested, exercisable,
     distributable and unrestricted (any contrary provision in the LTIP Plan
     notwithstanding) for a period of 183 days following the Effective Date (the
     "Exercise Period") whether or not during such period you continue to be
     employed by the Company. During the Exercise Period, you shall have the
     right immediately upon any written request by you to the Company, if
     approved in writing by any person (acting solely in his individual capacity
     and when so acting, such concurring person shall do so without any contrary
     "fiduciary" or other duty to the Company) who was at the Effective Date an
     officer or director of the Company, to (i) exercise all or any portion of
     all your options covered (including, at your sole election, any associated
     Tandem SAR) by the LTIP Plan and to have the underlying Shares issued to
     you, (ii) have issued to you on a non-forfeitable basis any or all Shares
     covered by Restricted Stock Awards held by you under the LTIP Plan, (iii)
     have issued to you any or all Performance Shares and/or Performance Units
     held by you in the LTIP Plan, (iv) exercise all or any portion of any LTIP
     Plan Freestanding SAR held by you, and (v) obtain the full benefit of any
     other contingent compensation rights to which you may be entitled under the
     LTIP Plan, in each case as though all applicable Performance Targets had
     been met for all Performance Periods (including those extending beyond the
     Effective Date) and any and all other LTIP Plan contingencies had been
     satisfied in full at the Effective Date and the maximum possible benefit
     thereunder had been earned in full at the Effective Date. To the extent you
     have not exercised or requested performance of such benefits following the
     Effective Date and prior to expiration of the Exercise Period, all terms
     applicable to any such benefit prior to the Effective Date shall again
     become fully applicable as though an Effective Date had never occurred.

          8.    Excise Tax.  To the extent that the acceleration of vesting or
     any payment, distribution or issuance made to you pursuant to this
     Agreement or otherwise is subject to federal income, excise, or other tax
     at a rate above the rate ordinarily applicable to like payments paid in the
     ordinary course of business ("Penalty Tax"), whether as a result of the
     provisions of Section 280G(b)(1) and 4999(a) of the Internal Revenue Code
     of 1986, as amended, any similar or analogous provisions of any statute
     adopted subsequent to the date hereof, or otherwise, then the Company shall
     pay you an additional amount of cash (the "Additional Amount") such that
     the net amount received by you, after paying any applicable Penalty Tax and
     any federal or state taxes on such Additional Amount, shall be equal to the
     amount that you would have received if such Penalty Tax were not
     applicable.

          9.    Deferral of Payments; Early Payments.  At any time prior to a
     Termination Date, you may irrevocably direct the Company that any amounts
     which are or should become payable to you under the Severance Package or
     pursuant to Section 7 hereof shall be paid to you in three equal
     installments, payable on or within ten days following the Termination Date,
     and on the first and second anniversaries of the initial installment
     payment. In addition, if any payment to you in respect of a stock-based
     benefit which is precipitated by the occurrence of an Effective Date or a
     Termination Date and which would, in and of itself, give rise to a short-
     swing profit under Section 16(b) of the Exchange Act, then both the payment
     and the entitlement to payment thereof, shall automatically be deferred
     until the earliest date (not later than 183 days following a Termination
     Date) at which the payment of such benefit would not, in and of itself,
     result
<PAGE>

     in a short-swing profit. The Company and you further agree that when it has
     become apparent in our collective best judgment (as expressed by the
     Compensation Committee of the Board, in the case of the Company) that a
     Change of Control is likely to occur and further, that a likely consequence
     thereof will be the occurrence of a Termination Date, the Company and you
     will use reasonable good faith efforts to undertake and conclude
     negotiations intended to result in the payment to you of a portion of the
     Severance Package earlier than would otherwise be the case hereunder,
     thereby increasing the benefit conferred upon you and the tax efficiency of
     such payments to the Company, with any consequent tax savings to be
     allocated between you and the Company in such reasonable proportions as we
     shall agree; unless so agreed to by both parties in writing, no such
     negotiation or agreement shall affect the Company's obligations to you
     under any other provision of this Agreement.

          10.   Conditional Share Purchase Obligation.

          (a)   If a Change of Control occurs as a consequence of a tender offer
or exchange offer (the "Tender Offer"), the Company shall, if requested by you,
purchase from you (whether a Termination Date has occurred following the Change
of Control) for cash on any business day selected by you upon not less than ten
days' notice to the Company, which day shall not be less than ten days following
consummation of the Tender Offer nor more than three years after the Effective
Date, up to that number of Shares which shall be equal to the product of (x) the
number of Shares acquired by you upon exercise or distribution of any benefit
under the Bonus Plan or LTIP Plan (including an option granted under the options
in lieu of pay program) prior to consummation of the Tender Offer, multiplied by
(y) the decimal equivalent of (I) the number of Shares accepted for purchase or
exchange in the Tender Offer, divided by (II) the number of Shares timely and
validly tendered pursuant to the Tender Offer. In the event the above obligation
to purchase Shares occurs by reason of a cash tender offer or a combination cash
tender offer and exchange offer, the cash price per share to be paid to you
hereunder shall be equal to the highest price paid in cash pursuant to the
Tender Offer. In the event such obligation occurs by reason of an exchange
offer, the cash price per share to be paid to you hereunder shall be equal to
the closing price, if traded on a stock exchange, or the average bid and asked
prices, if traded in the over-the-counter market, of the security of the person
so exchanged for the Shares (the "Exchange Security") on the first day on which
the Exchange Security could have been sold by you on such exchange or in the
over-the-counter market, as the case may be, in a regular broker's transaction
had your Shares been tendered and accepted, multiplied by the number of Exchange
Securities (or fraction thereof) issued in the Tender Offer for each Company
Share; and

          (b)   if a Change of Control occurs pursuant to a Tender Offer and
(i) a merger, consolidation, reorganization, sale, spin-off, or purchase of
assets under which all remaining outstanding Shares will be converted into or
become exchangeable for cash, or for securities ("Merger Security") issued or to
be issued by the Person who made the Tender offer (or a subsidiary or affiliate
of such Person), is thereafter proposed to the Company or its shareholders, and
(ii) such merger, consolidation, reorganization or purchase of assets occurs
less than three years after the Effective Date, and (iii) the amounts of cash
into which each Share would be converted if the transaction is effected wholly
for cash, or the Merger Security Value (as defined below) if such transaction is
effected wholly for Merger Securities, or the sum of the cash and the Merger
Security Value if the Transaction is effected partly for cash and partly for
Merger Securities, as the case may be, is less than 95% of the per share price
that would have been paid by the Company for such portion of your Shares had you
exercised your option to require the Company to purchase such Shares under
Section 10(a) above, the Company shall pay you

<PAGE>

(whether or not a Termination Date has occurred following a Change of
Control), an amount in cash equal to the difference between the aggregate price
you would have received from the number of Shares the Company would have been
required to purchase from you had you exercised such option under Section 10(a)
and the amount of cash and/or the Merger Security Value received for the same
number of Shares in such merger, consolidation, reorganization or purchase of
assets. Such cash payment shall be made to you on a business day selected by you
upon no less than ten calendar days' notice to the Company or its Successor (as
hereinafter defined). For purposes of this Section 10(b), "Merger Security
Value" shall mean the closing price, if traded on a stock exchange, or the
average bid and asked prices if traded in the over-the-counter market, of the
Merger Security on the first day on which the Merger Security could have been
sold by you on such exchange or in the over-the-counter market, as the case may
be, in a regular broker's transaction, multiplied by the number of Merger
Securities (or fraction thereof) for which each Share was exchangeable or into
which each Share was convertible. If no public market develops for the Merger
Security within 30 days from the date of its issue, however, "Merger Security
Value" shall mean the fair market value of such Merger Security (on a per unit
basis) in the written opinion of a nationally recognized investment banking firm
acceptable to you) on the effective date of the merger, consolidation,
reorganization or purchase of assets, as the case may be, multiplied by the
number of Merger Securities (or fraction thereof) for which each Share was
exchangeable or into which each Share was convertible.

     10A. Certain Rights with Respect to Options.

          (a)   In addition to any other rights or privileges held by a holder
with respect to an option (including an option granted under the options in lieu
of pay program) covered by the LTIP Plan ("LTIP Option") (including the
provisions of Section 7 and Section 10), upon a Change in Control of the
Company, the holder shall have the right to exchange such option for a new
option ("New Option"), that shall be issued according to the following:

                (1)   the New Option shall be immediately exercisable;

                (2)   the New Option shall have a term equal to the remaining
          term of the LTIP Option it replaces (and shall be exercisable through
          such term);

                (3)   the New Option will give the holder the right to acquire
          shares of the publicly traded common equity of the Company or any
          successor or direct or indirect parent of either ("Replacement Common
          Stock") (in the event of two or more classes of common equity, the
          common equity used shall be determined by the Compensation Committee
          of the Board of Directors of the Company existing prior to a Change in
          Control);

                (4)   the exercise price used for the New Option ("New Exercise
          Price") for acquiring a share of Replacement Common Stock shall be
          determined at the time of the Change in Control by taking (i) the
          higher of (a) the aggregate value (as of the date of the Change in
          Control) equal to the merger or acquisition consideration paid or
          payable in the Change in Control, on a per share basis, or (b) the
          highest price paid for a share of Cooper Cameron common stock over the
          New York Stock Exchange (or other primary exchange) during the 12
          months prior to the Change in Control, and (ii) dividing such amount
          into the per share exercise price of the LTIP Option; with the result
          multiplied by the Replacement Common
<PAGE>

          Stock closing price on its principal stock exchange on the day of the
          Change in Control, or if traded in the over-the-counter market and not
          on an exchange, the last bid price in such market;

                (5)   the number of shares of Replacement Common Stock subject
          to the New Option shall be the number necessary, using the New
          Exercise Price, to provide an aggregate value (as of the date of the
          Change in Control) equal to the higher of (a) the merger or
          acquisition consideration paid or payable in the Change in Control on
          a per share basis, or (b) the highest price paid for a share of Cooper
          Cameron common stock over the New York Stock Exchange (or other
          primary exchange) during the 12 months prior to the Change in Control;

                (6)   if there is no publicly traded common equity of the
          Company, or any successor or any direct or indirect parent of either,
          then the New Option shall be with respect to shares of the direct or
          indirect parent of the Company, and if no such parent then the
          Company, and if the Company no longer exists, then the successor to
          the Company;

          (b) In addition to any other rights or privileges held by a holder
with respect to an option covered by the LTIP Plan (including the provisions of
Section 7 and Section 10), if a Change in Control occurs, each holder of an
option shall have the right, but not the obligation, to tender, within 30 days
of such a Change in Control, any option to the Company (or any successor to the
Company) and receive in exchange therefor a lump sum cash amount equal to the
Black-Scholes value of the option, without discount for risk of forfeiture and
nontransferability determined by using the highest Black-Scholes valuation
during the one-year period prior to the Change in Control.  Any Black-Scholes
valuation shall be performed on a basis consistent with the methodology set
forth on Exhibit A to this Agreement.

          11.   Dispute Resolution.  It is irrevocably agreed that if any
     dispute arises between us under this Agreement, or as to any interpretive
     matter under or alleged breach of this Agreement, the exclusive remedy of
     each of us shall be to commence binding arbitration proceedings under the
     rules of the American Arbitration Association (the "Rules"), with any such
     arbitration proceeding to be conducted in Houston, Texas, applying the
     substantive law of the State of Texas ("Arbitration"). If Arbitration is
     commenced prior to an Effective Date, each of us will deposit with the
     arbitrator(s), 50% of the arbitrator's preliminary estimate of the costs of
     arbitration (excluding counsel fees and expenses) as security for costs; if
     Arbitration is commenced after an Effective Date, the Company will be
     solely responsible for all costs thereof and shall deposit with the
     arbitrator(s) 100% of the arbitrator(s) preliminary estimate thereof.
     Notwithstanding any contrary provision of the Rules or Texas law, the
     Company shall have the burden of proof with respect to any of the following
     which are at issue in Arbitration: (i) that Cause or Disability existed at
     the time any notice was given to you under Section 5 based upon either them
     and/or the sufficiency of such notice; and (ii) that Good Reason did not
     exist at the time notice was given to the Company under Section 5 based
     upon Good Reason (but only if such notice was dated on or after an
     Effective Date) and/or the sufficiency of such notice; and (iii) that a
     Change of Control has not occurred. Any final ruling of the arbitrator(s)
     in an Arbitration shall be final and binding for all purposes, and judgment
     on any Arbitration award may be entered and enforced in any court having
     jurisdiction.
<PAGE>

     The Company and you irrevocably agree that in the event the arbitrator(s)
shall determine (after hearing) that any matter presented in Arbitration is one
which under Texas law is not susceptible to arbitration, in such event (and only
in such event), (i) exclusive jurisdiction over the non-arbitrable issue shall
be in the lowest Texas state court of general jurisdiction sitting in Harris
County, Texas, (ii) we are each at the time present in Texas for the purpose of
conferring personal jurisdiction; (iii) any such action may be brought in such
courts, and any objection that the Company or you may now or hereafter have to
the venue of such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court is waived, and we each agree not
to plead or claim the same, (iv) service of process in any such proceeding or
action may be effected by mailing a copy thereof by registered or certified
mail, return receipt requested (or any substantially similar form of mail),
postage prepaid, to such party at the address provided in Section 14 hereof, (v)
no punitive or consequential damages shall be awarded in any such action or
proceeding and we each agree not to plead or claim the same; and (vi) prior to
any trial on the merits, we will submit any such non-arbitrable issue to court
supervised, non-binding mediation.

     If proceedings are commenced prior to an Effective Date, all actual costs
of Arbitration or court proceedings involving any non-arbitrable issue
(excluding, in each case, counsel fees and expenses), shall be apportioned by
the arbitrator(s) or the court in such manner as shall be deemed equitable in
light of any final Arbitration award or judgment; if commenced on or after an
Effective Date, all such costs shall be borne exclusively by the Company.

     Anything else in this Section to the contrary notwithstanding, nothing in
this Agreement shall impair your ability to seek specific performance of your
right to be paid under, and to receive all other benefits conferred by, Section
3 of this Agreement during the pendency of any dispute or proceeding concerning
Sections 5, 6, 7 and/or 9 hereof.

          12.   Successors; Binding Agreement.

          (a)   Upon your written request, the Company will seek to have any
Successor (as defined below), by agreement in form and substance satisfactory to
you, expressly 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 there
has been a Change of Control prior to, or a Change of Control will result from,
any such succession, then failure of the Company to obtain at your request such
agreement prior to or upon the effectiveness of any such succession (other than
by merger or consolidation) shall constitute Good Reason for termination by you
of your employment and, upon delivery of a Notice of Termination by you to the
Company, you shall be entitled to the benefits provided in Section 6(c) hereof.
"Successor" shall mean any Person that succeeds to, or has the ability to
control, the Company's business as a whole, directly by merger, consolidation or
spin-off or indirectly by purchase of the Company's Voting Securities or
acquisition of all or substantially all of the assets of the Company.

          (b)   This Agreement shall inure to the benefit of and be enforceable
by your personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

          13.   Fees and Expenses.  The Company shall pay all legal fees and
     reasonable expenses incurred by you (including costs of arbitration) as a
     result of (a) your termination following a Change of Control (including all
     such fees and expenses, if any, incurred in contesting or disputing any
     such termination) or (b) your seeking to obtain, assert or enforce any
     right or benefit conferred upon you by this Agreement.

<PAGE>

          14.   Notices.  Any and all notices required or permitted to be given
     hereunder shall be in writing and shall be deemed to have been given when
     delivered in person to the persons specified below or deposited in the
     United States mail, certified or registered mail, postage prepaid and
     addressed as follows:

          If to the Company:   Cooper Cameron Corporation
                               515 Post Oak Boulevard
                               Houston, Texas 77027
                               Attention: Chairman, Compensation
                               Committee of the Board of Directors

          If to you:           Sheldon R. Erikson
                               4 Longbow
                               Houston, Texas 77024

     Either party may change, by the giving of notice in accordance with this
Section 14, the address to which notices are thereafter to be sent.

          15.   Validity.  The invalidity or unenforceability of any provision
     of this Agreement shall not affect the validity or enforceability of any
     other provision of this Agreement, which shall remain in full force and
     effect.

          16.   Survival.  All obligations undertaken and benefits conferred
     pursuant to this Agreement, except those set forth in Sections 1 and 2,
     shall survive the Employment Period and continue thereafter until performed
     in full.

          17.   Miscellaneous.  No provision of this Agreement may be modified,
     waived or discharged unless such modification, waiver or discharge is
     agreed to in writing signed by you and the Chairman of the Compensation
     Committee of the Board. No waiver by either party hereto at any time of any
     breach by the other party hereto of, or of compliance with, any condition
     or provision of this Agreement to be performed by such other party shall be
     deemed a waiver of similar or dissimilar provisions or conditions at the
     same or at any prior or subsequent time. No agreements or representations,
     oral or otherwise, express or implied, with respect to the subject matter
     hereof have been made by either party which are not expressly set forth in
     this Agreement. The validity, interpretation, construction and performance
     of this Agreement shall be governed by the internal laws of the State of
     Texas.

<PAGE>

     If this letter correctly sets forth our understanding with respect to the
subject matter hereof, please sign and return one copy of this letter to the
Company.

                                     Sincerely,

                                     COOPER CAMERON CORPORATION

                                     BY:
                                        -------------------------------
                                          Grant A. Dove
                                          Chairman of the Compensation Committee
                                          of the Board

Agreed to as of the ___
day of August, 1999:

------------------------------
Sheldon R. Erikson

<PAGE>

                   ANNEX I TO AGREEMENT DATED AUGUST 13, 1999
                                    BETWEEN
                           COOPER CAMERON CORPORATION
                                      AND
                               SHELDON R. ERIKSON

                                 Definition of
                                 Certain Terms

     "BONUS PLAN" means for each year, the Company's Management Incentive
Compensation Plan or any other Plan adopted by the Board which provides for the
payment of additional compensation on an annual basis to senior executive
officers contingent upon the Company's results of operations for that specific
year, in either case as such Plan shall be amended or modified to, but not on or
after, any Effective Date.

     "BYLAWS" means the bylaws of the Company as in effect at the date hereof
and as the same shall be amended or otherwise modified to, but not on or after,
any Effective Date.

     "CAUSE" means (i) your conviction by a court of competent jurisdiction,
from which conviction no further appeal can be taken, of a felony-grade crime
involving moral turpitude, or (ii) your willful failure to perform substantially
your duties with the Company (other than a failure due to physical or mental
illness) which is materially and demonstrably injurious to the Company, or (iii)
only prior to an Effective Date, the engaging by you in any "business" engaged
in activities in direct competition with the Company, whether as an employee,
officer or director or through the beneficial ownership by you of 10% or more of
the Voting Securities of such "business." No act or failure to act on your part
shall be considered "willful" unless done, or omitted to be done, by you in bad
faith and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company.

     "CHANGE OF CONTROL" means the earliest date at which:

     (i)    any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding Voting Securities, other than through the purchase of Voting
Securities directly from the Company through a private placement; or

     (ii)   individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least two-thirds of the directors comprising the
Incumbent Board shall from and after such election be deemed to be a member of
the Incumbent Board; or

     (iii)  the Company is merged or consolidated with another corporation or
entity and as a result of such merger or consolidation less than 80% of the
outstanding Voting Securities of the surviving or resulting corporation or
entity shall then be owned by the former stockholders of the Company; or

<PAGE>

     (iv)   a tender offer or exchange offer is made and consummated by a
Person other than the Company for the ownership of 20% or more of the Voting
Securities of the Company then outstanding; or

     (v)    all or substantially all of the assets of the Company are sold or
transferred to a Person as to which (A) the Incumbent Board does not have
authority (whether by law or contract) to directly control the use or further
disposition of such assets and (B) the financial results of the Company and such
Person are not consolidated for financial reporting purposes.

     Anything else in this definition to the contrary notwithstanding, no
Change of Control shall be deemed to have occurred by virtue of any transaction
which results in you, or a group of Persons which includes you, acquiring 20% or
more of either the combined voting power of the Company's outstanding Voting
Securities or the Voting Securities of any other corporation or entity which
acquires all or substantially all of the assets of the Company, whether by way
of merger, consolidation, sale of such assets or otherwise.

     "DEFINED BENEFIT PLAN" means the Company's Retirement Plan and
Supplemental Excess Defined Benefit Plan, as the same shall be amended or
modified to, but not on or after, any Effective Date.

     "DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings
Plan and Supplemental Excess Defined Contribution Plan, as the same shall be
amended or modified to, but not on or after, any Effective Date.

     "DISABILITY" means your continuing full-time absence from your duties
with the Company for 180 days or longer as a result of physical or mental
incapacity.

     "EFFECTIVE DATE" means the earliest date upon which (i) any of the events
set forth under the definition of Change of Control shall have occurred, (ii)
the receipt by the Company of a Schedule 13D stating the intention of any Person
to take actions which, if accomplished, would constitute a Change of Control, or
(iii) the public announcement by any Person of its intention to take any such
action, in each case without regard for any contingency or condition which has
not been satisfied on such date.

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

<PAGE>

     "GOOD REASON" means any of the following:

          (i)   except as a result of your death or Retirement, or following
     the receipt by you of a Notice of Termination for Cause or due to
     Disability, a change in your status, title(s) or position(s) as an officer
     of the Company which, in your reasonable judgment, does not represent a
     promotion, with commensurate adjustment of compensation, from your status,
     title(s) and position(s); or the assignment to you of any duties or
     responsibilities which, in your reasonable judgment, are inconsistent with
     such status, title(s) or position(s); or the withdrawal from you of any
     duties or responsibilities which in your reasonable opinion are consistent
     with such status, title(s) or position(s); or any removal of you from or
     any failure to reappoint or reelect you to such position(s); or

          (ii)  a reduction by the Company in your base salary; or

          (iii) the failure by the Company to continue in effect any Plan
     in which you were then participating other than as a result of the normal
     expiration or amendment of any such Plan in accordance with its terms, or
     the taking of any action, or the failure to act, by the Company which would
     adversely affect your continued participation in any such Plan on at least
     as favorable a basis to you as is the case on the date hereof or which
     would materially reduce your benefits under any of such Plan or deprive you
     of any material benefit enjoyed by you on the date hereof, except as
     proposed by you to the Board or the Compensation Committee thereof; or

          (iv)  the Company's requiring you to be based anywhere other than
     the Company's principal executive offices as they were located as of the
     date hereof except for required travel on the Company's business to an
     extent substantially consistent with your business travel obligations on
     behalf of the Company prior to the date hereof; or

          (v)   the failure by the Company upon a Change of Control to obtain
     the assumption of this Agreement by any Successor (other than by merger or
     consolidation); or

          (vi)  any purported termination by the Company of your employment
     which is not effected pursuant to a Notice of Termination; and for purposes
     of this Agreement, no such purported termination shall be effective; or

          (vii) any refusal by the Company to continue to allow you to
     attend to matters or engage in activities not directly related to the
     business of the Company which you attended to or were engaged in prior to
     the date hereof and which do not otherwise violate your obligations
     hereunder; or

          (viii) any continuing material default by the Company in the
     performance of its obligations under this Agreement, whether before or
     after a Change of Control.

     "LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as the
same shall be amended or modified to, but not on or after, any Effective Date.

<PAGE>

     "OTHER PLANS" means any thrift; bonus or incentive; stock option or
stock accumulation;  pension; medical, disability, accident or life insurance
plan, program or policy of the Company which is intended to benefit the chief
executive officer and/or executive officers of the Company (other than the Bonus
Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase
Plan).

     "PERSON" means any individual, corporation, partnership, group,
association or other "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, other than the Company or any Plans sponsored by the
Company.

     "PERQUISITES" means individual perquisites benefits received by
executives, including, but not limited to, the use of company aircraft for 100
hours per year and club membership dues.

     "PLANS" means the Bonus Plan, Defined Benefit Plan, Defined
Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and
Other Plans.

     "PURCHASE PLAN" means the Company's Employee Stock Purchase Plan
adopted as the same shall be amended or modified to, but not on or after, any
Effective Date.

     "RETIREMENT" means termination of your employment on the "normal
retirement date" as set forth in the Defined Benefit Plan.

     "SEVERANCE PACKAGE" means your right to receive, and the Company's
obligation to pay and/or perform on, the following:

          (a)   on or within ten days following an applicable Termination
     Date, the Company shall pay to you a lump sum, cash amount equal to the sum
     of (i) three times the highest annual rate of Base Salary in effect during
     the current year or any of the three years preceding the Termination Date
     and (ii) three times the greater of (A) the maximum award you would have
     been eligible to receive under the Bonus Plan in respect of the current
     year, regardless of any limitations otherwise applicable to the Bonus Plan
     (i.e., the failure to have completed any vesting period or the current
     measurement period, or the failure to achieve any performance goal
     applicable to all or any portion of the measurement period) or (B) the
     largest award earned (whether or not paid) under the Bonus Plan in respect
     of any of the three years preceding the Termination Date, or (C) 180% of
     your Base Pay at the applicable Termination Date, and (ii) three times the
     Black-Scholes value at the time of grant of the most valuable one-year
     option grant (excluding any option you received at your election in lieu of
     salary) you had received from the Company during the five years prior to
     your Termination Date with any such Black-Scholes valuation performed on a
     basis consistent with the methodology set forth on Exhibit A to the
     Agreement.  In the event you shall have received for any relevant period,
     Shares or rights to acquire the same, in lieu of salary or bonus, then such
     Shares shall be valued for all purposes at the higher of aggregate market
     value at the date(s) of issue or the Termination Date, without discount in
     either case for (u) "blockage," (v) any restriction against transfer, or
     (w) any forfeiture provision; and any such "rights"
<PAGE>

     (whether denominated as warrants, options, rights or otherwise) shall be
     valued at the highest of the aggregate Black-Scholes' value (with any
     assumptions used in such valuation determined by an independent investment
     banker not associated with either party) or the aggregate "in the money"
     value at the date(s) of issue or the Termination Date, without discount in
     any case for (x) terms of vesting, forfeiture or exercise, or (y)
     "blockage" or (z) any restriction against transfer; and

          (b)   in addition to your entitlement to the vested portion of your
     interest in the Defined Contribution Plan in accordance with the terms of
     that plan, the Company shall pay to you, on or within ten days following
     the applicable Termination Date, an amount in cash equal to the unvested
     portion of the Company's contributions to your account, which unvested
     portion shall be valued on the same basis as the Shares contributed by the
     Company in respect of the unvested portion were valued at the date(s) of
     contribution; and

          (c)   in addition to any vested retirement benefits to which you
     are entitled on the Termination Date under the Defined Benefit Plan, the
     Company shall pay to you, on or within ten days following an applicable
     Termination Date, an amount in cash equal to the product of (i) a number
     equal to your years of life expectancy beyond age 65 as of the Termination
     Date determined in accordance with the actuarial assumptions utilized under
     the Defined Benefit Plan immediately prior to the Termination Date, times
     (ii) an amount equal to the difference between (A) the annual benefit to
     which you would have been entitled at age 65 determined (s) as if you were
     fully vested thereunder (and without regard to (I) whether you shall
     actually have completed the period of "vesting service" required to qualify
     for benefits under the Defined Benefit Plan, (II) any limitation on the
     amount used in the calculation of the annual benefit thereunder, (III) any
     offset thereunder for severance allowances payable thereunder, or (IV) any
     amendment to the Defined Benefit Plan made in connection with a Change of
     Control and on or prior to the Termination Date, which amendment adversely
     affects in any manner the computation of retirement benefits under such
     plan), (t) you had continued in employment with the Company as a "salaried
     employee" for three years beyond the Termination Date, and (u) based on
     "compensation" as defined as the highest annual rate of Base Salary in
     effect during the current year or any of the three years preceding the
     Termination Date plus the highest award (either earned or paid) under the
     Bonus Plan in respect of any of the three years preceding the Termination
     Date and (B) the annual benefit, if any, to which you would be entitled
     under the single life annuity method of distribution under the Defined
     Benefit Plan as of the Termination Date; and

          (d)   immediately upon an applicable Termination Date, all options
     and rights to other forms of contingent incentive compensation granted to
     you under the LTIP Plan which are not then fully vested, exercisable,
     distributable or otherwise performable by the Company shall immediately
     become fully vested, exercisable, distributable or otherwise performable by
     the Company as though all applicable Performance Targets had been met or
     achieved at maximum levels for all Performance Periods (including those
     extending beyond the Termination Date) and any and all other LTIP Plan
     contingencies had been
<PAGE>

     satisfied in full at the Termination Date and the maximum benefits
     thereunder had been earned at the Termination Date;

          (e)   following an applicable Termination Date, you shall receive
     all benefits under and in accordance with the terms of the Plans (other
     than the Bonus, Defined Contribution, Defined Benefit and LTIP Plans and
     medical, disability, accident and life insurance plans and programs for all
     of which separate provision is made herein) in which you are at the time a
     participant, but only to the extent the same are vested under the terms of
     such Plans at the Termination Date; and

          (f)   unless you give notice to the Company pursuant to the next
     sentence within 90 days following an applicable Termination Date, the
     Company shall maintain in full force and effect, at its sole expense for
     the continued benefit of you and your dependents during the period from the
     Termination Date through the earlier of (i) three years from the
     Termination Date or (ii) the commencement date of equivalent benefits from
     a new employer, all insured and self-insured employee welfare benefit Plans
     and Perquisites in which you were entitled to participate immediately prior
     to the Termination Date. Alternatively, if you notify the Company that you
     so elect, the Company shall pay you within five days of such notification
     an amount in cash equal to three times the average annual cost incurred by
     the Company during the preceding three calendar years as a result of your
     participation in such welfare benefit Plans (or such fewer whole calendar
     years as you have so participated). If your participation in any such
     welfare benefit Plan is barred, the Company, at its sole cost and expense,
     shall arrange to have issued for the benefit of you and your dependents
     individual policies of insurance providing benefits substantially similar
     (on an after-tax basis) to those which you are entitled to receive under
     such Plans. You shall not be required to pay any premiums or other charges
     for such policies. At the end of three years after the Termination Date,
     the Company, provided you have not previously received or are not then
     receiving equivalent benefits from a new employer, shall arrange, at its
     sole cost and expense, to enable you to convert you and your dependents'
     coverage under such Plans to individual policies or programs upon the same
     terms as employees of the Company may apply for such conversions.

     Anything else in this Agreement to the contrary notwithstanding, if an
applicable Termination Date results from a merger or a tender offer or an
exchange offer, then unless otherwise agreed to by both parties in writing, all
amounts to which you shall at the closing thereof, or which you may upon
subsequent notice or lapse of time, become entitled under this Severance Package
or Section 10 shall be accelerated to, and become immediately due and payable
contemporaneously with, such closing.

     "SHARES" means shares of Common Stock, $.01 par value, of the Company
at the date of this Agreement, as the same shall be subsequently amended,
modified or changed. The term "market value," when used with respect to a Share
means the closing price therefor on the New York Stock Exchange or if not listed
thereon, on such other exchange as shall at the time constitute the principal
exchange for trading in Shares.
<PAGE>

          "VOTING SECURITIES" means, with respect to any corporation or business
enterprise, those securities which under ordinary circumstances are entitled to
vote for the election of directors or others charged with comparable duties
under applicable law.

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