Unassociated Document


    
      EMPLOYMENT
        AGREEMENT

      


      This
        AGREEMENT (the "Agreement") by and between Carrizo Oil & Gas, Inc., a Texas
        corporation (the "Company") and Jack L. Bayless (the "Executive"), to be
        effective as of the 23rd day of January, 2006 (the "Agreement Effective
        Date").

      


      In
        entering into this Agreement, the Board of Directors of the Company (the
        "Board") desires to provide the Executive with substantial incentives to
        serve
        the Company as one of its senior executives performing at the highest level
        of
        leadership and stewardship, without distraction or concern over minimum
        compensation, benefits or tenure, to manage the Company's future growth and
        development, and maximize the returns to the Company's
        stockholders.

      


      NOW,
        THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

      


      1. Employment
        Period.
        As of the Agreement Effective Date (hereinafter defined), the Company hereby
        agrees to continue to employ the Executive and the Executive hereby agrees
        to
        accept continued employment with the Company, in accordance with, and subject
        to, the terms and provisions of this Agreement, for the period (the "Employment
        Period") commencing on the Agreement Effective Date and ending on the first
        anniversary of the Agreement Effective Date; provided, on the Agreement
        Effective Date and on each day thereafter, the Employment Period shall
        automatically be extended for an additional one day without any further action
        by either the Company or the Executive, it being the intention of the parties
        that there shall be continuously a remaining term of not less than one year's
        duration of the Employment Period until an event has occurred as described
        in,
        or one of the parties shall have made an appropriate election and notification
        pursuant to, the provisions of Section 3.

      


      2. Terms
        of Employment.

      


      (a) Position
        and Duties.
        As of October 15, 2005, the Executive became a full time employee and during
        the
        Employment Period, excluding any periods of vacation and sick leave to which
        the
        Executive is entitled, the Executive agrees to devote full attention and
        time
        during normal business hours to the business and affairs of the Company and,
        to
        the extent necessary to discharge the responsibilities assigned to the Executive
        hereunder, to use the Executive's reasonable best efforts to perform faithfully
        and efficiently such responsibilities. During the Employment Period, it shall
        not be a violation of this Agreement for the Executive to (A) serve on
        corporate, civic or charitable boards or committees, (B) deliver lectures,
        fulfill speaking engagements or teach at educational institutions and (C)
        manage
        personal investments, so long as such activities do not interfere with the
        performance of the Executive's responsibilities as an employee of the Company
        in
        accordance with this Agreement.

      


      (b) Compensation.

      


      (i) Base
        Salary.
        Commencing on the Agreement Effective Date and thereafter during his Employment
        Period, the Executive shall receive an annual base salary of $175,000 ("Annual
        Base Salary"), which shall be paid on a semimonthly basis. During the Employment
        Period, the Annual Base Salary shall be reviewed at least annually and shall
        be
        increased at any time and from time to 

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      time
        as shall be substantially consistent with increases in base salary generally
        awarded in the ordinary course of business to executives of the Company and
        its
        affiliated companies. Any increase in Annual Base Salary shall not serve
        to
        limit or reduce any other obligation to the Executive under this Agreement.
        As
        used in this Agreement, the term "affiliated companies" shall include, when
        used
        with reference to the Company, any company controlled by, controlling or
        under
        common control with the Company.

      


      (ii) Annual
        Bonus.
        In addition to Annual Base Salary, the Executive may be awarded, for each
        fiscal
        year or portion thereof during the Employment Period, an Annual Bonus (the
        "Annual Bonus"), in an amount comparable to the Annual Bonus Award to other
        Company executives, taking into account the Executive's position,
        responsibilities, and accomplishments with the Company, prorated for any
        period
        consisting of less than 12 full months.

      


      (iii) Incentive,
        Savings and Retirement Plans.
        During the Employment Period, the Executive shall be entitled to participate
        in
        all incentive, savings and retirement plans that are tax-qualified under
        Section
        401(a) of the Internal Revenue Code of 1986, as amended ("Code"), and all
        plans
        that are supplemental to any such tax-qualified plans, in each case to the
        extent that such plans are applicable generally to other salaried employees
        of
        the Company and its affiliated companies. 

      


      (iv) Welfare
        Benefit Plans.
        During the Employment Period, the Executive and/or the Executive's family,
        as
        the case may be, shall be eligible for participation in and shall receive
        all
        benefits under welfare benefit plans, practices, policies and programs provided
        by the Company or its affiliated companies (including, without limitation,
        medical, prescription, dental, vision, disability, salary continuance, group
        life and supplemental group life, accidental death and travel accident insurance
        plans and programs) to the extent applicable generally to other salaried
        employees of the Company and its affiliated companies.

      


      (v) Expenses.
        During the Employment Period, the Executive shall be entitled to receive
        prompt
        reimbursement for all reasonable expenses incurred by the Executive in
        accordance with the policies, practices and procedures of the Company and
        its
        affiliated companies.

      


      (vi) Vacation.
        During the Employment Period, the Executive shall be entitled to paid vacation
        in accordance with the plans, policies, programs and practices of the Company
        and its affiliated companies.


      
        
           

        

        
          2

          
            

          

        

        
           

        

      


      3. Termination
        of Employment. 

      


      (a) Death
        or Disability.
        The Executive's employment shall terminate automatically upon the Executive's
        death during the Employment Period. If the Company determines in good faith
        that
        the Disability of the Executive has occurred during the Employment Period
        (pursuant to the definition of Disability set forth below), it may give to
        the
        Executive written notice in accordance with Section 13(d) of this Agreement
        of
        its intention to terminate the Executive's employment. In such event, the
        Executive's employment with the Company shall terminate effective on the
        30th
        day after receipt of such notice by the Executive (the "Disability Effective
        Date"), provided that, within the 30 days after such receipt, the Executive
        shall not have returned to full-time performance of the Executive's duties.
        For
        the purposes of this Agreement, "Disability" shall mean the absence of the
        Executive from the Executive's duties with the Company on a full-time basis
        for
        either (i) 180 consecutive business days or (ii) in any two-year period 270
        nonconsecutive business days as a result of incapacity due to mental or physical
        illness which is determined to be total and permanent by a physician selected
        by
        the Company or its insurers and acceptable to the Executive or the Executive's
        legal representative (such agreement as to acceptability not to be withheld
        unreasonably.)

      


      (b) Cause.
        The Company may terminate the Executive's employment during the Employment
        Period for Cause. For purposes of this Agreement, "Cause" shall mean for
        the
        Company's termination of the Executive's employment for any of the following:
        (i) the Executive's final conviction of a felony crime that enriched the
        Executive at the expense of the Company; provided, however, that after
        indictment, the Company may suspend the Executive from the rendition of
        services, but without limiting or modifying in any other way the Company's
        obligations under this Agreement; (ii) a breach by the Executive of a fiduciary
        duty owed to the Company; (iii) a breach by the Executive of any of the
        covenants made by him in Sections 8 and 10 hereof; (iv) the willful and gross
        neglect by the Executive of the duties specifically and expressly required
        by
        this Agreement; or (v) the Executive's continuing failure to substantially
        perform his duties and responsibilities hereunder (except by reason of the
        Executive's incapacity due to physical or mental illness or injury) for a
        period
        of 45 days after the Required Board Majority, as defined herein, has delivered
        to the Executive a written demand for substantial performance hereunder which
        specifically identifies the bases for the Required Board Majority's
        determination that the Executive has not substantially performed his duties
        and
        responsibilities hereunder (that period being the "Grace Period"); provided,
        that for purposes of this clause (v), the Company shall not have Cause to
        terminate the Executive's employment unless (A) at a meeting of the Board
        called
        and held following the Grace Period in the city in which the Company's principal
        executive offices are located, of which the Executive was given not less
        than 10
        days' prior written notice and at which the Executive was afforded the
        opportunity to be represented by counsel, appear and be heard, the Required
        Board Majority shall adopt a written resolution which (1) sets forth the
        Required Board Majority's determination that the failure of the Executive
        to
        substantially perform his duties and responsibilities hereunder has (except
        by
        reason of his incapacity due to physical or mental illness or injury)continued
        past the Grace Period and (2) specifically identifies the bases for that
        determination, and (B) the Company, at the written direction of the Required
        Board Majority, shall deliver to the Executive a Notice of Termination for
        Cause
        to which a copy of that resolution, certified as being true and correct by
        the
        secretary or any assistant secretary of the Company, is attached. "Required
        Board Majority" means at any time a majority of the members of the Board
        at that
        time which includes at least a majority of the 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

       

      Directors,
        each of whom has not been an employee of the Company or any subsidiary of
        the
        Company.

      


      (c) Good
        Reason; Window Period.
        The Executive's employment may be terminated during the Employment Period
        by the
        Executive for Good Reason, or during a Window Period by the Executive without
        any reason. For purposes of this Agreement. "Window Period" shall mean the
        60-day period immediately following elapse of one year after any Change of
        Control as defined in Section 9 of this Agreement. For purposes of this
        Agreement, "Good Reason" shall mean:

      


      (i) the
        assignment to the Executive of any duties materially inconsistent in any
        respect
        with the Executive's position (including status, offices, titles and reporting
        requirements), authority, duties or responsibilities as contemplated by
        Section 2 of this Agreement, or any other action by the Company which
        results in a material diminution, in absolute terms, in such position,
        authority, duties or responsibilities, excluding for this purpose an isolated,
        insubstantial and inadvertent action not taken in bad faith and which is
        remedied by the Company promptly after receipt of notice thereof given by
        the
        Executive;

      


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

      


      (iii) any
        purported termination by the Company of the Executive's employment otherwise
        than as expressly permitted by this Agreement; 

      


      (iv) any
        failure by the Company to comply with and satisfy the requirements of Section
        11
        of this Agreement, provided that (A) the successor described in Section 11(c)
        has received, at least 10 days prior to the Date of Termination (as defined
        in
        subparagraph (e) below), written notice from the Company or the Executive
        of the
        requirements of such provision and (B) such failure to be in compliance and
        satisfy the requirements of Section 11 shall continue as of the Date of
        Termination.

      


      Notwithstanding
        any provision to the contrary, in order for any event(s) in subparagraph
        (i)
        through (iv) above to constitute "Good Reason" for purposes of this Agreement,
        (A) the Executive must notify the Company via Notice of Termination within
        180
        days following the occurrence of the event(s) that the Executive intends
        to
        terminate his employment with the Company because of the occurrence of Good
        Reason (which event must be described by the Executive in reasonable detail
        in
        the Notice of Termination) and (B) within 60 days after receiving such Notice
        of
        Termination from the Executive, the Company must fail to reinstate the Executive
        to the position he was in, or otherwise cure the circumstances giving rise
        to
        Good Reason.

      


      (d) Notice
        of Termination.
        Any termination by the Company for Cause, or by the Executive for Good Reason
        or
        without any reason during a Window Period, shall be 

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

       

      communicated
        by Notice of Termination to the other party hereto given in accordance with
        Section 13 of this Agreement. The failure by the Company to set forth in
        the
        Notice of Termination any fact or circumstance which contributes to a showing
        of
        Cause shall not waive any right of the Company hereunder or preclude the
        Company
        from asserting such fact or circumstance in enforcing the Company's rights
        hereunder.

      


      (e) Date
        of Termination.
        For purposes of this Agreement, the term "Date of Termination" means (i)
        if the
        Executive's employment is terminated by the Company for Cause, or by the
        Executive during a Window Period or for Good Reason, the date of receipt
        of the
        Notice of Termination or any later date specified therein, as the case may
        be,
        (ii) if the Executive's employment is terminated by the Company other than
        for
        Cause or Disability, the Date of Termination shall be the date on which the
        Company notifies the Executive of such termination and (iii) if the Executive's
        employment is terminated by reason of death or Disability, the Date of
        Termination shall be the date of death of the Executive or the Disability
        Effective Date, as the case may be.

      


      4. Obligations
        of the Company upon Termination.

      


      (a) Disability,
        Good Reason or During a Window Period; Other than for Cause or Death (except
        during a Window Period).
        If, during the Employment Period, (x) the Company shall terminate the
        Executive's employment other than for Cause, including a termination by reason
        of Disability (but not by reason of death), or (y) the Executive shall terminate
        employment for Good Reason or (z) his employment shall be terminated during
        a
        Window Period by the Company for Cause, by the Executive without any reason,
        or
        by reason of death:

      


      (i) the
        Company shall pay or provide to or in respect of the Executive the following
        amounts and benefits:

      


      A. in
        a lump sum in cash, within 10 days after the Date of Termination, an amount
        equal to the sum of (1) the Executive's Annual Base Salary through the Date
        of
        Termination, (2) any deferred compensation previously awarded to or earned
        by
        the Executive (together with any accrued interest or earnings thereon) and
        (3)
        any compensation for unused vacation time for which the Executive is eligible
        in
        accordance with the plans, policies, programs and practices of the Company
        and
        its affiliated companies, in each case to the extent not theretofore paid
        (the
        sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter
        referred to as (the "Accrued Obligation");

      


      B. in
        a lump sum cash, discounted at 6%, within 10 days after the Date of Termination,
        an amount equal to 100% of Annual Base Salary that would have been paid annually
        to the Executive pursuant to this Agreement for the period (the "Remaining
        Employment Period") beginning on the Date of Termination and ending on the
        latest possible date of termination of the Employment Period in accordance
        with
        the provisions of Section 1 hereof (the "Final Expiration Date") if the


       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

       

      Executive's
        employment had not been terminated; (if the termination occurs after the
        date a
        Change of Control occurs the "Remaining Employment Period" will be a minimum
        of
        18 months);

      


      C. effective
        as of the Date of Termination, (1) immediate vesting and exercisability of,
        and
        termination of any restrictions on sale or transfer (other than any such
        restriction arising by operation of law) with respect to, each and every
        stock
        option, restricted stock award, restricted stock unit award and other
        equity-based award and performance award (each, a "Compensatory Award") that
        is
        outstanding as of a time immediately prior to the Date of Termination and
        (2)
        unless a longer post-employment term is provided in the applicable award
        agreement, the extension of the term during which each and every Compensatory
        Award may be exercised by the Executive until the earlier of (x) the first
        anniversary of the Date of Termination or (y) the date upon which the right
        to
        exercise any Compensatory Award would have expired if the Executive had
        continued to be employed by the Company under the terms of this Agreement
        until
        the Final Expiration Date; and

      


      D. as
        soon as practicable following the calendar year of the date of termination,
        an
        amount equal to the product of (x) the Annual Bonus that would have been
        paid to
        the Executive with respect to the year of termination had the Date of
        Termination not occurred and (y) a fraction, the numerator of which is the
        number of days in the fiscal year through the Date of Termination and the
        denominator of which is 365.

      


      Anything
        in this Agreement to the contrary notwithstanding, if a Change of Control
        occurs
        and if the Executive's employment with the Company is terminated prior to
        the
        date on which the Change of Control occurs, and if it is reasonably demonstrated
        by the Executive that such termination of employment (x) was at the request
        of a
        third party who has taken steps reasonably calculated to effect the Change
        of
        Control or (y) otherwise arose in connection with or anticipation of the
        Change
        of Control, then for all purposes of this Agreement, the "date a Change of
        Control occurs" shall mean the date immediately prior to the date of such
        termination of employment. 

      


      (ii) for
        the Remaining Employment Period, or such longer period as any plan, program,
        practice or policy may provide, the Company shall continue benefits to the
        Executive and/or the Executive's family at least equal to those which would
        have
        been provided to them in accordance with the plans, programs, practices and
        policies described in Section 2(b)(iv) of this Agreement if the Executive's
        employment had not been terminated in accordance with the plans, practices,
        programs or policies of the Company and its affiliated companies(such
        continuation of such benefits for the applicable period herein set forth
        shall
        be hereinafter referred to as "Welfare Benefit Continuation"), but with the
        Company's medical benefits coverages being secondary to any coverages provided
        by another employer. For purposes of determining eligibility of the Executive
        for retiree benefits pursuant to such plans, practices, programs and


       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

       

      policies,
        the Executive shall be considered to have remained employed until the Final
        Expiration Date and to have retired on such date.

      


      (b) Death
        (except during a Window Period).
        If the Executive's employment is terminated by reason of the Executive's
        death
        during the Employment Period and other than during a Window Period in which
        event the provisions of Section 4(a) shall govern, this Agreement shall
        terminate without further obligations to the Executive's legal representatives
        under this Agreement, other than (i) the payment of Accrued Obligations (which
        shall be paid to the Executive's estate or beneficiary, as applicable, in
        a lump
        sum in cash within 30 days of the Date of Termination), (ii) the payment
        of an
        amount equal to the Annual Salary that would have been paid to the Executive
        pursuant to this Agreement during the Remaining Employment Period if the
        Executive's employment had not terminated by reason of death (which shall
        be
        paid to the Executive's estate or beneficiary, as applicable, in a lump sum
        in
        cash within 30 days of the Date of Termination) reduced by the amount payable
        in
        respect of the Executive's death under any life insurance policy (other than
        accidental death and dismemberment or travel accident policies) but only
        to the
        extent such amounts are attributable to premiums paid by the Company, (iii)
        during the period beginning on the Date of Termination and ending on the
        first
        anniversary thereof medical benefits coverage determined as if the Executive's
        employment had not terminated by reason of death, (iv) as soon as practicable
        following the fiscal year in which death occurs, payment of an amount equal
        to
        the product of (x) the Annual Bonus that would have been paid to the Executive
        with respect to the year of termination had the Date of Termination not occurred
        and (y) a fraction, the numerator of which is the number of days in the fiscal
        year through the Date of Termination and the denominator of which is 365
        and (v)
        effective as of the Date of Termination, (A) immediate vesting and
        exercisability of, and termination of any restrictions on sale or transfer
        (other than any such restriction arising by operation of law) with respect
        to,
        each and every Compensatory Award outstanding as of a time immediately prior
        to
        the Date of Termination, (B) the extension of the term during which each
        and
        every Compensatory Award may be exercised or purchased by the Executive until
        the earlier of (1) the first anniversary of the Date of Termination or (2)
        the
        date upon which the right to exercise or purchase any Compensatory Award
        would
        have expired if the Executive had continued to be employed by the Company
        under
        the terms of this Agreement until the Final Expiration Date.

      


      (c) Cause,
        Other than for Disability, Good Reason or During a Window Period.
        If the Executive's employment shall be terminated for Cause during the
        Employment Period and other than during a Window Period, in which event the
        provisions of Section 4(a) shall govern, this Agreement shall terminate without
        further obligations to the Executive other than for Accrued Obligations.
        If the
        Executive terminates employment during the Employment Period, excluding a
        termination for any Disability, Good Reason or without any reason during
        a
        Window Period, in which event the provisions of Section 4(a) shall govern,
        this
        Agreement shall terminate without further obligations to the Executive, other
        than for the payment of Accrued Obligations. In such case, all Accrued
        Obligations shall be paid to the Executive in a lump sum in cash within 30
        days
        of the Date of Termination.

      


      5. Non-exclusivity
        of Rights.
        Except as provided in Section 4 of this Agreement, nothing in this Agreement
        shall prevent or limit the Executive's continuing or future participation
        in any
        plan, program, policy or practice provided by the Company or any of its
        affiliated companies and for which the Executive may qualify, nor shall anything
        herein limit or otherwise 

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

       

      affect
        such rights as the Executive may have under any contract or agreement with
        the
        Company or any of its affiliated companies. Amount which are vested benefits
        or
        which the Executive is otherwise entitled to receive under any plan, policy,
        practice or program of or any contract or agreement with the Company or any
        of
        its affiliated companies at or subsequent to the Date of Termination shall
        be
        payable in accordance with such plan, policy, practice or program or contract
        or
        agreement except as such plan, policy, practice or program is superseded
        by this
        Agreement.

      


      6. Full
        Settlement; Resolution of Disputes.

      


      (a) The
        Company's obligation to make payments provided for in this Agreement and
        otherwise to perform its obligations hereunder shall not be affected by any
        setoff, counterclaim, recoupment, defense, mitigation or other claim, right
        or
        action which the Company may have against the Executive or others. In the
        event
        (i) prior to a Change in Control, the Executive's employment is terminated
        for
        any reason other than Executive's voluntary termination (with or without
        Good
        Reason), or (ii) within two years after a Change in Control, the Executive's
        employment is terminated by the Company or the Executive for any reason,
        the
        Company agrees to pay promptly as incurred, to the full extent permitted
        by law,
        all legal fees and expenses which the Executive may reasonably incur as a
        result
        of any arbitration pursuant to Section 6(b) (regardless of the outcome thereof)
        initiated by the Company, the Executive or others regarding the validity
        or
        enforceability of, or liability under, any provision of this Agreement or
        any
        guarantee of performance thereof (including as a result of any contest by
        the
        Executive about the amount of any such payment pursuant to this Agreement),
        plus
        in each case interest on any delayed payment at the annual percentage rate
        which
        is three percentage points above the interest rate shown as the Prime Rate
        in
        the Money Rates column in the then most recently published edition of The
        Wall
        Street Journal (Southwest Edition), or, if such rate is not then so published
        on
        at least a weekly basis, the interest rate announced by Chase Manhattan Bank
        (or
        its successor), from time to time, as its Base Rate (or prime lending rate),
        from the date those amounts were required to have been paid or reimbursed
        to the
        Employee until those amounts are finally and fully paid or reimbursed; provided,
        however, that in no event shall the amount of interest contracted for, charged
        or received hereunder exceed the maximum non-usurious amount of interest
        allowed
        by applicable law; provided, further, that if the Executive is not the
        prevailing party in any such arbitration, then he shall, upon the conclusion
        thereof, repay to the Company any amounts that were previously advanced pursuant
        to this sentence by the Company as payment of legal fees and
        expenses.

      


      (b) Any
        dispute arising out of or relating to this Agreement, including the breach,
        termination or validity thereof, shall be finally resolved by arbitration
        in
        accordance with the CPR Institute for Dispute Resolution Rules for
        Non-Administered Arbitration in effect on the date of this Agreement by a
        single
        arbitrator selected in accordance with the CPR Rules. The arbitration shall
        be
        governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment on the
        award rendered by the arbitrator may be entered by any court having jurisdiction
        thereof. The place of arbitration shall be in Harris County, Texas. The
        arbitrator's decision must be based on the provisions of this Agreement and
        the
        relevant facts, and the arbitrator's reasoned decision and award shall be
        binding on both parties. Nothing herein is or shall be deemed to preclude
        the
        company's resort to the injunctive relief prescribed in this Agreement,
        including any injunctive relief implemented by the arbitrator pursuant to
        this
        Section 6(b). The parties will each bear 

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

       

      their
        own attorneys' fees and costs in connection with any dispute, except in the
        circumstances in which the Company is required to advance the Executive's
        attorneys' fees in accordance with Section 6(a).

      


      (c) If,
        upon a termination within two years following a Change in Control, there
        shall
        be any dispute between the Company and the Executive concerning (i) in the
        event
        of any termination of the Executive's employment by the Company, whether
        such
        termination was for Cause or Disability, or (ii) in the event of any termination
        of employment by the Executive, whether Good Reason existed or whether such
        termination occurred during a Window Period, then, unless and until there
        is a
        final, determination by an arbitrator declaring that such termination was
        for
        Cause or not for Disability or that the determination by the Executive of
        the
        existence of Good Reason was not made in good faith or that the termination
        by
        the Executive did not occur during a Window Period, the Company shall pay
        all
        amounts, and provide all benefits, to the Executive and/or the Executive's
        family or other beneficiaries, as the case may be, that the Company would
        be
        required to pay or provide pursuant to Section 4(a) hereof as though such
        termination were by the Company without Cause or by the Executive with Good
        Reason or during a Window Period; provided, however, that the Company shall
        not
        be required to pay any disputed amounts pursuant to this paragraph except
        upon
        receipt of an undertaking by or on behalf of the Executive to repay all such
        amounts to which the Executive is ultimately adjudged by such arbitrator
        not to
        be entitled.

      


      (d) Notwithstanding
        any provision of Section 4, except in the case of a termination of employment
        within two years following a Change in Control, the Company's obligation
        to pay
        the amounts due on any termination of employment under Section 4 (other than
        the
        Accrued Obligations) are conditioned on the Executive's execution (without
        revocation during any applicable statutory revocation period) of a waiver
        and
        release of any and all claims against the Company and its affiliates in such
        form as may be prescribed by the Company.

      


      7. Certain
        Additional Payments by the Company.
        

      


      (a) Anything
        in this Agreement to the contrary notwithstanding and except as set forth
        below,
        in the event it shall be determined that any payment or distribution in the
        nature of compensation (within the meaning of Section 280G(b)(2) of the Code)
        to
        or for the benefit of the Executive, whether paid or payable or distributed
        or
        distributable pursuant to the terms of this Agreement or otherwise, but
        determined without regard to any additional payments required under this
        Section
        7 (a "Payment"), would be subject to the excise tax imposed by Section 4999
        of
        the Code, together with any interest or penalties imposed with respect to
        such
        excise tax ("Excise Tax"), then the Executive shall be entitled to receive
        an
        additional payment (a "Gross Up Payment") in an amount such that, after payment
        (whether through withholding at the source or otherwise) by the Executive
        of all
        taxes (including any interest or penalties imposed with respect to such taxes),
        including, without limitation, any income taxes (and any interest and penalties
        imposed with respect thereto), employment taxes and Excise Tax imposed upon
        the
        Gross Up Payment, the Executive retains an amount of the Gross Up Payment
        equal
        to the Excise Tax imposed upon the Payments.

      


      (b) Subject
        to the provisions of this Section 7, all determinations required to be made
        under this Section 7, including whether and when a Gross Up Payment is required
        and 

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

       

      the
        amount of such Gross Up Payment and the assumptions to be utilized in arriving
        at such determination, shall be made by Pannell Kerr Forster of Texas, P.C.
        (or
        such other nationally recognized certified public accounting firm that is
        providing audit services for the Company immediately prior to the date of
        a
        Change of Control in replacement of Pannell Kerr Forster of Texas, P.C.)
        (the
        "Accounting Firm") which shall provide detailed supporting calculations both
        to
        the Company and the Executive within 15 business days of the receipt of notice
        from the Executive that there has been a Payment, or such earlier time as
        is
        requested by the Company. In the event that the Accounting Firm is serving
        as
        accountant or auditor for the individual, entity or group effecting the Change
        of Control or the Accounting Firm declines or is unable to serve, the Executive
        shall appoint another nationally recognized certified public accounting firm
        to
        make the determinations required hereunder (which accounting firm shall then
        be
        referred to as the Accounting Firm hereunder). All fees and expenses of the
        Accounting Firm shall be borne solely by the Company. Any Gross Up Payment,
        as
        determined pursuant to this Section 7, shall be paid by the Company to the
        Executive within five days of the receipt of the Accounting Firm's
        determination. If the Accounting Firm determines that no Excise Tax is payable
        by the Executive, it shall furnish the Executive with a written opinion that
        failure to report the Excise Tax on the Executive's applicable federal income
        tax return would not result in the imposition of negligence or similar penalty.
        Any determination by the Accounting Firm shall be binding upon the Company
        and
        the Executive. As a result of the uncertainty in the application of Section
        4999
        of the Code at the time of the initial determination by the Accounting Firm
        hereunder, it is possible that Gross Up Payments which will not have been
        made
        by the Company should have been made ("Underpayment"), consistent with the
        calculations required to be made hereunder. In the event that the Company
        exhausts its remedies pursuant to the following provisions of this Section
        7 and
        the Executive thereafter is required to make a payment of any Excise Tax,
        the
        Accounting Firm shall determine the amount of the Underpayment that has occurred
        and any such Underpayment shall be promptly paid by the Company to or for
        the
        benefit of the Executive.

      


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

      


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

      


      (ii) take
        such action in connection with contesting such claim as the Company shall
        reasonably request in writing from time to time, including, without limitation,
        accepting legal representation with respect to such claim by an attorney
        reasonably selected by the Company;

      


      
        
           

        

        
          10

          
            

          

        

        
           

        

      

       

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

      


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

      


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

      


      (d) If,
        after the receipt by the Executive of an amount provided by the Company pursuant
        to the foregoing provisions of this Section 7, the Executive becomes entitled
        to
        receive any refund with respect to such claim, the Executive shall (subject
        to
        the Company complying with the requirements of this Section 7) promptly pay
        to
        the Company the amount of such refund (together with any interest paid or
        credited thereon after taxes applicable thereto).

      


      8. Confidential
        Information.
        The Executive shall hold in a fiduciary capacity for the benefit of the Company
        all secret or confidential information, knowledge or data relating to the
        Company or any of its affiliated companies, and their respective businesses,
        which shall have been obtained by the Executive during the Executive's
        employment by the Company or any of its affiliated companies and which shall
        not
        be or become public knowledge (other than by acts by the Executive or
        representatives of the Executive in violation of this Agreement) (referred
        to
        herein as "Confidential Information"). After termination of the Executive's
        employment with the Company, the Executive shall not, without the prior written
        consent of the Company or as may otherwise be required by law or legal process,
        communicate or divulge any such information, 

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

       

      knowledge
        or data to anyone other than the Company and those designated by it. In no
        event
        shall an asserted violation of the provisions of this Section 8 constitute
        a
        basis for deferring or withholding any amounts otherwise payable to the
        Executive under this Agreement. Also, within 14 days of the termination of
        the
        Executive's employment for any reason, the Executive shall return to Company
        all
        documents and other tangible items of or containing Company information which
        are in the Executive's possession, custody or control.

      


      9. Change
        of Control.
        

      


      As
        used in this Agreement, the terms set forth below shall have the following
        respective meanings:

      


      "Affiliate"
        shall have the meaning ascribed to such term in Rule 12b-2 of the General
        Rules
        and Regulations under the Exchange Act, as in effect on the date of this
        Agreement.

      


      "Associate"
        shall mean, with reference to any Person, (a) any corporation, firm,
        partnership, association, unincorporated organization or other entity (other
        than the Company or a subsidiary of the Company) of which such Person is
        an
        officer or general partner (or officer or general partner of a general partner)
        or is, directly or indirectly, the Beneficial Owner of 10% or more of any
        class
        of equity securities, (b) any trust or other estate in which such Person
        has a
        substantial beneficial interest or as to which such Person serves as trustee
        or
        in a similar fiduciary capacity and (c) any relative or spouse of such Person,
        or any relative of such spouse, who has the same home as such
        Person.

      


      "Beneficial
        Owner" shall mean, with reference to any securities, any Person if:

      


      (a) such
        Person or any of such Person's Affiliates and Associates, directly or
        indirectly, is the "beneficial owner" of (as determined pursuant to Rule
        13d-3
        of the General Rules and Regulations under the Exchange Act, as in effect
        on the
        date of this Agreement) such securities or otherwise has the right to vote
        or
        dispose of such securities, including pursuant to any agreement, arrangement
        or
        understanding (whether or not in writing); provided, however, that a Person
        shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
        any
        security under this subsection (a) as a result of an agreement, arrangement
        or
        understanding to vote such security if such agreement, arrangement or
        understanding: (i) arises solely from a revocable proxy or consent given
        in
        response to a public (i.e., not including a solicitation exempted by Rule
        14a-2(b)(2) of the General Rules and Regulations under the Exchange Act)
        proxy
        or consent solicitation made pursuant to, and in accordance with, the applicable
        provisions of the General Rules and Regulations under the Exchange Act and
        (ii)
        is not then reportable by such Person on Schedule 13D under the Exchange
        Act (or
        any comparable or successor report);

      


      (b) such
        Person or any of such Person's Affiliates and Associates, directly or
        indirectly, has the right or obligation to acquire such securities (whether
        such
        right or obligation is exercisable or effective immediately or only after
        the
        passage of time or the occurrence of an event) pursuant to any agreement,
        arrangement or understanding (whether or not in writing) or upon the exercise
        of
        conversion rights, exchange rights, other rights, warrants or options, or
        otherwise; provided, however, that a Person shall not be deemed the Beneficial
        Owner of, or to 

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

       

      "beneficially
        own," (i) securities tendered pursuant to a tender or exchange offer made
        by
        such Person or any of such Person's Affiliates or Associates until such tendered
        securities are accepted for purchase or exchange or (ii) securities issuable
        upon exercise of Exempt Rights; or

      


      (c) such
        Person or any such Person's Affiliates or Associates (i) has any agreement,
        arrangement or understanding (whether or not in writing) with any other Person
        (or any Affiliate or Associate thereof) that beneficially owns such securities
        for the purpose of acquiring, holding, voting (except as set forth in the
        proviso to subsection (a) of this definition) or disposing of such securities
        or
        (ii) is a member of a group (as that term is used in Rule 13d-5(b) of the
        General Rules and Regulations under the Exchange Act) that includes any other
        Person that beneficially owns such securities; 

      


      provided,
        however, that nothing in this definition shall cause a Person engaged in
        business as an underwriter of securities to be the Beneficial Owner of, or
        to
        "beneficially own," any securities acquired through such Person's participation
        in good faith in a firm commitment underwriting until the expiration of 40
        days
        after the date of such acquisition. For purposes hereof, "voting" a security
        shall include voting, granting a proxy, consenting or making a request or
        demand
        relating to corporate action (including, without limitation, a demand for
        stockholder list, to call a stockholder meeting or to inspect corporate books
        and records) or otherwise giving an authorization (within the meaning of
        Section
        14(a) of the Exchange Act) in respect of such security.

      


      The
        terms "beneficially own" and "beneficially owning" shall have meanings that
        are
        correlative to this definition of the term "Beneficial Owner".

      


      "Change
        of Control" shall mean any of the following:

      


      (a) any
        Person (other than an Exempt Person) shall become the Beneficial Owner of
        40% or
        more of the shares of Common Stock then outstanding or 40% or more of the
        combined voting power of the Voting Stock of the Company then outstanding;
        provided, however, that no Change of Control shall be deemed to occur for
        purposes of this subsection (a) if such Person shall become a Beneficial
        Owner
        of 40% or more of the shares of Common Stock or 40% or more of the combined
        voting power of the Voting Stock of the Company solely as a result of (i)
        an
        Exempt Transaction or (ii) an acquisition by a Person pursuant to a
        reorganization, merger or consolidation, if, following such reorganization,
        merger or consolidation, the conditions described in clauses (i), (ii) and
        (iii)
        of subsection (c) of this definition are satisfied; or 

      


      (b) individuals
        who, as of the Agreement Effective Date, constitute the Board (the "Incumbent
        Board") cease for any reason to constitute at least a majority of the Board;
        provided, however, that any individual becoming a director subsequent to
        the
        Agreement Effective Date whose election, or nomination for election by the
        Company's shareholders, was approved by a vote of at least a majority of
        the
        directors then comprising the Incumbent Board shall be considered as though
        such
        individual were a member of the Incumbent Board; provided, further, that
        there
        shall be excluded, for this purpose, any such individual whose initial
        assumption of office occurs as a result of any actual or threatened election
        contest that is subject to the provisions of Rule 14a-11 under the Exchange
        Act;
        or

      


      
        
           

        

        
          13

          
            

          

        

        
           

        

      

       

      (c) the
        Company engages in and completes a reorganization, merger or consolidation,
        in
        each case, unless, following such reorganization, merger or consolidation,
        (i)
        more than 85% of the then outstanding shares of common stock of the corporation
        resulting from such reorganization, merger or consolidation and the combined
        voting power of the then outstanding Voting Stock of such corporation
        beneficially owned, directly or indirectly, by all or substantially all of
        the
        Persons who were the Beneficial Owners of the outstanding Common Stock
        immediately prior to such reorganization, merger, or consolidation is in
        substantially the same proportions as their ownership, immediately prior
        to such
        reorganization, merger or consolidation, of the outstanding Common Stock,
        (ii)
        no Person (excluding any Exempt Person or any Person beneficially owning,
        immediately prior to such reorganization, merger or consolidation, directly
        or
        indirectly, 40% or more of the Common Stock then outstanding or 40% or more
        of
        the combined voting power of the Voting Stock of the Company then outstanding)
        beneficially owns, directly or indirectly, 40% or more of the then outstanding
        shares of common stock of the corporation resulting from such reorganization,
        merger or consolidation or the combined voting power of the then outstanding
        Voting Stock of such corporation and (iii) at least a majority of the members
        of
        the board of directors of the corporation resulting from such reorganization,
        merger or consolidation were members of the Incumbent Board at the time of
        the
        execution of the initial agreement or initial action by the Board providing
        for
        such reorganization, merger or consolidation; or

      


      (d) the
        Company engages in and completes (i) a complete liquidation or dissolution
        of
        the Company unless such liquidation or dissolution is approved a part of
        a plan
        of liquidation and dissolution involving a sale or disposition of all or
        substantially all of the assets of the Company to a corporation with respect
        to
        which, following such sale or other disposition, all of the requirements
        of
        clauses (ii) (A), (B) and (C) of this subsection (d) are satisfied, or (ii)
        the
        sale or other disposition of all or substantially all of the assets of the
        Company, other than to a corporation, with respect to which, following such
        sale
        or other disposition, (A) more than 85% of the then outstanding shares of
        common
        stock or such corporation and the combined voting power of the Voting Stock
        of
        such corporation is then beneficially owned, directly or indirectly, by all
        or
        substantially all of the Persons who were the Beneficial Owners of the
        outstanding Common Stock immediately prior to such sale or other disposition
        in
        substantially the same proportion as their ownership, immediately prior to
        such
        sale or other disposition, of the outstanding Common Stock, (B) no Person
        (excluding any Exempt Person and any Person beneficially owning, immediately
        prior to such sale or other disposition, directly or indirectly, 40% or more
        of
        the Common Stock then outstanding or 40% or more of the combined voting power
        of
        the Voting Stock of the Company then outstanding) beneficially owns, directly
        or
        indirectly, 40% or more of the then outstanding shares of common stock of
        such
        corporation and the combined voting power of the then outstanding Voting
        Stock
        of such corporation and (C) at least a majority of the members of the board
        of
        directors of such corporation were members of the Incumbent Board at the
        time of
        the execution of the initial agreement or initial action of the Board providing
        for such sale or other disposition of assets of the Company.

      


      "Exchange
        Act" shall mean the Securities Exchange Act of 1934, as amended.

      


      "Exempt
        Person" shall mean the Company, any subsidiary of the Company, any employee
        benefit plan of the Company or any subsidiary of the Company, and any Person
        

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

       

      organized,
        appointed or established by the Company for or pursuant to the terms of any
        such
        plan.

      


      "Exempt
        Rights" shall mean any rights to purchase shares of Common Stock or other
        Voting
        Stock of the Company if at the time of the issuance thereof such rights are
        not
        separable from such Common Stock or other Voting Stock (i.e., are not
        transferable otherwise than in connection with a transfer of the underlying
        Common Stock or other Voting Stock) except upon the occurrence of a contingency,
        whether such rights exist as of the Agreement Effective Date or are thereafter
        issued by the Company as a dividend on shares of Common Stock or other Voting
        Securities or otherwise.

      


      "Exempt
        Transaction" shall mean an increase in the percentage of the outstanding
        shares
        of Common Stock or the percentage of the combined voting power of the
        outstanding Voting Stock of the Company beneficially owned by any Person
        solely
        as a result of a reduction in the number of shares of Common Stock then
        outstanding due to the repurchase of Common Stock or Voting Stock by the
        Company, unless and until such time as (a) such Person or any Affiliate or
        Associate of such Person shall purchase or otherwise become the Beneficial
        Owner
        of additional shares of Common Stock constituting 1% or more of the then
        outstanding shares of Common Stock or additional Voting Stock representing
        1% or
        more of the combined voting power of the then outstanding Voting Stock, or
        (b)
        any other Person (or Persons) who is (or collectively are) the Beneficial
        Owner
        of shares of Common Stock constituting 1% or more of the then outstanding
        shares
        of Common Stock or Voting Stock representing 1% or more of the combined voting
        power of the then outstanding Voting Stock shall become an Affiliate or
        Associate of such Person.

      


      "Person"
        shall mean any individual, firm, corporation, partnership, association, trust,
        unincorporated organization or other entity.

      


      "Voting
        Stock" shall mean, with respect to a corporation, all securities of such
        corporation of any class or series that are entitled to vote generally in
        the
        election of directors of such corporation (excluding any class or series
        that
        would be entitled so to vote by reason of the occurrence of any contingency,
        so
        long as such contingency has not occurred).

      


      10. Non-Compete
        and Non-Solicitation.

      


      (a) The
        Executive recognizes that in each of the highly competitive businesses in
        which
        the Company is engaged, personal contact is of primary importance in securing
        new customers and in retaining the accounts and goodwill of present customers
        and protecting the business of the Company. The Executive, therefore, agrees
        that during the Employment Period and, if the Date of Termination occurs
        by
        reason of the Executive terminating his employment for reasons other than
        Disability or Good Reason and other than during a Window Period, for a period
        of
        one year after the Date of Termination, he will not either within 20 miles
        of
        any geographic location with respect to which he has devoted substantial
        attention to the material business interests of the Company or any of its
        affiliated companies or with respect to any immediate geologic trends in
        which
        the Company or any of its affiliated companies is active as of the Date of
        Termination, without regard, in either case, to whether the Executive has
        worked
        at such location (the "Relevant Geographic Area"), (i) accept employment
        or
        render service to 

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

       

      any
        person that is engaged in a business directly competitive with the business
        then
        engaged in by the Company or any of its affiliated companies, (ii) enter
        into or
        take part in or lend his name, counsel or assistance to any business, either
        as
        proprietor, principal, investor, partner, director, officer, executive,
        consultant, advisor, agent, independent contractor, or in any other capacity
        whatsoever, for any purpose that would be competitive with the business of
        the
        Company or any of its affiliated companies or (iii) regardless of geographic
        area, directly or indirectly, either as principal, agent, independent
        contractor, consultant, director, officer, employee, employer, advisor,
        stockholder, partner or in any other individual or representative capacity
        whatsoever, either for his own benefit or for the benefit of any other person
        or
        entity either (A) hire, contract or solicit, or attempt any of the foregoing,
        with respect to hiring any employee of the Company or its affiliated companies,
        or (B) induce or otherwise counsel, advise or encourage any employee of the
        Company or its affiliated companies to leave the employment of the Company
        or
        its affiliated companies (all of the foregoing activities described in (i),
        (ii)
        and (iii) are collectively referred to as the "Prohibited Activity").
        Notwithstanding anything contained in this Section 10 to the contrary, the
        Prohibited Activity shall not be applicable to the state or federal waters
        of
        the Gulf of Mexico except as to the area covered by any state or federal
        oil and
        gas lease in which Company owns a working interest which was acquired by
        Company
        prior to or during the Employment Period and further limited to the depths
        in
        which Company owns such working or operating rights interest. For the avoidance
        of doubt, the provisions of this Section 10 will not apply following a
        termination of the Executive's employment by the Company with or without
        Cause,
        by the Executive due to Disability or Good Reason or by the Executive during
        a
        Window Period.

      


      (b) In
        addition to all other remedies at law or in equity which the Company may
        have
        for breach of a provision of this Section 10 by the Executive, it is agreed
        that
        in the event of any breach or attempted or threatened breach of any such
        provision, the Company shall be entitled, upon application to any court of
        proper jurisdiction, to a temporary restraining order or preliminary injunction
        (without the necessity of (i) proving irreparable harm, (ii) establishing
        that
        monetary damages are inadequate or (iii) posting any bond with respect thereto)
        against the Executive prohibiting such breach or attempted or threatened
        breach
        by proving only the existence of such breach or attempted or threatened breach.
        If the provisions of this Section 10 should ever be deemed to exceed the
        time,
        geographic or occupational limitations permitted by the applicable law, the
        Executive and the Company agree that such provisions shall be and are hereby
        reformed to the maximum time, geographic or occupational limitations permitted
        by the applicable law.

      


      (c) The
        covenants of the Executive set forth in this Section 10 are independent of
        and
        severable from every other provision of this Agreement; and the breach of
        any
        other provision of this Agreement by the Company or the breach by the Company
        of
        any other agreement between the Company and the Executive shall not affect
        the
        validity of the provisions of this Section 10 or constitute a defense of
        the
        Executive in any suit or action brought by the Company to enforce any of
        the
        provisions of this Section 10 or seek any relief for the breach thereof by
        the
        Executive.

      


      (d) The
        Executive acknowledges, agrees and stipulates that: (i) the terms and provisions
        of this Agreement are reasonable and constitute an otherwise enforceable
        agreement to which the terms and provisions of this Section 10 are ancillary
        or
        a part of as contemplated by 

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

       

      TEX.
        BUS. & COM. CODE ANN. Sections 15.50-15.52; (ii) the consideration provided
        by the Company under this Agreement is not illusory; and (iii) the consideration
        given by the Company under this Agreement, including, without limitation,
        the
        provision by the Company of Confidential Information to the Executive as
        contemplated by Section 8, gives rise to the Company's interest in restraining
        and prohibiting the Executive from engaging in the Prohibited Activity within
        the Relevant Geographic Area as provided under this Section 10, and the
        Executive's covenant not to engage in the Prohibited Activity within the
        Relevant Geographic Area pursuant to this Section 10 is designed to enforce
        the
        Executive's consideration (or return promises), including, without limitation,
        the Executive's promise to not disclose Confidential Information under this
        Agreement.

      


      11. Successors.

      


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

      


      (b) This
        Agreement shall inure to the benefit of and be binding upon he Company and
        may
        only be assigned to a successor described in Section 11(c).

      


      (c) The
        Company will require any successor (whether direct or indirect, y purchase,
        merger, consolidation or otherwise) to all or substantially all of the business
        and/or assets of the Company to assume expressly and agree to perform this
        Agreement in the same manner and to the same extent that the Company would
        be
        required to perform it if no such succession had taken place. As used in
        this
        Agreement, "Company" shall mean the Company as hereinbefore defined and any
        successor to its business and/or assets as aforesaid which assumes and agrees
        to
        perform this Agreement by operation of law, or otherwise.

      


      12. Section
        409A.
        If any provision provided herein results in the imposition of an excise tax
        under the provisions of Section 409A of the Internal Revenue Code and related
        regulations and Treasury pronouncements ("Section 409A"), the Executive and
        the
        Company agree that any such provision will be reformed to avoid imposition
        of
        any such excise tax in the manner that the Executive and the Company determine
        are appropriate to comply with Section 409A.

      


      13. Miscellaneous.

      


      (a) This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of Texas, without reference to principles of conflict of laws that
        would
        require the application of the laws of any other state or
        jurisdiction.

      


      (b) The
        captions of this Agreement are not part of the provisions hereof and shall
        have
        no force or effect.

      


      (c) This
        Agreement may not be amended or modified otherwise than by a written agreement
        executed by the parties hereto or their respective successors and heirs,
        executors and other legal representatives. 

      


      
        
           

        

        
          17

          
            

          

        

        
           

        

      

       

      (d) All
        notices and other communications hereunder shall be in writing and shall
        be
        given, if by the Executive to the Company, by telecopy or facsimile transmission
        at the telecommunications number set forth below and, if by either the Company
        or the Executive, either by hand delivery to the other party or by registered
        or
        certified mail, return receipt requested, postage prepaid, addressed as
        follows:

      


      If
        to the Executive:

      


      Name: Jack
        L. Bayless

      11530
        Manor House Lane

      Houston,
        Texas 77082  

      


      


      If
        to the Company:

      


      Carrizo
        Oil & Gas, Inc.

      1000
        Louisiana Street , Suite 1500

      Houston,
        Texas 77002 

      Fax
        Number: (713) 328-1060

      Telephone
        Number: (713) 328-1000

      Attention:
        Corporate Secretary

      


      


      or
        to such other address as either party shall have furnished to the other in
        writing in accordance herewith. Notice and communications shall be effective
        when actually received by the addressee.

      


      (e) The
        invalidity or unenforceability of any provision of this Agreement shall not
        affect the validity or enforceability of any other provision of this
        Agreement.

      


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

      


      (g) The
        Executive's or the Company's failure to insist upon strict compliance with
        any
        provision hereof or any other provision of this Agreement or the failure
        to
        assert any right the Executive or the Company may have hereunder shall not
        be
        deemed to be a waiver of such provision or right or any other provision or
        right
        of this Agreement; provided, however, that any claim for "Good Reason"
        termination must be raised within 180 days following the occurrence of the
        event
        giving rise to the right to terminate for "Good Reason" as set forth in Section
        3(c) hereof.

      


      (h) This
        Agreement contains the complete and total understanding of the parties
        concerning the subject matter hereof and expressly supersedes any previous
        agreement between the parties relating to the subject matter
        hereof.

      


      [REMAINDER
        OF THIS PAGE INTENTIONALLY LEFT BLANK] 

       

      
        
           

        

        
          18

          
            

          

        

        
           

        

      

       

       IN
        WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to
        the
        authorization from its Board of Directors, the Company has caused these presents
        to be executed in its name on its behalf, all to be effective as of the
        Agreement Effective Date.



      


      CARRIZO
        OIL & GAS, INC.

      


      


      By:
        /s/
        Paul F. Boling   

      Name:
        Paul F. Boling

      Title: Chief
        Financial Officer, Secretary  and
        Treasurer

      


      


      


      EXECUTIVE

      


      /s/
        Jack L. Bayless  

      Jack
        L. Bayless

       

       

      
        
           

        

        
          19