SOUTH TEXAS DRILLING & EXPLORATION INC
1ST AMEND. TO EXECUTIVE EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>20
<FILENAME>h88511ex10-2.txt
<DESCRIPTION>1ST AMEND. TO EXECUTIVE EMPLOYMENT AGREEMENT
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.1

                         EXECUTIVE EMPLOYMENT AGREEMENT

         This Executive Employment Agreement (the "Agreement") dated effective
as of the 25th day of April, 1995, is between South Texas Drilling &
Exploration, Inc., a Texas corporation (the "Company"), and William Stacy Locke
(the "Employee").

                                   RECITALS:

         The Company desires to procure the services of the Employee in the
business of the Company as its President and Chief Executive Officer as of May
1, 1995 (the "Employment Date").

         The Employee desires to enter into the employment of the Company on the
Employment Date.

         NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto have agreed, and do hereby agree, as
follows:

         1. Term of Employment; Duties. The Company will employ the Employee in
the business of the Company, and the Employee will work for the Company, for the
period beginning as of the Employment Date, and ending two (2) years thereafter,
and thereafter from year-to-year, unless and until such employment hereunder
shall have been earlier terminated as hereinafter provided. During his
employment by the Company, the Employee shall perform such duties as shall from
time to time be delegated or assigned to him by the Board of Directors of the
Company.

         2. Full Time Employment. During his employment by the Company, the
Employee will devote his full time, energy and skill to the services of the
Company and the promotion of its interests. Notwithstanding the preceding,
Employee may engage in business which does not compete with the business of the
Company provided that such business involvement does not materially interfere
with the Employee's contractual obligations hereunder.

         3. Compensation. As compensation for his services to the Company under
this Agreement, the Company will pay to the Employee during the period of his
employment hereunder a base salary in accordance with the following:

               (a) The Company will pay Employee a base salary of $100,000 in
          year one of the initial two-year employment term (the "Employment
          Term") with $80,000 payable in cash in equal monthly installments on
          the last day of each month and $20,000 payable in shares of Company
          common stock on the last day of the last mouth of year one of the
          Employment Term (the "First Stock Payment Date"). The Employee shall
          receive such number of shares of Company common stock as equals 20,000
          divided by the Year One Per Share Price (as herein defined). The Year
          One Per Share Price shall equal the average of the average high and
          low bid quotations (as reported by the National Association of
          Securities Dealers ("NASD") Electronic Bulletin Board or, if such


<PAGE>   2
          quotations are not reported by the NASD Electronic Bulletin Board, as
          quoted by the Company's principal market maker) of the Company's
          common stock over the thirty-one days of the month of March preceding
          the First Stock Payment Date. Notwithstanding the preceding, until
          such time as the Company receives aggregate gross proceeds of a
          minimum of $750,000 in connection with one or more equity financings
          (the "Financing Goal"), Employee's base salary shall be $3,000 per
          month. At the end of the month within which the Company has reached
          the Financing Goal, Employee will receive $3,000 plus an amount equal
          to $3,666.66 times the number of months Employee received the reduced
          base salary of $3,000. For the remainder of the first year of the
          Employment Term, Employee will receive a base salary of $6,666.66 per
          month.

               (b) The Company will pay Employee a base salary of $150,000 in
          year two of the Employment Term with $95,000 payable in cash in equal
          monthly installments on the last day of each month and $55,000 payable
          in shares of Company common stock on the last day of the last month of
          year two of the Employment Term (the "Second Stock Payment Date"). The
          Employee shall receive such number of shares of Company common stock
          as equals 55,000 divided by the Year Two Per Share Price (as herein
          defined). The Year Two Per Share Price shall equal the average of the
          average high and low bid quotations (as reported by the National
          Association of Securities Dealers ("NASD") Electronic Bulletin Board
          or, if such quotations are not reported by the NASD Electronic
          Bulletin Board, as quoted by the Company's principal market maker) of
          the Company's common stock over the thirty-one days of the month of
          March preceding the Second Stock Payment Date. Notwithstanding the
          preceding, the $55,000 payable in shares of Company common stock will
          be reduced to $30,000 if the Company experienced a loss for the two
          consecutive quarters preceding the Second Stock Payment Date.

               (c) The Company agrees to register the shares of Company common
          stock issued to Employee (prior to the expiration of six months after
          the date of issuance) pursuant to Sections 3(a) and 3(b) above (the
          "Restricted Shares") on Form S-8 (as shares issued pursuant to an
          employee benefit plan within the meaning of Rule 405 of Regulation C
          under the Act) under the Securities Act of 1933, as amended (the
          "Act"). Notwithstanding the preceding sentence, the Company shall not
          be required to register the Restricted Shares until the Financing Goal
          is reached. Additionally, to the extent the Restricted Shares are not
          previously registered under the Act or eligible for sale under
          paragraph (k) of Rule 144 of the Act, Employee shall have unlimited
          piggyback registration rights with respect to the Restricted Shares.
          The number of shares of Company common stock proposed to be included
          pursuant to the exercise of any piggyback registration right in an
          underwritten offering will be subject to limitation if the managing
          underwriter reasonably believes that such exclusion is required. Any
          such limitation will be pro rata to all other holders exercising
          piggyback registration rights in proportion to the respective number
          of shares they have requested to be registered.

               As additional compensation for the Employee, the Company shall
          provide the following:

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<PAGE>   3
                    i) Major Medical Health Insurance for the Employee
         commencing August 1, 1995 (which includes $10,000 term life insurance
         on the life of the Employee and the Employee shall have the sole and
         absolute right to name the beneficiary or beneficiaries of such
         insurance policy); and

                    ii) A $500 per month car allowance which amount shall
         include operating expenses of the car.

                  In addition, the Company shall have the right to pay to
         Employee a bonus in such amount as may be determined by the Company's
         Board of Directors. In the event the Company has or establishes any
         bonus, incentive or similar program for all employees and/or for
         executive employees, Employee shall be entitled to participate. As a
         full time Employee, the Employee shall be entitled to participate in
         any present or future profit sharing, stock option, pension or
         retirement plan or other plan of the Company for the benefit of all
         employees and/or executive employees.

         4. Reimbursement for Expenses. The Company shall reimburse the Employee
for all reasonable and necessary traveling expenses and other disbursements
incurred by him for or on behalf of the Company in the performance of his duties
during his employment under this Agreement. For such purpose the Employee shall
submit to the Company periodic reports of such expenses and disbursements, all
of which expenses and disbursements shall be subject to approval of the Board of
Directors of the Company.

         5. Vacations. The Employee shall be entitled to a reasonable vacation
during each year of his employment under this Agreement, at such time as shall
be mutually agreed upon.

         6. Termination.

               (a) Except as provided in Section 6(b) below, the Employee may
          only be terminated for cause, as hereinafter defined, and only after
          written notice to Employee specifying the nature of the cause which
          would justify the Company to terminate this Agreement and, where
          curable, the Employee shall have thirty (30) days after receipt of
          notice of such alleged termination for cause to cure such reason for
          termination. For the purposes hereof, cause shall be defined as:

                    i) willful misconduct of Employee in the performance of
          Employee's duties, functions and responsibilities;

                    ii) failure of Employee to comply in any material respect
          with any duty, function or responsibility herein undertaken by
          Employee;

                    iii) conviction of Employee of any felony offense during the
          term of this Agreement; or

                    iv) voluntary resignation or retirement of Employee from
          employment.

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<PAGE>   4

               (b) The Company, in its sole discretion, may terminate Employee
         with or without cause after May 1, 1996 through the end of the
         Employment Term (the "Termination Date") upon and subject to the
         following terms:

                    i) The Company shall pay Employee $75,000 in cash on the
         Termination Date; and

                    ii) The Company shall issue Employee on the Termination Date
         a warrant to acquire 120,000 shares of Company common stock at an
         exercise price of $0.375 per share. Such warrant shall be
         exercisable for a period of five years commencing on the date of
         issue. The Employee shall have unlimited piggyback registration
         rights with respect to the 120,000 shares issuable upon exercise
         of the warrant to the extent such shares are not eligible for
         sale under paragraph (k) of Rule 144 under the Act. The number of
         shares of Company common stock proposed to be included pursuant
         to the exercise of any piggyback registration right in an
         underwritten offering will be subject to limitation if the
         managing underwriter reasonably believes that such exclusion is
         required. Any such limitation will be pro rata to all other
         holders exercising piggyback registration rights in proportion to
         the respective number of shares they have requested to be
         registered.

         7. Confidential Information.

               (a) The Employee acknowledges that in his employment hereunder he
         occupies a position of trust and confidence and agrees that he will
         treat as confidential and will not, without prior written
         authorization from the Company, directly or indirectly, disclose or
         make known to any person, firm, association or corporation or use for
         his own benefit or gain, the methods, process or manner of
         accomplishing the business undertaken by the Company, or any
         information, plans, formulas, products, trade secrets, marketing or
         merchandising strategies, or confidential material or information and
         instructions, technical or otherwise, issued or published for the sole
         use of the Company, or information which is disclosed to the Employee
         or in any way acquired by him during the term of this Agreement, or
         any information concerning the present or future business, processes,
         or methods of operation of the Company, or concerning improvements,
         inventions or know-how relating to the same or any part thereof, it
         being the intent of the Company, with which intent the Employee hereby
         agrees, to restrict him from disseminating or using for his own
         benefit any information belonging directly or indirectly to the
         Company which is unpublished and not readily available to the general
         public.

               (b) The Employee agrees to deliver or return to the Company, upon
         termination or expiration of this Agreement or as soon thereafter as
         possible, all data, drawings, prints and written information furnished
         by the Company or prepared by the Employee during the term of this
         Agreement in connection with his services hereunder. The Employee will
         retain no copies thereof after termination of this Agreement.


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<PAGE>   5
         8. Working Facilities. The Company shall furnish Employee with an
office, supplies, equipment, and such other facilities and services as are
suitable for performance of Employee's duties in San Antonio, Texas.

         9. Successors and Assigns. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, provided,
however, that the provisions hereof shall inure to the benefit of, and be
binding upon, each successor of the Company or such other affiliate, whether by
merger, consolidation, transfer of all or substantially all assets or otherwise.

         10. Notices. Any notice required or permitted to be given to the
Employee pursuant to this Agreement shall be sufficiently given if sent to the
Employee by registered or certified mail addressed to the Employee addressed to
him at 9310 Broadway, Building 1, San Antonio, Texas 78217, or at such other
address as he shall designate by notice to the Company, and any notice required
or permitted to be given to the Company pursuant to this Agreement shall be
sufficiently given if sent to the Company by registered or certified mail
addressed to it at 9310 Broadway, Building 1, San Antonio, Texas 78217, or at
such other address as it shall designate by notice to the Employee.

         11. Directorship. Contemporaneously herewith, Employee will be
appointed to serve on the Company's Board of Directors until the next annual
meeting of stockholders. So long as Employee serves as President and/or Chief
Executive Officer of the Company, the Company will take all reasonable steps to
cause Employee and, at Employee's option (but only after the Financing Goal is
reached), an individual selected by Employee to be included in the Company's
authorized slate of nominees for the Board of Directors at all annual or special
meetings of stockholders to vote for the election of directors.

         12. Indemnity. The Company and the Employee have entered into a
separate Indemnification Agreement contemporaneously herewith providing for the
indemnification of the Employee by the Company in connection with the Employee's
service as an officer and director of the Company.

         13. Stock Options.

               (a) On the Employment Date, the Company will enter into an
         incentive stock option agreement with Employee providing for the grant
         of incentive options effective on the Employment Date, under the
         Company's stock option plan (which plan, to be adopted or before the
         Employment Date by the Company's Board of Directors, and subject to
         subsequent shareholder approval, will, upon receipt of such shareholder
         approval, satisfy all conditions of Rule 16b-3 under the Securities
         Exchange Act of 1934 (the "Exchange Act"), to acquire 1,200,000 shares
         of Company common stock at an exercise price equal to the fair market
         value of the Company's common stock on the Employment Date (anticipated
         to be $0.375 per share, the fair market value on the date hereof). Such
         options shall become exercisable, in whole or in part, in five equal
         cumulative annual installments commencing on April 30, 1996. Once
         exercisable, such options shall remain exercisable until expiration. In
         the event of termination of employment, all options

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<PAGE>   6
         exercisable on the date of termination shall remain exercisable
         for a period of three months following termination. The options shall
         expire ten years from the date of grant. The Company agrees to
         promptly register on Form S-8 under the Act, all shares issuable
         pursuant to the options granted to Employee under this Section 13(a),
         but not prior to achieving the Financing Goal. On each May 1 (provided
         Employee is then employed by the Company), the exercise date for the
         240,000 shares included in the next annual installment, to become
         exercisable on the next May 1, shall be accelerated to the extent
         necessary for Employee to maintain, on a fully diluted basis, a 10%
         interest in the Company's common stock. No acceleration will be
         effected until Employee has obtained a 10% interest in the Company's
         common stock, on a fully diluted basis, the determination of which, as
         well as any determination regarding the maintenance of Employee's 10%
         interest in the Company's common stock, shall be made as if all of
         Employee's outstanding options, to the extent exercisable, had been
         exercised. For purposes of the preceding sentence, if Employee has not
         obtained a 10% interest in the Company's common stock prior to the
         expiration of three years from the Employment Date then Employee will
         be deemed to have obtained such 10% interest in the Company's common
         stock at the expiration of three years from the Employment Date.

               (b) If after all 1,200,000 shares covered by the incentive stock
         option agreement referred to in Section 13(a) have become exercisable,
         Employee does not beneficially own (including shares issuable pursuant
         to then exercisable options) 10% or more of the Company's then
         outstanding common stock, on a fully diluted basis, then, so long as
         Employee remains employed by the Company, an additional incentive
         stock option agreement shall be entered into between the Company and
         Employee. Under such agreement, Employee, on each May 1 while Employee
         remains an employee of the Company, shall receive an automatic grant
         of additional incentive options to acquire up to 240,000 shares of the
         Company's common stock to the extent necessary for Employee to obtain
         or maintain, on a fully diluted basis, beneficial ownership (including
         shares issuable pursuant to then exercisable options) of 10% of the
         Company's common stock. The exercise price of all options granted
         under this Section 13(b) shall be equal to the fair market value on
         the date of automatic grant. The options shall be exercisable, in
         whole or in part, commencing on the date of automatic grant and shall
         expire ten years after the date of automatic grant. In the event of
         termination of employment, all options exercisable on the date of
         termination shall remain exercisable for a period of three months
         following termination. The Company agrees to promptly register on Form
         S-8 under the Act all shares issuable pursuant to the options granted
         to Employee under this Section 13(b). In the event incentive stock
         options cannot be granted under applicable law, Employee shall receive
         nonqualified options under the stock option plan referred to in
         Section 13(a). To the extent that it shall become apparent that there
         will be insufficient shares available under the stock option plan to
         cover the Employee's options anticipated to be granted under this
         Section 13(b), the Company shall adopt an amendment to the stock
         option plan providing for an increase in shares issuable thereunder
         and submit such amendment to its shareholders for approval at the next
         annual or special shareholders' meeting.

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<PAGE>   7
                  In the event the Company shall receive gross cash proceeds of
         $10 million or more in connection with an underwritten public offering
         of common stock (the "Public Offering"), then no automatic grant shall
         be effected on the May 1 following the closing of the Public Offering
         or at any time thereafter.

               (c) The purchase price of the shares of common stock issuable
         upon exercise of the options referred to in Sections 13(a) and 13(b)
         is payable in cash, an equivalent fair market value of common stock,
         by cashless exercise procedures, or a combination of the foregoing.
         The purchase price and the number of shares issuable upon exercise of
         such options are subject to adjustments in the event that certain
         changes in capitalization should occur.

               (d) Upon the occurrence of a change of control, all outstanding
         options held by Employee, to the extent not exercisable, shall
         immediately become exercisable. A change in control shall mean the
         acquisition through any number of transactions by any individual or
         entity (any of which is herein referred to as a "Person"), or any two
         or more Persons acting as a partnership, syndicate, or other group for
         the purpose of acquiring or holding securities of the Company, and any
         such Person(s) controlling, controlled by, or under common control
         with any such person(s), of the beneficial ownership, as determined in
         accordance with Rule 13d-3 under the Exchange Act, directly or
         indirectly, in the aggregate at any point in time of 50% or of
         either (i) the then outstanding Company common stock, or (ii) the
         combined voting power of the then outstanding Company voting
         securities entitled to vote generally in the election of directors.

         14. Invalid Provisions. The invalidity or unenforceability of a
particular provision of this Agreement shall not affect the enforceability of
any other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.

         15. Amendments to the Agreement. This Agreement may only be amended in
writing by an agreement executed by both parties hereto.

         16. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto and supersedes any and all prior agreements, oral or written,
and negotiations between said parties regarding the subject matter herein
contained.

         17. Excess Parachute Payments. In the event that payment of the amounts
this Agreement requires the Company to pay Employee would cause Employee to be
the recipient of an excess parachute payment (within the meaning of Section
280G(b) of the Internal Revenue Code of 1986, as amended), the amount of the
payments to be made to Employee pursuant to this Agreement shall be reduced to
an amount equal to one dollar less than the amount that would cause the payments
hereunder to be excess parachute payments. The manner in which such reduction
occurs, including the items of payment and amounts thereof, shall be in the sole
discretion of Employee.

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<PAGE>   8



         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.


                                       South Texas Drilling & Exploration, Inc.


                                       By:  /s/ Robert R. Marmor
                                            ------------------------------------
                                                ROBERT R. MARMOR,
                                                Chairman of the Board


Attest:


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



                                       Employee:


                                       /s/ William Stacy Locke
                                       -----------------------------------------
                                       William Stacy Locke




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<PAGE>   9
                                                                    EXHIBIT 10.2

                          FIRST AMENDMENT TO EXECUTIVE
                              EMPLOYMENT AGREEMENT


         This First Amendment to Executive Employment Agreement (the
"Amendment"), dated effective as of the 16th day of November, 1998, is between
South Texas Drilling & Exploration, Inc., a Texas corporation (the "Company"),
and William Stacy Locke (the "Employee").

                                    RECITALS:

         The Employee is currently employed by the Company pursuant to an
Executive Employment Agreement (the "Employment Agreement") dated effective as
of the 25 day of April 1995.

         The Company and the Employee desire to modify and amend certain terms
and provisions of the Employment Agreement and to approve, ratify and confirm
the Employment Agreement, as modified and amended by this Amendment.

         NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto have agreed, and do hereby agree as
follows:

A. Section 1 of the Employment Agreement is hereby modified and amended as
necessary to provide that:

         1. The Company employs, as of the date of this Amendment, and will
employ Employee in the business of the Company as its President and Chief
Operating Officer, and the Employee works, as of the date of this Amendment, and
will continue to work for the Company as its President and Chief Operating
Officer, for the period beginning as of November 16, 1998 and ending April 30,
2001, and thereafter from year to year (renewing automatically upon expiration
of the employment term ending April 30, 2001 and upon expiration of each one
year employment term thereafter), unless and until such employment shall have
been earlier terminated as provided in the Employment Agreement, as amended by
this Amendment; and

         2. During his employment by the Company, the Employee shall perform
such duties as shall from time to time be delegated or assigned to him by the
Chief Executive Officer or Board of Directors of the Company.

B. Section 3 of the Employment Agreement, as it pertains to annual base salary,
is hereby modified and amended as necessary to provide that:

         1. The Company, as of the date of this Amendment, pays and will
continue to pay Employee an annual base salary of $95,000 for the year
commencing May 1, 1998 and ending April 30, 1999;

         2. The Company will pay Employee a minimum annual base salary of
$95,000 in each of years one and two of the two year period commencing May 1,
1999 and ending April 30, 2001;


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<PAGE>   10
         3. Employee's annual base salary shall be payable in cash in accordance
with the Company's customary payroll practices; and

         4. After April 30, 2001, Employee's annual base salary shall be as
determined by the Board of Directors of the Company but shall in no event be
less than $95,000.

C. Section 6 of the Employment Agreement is hereby modified and amended to amend
Sections 6(a)(i), 6(a)(ii), 6(a)(iii) and 6(a)(iv) to read as follows:

          (i)   repeated material willful misconduct of Employee in the
                performance of Employee's duties and responsibilities to the
                Company;

          (ii)  embezzlement or theft of Company property or funds;

          (iii) conviction of Employee of any felony offense during the term of
                this Agreement; or

          (iv)  conviction of any act or omission constituting fraud under the
                laws of the State of Texas.

D. Section 6 of the Employment Agreement is hereby modified and amended to
delete Section 6(b) in its entirety and to add a new Section 6(b) to read as
follows:

                  (b) Upon termination of this Agreement for any reason, the
         Company shall pay to Employee any and all unpaid annual base salary and
         accrued benefits due Employee through the date of termination.

                  Upon termination of the Employee without cause, as hereinafter
         defined, and only after providing thirty days prior written notice to
         Employee that the Company is terminating this Agreement without cause,
         or upon termination of this Agreement by Employee with reason, as
         hereinafter defined, the Company shall pay to Employee, as severance
         pay, the greater of (i) $75,000 or (ii) the annual base salary for the
         entire remaining term of the two year period ending April 30, 2001, in
         cash payable in one lump sum within five days of termination of
         Employee's employment relationship with the Company. Such severance pay
         shall be in addition to the payment of any and all unpaid annual base
         salary and accrued benefits due Employee through the date of
         termination.

                  Termination without cause shall mean any termination of this
         Agreement by the Company which is not with cause, as defined in Section
         6(a) above.

                  Termination with reason shall mean any termination of this
         Agreement by the Employee by way of Employee's resignation due to (i)
         the Company's failure in any material respect to perform any term or
         provision of this Agreement, (ii) any material changes in the duties
         and responsibilities of Employee without the written consent of
         Employee,

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<PAGE>   11
         (iii) the hiring or promotion by the Company after November 16, 1998
         of another executive employee (excluding Michael E. Little) to a
         position of equal or greater responsibility for the management of the
         Company without the written consent of Employee, (iv) the Company's
         directing Employee to work at a location other than San Antonio,
         Texas; or (v) after a change of control (as defined in Section 13(d)
         hereof), any material change which, in the sole but reasonable
         discretion of Employee, impacts detrimentally upon Employee's position
         within the Company.

                  Employee shall be entitled to terminate this Agreement, either
         with reason (as defined above) or without reason, by providing the
         Company with a written notice of resignation at least thirty days prior
         to his intended resignation date.

                  This Agreement shall terminate immediately upon the death of
         Employee. In such event, in addition to the payment of any and all
         unpaid annual base salary and accrued benefits due Employee through the
         date of termination, the Company shall also pay the Employee's estate
         the annual base salary that Employee would have earned for a period of
         ninety days following the date of death and a pro rata amount of any
         discretionary bonus and any other amounts attributable to any bonus,
         incentive or similar program (such discretionary bonus and programs
         referred to in Section 3 hereof) paid to Employee for the prior
         contract year, in the time and manner Employee would have been paid
         such compensation. In addition, Employee's designated beneficiaries
         shall be entitled to receive any life insurance benefits provided to
         Employee in accordance with the applicable plan documents and/or
         insurance policies governing such benefits.

E. Section 11 of the Employment Agreement is hereby modified and amended to
provide that should Employee resign as a director of the Company at any time
during his employment under the Employment Agreement, as amended by this
Amendment, he shall, upon written notice to the Company requesting reappointment
to the Board of Directors of the Company, be reappointed to serve on the
Company's Board of Directors until the next annual meeting of stockholders, and
following such reappointment the Company will take all reasonable steps to cause
Employee to be included in the Company's authorized slate of nominees for the
Board of Directors at all annual or special meetings of stockholders to vote for
the election of directors.

F. Section 13 of the Employment Agreement is hereby modified and amended to
reflect a reduction in the number of shares of Company common stock subject to
the incentive stock option granted to Employee as of May 1, 1995 (the "Incentive
Option"), which Incentive Option is referenced in Section 13(a) of the
Employment Agreement, from 1,200,000 shares to 960,000 shares. The reduction in
option shares shall effect a cancellation of 100,000 shares becoming exercisable
on April 30, 1999 and 140,000 shares becoming exercisable on April 30, 2000.

         Section 13(a) of the Employment Agreement is hereby modified and
amended to provide that the Company shall register on Form S-8 under the
Securities Act of 1933, as amended, all



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<PAGE>   12
shares issuable pursuant to the Incentive Option, referenced in Section 13(a) of
the Employment Agreement, prior to June 30, 1999.

         Section 13(a) of the Employment Agreement is hereby modified and
amended to delete the last three sentences of Section 13(a), which sentences
relate to the Employee's maintenance of a specified interest in the Company's
common stock.

         Section 13(b) of the Employment Agreement is hereby modified and
amended to delete Section 13(b) in its entirety.

G. Except as modified and amended by this Amendment, the Employment Agreement
shall remain in full force and effect as written. References to the "Agreement"
in the Employment Agreement shall mean the Employment Agreement as amended by
this Amendment.

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.

                                        South Texas Drilling & Exploration, Inc.



                                        By:      /s/ Michael E. Little
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------




                                                  /s/ Wm. Stacy Locke
                                        ----------------------------------------
                                        William Stacy Locke





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