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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12

DEVX ENERGY, INC.
(Name of Registrant as Specified in Its Charter)

DEVX ENERGY, INC.
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

1) Title of each class of securities to which transaction
applies:

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2) Aggregate number of securities to which transaction applies:

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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:

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5) Total Fee Paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
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2) Form Schedule or Registration Statement No.:
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4) Date Filed:
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DEVX ENERGY, INC.
13760 Noel Road, Suite 1030
Dallas, Texas 75240-7336
Telephone: (972) 233-9906
Telecopier: (972) 233-9575

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders
of DEVX ENERGY, INC. on Thursday, October 25, 2001, at 2:00 p.m., Dallas time.
The meeting will be held in the Sun Room of the Northwood Club at 6524 Alpha
Road, Dallas, Texas 75240. Your Board of Directors and management look forward
to greeting those stockholders able to attend in person.

At the meeting, you will be asked to consider and elect four directors
to serve until the next Annual Meeting of Stockholders. Your Board of Directors
has unanimously nominated these persons for election as directors. You are also
being asked to consider and approve (i) the DEVX ENERGY, INC. Amended and
Restated Incentive Equity Plan, (ii) the DEVX ENERGY, INC. Amended and Restated
Directors' Nonqualified Stock Option Plan and to ratify the appointment of Ernst
& Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 2001. Information about the business to be conducted at the meeting
is set forth in the accompanying proxy statement, which you are urged to read
carefully. During the meeting, I will review with you the affairs and progress
of the Company during the fiscal year ended December 31, 2000. Officers of the
Company will be present to respond to questions from stockholders.

The vote of every stockholder is important. The Board of Directors
appreciates and encourages stockholder participation in the Company's affairs.
Whether or not you plan to attend the meeting, please sign, date and return the
enclosed proxy promptly in the envelope provided. Your shares will then be
presented at the meeting, and the Company will be able to avoid the expense of
further solicitation. If you attend the meeting, you may, at your discretion,
withdraw the proxy and vote in person.

On behalf of the Board of Directors, thank you for your cooperation and
continued support.

Sincerely,

/s/ JOSEPH T. WILLIAMS
JOSEPH T. WILLIAMS
Chairman of the Board

September 21, 2001

DEVX ENERGY, INC.
13760 Noel Road, Suite 1030
Dallas, Texas 75240-7336
Telephone: (972) 233-9906
Telecopier: (972) 233-9575

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To
Be Held October 25, 2001

The Annual Meeting of Stockholders of DEVX ENERGY, INC., a Delaware
corporation (the "Company"), will be held in the Sun Room of the Northwood Club
at 6524 Alpha Road, Dallas, Texas 75240 on October 25, 2001 at 2:00 p.m. for the
following purposes:

1. To elect four directors to hold office until the next Annual
Meeting of Stockholders or until their successors have been
duly qualified and elected;

2. To consider and act upon a proposal to approve the DEVX
ENERGY, INC. Amended and Restated Incentive Equity Plan;

3. To consider and act upon a proposal to approve the DEVX
ENERGY, INC. Amended and Restated Directors' Nonqualified
Stock Option Plan

4. To consider and act upon a proposal to ratify the appointment
of Ernst & Young LLP as the independent auditors of the
Company to audit the accounts of the Company for the fiscal
year ending December 31, 2001; and

5. To transact such other business as may properly come before
the meeting or any adjournments thereof.

Only holders of the Company's common stock, par value $0.234 per share
(the "Common Stock"), of record on September 10, 2001 are entitled to notice of,
and to vote at, the meeting or any adjournment or adjournments thereof. At the
record date for determination of stockholders entitled to vote at the meeting or
any adjournments thereof, 12,748,612 shares of voting capital stock, comprised
of 12,748,612 shares of Common Stock were issued and outstanding.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED
TO FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.

By Order of the Board of Directors,
Dallas, Texas
September 21, 2001
/s/ JOSEPH T. WILLIAMS
JOSEPH T. WILLIAMS
Chairman of the Board

DEVX ENERGY, INC.
13760 Noel Road, Suite 1030
Dallas, Texas 75240-7336
Telephone: (972) 233-9906
Telecopier: (972) 233-9575

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

To Be Held October 25, 2001

This Proxy Statement is furnished to holders of the Company's common
stock, par value $0.234 per share (the "Common Stock"), in connection with the
solicitation of proxies by the Board of Directors of DEVX ENERGY, INC., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held in the Sun Room of the Northwood Club at
6524 Alpha Road, Dallas, Texas 75240 on Thursday, October 25, 2001, at 2:00
p.m., Dallas time, and at any and all postponements or adjournments thereof (the
"Annual Meeting") for the following purposes:

1. To elect four directors to hold office until the next Annual
Meeting of Stockholders or until their successors have been
duly qualified and elected;

2. To consider and act upon a proposal to approve the DEVX
ENERGY, INC. Amended and Restated Incentive Equity Plan;

3. To consider and act upon a proposal to approve the DEVX
ENERGY, INC. Amended and Restated Directors' Nonqualified
Stock Option Plan;

5. To transact such other business as may properly come before
the meeting or any adjournments thereof.

The approximate date on which this Proxy Statement and accompanying
proxy card are first being sent or given to stockholders is September 25, 2001.

Shares of Common Stock represented by each proxy, if properly executed
and returned to the Company prior to the Annual Meeting, will be voted as
directed, but if not otherwise specified, will be voted for the election of the
four nominees for director, for the approval of the Amended and Restated DevX
Energy, Inc. Incentive Equity Plan, for the approval of the Amended and Restated
DevX Energy, Inc. Directors' Nonqualified Stock Option Plan, and to ratify the
appointment of Ernst & Young LLP as independent auditors, all as recommended by
the Board of Directors.

If the Annual Meeting is postponed or adjourned for any reason, at any
subsequent reconvening of the Annual Meeting all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the Annual Meeting (except for proxies which have theretofore effectively been
revoked

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or withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.

The Board of Directors knows of no other business to be presented at
the Annual Meeting. If any other business is properly presented, the persons
named in the enclosed proxy have authority to vote on such matters in accordance
with such persons' discretion.

A proxy given pursuant to this solicitation may be revoked at any time
before it is voted. Proxies may be revoked (i) by filing with the Company (at
the address indicated above) at or before the Annual Meeting a written notice of
revocation bearing a later date than the proxy, (ii) by duly executing a
subsequent proxy bearing a later date than the proxy relating to the same shares
of Common Stock or (iii) by attending the Annual Meeting and voting in person
(although attendance at the meeting will not in itself constitute such
revocation).

The solicitation of proxies in the enclosed form is made on behalf of
the Company's Board of Directors. The entire cost of soliciting these proxies,
including the costs of preparing, printing and mailing this Proxy Statement and
accompanying materials to stockholders, will be borne by the Company. In
addition to use of the mails, proxies may be solicited personally or by
telephone or otherwise by officers, directors and employees of the Company, who
will receive no additional compensation for such activities. Arrangements will
also be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of shares
held of record by such brokerage houses, custodians, nominees and fiduciaries.
Such parties will be reimbursed for their reasonable expenses incurred in
forwarding the proxy materials.

Representatives of the Company's principal accountants, Ernst & Young
LLP, are expected to be present at the Annual Meeting and are expected to be
available to respond to appropriate questions from stockholders.

VOTE REQUIRED FOR APPROVAL;
SHARES ENTITLED TO VOTE; RECORD DATE

The affirmative vote of the holders of a plurality of the outstanding
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting at which a quorum is present is required to elect each of the
four directors nominated for reelection to the Company's Board of Directors. All
other matters properly brought before the Annual Meeting will be decided by a
majority of the votes cast on the matter. As of September 1, 2001, the Company's
directors and executive officers, and their affiliates, had a beneficial
interest in an aggregate of 18,100 shares of Common Stock, representing
approximately 0.0014% of the Common Stock outstanding at the close of business
on September 10, 2001 (the "Record Date") and entitled to vote on all proposals
to be presented at the Annual Meeting.

On the Record Date, there were outstanding 12,748,612 shares of Common
Stock . There were no shares of any other class of stock outstanding as of the
Record Date. Only holders of record of Common Stock (the "Stockholders") at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Annual Meeting. Each share of Common Stock is entitled to one vote for
each director to be elected and upon all other matters to be brought to a vote
by the Stockholders at the forthcoming Annual Meeting.

The presence at the Annual Meeting, whether in person or by proxy, of
the holders of at least a majority of the outstanding shares of Common Stock
entitled to vote thereat constitutes a quorum for the transaction of business.
For purposes of the quorum and the discussion below regarding the votes
necessary to take stockholder action, Stockholders of record who are present at
the meeting in person or by proxy and

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who abstain, including brokers holding customers' shares of record who cause
abstentions to be recorded at the meeting, are considered Stockholders who are
present and entitled to vote and they count toward the quorum.

Brokers holding shares of record for customers generally are not
entitled to vote on certain matters unless they receive voting instructions from
their customers. As used herein, "uninstructed shares" means shares held by a
broker who has not received instructions from its customers on such matters and
the broker has so notified the Company on a proxy form in accordance with
industry practice or has otherwise advised the Company that it lacks voting
authority. As used herein, "broker non-votes" means the votes that could have
been cast on the matter in question by brokers with respect to uninstructed
shares if the brokers had received their customers' instructions.

Election of Directors. Directors are elected by a plurality vote and
the four nominees who receive the most votes will be elected. In the election of
Directors, votes may be cast in favor of or withheld with respect to each
nominee. Abstentions and broker non-votes will not be taken into account in
determining the outcome of the election.

Approval of the DevX Energy, Inc. Amended and Restated Incentive Equity
Plan. To be adopted, the approval of the Plan must receive the affirmative vote
of more than 50% of the shares present in person or by proxy at the Annual
Meeting and entitled to vote. Uninstructed shares are not entitled to vote on
this matter, and therefore broker non-votes do not affect the outcome.
Abstentions have the effect of negative votes.

Approval of the DevX Energy, Inc. Amended and Restated Directors'
Nonqualified Stock Option Plan. To be adopted, the approval of the Plan must
receive the affirmative vote of more than 50% of the shares present in person or
by proxy at the Annual Meeting and entitled to vote. Uninstructed shares are not
entitled to vote on this matter, and therefore broker non-votes do not affect
the outcome. Abstentions have the effect of negative votes.

Ratification of the Appointment of Auditors. To be ratified, this
matter must receive the affirmative vote of more than 50% of the shares present
or by proxy at the Annual Meeting and entitled to vote. Uninstructed shares are
entitled to vote on this matter. Therefore, abstentions and broker non-votes
have the effect of negative votes.

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PROPOSAL ONE

ELECTION OF DIRECTORS

GENERAL

Pursuant to the Amended and Restated Bylaws of the Company (the
"Bylaws"), four directors are to be elected at the Annual Meeting (which number
shall constitute the entire Board of Directors of the Company). Unless otherwise
instructed, the proxy holders intend to vote the proxies received by them FOR
the four nominees below.

JOSEPH T. WILLIAMS
JERRY B. DAVIS
ROBERT L. KEISER
PATRICK J. KEELEY

All nominees listed above are currently members of the Board of
Directors. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any nominee becomes unavailable for any reason or if a
vacancy should occur before the election, the shares represented by the proxies
will be voted for such person, if any, as may be designated by the Board of
Directors. However, management of the Company has no reason to believe that any
nominee will be unavailable or that any vacancy on the Board of Directors will
occur. The four nominees will serve until the next Annual Meeting of
Stockholders and until their successors are elected.

Set forth below is a description of the backgrounds of each of the
directors and nominees of the Company.

Joseph T. Williams joined the Company on October 6, 2000. He is
Chairman of the Board and effective September 1, 2001 also assumed the positions
of President and Chief Executive Officer. From July 1998 to August 1999, Mr.
Williams was President and Chief Executive Officer of MCN Investment
Corporation, a diversified energy company with $2 billion in oil and natural
gas, natural gas pipeline and electrical power assets. From August 1997 to July
1998, Mr. Williams served as President and Chief Executive Officer of MCNIC Oil
and Gas Company, a broad-based exploration and production company. From June
1995 to February 1996, Mr. Williams served as Vice Chairman and Chief Executive
Officer of Enserch Exploration, Inc., an oil and gas exploration and production
company. Mr. Williams holds a B.S. degree in Petroleum Engineering from the
University of Texas at Austin.

Jerry B. Davis joined the board of directors of DevX Energy, Inc. on
October 26, 2000. He is chairman of the compensation committee and also serves
on the audit committee of the board. Mr. Davis has over 25 years of experience
working with Otis Engineering Corporation, an oil field service company and a
division of Halliburton Company. Mr. Davis served as President and Chief
Executive Officer of Otis from 1990 to 1993. From July 1993 to the present Mr.
Davis has pursued investing and ranching activities. Mr. Davis holds a Master of
Business Administration from Southern Methodist University, a B.S. degree in
Petroleum Engineering from Texas A&M University and has a degree in ranch
management from Texas Christian University.

Robert L. Keiser joined the board of directors of DevX Energy, Inc. on
October 26, 2000. Mr. Keiser is chairman of the audit committee and serves on
the compensation committee of the board. Mr. Keiser retired as Chairman of
Kerr-McGee Corp., an integrated energy company, in June 1999. Mr. Keiser served
as Chairman, Chief Executive Officer and President of Oryx Energy Company, an
independent oil and natural gas exploration company, from 1994 until March 1999
when Oryx merged with Kerr-McGee. Prior to his

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appointment as its Chairman in 1994, Mr. Keiser served Oryx in various
capacities during the period from 1988 to 1994. Mr. Keiser also sits on the
board of HVIDE Marine Inc., a company engaged in the business of providing
marine support and transportation services to the energy and chemical
industries. Mr. Keiser holds a B.S. degree in Electrical Engineering from The
University of Missouri-Rolla.

Patrick J. Keeley joined the board of directors of DevX Energy, Inc. on
November 10, 2000 and serves on its audit and compensation committees. Mr.
Keeley is currently the managing director of the Energy and Industrial Group of
the investment banking firm of Friedman Billings Ramsey & Co., Inc. which he
joined in January 1998. From 1977 to 1998 Mr. Keeley was a partner with the law
firm of Fulbright & Jaworski LLP where he represented oil and gas producers,
pipelines, distribution companies, refineries, and independent power producers.
Prior to joining Fulbright & Jaworski, Mr. Keeley served as assistant to the
General Counsel of the Federal Power Commission in Washington, D.C. Mr. Keeley
has served on the board of several public and private energy and banking
companies and mutual funds. Mr. Keeley received his J.D. degree from Fordham
University in 1975 and received a degree in business administration from
Georgetown University in 1970.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR NAMED ABOVE.

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PROPOSAL TWO

TO APPROVE THE DEVX ENERGY, INC.
AMENDED AND RESTATED INCENTIVE EQUITY PLAN

GENERAL

The DevX Energy, Inc. Amended and Restated Incentive Equity Plan (the
"Amended Plan") attached as Appendix I to this proxy statement is being proposed
to replace the Queen Sand Resources, Inc. 1997 Incentive Equity Plan (the "1997
Plan") which was approved by the stockholders on November 20, 1997. The board is
recommending the adoption of the Amended Plan because the number of shares
reserved for issuance under the 1997 Plan and the maximum number of shares
issuable in any one grant is no longer adequate to achieve the purposes of the
1997 Plan. In addition, the Board has determined that the term of the 1997 Plan
should be extended to reflect the passage of time since the 1997 Plan was
adopted. Finally, the Amended Plan replaces the old company name of Queen Sand
Resources, Inc. with the new name approved by the stockholders at the last
annual meeting held on September 18, 2000.

The Amended Plan is being submitted for Stockholder approval at the
2001 Annual Meeting for three reasons. First, under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), Stockholder approval is
necessary in order for performance payments under the Amended Plan to certain
executive officers to be deductible by the Company for federal income tax
purposes. Section 162(m) imposes a $1,000,000 limit on the deductibility of
compensation paid to certain executive officers. Stockholder approval of the
Amended Plan will enable awards made under the Amended Plan to be excluded in
calculating the $1,000,000 limit. Second, Stockholder approval of the Amended
Plan allows certain transactions under the Amended Plan to be exempt from the
Securities and Exchange Commission regulations on short-swing trading under
Section 16 of the Securities Exchange Act of 1934 (the "1934 Act"). Third,
Stockholder approval of the Amended Plan is required to award incentive stock
options under the requirements of Section 422 of the Code.

All 763,500 options previously issued under the 1997 Plan were
surrendered and cancelled prior to the implementation of the 156:1 reverse split
last year on October 31, 2000. A total of 632,500 options, each having an
exercise price of $7.00 per share, was granted by the board on October 27, 2000
subject to shareholder approval of the Amended Plan. A total of 265,000 of the
options granted on October 27, 2000 was subsequently surrendered and cancelled
when the employees to whom they had been granted resigned. On August 29, 2001,
the Board authorized the grant of an additional 55,000 options at an exercise
price of $5.90. If the Amended Plan is adopted at the 2001 Annual Meeting and,
assuming the board does not make any additional grants in the interim, there
will be a total of 432,500 options outstanding at that time of which 267,500
will become vested as of October 27, 2001.

DISCUSSION OF PROPOSED CHANGES TO THE AMENDED PLAN

TOTAL SHARES RESERVED TO THE AMENDED PLAN

There were 3,000,000 shares of pre-split common stock reserved for
issuance under the 1997 Plan. This represented approximately 12.8% of the total
number of shares of common stock issued and outstanding at the time the 1997
Plan was approved and 3% of the total number of shares of common stock then
authorized by the Company's articles. After implementation of the 156:1 reverse
split of the company's common stock on October 31, 2000, the effective number of
shares reserved to the 1997 Plan was reduced to 19,230.

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Article 5 of the Amended Plan provides that the maximum number of
shares eligible under the Amended Plan will be 1,000,000. This represents 1.0%
of the total number of shares of common stock authorized by the amended and
restated articles of incorporation and approximately 7.8% of the total number of
shares of common stock issued and outstanding as of September 10, 2001.

MAXIMUM INDIVIDUAL GRANTS

The maximum number of options awardable to any individual in any
calendar year under the 1997 Plan was 100,000. After implementation of the 156:1
reverse split of the Company's common stock on October 31, 2000, the maximum
grant to any individual under the 1997 Plan was reduced to approximately 641.
Article 6.4 of the Amended Plan provides that the maximum grant to any
individual in any calendar year will be 250,000.

TERM

The term of the 1997 Plan expires on July 1, 2007 which is ten years
after it was adopted by the board. Article 12 of the Amended Plan effectively
extends this term to January 1, 2011.

CORPORATE NAME

At the time the 1997 Plan was adopted, the name of the Company was
Queen Sand Resources, Inc. That name was changed to DevX Energy, Inc. on
September 19, 2000. The Amended Plan replaces all references to "Queen Sand
Resources, Inc." with the new name of "DevX Energy, Inc."

GENERAL DISCUSSION OF THE TERMS OF THE AMENDED PLAN

The provisions of the Amended Plan are summarized below. All such
statements are qualified in their entirety by reference to the full text of the
Amended Plan, which is attached hereto as Appendix I.

The Amended Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The Amended Plan is not a
"qualified plan" within the meaning of Section 401 of the Code. The Amended Plan
will terminate on January 1, 2011, and thereafter no incentive stock options,
non-qualified stock options or stock appreciation rights ("awards") may be
granted thereunder. The Board of Directors may amend or discontinue the Amended
Plan without the approval of the stockholders, subject to certain limitations.
See "Amendment of the Amended Plan" below.

Nothing in the Amended Plan or in any award granted pursuant to the
Amended Plan confers upon any employee any right to continue in the employ of
the Company or to interfere in any way with the right of the Company to
terminate the employment of any person at any time.

The proceeds from the sale of Common Stock pursuant to the exercise of
or payment for awards under the Amended Plan will be added to the general funds
of the Company and used for general corporate purposes. The holder of an award
granted pursuant to the Amended Plan does not have any of the rights or
privileges of a Stockholder, except with respect to shares that have been
actually issued.

PURPOSE AND ELIGIBILITY

The purposes of the Amended Plan are to attract and retain key
management employees and to encourage performance by providing such persons with
a proprietary interest in the Company through the granting of incentive stock
options, non-qualified stock options and stock appreciation rights relating to
shares

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of our common stock or any of the foregoing in combination or in tandem. The
Amended Plan is designed to help achieve those purposes through the use of
compensation strategies that will attract and retain those employees who are
important to the long-term success of the Company.

Any employee of the Company or its subsidiary corporations or
partnerships (including officers or directors who are employees) is eligible to
receive awards under the Amended Plan at the discretion of the Compensation
Committee. See "Administration of the Amended Plan" below. Non-employee
directors shall not be eligible to participate in the Amended Plan.

The Company had 20 employees at the date of this Proxy Statement, all
of whom are eligible to participate in the Amended Plan.

ADMINISTRATION OF THE AMENDED PLAN

The Amended Plan is administered by the Compensation Committee
appointed by the Company's Board of Directors. The current members of the
Compensation Committee are Robert L. Keiser, Jerry B. Davis (Chairman) and
Patrick J. Keeley. Members of the Compensation Committee serve at the will of
the Board of Directors and may be removed, with or without cause, from the
Compensation Committee at any time at the Board of Directors' discretion.

The Compensation Committee has full discretion to grant awards under
the Amended Plan, to interpret the Amended Plan, to make such rules as it deems
advisable in the administration of the Amended Plan and to take all other
actions advisable to administer the Amended Plan. The Compensation Committee
shall determine the eligible persons to whom awards will be granted and will set
forth the terms of the awards in award agreements, so long as those terms are
not inconsistent with the Amended Plan.

AWARDS

The Compensation Committee may grant or award incentive stock options,
non-qualified stock options and stock appreciation rights or any of the
foregoing in combination or in tandem. A tandem award dictates that the exercise
of one type of award terminates the award granted in tandem with the other
award. For example, in the event a stock appreciation right is granted in tandem
with a stock option, the exercise of the stock appreciation right will result in
the termination of the related stock option and vice versa.

Stock options which are intended to qualify for special tax treatment
under particular provisions of the Code are considered "Incentive Stock
Options," and options which are not intended to so qualify are considered
"Non-qualified Stock Options." See "Certain Federal Income Tax Aspects" below.

Stock appreciation rights ("SARs") entitle the holder to receive cash
or Common Stock having a value equal to the appreciation in the market price of
the Common Stock underlying the SAR from the date of grant to the date of
exercise.

If adopted, the maximum number of shares of Common Stock presently
authorized for issuance under the Amended Plan will be 1,000,000, subject to
adjustment for stock splits and similar events. Shares to be issued may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares of Common Stock previously subject to
awards that are expired, terminated, forfeited, settled in cash in lieu of
Common Stock or exchanged for awards that do not involve Common Stock are
available for further grants of awards under the Amended Plan.

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AWARD AGREEMENTS

Each award granted under the Amended Plan is required to be evidenced
by an award agreement, which designates the type of award (or combination or
tandem of awards) being granted and sets forth the number of shares or the total
cash amount subject to each award (if applicable), the award or exercise price
(if applicable), the maximum term of the award, any rules related to forfeiture,
the vesting or restriction schedule or criteria (if applicable), the date of
grant, and any other terms, provisions, limitations and performance requirements
of the award. The Compensation Committee may require that each participant
irrevocably grant to the Company a power of attorney to transfer to the Company
any shares forfeited under the award and that the stock certificates evidencing
shares of restricted stock be held in custody by the Company until the
restrictions have lapsed.

The exercise period for an award may not extend longer than ten years
from the date the award is granted and, in the case of incentive stock options,
is limited to five years from the date of grant for certain employees owning
more than 10% of the outstanding shares of Voting Stock.

EXERCISE OF AWARDS

The exercise price for an Incentive Stock Option and the SAR price for
any share of Common Stock subject to an SAR will be at least 100% (or at least
110% in the case of incentive stock options granted to certain employees owning
more than 10% of the outstanding shares of Common Stock) of the fair market
value of the Common Stock on the date of grant. The exercise price for a
Non-qualified Stock Option shall be determined by the Compensation Committee and
may be less than the fair market value of the Common Stock on the date of grant.
As of the close of business on September 4, 2001, the market price of our Common
Stock as quoted on the NASDAQ National Market System was $5.798 per share.

On the date that the participant desires to exercise a stock option
(the "Exercise Date"), the participant must pay the total exercise price of the
shares to be purchased by delivering to the Company cash, check, bank draft,
money order in the amount of the exercise price or Common Stock having a fair
market value equal to the exercise price, by delivery of an executed irrevocable
option exercise form to sell certain shares of Common Stock purchased upon
exercise of the option or to pledge such shares as collateral for a loan and
promptly deliver the amount of loan proceeds to pay the purchase price, or any
other form of payment which is acceptable to the Compensation Committee. If the
participant fails to pay the exercise price on the Exercise Date or fails to
accept delivery of the Common Stock to be issued upon exercise, the
participant's option may be terminated by the Company.

On the date that the participant desires to exercise an SAR (the "SAR
Exercise Date"), the participant will receive from the Company cash in an amount
equal to the appreciation in the market price of the Common Stock attributable
to the portion of the SAR being exercised from the date of grant to the SAR
Exercise Date.

The exercise of SARs and receipt of cash by a director, executive
officer or 10% or greater stockholder of the Company as determined under Section
16 of the 1934 Act and the rules promulgated thereunder (an "insider") will be
subject to certain restrictions, including the requirement that the insider must
exercise the SAR during the quarterly "SAR window period" beginning on the third
business day following the issuance by the Company for publication of its
quarterly earnings release and ending on the twelfth business day following the
issuance of the earnings release.

RESTRICTIONS

Under the Amended Plan, the Compensation Committee determines the
vesting schedule, restrictions or conditions, if any, applicable to any award
granted. Once vested, awards may be exercised at any time

9
13

during the award period. The Compensation Committee may, in its discretion and
in accordance with the terms of the Amended Plan, accelerate any vesting
schedule or otherwise remove any restrictions or conditions applicable to an
award.

If the Amended Plan is adopted by the Shareholders as proposed, no
participant may receive during any fiscal year awards covering an aggregate of
more than 250,000 shares of Common Stock under the Amended Plan.

The grant of incentive stock options to each participant is subject to
a $100,000 calendar year limit. This limitation prohibits the grant of an
incentive stock option that would entitle the recipient to purchase, thereunder
and together with other incentive options, securities worth more than $100,000
(based upon the aggregate fair market value of the securities underlying such
options on the date of grant) in the year in which such options first become
exercisable. See "Certain Federal Income Tax Aspects" for additional limitations
on incentive stock options.

A participant who is an insider cannot exercise a stock option or SAR
until at least six months have expired from the date of grant of the award.
Stock options and SARs, and other awards that have not yet vested or are subject
to forfeiture, are not transferable or assignable other than by will or by the
laws of descent and distribution or pursuant to the terms of a qualified
domestic relations order as defined in the Code.

The Company is not required to sell or issue shares of Common Stock
under any award if the issuance of Common Stock would violate any provisions of
any law or regulation of any governmental authority or any national securities
exchange or other forum on which shares of Common Stock are traded (including
Section 16 of the 1934 Act). As a condition of any sale or issuance of shares of
Common Stock under an award, the Compensation Committee may require such
agreements or undertakings, if any, as it may deem necessary or advisable to
ensure compliance with any such law or regulation.

TERMINATION AND FORFEITURE

In the event of termination of service of a participant, an incentive
option may only be exercised as determined by the Compensation Committee and
provided in the Award Agreement.

ADJUSTMENTS

The Amended Plan provides that the maximum number of shares issuable
under the Amended Plan as a whole and to each participant individually, the
number of shares issuable upon exercise of outstanding stock options and SARs,
and the exercise prices of such awards are subject to such adjustments as are
appropriate to reflect any stock dividend, stock split, share combination,
exchange of shares, recapitalization or increase or decrease in shares of Common
Stock without receipt of consideration of or by the Company.

If the Company merges or consolidates, transfers all or substantially
all of its assets to another entity or dissolves or liquidates, then under
certain circumstances a holder of an award will be entitled to purchase the
equivalent number of shares of stock, other securities, cash or property that
the award holder would have been entitled to receive had he or she exercised his
or her award immediately prior to such event. Notwithstanding these adjustment
provisions, all awards granted under the Amended Plan may be canceled by the
Company upon a merger or consolidation of the Company in which the Company is
not the surviving or resulting corporation, or the reorganization, dissolution
or liquidation of the Company, subject to each participant's right to exercise
his or her award as to the shares of Common Stock covered by that award for a
period of 30 days immediately preceding the effective date of such event.

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14

The Amended Plan provides that in the event of a "Change of Control" of
the Company, all unmatured installments of awards will become fully accelerated
and exercisable in full. "Change of Control" is defined as the occurrence of the
following events: (i) a consolidation or merger in which the Company does not
survive or in which shares of Common Stock would be converted into cash,
securities or other property, unless the Company's stockholders retain the same
proportionate common stock ownership in the surviving company after the merger,
(ii) a sale, lease, exchange or other transfer of all or substantially all of
the Company's assets, (iii) the approval by the Company's stockholders of a plan
to dissolve or liquidate the Company, (iv) the termination of control of the
Company by directors in office as of date of the Amended Plan and their
successors approved in accordance with the terms of the Amended Plan, by virtue
of their ceasing to constitute a majority of the entire Board of Directors, (v)
the acquisition of beneficial ownership of 20% of the voting power of the
Company's outstanding voting securities by any person or group who beneficially
owned less than 15% of such voting power on date of the Amended Plan or the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least 5% of such voting power on date of the Amended Plan
in each case subject to certain exceptions or (vi) the appointment of a trustee
in a bankruptcy proceeding involving the Company.

If the Company makes a partial distribution of its assets in the nature
of a partial liquidation (except for certain cash dividends) then the prices
then in effect with respect to each outstanding award will be reduced in
proportion to the percentage reduction in the tangible book value of the shares
of the Company's Common Stock as a result of such distribution.

Stock options and SARs may also be granted under the Amended Plan in
substitution for stock options and SARs held by employees of a corporation who
become management employees of the Company or a subsidiary as a result of a
merger, consolidation or stock acquisition.

AMENDMENT OF THE AMENDED PLAN

The Amended Plan provides that the Board of Directors may from time to
time discontinue or amend the Amended Plan without the consent of the
stockholders unless such discontinuance or amendment (i) materially increases
the benefits accruing to participants under the Amended Plan, (ii) materially
increases the number of securities that may be issued under the Amended Plan or
(iii) materially modifies the requirements as to eligibility for participation
in the Amended Plan. In addition, if an amendment would adversely affect an
outstanding award, the consent of the participant holding that award must be
obtained unless the Board of Directors determines that the application to
outstanding awards of an accounting standard in compliance with any statement
issued by the Financial Accounting Standards Board concerning the treatment of
awards would have a significant, adverse effect on the Company's financial
statements. The Board of Directors may cancel and revoke all outstanding awards
that are deemed to cause such adverse effect, and the holders of these awards
will not have any further rights to the awards.

CERTAIN FEDERAL INCOME TAX ASPECTS

Withholding. Withholding of federal taxes at applicable rates will be
required in connection with any ordinary income realized by a participant by
reason of the exercise of awards granted pursuant to the Amended Plan. A
participant must pay such taxes to the Company in cash or Common Stock prior to
the receipt of any Common Stock certificate. If an insider (as defined in
"Exercise of Awards" above) desires to have Common Stock withheld upon exercise
of an award to pay withholding taxes, the conditions in "Exercise of Awards"
governing the exercise of SARs must be satisfied.

Nonqualified Stock Options. The granting of a non-qualified stock
option will not result in federal income tax consequences to either the Company
or the optionee. Upon exercise of a non-qualified stock option, the optionee
will recognize ordinary income in an amount equal to the difference between the
fair

11
15

market value of the shares on the date of exercise and the exercise price, and
the Company will be entitled to a corresponding deduction.

For purposes of determining gain or loss realized upon a subsequent
sale or exchange of such shares, the optionee's tax basis will be the sum of the
exercise price paid and the amount of ordinary income, if any, recognized by the
optionee upon exercise of the option. Any gain or loss realized by an optionee
on disposition of such shares generally will be a long-term capital gain or loss
(if the shares are held as a capital asset for at least one year) and will not
result in any tax deduction to the Company. Long-term capital gains are
currently taxed at a maximum rate of 20% if the shares are held between one year
and five years after the date of exercise and 18% if held for five years or
longer after the date of exercise and short-term capital gains are currently
taxed as ordinary income. Ordinary income is currently taxed at five rates,
depending upon a taxpayer's income level.

Incentive Stock Options. In general, no income will be recognized by an
optionee and no deduction will be allowed to the Company at the time of the
grant or exercise of an incentive stock option granted under the Amended Plan.
When the stock received on exercise of the option is sold, provided that the
stock is held for more than two years from the date of grant of the option and
more than one year from the date of exercise, the optionee will recognize
long-term capital gain or loss equal to the difference between the amount
realized and the exercise price of the option related to such stock. Long-term
capital gains are currently taxed at a maximum rate of 20% if the shares are
held between one year and five years after the date of exercise and 18% if held
for five years or longer after the date of exercise and short-term capital gains
are currently taxed as ordinary income. or longer after the date of exercise and
short-term capital gains are currently taxed as ordinary income. If these
holding period requirements under the Code are not satisfied, the sale of stock
received upon exercise of an incentive stock option is treated as a
"disqualifying disposition", and the optionee must notify the Company in writing
of the date and terms of the disqualifying disposition.

In general, the optionee will recognize at the time of a disqualifying
disposition ordinary income in an amount equal to the amount by which the lesser
of (i) the fair market value of the Common Stock on the date the incentive stock
option is exercised or (ii) the amount realized on such disqualifying
disposition, exceeds the exercise price. The optionee will also recognize
capital gain to the extent of any excess of the amount realized on such
disqualifying disposition over the fair market value of the Common Stock on the
date the incentive stock option is exercised (or capital loss to the extent of
any excess of the exercise price over the amount realized on disposition). Any
capital gain or loss recognized by the optionee will be long-term or short-term
depending upon the holding period for the stock sold. Long-term capital gains
are currently taxed at a maximum rate of 20% if the shares are held between one
year and five years after the date of exercise and 18% if held for five years or
longer after the date of exercise and short-term capital gains are currently
taxed as ordinary income. Ordinary income is currently taxed at five rates,
depending upon a taxpayer's income level. The Company may claim a deduction at
the time of the disqualifying disposition equal to the amount of the ordinary
income the optionee recognizes.

Although an optionee will not realize ordinary income upon the exercise
of an incentive stock option, the excess of the fair market value of the shares
acquired at the time of exercise over the option price is included in
"alternative minimum taxable income" for purposes of calculating the optionee's
alternative minimum tax, if any, pursuant to Section 55 of the Code.

Stock Appreciation Rights. A participant who is granted a stock
appreciation right will not recognize any taxable income for Federal income tax
purposes upon receipt of the award. At the time of exercise, however, the
participant will recognize compensation income equal to any cash received and
the fair market value on the date of exercise of any Common Stock received. If a
stock appreciation right is paid in whole or in part in shares of Common Stock
and the participant is subject to Section 16(b) of the 1934 Act on the date of
receipt of such shares, the participant generally will not recognize
compensation income until the expiration

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16

of six months from the date of receipt, unless the participant makes an election
under Section 83(b) of the Code to recognize compensation income on the date of
receipt. The Company or one of its subsidiaries generally will be entitled to a
compensation deduction for the amount of compensation income the participant
recognizes.

Other Tax Matters. If unmatured installments of awards are accelerated
as a result of a Change of Control (see "Adjustments" above), any amounts
received from the exercise by a participant of a stock option may be included in
determining whether or not a participant has received an "excess parachute
payment under Section 280G of the Code, which could result in (i) the imposition
of a 20% Federal excise tax (in addition to Federal income tax) payable by the
participant on the cash resulting from such exercise and (ii) the loss by the
Company of a compensation deduction.

The following table provides information with respect to the number of
options granted during the year ended December 31, 2000 under the DevX Amended
and Restated DevX Energy, Inc. Incentive Equity Plan. All such options were
granted subject to stockholder approval of the Amended and Restated Plan.

<Table>
<Caption>
Dollar Value Number of Share
Name & Position (1) Options
--------------------------------------------------------------------------- ------------ ---------------

Joseph T. Williams, Chairman $ 0 250,000
Edward J. Munden, President, Chief Executive Officer and Director (2) $ 0 240,000
William W. Lesikar, Chief Financial Officer $ 0 35,000
Ronald Idom, Vice President, Operations $ 0 35,000
William A. Williamson, Vice President, Land $ 0 25,000
Brian J. Barr, General Counsel & Secretary (2) $ 0 25,000
All current executive officers as a group $ 0 610,000
All current directors who are not executive officers as a group $ 0 -0-
All employees as a group (excluding executive officers) $ 0 32,500
</Table>

----------

(1) The dollar value represents the positive difference, if any, between
the exercise price of $7.00 ($7.0625 in the case of 27,000 options
granted to each of the non-officer directors) and the last reported
sale price as of the close of business on September 1, 2001.

(2) All options granted to Mr. Munden and Mr. Barr were surrendered and
cancelled effective August 31, 2001 upon their respective resignations.
An equivalent number of warrants were issued to Mr. Munden and Mr. Barr
as part of their respective termination agreements.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE DEVX ENERGY, INC. AMENDED AND RESTATED INCENTIVE EQUITY PLAN.

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PROPOSAL THREE

TO APPROVE THE DEVX ENERGY, INC. AMENDED AND RESTATED DIRECTORS'
NONQUALIFIED STOCK OPTION PLAN

GENERAL

The DevX Energy, Inc. Amended and Restated Directors' Nonqualified
Stock Option Plan (the "Amended Directors' Plan") attached as Appendix II to
this proxy statement is being proposed to replace the Queen Sand Resources, Inc.
1998 Directors Nonqualified Stock Option Plan (the "1998 Directors' Plan") which
was approved by the stockholders on November 12, 1998. The board is recommending
the adoption of the Amended Directors' Plan because the number of share reserved
for issuance under the 1998 Directors' Plan and the maximum number of shares
issuable in any one grant is no longer adequate to achieve the purposes of the
1998 Directors' Plan. In addition the board has determined that the term of the
1998 Directors' Plan should be extended to reflect the passage of time since the
1998 Directors' Plan was adopted. Finally, the Amended Plan replaces the old
company name of Queen Sand Resources, Inc. with the new name approved by the
stockholders at the last annual meeting held on September 18, 2000.

A total of 10,000 options were issued under the 1998 Directors' Plan.
These were surrendered and cancelled in May and June of 2000 upon the
resignations of the directors to whom they had been granted. A total of 90,000
options have been granted under the Amended Directors' Plan subject to
stockholder approval of the Amended Directors' Plan. Messrs. Keiser, Davis and
Keeley were each granted 3,000 options at an exercise price of $7.000 upon their
joining the board in October 2000. In the event that the stockholders do not
approve the Amended Directors' Plan, we will be obligated to pay these directors
the cash equivalent of these options. A further 27,000 options with an exercise
price of $7.0625 were granted to each of Messrs. Keiser, Davis and Keeley on
December 14, 2000. All 90,000 options granted to Messrs. Keiser, Davis and
Keeley under the Amended Directors' Plan will vest immediately upon stockholder
approval of the Amended Directors' Plan. If the Amended Directors' Plan is
adopted at the 2001 Annual General Meeting and, assuming the board does not make
any additional grants in the interim, there will be a total of 90,000 options
outstanding under the Amended Directors' Plan at that time.

DISCUSSION OF PROPOSED CHANGES TO THE AMENDED DIRECTORS' PLAN

TOTAL SHARES RESERVED TO THE AMENDED DIRECTORS' PLAN

There were 500,000 shares of pre-split common stock reserved for
issuance under the 1998 Directors' Plan. After implementation of the 156:1
reverse split of the Company's common stock on October 31, 2000, the number of
shares reserved to the 1998 Directors' Plan was effectively reduced to 3,205.

Article 5 of the Amended Directors' Plan provides that the maximum
number of shares eligible under the Amended Directors' Plan will be 150,000.
This represents 0.15% of the total number of shares of common stock authorized
by the amended and restated articles of incorporation and approximately 1.2% of
the total number of shares of common stock issued and outstanding as of August
31, 2001.

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MAXIMUM INDIVIDUAL GRANTS

The maximum number of options awardable to any individual in any
calendar year under the 1998 Directors' Plan was 5,000. After implementation of
the 156:1 reverse split of the Company's common stock on October 31, 2000, the
maximum grant to any individual under the 1998 Directors' Plan was reduced to
approximately 32. Article 6 of the Amended Directors' Plan provides that the
maximum grant to any individual in any calendar year will be 30,000.

TERM

The term of the 1998 Directors' Plan expired on November 19, 2007.
Article 12 of the Amended Directors' Plan effectively extends this term to
December 15, 2010.

CORPORATE NAME

At the time the 1998 Directors' Plan was adopted the name of the
Company was Queen Sand Resources, Inc. That name was changed to DevX Energy,
Inc. on September 19, 2000. The Amended Directors' Plan replaces all references
to "Queen Sand Resources, Inc." with the new name of "DevX Energy, Inc."

GENERAL DISCUSSION OF THE TERMS OF THE AMENDED PLAN

The Amended Directors' Plan is being submitted for Stockholder approval
at the Annual Meeting to permit certain transactions under the Plan to be exempt
from the Securities and Exchange Commission regulations on short-swing trading
under Section 16 of the 1934 Act.

The provisions of the Amended Directors' Plan are summarized below. All
such statements are qualified in their entirety by reference to the full text of
the Amended Directors' Plan, which is attached hereto as Appendix II.

The Amended Directors' Plan is not subject to the provisions of ERISA.
The Amended Directors' Plan is not a "qualified plan" within the meaning of
Section 401 of the Code. The Amended Directors' Plan will terminate on January
1, 2011, and thereafter no non-qualified stock options ("awards") may be granted
thereunder. The Board of Directors may amend or discontinue the Plan without the
approval of the Stockholders, subject to certain limitations. See "Amendment of
the Plan" below.

Nothing in the Amended Directors' Plan or in any stock option granted
pursuant to the Amended Directors' Plan creates an employer-employee
relationship between the Company and a director of the Company to whom a stock
option is granted under the Amended Directors' Plan (a "Participant").

The proceeds from the sale of Common Stock pursuant to the stock
options granted under the Amended Directors' Plan will be added to the general
funds of the Company and used for general corporate purposes. The holder of a
stock option granted pursuant to the Amended Directors' Plan does not have any
of the rights or privileges of a Stockholder of the Company, except with respect
to shares that have been actually issued.

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19

PURPOSE AND ELIGIBILITY

The purposes of the Amended Directors' Plan are to attract and retain
Directors and to provide such persons with a proprietary interest in the Company
through the granting of non-qualified stock options to purchase shares of our
common stock that will increase the interest of such persons in the Company's
welfare, furnish an incentive to such persons to continue their services for the
Company and provide a means through which the Company may attract able persons
as Directors.

Any Director of the Company, including each of the nominees for
Director named herein, is eligible to receive awards under the Plan at the
discretion of the Compensation Committee. See "Administration of the Plan"
below.

The Company had four directors at the date of this Proxy Statement, all
of whom are eligible to participate in the Amended Directors' Plan.

ADMINISTRATION OF THE PLAN

The Amended Directors' Plan is administered by the Compensation
Committee appointed by the Company's Board of Directors. The current members of
the Compensation Committee are Jerry B. Davis (Chairman), Robert L. Keiser and
Patrick J. Keeley. Members of the Compensation Committee serve at the will of
the Board of Directors and may be removed, with or without cause, from the
Compensation Committee at any time at the Board of Directors' discretion.

The Compensation Committee has full discretion to grant stock options
under the Plan, to interpret the Plan, to make such rules as it deems advisable
in the administration of the Plan and to take all other actions advisable to
administer the Plan. The Compensation Committee shall determine the eligible
persons to whom stock options will be granted and will set forth the terms of
the stock options in stock option agreements, so long as those terms are not
inconsistent with the Plan.

STOCK OPTIONS

The Compensation Committee may grant awards under the Amended
Directors' Plan. The maximum number of shares of Common Stock authorized for
issuance under the Amended Directors' Plan in any one year is 30,000, subject to
adjustment for stock splits and similar events. Shares to be issued may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares of Common Stock previously subject to
stock options that have expired or been canceled may be reissued under the
Amended Directors' Plan.

STOCK OPTION AGREEMENTS

Each stock option granted under the Amended Directors' Plan is required
to be evidenced by a stock option agreement that sets forth the number of shares
subject to the stock option, the option price, the maximum term of the stock
option, any rules related to forfeiture, the vesting or restriction schedule or
criteria (if applicable), the date of grant, and any other terms, provisions,
limitations and performance requirements of the stock option. The Compensation
Committee may require that each Participant irrevocably grant to the Company a
power of attorney to transfer to the Company any shares forfeited under the
award and that the stock certificates evidencing shares of restricted stock be
held in custody by the Company until the restrictions have lapsed.

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Stock options granted pursuant to the Amended Directors' Plan must be
granted within ten years from the date of the adoption of the Amended Directors'
Plan. The exercise period for a non-qualified stock option may not extend longer
than ten years from the date the option is granted.

EXERCISE OF STOCK OPTIONS

The exercise price for a stock option shall be determined by the
Compensation Committee and may be less than the fair market value of the Common
Stock on the date of grant. As of the close of business on September 4, 2001 the
market price for our Common Stock as quoted on the NASDAQ National Market System
was $5.798 per share.

On the date that the Participant desires to exercise a stock option
(the "Exercise Date"), the Participant shall deliver to the Company
consideration with a value equal to the total exercise price of the shares to be
purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock owned by the Participant
on the Exercise Date, valued at its fair market value on the Exercise Date, (c)
by delivery (including by telecopy) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable instructions
from the Participant to a broker or dealer, reasonably acceptable to the
Company, to sell certain of the shares of Common Stock purchased upon exercise
of the stock option or to pledge such shares as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds necessary to
pay such purchase price, and/or (d) in any other form of valid consideration
that is acceptable to the Compensation Committee in its sole discretion. If the
Participant fails to pay the exercise price on the Exercise Date or fails to
accept delivery of the Common Stock to be issued upon exercise, the
Participant's award may be terminated by the Company.

RESTRICTIONS

Under the Amended Directors' Plan, the Compensation Committee
determines the vesting schedule, restrictions or conditions, if any, applicable
to any award granted. Once vested, awards may be exercised at any time during
the option period. The Compensation Committee may, in its discretion and in
accordance with the terms of the Amended Directors' Plan, accelerate any vesting
schedule or otherwise remove any restrictions or conditions applicable to an
award.

A Participant who is an insider cannot exercise a stock option until at
least six months have expired from the date of grant of the award. Stock options
that have not yet vested or are subject to forfeiture are transferable and
assignable to the extent described in the Amended Directors' Plan.

The Company is not required to sell or issue shares of Common Stock
under any stock option if the issuance of Common Stock would violate any
provisions of any law or regulation of any governmental authority or any
national securities exchange or other forum on which shares of Common Stock are
traded (including Section 16 of the 1934 Act). As a condition of any sale or
issuance of shares of Common Stock under an award, the Compensation Committee
may require such agreements or undertakings, if any, as it may deem necessary or
advisable to ensure compliance with any such law or regulation.

TERMINATION AND FORFEITURE

In the event of termination of service of a Participant as a Director,
a stock option may be exercised only as follows: (i) in the event of a
Participant's death while serving as a Director, the option may be exercised for
a period of 6 months after the Participant's death; (ii) upon the termination of
service as a Director by reason of disability, the option may be exercised for a
period of 6 months following the termination of service as a Director and (iii)
upon the termination of service as a Director for any other reason, the option
may be exercised for a period of 30 days after termination of service as a
Director.

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ADJUSTMENTS

The Amended Directors' Plan provides that the maximum number of shares
issuable under the Amended Directors' Plan as a whole and to each Participant
individually, the number of shares issuable upon exercise of outstanding stock
options, and the exercise prices of such stock options are subject to such
adjustments as are appropriate to reflect any stock dividend, stock split, share
combination, exchange of shares, recapitalization or increase or decrease in
shares of Common Stock without receipt of consideration of or by the Company.

If the Company merges or consolidates, transfers all or substantially
all of its assets to another entity or dissolves or liquidates, then under
certain circumstances a holder of a stock option will be entitled to purchase
the equivalent number of shares of stock, other securities, cash or property
that the award holder would have been entitled to receive had he or she
exercised his or her stock option immediately prior to such event.
Notwithstanding these adjustment provisions, all stock options granted under the
Plan may be canceled by the Company upon a merger or consolidation of the
Company in which the Company is not the surviving or resulting corporation, or
the reorganization, dissolution or liquidation of the Company, subject to each
Participant's right to exercise his or her stock option as to the shares of
Common Stock covered by that stock option for a period of 30 days immediately
preceding the effective date of such event.

Stock options may also be granted under the Amended Directors' Plan in
substitution for stock options held by directors of a corporation who become or
are about to become outside Directors of the Company or a subsidiary as a result
of a merger, consolidation or stock acquisition.

AMENDMENT OF THE PLAN

The Amended Directors' Plan provides that the Board of Directors may
from time to time discontinue or amend the Plan without the consent of the
Stockholders unless such discontinuance or amendment (i) materially increases
the benefits accruing to Participants under the Amended Directors' Plan, (ii)
materially increases the number of securities that may be issued under the
Amended Directors' Plan or (iii) materially modifies the requirements as to
eligibility for participation in the Amended Directors' Plan. In addition, if an
amendment would adversely affect an outstanding stock option, the consent of the
Participant holding that stock option must be obtained unless the Board of
Directors determines that the application to outstanding stock options of an
accounting standard in compliance with any statement issued by the Financial
Accounting Standards Board concerning the treatment of stock options would have
a significant, adverse effect on the Company's financial statements. The Board
of Directors may cancel and revoke all outstanding stock options that are deemed
to cause such adverse effect, and the holders of these stock options will not
have any further rights to the stock options.

CERTAIN FEDERAL INCOME TAX ASPECTS

Withholding of federal taxes at applicable rates will be required in
connection with any ordinary income realized by a Participant by reason of the
exercise of stock options granted pursuant to the Amended Directors' Plan. A
Participant must pay such taxes to the Company in cash or Common Stock prior to
the receipt of any Common Stock certificate.

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The granting of a non-qualified stock option will not result in federal
income tax consequences to either the Company or the optionee. Upon exercise of
a non-qualified stock option, the optionee will recognize ordinary income in an
amount equal to the difference between the fair market value of the shares on
the date of exercise and the exercise price, and the Company will be entitled to
a corresponding deduction.

The following table provides information with respect to the number of
options granted during the year ended December 31, 2000 under the DevX Energy,
Inc. Directors' Non-qualifying Stock Option Plan. All such options were granted
subject to stockholder approval of the Amended and Restated Plan.

<Table>
<Caption>
Dollar Number of Share
Name & Position Value (1) Options
--------------------------------------------------------------------------- -------------- ---------------

All current executive officers as a group $ 0 0,000
Jerry B. Davis, Director $ 0 30,000
Robert L. Keiser, Director $ 0 30,000
Patrick J. Keeley, Director $ 0 30,000
All current directors who are not executive officers as a group $ 0 90,000
All employees as a group (excluding executive officers) $ 0 0
</Table>

----------
(1) The dollar value represents the positive difference, if any, between
the exercise price of $7.00 in the case of 3,000 options granted to
each non-officer director and $7.0625 in the case of 27,000 options
granted to each of the non-officer directors, and the last reported
sale price as of the close of business on September 1, 2001.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE
THE AMENDED AND RESTATED DEVX ENERGY, INC. DIRECTORS' NONQUALIFIED STOCK OPTION
PLAN.

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PROPOSAL FOUR

TO RATIFY THE APPOINTMENT OF AUDITORS

The Board of Directors, upon the recommendation of its Audit Committee,
has appointed Ernst & Young LLP ("E&Y") as the independent auditors of the
Company for the fiscal year ending December 31, 2001. Stockholders are being
asked to ratify this appointment. The Company has been informed that E&Y are
independent with respect to the Company within the meaning of the applicable
published rules and regulations if the Securities and Exchange Commission, the
pronouncements of the independent Standards Board, and Rule 101 of the American
Institute of Certified Public Accountants' Code of Professional Conduct, its
interpretations and rulings.

Representatives of E&Y expected to be present at the meeting with the
opportunity to make a statement if they so desire and to be available to respond
to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2001.

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24

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

BOARD OF DIRECTOR MEETINGS

During the fiscal year ended December 31, 2000, the entire Board of
Directors met two times and acted five times by written consent. No Director
attended fewer than 75% of the meetings of the Board of Directors or of the
committees of the Board of Directors on which they served. The Board of
Directors has established two standing committees to assist it in the discharge
of its responsibilities.

AUDIT COMMITTEE

The Audit Committee recommends the independent public accountants that
the Company considers to perform the annual audit, reviews financial statements,
and reviews the observations of independent public accountants concerning their
annual audit. The Audit Committee consists of Robert L. Keiser (Chairman), Jerry
B. Davis and Patrick J. Keeley. During the fiscal year ended December 30, 2001,
the Audit Committee acted one time by written consent.

REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Our Board of Directors adopted a formal written charter for its audit
committee on October 6, 2000 in accordance with the recently adopted NASDAQ
National Market Systems and Securities and Exchange Commission regulations
regarding audit committees. The audit committee's charter is attached as Exhibit
A to this proxy statement.

In fulfilling its responsibilities as set forth in its charter, the
audit committee reviewed and discussed with management our audited financial
statements for the year ended December 31, 2000. The audit committee also
discussed with our independent auditor Ernst & Young LLP the matters required to
be discussed by the Codification of Statements on Auditing Standards 61,
Communications with Audit Committees.

The audit committee received the written disclosures and the letter
from our independent auditor Ernst & Young LLP required by Independence
Standards Board Standard 1, Independence Discussions with Audit Committees, and
discussed with Ernst & Young LLP its independence from the company.

Based on these reviews and discussions and in reliance thereon, the
audit committee recommended to our board of directors that our audited financial
statements be included in our annual Report on Form 10-K for the fiscal year
ended December 31, 2000 and the board of directors approved the recommendation.

Robert L. Keiser
Jerry B. Davis
Patrick J. Keeley

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25

AUDIT FEES

The following table summarizes the fees paid or payable to Ernst &
Young LLP for services rendered for the fiscal year ended December 31, 2000.

<Table>

Audit fees $ 198,000

Other fees:
Audit related 139,000
Tax consulting and compliance services 315,000
------------

Total fees $ 652,000
============
</Table>

The category "other fees" generally includes fees incurred in
connection with the preparation and filing of registration statements with the
Securities and Exchange Commission, and fees for advice on tax matters. The
audit committee has considered whether the nonaudit services rendered by Ernst &
Young LLP to the Company during the year ended December 31, 2000 are compatible
with the independence of Ernst & Young LLP.

COMPENSATION COMMITTEE

The Compensation Committee reviews and makes recommendations regarding
executive compensation and oversees the Company's incentive compensation plans
as they may exist from time to time. The Compensation Committee consists of
Jerry B. Davis (Chairman), Robert L. Keiser and Patrick J. Keeley. For the
fiscal year ended December 31, 2000, the Compensation Committee acted two times
by written consent.

EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the officers of the Company as of
September 1, 2001.

<Table>
<Caption>
NAME AGE CURRENT POSITION
--------------------- --- ------------------------------------------------------------

Joseph T. Williams* 64 Chairman of the Board, Chief Executive Officer and President
William W. Lesikar* 48 Senior Vice President, Chief Financial Officer & Secretary
Ronald Idom* 46 Senior Vice President, Operations
William A. Williamson 45 Vice President, Land
</Table>

* Executive Officers

The following biographies describe the business experience of our
officers other than Mr. Williams whose biography is set forth above in the
discussion of Proposal 1.

Ronald Idom joined DevX Energy, Inc. in January 1998 as Vice President,
Acquisitions. He has over 25 years of experience in reservoir engineering and
management. From 1991 to 1997, he was Manager Gas Supply for Delhi Gas Pipeline
Corporation and Manager Engineering/Project Development from 1988 to 1991. From
1985 to 1988 he held the position of Chief Reservoir Engineer for TXO Production
Corp. Both Delhi Gas Pipeline and TXO Production Corp. were subsidiaries of
USX/Texas Oil & Gas Corporation. He also served as acquisition engineer for NRM
Petroleum from 1983 to 1985; a self-employed petroleum consultant from 1980 to
1983 and held various engineering positions with Texas Oil and Gas Corporation
from 1976 to 1980. Mr. Idom graduated from Texas A&M University in 1976 with a
Bachelor of Science in Petroleum

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26

Engineering. On September 1, 2001, Mr. Idom was promoted to the position of
Senior Vice President, Operations.

William W. Lesikar joined DevX Energy, Inc. in June 1998 as Vice
President, Finance. Mr. Lesikar, a Certified Public Accountant, has over 25
years of experience in finance and accounting with 20 years in the oil and gas
industry and has served as our Chief Financial Officer since September 2000.
From 1981 to 1998, Mr. Lesikar held increasing positions of authority with Lyco
Energy Corporation of Dallas, Texas including Controller from 1981 to 1983, and
Chief Financial Officer and Executive Vice President from 1988 to 1998. From
1978 to 1981, Mr. Lesikar was an audit manager and senior auditor with Arthur
Young & Company, now known as Ernst & Young LLP. From 1976 to 1978, Mr. Lesikar
was an auditor with Haskins & Sells, now known as Deloitte & Touche LLP. Mr.
Lesikar holds a Masters of Business Administration from Southern Methodist
University and a Bachelor of Business Administration from University of Texas at
Austin. On September 1, 2001, Mr. Lesikar was promoted to the position of Senior
Vice President and Chief Financial Officer. Mr. Lesikar also assumed the role of
Corporate Secretary at that time.

William A. Williamson joined DevX Energy, Inc. in March 1998 as Vice
President, Land. He has over 20 years of experience in petroleum land
management. From 1989 to 1998, he served as President of BAW Energy, Inc. BAW
Energy, Inc. was formed primarily to provide oil and gas asset management from a
land and legal perspective to independent oil and gas companies. Clients of BAW
Energy, Inc. included INCO Oil Corporation, Janex Oil Co., Inc., Walter
Exploration, Inc. and DevX Energy, Inc. From 1979 to 1989, he was self-employed
as an independent petroleum landman. Mr. Williamson holds a Bachelor of Business
Administration in Finance from Texas A&M University.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

To the Company's knowledge, based solely on a review of the copies of
reports furnished to the Company and, in certain instances, written
representations that no additional reports were required, during the fiscal year
ended December 31, 2000 all of the Company's executive officers, directors and
holders of more than 10% of its Common Stock timely filed all reports required
by Section 16(a) of the 1934 Act except with respect to the late filings of the
initial reports of the Company's directors Mr. Davis, Mr. Keiser and Mr.
Williams and its executive officers Mr. Lesikar and Mr. Barr.

EXECUTIVE COMPENSATION

COMPENSATION OF OFFICERS

The following table sets forth a summary of the compensation of the
Chief Executive Officer and the five other most highly compensated officers of
the Company for the years ended December 31, 2000, 1999 and 1998. No
compensation information is given for any person for any l year in which that
person was not an officer of the Company.

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27

SUMMARY COMPENSATION TABLE

<Table>
<Caption>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------- ----------------------
NUMBER OF
YEAR OTHER SECURITIES ALL
ENDED ANNUAL UNDERLYING OTHER
NAME AND DECEMBER COMP. OPTIONS/ COMPEN-
PRINCIPAL POSITION 31, SALARY BONUS (7) SARS SATION
------------------------------ -------- ----------- ----------- ----------- ----------- -------

Joseph T. Williams 2000 $ 59,000 $ 38,000 -- 250,000 -0-
Chairman of the 1999 -0- -0- -- -0- -0-
Board (1) 1998 -0- -0- -- -0- -0-

Edward J. Munden 2000 $ 174,000 $ 150,000 -- 240,000 -0-
Chief Executive 1999 $ 160,000 $ 40,000 -- 55,000 -0-
Officer & 1998 $ 144,000 $ 105,000 -- 45,000 -0-
President (2)(5)

William W. Lesikar 2000 $ 128,000 $ 45,000 -- 35,000 -0-
Chief Financial 1999 $ 120,000 $ 21,000 -- 15,000 -0-
Officer (3) 1998 $ 62,000 $ 6,000 -- 10,000 -0-

Ronald Idom 2000 $ 127,000 $ 35,000 -- 35,000 -0-
Vice President, 1999 $ 120,000 $ 21,000 -- 15,000 -0-
Operations 1998 $ 117,000 $ 21,000 -- 17,000 -0-

William Williamson 2000 $ 121,000 $ 30,000 -- 25,000 -0-
Vice President, Land 1999 $ 115,000 $ 21,000 -- 14,500 -0-
1998 $ 96,000 $ 16,000 -- 15,000 -0-

Brian J. Barr 2000 $ 122,000 $ 75,000 -- 25,000 -0-
Vice President, 1999 $ 98,000 -0- -- -0- -0-
General Counsel & 1998 $ 51,000 -0- -- -0- -0-
Secretary (4)(6)
</Table>

----------
(1) Became Chairman of the Board in October 2000 and President and Chief
Executive Officer on September 1, 2001.

(2) Previously also served as Chairman of the Board.

(3) Became Chief Financial Officer in September 2000 and Senior Vice
President on September 1, 2001. Previously served as Vice President,
Finance.

(4) Became Vice President, General Counsel in October 2000.

(5) Resigned August 31, 2001.

(6) Resigned all officer positions effective August 31, 2001.

(7) As permitted by the rules of the SEC, this column excludes perquisites
and other personal benefits for the named officers if the total cost in
a given year did not exceed the lesser of $50,000 or 10% of the
officer's combined salary and bonus for that year.

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28

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<Table>
<Caption>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
UNDERLYING GRANTED TO BASE GRANT DATE
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED (#) DURING YEAR ($/SH) DATE VALUE (4)
----------------------------- ------------------- ------------------ ----------------- --------------- --------------

Joseph T. Williams 250,000(1) 40.98% $7.00 10/27/10 $525,000

Edward J. Munden 240,000(2)(5) 39.34% $7.00 10/27/10 $504,000

William W. Lesikar 35,000(3) 5.74% $7.00 10/27/10 $73,500

Ronald Idom 35,000(3) 5.74% $7.00 10/27/10 $73,500

William Williamson 25,000(3) 4.10% $7.00 10/27/10 $52,500

Brian J. Barr 25,000(3)(5) 4.10% $7.00 10/27/10 $52,500
</Table>

----------
(1) Subject to stockholder approval of certain amendments to the Company's
1997 Incentive Equity Plan which amendments include increasing the
number of shares reserved to the Plan to 1,000,000. Of the 250,000
options, 20,000 are exercisable immediately upon stockholder approval.
The remaining 230,000 are exercisable cumulatively at the rate of
115,000 per year on each of October 27, 2001 and October 27, 2002 and
continue to be exercisable until October 27, 2010 unless earlier
terminated.

(2) Subject to stockholder approval of certain amendments to the Company's
1997 Incentive Equity Plan which amendments include increasing the
number of shares reserved to the Plan to 1,000,000. Exercisable
cumulatively at the rate of 120,000 per year on each of October 27,
2001 and October 27, 2002. The Options continue to be exercisable until
October 27, 2010 unless earlier terminated.

(3) Subject to stockholder approval of certain amendments to the Company's
1997 Incentive Equity Plan which amendments include increasing the
number of shares reserved to the Plan to 1,000,000. The Options are
exercisable cumulatively at the rate of 33.33% on or after October 27,
2001 and 33.33% per year on each of October 27 thereafter. The Options
continue to be exercisable thereafter until October 27, 2010 unless
earlier terminated.

(4) This amount was calculated using the Black-Scholes option pricing
model, a complex mathematical formula that uses a number of factors to
estimate the present value of stock options. The assumptions used in
the valuation of the options for 2000 were: exercise price of $7.00, a
stock price volatility factor of 0.256; an expected life of 4 years, a
risk-free interest rate of 5.75% and a dividend yield of 0.0%. The
Black-Scholes model generates an estimate of the value of the right to
purchase a share of stock at a fixed price over a fixed period. The
actual value, if any, an executive realizes will depend on whether the
stock price at exercise is greater than the grant price as well as the
executive's continued employment through the vesting period and the
option term.

(5) All options previously granted to Mr. Munden and Mr. Barr were
surrendered and cancelled upon their resignations during 2001. As part
of their termination agreements, the Company issued warrants to Mr.
Munden and Mr. Barr equivalent to the number of options surrendered.
The exercise price of the warrants was $7.00 per share. Mr. Munden's
warrants will expire on September 27, 2004 and Mr. Barr's warrants will
expire on February 24, 2003.

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29

The following table provides information on the value of each named
officer's unexercised options to acquire Common Stock at December 31, 2000.

<Table>
<Caption>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
-------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/ OPTIONS/SARS AT
SHARES SARS AT FY-END (#) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
------------------------------ ------------------ ----------------- ----------------------- -----------------------

Joseph T. Williams -0- -0- 0/250,000 $0/$218,750
Edward J. Munden (2) -0- -0- 0/240,000 $0/$210,000
William W. Lesikar -0- -0- 0/35,000 $0/$30,625
Ronald Idom -0- -0- 0/35,000 $0/$30,625
William A. Williamson -0- -0- 0/25,000 $0/$21,875
Brian J. Barr (3) -0- -0- 0/25,000 $0/$21,875
</Table>

----------
(1) Based on December 31, 2000 closing price of $7.875

(2) Resigned effective August 31, 2001

(3) Resigned officer positions effective August 31, 2001

EXECUTIVE EMPLOYMENT AGREEMENTS

Joseph T. Williams

Effective October 6, 2000, we entered into an employment agreement with
Joseph T. Williams. The initial term of the employment agreement is for 2 years
but it will be automatically extended for a further term of 2 years on each
anniversary date of the agreement unless, at least 60 days before the
anniversary date we notify Mr. Williams that we will not be extending the term.
Mr. Williams will receive a base salary of $250,000 per year. Each year during
the term, our compensation committee will determine a target bonus for Mr.
Williams for that year that will be in the range of between 20% and 120% of Mr.
Williams' base salary. Determination of the actual bonus amount to be paid to
Mr. Williams will be in the discretion of our board of directors and will depend
in part of the performance of the Company during the year but in any case will
not be less than 20% of the base salary.

If we terminate Mr. Williams' employment for reasons other than for
'cause' or Mr. Williams terminates his employment for 'good reason', as those
terms are defined in the contract, then we must pay Mr. Williams, in addition to
any accrued but unpaid salary and bonus to which he may then be entitled, the
sum of 1 year's base salary plus the greater of his target bonus for that year
or the actual bonus paid or payable with respect to the previous year. If
termination occurs for those reasons within 2 years of a change of control or
Mr. Williams resigns for any reason during the 13th month following a change of
control, then Mr. Williams will be entitled to receive 3 times that amount. If
termination is for reasons other than for cause or Mr. Williams terminates his
employment for good reason he will also be entitled to receive health benefits
for 3 years after termination as well as any benefits he might then be entitled
to under any supplemental retirement plan we may have in place at the time. In
addition, all of Mr. Williams' unvested stock options will vest immediately or
he

26
30

may elect to receive the cash equivalent of any unexercised stock options. We
have also agreed to make additional payments to indemnify Mr. Williams should
the severance payments attract excise tax under Article 4999 of the Internal
Revenue Code.

"Change of Control" is defined in Mr. William's contract to include:
(i) the acquisition of beneficial ownership of an aggregate of 15% of the voting
power of our outstanding voting securities by any person, (ii) specified changes
in the composition of our board of directors, (iii) a merger or sale of our
Company if we are not the surviving entity, (iv) the sale of all or
substantially all of our assets, and (v) the approval by our stockholders of a
plan of liquidation or dissolution,

Under the employment agreement, we agreed to issue to Mr. Williams
options to purchase 250,000 shares of our common stock. The exercise price for
these options is $7.00 per share of common stock. The grant of the options is
subject to the approval by our stockholders of an certain amendments to our 1997
Incentive Equity Plan including an amendment that increases the number of
options that may be awarded under the plan. Of these options, 20,000 will vest
immediately upon stockholder approval and fifty percent of the balance of these
options will vest on each of the first two anniversary dates of the grant. If we
fail to deliver the options or fail to receive stockholder approval in a timely
fashion, Mr. Williams may elect to receive the cash equivalent of the options.
In addition, we have also entered into an indemnification agreement with Mr.
Williams.

Edward J. Munden

Effective as of November 11, 2000, the Company entered into an
employment agreement with Edward J. Munden that was substantially similar to
that of Mr. Williams except that Mr. Munden's contract provided for a base
salary of $240,000 per annum and incentive stock options for 240,000 shares of
common stock. Mr. Munden resigned effective August 31, 2001

On August 6, 2000, in connection with the Company's decision to close
its offices in Ottawa, Canada, the Board notified Mr. Munden that it required
him to relocate to Dallas on or before November 6, 2001. Mr. Munden declined to
relocate and instead elected to resign effective on August 31, 2001. As a
settlement of its obligations under Mr. Munden's employment contract, which was
to have expired on November 10, 2002, the Company entered into a severance
agreement with Mr. Munden under which it agreed to pay him $579,853 consisting
of his Base Salary plus accrued Highest Annual Bonus through November 6, 2001
plus a severance payment equal to the sum of 1 year's Base Salary plus his
Highest Annual Bonus (as those capitalized terms were defined in his employment
contract) in exchange for Mr. Munden's general release and surrender of his
options. The termination agreement also provides that we will issue 240,000
warrants to Mr. Munden to replace the options that he had been previously
granted. The warrants have an exercise price of $7.00 per share and will expire
on September 27, 2003. In the event that a Change of Control (as defined in Mr.
Munden's employment contract) occurs at any time through March 31, 2003, the
Company will pay Mr. Munden an additional amount of two times his Base Salary
and Highest Annual Bonus. As part of the severance package, the Company also
agreed to pay Mr. Munden an additional cash amount of $36,086 in consideration
of its obligation to maintain certain fringe benefits that Mr. Munden would have
been entitled to receive to the end of the term had his employment contract
remained in place. Mr. Munden has agreed to make himself available as a
consultant for up to 1 hour per week for a period of 6 months following the
effective date of his termination of employment.

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31

William W. Lesikar, Ronald Idom, and William A. Williamson

Effective as of November 11, 2000, the Company entered into employment
agreements with each of its Vice Presidents: William W. Lesikar, Ronald Idom,
and William A. Williamson. The terms of the employment agreements for each of
the Vice Presidents are substantially similar although they do differ in terms
of the amount of base salary and target bonus.

Mr. Lesikar's employment contract initially provided for a base salary
of $145,000 per annum. On August 29, 2001, the compensation committee approved
an increase in Mr. Lesikar's base salary to $155,000 Mr. Idom's agreement
initially established a base salary of $135,000. On August 29, 2001, the
compensation committee approved an increase in Mr. Idom's base Salary to
$155,000. The employment agreement of Mr. Williamson establishes his base salary
at $130,000 per annum. The vice president employment agreements provide that for
each year during the term, the Company's compensation committee will determine a
target bonus for each vice president for that year that will be in the range of
between 0% and 60% of their respective base salaries. Determination of the
actual bonus amount to be paid to a particular vice president will be in the
discretion of our board of directors and will depend in part of the performance
of the Company during the year. Generally, actual bonuses will range between 0%
and 200% of the target bonus. For the fiscal year ending December 31, 2001, the
target bonus established for Mr. Lesikar and Mr. Idom is 35% and for Mr.
Williamson the target bonus has been set at 25%. For the year ended December 31,
2000, the Company paid bonuses totaling $110,000 to these three officers. Mr.
Barr resigned his officer positions effective on August 31, 2001

Each of the vice president employment agreements is for an initial term
of 2 years and the agreements provide that the term will be automatically
extended for 2 years on each anniversary of their effective dates unless the
Company notifies the particular officer at least 60 days prior to the
anniversary date that it is electing not to extend the term.

Each of the vice president employment agreements includes a severance
provision which is triggered by the Company's termination of the agreement
without 'cause', or the officer's termination with 'good reason', as those terms
are defined in the agreement. Under the severance provisions, the Company must
pay the officer a severance payment equivalent to his annual base salary plus
the target bonus established for the year in which termination occurs prorated
to the termination date. If the termination follows a change of control, then
the Company must pay the officer a severance payment equivalent to the full
target bonus established for the year in which termination occurs plus 1.5 times
his annual base salary.

"Change of Control" is defined in the vice president employment
agreements to include a merger or sale of the Company in which the Company is
not the surviving entity, the sale of all or substantially all of the Company's
assets, the approval by the Company's stockholders of a plan of liquidation,
bankruptcy of the Company, specified changes in the composition of the board of
directors, and the acquisition of beneficial ownership of an aggregate of 15% of
the voting power of the Company's outstanding voting securities by any person or
group who, on the date of the employment agreement, beneficially owned less than
10% of the voting power of the Company's outstanding voting securities, the
acquisition of beneficial ownership of an additional 5% of the voting power of
the Company's outstanding voting securities by any person or group who, on the
date of the employment agreement, beneficially owned at least 10% of the voting
power of the Company's outstanding voting securities, or the execution by the
Company and a stockholder of a contract that by its terms grants such
stockholder or such stockholder's affiliate, the right to veto or block
decisions or actions of the Board of Directors.

Each of the vice president employment agreements includes a
non-competition covenant pursuant to which throughout the term of the agreement
and, unless the agreement terminates at the expiration of the term, or the
Company terminates the agreement without cause or the officer terminates the
agreement with good reason or the agreement is terminated after a change of
control, through the first anniversary of the expiration

28
32

of the agreement, the officer may not engage in the business of acquiring oil
and natural gas reserves and oil and natural gas production and exploitation.
The geographic area covered by the non-competition covenant includes any state
in which the Company has material operations at the time of the termination.

Brian J. Barr

Effective as of November 11, 2000, the Company entered into an employment
agreement with Brian J. Barr under which Mr. Barr was employed as Vice President
and General Counsel. The terms of Mr. Barr's employment contract, including Base
Salary and Target Bonus were substantially similar to that of Mr. Williamson
described above. The initial term of the contract was to have expired on
November 10, 2002. Mr. Barr was located at the company's Ottawa office along
with Edward J. Munden. On August 6, 2000, in connection with the Company's
decision to close its Ottawa office, the Board notified Mr. Barr that it
required him to relocate to Dallas on or before November 6, 2001. Mr. Barr
declined to relocate. The Company entered into a severance agreement with Mr.
Barr under which Mr. Barr agreed to resign his officer positions effective
August 31, 2001 and to resign his employment on the earlier of his receipt of
written notice from the Company or November 6, 2001. As a settlement of the
Company's obligations under Mr. Barr's employment contract, the Company agreed
to pay Mr. Barr the amount of $157,603 consisting of his Base Salary through
November 6, 2001 plus a severance payment equal to the sum of one year's Base
Salary plus accrued Target Bonus (as those capitalized terms were defined in his
employment contract). In addition, the Company agreed to issue 25,000 warrants
to Mr. Barr to replace the options that he had been previously granted. The
warrants have an exercise price of $7.00 per share and will expire on February
24, 2003. In the event that a Change of Control (as that term is defined in Mr.
Barr's employment contract) occurs at any time through March 31, 2003, the
Company will pay Mr. Barr an additional amount of one half his annual Base
Salary. As part of the severance package, the Company also agreed to pay Mr.
Barr an additional cash payment of $16,000 which is the equivalent amount of the
fringe benefits that he would have been entitled to receive to the end of the
term had his employment contract remained in place to the end of its term. Mr.
Barr's termination agreement also contains a general release and a
non-competition clause and provides for the surrender and cancellation of all
options previously granted to Mr. Barr. Mr. Barr has agreed to make himself
available as a consultant for up to 5 hours per month for a period of 12 months
following the effective date of his termination of employment.

COMPENSATION COMMITTEE REPORT

The compensation committee of the board of directors of the Company is
responsible for overseeing the compensation of our executive officers. It
consists of three independent directors: Jerry B. Davis (Chairman), Robert L.
Keiser and Patrick J. Keeley.

Compensation policies. The Company executive officer compensation
package consists of three components: base salary, annual incentive bonuses and
stock option grants. The Company is committed to pay base salaries that are
above the median among the companies in our peer group to attract and retain
talented executives who can create value for the Company. In addition we pay
annual incentive bonuses as a percent of base salary based upon the performance
of the Company and we award stock option grants to our executive officers and
employees. The Company's compensation committee reviews industry performance and
cost-of-living increments as well as compensation levels among our peer group to
arrive at appropriate compensation levels for its executives.

Incentive bonuses are awarded annually based on performance measures
and goals established by our compensation committee. The committee reviews,
among other things, reserve growth, lease operating expenses, finding costs,
administrative expenses and returns to stockholders. Based on the results of
these assessments and an evaluation by the committee of individual executive
performance, the committee may adjust awards to reflect individual performance.
Prior to fiscal 2000, the compensation committee targeted bonuses at 50% of base
salary. Beginning in the year 2000 the committee established target bonuses
ranging

29
33

from 0% to 60% of base salary. Actual bonuses may be more or less than the
target depending on individual performance and cash availability in the Company.

Long-term incentives are an essential component of the Company's pay
package because they hold our executive officers accountable for attaining our
business strategy. At this time, stock options are the Company's primary
long-term incentive reward vehicles and may be awarded in the discretion of the
compensation committee. Stock options are granted with the option price equal to
the fair market value of the Company's stock on the date of the grant and with
incremental vesting restrictions. As part of the Recapitalization that occurred
during the year ending December 31, 2000 (See: Item 1, "Business-Recent
Developments" in our Annual Report on Form 10-K filed with the SEC on March 30,
2001), all 558,000 options that had been granted in prior years were cancelled.
Following the Recapitalization, the compensation committee awarded new options
to purchase shares of post reverse split common stock to executives and
employees. All of these grants are subject to stockholder approval of certain
amendments to the Company's 1997 Incentive Equity Plan including an increase in
the number of shares authorized for issuance under the plan. As of December 31,
2000, options to acquire a total of 642,500 shares of post reverse split common
stock had been granted to certain executives and employees. The options will
vest in two or three year annual installments depending on the particular
grantee. All have an exercise price of $7.00. On August 31, 2001, 265,000
options were surrendered and cancelled upon the resignation of the two officers
to whom they had been issued.

Relationship of compensation to performance. During the course of the
year ended December 31, 2000 much of the focus of management was directed at the
Recapitalization. and executive compensation was related primarily to the
successful completion of the Recapitalization. The Recapitalization was approved
by the stockholders at a meeting held on September 18, 2000. As a result of the
successful completion of the Recapitalization, the Company's financial position
was significantly strengthened: outstanding debt was reduced by almost 64%;
outstanding preferred stock and dilutive conversion and repricing rights were
eliminated; and borrowing capacity was increased.

Following the successful completion of the Recapitalization , the
Company announced a four-part strategy directed at growing its asset base and
increasing shareholder value. This strategy consists of: (1) establishing an
exploration program to add reserves at competitive finding costs; (2) developing
and exploiting our existing properties; (3) pursuing selective property
acquisitions; and (4) actively seeking corporate acquisitions and mergers. The
Company's executive pay strategy for the year ending December 31, 2001 is
designed to support this business strategy through competitive base salaries,
annual incentive bonuses and stock option grants that rewards the attainment of
these objectives.

2000 Compensation for our chief executive officer. In determining the
compensation of Edward J. Munden, Chief Executive Officer, the compensation
committee considered Mr. Munden's history with the Company dating back to its
inception in 1994, his key role in the successful completion of the
Recapitalization as well as his contribution to the Company's operating and
financial results for fiscal year 2000. The committee evaluated Mr. Munden's
individual performance and substantial contribution to those results and
considered the compensation range for other chief executive officers in our peer
group. Based on that review and assessment, the Company agreed to a new
employment contract with Mr. Munden which became effective on November 6, 2000
and, among other things, increased his base salary from $160,000 to $240,000 per
year and awarded him options to purchase 240,000 shares of post reverse split
common stock. For the fiscal year ended December 31, 2000, our Company paid Mr.
Munden a base salary of $174,000 and an annual incentive bonus of $150,000. Mr.
Munden resigned effective on August 31, 2001.

Jerry B. Davis (Chairman)
Robert L. Keiser
Patrick J. Keeley

30
34

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION IN COMPENSATION DECISIONS

The compensation committee consists of: Jerry B. Davis (Chairman),
Robert L. Keiser and Patrick J. Keeley. None of the members of the compensation
committee of the board of directors is or has been an officer or employee of our
Company. No executive officer of our Company serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on our Company's compensation committee.

COMPENSATION OF DIRECTORS

The board of directors has adopted a policy whereby each non-employee
director is paid an annual retainer fee of $18,000 plus meeting fees of $1,000
for each board of directors meeting and $1,000 for each committee meeting (other
than brief telephonic meetings) attended by the director unless the committee
meeting is held on the same day s a board meeting, in which case the fee is
$500. The Company also reimburses its directors for travel, lodging and related
expenses they may incur attending board of directors and committee meetings. In
addition, subject to stockholder approval of an amendment to our directors'
nonqualified stock option plan to increase the number of shares subject to the
plan, we have granted each non-employee director options to purchase a total of
30,000 shares of common stock upon the director's joining our board. The
exercise price in respect of 3,000 of the options is $7.00 and is $7.0625 in
respect of the remaining 27,000 options. If we do not obtain stockholder
approval of the amendment to the option plan, then we will pay the directors the
cash equivalent of the options. In addition, we have entered into
indemnification agreements with our non-employee directors.

STOCKHOLDER RETURN COMPARISON

Set forth below is a line graph comparing the total return on the
Common Stock with the cumulative total return of the Nasdaq Market index, the
Russell 2000 Index and the 3 digit MG Industry Group Index for Independent Oil
and Gas Companies, resulting from an initial assumed investment of $100 in each
and assuming the reinvestment of any dividends, for the period beginning on
December 31, 1997 and ending on December 31, 2000. The Company believes that
since its common stock began trading on the Nasdaq National Market System in
October 2000, it is appropriate to use the broadly based Nasdaq Market Index.
Because the Company used the Russell 2000 Index as a comparable in previous
years, it is required to use include the Russell 2000 Index this year but the
Company expects to discontinue its use in future years. The stock performance
graph is not necessarily indicative of future price performance.

<Table>
<Caption>
COMPANY/INDEX 12/31/97 12/31/98 12/31/99 12/31/00
------------- -------- -------- -------- --------

DevX Energy, Inc. 100.00 60.45 7.05 0.81

MG 121 Index 100.00 64.77 90.74 131.68

NASDAQ Market Index 100.00 141.04 248.76 156.35

Russell 2000 Index 100.00 97.20 116.24 111.22
</Table>

31
35

COMPARE CUMULATIVE TOTAL RETURN
AMONG DEVX ENERGY INCORPORATED,
RUSSELL 2000 INDEX AND MG GROUP INDEX

[PERFORMANCE GRAPH]

<Table>
<Caption>
12/31/97 12/31/98 12/31/99 12/31/00
---------- ---------- ---------- ----------

DEVX ENERGY INC 100.00 60.45 7.05 0.81
MG GROUP INDEX 100.00 64.77 90.74 131.68
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35
RUSSELL 2000 INDEX 100.00 97.20 116.24 111.22
</Table>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

OWNERSHIP OF SECURITIES

The following table sets forth information with respect to the number
of shares of the Company's Common Stock beneficially owned as of September 1,
2001 by (i) all holders (the "Stockholders") of shares of the Common Stock known
by the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) the executive officers of the Company, (iii) each Director of
the Company and (iv) all Directors and officers of the Company as a group.

<Table>
<Caption>
AMOUNT AND
NATURE OF
BENEFICIAL APPROXIMATE % OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) COMMON STOCK
------------------------------------------------------------------------------- ----------------- ------------------

DIRECTORS & OFFICERS

Joseph T. Williams 10,000 *

William W. Lesikar 100 *
Ronald Idom -0- *
William A. Williamson -0- *
Patrick J. Keeley 2,000 *
Robert L. Keiser 4,000 *
Jerry B. Davis 2,000 *

ALL DIRECTORS & OFFICERS AS A GROUP 18,100 *
</Table>

32
36

<Table>
<Caption>
FIVE PERCENT STOCKHOLDERS(2)

Mark E. Brady, Robert J. Suttman, Ron L. Eubel
c/o Eubel Brady & Suttman Asset Management Inc.
7777 Washington Village Drive, Ste 210, Dayton, OH 45459 731,000 5.73%

Bernie Holtgrieve, William E. Hazel & EBS Asset Management, Inc.
c/o Eubel Brady & Suttman Asset Management Inc.
7777 Washington Village Drive, Ste 210, Dayton, OH 45459 707,000 5.55%

Mark E. Strome, Strome Investment Management L.P., SSCO, Inc., Strome
Offshore Limited, Strome Hedgecap Fund, L.P.
c/o Strome Investment Management L.P.
100 Wilshire Blvd., 15th Floor, Santa Monica, CA 90401 1,100,000 8.63%

Paul P. Tanico, Ellen H. Adams, CastleRock Management, LLC, CastleRock
Asset Management, Inc., CastleRock Partners, L.P., CastleRock Partners II,
L.P. CastleRock Fund, Ltd.
c/o CastleRock Asset Management, Inc.
101 Park Avenue, 6th Floor, New York, NY 10178 1,104,400 8.66%

Tudor Investment Corporation, Paul Tudor Jones, II, Tudor Proprietary
Trading, L.L.C., The Altar Rock Fund L.P.
c/o 1275 King St., Greenwich, CT 06831
The Raptor Global Portfolio Ltd. The Tudor BVI Global Portfolio Ltd., The
Ospraie Portfolio Ltd.
c/o CITCO Kaya Flamboyan 9, Curacao, Netherlands Antilles (3) 1,500,000 11.77%

Farallon Capital Partners, L.P., Farallon Capital Institutional Partners,
L.P., Farallon Capital Institutional Partners II, L.P., Farallon Capital
Institutional Partners III, L.P., Tinicum Partners L.P., Farallon Capital
Management L.L.C., Farallon Partners, L.L.C., Enrique H. Boilini, David I.
Cohen, Joseph F. Downes, William F. Duhamel, Andrew B. Fremder, Richard B.
Fried, Monica R. Landry, William F. Mellin, Stephen L. Millham, Meridee A.
Moore, Thomas F. Steyer, Mark C. Wehrly 1,112,300 8.7%
</Table>

* indicates less than 1%.

(1) Includes options exercisable within 60 days.

(2) Information based on most recent SEC Filings made by these
stockholders as of September 1, 2001.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

JEDI TRANSACTION

On May 6, 1997, an affiliate of Enron Corp. by the name of Joint Energy
Development Investments L.P. ("JEDI"), became a significant stockholder by
purchasing 9,600,000 shares of our Series A preferred stock and warrants to
purchase our common stock in exchange for the payment to us of $5,000,000 cash
and the execution and delivery by JEDI of an earn up agreement. The 9,600,000
shares of Series A preferred stock represented approximately 33% of the voting
power of the Company at that time.

In connection with the investment by JEDI, we entered into a securities
purchase agreement, a stockholders agreement, a registration rights agreement
and a letter agreement with an affiliate of JEDI. The securities purchase
agreement included customary representations, warranties and covenants for an
investment in preferred stock and warrants. The purchase agreement also granted
JEDI certain "maintenance rights"

33
37

which gave JEDI the right to maintain its proportionate equity interest in our
company. Under the stockholders agreement, both JEDI and our management
stockholders agreed to specified transfer restrictions on our company's
securities. Under the registration rights agreement, we granted JEDI
registration rights with respect to common stock issuable upon conversion of the
Series A preferred stock and upon exercise of the warrants. Under the letter
agreement, we engaged ECT Securities Corp. to act as our advisor and provide
consultation, assistance and advice to us with respect to our operations and
properties.

As part of our Recapitalization, JEDI exchanged all its 9,600,000
shares of Series A Preferred Stock together with all its outstanding warrants
and maintenance rights for 212,500 shares of post reverse split common stock. In
addition, the purchase agreement, the registration rights agreement, the
stockholders' agreement and the ECT letter agreement described above were
terminated and JEDI ceased to be an affiliate of the Company as a result of the
Recapitalization. As a result of the 156:1 reverse split of our common stock
that was part of the Recapitalization, JEDI's 2,634,952 million shares of pre
reverse split common stock (par value $0.0015), which it had acquired pursuant
to its exercise of certain warrants and maintenance rights that we had granted
to JEDI under the purchase agreement, were converted into 16,891 shares of post
reverse common stock (par value $0.234).

HEDGING ACTIVITIES

During the year ended December 31, 2000, we were a party to the hedging
agreements described below with Enron North America Corp. ("Enron"), an
affiliate of JEDI who, until October 31, 2000, was one of our significant
stockholders.

The table below sets out volumes of natural gas hedged with a swap at
$2.40 per MMBtu with Enron. No fee was paid to Enron for entering into this
agreement. The volumes presented in this table are divided equally over the
months during the period.

VOLUME
PERIOD BEGINNING PERIOD ENDING (MMBTU)
----------------------------------------------- -------------------------- ------------------

May 1, 1998 December 31, 1998 2,210,000
January 1, 1999 December 31, 1999 2,710,000
January 1, 2000 December 31, 2000 2,200,000
January 1, 2001 December 31, 2001 1,850,000
January 1, 2002 December 31, 2002 1,600,000
January 1, 2003 December 31, 2003 1,400,000
</Table>

The table below sets out the volumes of natural gas hedged with a floor
price of $1.90 per MMBtu under an agreement with Enron, which received a fee of
$478,000 during the year ended December 31, 1998 for entering into this
agreement. The volumes presented in this table are divided equally over the
months during the period.

<Table>
<Caption>
VOLUME
PERIOD BEGINNING PERIOD ENDING (MMBTU)
------------------------------------------------ ------------------------- -------------------

May 1, 1998 December 31, 1998 885,000
November 1, 1999 December 31, 1999 1,080,000
January 1, 2000 December 31, 2000 880,000
January 1, 2001 December 31, 2001 740,000
January 1, 2002 December 31, 2002 640,000
January 1, 2003 December 31, 2003 560,000
</Table>

34
38

The table below sets out volumes of oil hedged with a collar with Enron
involving floor and ceiling prices as set out in the table below. The volumes
presented in this table are divided equally over the months during the period.

<Table>
<Caption>
VOLUME FLOOR CEILING
PERIOD BEGINNING PERIOD ENDING (MMBTU) PRICE PRICE

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

December 1, 1999 March 31, 2000 40,000 $22.90 $25.77
April 1, 2000 June 30, 2000 15,000 $23.00 $28.16
July 1, 2000 December 31, 2000 30,000 $22.00 $28.63
</Table>

During the years ended December 31, 2000 and 1999, the Company
recognized hedging losses of approximately $3,000 and $203,000, respectively,
relating to this contract.

FRIEDMAN BILLINGS RAMSEY & CO.

In August 1999 the Company retained the firm of Friedman Billings
Ramsey & Co. ("FBR") of Arlington, Virginia as its financial advisor for an
initial term of 2 years. This term was subsequently extended to November of
2002. On November 10, 2000, Mr. Patrick J. Keeley, who serves as one of FBR's
managing directors, became one of our directors. Our agreement with FBR provides
that FBR will assist us to identify, evaluate and, where we deem it appropriate,
implement various strategic alternatives including business combinations,
capital raising and self tenders. The agreement obligates us to pay FBR a fee of
up to 2% of the total consideration involved in any business combination that we
implement plus a fee of 5% of the gross proceeds of any capital raised during
the term of the agreement. In addition we have agreed to reimburse FBR for any
out-of-pocket expenses it incurs in connection with performing its services
under the agreement including the fees and disbursements of its legal counsel
and its petroleum engineering consultants.

During the year ending December 31, 2000, FBR assisted the Company to
implement the Recapitalization by helping us negotiate with our major equity and
debt stakeholders. In addition FBR acted as the lead underwriter for the public
offering of 11,500,000 shares of our post reverse split common stock that we
closed in October and November of 2000. Simultaneously with the underwriting,
FBR assisted the Company to execute a tender to repurchase $75 million of
original principal amount of our 12.5% Senior Notes due July 2008. During the
year we paid FBR fees totaling approximately $5.7 million plus expenses.

Employment Agreements

Each of Joseph T. Williams, Ronald Idom, William Lesikar, and William
Williamson has entered into an employment agreement with the Company. See
"Executive Compensation - Employment Agreements."

Severance Agreements

The Company entered into severance agreements with each of Edward J.
Munden and Brian J. Barr Described above under "Executive Compensation-Executive
Employment Agreements".

35
39

GENERAL; 2002 ANNUAL MEETING

The Company's Annual Report on Form 10-K and Form 10KA-1 No. 1 dated
April 30, 2001 for the fiscal year ended December 31, 2000 are enclosed
herewith. A proposal to be presented by a Stockholder pursuant to Rule 14A-8 of
the 1934 Act at the Company's 2002 Annual Meeting, presently expected to be held
on July 15, 2002, must be received by the Company at its principal executive
offices no later than February 15, 2002 to be included in the Company's proxy
statement for that meeting. At the 2002 Annual Meeting, management proxies will
have discretionary authority, under Rule 14a-4 of the 1934 Act, to vote on
stockholder proposals that are not submitted for inclusion in the Company's
proxy statement unless received by the Company before May 1, 2002.

OTHER BUSINESS

Management knows of no other matter that will come before the meeting.
However, if other matters do come before the meeting, the proxy holders will
vote in accordance with their best judgment.

By Order of the Board of Directors,

/s/ WILLIAM W. LESIKAR
------------------------------------------
WILLIAM W. LESIKAR
Secretary, Senior Vice President & Chief
Financial Officer

September 21, 2001

36
40

EXHIBIT A

DEVX ENERGY, INC.
AUDIT COMMITTEE CHARTER

EXHIBIT A

DEVX ENERGY, INC.
AUDIT COMMITTEE CHARTER

I. PURPOSE OF THE COMMITTEE

The Audit Committee (the "Committee") of DevX Energy, Inc. (the "Company") is a
committee of the Board of Directors. Its primary function is to assist the Board
of Directors in fulfilling its oversight responsibilities by reviewing (i) the
financial information which will be provided to the shareholders, potential
shareholders, the investment community and others; (ii) the systems of internal
controls which management and the Board of Directors have established; and (iii)
the audit process.

II. ORGANIZATION

The Committee will be organized as follows:

1. FREQUENCY OF MEETINGS. The Committee shall meet at least four times
per year or more frequently as circumstances require. The Committee may ask
members of management or others to attend the meeting and provide pertinent
information as necessary.

2. SIZE OF COMMITTEE. The Committee shall initially have two members
and may be expanded to include three members, who shall serve at the pleasure of
the Board of Directors.

3. QUALIFICATIONS. All members shall be independent directors, except
that, in exceptional and usual circumstances, one member of the Committee may
not be an independent director if he or she is neither a current employee of the
company nor a family member of an employee of the company and the Board of
Directors determines that the person's Committee membership is required by the
best interest of the Company and its shareholders. An "independent director" is
a person who:

(a) is not employed by the Company or any of its affiliates for
the current year or any of the past three years,

(b) does not accept any compensation from the Company or any of
its affiliates in excess of $60,000 during the previous fiscal
year, other than compensation for board service, benefits
under a tax re-qualified retirement plan, or non-discretionary
compensation;

(c) is not a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by
the Company or any of its affiliates as an executive officer,

(d) is not a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to
which the Company made, or from which the Company received,
payments (other than those arising solely from investments in
the Company's securities) that exceeded 5% of the Company's or
the business organization's consolidated gross revenues for
that year, or $200,000, whichever is more, in any of the past
three years,

1
42

(e) is not employed as an executive of another entity where any of
the Company's executives serve on that entity's compensation
committee, and

(f) does not have a relationship that, in the opinion of the Board
of Directors of the Company, would interfere with the exercise
of independent judgment in carrying out the responsibilities
of a director.

Immediate family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in that person's home.

4. APPOINTMENT. The Committee members and the Committee chairman shall
be designated by the full Board of Directors.

III. ROLES AND RESPONSIBILITIES

In meeting its responsibilities, the Committee will:

1. COMMUNICATION WITH AUDITOR. Provide an open avenue of communication
between the internal auditor, the independent accountant and the Board of
Directors, including meeting with the internal auditor, the independent
accountant and management in separate executive sessions to discuss any matters
that the Committee or any of these persons believe should be discussed privately
with the Committee.

2. CHARTER. Review and update the Committee's charter annually.

3. ACCOUNTABILITY. Confirm with the independent accountant the
accountant's ultimate accountability to the Board of Directors and the Audit
Committee, as representatives of the shareholders.

4. OVERSIGHT. Select and recommend to the Board of Directors the
independent accountant to be proposed for shareholder approval, approve the
compensation of the independent accountant, review and evaluate the independent
accountant, and recommend to the Board of Directors the discharge of the
independent accountant.

5. PLACEMENT OF STAFF. Review and concur in the appointment,
replacement, reassignment or dismissal of the Company's audit staff.

6. INDEPENDENCE. Take action, or recommend that the full Board of
Directors take action, to oversee the independence of the independent accountant
by, among other things, (i) receiving from the independent accountant a formal
written statement delineating all relationships between the accountant and the
Company, consistent with Independence Standards Board Standard 1, and (ii)
actively engaging in a dialogue with the accountant with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the accountant.

7. RISKS. Inquire of management, the internal auditor and the
independent accountant about significant risks or exposures and assess the steps
management has taken to minimize such risk to the Company.

2
43

8. AUDIT SCOPE. Review with the Company's audit staff the audit scope
and plan, including the coordination of audit effort between the internal
auditor and the independent accountant, to assure completeness of coverage,
reduction of redundant efforts and the effective use of audit resources.

9. OTHER AUDITORS. Consider with management and the independent
accountant the rationale for employing audit firms other than the principal
independent accountant.

10. MD&A. Review Management's Discussion and Analysis (MD&A) included
in Form 10-K.

11. ANNUAL EXAMINATION. Review with management and the independent
accountant at the completion of the annual examination:

(a) The Company's annual financial statements and related
footnotes.

(b) The independent accountant's audit of the financial
statements its report thereon.

(d) Any serious difficulties or disputes with management
encountered during the course of the audit.

(e) Other matters related to the conduct of the audit
which are to be communicated to the Committee under
generally accepted auditing standards or any other
concerns.

(f) The Company's compliance with its loan agreements.

(g) The existence of significant estimates and the
rationale behind those estimates as well as any
significant changes in such estimates.

(h) All fees paid to the independent accountant for the
previous fiscal year.

(i) Any significant transactions that were not a normal
part of the Company's business.

(j) Any change in accounting principles.

(k) Any prior period adjustments.

(l) The initial reporting of any signification loss or
gain contingency (or significant change in the
magnitude of any contingency).

(m) The "Management Letter" from the independent
accountants.

3
44

12. INTERNAL CONTROLS. Consider and review with management, the
independent accountant and the internal auditor:

(a) The adequacy of the Company's internal controls,
including the adequacy of controls and security for
management information systems and other information
technology.

(b) Any related significant findings and recommendations
of the independent accountant and internal audit
together with management's responses thereto.

13. INTERNAL REVIEW. Consider and review with management and the
internal auditor:

(a) Significant findings during the year and management's
responses thereto.

(b) Any difficulties encountered in the course of their
audits, including any restrictions on the scope of
their work or access to required information.

(d) The internal auditing department budget and staffing.

(e) The internal audit department charter.

(f) The internal auditor's compliance with the Institute
of Internal Auditors Standards for the Professional
Practice of Internal Audits.

14. SEC FILINGS. Review filings with the Securities and Exchange
Commission (the "SEC") and other published documents containing the Company's
financial statements and consider whether the information contained in these
documents is consistent with the information contained in the financial
statements.

15. COMPLIANCE. Review the Company's policies relating to compliance
with laws and regulations; the Company's code of conduct; ethics; officers'
expense accounts, perquisites, and use of corporate assets; conflict of interest
and the investigation of misconduct or fraud. Determine the extent to which the
planned audit scope of the internal auditor and independent accountant can be
relied on to detect fraud.

16. LEGAL MATTERS. Review legal and regulatory matters that may have a
material impact on the financial statements, the Company's related compliance
policies and programs and reports received from regulators.

17. REPORT TO BOARD. Report actions of the Committee to the Board of
Directors with such recommendations as the Committee may deem appropriate.

18. NEW ANNOUNCEMENTS. Review with management and the Company's
independent public accountants the applicability and impact of any new
pronouncements (or exposure drafts) issued by the Financial Accounting Standards
Board or other applicable regulatory agencies.

4
45

19. APPROPRIATENESS OF POLICIES. Review with the internal auditor and
independent accountant the appropriateness, not just the acceptability, of
accounting principles and financial disclosure practices used or proposed by the
Company and the related degree of aggressiveness or conservatism of its
accounting principles and underlying estimates.

20. DERIVATIVE TRANSACTIONS. Review with management the Company's
policies and controls, including reporting controls over derivative
transactions, including Foreign Currency exposures and hedging activities.

21. INVESTIGATIONS. Conduct or authorize investigations into any
matters within the Committee's scope of responsibilities. The Committee shall be
empowered to retain independent counsel, accountants or others to assist it in
the conduct of any investigation.

22. OTHER FUNCTIONS. Perform such other functions as assigned by law,
the Company's charter or bylaws, or the Board of Directors.

23. OTHER MATTERS. Engage in such other matters relating to the
accounting and audit practices of the Company as the Committee shall deem
appropriate, such action thereby to be conclusive evidence at to its authority
to act on behalf of and in the name of the Board of Directors of the Company.

The duties and responsibilities of a member of the Committee are in addition to
those duties set out for a member of the Board of Directors. In carrying out
these responsibilities, the Committee believes its policies and procedures
should remain flexible in order that it can best react to changing conditions
and environment and to assure the Board of Directors and shareholders that the
Company accounting practices are in accordance with all requirements and are of
the highest quality.

IV. REPORTING REQUIREMENTS

The Committee Chairperson will update the full Board of Directors regarding the
significant items of discussion during each of the Committee's meetings.
Additional reports on matters of special interest will be submitted to the Board
of Directors as appropriate.

In addition to Board of Director communication, an Audit Committee Report
containing the following information will be included in the annual proxy
statement: (1) confirmation that the Company has a formal, documented Audit
Committee Charter, (2) the full text of the Audit Committee Charter at least
once every three years and after any significant modification is approved by the
Board of Directors, (3) whether the members of the Committee are independent and
certain information about any committee member who is not independent, as
required by the SEC, (4) whether the Committee has reviewed and discussed the
audited financial statements with management, (5) whether the Committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, (6) whether the Committee has received
form the independent auditors disclosures regarding their independence required
by Independence Standards Board Standard No. 1, and had discussions with the
independent auditors regarding the independent auditors' independence, and (7)
whether the Committee has recommended to the Board of Directors that the audited
financial statements be included in the Company's annual report on Form 10-K.

5
46
APPENDIX I

DEVX ENERGY, INC.
AMENDED AND RESTATED INCENTIVE EQUITY PLAN

DEVX ENERGY, INC.

AMENDED AND RESTATED
INCENTIVE EQUITY PLAN

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

ARTICLE 1 PURPOSE.........................................................................................1

ARTICLE 2 DEFINITIONS.....................................................................................1

ARTICLE 3 ADMINISTRATION..................................................................................4

ARTICLE 4 ELIGIBILITY.....................................................................................5

ARTICLE 5 SHARES SUBJECT TO PLAN..........................................................................5

ARTICLE 6 GRANT OF AWARDS.................................................................................6
6.1 In General.............................................................................6
6.2 Maximum ISO Grants.....................................................................6
6.3 SAR....................................................................................6
6.4 Maximum Individual Grants..............................................................6
6.5 Tandem Awards..........................................................................6

ARTICLE 7 OPTION PRICE; SAR PRICE.........................................................................7

ARTICLE 8 AWARD PERIOD; VESTING...........................................................................7
8.1 Award Period...........................................................................7
8.2 Vesting................................................................................7

ARTICLE 9 TERMINATION OF SERVICE..........................................................................7

ARTICLE 10 EXERCISE OF INCENTIVE...........................................................................8
10.1 In General.............................................................................8
10.2 Disqualifying Disposition of ISO.......................................................9

ARTICLE 11 AMENDMENT OR DISCONTINUANCE.....................................................................9

ARTICLE 12 TERM............................................................................................9

ARTICLE 13 CAPITAL ADJUSTMENTS............................................................................10

ARTICLE 14 RECAPITALIZATION, MERGER AND CONSOLIDATION.....................................................10

ARTICLE 15 LIQUIDATION OR DISSOLUTION.....................................................................11
</Table>

- i -
48

<Table>

ARTICLE 16 INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED
BY OTHER CORPORATIONS..........................................................................11

ARTICLE 17 MISCELLANEOUS PROVISIONS.......................................................................12
17.1 Investment Intent.....................................................................12
17.2 No Right to Continued Employment......................................................12
17.3 Indemnification of Board and Committee................................................12
17.4 Effect of the Plan....................................................................12
17.5 Compliance With Other Laws and Regulations............................................12
17.6 Tax Requirements......................................................................12
17.7 Assignability.........................................................................13
17.8 Use of Proceeds.......................................................................13
</Table>

- ii -
49

DEVX ENERGY, INC.

AMENDED AND RESTATED
INCENTIVE EQUITY PLAN

The name of the plan is the AMENDED AND RESTATED INCENTIVE EQUITY PLAN
(the "PLAN") of DevX Energy, Inc., a Delaware corporation formerly known as
Queen Sand Resources, Inc. (the "COMPANY"). The 1997 Queen Sand Resources, Inc.
Incentive Equity Plan was originally adopted by the Board of Directors effective
as of July 1, 1997, and was approved by the Company's stockholders in 1997.
Effective December 15, 2000 the Board of Directors approved, subject to
stockholder approval, this Amended and Restated Incentive Equity Plan.

ARTICLE 1
PURPOSE

The purpose of the Plan is to attract and retain the services of
Employees and Consultants of the Company and its Subsidiaries and to provide
such persons with a proprietary interest in the Company through the granting of
incentive stock options, non-qualified stock options, stock appreciation rights,
or whether granted singly, or in combination, or in tandem, that will

(a) increase the interest of such persons in the Company's welfare and
success;

(b) furnish an incentive to such persons to continue their services for
the Company; and

With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 ACT"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.

ARTICLE 2
DEFINITIONS

Unless the context requires otherwise, the following terms shall have
the meanings indicated:

2.1 "AWARD" means the grant of any Incentive Stock Option,
Non-qualified Stock Option, or SAR whether granted singly, in combination or in
tandem (each individually referred to herein as an "INCENTIVE").

2.2 "AWARD AGREEMENT" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.

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2.3 "AWARD PERIOD" means the period during which one or more Incentives
granted under an Award may be exercised.

2.4 "BOARD" means the board of directors of the Company.

2.5 "CHANGE OF CONTROL" means any of the following: (i) any
consolidation, merger or share exchange of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property of another entity, other than a consolidation, merger or share exchange
of the Company in which the holders of the Company's Common Stock immediately
prior to such transaction have the same proportionate ownership of Common Stock
of the surviving entity immediately after such transaction; (ii) any sale,
lease, exchange or other transfer (excluding transfer by way of pledge or
hypothecation) in one transaction or a series of related transactions, of all or
substantially all of the assets of the Company; (iii) the stockholders of the
Company approve any plan or proposal for the liquidation or dissolution of the
Company; (iv) the cessation of control (by virtue of their not constituting a
majority of directors) of the Board by the individuals (the "CONTINUING
DIRECTORS") who (x) at the date of this Plan were directors or (y) become
directors after the date of this Plan and whose election or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors (1) then in office who were directors at the date of
this Plan or (2) whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the 1934 Act) of an aggregate of twenty percent (20%) of the
voting power of the Company's outstanding voting securities by any person or
group (as such term is used in Rule 13d-5 under the 1934 Act) who beneficially
owned less than fifteen percent (15%) of the voting power of the Company's
outstanding voting securities on the date of this Plan, or the acquisition of
beneficial ownership of an additional five percent (5%) of the voting power of
the Company's outstanding voting securities by any person or group who
beneficially owned at least fifteen percent (15%) of the voting power of the
Company's outstanding voting securities on the date of this Plan, provided,
however, that notwithstanding the foregoing, an acquisition shall not constitute
a Change of Control hereunder if the acquiror is (x) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company and
acting in such capacity, (y) a Subsidiary of the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of voting securities of the Company or (z)
any other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.

2.6 "CODE" means the Internal Revenue Code of 1986, as amended, or any
successor legislation.

2.7 "COMMITTEE" means the committee appointed or designated by the
Board to serve as the Compensation and Stock Option Committee (or a similarly
named Committee generally intended to administer and oversee employee
compensation plans such as the Plan) of the Board to administer the Plan in
accordance with ARTICLE 3 of this Plan.

2.8 "COMMON STOCK" means the common stock, par value $0.234 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue.

2.9 "COMPANY" means DEVX ENERGY, INC., a Delaware corporation, and any
successor entity.

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2.10 "CONSULTANT" means any person performing advisory or consulting
services for the Company or a Subsidiary, with or without compensation, to whom
the Company chooses to grant an Award in accordance with the Plan, provided that
bona fide services must be rendered by such person and such services shall not
be rendered in connection with the offer or sale of securities in a capital
raising transaction.

2.11 "DATE OF GRANT" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement; provided,
however, that solely for purposes of Section 16 of the 1934 Act and the rules
and regulations promulgated thereunder, the Date of Grant of an Award shall be
the date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.

2.12 "EMPLOYEE" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.

2.13 "FAIR MARKET VALUE" of a share of Common Stock is (i) the mean of
the highest and lowest prices per share on any exchange or stock quotation
system that reports daily high and low sales prices, (ii) the mean of the bid
and sale prices on any other stock quotation system, or (iii) if the common
stock is not then-traded on any organized system, the fair market value of a
share of Common Stock as determined in good faith by the Board, on the
appropriate date, or in the absence of reported sales on such day, the most
recent previous day for which sales were reported.

2.14 "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.

2.15 "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.

2.16 "NON-QUALIFIED STOCK OPTION" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.

2.17 "OPTION PRICE" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

2.18 "PARTICIPANT" shall mean an Employee or a Consultant of the
Company or a Subsidiary to whom an Award is granted under this Plan.

2.19 "PLAN" means this DEVX ENERGY, INC. AMENDED AND RESTATED INCENTIVE
EQUITY PLAN, as amended from time to time.

2.20 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

2.21 "RETIREMENT" means any Termination of Service solely due to
retirement upon attainment of age 62, or permitted early retirement as
determined by the Committee.

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2.22 "SAR" means the right to receive a payment, in cash and/or Common
Stock, equal to the excess of the Fair Market Value of a specified number of
shares of Common Stock on the date the SAR is exercised over the SAR Price for
such shares.

2.23 "SAR PRICE" means the Fair Market Value of each share of Common
Stock covered by an SAR, determined on the Date of Grant of the SAR.

2.24 "STOCK OPTION" means a Non-qualified Stock Option or an Incentive
Stock Option.

2.25 "SUBSIDIARY" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "SUBSIDIARIES" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

2.26 "TERMINATION OF SERVICE" occurs when a Participant who is an
Employee or a Consultant of the Company or any Subsidiary shall cease to serve
as an Employee or a Consultant of the Company and its Subsidiaries, for any
reason.

2.27 "TOTAL AND PERMANENT DISABILITY" means a Participant is qualified
for long-term disability benefits under the Company's disability plan or
insurance policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under the
rules governing Incentive Stock Options under the Code.

ARTICLE 3
ADMINISTRATION

The Plan shall be administered by a committee appointed by the Board
(the "Committee"). The Committee shall consist of not fewer than two persons.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.

Membership on the Committee shall be limited to those members of the
Board who are Non-employee Directors as defined in Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, and who are "OUTSIDE DIRECTORS" under Section
162(m) of the Code. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.

The Committee shall determine and designate from time to time the
eligible persons to whom Awards will be granted and shall set forth in each
related Award Agreement the Award Period, the Date of Grant, and such other
terms, provisions, limitations, and performance requirements, as are approved by
the

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Committee, but not inconsistent with the Plan. The Committee shall determine
whether an Award shall include one type of Incentive, two or more Incentives
granted in combination, or two or more Incentives granted in tandem (that is, a
joint grant where exercise of one Incentive results in cancellation of all or a
portion of the other Incentive).

The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.

With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "APPLICABLE LAW"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.

ARTICLE 4
ELIGIBILITY

Any Employee (including an Employee who is also a director or an
officer) or Consultant whose judgment, initiative, and efforts contributed or
may be expected to contribute to the successful performance of the Company is
eligible to participate in the Plan; provided that only Employees shall be
eligible to receive Incentive Stock Options. The Committee, upon its own action,
may grant, but shall not be required to grant, an Award to any Employee or
Consultant of the Company or any Subsidiary. Awards may be granted by the
Committee at any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees or Consultants, if any, are
to receive Awards, the form, amount and timing of such Awards, the terms and
provisions of such Awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among Employees and Consultants who
receive, or are eligible to receive, Awards under the Plan.

ARTICLE 5
SHARES SUBJECT TO PLAN

Subject to adjustment as provided in ARTICLES 13 and 14, the maximum
number of shares of Common Stock that may be delivered pursuant to Awards
granted under the Plan is (a) one million (1,000,000) shares; plus (b) shares of
Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (c) without duplication for
shares counted under the immediately preceding clause, a number of shares of
Common Stock equal to the number of shares repurchased by the Company in the
open market or otherwise and having an aggregate repurchase price no greater
than the amount of cash proceeds received by the Company from the sale of shares
of Common Stock under the Plan; plus (d) any shares of Common Stock surrendered
to the Company in payment of the exercise price of options issued under the
Plan.

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Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the number
of shares of Common Stock that shall be sufficient to satisfy the requirements
of this Plan.

ARTICLE 6
GRANT OF AWARDS

6.1 IN GENERAL. The grant of an Award shall be authorized by the
Committee and shall be evidenced by an Award Agreement setting forth the
Incentive or Incentives being granted, the total number of shares of Common
Stock subject to the Incentive(s), the Option Price (if applicable), the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance objectives, as are approved by the Committee, but not inconsistent
with the Plan. The Company shall execute an Award Agreement with a Participant
after the Committee approves the issuance of an Award. Any Award granted
pursuant to this Plan must be granted within ten (10) years of the date of
adoption of this Plan. The Plan shall be submitted to the Company's stockholders
for approval; however, the Committee may grant Awards under the Plan prior to
the time of stockholder approval. Any such Award granted prior to such
stockholder approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.

6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option shall be a Non-qualified Stock Option.

6.3 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of an SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.

6.4 MAXIMUM INDIVIDUAL GRANTS. No participant may receive during any
calendar year of the Company Awards covering an aggregate of more than two
hundred fifty thousand (250,000) shares of Common Stock.

6.5 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "TANDEM AWARD," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to one
hundred (100) shares of Common Stock, the right of the Participant to exercise
the related Stock Option shall be canceled to the extent of one hundred (100)
shares of Common Stock.

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ARTICLE 7
OPTION PRICE; SAR PRICE

The Option Price for a Non-qualified Stock Option shall be such price
as determined by the Committee; provided, however, such Option Price shall not
be less than the par value per share of the Common Stock. The Option Price for
an Incentive Stock Option and the SAR Price for any share of Common Stock
subject to an SAR shall be at least one hundred percent (100%) of the Fair
Market Value of the share on the Date of Grant. If an Incentive Stock Option is
granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Company (or any parent
or Subsidiary), the Option Price shall be at least one hundred and ten percent
(110%) of the Fair Market Value of the Common Stock on the Date of Grant.

ARTICLE 8
AWARD PERIOD; VESTING

8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this ARTICLE 8 and ARTICLE 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company (or any parent or Subsidiary) and an Incentive Stock Option is granted
to such Employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5) years
from the Date of Grant.

8.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.

ARTICLE 9
TERMINATION OF SERVICE

In the event of Termination of Service of a Participant, an Incentive
may only be exercised as determined by the Committee and provided in the Award
Agreement.

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ARTICLE 10
EXERCISE OF INCENTIVE

10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in Article
9. A vested Incentive may be exercised at such times and in such amounts as
provided in this Plan and the applicable Award Agreement, subject to the terms,
conditions, and restrictions of the Plan.

In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.

(a) STOCK OPTIONS. Subject to such administrative regulations
as the Committee may from time to time adopt, a Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be exercised
and the date of exercise thereof (the "EXERCISE DATE") which shall be at least
three (3) days after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall deliver to the
Company consideration with a value equal to the total Option Price of the shares
to be purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company, (b) Common Stock owned by the Participant
on the Exercise Date, valued at its Fair Market Value on the Exercise Date and
which the Participant has not acquired from the Company within six (6) months
prior to the Exercise Date, (c) by delivery (including by FAX) to the Company or
its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions from the Participant to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares of Common
Stock purchased upon exercise of the Stock Option or to pledge such shares as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price, and/or (d) in any other form
of valid consideration that is acceptable to the Committee in its sole
discretion.

Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the Stock Option or the issuance or purchase of
shares of Common Stock thereunder, the Stock Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.

If the Participant fails to pay for any of the Common Stock
specified in such notice or fails to accept delivery thereof, the Participant's
right to purchase such Common Stock may be terminated by the Company.

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(b) SARs. Subject to the conditions of this Section 10.1(b)
and such administrative regulations as the Committee may from time to time
adopt, an SAR may be exercised by the delivery (including by FAX) of written
notice to the Committee setting forth the number of shares of Common Stock with
respect to which the SAR is to be exercised and the date of exercise thereof
(the "EXERCISE DATE") which shall be at least three (3) days after giving such
notice unless an earlier time shall have been mutually agreed upon. On the
Exercise Date, the Participant shall receive from the Company in exchange
therefor cash in an amount equal to the excess (if any) of the Fair Market Value
(as of the date of the exercise of the SAR) per share of Common Stock over the
SAR Price per share specified in such SAR, multiplied by the total number of
shares of Common Stock of the SAR being surrendered. In the discretion of the
Committee, the Company may satisfy its obligation upon exercise of an SAR by the
distribution of that number of shares of Common Stock having an aggregate Fair
Market Value (as of the date of the exercise of the SAR) equal to the amount of
cash otherwise payable to the Participant, with a cash settlement to be made for
any fractional share interests, or the Company may settle such obligation in
part with shares of Common Stock and in part with cash.

10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock
acquired upon exercise of an Incentive Stock Option are disposed of by a
Participant prior to the expiration of either two (2) years from the Date of
Grant of such Stock Option or one (1) year from the transfer of shares of Common
Stock to the Participant pursuant to the exercise of such Stock Option, or in
any other disqualifying disposition within the meaning of Section 422 of the
Code, such Participant shall notify the Company in writing of the date and terms
of such disposition. A disqualifying disposition by a Participant shall not
affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

ARTICLE 11
AMENDMENT OR DISCONTINUANCE

Subject to the limitations set forth in this ARTICLE 11, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Section 162(m) of the Code, including any successors to such Section, shall
be effective unless such amendment shall be approved by the requisite vote of
the stockholders of the Company entitled to vote thereon. Any such amendment
shall, to the extent deemed necessary or advisable by the committee, be
applicable to any outstanding Incentives theretofore granted under the Plan,
notwithstanding any contrary provisions contained in any stock option agreement.
In the event of any such amendment to the Plan, the holder of any Incentive
outstanding under the Plan shall, upon request of the Committee and as a
condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless required
by law, no action contemplated or permitted by this ARTICLE 11 shall adversely
affect any rights of Participants or obligations of the Company to Participants
with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.

ARTICLE 12
TERM

The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on January 1, 2011, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.

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ARTICLE 13
CAPITAL ADJUSTMENTS

If at any time while the Plan is in effect, or Incentives are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding shares of Common Stock resulting from (1) the declaration or payment
of a stock dividend, (2) any recapitalization resulting in a stock split-up,
combination, or exchange of shares of Common Stock, or (3) other increase or
decrease in such shares of Common Stock effected without receipt of
consideration by the Company, then and in such event:

(i) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being awarded under
the Plan and in the maximum number of shares of Common Stock that may
be awarded to a Participant to the end that the same proportion of the
Company's issued and outstanding shares of Common Stock shall continue
to be subject to being so awarded.

(ii) Appropriate adjustments shall be made in the number of
shares of Common Stock and the Option Price thereof then subject to
purchase pursuant to each such Stock Option previously granted and
unexercised, to the end that the same proportion of the Company's
issued and outstanding shares of Common Stock in each such instance
shall remain subject to purchase at the same aggregate Option Price.

(iii) Appropriate adjustments shall be made in the number of
SARs and the SAR Price thereof then subject to exercise pursuant to
each such SAR previously granted and unexercised, to the end that the
same proportion of the Company's issued and outstanding shares of
Common Stock in each instance shall remain subject to exercise at the
same aggregate SAR Price.

Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, or (ii)
the number of or SAR Price or SARs then subject to outstanding SARs granted
under the Plan.

Upon the occurrence of each event requiring an adjustment with respect
to any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.

ARTICLE 14
RECAPITALIZATION, MERGER AND CONSOLIDATION

14.1 The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure and its business, or any merger
or consolidation of the Company, or any issue of bonds, debentures, preferred or
preference stocks ranking prior to or otherwise affecting the Common Stock or
the rights thereof (or any rights, options, or warrants to purchase same), or
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.

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14.2 Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any reorganization, merger,
consolidation or share exchange, any Incentive granted hereunder shall pertain
to and apply to the securities or rights (including cash, property, or assets)
to which a holder of the number of shares of Common Stock subject to the
Incentive would have been entitled. Notwithstanding the foregoing, however, all
such Incentives may be canceled by the Company as of the effective date of any
such reorganization, merger, consolidation or share exchange by giving notice to
each holder thereof or his personal representative of its intention to do so and
by permitting the purchase during the thirty (30) day period next preceding such
effective date of all of the shares of Common Stock subject to such outstanding
Incentives.

14.3 In the event of any reorganization, merger, consolidation or share
exchange pursuant to which the Company is not the surviving or resulting
corporation, there shall be substituted for each share of Common Stock subject
to the unexercised portions of such outstanding Incentives, that number of
shares of each class of stock or other securities or that amount of cash,
property, or assets of the surviving, resulting or consolidated company which
were distributed or distributable to the stockholders of the Company in respect
to each share of Common Stock held by them, such outstanding Incentives to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.

ARTICLE 15
LIQUIDATION OR DISSOLUTION

In case the Company shall, at any time while any Incentive under this
Plan shall be in force and remain unexpired, (i) sell all or substantially all
of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each
Participant shall be thereafter entitled to receive, in lieu of each share of
Common Stock of the Company which such Participant would have been entitled to
receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.

ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS

Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees of a corporation who
become or are about to become management Employees of the Company or any
Subsidiary as a result of a merger or consolidation of the employing corporation
with the Company or the acquisition by the Company of stock of the employing
corporation. The terms and conditions of the substitute Incentives so granted
may vary from the terms and conditions set forth in this Plan to such extent as
the Board at the time of grant may deem appropriate to conform, in whole or in
part, to the provisions of the Incentives in substitution for which they are
granted.

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ARTICLE 17
MISCELLANEOUS PROVISIONS

17.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.

17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.

17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Non-qualified
Stock Option or SAR pursuant to Section 17.7, the Participant who assigns the
Non-qualified Stock Option or SAR shall remain subject to withholding taxes upon
exercise of the Non-qualified Stock Option or SAR by the transferee to the
extent required by the Code or the rules and regulations promulgated thereunder.
Such payments shall be required to be made prior to the delivery of any
certificate representing such shares of Common Stock. Such payment may be made
in cash, by check, or through the delivery of shares of Common Stock owned by
the Participant (which may be effected by the actual delivery of shares of
Common Stock by the Participant that the Participant has not acquired from

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the Company within six (6) months prior to the Exercise Date, or by the
Company's withholding a number of shares to be issued upon the exercise of a
Stock Option, if applicable), which shares have an aggregate Fair Market Value
equal to the required minimum withholding payment, or any combination thereof.

17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code. The Committee may, in its discretion, authorize all or a
portion of a Non-qualified Stock Option or SAR to be granted to a Participant to
be on terms which permit transfer by such Participant to (i) the spouse,
children or grandchildren of the Participant ("IMMEDIATE FAMILY MEMBERS"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only
partners, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code or any successor provision, or (v) a split interest trust
or pooled income fund described in Section 2522(c)(2) of the Code or any
successor provision, provided that (x) there shall be no consideration for any
such transfer, (y) the Award Agreement pursuant to which such Non-qualified
Stock Option or SAR is granted must be approved by the Committee and must
expressly provided for transferability in a manner consistent with this Section,
and (z) subsequent transfers of transferred Non-qualified Stock Options or SARs
shall be prohibited except those by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended.
Following transfer, any such Non-qualified Stock Option and SAR shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of ARTICLES 10, 11, 13, 15 and 17
hereof the term "PARTICIPANT" shall be deemed to include the transferee. The
events of Termination of Service shall continue to be applied with respect to
the original Participant, following which the Non-qualified Stock Options and
SARs shall be exercisable by the transferee only to the extent and for the
periods specified in the Award Agreement. The Committee and the Company shall
have no obligation to inform any transferee of a Non-qualified Stock Option or
SAR of any expiration, termination, lapse or acceleration of such Option. The
Company shall have no obligation to register with any federal or state
securities commission or agency any Common Stock issuable or issued under a
Non-qualified Stock Option or SAR that has been transferred by a Participant
under this Section 17.7.

17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

A copy of this Plan shall be kept on file in the office of the Company
in Dallas, Texas or any successor location of the Company's principal executive
offices.

* * * * *

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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized representative pursuant to prior action taken by
the Board.

DEVX ENERGY, INC.

By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------

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APPENDIX II

DEVX ENERGY, INC.

AMENDED AND RESTATED DIRECTORS' NONQUALIFIED STOCK OPTION PLAN

DEVX ENERGY, INC.

AMENDED AND RESTATED
DIRECTORS' NONQUALIFIED STOCK OPTION PLAN

TABLE OF CONTENTS

<Table>
<Caption>
Page
----

ARTICLE 1 PURPOSE....................................................................................... 1

ARTICLE 2 DEFINITIONS................................................................................... 1

ARTICLE 3 ADMINISTRATION................................................................................ 2

ARTICLE 4 ELIGIBILITY................................................................................... 2

ARTICLE 5 SHARES SUBJECT TO PLAN........................................................................ 3

ARTICLE 6 GRANT OF OPTIONS.............................................................................. 3

ARTICLE 7 OPTION PRICE.................................................................................. 3

ARTICLE 8 OPTION PERIOD; FORFEITURE..................................................................... 3
8.1 Option Period........................................................................ 3
8.2 Forfeiture........................................................................... 4

ARTICLE 9 TERMINATION OF SERVICE........................................................................ 4
9.1 Death................................................................................ 4
9.2 Disability or Retirement............................................................. 4
9.3 Other Termination.................................................................... 4

ARTICLE 10 EXERCISE OF OPTION............................................................................ 4

ARTICLE 11 AMENDMENT OR DISCONTINUANCE................................................................... 5

ARTICLE 12 TERM.......................................................................................... 5

ARTICLE 13 CAPITAL ADJUSTMENTS........................................................................... 6

ARTICLE 14 RECAPITALIZATION, MERGER AND CONSOLIDATION.................................................... 6

ARTICLE 15 LIQUIDATION OR DISSOLUTION.................................................................... 7

ARTICLE 16 OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED
BY OTHER CORPORATIONS......................................................................... 7

ARTICLE 17 MISCELLANEOUS PROVISIONS...................................................................... 8
</Table>

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<Table>

17.1 Investment Intent.................................................................... 8
17.2 No Employment Relationship........................................................... 8
17.3 Indemnification of Board............................................................. 8
17.4 Effect of the Plan................................................................... 8
17.5 Compliance With Other Laws and Regulations........................................... 8
17.6 Tax Requirements..................................................................... 8
17.7 Assignability........................................................................ 8
17.8 Use of Proceeds...................................................................... 9
17.9 Legend............................................................................... 9
</Table>

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DEVX ENERGY, INC.

AMENDED AND RESTATED
DIRECTORS' NONQUALIFIED STOCK OPTION PLAN

The name of the plan is the AMENDED AND RESTATED DIRECTORS'
NONQUALIFIED STOCK OPTION PLAN (the "PLAN") of DevX Energy, Inc., a Delaware
corporation (hereinafter called the "COMPANY"). The Directors' Nonqualified
Stock Option Plan was originally adopted by the Board of Directors of the
Company, and was approved by the Company's stockholders, in 1998. Effective
December 15, 2000, the Company's Board of Directors approved, subject to
stockholder approval, the Amended and Restated Directors' Nonqualified Stock
Option Plan.

ARTICLE 1
PURPOSE

The purpose of the Plan is to attract and retain Outside Directors of
the Company and to provide such persons with a proprietary interest in the
Company through the granting of Nonqualified Stock Options that will

(a) increase the interest of such persons in the
Company's welfare;

(b) furnish an incentive to such persons to continue
their services for the Company; and

ARTICLE 2
DEFINITIONS

For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

2.1 "Board" means the board of directors of the Company.

2.2 "Code" means the Internal Revenue Code of 1986, as
amended.

2.3 "Common Stock" means the common stock, par value $0.234
per share, which the Company is currently authorized to issue or may in
the future be authorized to issue.

2.4 "Company" means DevX Energy, Inc., a Delaware corporation.

2.5 "Date of Grant" means the effective date on which a Stock
Option is awarded to a Participant as set forth in the applicable Stock
Option Agreement.

2.6 "Option Period" means the period during which a Stock
Option may be exercised.

2.7 "Option Price" means the price which must be paid by a
Participant upon exercise of a Stock Option to purchase a share of
Common Stock.

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2.8 "Outside Director" means a Director of the Company who is
not an Employee.

2.9 "Participant" shall mean an Outside Director to whom a
Stock Option is granted under this Plan.

2.10 "Plan" means this DevX Energy, Inc. Amended and Restated
Directors' Nonqualified Stock Option Plan, as amended from time to
time.

2.11 "Stock Option" means a nonqualified option to purchase
Common Stock of the Company granted under this Plan.

2.12 "Stock Option Agreement" means a written agreement
between a Participant and the Company which sets out the terms of the
grant of a Stock Option.

2.13 "Termination of Service" occurs when a Participant shall
cease to serve as an Outside Director for any reason.

2.14 "Total and Permanent Disability" means a Participant is
qualified for long-term disability benefits under the Company's
disability plan or insurance policy; or, if no such plan or policy is
then in existence, that the Participant, because of ill health,
physical or mental disability or any other reason beyond his or her
control, is unable to perform his or her duties of employment for a
period of six (6) continuous months, as determined in good faith by the
Board.

ARTICLE 3
ADMINISTRATION

The Plan shall be administered by the Board of Directors of the
Company. The Board, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Board of Directors shall be final, binding, and conclusive on all interested
parties.

ARTICLE 4
ELIGIBILITY

Any Outside Director whose judgment, initiative, and efforts
contributed or may be expected to contribute to the successful performance of
the Company is eligible to participate in the Plan. The Board, upon its own
action, may grant, but shall not be required to grant, a Stock Option to any
Outside Director. Except as required by this Plan, Stock Options granted at
different times need not contain similar provisions. The Board's determinations
under the Plan need not be uniform and may be made by it selectively among
Outside Directors who receive, or are eligible to receive, Stock Options under
the Plan.

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ARTICLE 5
SHARES SUBJECT TO PLAN

The Board may not grant Stock Options under the Plan for more than
150,000 shares of Common Stock of the Company (as may be adjusted in accordance
with ARTICLES 13 and 14 hereof), all of which are designated as nonqualified
stock options. Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the Company in its
treasury. Shares previously subject to Stock Options which have expired or been
canceled may be reissued under the Plan.

The Company during the term of this Plan will at all times reserve and
keep available the number of shares of Stock that shall be sufficient to satisfy
the requirements of this Plan.

ARTICLE 6
GRANT OF OPTIONS

Subject to the terms of this Plan, the Board may grant options to
purchase up to 30,000 shares of Common Stock to each Participant, in any year as
the Board deems appropriate, subject to adjustment as provided herein. The grant
of a Stock Option shall be evidenced by a Stock Option Agreement setting forth
the total number of shares subject to the Stock Option, the Option Price, the
maximum term of the Stock Option, the Date of Grant, and such other terms and
provisions as are approved by the Board, but not inconsistent with the Plan. The
Company shall execute a Stock Option Agreement with a Participant after the
issuance of a Stock Option. Any Stock Option granted pursuant to this Plan must
be granted within ten (10) years of the date of adoption of this Plan. The Plan
shall be submitted to the Company's shareholders for approval; however, the
Board may grant Stock Options under the Plan prior to the time of shareholder
approval.

ARTICLE 7
OPTION PRICE

The Option Price for any share of Common Stock which may be purchased
under a Stock Option shall be such price as determined by the Board.

ARTICLE 8
OPTION PERIOD; FORFEITURE

8.1 OPTION PERIOD. A Stock Option may be exercised in whole or in part
at any time during its term. The Option Period for a Stock Option may be reduced
or terminated upon Termination of Service in accordance with ARTICLE 9. No Stock
Option granted under the Plan may be exercised at any time after the end of its
Option Period.

Each Stock Option will terminate at the first of the following to
occur:

(i) 5 p.m. on the tenth anniversary of the Date of Grant;

(ii) 5 p.m. on the date which is six (6) months following the
Participant's Termination of Service due to death or Total and
Permanent Disability; or

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(iii) 5 p.m. on the 90th day after the date of any other
Termination of Service, except as provided in Section 9.3 below.

8.2 FORFEITURE. In the event of a Participant's Termination of Service
other than as a result of death or Total and Permanent Disability, the
unexercised portion of the Stock Option previously granted to such Participant
shall terminate and be forfeited as of 5 p.m. on the 90th day after the day of
the termination.

ARTICLE 9
TERMINATION OF SERVICE

In the event of Termination of Service of a Participant, the Option
Period for any Stock Option of the Participant shall be amended in accordance
with this ARTICLE 9 and such Stock Option may only be exercised as follows:

9.1 DEATH. In the event of the Participant's death while serving as an
Outside Director, his Stock Option may be exercised for a period of six (6)
months after the Participant's death; such Stock Option may be exercised by the
Participant's estate or personal representative, or by the person who acquired
the right to exercise the Stock Option by bequest or inheritance or by reason of
the Participant's death.

9.2 DISABILITY OR RETIREMENT. Upon the Termination of the Participant's
Service as an Outside Director by reason of Total and Permanent Disability, the
Participant or his guardian may exercise such Participant's Stock Option within
six (6) months after the date of such Termination of Service.

9.3 OTHER TERMINATION. Upon the Termination of the Participant's
Service as an Outside Director for any reason other than as a result of death,
or Total and Permanent Disability, the Participant may, before 5 p.m. on the
90th day after the day of such Termination of Service, exercise any Stock
Options to the extent such Stock Options were exercisable at the date of such
Termination of Service.

ARTICLE 10
EXERCISE OF OPTION

Stock Options may be exercised during the Option Period, subject to
limitations and restrictions set forth in ARTICLE 9. Stock Options may be
exercised at such times and in such amounts as provided in this Plan and the
applicable Stock Option Agreements, subject to the terms, conditions, and
restrictions of the Plan.

In no event may a Stock Option be exercised or shares be issued
pursuant to a Stock Option if a necessary listing of the shares on a stock
exchange or any registration under state or federal securities laws required
under the circumstances has not been accomplished. No Stock Option may be
exercised for a fractional share of Stock. The granting of a Stock Option shall
impose no obligation upon the Participant to exercise that Stock Option.

Subject to such administrative regulations as the Board may from time
to time adopt, a Stock Option may be exercised by the delivery of written notice
to the Board setting forth the number of shares with respect to which the Stock
Option is to be exercised and the date of exercise thereof (the "EXERCISE DATE")
which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall deliver to the Company consideration with a value equal to the
total Option Price of the shares to be purchased, payable as follows: (a) cash,
check, bank draft, or money order payable to the order of the Company, (b)
Common Stock owned by the Participant on the Exercise Date,

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70

valued at its Fair Market Value on the Exercise Date, (c) by delivery (including
by FAX) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions from the Participant to a
broker or dealer, reasonably acceptable to the Company, to sell certain of the
shares of Common Stock purchased upon exercise of the Stock Option or to pledge
such shares as collateral for a loan and promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay such purchase price, and/or (d)
in any other form of valid consideration that is acceptable to the Board in its
sole discretion.

Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered to
the Participant (or the person exercising the Participant's Stock Option in the
event of his death) at its principal business office within ten (10) business
days after the Exercise Date. The obligation of the Company to deliver shares
shall, however, be subject to the condition that if at any time the Board shall
determine in its discretion that the listing, registration, or qualification of
the Stock Option or the Common Stock being purchased upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the Stock Option or the issuance or purchase of shares
thereunder, the Stock Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.

If the Participant fails to pay for any of the Common Stock specified
in such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.

ARTICLE 11
AMENDMENT OR DISCONTINUANCE

The Plan may be amended or discontinued by the Board without the
approval of the shareholders of the Company unless shareholder approval is
required by any stock exchange on which the shares to be issued upon exercise of
the Stock Options are listed. Any amendment to the Plan shall be approved by
shareholders if the amendment would:

(a) materially increase the benefits accruing to
Participants under the Plan;

(b) materially increase the number of securities which
may be issued under the Plan; or

In addition, no amendment may adversely affect an outstanding Stock Option
without the consent of the Participant.

ARTICLE 12
TERM

The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on December 15, 2010, but Stock Options granted before the effective
date will continue to be effective in accordance with their terms and
conditions.

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ARTICLE 13
CAPITAL ADJUSTMENTS

If at any time while the Plan is in effect or unexercised Stock Options
are outstanding there shall be any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from (1) the declaration or
payment of a stock dividend, (2) any recapitalization resulting in a stock
split-up, combination, or exchange of shares of Common Stock, or (3) other
increase or decrease in such shares effected without receipt of consideration by
the company, then and in such event:

(i) An appropriate adjustment shall be made in the maximum
number of shares of Common Stock then subject to being awarded under
the Plan, to the end that the same proportion of the Company's issued
and outstanding shares of Common Stock shall continue to be subject to
being so awarded; and

Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or Option Price of shares of Common Stock
then subject to outstanding Stock Options granted under the Plan.

Upon the occurrence of each event requiring an adjustment of the Option
Price or the number of shares purchasable pursuant to Stock Options granted
pursuant to the terms of this Plan, the Company shall mail to each Participant
its computation of such adjustment which shall be conclusive and shall be
binding upon each such Participant.

ARTICLE 14
RECAPITALIZATION, MERGER AND CONSOLIDATION

(a) The existence of this Plan and Stock Options granted
hereunder shall not affect in any way the right or power of the Company
or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's
capital structure and its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or preference
stocks ranking prior to or otherwise affecting the Common stock or the
rights thereof (or any rights, options, or warrants to purchase same),
or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.

(b) Subject to any required action by the shareholders, if the
Company shall be the surviving or resulting corporation in any merger
or consolidation, any Stock Option granted hereunder shall pertain to
and apply to the securities or rights (including cash, property, or
assets) to which a holder of the number of shares of Common Stock
subject to the Stock Option would have been entitled.

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(c) In the event of any merger or consolidation pursuant to
which the Company is not the surviving or resulting corporation, there
shall be substituted for each share of Common Stock subject to the
unexercised portions of such outstanding Stock Options, that number of
shares of each class of stock or other securities or that amount of
cash, property, or assets of the surviving or consolidated company
which were distributed or distributable to the shareholders of the
Company in respect to each share of Common Stock held by them, such
outstanding Stock Options to be thereafter exercisable for such stock,
securities, cash, or property in accordance with their terms.
Notwithstanding the foregoing, however, all such Stock Options may be
canceled by the Company as of the effective date of any such
reorganization, merger, consolidation, or any dissolution or
liquidation of the Company by giving notice to each holder thereof or
his personal representative of its intention to do so and by permitting
the purchase during the thirty (30) day period next preceding such
effective date of all of the shares subject to such outstanding Stock
Options.

(d) Upon the occurrence of each event requiring an adjustment
of the Option Price or the number of shares purchasable pursuant to
Stock Options granted pursuant to the terms of this Plan, the Company
shall mail to each Participant its computation of such adjustment which
shall be conclusive and shall be binding upon each such Participant.

ARTICLE 15
LIQUIDATION OR DISSOLUTION

In case the Company shall, at any time while any Stock Option under
this Plan shall be in force and remain unexpired, (i) sell all or substantially
all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then
each Participant may thereafter receive upon exercise hereof (in lieu of each
share of Common Stock of the Company which such Participant would have been
entitled to receive) the same kind and amount of any securities or assets as may
be issuable, distributable, or payable upon any such sale, dissolution,
liquidation, or winding up with respect to each share of Common Stock of the
Company. If the Company shall, at any time prior to the expiration of any Stock
Option, make any partial distribution of its assets, in the nature of a partial
liquidation, whether payable in cash or in kind (but excluding the distribution
of a cash dividend payable out of earned surplus and designated as such) then in
such event the prices then in effect with respect to each Stock Option shall be
reduced, on the payment date of such distribution, in proportion to the
percentage reduction in the tangible book value of the shares of the Company's
Common Stock (determined in accordance with generally accepted accounting
principles) resulting by reason of such distribution.

ARTICLE 16
OPTIONS IN SUBSTITUTION FOR
STOCK OPTIONS GRANTED BY OTHER CORPORATIONS

Stock Options may be granted under the Plan from time to time in
substitution for such options held by directors of a corporation who become or
are about to become Outside Directors of the Company as a result of a merger or
consolidation of the employing corporation with the Company or the acquisition
by the Company of stock of the employing corporation. The terms and conditions
of the substitute options so granted may vary from the terms and conditions set
forth in this Plan to such extent as the Board at the time of grant may deem
appropriate to conform, in whole or in part, to the provisions of the options in
substitution for which they are granted.

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ARTICLE 17
MISCELLANEOUS PROVISIONS

17.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the options granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

17.2 NO EMPLOYMENT RELATIONSHIP. The Participant is not an employee of
the Company. Nothing herein shall be construed to create an employer-employee
relationship between the Company and the Participant.

17.3 INDEMNIFICATION OF BOARD. No member of the Board, nor any officer
or employee of the Company acting on behalf of the Board, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board and each and any
officer or employee of the Company acting on the Board's behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination, or interpretation.

17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board shall be deemed to give any person any right to be granted a
Stock Option to purchase Common Stock of the Company or any other rights except
as may be evidenced by a Stock Option Agreement, or any amendment thereto, duly
authorized by the Board and executed on behalf of the Company, and then only to
the extent and upon the terms and conditions expressly set forth therein.

17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Stock Option if the issuance
thereof would constitute a violation by the Participant or the Company of any
provisions of any law or regulation of any governmental authority or any
national securities exchange or other forum in which shares of Common Stock are
traded (including Section 16 of the Securities Exchange Act of 1934); and, as a
condition of any sale or issuance of shares of Common Stock under a Stock
Option, the Board may require such agreements or undertakings, if any, as the
Board may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Stock Options hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.

17.7 ASSIGNABILITY. Unless the Board provides otherwise, all or a
portion of a Stock Option to be granted to a Participant may be transferred by
such Participant to (i) the spouse, children or grandchildren of the Participant
("IMMEDIATE FAMILY MEMBERS"), (ii) a trust or trusts for the exclusive benefit
of one or more Immediate Family Members, or (iii) a partnership in which one or
more Immediate Family Members are the only partners, (iv) an entity exempt from
federal income tax pursuant to Section 501(c)(3) of the Code or any successor
provision, or (v) a split interest trust or pooled income fund described in
Section 2522(c)(2) of the Code or any successor provision, provided that (x)
there shall be no consideration for any such transfer, and

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(y) subsequent transfers of previously transferred Stock Options shall be
prohibited except those by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Code or Title
I of the Employee Retirement Income Security Act of 1974, as amended. Following
transfer, any such Stock Option shall continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer, provided that
for purposes of ARTICLES 10, 11, 13, 14, 15, 16 AND 17 hereof the term
"PARTICIPANT" shall be deemed to include the transferee. The events of
Termination of Service and any vesting of the Stock Options shall continue to be
applied with respect to the original Participant, following which the Stock
Options shall be exercisable by the transferee only to the extent and for the
periods and installments specified in the Award Agreement. The Board and the
Company shall have no obligation to inform any transferee of a Stock Option of
any expiration, termination, lapse or acceleration of such Option. The Company
shall have no obligation to register with any federal or state securities
commission or agency any Common Stock issuable or issued under a Stock Option
that has been transferred by a Participant under this Section 17.7. If the
Participant attempts to alienate, assign, pledge, hypothecate, or otherwise
dispose of this Stock Option or any right thereunder, except as provided for in
this Plan or the Stock Option Agreement, the Board may terminate the
Participant's Stock Option by notice to him, and it shall thereupon become null
and void.

17.8 USE OF PROCEEDS. Proceeds from the sale of shares pursuant to
Stock Options granted under this Plan shall constitute general funds of the
Company.

17.9 LEGEND. Each certificate representing shares of Common Stock
issued to a Participant upon exercise of a Stock Option shall bear the following
legend, or a similar legend deemed by the Company to constitute an appropriate
notice of the provisions hereof and the applicable security laws (any such
certificate not having such legend shall be surrendered upon demand by the
Company and so endorsed) unless the shares of Common Stock being issued have
been registered pursuant to a Registration Statement on Form S-8 (or a successor
form) filed with and declared effective by the Securities and Exchange
Commission:

On the face of the certificate:

"Transfer of this stock is restricted in accordance
with conditions printed on the reverse of this
certificate."

On the reverse:

"The shares of stock evidenced by this certificate
are subject to and transferrable only in accordance
with that certain DevX Energy, Inc. Amended and
Restated Directors Nonqualified Stock Option Plan,
dated as of January 1, 2001, as amended from time to
time, a copy of which is on file at the principal
office of the Company in Dallas, Texas. No transfer
or pledge of the shares evidenced hereby may be made
except in accordance with and subject to the
provisions of said Plan. By acceptance of this
certificate, any holder, transferee or pledge hereof
agrees to be bound by all of the provisions of said
Plan."

Insert the following legend on the certificate if the shares
were not issued in a transaction registered under the
applicable federal and state securities laws:

"Shares of stock represented by this certificate have
been acquired by the holder for investment and not
for resale, transfer or

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distribution, have been issued pursuant to exemptions
from the registration requirements of applicable
state and federal securities laws, and may not be
offered for sale, sold or transferred other than
pursuant to effective registration under such laws,
or in transactions otherwise in compliance with such
laws, and upon evidence satisfactory to the Company
of compliance with such laws, as to which the Company
may rely upon an opinion of counsel satisfactory to
the Company."

A copy of this Plan shall be kept on file in the principal office of
the Company in Dallas, Texas or any successor location of the Company's
principal executive offices.

* * * * *

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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized representative pursuant to prior action taken by
the Board.

DEVX ENERGY, INC.

By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------

Attest:

Secretary

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PROXY
DEVX ENERGY, INC.
13760 Noel Road, Suite 1030
Dallas, Texas 75240-7336
Telephone: (972) 233-9906
Telecopier: (972) 233-9575

This Proxy is Solicited on Behalf of the Board of Directors.

The undersigned hereby appoints Joseph T. Williams and William W. Lesikar as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
Common Stock of DEVX ENERGY, INC. held of record by the undersigned on September
10, 2001 at the annual meeting of stockholders to be held in the Sun Room of the
Northwood Club at 6524 Alpha Road, Dallas, Texas 75240 on Thursday, October 25,
2001 at 2:00 p.m., Dallas time, or any adjournment or postponement thereof.

This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1 through 4.

The Board of Directors recommends that the stockholders vote FOR each of the
proposals. Please review carefully the Proxy Statement delivered with this
Proxy.

1. Proposal to elect Joseph T. Williams, Robert L. Keiser, Jerry B. Davis
and Patrick J. Keeley as directors until the next Annual Meeting or
until their successors have been duly qualified and elected.

[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed above
---------
(Instruction: to withhold authority to vote for any individual nominee
write that nominee's name in the space provided above)

2. Proposal to approve the Amended and Restated DEVX ENERGY, INC.
Incentive Equity Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. Proposal to approve the Amended and Restated DEVX ENERGY, INC.
Directors' Nonqualified Stock Option Plan.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. Proposal to ratify the appointment of Ernst & Young LLP as the
independent auditors of the Company to audit the accounts of the
Company for the fiscal year ending December 31, 2001.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

The Proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting.

------------------------------
Signature

Dated: ________ ___, 2001
------------------------------
Signature, if held jointly

Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.