exhibit120109.htm


    
      
        

      

      Exhibit
10.1

      


      CWEI
FUHRMAN-MASCHO REWARD PLAN

      


      ARTICLE
I

      Purpose of
Plan

      


      1.1           Purpose
of Plan.  The purpose of
the Reward Plan (the “Plan”) is to reward eligible employees and other service
providers listed on Exhibit A of Clayton Williams Energy, Inc., and its
wholly-owned affiliates (the “Employer”) for continued quality service to the
Employer, and to encourage retention of those employees and service providers,
by providing them the opportunity to receive bonus payments that are based on
profits derived from a portion of the Employer’s working interest in certain
wells drilled by Employer in the Fuhrman-Mascho area described on Exhibit
B.

      


      ARTICLE
II

      Definitions and
Construction

      


      2.1           Definitions.                                Where
the following words and phases appear in the Plan, each will have the respective
meaning set forth below, unless the context clearly indicated to the
contrary.

      


      
        	
                 
      

              	
                (a)

              	
                Acquisition
      Costs:  The portion of any costs or expenses incurred by
      the Employer that are attributable to acquiring the Well
      Interests.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                Affiliate:  An
      “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 the 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, through the ownership of voting securities, by contract or
      otherwise, and the terms “controlling” and “controlled” have meanings
      correlative to the foregoing.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                Agreed
      Rate:  3.97% per annum, compounded
    quarterly.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                Bonus
      Award:  The right granted to a Participant to receive
      payments, if any, under the terms and conditions of the
    Plan.

              


      

      


      
        	
                 
      

              	
                (e)

              	
                Bonus
      Percentage:  The designated percentage set forth in each
      Participant’s Notice of Bonus Award that is used to calculate the amount
      of payments, if any, that such Participant may be entitled to under the
      Plan.

              


      

      


      
        	
                 
      

              	
                (f)

              	
                Change
      of Control. A “Change of
      Control” will be deemed to occur as of (i) the date  any
      “person” or “group” of related persons (as such terms are used in Sections
      13(d) and 14(d) of the Exchange Act), 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 or group shall be
      deemed to have “beneficial ownership” of all shares that any such person
      or group has the right to

              


      


      
        
          
             

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      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 or group shall be deemed to beneficially own any Voting
Stock of the Company held by a parent entity,  if such person or group
“beneficially owns” (as defined above), directly or indirectly, more than 35% of
the 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
date of death of Clayton W. Williams, Jr.

      


      
        	
                 
      

              	
                (g)

              	
                Code:  The
      Internal Revenue Code of 1986, as amended from time to
    time.

              


      

      


      
        	
                 
      

              	
                (h)

              	
                Committee: The Compensation
      Committee of the Company’s board of
directors.

              


      

      


      
        	
                 
      

              	
                (i)

              	
                Company: Clayton Williams
      Energy, Inc.

              


      

      


      
        	
                 
      

              	
                (j)

              	
                Effective
      Date:  August 1,
2008

              


      

      


      
        	
                 
      

              	
                (k)

              	
                Eligible
      Person: Each person who is
      employed by Employer or who performs services for the Employer as a
      consultant or independent
contractor.

              


      

      


      
        	
                 
      

              	
                (l)

              	
                Employer: The Company and
      its wholly-owned Affiliates.

              


      

      


      
        	
                 
      

              	
                (m)

              	
                Exchange
      Act: The Securities
      Exchange Act of 1934, as amended.

              


      

      


      
        	
                 
      

              	
                (n)

              	
                Full
      Vesting Date: November 4,
      2011

              


      

      


      
        	
                 
      

              	
                (o)

              	
                Notice
      of Bonus Award: The notice
      provided to each Participant pursuant to Section 3.1, setting forth, among
      other things, the Participant’s Bonus Percentage under the
      Plan.

              


      

      


      
        	
                 
      

              	
                (p)

              	
                Participant: Each Eligible
      Person who has been granted a Bonus Award under the Plan and participates
      in the Plan in accordance with the provisions of Article
    III.

              


      

      


      
        	
                 
      

              	
                (q)

              	
                Payment
      Date: With respect to
      each Plan Quarter, the date that payment, if any, is made to eligible
      Participants pursuant to Article V.

              


      

      


      
        	
                 
      

              	
                (r)

              	
                Permitted
      Assignee: Each Participant’s
      spouse, parents, or natural or adoptive lineal descendants, or one or more
      trusts or partnerships established exclusively for the benefit of each
      Participant’s spouse, parents or natural or adoptive lineal
      descendants.

              


      

      



      
        
          
             

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                (s)

              	
                Permitted
      Holder: Clayton W.
      Williams, Jr. and any Affiliate or Related Person
  thereof.

              


      

      


      
        	
                 
      

              	
                (t)

              	
                Plan: This CWEI
      Fuhrman-Mascho Reward Plan, as amended from time to
  time.

              


      

      


      
        	
                 
      

              	
                (u)

              	
                Plan
      Quarter:  Each calendar quarter within a Plan
      Year.

              


      

      


      
        	
                 
      

              	
                (v)

              	
                Plan
      Year: Each twelve
      consecutive month period beginning each January
  1.

              


      

      


      
        	
                 
      

              	
                (w)

              	
                Quarterly
      Bonus Amount: This amount, if
      any, for each Participant with respect to each Plan Quarter that is
      calculated in accordance with the provisions of Section
    4.3.

              


      

      


      
        	
                 
      

              	
                (x)

              	
                Quarterly
      Bonus Pool: The bonus pool, if
      any, determined as of the end of each Plan Quarter in accordance with the
      provisions of Article IV.

              


      

      


      
        	
                 
      

              	
                (y)

              	
                Related
      Person: With respect to
      any Permitted Holder, a “Related Person”
means:

              


      

      


      (1)           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

      


      (2)           any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, owners or persons beneficially owning a majority (or more)
controlling interest of which consist of such Permitted Holder and/or such other
persons referred to in the immediately preceding clause (1).

      


      
        	
                 
      

              	
                (z)

              	
                Sale
      Transaction: A “Sale
      Transaction” will be deemed to occur on (1) any sale, exchange, or other
      disposition to a third party (excluding any Affiliate of the Employer) of
      (i) the Employer’s Well Interests or of the Employer’s rights or benefits
      with respect to the Well Interests, or (ii) all or substantially all of
      the Company’s assets, or (2) a Change of
  Control.

              


      

      


      
        	
                 
      

              	
                (aa)

              	
                Voting
      Stock: All classes of
      capital stock of a corporation then outstanding and normally entitled to
      vote in the election of directors.

              


      

      


      
        	
                 
      

              	
                (bb)

              	
                Well: A well drilled by
      the Employer in the area described on Exhibit A, provided that the well
      has a spud date on or after the Effective
Date.

              


      

      


      
        	
                 
      

              	
                (cc)

              	
                Well
      Costs: The Employer’s
      share of costs pursuant to any operating agreement for the drilling,
      completing, equipping, deepening, or sidetracking the Well, including,
      without limitation: (i) the costs of surveying and staking the Well, the
      costs of any surface damages, and the costs of clearing, coring, testing,
      logging, and evaluating the Well; (ii) the costs of casing, cement, and
      cement

              


      


      
        
          
             

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      services
for the Well; (iii) the cost of plugging and abandoning the Well (including
standard and customary radiation activities associated therewith), if it is
determined that the Well would not produce in commercial  quantities
and should be abandoned; (iv) all direct charges and overhead chargeable to the
Employer with respect to the Well under any applicable operating agreement until
such time as all operations are carried out as required by applicable
regulations and sound engineering practices to make such Well ready for
production, including such charges and overhead attributable to the installation
and testing of wellhead equipment, or costs to plug and abandon a dry hole; (v)
all costs incurred by the Employer in recompleting or plugging back the Well;
(vi)  all costs incurred by the Employer in reworking the Well if the
rework is covered by an authority for expenditure under the applicable operating
agreement; (vii) all costs incurred by the Employer in locating, drilling,
completing, equipping, deepening, or sidetracking any enhanced recovery producer
or injector Well (including the costs of all necessary surface equipment such as
steam generators, compressors, water treating facilities, injection pumps, flow
lines and steam lines); and (viii) the costs of constructing production
facilities, pipelines and other facilities necessary to develop property
acquired pursuant to the terms  hereof and produce, collect, store,
treat, deliver, market, sell or otherwise dispose of oil, gas, and other
hydrocarbons and minerals therefrom; provided, that Well
Costs will not include any Acquisition Costs.

      


      
        	
                 
      

              	
                (dd)

              	
                Well
      Interest: 7% of the
      Employer’s working interest in a
Well.

              


      

      


      
        	
                 
      

              	
                (ee)

              	
                Well
      Interest Profits: As of the
      applicable measurement date, an amount equal to the cumulative cash
      proceeds earned by the Employer with respect to each Well Interests, minus
      the sum of (i) Well Costs and other expenses incurred by the Employer with
      respect to such Well Interests, plus (ii) an internal rate of return on
      such costs equal to the Agreed
Rate.

              


      

      


      2.2           Number
and Gender. 
The masculine gender, when used herein, includes the feminine gender, and,
unless context indicates otherwise, the singular includes the plural and the
plural the singular.

      


      2.3           Headings.  The
headings of Articles and Section herein are included solely for convenience, and
if there is any conflict between headings and the text of the Plan, the text
will control.  All references to Sections and Articles are to this
Plan unless otherwise indicated.


      
        
          
             

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      ARTICLE
III

      Participation

      


      3.1           Selection
of Participants and Grant of Bonus Awards.  The Committee, in
its sole discretion, may select which, if any, Eligible Persons will be granted
Bonus Awards and become Participants in the Plan. Each Participant's Bonus
Percentage will be determined by, and in the sole discretion of, the Committee.
Each Bonus Award granted to a Participant will be evidenced by a Notice of Bonus
Award that will specify (a) the Participant's Bonus Percentage, (b) the
Participant's effective date of Plan participation, and (c) such other terms and
provisions as the Committee may determine in its sole discretion.

      


      3.2           Commencement
of Participation.  Each Eligible Person will become a
Participant upon the effective date of Plan participation specified in his
Notice of Bonus Award, provided that such Eligible Person returns to the Company
an executed Notice of Bonus Award. Once an Eligible Person becomes a Participant
in the Plan, he will remain a Participant until his Plan participation
terminates in accordance with Section 3.3.

      


      3.3           Termination
of Participation.  A Participant's Plan
participation will terminate on the earliest to occur of the
following:

      


      
        	
                 
      

              	
                (a)

              	
                The
      date on which such Participant terminates employment or service with the
      Employer for any reason, but only if such termination date occurs prior to
      the Full Vesting Date; provided, however, that with respect to a
      Participant who is a consultant or independent contractor and who is not
      actively performing services for the Employer, such Participant will, for
      purposes of the Plan, be deemed to remain in the service of the Employer
      unless and until the Committee, in its sole discretion, determines that
      such service relationship has been
terminated;

              


      

      


      
        	
                 
      

              	
                (b)

              	
                The
      date on which such Participant forfeits his Bonus Award after the Full
      Vesting Date pursuant to Section
6.2;

              


      

      


      
        	
                 
      

              	
                (c)

              	
                The
      date of death of such Participant if there is no Permitted Assignee
      pursuant to Article VII; or

              


      

      


      
        	
                 
      

              	
                (d)

              	
                The
      date of termination of the Plan or such Participant's Bonus Award pursuant
      to Article X.

              


      

      


      From and after the date a person's Plan
participation terminates, such person will not be entitled to receive any
payment under the Plan, pursuant to a Bonus Award or otherwise.

      


      ARTICLE
IV

      Quarterly Bonus Pool and
Quarterly Bonus Amounts

      


      4.1           Calculation
of Quarterly Bonus Pool.  As soon as administratively
practicable after the last day of each Plan Quarter, the Committee will
calculate the Quarterly Bonus Pool for such Plan Quarter in the following
manner:

      
        	
                 
      

              	
                (a)

              	
                If
      Well Interest Profits, determined as of the last day of the applicable
      Plan Quarter, equal a negative amount or zero, the Quarterly Bonus Pool
      for such Plan Quarter will be deemed to be equal to
  zero.

              


      


      
        
          
             

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                (b)

              	
                If
      Well Interest Profits, determined as of the last day of the applicable
      Plan Quarter, equal an amount greater than zero, the Quarterly Bonus Pool
      for such Plan Quarter will be an amount equal to (i) Well Interest Profits
      determined as of the last day of such Plan Quarter, minus (ii) the sum of
      the Quarterly Bonus Pools for all preceding Plan Quarters (taking into
      account that a Quarterly Bonus Pool will be deemed to be equal to zero if
      it would otherwise be a negative
amount).

              


      

      


      4.2           Calculation
of Quarterly Bonus Pool in the Event of a Sale Transaction. In the event
a Sale Transaction occurs with respect to a Plan Quarter, the Quarterly Bonus
Pool for such Plan Quarter will be calculated in the manner described in Section
4.1, except that Well Interests Profits will be deemed to include the amount of
net sale proceeds from the Sale Transaction that the Committee, using any
reasonable method it deems appropriate, determines is attributable to the Well
Interests. In the event that the Sale Transaction does not result in the receipt
of any net sale proceeds (for example, a Change of Control), the Committee will
determine a deemed amount of net sale proceeds attributable to the Well
Interests, taking into account the relevant facts and circumstances and using
any reasonable method it deems appropriate.

      


      4.3           Calculation
of Participants' Quarterly Bonus Amounts. As soon as
administratively practicable after the last day of each Plan Quarter, the
Committee will calculate each Participant's Quarterly Bonus Amount for such Plan
Quarter, which will be an amount equal to the product of the Participant's Bonus
Percentage multiplied by the Quarterly Bonus Pool for such Plan Quarter (taking
into account that a Quarterly Bonus Pool will be deemed to be equal to zero if
it would otherwise be a negative amount).

      


      ARTICLE
V

      Payment of Quarterly Bonus
Amounts

      


      5.1 Payment
of Quarterly Bonus Amounts.  With respect to each Plan Quarter,
each Participant whose Plan participation has not terminated as of the Payment
Date for such Plan Quarter will be entitled to receive a payment, if any, equal
to one hundred percent (100%) of his Quarterly Bonus Amount for such Plan
Quarter. Such payment will be made by the Employer in cash in a single sum as
soon as administratively practicable following the last day of the applicable
Plan Quarter, but in no event later than two and one-half (2 1/2) months
following the last day of the Plan Year in which such Plan Quarter
ends.

      


      ARTICLE
VI

      Forfeiture of Bonus
Awards

      


      6.1           Forfeiture
of Bonus Award Prior to Full Vesting Date.  If a Participant's
Plan participation terminates in accordance with Section 3.3 prior to the Full
Vesting Date, such Participant's Bonus Award will be forfeited as of the date
that his Plan participation terminates. By way of example and not limitation, a
Participant who terminates employment with the Employer prior to the Full
Vesting Date will forfeit his Bonus Award as of the date of such termination of
employment.

      


      6.2           Forfeiture
of Vested Bonus Award for Cause.  Each Participant will forfeit
his Bonus Award if such Participant:

      



      
        
          
             

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                (a)

              	
                with
      respect to time periods during which such Participant is employed by or
      performing (or deemed to be performing) services for the Employer, (1)
      materially breaches the terms of his employment agreement or other
      services agreement with the Employer or any of its Affiliates, (2)
      materially breaches the terms of any corporate policy or code of conduct
      established by the Employer or any of its Affiliates, or (3) the
      Committee, in its sole discretion, determines that such Participant has
      engaged in gross negligence or willful misconduct in the performance of
      services for the Employer or any of its Affiliates, including, without
      limitation, a willful refusal without proper legal reason to perform his
      duties and responsibilities, or

              


      

      


      
        	
                 
      

              	
                (b)

              	
                at
      any time, including time periods during which such Participant is not
      employed by or performing (or deemed to be performing) services for the
      Employer, (i) admits or enters a plea of no contest to or is convicted of
      a felony against the Employer or any of its Affiliates, (ii) materially
      breaches any provision of any agreement with the Employer or any of its
      Affiliates, or (iii) engages in dishonest or fraudulent conduct with
      respect to the business, reputation or affairs of the Employer or any of
      its Affiliates.

              


      

      


      The
forfeiture provisions of this Section 6.2 will apply regardless of whether a
Participant's employment or service relationship with the Employer was
terminated as a result of conduct described in subsections (a) or (b) above, and
regardless of whether such Participant continued Plan participation through the
Full Vesting Date.

      


      6.3           Forfeiture
of Bonus Award on Account of Participant's Death if No Permitted
Assignee.  A Participant
will forfeit his Bonus Award upon the Participant's date of death if the
Committee determines that the deceased Participant's Bonus Award was not
transferred to a Permitted Assignee pursuant to Article VII or that no Permitted
Assignee exists.

      


      6.4           Consequences
of Forfeiture of Bonus Award.  From and after the date a
Participant forfeits his Bonus Award, such person will not be entitled to
receive any payment under the Plan pursuant to a Bonus Award or
otherwise.


      
        
          
             

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      ARTICLE
VII

      Permitted Assignees of
Vested Bonus Award Upon Participant's Death

      


      7.1           Permitted Assignees of
Vested Bonus Award Upon Participant's Death.

      


      
        	
                 
      

              	
                (a)

              	
                On
      or after the Full Vesting Date, all or any portion of each Participant's
      Bonus Award may be transferred, by operation of will or applicable law, to
      a Permitted Assignee upon such Participant's
  death.

              


      

      


      
        	
                 
      

              	
                (b)

              	
                Each
      Permitted Assignee who is entitled to receive payments from the Plan under
      this Section 7.1, if any, will receive and hold only those rights and
      interests, and be subject to the same terms and conditions that would
      apply if such Permitted Assignee were a Participant in the Plan,
      including, without limitation, the restrictions on the transfer of a
      Participant's Bonus Award. As a condition to receipt of any rights and
      interests under this Section 7.1, a Permitted Assignee may be required to
      provide the Committee with any information necessary for the Committee to
      effect a transfer of such rights and interests, and to execute and deliver
      a written agreement with the Company agreeing to be bound by the terms of
      the Plan. Notwithstanding whether a Permitted Assignee has executed and
      delivered such an agreement, the acceptance of distributions from the Plan
      by a Permitted Assignee will be deemed to be an agreement by such
      Permitted Assignee to be bound by the Plan's
  terms.

              


      

      


      
        	
                 
      

              	
                (c)

              	
                To
      the extent that a payment is made under the Plan to an individual who the
      Committee determines in good faith is a Permitted Assignee with respect to
      a deceased Participant's Bonus Award, any and all obligations with respect
      to such payment will be discharged and neither the Plan nor the Employer
      will have any obligation to another person claiming to be the
      Participant's Permitted Assignee with respect to such payment,
      notwithstanding any subsequent determination by the Committee, a court of
      law, or otherwise, that such payment was made based on a mistake of fact
      or a mistake of law.

              


      

      


      
        	
                 
      

              	
                (d)

              	
                In
      the event that there is a dispute or uncertainty regarding the identity of
      the Permitted Assignee(s) to whom a deceased Participant's Bonus Award may
      have been transferred, the Committee will be permitted to retain any
      payment that would otherwise be payable with respect to such Bonus Award
      until the identity of such Permitted Assignee(s) can be determined. The
      amount of any such retained payment will be credited with interest at the
      Agreed Rate from the time such amount would otherwise be payable until the
      time such amount is paid. In addition, in the case of any bona fide
      dispute between parties concerning the right to a payment under the Plan,
      the Committee may, in its discretion, file an interpleader action in a
      court of competent jurisdiction, naming the parties to the dispute and, if
      applicable, may pay the disputed amount into the court to be distributed
      in accordance with the court's decision or take such other action as it
      determines, in its sole discretion, constitutes an appropriate way to
      resolve or otherwise settle the
dispute.

              


      


      
        
          
             

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      ARTICLE
VIII

      Administration

      


      8.1           Committee
Administration.  The Plan will be
administered by the Committee.

      


      8.2           Meetings.                      The
Committee will hold meetings upon such notice and at such time and place as it
may from time to time determine. Notice to a member will not be required if
waived in writing by that member. A majority of the members of the Committee
duly appointed will constitute a quorum for the transaction of business. All
resolutions or other actions taken by the Committee at any meeting where a
quorum is present will be by vote of a majority of those present at such meeting
and entitled to vote. Resolutions may be adopted or other action taken without a
meeting upon written consent signed by all of the members of the Committee.
Members of the Committee may participate in meetings by means of telephone
conference or similar communication whereby all persons participating in the
meeting can hear and speak to each other.

      


      8.3           Discretion
to Interpret Plan.  The Committee has absolute discretion to
construe any and all provisions of the Plan, including, but not limited to, the
discretion to resolve ambiguities, inconsistencies, or omissions conclusively.
The decisions of the Committee upon all matters within the scope of its
authority will be binding and conclusive upon all persons.

      


      8.4           Powers
and Duties.  In addition to the powers described in Section 8.3
and all other powers specifically granted under the Plan, the Committee will
have all powers necessary or proper to administer the Plan and to discharge its
duties under the Plan, including, but not limited to, the following
powers:

      


      
        	
                 
      

              	
                (a)

              	
                To
      make and enforce such rules, regulations, and procedures as it may deem
      necessary or proper for the orderly and efficient administration of the
      Plan;

              


      

      


      
        	
                 
      

              	
                (b)

              	
                To
      enter into an agreement with any individual or entity to perform services
      with respect to the Plan;

              


      

      


      
        	
                 
      

              	
                (
      c)

              	
                In
      its discretion, to interpret and decide all matters of fact in determining
      the amount of and authorizing payments with respect to Bonus Awards under
      the Plan, its interpretation and decision thereof to be final and
      conclusive on all persons claiming a right with respect to such Bonus
      Awards;

              


      

      


      
        	
                 
      

              	
                (d)

              	
                In
      its discretion, to determine eligibility under the terms of the Plan, its
      determination thereof to be final and conclusive on all
      persons;

              


      

      


      
        	
                 
      

              	
                (e)

              	
                To
      prepare and distribute information explaining the
  Plan;

              


      

      


      
        	
                 
      

              	
                (f)

              	
                To
      obtain from the Employer and Participants (or the assignee of a
      Participant) such information as may be necessary for the proper
      administration of the Plan;

              


      

      


      
        	
                 
      

              	
                (g)

              	
                To
      sue or cause suit to be brought in the name of the Plan;
    and

              


      

      


      
        	
                 
      

              	
                (h)

              	
                To
      establish a claims procedure and any other procedures for implementation
      of the Plan.

              


      


      
        
          
             

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      8.5           Expenses.  The
Employer will pay the reasonable expenses incident to the administration of the
Plan, including, but not limited to, the compensation of any legal counsel,
advisors, or other technical or clerical assistance as may be required; the
payment of any bond or security required by applicable law; and any other
expenses incidental to the operation of the Plan that the Committee determines
are proper.

      


      8.6           Reliance
on Reports, Certificates, and Participant Information.  The
Committee is entitled to rely conclusively upon all tables, valuations,
certificates, opinions, and reports furnished by an actuary, accountant,
controller, counsel, insurance company, or other person who is employed or
engaged for such purposes. Moreover, the Committee will be entitled to rely upon
information furnished to the Committee or the Employer by a Participant (or a
Permitted Assignee), including, but not limited to, such person's current
mailing address.

      


      8.7           Right to
Delegate.  The Committee, in its sole discretion, may delegate
to one or more employees or agents of the Employer its day-to-day ministerial
duties and powers (but only its day-to-day ministerial duties and powers) under
the Plan.

      


      8.8           Indemnification.  The Company will
indemnify and hold harmless each member of the Committee, and each employee or
agent of the Employer who is a delegate of the Committee, against any and all
expenses and liabilities arising out of such individual's administrative
functions or other responsibilities, including, but not limited to, any expenses
and liabilities that are caused by or result from an act or omission
constituting the negligence of such individual in the performance of such
functions or responsibilities, but excluding expenses and liabilities arising
out of such individual's own gross negligence or willful misconduct. Expenses
against which such person will be indemnified hereunder include, but are not
limited to, the amounts of any settlement, judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim asserted or a
proceeding brought. Notwithstanding the foregoing provisions of this Section,
this Section will not apply to, and the Company will not indemnify against, any
expense that was incurred without the consent or approval of the Company, unless
such consent or approval has been waived in writing by the Company.

      


      ARTICLE
IX

      Nature of the
Plan

      


      9.1           Unfunded,
Unsecured Plan.  The Plan will constitute an unfunded,
unsecured obligation of the Employer to make payments of incentive rewards to
certain persons from its general assets in accordance with the Plan. Each Bonus
Award granted under the Plan merely constitutes a mechanism for measuring such
incentive compensation and does not constitute any property right or interest in
the Company or any of its Affiliates, or in the Well or the Well Interest.
Neither the establishment of the Plan, the granting of Bonus Awards, nor any
other action taken in connection with the Plan will be deemed to create an
escrow or trust fund of any kind.

      9.2           No Rights
of Participant.  No Participant will have any security or other
interest in any assets of the Employer or any of its Affiliates as a result of a
Bonus Award. Further, no Participant will have any right to receive a property
interest in the Well or the Well Interest. Participants and all persons claiming
under Participants (including Permitted Assignees) will rely solely on the
unsecured promise of the Employer set forth herein, and nothing in the Plan or a
Notice of Bonus Award will be construed to give a Participant or anyone claiming
under a


      
        
          
             

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      Participant
(including a Permitted Assignee) any right, title, interest, or claim in or to
any specific asset, fund, entity, reserve, account, or property of any kind
whatsoever owned by the Employer or any of its Affiliates, or in which any such
entity may have an interest now or in the future, and each Participant will have
the right to enforce any claim hereunder only in the same manner as a general
creditor. Neither the establishment of the Plan nor the granting of any Bonus
Award will create any right in any Participant to make any decision, or provide
input with respect to any decision, relating to the business of the Employer or
any of its Affiliates.

      


      ARTICLE
X

      Amendment and
Termination

      


      10.1           Amendment
of Plan.  Notwithstanding any provision of any other
communication, either oral or written, made by the Employer or any of its
Affiliates, the Committee, or any other individual or entity to Eligible Persons
or to any other individual or entity, the Company reserves the absolute and
unconditional right to amend the Plan from time to time. All amendments to the
Plan will be in writing, and any oral statements or representations made by the
Employer or any of its Affiliates, the Committee, or any other individual or
entity that alter, modify, amend, or are inconsistent with the written terms of
the Plan will be invalid and unenforceable and may not be relied upon by any
Eligible Person, Permitted Assignee, service provider, or other individual or
entity. All amendments will be executed by such person or persons as the Company
in its discretion authorizes.

      


      10.2           Right to
Terminate.  Notwithstanding any provision of any other
communication, either oral or written, made by the Employer or any of its
Affiliates, the Committee, or any other individual or entity to any Eligible
Person, Permitted Assignee, service provider, or other individual or entity, the
Company reserves the absolute and unconditional right to terminate the Plan, in
whole or in part, and to terminate the Bonus Awards of some or all Participants
and each Permitted Assignee of such Participants, with such termination to be
effective as of the date selected by the Company in its sole
discretion.

      


      10.3           Effect of
Termination.  In the event of a termination of the Plan or a
termination of the Bonus Award with respect to one or more Participants pursuant
to Section 10.2, each such affected Participant (or his Permitted Assignee(s))
will receive a final payment under the Plan reflecting such Participant's
estimated future payments attributable to the Bonus Award as of the date of such
termination. The Committee will determine, in its sole discretion and using any
reasonable method and manner which it deems appropriate, the final payment
amount that each Participant (or his Permitted Assignee(s)) is entitled to upon
such termination, taking into account, in the manner it deems appropriate, such
information which is available to the Committee as of the date that it makes its
determination. A final payment pursuant to this Section 10.3 will be distributed
to a Participant (or his Permitted Assignee(s)) as soon as administratively
practicable after such termination and in no event later than two and one-half
(2 1/2) months following the last day of the Plan Year in which such termination
occurs; provided, however, that, notwithstanding the foregoing to the contrary,
to the extent that such termination and final payment would be subject to
section 409A of the Code, such termination and final payment will be made in
accordance with the applicable requirements of section 409A of the Code and the
authority thereunder.

      



      
        
          
             

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      ARTICLE
XI

      General
Provisions

      


      11.1           No
Guarantee of Employment.  Nothing contained in the Plan will
grant any Eligible Person, or other individual who is an employee of the
Employer or any of its Affiliates, or who otherwise performs services for the
Employer or any of its Affiliates, the right to be retained in the service of
the Employer or any of its Affiliates, nor will anything contained in the Plan
limit in any way the right of the Employer or any of its Affiliates to discharge
or terminate the service of any individual, including an Eligible Person, at any
time, without regard to the effect such discharge or termination may have on any
of such individual's rights under the Plan.

      


      11.2           Withholding.  The
Employer will at all times be entitled with respect to a payment due under the
Plan: (a) to withhold, or cause to be withheld, from such payment to a
Participant (or Permitted Assignee), or from any other payment to such
Participant (or Permitted Assignee), an amount necessary to satisfy any and all
tax withholding obligations or other deductions with respect to any wages or
other payments made to a Participant (or Permitted Assignee), which arise under
applicable law or are authorized by the Participant (or Permitted Assignee), and
(b) to take any other action as may in its opinion be necessary to satisfy all
obligations for the payment of such taxes or such other deductions.

      


      11.3           Offset of
Amounts Owed to the Employer.  Whenever a
Participant (or Permitted Assignee) would be otherwise due any payment pursuant
to the Plan, the Employer will be entitled to deduct from such payment any
amounts that the Participant (or Permitted Assignee) owes the Employer or any of
its Affiliates, including, without limitation, overpayments made under the Plan
to either the Participant or a Permitted Assignee, before payment of such amount
to such Participant (or Permitted Assignee).

      


      11.4           Agreement
to be Bound by Plan.  Through the
acceptance of payments pursuant to the Plan, each Participant agrees to be bound
by the terms and conditions of the Plan.

      


      11.5           Nonalienation of
Benefits.

      


      
        	
                 
      

              	
                (a)

              	
                Except
      as provided in Section 7.1, Section 11.3, and Section 11.5(b), or as the
      Committee may otherwise permit, in writing, in its sole discretion, no
      interest in or benefit payable under the Plan will be subject in any
      manner to anticipation, alienation, sale, transfer, assignment, pledge,
      encumbrance, or charge, and any action by a Participant to anticipate,
      alienate, sell, transfer, assign, pledge, encumber, or charge the same
      will be void and of no effect; nor will any interest in or benefit payable
      under the Plan be in any way subject to any legal or equitable process,
      including, but not limited to, garnishment, attachment, levy, seizure, or
      the lien of any person. This provision will be construed to provide each
      Participant, or other person claiming any interest or benefit in the Plan
      through a Participant, with the maximum protection afforded such
      Participant's interest in the Plan (and the benefits provided thereunder)
      by law against alienation, encumbrance, and any legal and equitable
      process, including, but not limited to, attachment, garnishment, levy,
      seizure, or other lien.

              


      

      



      
        
          
             

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                (b)

              	
                Notwithstanding
      Section 11.5(a), the Committee will comply with the terms and provisions
      of a "qualified domestic relations order" as defined in section 414(p) of
      the Code.

              


      

      


      11.6           Unknown
Whereabouts.  It will be the affirmative duty of each
Participant (and Permitted Assignee) to inform the Committee of, and to keep on
file with the Committee, his current mailing address. If a Participant (or
Permitted Assignee) fails to inform the Committee of his current mailing
address, neither the Committee, the Employer, or any Affiliate will be
responsible for any late payment or loss of benefits or for failure of any
notice to be provided or provided timely under the terms of the Plan to such
Participant (or Permitted Assignee).

      


      11.7           Code
Section 409A.  To the extent that the Plan is (or becomes)
subject to Code section 409A, or any successor provision, as amended from time
to time, the Committee may at all times interpret and construe the Plan's terms
to conform and comply with the requirements of Code section 409A (or any
successor provision). Further, notwithstanding any other provision of the Plan
to the contrary, the Committee retains the right to amend the Plan to conform
and comply with the requirements of Code section 409A (or any successor
provision).

      


      11.8           Jurisdiction.  Except
to the extent that any federal law applies to the Plan and preempts state law,
the Plan and all actions arising out of or in connection with the Plan shall be
governed by and construed, enforced, and administered according to the laws of
the state of Texas, without regard to the conflict of law provisions of the
State of Texas or of any other state or jurisdiction.

      


      11.9           Severability.  In
case any provision of the Plan is held to be illegal, invalid, or unenforceable
for any reason, such illegal, invalid, or unenforceable provision will not
affect the remaining provisions of the Plan, but the Plan will be construed and
enforced as if such illegal, invalid, or unenforceable provision had not been
included therein.

      


      11.10           Successors.  The
rights and obligations of the Company hereunder shall be binding upon and inure
to the benefit of the Company and its successors and assigns.

      



      
        
          
             

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      EXECUTED the
1st day
of December, 2009 to be effective the 1st day
of August, 2008.

      


      Clayton Williams Energy,
Inc.

      


      By:   /s/ L. Paul
Latham                       
 

      L. Paul Latham

      Executive Vice
President


      
        
          
             

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      EXHIBIT
A

      Schedule
of Participants

      


      


      


      
        	
                Williams

              	
                Clayton

              	
                28.5714%

              
	
                Latham

              	
                Paul

              	
                5.0000%

              
	
                Riggs

              	
                Mel

              	
                5.0000%

              
	
                Lyssy

              	
                Sam

              	
                2.8571%

              
	
                Pullin

              	
                Cash

              	
                1.4286%

              
	
                Ward

              	
                Larry

              	
                2.1429%

              
	
                Welborn

              	
                Greg

              	
                2.1429%

              
	
                Uzzell

              	
                Ed

              	
                1.4286%

              
	
                Howard

              	
                Randy

              	
                2.8571%

              
	
                Madrid

              	
                Armando

              	
                4.2857%

              
	
                Newton

              	
                Robert

              	
                4.2857%

              
	
                Brock

              	
                Danny

              	
                3.9286%

              
	
                Gasser

              	
                Ron

              	
                4.2857%

              
	
                Swierc

              	
                Matt

              	
                2.1429%

              
	
                Williams

              	
                Clayton
      Wade

              	
                1.4286%

              
	
                Gygax

              	
                Mark

              	
                2.1429%

              
	
                Helmreich

              	
                Andrew

              	
                3.2143%

              
	
                Kennedy

              	
                John

              	
                4.9999%

              
	
                Grafe

              	
                David

              	
                3.5714%

              
	
                Fincher

              	
                Matt

              	
                3.2143%

              
	
                Pollard

              	
                Mike

              	
                2.2500%

              
	
                Schwope

              	
                Kathy

              	
                0.5714%

              
	
                Thomas

              	
                Robert

              	
                1.1429%

              
	
                Alford

              	
                Danny

              	
                1.1429%

              
	
                Hamilton

              	
                Janet

              	
                0.7500%

              
	
                Smith

              	
                Mark

              	
                0.5714%

              
	
                Peacock

              	
                Ray

              	
                0.3571%

              
	
                Beebe

              	
                Willson

              	
                0.3571%

              
	
                Tisdale

              	
                Mark

              	
                0.8929%

              
	
                Polson

              	
                Dennis

              	
                0.7143%

              
	
                Pruitt

              	
                Donnie

              	
                0.7143%

              
	
                Jones

              	
                Kim

              	
                0.8929%

              
	
                Kelly

              	
                Denise

              	
                0.3571%

              
	
                Roome

              	
                Joe

              	
                0.3571%

              
	 
      	 
      	 
      
	 
      	
                Total

              	
                100.0000%

              
	 
      	 
      	 
      
	 
      	 
      	 
      


      


      
        
          
             

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      EXHIBIT
B

       

       

      
        [Exhibit
B consists of a map depicting a lease held by the Employer in Andrews County,
Texas.]

      

       

       

       

       

       

      16