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Exhibit 10.71
 
CLAYTON WILLIAMS ENERGY, INC.
 
INDEMNIFICATION AGREEMENT
 
This Indemnification Agreement (“Agreement”) is made and entered into as of the
_____ day of ___________________, 2008, by and between Clayton Williams Energy,
Inc., a Delaware corporation (the “Company”), and [NAME] (“Indemnitee”).
 
RECITALS
 
A.           Competent and experienced persons are reluctant to serve or
continue to serve corporations as directors, executive officers or in other
capacities unless they are provided with adequate protection through insurance
and indemnification against claims and actions against them arising out of their
service to and activities on behalf of those corporations.
 
B.           The Board of Directors of the Company (the “Board”) has determined
that the inability to attract and retain such persons would be detrimental to
the best interests of the Company and its stockholders and that the Company
should act to assure such persons that there will be increased certainty of
adequate protection in the future.
 
C.           The Board has also determined that it is reasonable, prudent and
necessary for the Company, in addition to purchasing and maintaining directors’
and officers’ liability insurance (or otherwise providing for adequate
arrangements of self-insurance), contractually to obligate itself to indemnify
its directors and executive officers to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be adequately protected.
 
D.           Indemnitee is willing to serve and continue to serve the Company on
the condition that Indemnitee be so indemnified to the fullest extent permitted
by law.
 
E.           Article IX of the Second Restated Certificate of Incorporation of
the Company (as amended) provides for indemnification of directors and officers
to the fullest extent permitted by law.
 
In consideration of the foregoing and the mutual covenants contained in this
Agreement, and other good and valuable consideration, the sufficiency and
receipt of which are hereby acknowledged, the parties hereby agree as follows:
 
ARTICLE I
 
 
Certain Definitions
 
As used herein, the following words and terms shall have the following
respective meanings (whether singular or plural):
 

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“Acquiring Person” means any Person other than (i) the Company, (ii) any of the
Company’s Subsidiaries, (iii) any employee benefit plan of the Company or of a
Subsidiary of the Company or of a Company owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, or (iv) any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or of a
Subsidiary of the Company or of a Company owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
 
“Affiliate” of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person.  For purposes of this definition, “control”
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” have meanings correlative to the foregoing.
 
“Capital Stock” of any Person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.

“Change in Control” means the occurrence of any of the following events:

(i)           (A)  Any Person, other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that such Person shall be deemed to have “beneficial
ownership” of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting power of the Voting
Stock of the Company (or its successor by merger, consolidation or purchase of
all or substantially all of its assets) (for the purposes of this clause, such
Person shall be deemed to beneficially own any Voting Stock of the Company held
by a parent entity, if such Person “beneficially owns” (as defined above),
directly or indirectly, more than 35% of the voting power of the Voting Stock of
such parent entity); and (B)  the Permitted Holders “beneficially own” (as
defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or indirectly,
in the aggregate less than 25% of the total voting power of the Voting Stock of
the Company (or its successor by merger, consolidation or purchase of all or
substantially all of its assets) or its parent entity and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company (or such successor)
or its parent entity; or
 
(ii)           The members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board;
 
(iii)           The sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any Person other than a Permitted Holder; or
 

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(iv)         Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
 
“Claim” means an actual or threatened claim or request for relief which was, is
or may be made by reason of anything done or not done by Indemnitee in, or by
reason of any event or occurrence related to, Indemnitee’s Corporate Status.
 
“Corporate Status” means the status of a person who is, becomes or was a
director, officer, employee, agent or fiduciary of the Company or is, becomes or
was serving at the request of the Company as a director, officer, partner,
member, venturer, proprietor, trustee, employee, agent, fiduciary or similar
functionary of another foreign or domestic corporation, partnership, limited
liability company, joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise.  For purposes of this Agreement, the Company agrees
that Indemnitee’s service on behalf of or with respect to any Subsidiary of the
Company shall be deemed to be at the request of the Company.
 
“DGCL” means the Delaware General Corporation Law and any successor statute
thereto, as either of them may from time to time be amended.
 
“Disinterested Director” with respect to any request by Indemnitee for
indemnification hereunder, means a director of the Company who at the time of
the vote is not a named defendant or respondent in the Proceeding in respect of
which indemnification is sought by Indemnitee.
 
“Exchange Act” means the Securities Exchange Act of 1934.
 
“Expenses” means all attorneys’ fees and disbursements, retainers, accountant’s
fees and disbursements, private investigator fees and disbursements, court
costs, transcript costs, fees and expenses of experts, witness fees and
expenses, travel expenses, duplicating costs, printing and binding costs,
telephone charges, postage, delivery service fees and all other disbursements,
costs or expenses of the types customarily incurred in connection with
prosecuting, defending (including affirmative defenses and counterclaims),
preparing to prosecute or defend, investigating, being or preparing to be a
witness in, or participating in or preparing to participate in (including on
appeal) a Proceeding and all interest or finance charges attributable to any
thereof.  Should any payments by the Company under this Agreement be determined
to be subject to any federal, state or local income or excise tax, “Expenses”
shall also include such amounts as are necessary to place Indemnitee in the same
after-tax position (after giving effect to all applicable taxes) as Indemnitee
would have been in had no such tax been determined to apply to such payments.
 
“Incumbent Board” means the individuals who, as of the date of this Agreement,
constitute the Board and any other individual who becomes a director of the
Company after that date and whose election or appointment by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
 

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respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Incumbent Board.
 
“Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither contemporaneously is, nor
in the immediately preceding five years has been, retained to represent:  (i)
the Company or Indemnitee in any matter material to either such party (other
than as Independent Counsel under this Agreement or similar agreements), (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder or (iii) the beneficial owner, directly or indirectly, of securities
of the Company representing 5% or more of the combined voting power of the
Company’s then outstanding voting securities (other than, in each such case,
with respect to matters concerning the rights of Indemnitee under this
Agreement, or of other indemnitees under similar indemnification
agreements).  Notwithstanding the foregoing, the term “Independent Counsel”
shall not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee’s rights
under this Agreement.
 
“Independent Directors” means the directors on the Board that are independent
directors as defined in Rule 4200(a)(15) of the NASDAQ Stock Market or successor
provision, or, if the Company’s common stock is not then quoted on the NASDAQ,
that qualify as independent, disinterested, or a similar term as defined in the
rules of the principal securities exchange or inter-dealer quotation system on
which the Company’s common stock is then listed or quoted.
 
“Permitted Holders” means Clayton Williams, Jr. and any Affiliate or Related
Person thereof.
 
“Person” means any individual, group (within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Exchange Act) or corporation, partnership, joint venture,
association, join-stock company, trust, unincorporated organization, limited
liability company, government or any agency or political subdivision thereof,
other entity.
 
“Potential Change in Control” shall be deemed to have occurred if (i) any Person
shall have announced publicly an intention to effect a Change in Control, or
commenced any action (such as the commencement of a tender offer for the
Company’s Common Stock or the solicitation of proxies for the election of any of
the Company’s directors) that, if successful, could reasonably be expected to
result in the occurrence of a Change in Control; (ii) the Company enters into an
agreement, the consummation of which would constitute a Change in Control; or
(iii) any other event occurs which the Board declares to be a Potential Change
of Control.
 
“Preferred Stock”, as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
 

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“Proceeding” means any threatened, pending or completed action, suit,
arbitration, investigation, inquiry, alternate dispute resolution mechanism,
administrative or legislative hearing, or any other proceeding (including,
without limitation, any securities laws action, suit, arbitration, alternative
dispute resolution mechanism, hearing or procedure) whether civil, criminal,
administrative, arbitrative or investigative and whether or not based upon
events occurring, or actions taken, before the date hereof, and any appeal in or
related to any such action, suit, arbitration, investigation, hearing or
proceeding and any inquiry or investigation (including discovery), whether
conducted by or in the right of the Company or any other Person, that Indemnitee
in good faith believes could lead to any such action, suit, arbitration,
alternative dispute resolution mechanism, hearing or other proceeding or appeal
thereof.
 
“Related Person” with respect to any Permitted Holder means:
 
(i)           any controlling stockholder or a majority (or more) owned
Subsidiary of such Permitted Holder, or, in the case of an individual, any
spouse, family member, (including adopted children), heir or descendant of such
Permitted Holder, any trust created for the benefit of such individual or such
individual’s estate, executor, administrator, committee or beneficiaries; or
 
(ii)           any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding a
majority (or more) controlling interest of which consist of such Permitted
Holder and/or such other Persons referred to in clause (i) of this definition.
 
“Subsidiary” means, with respect to any Person, any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by that Person.
 
“Voting Stock” of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
 
ARTICLE II
 
 
Services by Indemnitee
 
Indemnitee is serving as a director of the Company.  Indemnitee may from time to
time also agree to serve, as the Company may request from time to time, in
another capacity for the Company or as a director, officer, partner, member,
venturer, proprietor, trustee, employee, agent, fiduciary or similar functionary
of another foreign or domestic corporation, partnership, joint venture, limited
liability company, sole proprietorship, trust, employee benefit plan or other
enterprise.  Indemnitee and the Company each acknowledge that they have entered
into this Agreement as a means of inducing Indemnitee to serve, or continue to
serve, the Company in such capacities.  Indemnitee may at any time and for any
reason resign from such position or positions (subject to any other contractual
obligation or any obligation imposed by operation of law).  The Company shall
have no obligation under this Agreement to continue Indemnitee in any such
position or positions.
 

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ARTICLE III
 
 
Indemnification
 
Section 3.1     General.  Subject to the provisions set forth in Article IV, the
Company shall indemnify, and advance Expenses to, Indemnitee to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may hereafter from time to time permit.  The
other provisions set forth in this Agreement are provided in addition to and as
a means of furtherance and implementation of, and not in limitation of, the
obligations expressed in this Article III.  No requirement, condition to or
limitation of any right to indemnification or to advancement of Expenses under
this Article III shall in any way limit the rights of Indemnitee under Article
VI or Article VII.
 
Section 3.2     Additional Indemnity of the Company.  Indemnitee shall be
entitled to indemnification pursuant to this Section 3.2 if, by reason of
anything done or not done by Indemnitee in, or by reason of any event or
occurrence related to, Indemnitee’s Corporate Status, Indemnitee is, was or
becomes, or is threatened to be made, a party to, or witness or other
participant in any Proceeding.  Pursuant to this Section 3.2, Indemnitee shall
be indemnified against any and all Expenses, judgments, penalties (including
excise or similar taxes), fines and amounts paid in settlement (including all
interest, assessments and other charges paid or payable in connection with or in
respect of any such Expenses, judgments, penalties, fines and amounts paid in
settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s
behalf in connection with such Proceeding or any Claim, issue or matter
therein.  Notwithstanding the foregoing, the obligations of the Company under
this Section 3.2 shall be subject to the condition that no determination (which,
in any case in which Independent Counsel is involved, shall be in a form of a
written opinion) shall have been made pursuant to Article IV that Indemnitee
would not be permitted to be indemnified under applicable law. Nothing in this
Section 3.2 shall limit the benefits of Section 3.1, Section 3.3 or any other
Section hereunder.
 
Section 3.3     Advancement of Expenses.  The Company shall pay all Expenses
reasonably incurred by, or in the case of retainers, to be incurred by, or on
behalf of Indemnitee (or, if applicable, reimburse Indemnitee for any and all
Expenses reasonably incurred by Indemnitee and previously paid by Indemnitee) in
connection with any Claim or Proceeding, whether brought by the Company or
otherwise, until it shall ultimately be determined (in a final adjudication by a
court from which there is no further right of appeal or in a final adjudication
of an arbitration pursuant to Section 5.1 if Indemnitee elects to seek such
arbitration) that Indemnitee is not entitled to be indemnified by the Company
against such Expenses) within 10 days after the receipt by the Company of  (a) a
written request from Indemnitee requesting such payment or payments from time to
time, whether prior to or after final disposition of such Proceeding, and (b) a
written affirmation from Indemnitee of Indemnitee’s good faith belief that
Indemnitee has met the standard of conduct necessary for Indemnitee to be
permitted to be indemnified under applicable law.  Any such payment by the
Company is referred to in this Agreement as an “Expense Advance.”  In connection
with any request for an Expense Advance, if requested by the Company, Indemnitee
or Indemnitee’s counsel shall also submit an affidavit stating that the Expenses
incurred were, or in the case of retainers to be incurred are, reasonably
incurred.  Any dispute as to the reasonableness of the incurrence of any Expense
shall not delay an Expense Advance by the Company, and the Company agrees that
any such dispute shall be
 
 
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resolved only upon the disposition or conclusion of the underlying Claim against
Indemnitee.  Indemnitee hereby undertakes and agrees that Indemnitee will
reimburse and repay the Company without interest for any Expense Advances to the
extent that it shall ultimately be determined (in a final adjudication by a
court from which there is no further right of appeal or in a final adjudication
of an arbitration pursuant to Section 5.1 if Indemnitee elects to seek such
arbitration) that Indemnitee is not entitled to be indemnified by the Company
against such Expenses.  Indemnitee shall not be required to provide collateral
or otherwise secure the undertaking and agreement described in the prior
sentence.
 
Section 3.4     Indemnification for Additional Expenses.  The Company shall
indemnify Indemnitee against any and all costs and expenses (of the types
described in the definition of Expenses in Article I) and, if requested by
Indemnitee, shall (within two business days of that request) advance those costs
and expenses to Indemnitee, that are incurred by Indemnitee in connection with
any claim asserted against, or action brought by, Indemnitee for (i)
indemnification or an Expense Advance by the Company under this Agreement or any
other agreement or provision of the Company’s Certificate of Incorporation or
Bylaws now or hereafter in effect relating to any Claim or Proceeding, (ii)
recovery under any directors’ and officers’ liability insurance policies
maintained by the Company, or (iii) enforcement of, or claims for breaches of,
any provision of this Agreement, in each of the foregoing situations regardless
of whether Indemnitee ultimately is determined to be entitled to that
indemnification, advance expense payment, insurance recovery, enforcement, or
damage claim, as the case may be and regardless of whether the nature of the
proceeding with respect to such matters is judicial, by arbitration, or
otherwise.
 
Section 3.5     Partial Indemnity.  If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties, and amounts paid in
settlement of a Claim or Proceeding but not, however, for all of the total
amount thereof, the Company shall nevertheless indemnify Indemnitee for the
portion thereof to which Indemnitee is entitled.  Moreover, notwithstanding any
other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all Claims or
Proceedings, or in defense of any issue or matter therein, including dismissal
without prejudice, Indemnitee shall be indemnified against all Expenses incurred
in connection therewith.
 
ARTICLE IV
 
 
Procedure for Determination of Entitlement
to Indemnification
 
Section 4.1     Request by Indemnitee.  To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.  The Secretary or an
Assistant Secretary of the Company shall, promptly upon receipt of such a
request for indemnification, advise the Board in writing that Indemnitee has
requested indemnification.
 

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Section 4.2     Determination of Request.  Upon written request by Indemnitee
for indemnification pursuant to the first sentence of Section 4.1 hereof, a
determination, if required by applicable law, with respect to whether Indemnitee
is permitted under applicable law to be indemnified shall be made in accordance
with the terms of Section 4.4, in the specific case as follows:
 
(a)     If a Potential Change in Control or a Change in Control shall have
occurred, by Independent Counsel (selected in accordance with Section 4.3) in a
written opinion to the Board and Indemnitee, unless Indemnitee shall request
that such determination be made by the Board, or a committee of the Board, in
which case by the person or persons or in the manner provided for in clause (i)
or (ii) of paragraph (b) below; or
 
(b)     If a Potential Change in Control or a Change in Control shall not have
occurred, (i) by the Board by a majority vote of the Disinterested Directors
even though less than a quorum of the Board, or (ii) by a majority vote of a
committee solely of two or more Disinterested Directors designated to act in the
matter by a majority vote of all Disinterested Directors even though less than a
quorum of the Board, or (iii) by Independent Counsel selected by the Board or a
committee of the Board by a vote as set forth in clauses (i) or (ii) of this
paragraph (b), or if such vote is not obtainable or such a committee cannot be
established, by a majority vote of all directors, or (iv) if Indemnitee and the
Company agree, by the stockholders of the Company in a vote that excludes the
shares held by directors who are not Disinterested Directors.
 
If it is so determined that Indemnitee is permitted to be indemnified under
applicable law, payment to Indemnitee shall be made within 10 days after such
determination.  Nothing contained in this Agreement shall require that any
determination be made under this Section 4.2 prior to the disposition or
conclusion of a Claim or Proceeding against Indemnitee; provided, however, that
Expense Advances shall continue to be made by the Company pursuant to, and to
the extent required by, the provisions of Article III.  Indemnitee shall
cooperate with the person or persons making such determination with respect to
Indemnitee’s entitlement to indemnification, including providing to such person
upon reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination.  Any
costs or expenses (including attorneys’ fees and disbursements) incurred by
Indemnitee in so cooperating with the person or persons making such
determination shall be borne by the Company (irrespective of the determination
as to Indemnitee’s entitlement to indemnification), and the Company shall
indemnify and hold harmless Indemnitee therefrom.
 
Section 4.3     Independent Counsel.  If a Potential Change in Control or a
Change in Control shall not have occurred and the determination of entitlement
to indemnification is to be made by Independent Counsel, the Independent Counsel
shall be selected by (a) a majority vote of the Disinterested Directors, even
though less than a quorum of the Board or (b) if there are no Disinterested
Directors, by a majority vote of all directors, and the Company shall give
written notice to Indemnitee, within 10 days after receipt by the Company of
Indemnitee’s request for indemnification, specifying the identity and address of
the Independent Counsel so selected.  If a Potential Change in Control or a
Change in Control shall have occurred and the determination of
 
 
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entitlement to indemnification is to be made by Independent Counsel, the
Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give
written notice to the Company, within 10 days after submission of Indemnitee’s
request for indemnification, specifying the identity and address of the
Independent Counsel so selected (unless Indemnitee shall request that such
selection be made by the Disinterested Directors or a committee of the Board, in
which event the Company shall give written notice to Indemnitee within 10 days
after receipt of Indemnitee’s request for the Board or a committee of the
Disinterested Directors to make such selection, specifying the identity and
address of the Independent Counsel so selected).  In either event, (i) such
notice to Indemnitee or the Company, as the case may be, shall be accompanied by
a written affirmation of the Independent Counsel so selected that it satisfies
the requirements of the definition of “Independent Counsel” in Article I and
that it agrees to serve in such capacity and (ii) Indemnitee or the Company, as
the case may be, may, within seven days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection.  Any objection to the selection of
Independent Counsel pursuant to this Section 4.3 may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of the definition of “Independent Counsel” in Article I, and the objection shall
set forth with particularity the factual basis of such assertion.  If such
written objection is timely made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court of competent jurisdiction
(the “Court”) has determined that such objection is without merit.  In the event
of a timely written objection to a choice of Independent Counsel, the party
originally selecting the Independent Counsel shall have seven days to make an
alternate selection of Independent Counsel and to give written notice of such
selection to the other party, after which time such other party shall have five
days to make a written objection to such alternate selection.  If, within 30
days after submission of Indemnitee’s request for indemnification pursuant to
Section 4.1, no Independent Counsel shall have been selected and not objected
to, either the Company or Indemnitee may petition the Court for resolution of
any objection that shall have been made by the Company or Indemnitee to the
other’s selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person as
the Court shall designate, and the person with respect to whom an objection is
so resolved or the person so appointed shall act as Independent Counsel under
Section 4.2.  The Company shall pay any and all fees and expenses reasonably
incurred by such Independent Counsel in connection with acting pursuant to
Section 4.2, and the Company shall pay all fees and expenses reasonably incurred
incident to the procedures of this Section 4.3, regardless of the manner in
which such Independent Counsel was selected or appointed.  Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 5.1,
Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
 
Section 4.4     Presumptions and Effect of Certain Proceedings.
 
(a) Indemnitee shall be presumed to be entitled to indemnification under this
Agreement upon submission of a request for indemnification under Section 4.1,
and the Company shall have the burden of proof in overcoming that presumption in
reaching a determination contrary to that presumption.  Such presumption shall
be used by Independent Counsel (or other person or persons determining
entitlement to indemnification) as a basis for a determination of entitlement to
indemnification unless
 
 
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       the Company provides information sufficient to overcome such presumption
by clear and convincing evidence or unless the investigation, review and
analysis of Independent Counsel (or such other person or persons) convinces
Independent Counsel by clear and convincing evidence that the presumption should
not apply.
 
(b)     If the person or persons empowered or selected under Article IV of this
Agreement to determine whether Indemnitee is entitled to indemnification shall
not have made a determination within 60 days after receipt by the Company of the
request by Indemnitee therefor, the determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification; provided, however, that such 60-day period may
be extended until the disposition or conclusion of a Claim or Proceeding against
Indemnitee, and may be further extended for a reasonable time, not to exceed an
additional 30 days, if the person making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating to such
determination; and provided, further, that the 60-day limitation set forth in
this Section 4.4(b) shall not apply and such period shall be extended as
necessary (i) if within 30 days after receipt by the Company of the request for
indemnification under Section 4.1 Indemnitee and the Company have agreed, and
the Board has resolved to submit such determination to the stockholders of the
Company pursuant to Section 4.2(b) for their consideration at an annual meeting
of stockholders to be held within 90 days after such agreement and such
determination is made thereat, or a special meeting of stockholders is called
within 30 days after such receipt for the purpose of making such determination,
such meeting is held for such purpose within 60 days after having been so called
and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 4.2(a) of this Agreement, in which case the applicable period shall be
as set forth in Section 5.1(c).
 
(c)     The termination of any Proceeding or of any Claim, issue or matter by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this Agreement) by itself adversely
affect the rights of Indemnitee to indemnification or create a presumption that
Indemnitee failed to meet any particular standard of conduct, that Indemnitee
had any particular belief, or that a court has determined that indemnification
is not permitted by applicable law.  Indemnitee shall be deemed to have been
found liable in respect of any Claim, issue or matter only after Indemnitee
shall have been so adjudged by the Court after exhaustion of all appeals
therefrom.
 
ARTICLE V
 
 
Certain Remedies of Indemnitee
 
Section 5.1     Indemnitee Entitled to Adjudication in an Appropriate Court. If
(a) a determination is made pursuant to Article IV that Indemnitee is not
entitled to indemnification under this Agreement; (b) there has been any failure
by the Company to make timely payment or advancement of any amounts due
hereunder (including, without limitation, any Expense
 
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Advances); or (c) the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to Section 4.2 and such determination shall
not have been made and delivered in a written opinion within 90 days after the
latest of (i) such Independent Counsel’s being appointed, (ii) the overruling by
the Court of objections to such counsel’s selection, or (iii) expiration of all
periods for the Company or Indemnitee to object to such counsel’s selection,
Indemnitee shall be entitled to commence an action seeking an adjudication in
the Court of Indemnitee’s entitlement to such indemnification or advancements
due hereunder, including, without limitation, Expense Advances.  Alternatively,
Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the commercial arbitration rules of
the American Arbitration Association.  Indemnitee shall commence such action
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such action pursuant to
this Section 5.1, or such right shall expire.  The Company agrees not to oppose
Indemnitee’s right to seek any such adjudication or award in arbitration and it
shall continue to pay Expense Advances pursuant to Section 3.3 until it shall
ultimately be determined (in a final adjudication by a court from which there is
no further right of appeal or in a final adjudication of an arbitration pursuant
to this Section 5.1 if Indemnitee elects to seek such arbitration) that
Indemnitee is not entitled to be indemnified by the Company against such
Expenses.
 
Section 5.2     Adverse Determination Not to Affect any Judicial Proceeding.  If
a determination shall have been made pursuant to Article IV that Indemnitee is
not entitled to indemnification under this Agreement, any judicial proceeding or
arbitration commenced pursuant to this Agreement shall be conducted in all
respects as a de novo trial or arbitration on the merits, and Indemnitee shall
not be prejudiced by reason of such initial adverse determination.  In any
judicial proceeding or arbitration commenced pursuant to this Agreement,
Indemnitee shall be presumed to be entitled to indemnification or advancement of
Expenses, as the case may be, under this Agreement and the Company shall have
the burden of proof in overcoming such presumption and to show by clear and
convincing evidence that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
 
Section 5.3     Company Bound by Determination Favorable to Indemnitee in any
Judicial Proceeding or Arbitration.  If a determination shall have been made or
deemed to have been made pursuant to Article IV that Indemnitee is entitled to
indemnification, the Company shall be irrevocably bound by such determination in
any judicial proceeding or arbitration commenced pursuant to this Article V, and
shall be precluded from asserting that such determination has not been made or
that the procedure by which such determination was made is not valid, binding
and enforceable.
 
Section 5.4     Company Bound by the Agreement.  The Company shall be precluded
from asserting in any judicial proceeding or arbitration commenced pursuant to
this Article V that the procedures and presumptions of this Agreement are not
valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Agreement.
 
Section 5.5     Assumption of Defense by Company.  In the event the Company
shall be requested by Indemnitee to pay the Expenses of any Proceeding, the
Company, if appropriate, shall be entitled to assume the defense of such
Proceeding, or to participate to the extent
 
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permissible in such Proceeding, with counsel reasonably acceptable to
Indemnitee.  Upon assumption of the defense by the Company and the retention of
such counsel by the Company, the Company shall not be liable to Indemnitee under
this Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Proceeding, provided that Indemnitee shall have the right to
employ separate counsel in such Proceeding at Indemnitee’s sole cost and
expense.  Notwithstanding the foregoing, if Indemnitee’s counsel delivers a
written notice to the Company stating that such counsel has reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of any such defense or the Company shall not, in fact, have employed
counsel or otherwise actively pursued the defense of such Proceeding within a
reasonable time, then in any such event the fees and expenses of Indemnitee’s
counsel to defend such Proceeding shall be subject to the indemnification and
advancement of expenses provisions of this Agreement.
 
ARTICLE VI
 
 
Contribution
 
Section 6.1     Contribution Payment.  To the extent the indemnification
provided for under any provision of this Agreement is determined (in the manner
provided above) not to be permitted under applicable law, then in the event
Indemnitee was, is, or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, a
Proceeding by reason of (or arising in part out of) Indemnitee’s Corporate
Status, the Company, in lieu of indemnifying Indemnitee, shall contribute to the
amount of any and all Expenses, judgments, fines, or penalties assessed against
or incurred or paid by Indemnitee on account of such Proceeding and any and all
amounts paid in settlement of that Proceeding (including all interest,
assessments, and other charges paid or payable in connection with or in respect
of such Expenses, judgments, fines, penalties, or amounts paid in settlement)
for which such indemnification is not permitted (“Contribution Amounts”), in
such proportion as is appropriate to reflect the relative fault with respect to
the subject matter of the Proceeding giving rise to the Contribution Amounts of
Indemnitee, on the one hand, and of the Company and any and all other parties
(including officers and directors of the Company other than Indemnitee) who may
be at fault with respect to such matter (collectively, including the Company,
the “Third Parties”) on the other hand.
 
Section 6.2     Relative Fault.  The relative fault of the Third Parties and
Indemnitee shall be determined (i) by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency assessing the
Contribution Amounts or (ii) to the extent such court or other governmental
agency does not apportion relative fault, by the Independent Counsel (or such
other party which makes a determination under Article IV) after giving effect
to, among other things, the relative intent, knowledge, access to information,
and opportunity to prevent or correct the subject matter of the Proceedings and
other relevant equitable considerations of each party.  The Company and
Indemnitee agree that it would not be just and equitable if contribution
pursuant to this Section 6.2 were determined by pro rata allocation or by any
other method of allocation which does take account of the equitable
considerations referred to in this Section 6.2.
 

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ARTICLE VII
 
 
Miscellaneous
 
Section 7.1     Non-Exclusivity.  The rights of Indemnitee to receive
indemnification and advancement of Expenses under this Agreement shall be in
addition to, and shall not be deemed exclusive of, any other rights Indemnitee
shall under the DGCL or other applicable law, the Company’s Certificate of
Incorporation or Bylaws, any other agreement, vote of stockholders or a
resolution of directors, or otherwise.  No amendment or alteration of the
Company’s Certificate of Incorporation or Bylaws or any provision thereof shall
adversely affect Indemnitee’s rights hereunder and such rights shall be in
addition to any rights Indemnitee may have under the Company’s Certificate of
Incorporation, Bylaws and the DGCL or other applicable law.  To the extent that
there is a change in the DGCL or other applicable law (whether by statute or
judicial decision) that allows greater indemnification by agreement than would
be afforded currently under the Company’s Certificate of Incorporation or Bylaws
and this Agreement, it is the intent of the parties hereto that Indemnitee shall
enjoy by virtue of this Agreement the greater benefit so afforded by such
change.  Any amendment, alteration or repeal of the DGCL that adversely affects
any right of Indemnitee shall be prospective only and shall not limit or
eliminate any such right with respect to any Proceeding involving any occurrence
or alleged occurrence of any action or omission to act that took place before
such amendment or repeal.
 
Section 7.2     I nsurance and Subrogation.
 
(a) To the extent that the Company maintains an insurance policy or policies
providing liability insurance for directors, officers, employees, agents or
fiduciaries of the Company or for individuals serving at the request of the
Company as directors, officers, partners, members, venturers, proprietors,
trustees, employees, agents, fiduciaries or similar functionaries of another
foreign or domestic corporation, partnership, limited liability company, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, employee, agent or fiduciary under such policy or
policies.  If, at the time of the receipt of a notice of a Proceeding pursuant
to the terms of this Agreement the Company has such policy or policies in
effect, the Company shall give prompt notice of the commencement of such
Proceeding to the insurers in accordance with the procedures set forth in the
respective policy or policies.  The Company shall thereafter use commercially
reasonable efforts to cause such insurers to pay, on behalf of Indemnitee, all
amounts payable as a result of such Proceeding in accordance with the terms of
such policies.
 
(b)     In the event of any payment by the Company under this Agreement for
which reimbursement is available under any insurance policy or policies obtained
by the Company, the Company shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee under such insurance policy or
policies, who shall execute all papers required and take all action necessary to
secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights, provided that all
Expenses relating to such action shall be borne by the Company.
 

Austin 1027494v3
                                                                  
 
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(c) The Company shall not be liable under this Agreement to make any payment of
amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under the Company’s charter or
bylaws or any insurance policy, contract, agreement or otherwise.
 
(d)     If Indemnitee is a director of the Company, the Company will advise the
Board of any proposed material reduction in the coverage for Indemnitee to be
provided by the Company’s directors’ and officers’ liability insurance policy
and will not effect such a reduction with respect to Indemnitee without the
prior approval of at least 80% of the Independent Directors of the Company.
 
(e)     If Indemnitee is a director of the Company during the term of this
Agreement and if Indemnitee ceases to be a director of the Company for any
reason, the Company shall procure an excess liability insurance policy with
respect to claims arising from facts or events that occurred before the time
Indemnitee ceased to be a director of the Company and covering Indemnitee, which
policy, without any lapse in coverage, will provide coverage for a period of six
years after the time Indemnitee ceased to be a director of the Company and will
provide coverage in the amount of $10 million; provided, however, that:
 
(i) this obligation shall be suspended during the period immediately following
the time Indemnitee ceases to be a director of the Company if and only so long
as the Company has a directors’ and officers’ liability insurance policy in
effect covering Indemnitee for such claims that, if it were an excess liability
policy, would meet or exceed the foregoing standards, but in any event this
suspension period shall end when a Change in Control occurs; and
 
(ii) no later than the end of the suspension period provided in the preceding
clause (i) (whether because of failure to have a policy meeting the foregoing
standards or because a Change in Control occurs), the Company shall procure an
excess liability insurance policy meeting the foregoing standards and lasting
for the remainder of the six-year period.
 
(f)     Notwithstanding the preceding clause (e) including the suspension
provisions therein, if Indemnitee ceases to be an officer or a director of the
Company in connection with a Change in Control or at or during the 12-month
period following the occurrence of a Change in Control, the Company shall
procure an excess liability insurance policy covering Indemnitee and meeting the
foregoing standards in clause (e) and lasting for a six-year period upon the
Indemnitee’s ceasing to be an officer or a director of the Company in such
circumstances.
 
Section 7.3     Self Insurance of the Company; Other Arrangements.  The parties
hereto recognize that the Company may, but except as provided in Section 7.2(d),
Section 7.2(e), and Section 7.2(f) is not required to, procure or maintain
insurance or other similar arrangements, at its expense, to protect itself and
any person, including Indemnitee, who is or was a director, officer, employee,
 
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agent or fiduciary of the Company or who is or was serving at the request of the
Company as a director, officer, partner, member, venturer, proprietor, trustee,
employee, agent, fiduciary or similar functionary of another foreign or domestic
corporation, partnership, limited liability company, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any
expense, liability or loss asserted against or incurred by such person, in such
a capacity or arising out of the person’s status as such a person, whether or
not the Company would have the power to indemnify such person against such
expense or liability or loss.
 
Except as provided in Section 7.2(d), Section 7.2(e) and Section 7.2(f), in
considering the cost and availability of such insurance, the Company (through
the exercise of the business judgment of its directors and officers) may, from
time to time, purchase insurance which provides for certain (i) deductibles,
(ii) limits on payments required to be made by the insurer, or (iii) coverage
which may not be as comprehensive as that previously included in insurance
purchased by the Company or its predecessors.  The purchase of insurance with
deductibles, limits on payments and coverage exclusions, even if in the best
interest of the Company, may not be in the best interest of Indemnitee.  As to
the Company, purchasing insurance with deductibles, limits on payments and
coverage exclusions is similar to the Company’s practice of self-insurance in
other areas.  In order to protect Indemnitee who would otherwise be more fully
or entirely covered under such policies, the Company shall, to the maximum
extent permitted by applicable law, indemnify and hold Indemnitee harmless to
the extent (i) of such deductibles, (ii) of amounts exceeding payments required
to be made by an insurer, or (iii) of amounts that prior policies of directors’
and officers’ liability insurance held by the Company or its predecessors have
provided for payment to Indemnitee, if by reason of Indemnitee’s Corporate
Status Indemnitee is or is threatened to be made a party to any Proceeding.  The
obligation of the Company in the preceding sentence shall be without regard to
whether the Company would otherwise be required to indemnify such officer or
director under the other provisions of this Agreement, or under any law,
agreement, vote of stockholders or directors or other arrangement.   Without
limiting the generality of any provision of this Agreement, the procedures in
Article IV hereof shall, to the extent applicable, be used for determining
entitlement to indemnification under this Section 7.3.
 
Section 7.4     Certain Settlement Provisions.  The Company shall have no
obligation to indemnify Indemnitee under this Agreement for amounts paid in
settlement of a Proceeding or Claim without the Company’s prior written
consent.  The Company shall not settle any Proceeding or Claim in any manner
that would impose any fine or other obligation on Indemnitee without
Indemnitee’s prior written consent.  Neither the Company nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.
 
Section 7.5     Duration of Agreement.  This Agreement shall continue for so
long as Indemnitee serves as a director, officer, employee, agent or fiduciary
of the Company or, at the request of the Company, as a director, officer,
partner, member, venturer, proprietor, trustee, employee, agent, fiduciary or
similar functionary of another foreign or domestic corporation, partnership,
limited liability company, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise, and thereafter shall survive until and
terminate upon the later to occur of:  (a) the expiration of 20 years after the
latest date that Indemnitee shall have ceased to serve in any such capacity; (b)
the final termination of all pending Proceedings in respect of which Indemnitee
is granted rights of indemnification or advancement of Expenses hereunder and of
any proceeding commenced by Indemnitee pursuant to Article IV relating thereto;
or (c) the
 
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expiration of all statutes of limitation applicable to possible Claims arising
out of Indemnitee’s Corporate Status.
 
Section 7.6     Notice by Each Party.  Indemnitee shall promptly notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document or communication relating
to any Proceeding or Claim for which Indemnitee may be entitled to
indemnification or advancement of Expenses hereunder; provided, however, that
any failure of Indemnitee to so notify the Company shall not adversely affect
Indemnitee’s rights under this Agreement except to the extent the Company shall
have been materially prejudiced as a direct result of such failure.  The Company
shall promptly notify Indemnitee in writing as to the pendency of any Proceeding
or Claim that may involve a claim against Indemnitee for which Indemnitee may be
entitled to indemnification or advancement of Expenses hereunder.
 
Section 7.7     Amendment.  This Agreement may not be modified or amended except
by a written instrument executed by or on behalf of each of the parties hereto.
 
Section 7.8     Waivers.  The observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term only by a writing
signed by the party against which such waiver is to be asserted.  Unless
otherwise expressly provided herein, no delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
 
Section 7.9     Entire Agreement.  This Agreement and the documents expressly
referred to herein constitute the entire agreement between the parties hereto
with respect to the matters covered hereby, and any other prior or
contemporaneous oral or written understandings or agreements with respect to the
matters covered hereby, including without limitation any prior indemnification
agreements, are expressly superseded by this Agreement.
 
Section 7.10    Severability.  If any provision of this Agreement (including any
provision within a single section, paragraph or sentence) or the application of
such provision to any Person or circumstance, shall be judicially declared to be
invalid, unenforceable or void, such decision will not have the effect of
invalidating or voiding the remainder of this Agreement or affect the
application of such provision to other Persons or circumstances, it being the
intent and agreement of the parties that this Agreement shall be deemed amended
by modifying such provision to the extent necessary to render it valid, legal
and enforceable while preserving its intent, or if such modification is not
possible, by substituting therefor another provision that is valid, legal and
unenforceable and that achieves the same objective. Any such finding of
invalidity or unenforceability shall not prevent the enforcement of such
provision in any other jurisdiction to the maximum extent permitted by
applicable law.
 
Section 7.11    Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given upon (a) transmitter’s confirmation of a
receipt of a facsimile
 
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transmission if during normal business hours of the recipient, otherwise on the
next business day, (b) confirmed delivery of a standard overnight courier or
when delivered by hand or (c) the expiration of five business days after the
date mailed by certified or registered mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice):
 
If to the Company, to it at:

Clayton Williams Energy, Inc.
6 Desta Drive
Midland, Texas  79705
Facsimile:  [(___) -_________]

 
If to Indemnitee, to Indemnitee at:

[INDEMNITEE ADDRESS]

or to such other address or to such other individuals as any party shall have
last designated by notice to the other parties.  All notices and other
communications given to any party in accordance with the provisions of this
Agreement shall be deemed to have been given when delivered or sent to the
intended recipient thereof in accordance with and as provided in the provisions
of this Section 7.11.
 
Section 7.12    Governing Law.  This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware without regard to the
principles of conflict of laws.
 
Section 7.13    Certain Construction Rules.
 
(a)     The article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  As used in this Agreement, unless otherwise
provided to the contrary, (1) all references to days shall be deemed references
to calendar days and (2) any reference to a “Section” or “Article” shall be
deemed to refer to a section or article of this Agreement.  The words “hereof,”
“herein” and “hereunder” and words of similar import referring to this Agreement
refer to this Agreement as a whole and not to any particular provision of this
Agreement.  Whenever the words “include,” “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation.”  Unless otherwise specifically provided for herein, the term “or”
shall not be deemed to be exclusive.  Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
 
(b)     For purposes of this Agreement, references to “other enterprises” shall
include employee benefit plans; references to “fines” shall include any excise
taxes assessed on a person with respect to any employee benefit plan; references
to “serving at the request of the Company” shall include any service as a
director, officer, employee or
 
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agent of the Company which imposes duties on, or involves services by, such
director, nominee, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner the person reasonably believed to be in the interests of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner “not opposed to the best interest of the Company” for
purposes of this Agreement and the DGCL.

 
Section 7.14    Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument, notwithstanding that
both parties are not signatories to the original or same counterpart.
 
Section 7.15    Certain Persons Not Entitled to Indemnification.  The Company
shall not be obligated pursuant to the terms of this Agreement:
 
(a)     To indemnify Indemnitee if a final decision by a court or arbitration
body having jurisdiction in the matter shall determine that such indemnification
is not lawful;
 
(b)     To indemnify Indemnitee for the payment to the Company of profits
pursuant to Section 16(b) of the Exchange Act, or Expenses incurred by
Indemnitee for Proceedings in connection with such payment under Section 16(b)
of the Exchange Act;
 
(c)     To indemnify Indemnitee in connection with any Proceeding (or any part
of any Proceeding) initiated by Indemnitee other than as contemplated by Section
7.18, but including any Proceeding (or any part of any Proceeding) initiated by
Indemnitee against the Company or its directors, officers, employees or other
indemnitees, unless (i) the Board of Directors of the Company authorized the
Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the
Company provides the indemnification, in its sole discretion, pursuant to the
powers vested in the Company under applicable law; or
 
(d)     To indemnify Indemnitee in connection with Proceedings (or any part of
any Proceeding) or Claim involving the enforcement of non-compete and/or
non-disclosure agreements or the non-compete and/or non-disclosure provisions of
employment, consulting or similar agreements the Indemnitee may be a party to
with the Company, or any Subsidiary of the Company or any other applicable
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, if any.
 
Section7.16     Indemnification for Negligence, Gross Negligence, etc.  Without
limiting the generality of any other provision hereunder, it is the express
intent of this Agreement that Indemnitee be indemnified and Expenses be advanced
regardless of Indemnitee’s acts of negligence, gross negligence, intentional or
willful misconduct to the extent that indemnification and advancement of
Expenses is allowed pursuant to the terms of this Agreement and under applicable
law.
 
Section 7.17     Mutual Acknowledgments.  Both the Company and Indemnitee
acknowledge that in certain instances, applicable law (including applicable
federal law that may preempt or override applicable state law) or public policy
may prohibit the Company from indemnifying the directors, officers, employees,
agents or fiduciaries of the Company under this
 
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Agreement or otherwise.  For example, the Company and Indemnitee acknowledge
that the U.S. Securities and Exchange Commission has taken the position that
indemnification of directors, officers and controlling Persons of the Company
for liabilities arising under federal securities laws is against public policy
and, therefore, unenforceable.  Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company’s right
under public policy to indemnify Indemnitee.  In addition, the Company and
Indemnitee acknowledge that federal law prohibits indemnifications for certain
violations of the Employee Retirement Income Security Act of 1974, as amended.
 
Section 7.18    Enforcement.  The Company agrees that its execution of this
Agreement shall constitute a stipulation by which it shall be irrevocably bound
in any court or arbitration in which a proceeding by Indemnitee for enforcement
of Indemnitee’s rights hereunder shall have been commenced, continued or
appealed, that its obligations set forth in this Agreement are unique and
special, and that failure of the Company to comply with the provisions of this
Agreement will cause irreparable and irremediable injury to Indemnitee, for
which a remedy at law will be inadequate.  As a result, in addition to any other
right or remedy Indemnitee may have at law or in equity with respect to breach
of this Agreement, Indemnitee shall be entitled to injunctive or mandatory
relief directing specific performance by the Company of its obligations under
this Agreement.  The Company agrees not to seek, and agrees to waive any
requirement for the securing or posting of, a bond in connection with
Indemnitee’s seeking or obtaining such relief.
 
Section 7.19    Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the parties hereto and their respective successors, assigns,
heirs, executors, administrators, legal representatives.
 
Section 7.20    Period of Limitations.  No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
Affiliate of the Company against Indemnitee or Indemnitee’s spouse, heirs,
executors, or personal or legal representatives after the expiration of one year
from the date of accrual of that cause of action, and any claim or cause of
action of the Company or its Affiliate shall be extinguished and deemed released
unless asserted by the timely filing of a legal action within that one-year
period; provided, however, that for any claim based on Indemnitee’s breach of
fiduciary duties to the Company or its stockholders, the period set forth in the
preceding sentence shall be three years instead of one year; and provided,
further, that, if any shorter period of limitations is otherwise applicable to
any such cause of action, the shorter period shall govern.
 
[Signature Page Follows]
 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be
effective as of the date first above written.
 

 
CLAYTON WILLIAMS ENERGY, INC.
       
By:
Name:
Title:
       
INDEMNITEE:
       
[NAME]

 
Signature Page to
Indemnification Agreement