Exhibit
      10.1

    


    

    


    June
      30,
      2008

    


    Mr.
      Gary
      Grinsfelder

    777
      E.
      Sonterra Blvd, Suite 350

    San
      Antonio, Texas 78258

    


    Dear
      Mr.
      Grinsfelder:

    


    In
      its
      meeting on June 26, 2008, the Board of Directors (the “Board”) of the Company
      voted to amend the Change in Control Agreement dated May 15, 2007 (the “Prior
      Agreement”), between the Company and you, in order to increase the amount you
      would be paid in the event of a Change in Control. This Agreement amends,
      restates and wholly replaces the Prior Agreement, as previously
      amended.

    


    The
      Board
      of the Company recognizes that your contribution to the past and future growth
      and success of the Company has been and will be substantial, and the Board
      desires to assure the Company of your continued services for the benefit of
      the
      Company, particularly in the face of a change in control.

    


    This
      Agreement therefore sets forth those benefits which the Company will provide
      to
      you in the event of a "Change in Control of the Company" [as defined in
      paragraph 2] under the circumstances described below.

    


    1. Term.
      If a
      Change in Control of the Company should occur while you are still an employee
      of
      the Company, then this Agreement shall continue in effect from the date of
      such
      Change in Control of the Company for so long as you remain an employee of the
      Company, but in no event for more than one full calendar year following a Change
      in Control of the Company; provided, however, that the expiration of the term
      of
      this Agreement shall not adversely affect your rights under this Agreement
      which
      have accrued prior to such expiration. If no Change in Control of the Company
      occurs before your status as an employee of the Company is terminated, this
      Agreement shall expire on your termination date. Prior to a Change in Control
      of
      the Company, your employment may be terminated by the Company with or without
      cause at any time upon written notice to you, and in such event, you shall
      not
      be entitled to any of the benefits provided hereunder. 

    

      777
        East
        Sonterra Boulevard • Suite 350 • San Antonio, Texas 78258 • (210) 496-5300 • fax
        (210) 496-5300 • www.txco.com

    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Mr.
        Gary
        Grinsfelder

      June
        30,
        2008

      Page
        2

       

      2. Change
        in Control.
        For
        purposes of this Agreement, a "Change in Control of the Company" shall be
        deemed
        to have occurred if (A) there shall be consummated (I) any consolidation
        or
        merger of the Company in which the Company is not the continuing or surviving
        corporation, or pursuant to which shares of the Company's Common Stock would
        be
        converted in whole or in part into cash, securities or other property, other
        than a merger
        of
        the Company in which the holders of the Company's Common Stock immediately
        prior
        to the merger have substantially the same proportionate ownership of common
        stock of the surviving corporation immediately after the merger, or (II)
        any
        sale, lease, exchange or transfer (in one transaction or a series of related
        transactions) of all or substantially all the assets of the Company, or (B)
        the
        shareholders of the Company shall approve any plan or proposal for the
        liquidation or dissolution of the Company, or (C) any "person" [as such term
        is
        used in Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of
        1934,
        as amended (the "Exchange Act")] other than the Company or a subsidiary thereof
        or any employee benefit plan sponsored by the Company or a subsidiary thereof
        or
        a corporation owned, directly or indirectly, by the shareholders of the Company
        in substantially the same proportions as their ownership of stock of the
        Company, shall become the beneficial owner (within the meaning of Rule 13d-3
        under the Exchange Act) of securities of the Company representing 20% or
        more of
        the combined voting power of the Company's then outstanding securities
        ordinarily (and apart from rights accruing in special circumstances) having
        the
        right to vote in the election of directors, as a result of a tender or exchange
        offer, open market purchases, privately negotiated purchases or otherwise,
        or
        (D) at any time during a period of two consecutive years, individuals who
        at the
        beginning of such period constituted the Board of Directors of the Company
        shall
        cease for any reason to constitute at least a majority thereof, unless the
        election or the nomination for election by the Company's shareholders of
        each
        new director during such two-year period was approved by a vote of at least
        two-thirds of the directors then still in office who were directors at the
        beginning of such two-year period, or (E) any other event shall occur that
        would
        be required to be reported in response to Item 6(e) (or any successor provision)
        of Schedule 14A of Regulation 14A promulgated under the Exchange
        Act.

    

    


    3. Entitlement
      Following Change in Control.
      If a
      Change in Control of the Company shall occur while you are still an employee
      of
      the Company, you shall be entitled to the payments and benefits provided in
      paragraph 4 delivered to you on or before 30 days following the date of the
      Change in Control of the Company. However, the Company may defer such delivery
      to you until March 15th
      of the
      year following the year in which the Change in Control occurs by continuing
      to
      employ you in the same geographic location and with the same or substantially
      the same salary and benefits and comparable duties and responsibilities as
      were
      in effect at the time of the Change in Control of the Company. Should the
      Company terminate your employment prior to March 15th
      of the
      year following the year in which the Change in Control occurs, the payments
      and
      benefits to which you are entitled under paragraph 4 shall be delivered to
      you
      on or before 10 days following the date of your termination. In the event your
      employment is not terminated by the Company prior to March 15th
      of the
      year following the year in which the Change in Control occurs, you shall
      nevertheless become entitled to the payments and benefits provided in paragraph
      4 on March 15th
      of the
      year following the year in which the Change in Control occurs.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Mr.
        Gary
        Grinsfelder

      June
        30,
        2008

      Page
        3

       

      4. Payments
        and Benefits Due.
        (i)
        Subject to the provisions of paragraph 3 above, in the event of a Change
        in
        Control of the Company, you shall be entitled to an amount equal to the sum
        of
        the following: 

    

    


    (x) your
      full
      base salary through the date on which your employment by the Company is
      terminated at the rate in effect on the date of the Change in Control of the
      Company; plus 

    


    (y) an
      amount
      equal to the product of (a) the sum of your annual base salary at the highest
      rate in effect during the 12-month period immediately preceding the date of
      the
      Change in Control of the Company, multiplied by (b) the number
      three.

    


    (ii) You
      shall
      not be required to mitigate the amount of any payment provided for in this
      paragraph 4 or in paragraphs 6 or 15 by seeking other employment or otherwise,
      nor shall the amount of any payment provided for in this paragraph 4 be reduced
      by any compensation earned by you as the result of employment by another
      employer after the date of termination of your employment by the Company, or
      otherwise.

    


    (iii) The
      provisions of this Agreement, and any payment provided for hereunder, shall
      not
      reduce any amounts otherwise payable, or in any way diminish your existing
      rights, or rights which would accrue solely as a result of the passage of time,
      under any employee benefit plan of the Company, any employment agreement or
      other contract, plan or arrangement of the Company, except to the extent
      necessary to prevent double payment under any other severance plan or program
      of
      the Company in effect at the date of termination of your
      employment.

    


    5. Gross-Up
      Provision.
      If any
      portion of any payments received by you from the Company (whether payable
      pursuant to the terms of this Agreement or any other plan, agreement or
      arrangement with the Company, its successors or any person whose actions result
      in a Change in Control of the Company) shall be subject to the tax imposed
      by
      Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
      or
      any successor statutory provision ("Excess Parachute Payments"), the Company
      shall pay to you such additional amounts as are necessary so that, after taking
      into account any tax imposed by such Section 4999 or any successor statutory
      provision only on any Net Excess Parachute Payments (as hereinafter defined),
      as
      well as on payments made pursuant to this sentence, and any federal and state
      income taxes payable as a result of any payments due you pursuant to this
      sentence, you are in the same after-tax position that you would have been in
      if
      such Section 4999 or any successor statutory provision did not apply and no
      payments were made pursuant to this sentence. "Net Excess Parachute Payments"
      shall mean that amount equal to the difference between (i) all Excess Parachute
      Payments and (ii) all "parachute payments" (as that term is defined in Section
      280G of the Code) attributable to the acceleration of the exercisability of
      stock options (or any right to receive cash in lieu thereof) under any plan
      of
      the Company or any successor or person whose actions result in a Change in
      Control of the Company.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Mr.
        Gary
        Grinsfelder

      June
        30,
        2008

      Page
        4

       

      6. Successor's
        Binding Agreement.
        (i) The
        Company will require any successor (whether direct or indirect, by purchase,
        merger, consolidation or otherwise) to all or substantially all of the business
        and/or assets of the Company, by agreement in form and substance satisfactory
        to
        you, expressly to assume and agree to perform this Agreement in the same
        manner
        and to the same extent that the Company would be required to perform if no
        such
        succession had taken place. Failure of the Company to obtain such agreement
        prior to the effectiveness of any such succession shall be a breach of this
        Agreement and shall entitle you to compensation from the Company in the same
        amount and on the same terms as you would be entitled hereunder if you
        terminated your employment on the date of the Change in Control of the Company
        (whether or not you terminate your employment). As used in this Agreement,
        "Company" shall mean the Company as herein before defined and any successor
        to
        its business and/or assets as aforesaid which executes and delivers the
        agreement provided for in this paragraph 6 or which otherwise becomes bound
        by
        all the terms and provisions of this Agreement by operation of law. If you
        received payments pursuant to this paragraph 6 prior to termination of your
        employment, you shall not be entitled to any benefits hereunder at the time
        of
        any subsequent termination of your employment.

    

    


    (ii) This
      Agreement shall inure to the benefit of, and be enforceable by, your personal
      or
      legal representatives, executors, administrators, successors, heirs,
      distributes, devisees and legatees. If you should die while any amounts would
      still be payable to you hereunder if you had continued to live, all such
      amounts, unless otherwise provided herein, shall be paid in accordance with
      the
      terms of this Agreement to your devisee, legatee or other designee or, if there
      be no such designee, to your estate.

    


    7. Employment.
      In
      consideration of the foregoing obligations of the Company, you agree to be
      bound
      by the terms and conditions of this Agreement and to remain in the employ of
      the
      Company during any period following any public announcement by any person of
      any
      proposed transaction or transactions which, if effected, would result in a
      Change in Control of the Company until a Change in Control of the Company has
      taken place or, in the opinion of the Board, such person has abandoned or
      terminated its efforts to effect a Change in Control of the Company. Subject
      to
      the foregoing, nothing contained in this Agreement shall impair or interfere
      in
      any way with your right to terminate your employment or the right of the Company
      to terminate your employment with or without cause prior to a Change in Control
      of the Company. Nothing contained in this Agreement shall be construed as a
      contract of employment between the Company and you or as a right for you to
      continue in the employ of the Company, or as a limitation of the right of the
      Company to discharge you with or without cause prior to a Change in Control
      of
      the Company.

    
       

      8. Injunctive
        Relief.
        You
        acknowledge and agree that the remedy of the Company at law for any breach
        of
        the covenants and agreements contained in paragraph 8 of this Agreement will
        be
        inadequate, and that the Company shall be entitled to injunctive relief as
        its
        sole and exclusive remedy against any such breach or any threatened breach.
        You
        represent and agree that such injunctive relief shall not prohibit you from
        earning a livelihood acceptable to you. The Company waives all right to any
        claim for damages or set-off in connection with any such breach of such
        covenants and agreements.

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Mr.
        Gary
        Grinsfelder

      June
        30,
        2008

      Page
        5

       

    

    9. Notice.
      For the
      purpose of this Agreement, notices and all other communications provided for
      in
      this Agreement shall be in writing and shall be deemed to have been duly given
      when delivered or mailed by United States registered mail, return receipt
      requested, postage prepaid, addressed to the respective addresses set forth
      on
      the first page of this Agreement, provided that all notices to the Company
      should be directed to the attention of the Chief Financial Officer of the
      Company, or to such other address as either party may have furnished to the
      other in writing in accordance herewith, except that notices of change of
      address shall be effective only upon receipt.

    


    10. Indemnification.
      The
      Company will indemnify you to the fullest extent permitted by the laws of the
      State of Delaware and the by-laws of the Company as in effect on the date of
      the
      Change in Control of the Company, in respect of all your services rendered
      to
      the Company and its subsidiaries prior to the date on which your employment
      is
      terminated. You shall be entitled to the protection of any insurance policies
      the Company now or hereafter maintains generally for the benefit of its
      directors, officers and employees (but only to the extent of the coverage
      afforded by the existing provisions of such policies) to protect against all
      costs, charges and expenses whatsoever incurred or sustained by you in
      connection with any action, suit or proceeding to which you may be made a party
      by reason of your being or having been a director, officer or employee of the
      Company or any of its subsidiaries during your employment
      therewith.

    


    11. Further
      Assurances.
      Each
      party hereto agrees to furnish and execute such additional forms and documents,
      and to take such further action, as shall be reasonable and customarily required
      in connection with the performance of this Agreement or the payment of benefits
      hereunder.

    


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

    


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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      Mr.
        Gary
        Grinsfelder

      June
        30,
        2008

      Page
        6

       

      14. Counterparts.
        This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed to be an original but all of which together will constitute one and
        the
        same instrument.

    

    


    15. Legal
      Fees and Expenses.
      In
      addition to any other benefits to which you may be entitled hereunder, the
      Company shall pay all legal fees and expenses which you may incur as a result
      of
      the Company's contesting the validity, enforceability or your interpretation
      of,
      or determinations under, this Agreement or otherwise as a result of
      any

    termination
      as a result of which you are entitled to the benefits set forth in this
      Agreement.

    


    16. Arbitration.
      Any
      dispute or controversy arising under or in connection with this Agreement shall
      be settled exclusively by arbitration in San Antonio, Texas, in accordance
      with
      the rules of the American Arbitration Association then in effect. Judgment
      may
      be entered on the arbitrator's award (which the parties agree may include any
      measure or type of damages or other remedy available at law or in equity) in
      any
      court having jurisdiction; provided, however, that you shall be entitled to
      seek
      specific performance of your right to be paid until the date on which your
      employment is terminated during the pendency of any dispute or controversy
      arising under or in connection with this Agreement.

    


    If
      this
      Agreement correctly sets forth our agreement on the subject matter hereof,
      kindly sign and return to the Company the enclosed copy of this Agreement which
      will then constitute our agreement on this subject.

    

      
        	
                Sincerely,

              
	 	 
	
                TXCO
                  RESOURCES INC.

              
	 	 
	
                By:

              	
                /s/
                  JAMES E. SIGMON

              
	 	
                James
                  E. Sigmon,

              
	 	
                Chief
                  Executive Officer

              


      

    

    


    AGREED
      TO
      this 1st
      day of


    July,
      2008.

    

      
        	
                /s/
                  GARY GRINSFELDER

              
	
                Gary
                  Grinsfelder