WAIVER AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

Exhibit 10.7

WAIVER AND FIRST AMENDMENT

     This WAIVER AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this “First Amendment”) is entered into as of August 27, 2004 between GAINSCO, INC., a Texas corporation (the “Company”), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (“Employee”):

     WHEREAS, the Company and Employee have entered into an Employment Agreement effective as of April 17, 1998 (the “1998 ▇▇▇▇▇▇▇▇ Employment Agreement”), the current expiration of which is April 16, 2008;

     WHEREAS, GAINSCO Service Corp. and Employee entered into a Change in Control Agreement dated April 17, 1998 (the “1998 Change in Control Agreement”);

     WHEREAS, concurrently herewith and in reliance hereon, the Company is entering into (i) the Securities Exchange Agreement dated as of August 27, 2004 with ▇▇▇▇ ▇▇▇▇▇ Strategic Partners, L.P., a Texas limited partnership (“GMSP”, and such agreement, the “GMSP Exchange Agreement”); (ii) the Stock Investment Agreement dated as of August 27, 2004 with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇▇▇”, and such agreement, the “▇▇▇▇▇▇▇▇▇ Investment Agreement”); (iii) the Securities Purchase Agreement dated as of August 27, 2004 with ▇▇▇▇▇ ▇▇▇▇ (“▇▇▇▇”, and such agreement, the “▇▇▇▇ Investment Agreement”); (iv) the Employment Agreement dated as of August 27, 2004 with ▇▇▇▇▇▇▇▇▇ (the “▇▇▇▇▇▇▇▇▇ Employment Agreement”); and (v) the Employment Agreement dated as of August 27, 2004 with ▇▇▇▇ (the “▇▇▇▇ Employment Agreement”) (the GMSP Exchange Agreement, the ▇▇▇▇▇▇▇▇▇ Investment Agreement and the ▇▇▇▇ Investment Agreement collectively, the “Stock Agreements”; and the ▇▇▇▇▇▇▇▇▇ Employment Agreement and the ▇▇▇▇ Employment Agreement together, the “Employment Agreements”);

     WHEREAS, the Company and Employee desire to amend the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement as more particularly set forth below; and

     WHEREAS, the Company desires to issue shares of its common stock, par value $0.10 per share (“Common Stock”), to Employee on the terms set forth below;

     NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Employee agree as follows:

     1.      Waiver. Employee hereby consents to the execution, delivery and performance of the Stock Agreements and the Employment Agreements, and confirms and agrees that the execution, delivery and performance of the Stock Agreements and Employment Agreements in accordance with their respective terms, and the consummation of the transactions and the performance of the duties and obligations contemplated thereby, do not and will not violate or trigger, and no prior transaction has violated or triggered, any payment or other rights under the

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1998 ▇▇▇▇▇▇▇▇ Employment Agreement or the 1998 Change in Control Agreement, and Employee hereby waives any such violation or trigger.

     2.     Amendments to Section 4 of 1998 ▇▇▇▇▇▇▇▇ Employment Agreement.

          (a)     Subject to both (i) receipt of the GNAC Shareholder Approval (as such term is defined in the Stock Agreements) hereof and (ii) the consummation of the transactions contemplated in the Stock Agreements (the later of the date of the occurrence of the events in clause (i) or (ii) preceding is hereinafter referred to as the “Effective Date”), Section 4(b) of the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement is hereby amended and restated to read in its entirety as follows:

     (b) Bonus. Employee shall receive a bonus (in respect of each completed calendar year during the term specified in Section 3, commencing with the calendar year in which the Effective Date occurs) in an amount equal to two percent (2%) of EBIT of the Company for the applicable calendar year and payable no later than March 31 of the following calendar year. In respect of the calendar year in which the Effective Date occurs, Employee shall receive a bonus equal to 2% of the Company’s EBIT for such calendar year Prorated for the partial year that commenced on the Effective Date. As used in this Agreement, (i) “EBIT” means consolidated Income before Federal income taxes plus (A) Interest expense and (B) any bonuses accrued in respect of Employee (but not any other officer or employee of the Company or any of its subsidiaries), in each case as determined on a consolidated basis and in accordance with generally accepted accounting principles for financial reporting in the United States, consistently applied (for purposes of the definition of EBIT, (x) dividends are not a deduction from Income before Federal income taxes in the computation of EBIT and (y) bonuses accrued for directors, officers and employees are expenses deducted in the computation of Income before Federal income taxes); and (ii) “Prorated” means, with respect to any number, the product of the number multiplied by a fraction, the numerator of which is the number of days worked by such Employee during the applicable calendar year and the denominator of which is 365.

          (b)     Section 4(c) of the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement is hereby deleted in its entirety, and the parties agree that the Option provided for therein has been granted and has expired unexercised in accordance with its terms.

     3.     Stock Grants.

          (a)      Subject to and forthwith after both the (i) receipt of the GNAC Shareholder Approval hereof and (ii) the consummation of the transactions contemplated in the Stock Agreements, the Company shall issue to Employee 200,000 shares of Common Stock (the “Granted Shares”). There will be no vesting or forfeiture conditions applicable to the Granted Shares. There will be no transfer restrictions applicable to the Granted Shares beyond those set forth in Sections 4(d) and (f) below and under the Securities Act of 1933, as amended (the

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“Securities Act”), and applicable state securities laws (the Securities Act and applicable state securities laws collectively, the “Applicable Securities Laws”) .

          (b)      Subject to and forthwith after both the (i) receipt of the GNAC Shareholder Approval hereof and (ii) the consummation of the transactions contemplated in the Stock Agreements, the Company and Employee shall enter into a Restricted Stock Agreement substantially in the form attached hereto as Exhibit “A” (the “Restricted Stock Agreement”), pursuant to which the Company shall issue to Employee 400,000 shares of restricted Common Stock (the “Restricted Shares”).

          (c)      The Granted Shares and the Restricted Shares will be issued to Employee without registration under the Securities Act or any other Applicable Securities Laws. The Company will have no obligation to register the Granted Shares or the Restricted Shares for resale under any Applicable Securities Laws.

          (d)     Employee will be acquiring the Granted Shares and the Restricted Shares for investment and with no intent to sell or otherwise dispose of them. In no event shall Employee sell, assign, pledge, exchange, transfer, encumber, charge or otherwise dispose of any of the Granted Shares or the Restricted Shares, if such sale, assignment, pledge, exchange, transfer, encumbrance, charge or disposition might reasonably be expected to result in a violation of any of the Applicable Securities Laws. Unless the Company agrees otherwise, Employee shall be required to provide a legal opinion in form and substance and from counsel satisfactory to the Company that any such intended sale, assignment, pledge, exchange, transfer, encumbrance, charge or disposition is exempt from the registration requirements of the Applicable Securities Laws.

          (e)     Employee is an “accredited investor” (as defined in Rule 501(a) of the Regulation D under the Securities Act) resident and domiciled in the State of Texas.

          (f)     The reverse side of each certificate reflecting ownership of the Restricted Shares shall bear the legends set forth in the Restricted Stock Agreement. The reverse side of each certificate reflecting ownership of the Granted Shares shall bear the following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND AN OPINION IN FORM AND SUBSTANCE AND FROM COUNSEL SATISFACTORY TO THE COMPANY HAS BEEN RECEIVED BY THE COMPANY.

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     4.      Replacement Change in Control Agreement.

          (a)     Contemporaneously with the execution of this Agreement, the Company and Employee are entering into a replacement Change in Control Agreement (the “2004 Change in Control Agreement”) and upon execution of the 2004 Change in Control Agreement, the 1998 Change in Control Agreement shall terminate and be of no force and effect.

          (b)     The Company and Employee each hereby release the other from any and all present and future payment obligations, adjustments, executions, offsets, actions, causes of action, suits, debts, sums of money, accounts, covenants, controversies, promises, damages, judgments, claims, demands, liabilities or losses whatsoever, all whether known or unknown, which either of them, and their respective successors and assigns ever had, now have, or hereafter may have, whether grounded in law or in equity, in contract or in tort, against the other, by reason of any matter whatsoever arising out of the 1998 Change in Control Agreement on or prior to the date of this Agreement.

          (c)     Section 6(c) of the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement is hereby amended to read as follows:

     (c) Change in Control. If Employee’s employment is terminated pursuant to Section 6(a)(iii) above prior to the end of a period of twenty-four (24) months beyond the month in which a “change in control of the Company” (as defined in the 2004 Change in Control Agreement) occurs, Employee shall receive the greater of (i) the amount determined pursuant to Section 6(b)(ii) above or (ii) the amounts payable pursuant to the 2004 Change in Control Agreement.

     5.      Definitions. Terms defined in this First Amendment are incorporated by this reference into Section 11 of the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement. References in the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement to “Change in Control Agreement” are hereby amended to be references to “2004 Change in Control Agreement.”

     6.      Ratification. Except as amended or waived hereby, the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement shall remain in full force and effect and is hereby ratified, approved and confirmed.

     7.     Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

     8.      Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto.

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     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives all as of the day and year first above written.

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EXHIBIT A

FORM OF RESTRICTED STOCK AGREEMENT

GAINSCO, INC.

     THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) dated as of                                       , 2004, is entered into between GAINSCO, INC., a Texas corporation (the “Company”), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the “Employee”) pursuant to a Waiver and First Amendment dated August 27, 2004 (the “First Amendment”) to the Employment Agreement dated effective April 17, 1998 (the “1998 ▇▇▇▇▇▇▇▇ Employment Agreement”) (terms defined in the First Amendment are used herein with the same meaning). The Company and the Employee agree as follows:

     1.     Definitions.

          1.1     “Change in Control” shall have the meaning set forth in the Change in Control Agreement dated as of August 27, 2004 between the Company and Employee.

          1.2     “Person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

     2.     Acquisition of Restricted Stock. Concurrently with the execution and delivery hereof, the Company has issued to the Employee 400,000 shares of the Company’s common stock, par value $.10 per share (“Common Stock”). The Company and the Employee have determined that it would be in their best interests to impose certain rights and obligations upon the Company, the Employee and his legal representatives, as the case may be, with respect to such 400,000 shares of Common Stock (as adjusted for stock splits, dividends and the like, the "Shares”).

     3.      Restriction Period. During the period (the “Restriction Period”) commencing as of the date of this Agreement and ending on the fifth anniversary of the date of this Agreement, the Shares shall be subject to the restrictions described in Section 4 of this Agreement (the “Restrictions”). The Shares subject to the Restrictions at any given time are called the “Restricted Shares.”

     4.      Restrictions. The Restricted Shares shall be represented by one or more stock certificates registered in the name of the Employee. The Employee shall have the right to receive dividends on the Restricted Shares, to vote the Restricted Shares and to enjoy all other shareholder rights with respect thereto, except that (i) the Employee shall not be entitled to possession of the stock certificate representing the Restricted Shares, (ii) the Company shall retain custody of the stock certificate(s) representing the Restricted Shares, (iii) the Employee

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may not, other than as permitted under Section 9.2, sell, assign, pledge, exchange, transfer, encumber, charge, otherwise dispose of the Restricted Shares, or any of them, or any interest therein or thereto, and (iv) the Restricted Shares are subject to potential forfeiture as provided in Section 5 of this Agreement.

     5.     Forfeiture. Any Restricted Shares (and all voting and other rights associated with such Restricted Shares) shall be forever forfeited (to the extent that the Restrictions with respect to such Restricted Shares have not previously lapsed) in the event (i) such Restricted Shares are transferred by operation of law to any Person other than the Company or in accordance with Section 9.2 for any reason (including without limitation the bankruptcy of the Employee or seizure and sale by legal process), or (ii) the Employee’s employment with the Company is terminated prior to the end of the Restriction Period for any reason; provided, however, that if Employee is terminated Without Cause pursuant to Section 6(a)(iii) of the 1998 ▇▇▇▇▇▇▇▇ Employment Agreement or in the event of the death or employment ending disability of Employee, a Prorated number of Restricted Shares for the year in which such event occurred shall become fully vested as of the date of such termination or death or employment ending disability from the last anniversary of the date of this Agreement to the date of such event. The Company shall not be obligated to pay the Employee any amount for the forfeiture of any Restricted Shares. The Employee shall be entitled to retain all Shares to which the Restrictions have ceased to apply.

     6.      Lapse of Restrictions. Subject to Section 5 of this Agreement, Restricted Shares shall become “vested”, and the Restriction Period with regard thereto shall lapse, as follows:

     (i)     80,000 Restricted Shares shall become fully vested on the first anniversary of the date of this Agreement;

     (ii)     an additional 80,000 Restricted Shares shall become fully vested on the second anniversary of the date of this Agreement;

     (iii)     an additional 80,000 Restricted Shares shall become fully vested on the third anniversary of the date of this Agreement;

     (iv)     an additional 80,000 Restricted Shares shall become fully vested on the fourth anniversary of the date of this Agreement; and

     (v)     the remaining 80,000 Restricted Shares shall become fully vested on the fifth anniversary of the date of this Agreement.

Notwithstanding the foregoing, however, the Restrictions shall lapse automatically with respect to all previously unvested Shares (unless earlier forfeited in accordance with Section 5 of this Agreement) upon the occurrence of a Change in Control.

     7.     Restrictions on Corresponding Securities and Assets. Any other securities or assets (other than ordinary cash dividends) that are received by the Employee in respect of any of the Restricted Shares shall be subject to the Restrictions to the same extent and for so long as such Restricted Shares to which such securities or other assets are attributable remain subject to the Restrictions.

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     8.     Delivery of Certificates Upon Lapse of Restrictions. Promptly following the lapse of the Restrictions as to any of the Shares, the Company will deliver the stock certificate or certificate representing such Shares with respect to which the Restrictions have lapsed to the Employee or his legal representative.

     9.     Certain Restrictions on Transferability of Shares by the Employee. The following restrictions shall apply to all Restricted Shares:

          9.1     Restriction on Transfers in Violation of the Securities Act. Employee will be acquiring the Restricted Shares for investment and with no intent to sell or otherwise dispose of them. In no event shall Employee sell, assign, pledge, exchange, transfer, encumber, charge or otherwise dispose of any of the Restricted Shares or any right or benefit under this Agreement, if such sale, assignment, pledge, exchange, transfer, encumbrance, charge or disposition might reasonably be expected to result in a violation of the Securities Act of 1933, as amended (the “Securities Act”), or applicable state securities laws (the Securities Act and applicable state securities laws collectively, the “Applicable Securities Laws”). Unless the Company agrees otherwise, Employee shall be required to provide a legal opinion in form and substance and from counsel satisfactory to the Company that such intended sale, assignment, pledge, exchange, transfer, encumbrance, charge or disposition is exempt from the registration requirements of the Applicable Securities Laws.

          9.2     Permitted Transfers. The Employee may transfer all or any part of the Shares, to (i) the members of the immediate family of the Employee (including lineal descendants) or one or more trusts or partnerships for the benefit of the Employee or members of the immediate family of the Employee (including lineal descendants); or (ii) the estate of the Employee or to any heir, executor, administrator or lineal descendant of the Employee; provided that prior to any such transfer either the Employee or the transferee delivers to the Company a written instrument in accordance with Section 10 and an opinion of counsel reasonably satisfactory to the Company in accordance with Section 9.1 to the effect that the transfer is exempt from registration under Applicable Securities Laws. In the event of a transfer under this Section 9.2, such transferee(s) shall be deemed a Shareholder for purposes of this Agreement.

     10.     Conditions to Transfers. It shall be a condition to the transfer of any Restricted Shares by the Employee to any Person that the recipient of such Restricted Shares shall become a signatory to this Agreement by executing an Addendum Agreement in the form and substance satisfactory to the Company.

     11.     Legends of Certificates. The reverse side of each certificate reflecting ownership of the Restricted Shares subject to the Restrictions under Section 4 shall bear the following legends:

THE SALE, ASSIGNMENT, PLEDGE, ENCUMBRANCE OR OTHER DISPOSITION (EACH A “TRANSFER”) AND VOTING OF ANY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF A RESTRICTED STOCK AGREEMENT DATED AS OF                , 2004, WITH THE COMPANY (THE “RESTRICTED STOCK

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AGREEMENT”), COPIES OF WHICH ARE AVAILABLE AT THE COMPANY’S PRINCIPAL OFFICE FOR INSPECTION. THE COMPANY WILL NOT REGISTER THE TRANSFER OF SUCH SECURITIES ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL THE TRANSFER HAS BEEN MADE IN COMPLIANCE WITH THE TERMS OF THE RESTRICTED STOCK AGREEMENT.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE AND AN OPINION IN FORM AND SUBSTANCE AND FROM COUNSEL SATISFACTORY TO THE COMPANY HAS BEEN RECEIVED BY THE COMPANY.

     12.     Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed to be delivered (i) upon physical delivery (if hand delivered); (ii) three business days after deposit in the United States mail (if mailed), postage prepaid, certified or registered mail, return receipt requested, addressed as set forth below or (iii) the day such notice is sent via facsimile as set forth below:

Notice given in any other manner shall be effective when received. The address for notice may be changed by notice given in accordance with this provision. If notice is required to be delivered to any party to this Agreement, a copy of such notice shall be delivered to all other parties to this Agreement.

     13.     Power of Attorney. The Chairman of the Board of the Company, from time to time, is hereby appointed the attorney-in-fact, with full power of substitution of the Employee for the sole purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument which such attorney-in fact may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in fact is irrevocable and coupled with an interest. The Chairman of the Board of the Company, as attorney-in-fact for the Employer may, in the name of the Employee, make and execute all conveyances, assignments and transfers of the Restricted Shares, and the Employee hereby ratifies and confirms all that the

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Chairman of the Board of the Company, as said attorney-in-fact, shall do so by virtue hereof, provided that the foregoing shall be solely for the purpose of carrying out the provisions of this Agreement. Nevertheless, the Employee shall, if so requested by the Company, execute and deliver to the Company all such instruments as may, in the reasonable judgment of the Company, be advisable for the purposes hereof.

     14.     Waiver. No waiver of any provision of this Agreement shall constitute a waiver of any other provision of this Agreement, nor shall such waiver constitute a waiver of any subsequent breach of such provision.

     15.     Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the Employee and his heirs, executors, administrators and legal representatives and upon the Company and its successors and assigns.

     16.      Governing Law; Venue. The validity, construction, and enforcement of this Agreement shall be governed by the laws of the State of Texas, without regard for any principles of conflict of laws. Any dispute arising out of or relating to this Agreement may be brought in a court of competent jurisdiction located in Dallas, Texas, and both of the parties to this Agreement irrevocably submit to the exclusive jurisdiction of such courts in any such dispute, waives any objection it may now or hereafter have to venue or to convenience of forum, agrees that all claims in respect of the dispute shall be heard and determined only in any such court, and agrees not to bring any dispute arising out of or relating to this Agreement in any other court. The parties agree that either or both of them may file a copy of this paragraph with any court as written evidence of the knowing, voluntary and bargained agreement among the parties irrevocably to waive any objections to venue or to convenience of forum. Process in any dispute may be served on any party anywhere in the world.

     17.     Severability. If any provision of this Agreement is declared unenforceable by a court of last resort, such declaration shall not affect the validity of any other provision of this Agreement.

     18.     Construction. The headings contained in this Agreement are for reference purposes only and shall not affect this Agreement in any manner whatsoever. Wherever required by the context, any gender shall include any other gender, the singular shall include the plural, and the plural shall include the singular.

     19.      Amendments. This Agreement may only be amended or modified by written agreement of the Company and the Employee.

     20.      Tax Consequences. Employee understands that he shall be responsible for his own tax liability that may arise as a result of the transaction contemplated by this Agreement. Employee understands that Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), taxes as ordinary income the difference between the amount paid for the Shares and the fair market value of the Shares as of the date any of the restrictions on the Shares lapse. Employee understands that he may elect to be taxed at the time the Shares are granted rather than when the restrictions lapse by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days from the date of grant. If Employee does not choose to elect

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Section 83(b) status, Employee may ask the Company to reduce the number of Restricted Shares issued pursuant to this Agreement to equal the estimated after-tax value of Restricted Shares when reduced.

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The parties have executed this Agreement effective as of the date first set forth above.

     The undersigned, the spouse of the Employee, hereby joins in the execution and delivery of this Agreement to evidence her consent and approval to, and agreement to be bound by, all the terms and provisions hereof.

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