Exhibit 10.35


 


September 3, 1997


 


Mr. Robert C. Lyon


6 Desta Drive, Suite 2025


Midland, Texas  79705


 


RE:         Agreement dated April
23, 1993


 


Dear Bob:


 


The purpose of this letter is to amend the terms of our agreement with
respect to your right to participate in the acquisition or construction of a
Gas Gathering Asset by the Company.  In
the event of future acquisitions by the Company which includes a Gas Gathering
Asset together with a non-Gas Gathering Asset, your right to participate set
forth in Paragraph 5.1 shall pertain to the entire acquisition (both the Gas
Gathering Asset(s) and the non-Gas Gathering Assets), rather than to the Gas
Gathering Asset only.  Further, you have
agreed that your right to participate in the construction or acquisition of any
Gas Gathering Asset related to the Company’s Cotton Valley acreage shall be
limited to those assets specifically offered to you by the Company in its sole
discretion.  You further acknowledge that
you shall have no right to purchase or participate in the construction of any
Gas Gathering Asset related to the Buda gas now owned or hereafter acquired by
the Company in the Pearsall area. 
Finally, we have agreed that any interest income or interest expense
resulting from inter-company debts shall be excluded from the calculation of
your net profits interest.


 


To accomplish the foregoing, we have agreed to the amendments to
Paragraphs 1.02 and 5.01 which are attached hereto.


 


If the letter accurately sets forth our agreement, please indicate your
acceptance by signing in the space provided


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  /s/ CLAYTON W. WILLIAMS, JR.

  	
   

  
	
   

  	
  Clayton W. Williams, Jr.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed and accepted this

  	
   

  
	
  3rd day of Sept., 1997.

  	
   

  
	
   

  	
   

  
	
    /s/ ROBERT C. LYON

  	
   

  	
   

  
	
  Robert C. Lyon

  	
   

  
				



 





















 


ARTICLE I


NET PROFITS INTEREST IN PGL


 


1.02         Computation of Net
Profits:  Payment.  For purposes of this Agreement, the Net
Profits of PGL shall be defined as PGL’s net profits, prior to taxes, computed
in accordance with generally accepted accounting principles, except that (i)
PGL may charge against such Net Profits an amount equal to the Cost of Funds on
the net fixed assets of PGL less all interest bearing debt the proceeds of
which were used to acquire fixed assets if interest on such debt was expensed
to determine the New Profits of PGL and (ii) PGL may not expense the PGL Net
Profits Interest.  “Cost of Funds” shall
mean the interest rate charged to PGL or its partners, from time to time, under
its secured credit facility(s).  Any
interest expense or interest income resulting from loans to or from an
affiliated company shall be excluded from the calculation of Net Profits.  Determination of the PGL Net Profits Interest
due Lyon shall be made on a quarterly basis following the preparation of PGL’s
Financial Statements for each March 31, June 30, September 30 and
December 31, beginning for the quarter ended March 31, 1993.  With respect to each of the four (4) quarters
of any fiscal year, the PGL Financial Statements shall be prepared, and Lyon shall
receive such amount as may be due in respect of the PGL Net Profits Interest,
within forth-five days following the end of each quarter.  Any adjustments with respect to the audit of
PGL’s Financial Statements (if one should be conducted) to the PGL Net Profits
Interest received by Lyon, shall be taken into account with respect to the
distribution in subsequent quarters.  In
no event shall Lyon owe any sums to PGL should PGL not have Net Profits for any
such quarter but the effect of any net loss shall be taken into account in
subsequent determinations of computing and paying the PGL Net Profits Interest.


 





















 


ARTICLE V


ACQUISITION RIGHTS WITH RESPECT TO CWE


 


5.01         Acquisition Rights
With Respect to CWEI Assets.  Except
as set forth below, Lyon shall have the right to acquire upon inception of any
Gas Gathering Asset, acquired or constructed after the CWE Acquisition Date, up
to a ten percent (10%) of CWEI’s equity interest in the same (the “CWE
Acquisition Right”) by making such election at the same time CWE acquires such
asset or determines to undertake construction. 
Thereafter, CWE and Lyon shall cause the Gas Gathering Asset to be
acquired or constructed 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 PGL or CWE) shall be
distributed monthly.  Should Lyon not
fully exercise the CWE Acquisition Right with respect to a particular project,
the portion of the CWE Acquisition Right with respect to the particular project
not exercised shall terminate.


 


For purposes of this paragraph, when a Gas Gathering Asset is acquired
in a transaction involving other assets, the CWE Acquisition right shall run to
and must be exercised as the entire acquisition as a whole, and not just to the
Gas Gathering Asset(s).  As to the
construction of Gas Gathering Asset which relate either to CWE’s interest in
the Cotton Valley trend in Robertson, Burleson, Leon and counties to which it
may be expanded and CWE’s Buda gas rights in the Pearsall area, Lyon shall have
no acquisition right in such Gas Gathering Assets unless CWE, in its sole
discretion, elects to grant such right to Lyon.


 


5.02         Termination of
Acquisition Right.  The CWE
Acquisition Right shall terminate on the date of Lyon’s cessation of employment
with CWE.