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Exhibit 10.1
 
 
[JPMorgan Chase Bank Letterhead]
 
March 21, 2007
 
Our L/C No.: XXXX-XXXXXX
 
 
Issue Date:
March 21, 2007
 
Expiry Date:
June 19, 2007

 
Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Administrative Agent,
its successors and assigns (“Beneficiary”)
222 North LaSalle Street, 15th Floor
Chicago, Illinois  60601
 
Ladies and Gentlemen:
 
We hereby establish our Irrevocable Transferable Letter of Credit in
Beneficiary’s favor for the account of Clayton Williams Energy, Inc. for the
account of Larclay, L.P. (“Applicant”), 6 Desta Drive, Suite 6500, Midland,
Texas 79705, in the aggregate amount of USD $5,000,000.00, effective immediately
and expiring at our office with the close of business on the Expiry Date.
 
This Credit cannot be modified or revoked without Beneficiary’s consent.
 
Funds under this Credit are available to Beneficiary against presentation to us,
by tested telex or authenticated SWIFT, in person, by mail, by messenger
delivery or by facsimile transmission, to our offices at 300 South Riverside
Plaza, Mail Code IL1-0236, Chicago, IL 60606-0236, Attn:
 

 
 

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Standby Letter of Credit Dept., of Beneficiary’s sight draft marked “Drawn Under
JPMorgan Chase Bank, N.A., Letter of Credit No. XXX-XXXXXX Dated ___________”
and Beneficiary’s signed and dated statement reading as follows:  “We hereby
certify that the amount of the drawing represents indebtedness owed or other
right to draw on as has occurred under that certain Term Loan and Security
Agreement dated April 21, 2006 (the “Loan Agreement”) among Larclay, LP, as
Borrower, the Lenders from time to time party to the Loan Agreement, and Merrill
Lynch Capital, a division of Merrill Lynch Business Financial Services, Inc., as
Administrative Agent for Lenders”.
 
Drawings presented by telefacsimile (“fax”) to fax number 312-954-0203, or
alternately to fax number 312-954-2457 are acceptable, under telephone
pre-advice to 312-954-1910, or alternately to 1-800-634-1969, Option 1; provided
that such fax presentation is received on or before the expiry date on this
instrument in accordance with the terms and conditions of this Letter of Credit.
 
Except as stated herein, our undertaking is not subject to any requirement or
qualification. Our obligation under this Credit is our individual obligation and
in no way contingent upon reimbursement with respect thereto, or upon our
ability to perfect any lien or security interest.
 
Partial and multiple drawings are permitted. The amount available from time to
time under this irrevocable Credit shall be the original amount set forth above,
less the sum of any drawings honored by us hereunder. All banking charges are
the responsibility of the Applicant.
 
This irrevocable Credit is transferable to any assigns or successors in title to
Beneficiary’s interests as Administrative Agent, and any such successor or
assign shall be deemed the Beneficiary hereunder, and shall be entitled to draw
against the Credit in accordance with the terms hereof. Each letter of credit
issued upon any such transfer may be successively transferred to any successor
Administrative Agent. This Letter of Credit is transferable in whole but not in
part, and except as expressly stated herein, is transferable in accordance with
the ICC
 

 
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Publication No. 500. Any transfer request must be presented to us with the
attached form together with the original Letter of Credit. Transfers to
designated foreign nationals and /or specially designated nationals are not
permitted as being contrary to the U.S. Treasury Department or Foreign Assets
Control Regulations.
 
We hereby engage with Beneficiary that drawings in compliance with the terms and
conditions of this Credit shall be honored by us and payment shall be effected
in accordance with Beneficiary’s instructions within three business day after
the date of Beneficiary’s telex/SWIFT or other demand as contemplated herein if
presented at our office at 300 South Riverside Plaza, Mail Code IL1-0236,
Standby Letter of Credit Unit, Chicago, IL 60606-0236 on or before the
expiration date of this Letter of Credit.
 
This Letter of Credit is subject to the Uniform Customs and Practices for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500 (the “Uniform Customs”), except that Article 13(b) shall not
be included in this reference to the Uniform Customs. Notwithstanding Article 17
of the Uniform Customs, if this Credit expires during an interruption of
business as described in Article 17, we hereby specifically agree to extend the
validity of the Credit and thereby undertake to honor drawings and effect
payment thereof for thirty (30) days after the date of resumption of business.
and in the event of any conflict, the laws of the State of Illinois will
control, without regard to principles of conflict of laws.
 
Please address all correspondence regarding this Letter of Credit to the
attention of the Standby Letter of Credit Unit, 300 S. Riverside Plaza, Mail
Code IL1-0236, Chicago, IL 60606-0236, including the Letter of Credit number
mentioned above. For telephone assistance, please contact the Standby Client
Service Unit at 1-800-634-1969, select Option 1, and have this Letter of Credit
number available.
 
 

 
Very truly yours,
 
 
 
JPMorgan Chase Bank, N.A.
 
 
 
 
 
 
Authorized Signature

 
 
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