Exhibit
10.36


 


SECOND
AMENDMENT TO AGREEMENT


 


This is the Second
Amendment to Agreement dated April 23, 1993, as amended by letter agreement
dated September 3, 1997 (herein the “Agreement”) between Prospectors Gas, Ltd.
(“PGL”), Clayton Williams Energy, Inc. (“CWE”), and Robert C. Lyon (“Lyon”).


 


RECITALS


 


WHEREAS, PGL, CWE and
Lyon entered into the Agreement regarding the terms of a net profits agreement;


 


WHEREAS, as anticipated
by the Agreement, the assets of PGL were acquired by CWE and PGL was dissolved
in June of 1993;


 


WHEREAS due to changes in
law relating to relationships between publicly traded companies and employees,
CWE and Lyon desire to amend the Agreement;


 


NOW, THEREFORE, in
consideration of these premises and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:


 


1.  Definitions.  The following terms shall be defined as
follows:


 


a.                                       CWE
shall mean Clayton Williams Energy, Inc., each of its subsidiaries and any partnership,
limited partnership or other entity in which CWE owns a controlling interest.


 


b.                                      Lyon
shall mean Robert C. Lyon and any partnership, limited partnership or other
entity in which Lyon owns a controlling interest.


 


c.                                       Gas
Gathering Asset shall mean any project undertaken for the gathering,
compression, treating, processing, transporting or other handling and related
marketing of natural gas, natural gas liquids and carbon dioxide.


 


d.                                      Material
Interest shall mean any interest in excess of twenty-five percent (25%) of the
total volume of products transported and/or processed for the most recent three
(3) months of production available prior to the Exercise Date.


 


e.                                       Exercise
Date shall mean within ten (10) days of the date on which CWE signs a contract
for the construction or purchase of a Gas Gathering Asset.


 


2.  Article I, Net Profits Interest in PGL.  The provisions of Article I of the Agreement
are hereby deleted and Lyon hereby acknowledges his right to any net profits
interest in PGL terminated effective on the CWE Acquisition Date as defined in
the Agreement.


 





















 


3.  Article II, Acquisition Rights with
Respect to PGL Old Assets.  The
provisions of Article II of the Agreement are herby deleted effective on the
CWE Acquisition Date as defined in the Agreement.


 


4.  Article III, Net Profits Interest in CWE.  The provisions of Article III of the
Agreement are hereby terminated and deleted effective on the Effective Date as
defined herein.


 


5.  Article IV, Acquisition Rights with
Respect to PGL New Assets.  The
provisions of Article IV of the Agreement are hereby deleted and Lyon
acknowledges his acquisition rights with respect to PGL new assets terminated
effective on the CWE Acquisition Date as defined in the Agreement.


 


6.  Article V, Acquisition Rights with Respect
to CWE.  The provisions of Article V
of the Agreement are hereby deleted and the following is substituted in lieu
thereof:


 


Article V


 


ACQUISITION RIGHTS
WITH RESPECT TO CWE


 


5.01  Acquisition Right with Respect to CWE Gas
Gathering Assets.  Lyon shall have no
right to acquire an equity interest in any Gas Gathering Asset constructed or
purchased after the Effective Date by CWE if CWE holds a Material Interest in
the product being gathered, treated, compressed, processed, transported, or
otherwise handled by the Gas Gathering Asset.  
If CWE does construct or purchase a Gas Gathering Asset and does not
hold a Material Interest in the product being gathered, treated, compressed,
processed, transported or otherwise handled by the Gas Gathering Asset, Lyon
shall have the right to acquire up to a ten percent (10%) equity interest out
of the interest to be owned by CWE in said Gas Gathering Asset by giving
written notice to CWE prior to the Exercise Date.  Thereafter, CWE and Lyon shall hold their
interests in the Gas Gathering Asset by a joint venture, the sharing ratios in
which Lyon shall own the Lyon percent and CWE the remainder.  The Joint Operating Agreement for the joint
venture shall have terms and conditions as shall be mutually satisfactory to
CWE and Lyon, but shall in any event provide that principal joint venture
decisions be made by a vote of the venturers in accordance with their sharing
ratios and cash in excess of ordinary working capital requirements of the joint
venture (as determined in the reasonable judgment of CWE) shall be distributed
monthly.  Should Lyon not timely exercise
the rights granted herein as to a particular Gas Gathering Asset, Lyon’s right
to participate in that particular Gas Gathering Asset shall terminate.


 


5.02 Limitations
with Respect to Acquisition Right of Acquired Gas Gathering Assets.


 


(a)           Lyon shall not have the acquisition
right described in paragraph 5.01 above when a Gas Gathering Asset is acquired
in a transaction involving assets in addition to the Gas Gathering Asset, if
the fair value of


 





















 


the other assets (in the
sole discretion of CWE) exceeds the fair value of the Gas Gathering Assets
being acquired.


 


(b)           If a Gas Gathering Asset is acquired
in a transaction involving assets in addition to the Gas Gathering Assets and
the fair value of the Gas Gathering Assets being acquired exceeds the value of
the other assets, if Lyon exercised the acquisition right, such exercise must
be inclusive of the entire acquisition, not just the Gas Gathering Asset
portion of said acquisition.


 


5.03.  Termination of Acquisition Right.  The acquisition right described in Paragraph
5.01shall terminate on the date of Lyon’s cessation of employment with CWE.


 


6.  Article VII.  Compensation.  In consideration of the execution of this
Second Amendment to Agreement, CWE agrees to increase Lyon’s annual
compensation from $60,000 per annum to $100,000 per annum beginning April 1, 2004.  Lyon’s right to compensation under the terms
hereof shall terminate on the date of Lyon’s cessation of employment with CWE.


 


7.  Exclusion of Mississippi Net Profits
Interest.  CWE and Lyon acknowledge
the terms of the Agreement, as amended herein, do not effect the rights of Lyon
to certain net profits derived from Newman Treating Plant situated in Hinds
County, Mississippi pursuant to the terms of a separate agreement.


 


8.   Mutual Releases


 


(a)           Lyon hereby acknowledges that CWE has
performed all of its obligations pursuant to the Agreement as of the date
hereof and hereby releases CWE from and against any claims which could be made
by Lyon against CWE under the terms of the Agreement.


 


(b)           CWE hereby acknowledges that Lyon has
performed all of its obligations pursuant to the Agreement as of the date
hereof and hereby releases Lyon from and against any claims which could be made
by CWE against Lyon under the terms of the Agreement.


 


9.  Effective Date.  The Effective Date of this Second Amendment
to Agreement shall be the 1st day of April, 2004.


 


	
  CWE

  	
  Lyon

  
	
   

  	
   

  	
   

  
	
  Clayton Williams
  Energy, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
     /s/
  L. Paul Latham

  	
   

  	
  /s/ Robert C. Lyon

  	
   

  
	
  Name:

  	
  L. Paul Latham

  	
  Robert C. Lyon

  
	
  Title:

  	
  Executive Vice
  President