EXHIBIT 10.3

<PAGE>


                                  SEITEL, INC.
                      EMPLOYMENT AGREEMENT AMENDMENT NO. 2


         THIS EMPLOYMENT AGREEMENT AMENDMENT NO. 2 (this "Agreement") is between
Seitel, Inc. (the "Company"), a Delaware corporation with its principal place of
business in  Houston,  Texas,  and  Herbert M.  Pearlman  (the  "Employee,"  and
collectively  with the  Company,  the  "Parties"),  and is an  amendment to that
certain  Employment  Agreement  between  the  Company  and  the  Employee  dated
effective January 1, 1991 (the "Original Employment  Agreement"),  as amended by
that certain  Employment  Agreement  Amendment  dated effective as of January 1,
1998 (the Original Employment Agreement, as so amended, is referred to herein as
the "Employment Agreement").

                                    Recitals

         WHEREAS,  the  Company  and the  Employee  entered  into  the  Original
Employment  Agreement effective as of January 1, 1991 to govern the terms of the
Employee's employment by the Company;

         WHEREAS,  the Company and the Employee entered into an amendment to the
Original  Employment  Agreement effective January 1, 1998 to amend certain terms
of the Original Employment Agreement;

         WHEREAS,  the Employee and the Company are entering into this Agreement
to further amend the Employment Agreement as set forth herein;

         NOW, THEREFORE, the Parties do hereby agree as follows:

         1.   Compensation.  Section 2 of the  Employment  Agreement  is  hereby
amended by deleting the following sentence:

         "If the Employment Period reaches the Termination  Date,  Employer will
         pay  Employee  for two  (2)  additional  years  the  compensation  then
         applicable,  which shall  include for purposes of this payment the Base
         Salary,  together  with  the  average  of all  bonus  payments  paid to
         Employee for the prior three (3) years (the Severance Payment)."

and replacing such sentence with the following sentence:

         "If the Employment Period reaches the Termination  Date,  Employer will
         pay  Employee  for two  (2)  additional  years  the  compensation  then
         applicable,  which shall  include for purposes of this payment the Base
         Salary, together with the average of all Pre-Tax Profits Bonus payments
         that would have been paid to Employee  for the prior three (3) years as
         calculated  under  Section 3 of this  Agreement as amended by Amendment
         No. 2 to this Agreement (the Severance Payment)."

In  addition,  Section 2 of the  Employment  Agreement  is  further  amended  by
deleting the following sentence:

         "If  Employee  terminates  this  Agreement  during any renewal  period,
         Employer  will  pay  Employee  100% of his  then  current  Base  Salary
         (including bonus and/or commissions) for two additional years, provided
         Employee performs the Consulting Services (the Termination Payment)."

and replacing such sentence with the following sentence:

         "If  Employee  terminates  this  Agreement  during any renewal  period,
         Employer  will pay  Employee  100% of his then  current Base Salary and
         Pre-Tax  Profits  Bonus for two  additional  years,  provided  Employee
         performs the Consulting Services (the Termination Payment)."

         2.   Compensation. Section  3 of the  Employment  Agreement  is  hereby
amended to reduce the amount of the Pre-Tax Profits Bonus payable thereunder for
the year ending  December 31, 2000 and  subsequent  years during the term of the
Agreement by  redesignating  existing  Section 3(b) of the  Agreement as Section
3(b)(I),  and by deleting the first paragraph  thereof and replacing it with the
following:

                           "(b)(I) Pre-Tax Profits Bonus.  Commencing January 1,
                  1998,  the Employee  shall receive bonus payments based on the
                  annual  Pre-Tax  Profits  (the  "PTP") of the  Company and its
                  majority  owned  subsidiaries  ("Subsidiaries").  If  the  PTP
                  exceeds  the PTP  Threshold  (hereinafter  defined),  Employee
                  shall receive a pre-tax  profits bonus equal to the difference
                  of (I) 3.5% of PTP for PTP up to $50  million and 3.71% of PTP
                  for  PTP  in  excess  of $50  million,  minus  (II)  $300,000,
                  provided,  however, that if the amount determined under clause
                  (I)  is  less  than  $300,000,   no  bonus  shall  be  payable
                  hereunder."

Section  3(b) of the  Employment  Agreement  shall be further  amended by adding
thereto after Section 3(b)(I) the following Section 3(b)(II):

                           "(II) Bonus for Reduction of Pre-Tax  Profits  Bonus.
                  In consideration  of Employee's  agreement to the reduction in
                  Pre-Tax  Profits  Bonus  and  the  other  amendments  to  this
                  Employment   Agreement  set  forth  in  Employment   Agreement
                  Amendment  No. 2 to this  Employment  Agreement,  the  Company
                  shall  pay  Employee  a  bonus  in  the  aggregate  amount  of
                  $2,674,040, which shall be payable as follows:

                           (i)      The  Company  shall issue  Employee  150,000
                                    shares  of  restricted  common  stock of the
                                    Company on the date  hereof,  which shall be
                                    valued at $6.5875  per share,  or a total of
                                    $988,125  (which is  approximately  15% less
                                    than the  current  market  value  of  freely
                                    tradable   common   stock  to  reflect   the
                                    transfer  restrictions  applicable  to  such
                                    shares of restricted  stock),  and shall pay
                                    to  Employee  on the date  hereof the sum of
                                    $532,067,    subject   to   withholding   as
                                    specified  in paragraph  (vii) below,  for a
                                    net cash payment of $-0-.

                           (ii)     The Company shall pay Employee on January 2,
                                    2001  the  sum  of   $288,462,   subject  to
                                    withholding as specified in paragraph  (vii)
                                    below, for a net cash payment of $187,500.
                           (iii)    The Company shall pay Employee on January 2,
                                    2002  the  sum  of   $288,462,   subject  to
                                    withholding as specified in paragraph  (vii)
                                    below, for a net cash payment of $187,500.

                           (iv)     The Company shall pay Employee on January 2,
                                    2003  the  sum  of   $288,462,   subject  to
                                    withholding as specified in paragraph  (vii)
                                    below, for a net cash payment of $187,500.

                           (v)      The Company shall pay Employee on January 2,
                                    2004  the  sum  of   $288,462,   subject  to
                                    withholding as specified in paragraph  (vii)
                                    below, for a net cash payment of $187,500.

                           (vi)     The payments in  paragraphs  (i) through (v)
                                    above  shall  be   contingent   on  Employee
                                    continuing  to be an employee of the Company
                                    on the date such  payments  are due, and the
                                    right to  receive  such  payments  shall not
                                    vest until such  dates;  provided,  however,
                                    that if  Employee  is not an employee of the
                                    Company on any such date due to  termination
                                    of his  employment  prior to such  date as a
                                    result  of  his  death  or  disability,  the
                                    Company shall continue to make such payments
                                    to Employee or his estate on such dates.

                           (vii)    The payments in  paragraphs  (i) through (v)
                                    above   shall  be  subject  to  federal  tax
                                    withholding  at the  aggregate  rate of 35%.
                                    For the purpose of paragraph (i) above,  the
                                    withholding  shall be based on the amount of
                                    the  cash  payment  and the  $988,125  value
                                    attributed to the stock issued to Employee."

Section 3 of the  Employment  Agreement  shall be further  amended  by  deleting
existing Section 3(d) and replacing it with the following:

                  "(d) Salary  Continuation  Benefits.  The Company will pay, so
         long as the Employee's  Employment  Agreement,  as amended,  is in full
         force  and  effect  on  the  date  of  his  death,   a  monthly  salary
         continuation  amount  to the  Employee's  estate or his  designee,  for
         twelve  months  beginning on the date of his death.  The annual  salary
         continuation  amount will equal the Employee's  base salary at his date
         of death plus the average of all Pre-Tax  Profits  Bonus  payments that
         would have been paid to Employee for the three calendar years preceding
         the year of his death as calculated  under Section 3 of this  Agreement
         as amended by Amendment No. 2 to this Agreement."

         3.   Termination.  Paragraph  (b)  of  Section  13  of  the  Employment
Agreement is hereby amended by deleting the existing paragraph (b) and replacing
it with the following:

                  "(b)  Termination for Employer's  Breach:  Employee shall have
         the  right to  terminate  this  Agreement  if the  Employer  materially
         breaches  any of the  provisions  hereof  and such  breach is not cured
         within thirty (30) days after the Employer receives written notice from
         Employee  thereof.  In  such  event,  or in  the  event  of a  wrongful
         termination of Employee, all monies due to Employee through the term of
         this  Agreement,  including  the  Severance  Payment,  shall be paid by
         Employer in a lump sum amount  within  thirty  (30) days of  Employee's
         termination.  Employee shall have no obligation to mitigate his loss or
         any occasioned damages as a result of such termination,  or perform any
         services to receive such payments.

         4.   Restriction on Transfer of Stock,  Registration  Rights.  Employee
agrees that he will not sell,  assign or otherwise  transfer the shares received
pursuant to Section  3(b)(II)(i) of the  Employment  Agreement as amended hereby
for a period of one year  from the date of this  Agreement;  provided,  however,
that  Employee may transfer a portion of such shares to members of his immediate
family or trusts for the benefit of members of his immediate family who agree to
be bound by the transfer restrictions set forth herein and who make any required
representations  regarding their  investment  intent as the Company may require.
The  Employee  shall  have the right to  demand  that the  Company  use its best
efforts to effect an effective registration under the Securities Act of 1933, as
amended,  of  Employee's  resale of such shares on one  occasion not sooner than
nine months after the date hereof or later than  December 31, 2003.  The Company
may grant similar registration rights to other stockholders, and upon any demand
by any other such  stockholder for the  registration of his shares,  the Company
may also include Employee's shares in such registration and such inclusion shall
constitute the one required registration hereunder. If requested by the Company,
Employee  and the  Company  shall enter into a  customary  form of  registration
agreement  relating  thereto.  The Company may include  other shares and selling
shareholders in any such registration in its sole discretion.

         5.   Representations  and  Warranties  of  Employee   Relating to Stock
Issuance.  In  connection  with the  issuance of common  stock of the Company to
Employee hereunder, Employee represents and warrants to the Company as follows:

                  (a)  Acquisition  for Own Account.  Employee is acquiring  the
         common stock for his own account, for investment and not with a view to
         the sale or  distribution  thereof  or with any  present  intention  of
         distributing  or selling the same,  or dividing  the common  stock with
         other persons.

                  (b)  Securities  Law  Restrictions.   Employee  will not sell,
         assign, transfer,  pledge or  otherwise dispose of any of the shares of
         common stock except in   accordance  with the  provisions of applicable
         state and federal securities laws.

                  (c)  Investment  Risk.   Employee  has  such   knowledge   and
         experience  in  financial  and  business  matters  as  to be capable of
         evaluating  the merits and risks of investment in  the shares of common
         stock.

                  (d)  Accredited Investor. Employee is an "accredited investor"
         as said  term  is  defined  in  Rule  501 of  Regulation  D  under  the
         Securities  Act,  in that he is an  individual  and  either  (i) has an
         individual net worth, or joint net worth with his spouse,  in excess of
         $1,000,000,  or (ii) had an individual  income in excess of $200,000 in
         each of the two most  recent  years or joint  income with his spouse of
         $300,000 in each of those  years and has a  reasonable  expectation  of
         reaching the same level in the current year.

                  (e)  Legends, Etc.  Employee  acknowledges and agrees that (i)
         the certificates representing the shares of common stock will contain a
         legend  substantially in the form of the following,  (ii) the shares of
         common stock are not  registered  under the Securities Act or any other
         Federal or state law, and (iii)  Employee must bear the economic  risks
         of his  investment  for an indefinite  period of time and is capable of
         bearing such risk.

                  "The  securities  represented  hereby have not been registered
                  under  the  Securities  Act of  1933  and  may  not  be  sold,
                  assigned, transferred, pledged or otherwise disposed of except
                  in compliance with the  requirements of such Act and until the
                  Corporation shall have received the written opinion of counsel
                  to the holder of this certificate,  reasonably satisfactory to
                  the Corporation, to that effect."

                  (f)  Information  Provided.  Employee  has had  access  to the
         Company's  most recent  publicly  filed Annual  Report on Form 10-K and
         Quarterly  Report  on Form  10-Q  and has  had the  opportunity  to ask
         questions  of, and  receive  satisfactory  answers  from the  executive
         management  of  the  Company  regarding  the  Company's   business  and
         prospects.  He has  had  the  opportunity  to  obtain  the  information
         necessary to satisfy himself concerning the answers so obtained.

         6.   Termination of Automatic  Renewal of Agreement. The Company hereby
gives notice to Employee,  which Employee  acknowledges as good and valid notice
under the terms of the  Agreement,  that the Company will not extend the term of
the Agreement  pursuant to Section 2 of the Agreement,  so that the  Termination
Date will occur on December 31, 2004.

         7.   Amendment of Employment Agreement. This  Agreement is  executed as
and shall  constitute  an amendment to the  Employment  Agreement,  and shall be
construed in connection with and as a part of the Employment  Agreement.  Except
as specifically  amended by this  Agreement,  all of the terms and provisions of
the Employment  Agreement shall remain in full force and effect. In the event of
any conflict between the terms of the Employment Agreement and the terms of this
Agreement, the terms of this Agreement shall apply.

         8.   Miscellaneous.

                  (a) Controlling Law. The execution,  validity,  interpretation
         and  performance of this Agreement  shall be determined and governed by
         the laws of the State of Texas,  and,  in any action by the  Company to
         enforce this Agreement, venue may be had in Harris County, Texas.

                  (b) Entire Agreement.  The Employment Agreement, as amended by
         this  Agreement,  contains the entire  agreement  of the  Parties.  The
         Employment Agreement and this Agreement may not be changed orally or by
         action or inaction,  but only by an agreement in writing  signed by the
         Party against whom  enforcement  of any waiver,  change,  modification,
         extension or discharge is sought.

                  (c)  Severability.  If any  provision  of  this  Agreement  is
         rendered or declared illegal or unenforceable by reason of any existing
         or  subsequently  enacted  legislation  or by decree of a court of last
         resort,  the  Parties  shall  promptly  meet and  negotiate  substitute
         provisions for those rendered or declared illegal or unenforceable, but
         all remaining  provisions of this Agreement  shall remain in full force
         and effect.

                  (d)  Execution.  This  Agreement  may be executed in  multiple
         counterparts,  each  of which  shall be deemed an  original  and all of
         which shall constitute one instrument.

         EXECUTED to be effective as of the 26th day of June, 2000.

                                                  SEITEL, INC.


                                                  By: /s/ Paul A. Frame
                                                     ---------------------------
                                                     Paul A. Frame
                                                     President and CEO


                                                      /s/ Herbert M. Pearlman
                                                     ---------------------------
                                                     HERBERT M. PEARLMAN