**Exhibit 10.13**

 

**SECONDAMENDMENT TO**

**OUTSIDEDIRECTORS STOCK OPTION PLAN OF**

**CLAYTONWILLIAMS ENERGY, INC.**

 

 

Adopted by theBoard of Directors of Clayton Williams Energy, Inc. on November 1, 2005.

 

1.             Section5 of the Outside Directors Stock Option Plan of Clayton Williams Energy, Inc.(the “Plan”) is restated in its entirety as follows:

 

“5.           **Terms and Conditions of Options**.All Options granted pursuant to this Plan must be granted prior to thetermination of the Plan.

 

(a)           ***Number of Shares***. Each Option shall represent 1000shares of Common Stock.

 

(b)           ***Exercise Price***. The purchase price for each share ofCommon Stock purchased upon exercise of an Option shall be equal to the fairmarket value of a share of Common Stock at the time the Option is granted. The “fairmarket value” per share of Common Stock shall be equal to the closing salesprice of the Common Stock as reported on the NASDAQ National Market on the daythe Option is granted, so long as the Common Stock is quoted thereon. If nosale is reported on the day the Option is granted, the “fair market value”shall be equal to the closing sales price reported on the next preceding day onwhich a sale of Common Stock is reported.

 

(c)           ***Vesting***. Each Option shall be fully vested andexercisable six (6) months from the date such Option is granted.

 

(d)           ***Option Period***.

 

(1)           ***General***. Each Option shall state the date upon which itis granted and the period during which it is exercisable, which period shallnot exceed ten (10) years from the date of grant.

 

(2)           ***Termination of Status as Outside Director***. In the eventan optionee’s status as an Outside Director is terminated for any reason, otherthan the death of such optionee or a Change of Control (as hereinafterdefined), prior to the full exercise of an Option, such optionee may exercisethe Option at any time within ninety (90) days after such termination to theextent the optionee was entitled to exercise such option on the date of suchtermination; provided, however, that the Option may not be exercised after theexpiration of the term of the Option.

 

(3)           ***Death***. If an optionee dies while an Outside Director ofthe Company and held unexercised Options granted pursuant to the Plan, suchOptions may 

 

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be exercisedin whole or in part at any time within one (1) year after the optionee’s deathby the executors or administrators of the optionee’s estate or by any person orpersons who acquire the Options directly from the optionee by bequest orinheritance, but only to the extent that the Outside Director was entitled toexercise such Option at the date of his death; provided, however, that noOption shall be exercisable after the expiration of the term of the Option.

 

(4)           ***Acceleration and Exercise Upon Change of Control***. Notwithstandingthe preceding provisions of this Section 5, the six (6) month vesting periodfor the Options shall be accelerated upon the occurrence of a Change of Controlof the Company so that such Option shall thereupon become exercisableimmediately in its entirety by the holder thereof, as such holder shall elect,subject to the condition that no Option shall be exercisable after theexpiration of the term of the Option, and provided that a period of at leastsix (6) months expire between the date the Option was granted and the date theshares of Common Stock acquired upon exercise are disposed of in any manner. Forthe purposes of this Plan, a “Change of Control” shall be deemed to haveoccurred if:

 

(i)            Any“person”, including a “group” as determined in accordance with Section 13(d)(3)of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules andregulations promulgated thereunder, is or becomes, through one or a series ofrelated transactions or through one or more intermediaries, the beneficialowner, directly or indirectly, of securities of the Company representing 25% ormore of the combined voting powers of the Company’s then outstandingsecurities, other than a person who is such a beneficial owner on the EffectiveDate of the Plan and any affiliate of such person;

 

(ii)           Asa result of, or in connection with, any tender offer or exchange offer, mergeror other business combination, sale of assets or contested election, or anycombination of the foregoing transactions (a “Transaction”), the persons whowere directors of the Company before the Transaction shall cease to constitutea majority of the Board of Directors of the Company or any successor to theCompany;

 

(iii)          Followingthe Effective Date of the Plan, the Company is merged or consolidated withanother corporation and as a result of such merger or consolidation less than40% of the outstanding voting securities of the surviving or resultingcorporation shall then be owned in the aggregate by the former stockholders ofthe Company, not including any former stockholder who is a party to such mergeror consolidation or any affiliates of any such party;

 

(iv)          Atender offer or exchange offer is made and consummated for the ownership ofsecurities of the Company representing 25% or more of the combined voting powerof the Company’s then outstanding voting securities; or

 

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(v)           TheCompany or a subsidiary transfers more than 50% of its assets, or the last of aseries of transfers result in the transfer of more than 50% of the assets ofthe Company, to another corporation the capital stock of which is notwholly-owned by the Company. For purposes of this subsection 5(d)(4)(v), thedetermination of what constitutes more than 50% of the assets of the Companyshall be determined as of the date of the transfer based on the sum of thevalues attributed to (A) the oil and gas reserves of the Company as reflectedby the most recent reserve report prepared or audited by the Company’sindependent petroleum engineers, (B) the Company’s undeveloped oil and gasproperties as determined by an independent appraisal thereof and (C) the netbook value of all other assets of the Company.

 

(e)           ***Exercise of Options***. To the extent that a holder of anOption has a current right to exercise the Option, said Option may be exercisedfrom time to time by written notice to the attention of the Secretary of theCompany at its principal place of business. Such notice shall state theelection to exercise the Option and the number of shares in respect of which itis being exercised, and shall be signed and dated by the person or persons soexercising the Option. Such notice shall be accompanied by payment of the fullpurchase price of such shares. The Company shall deliver a certificate orcertificates representing such shares as soon as practicable after such noticeand payment are received. The certificate or certificates for the shares as towhich the Option is exercised shall be registered on the books of the Companyin the name of the person or persons exercising the Option.

 

(f)            ***Non-Transferability of Options***. An Option grantedpursuant to the Plan is exercisable only by the optionee during his or herlifetime and is not assignable or transferable by him or her other than by willor the laws of descent and distribution.

 

(g)           ***Compliance with Securities Laws***. At the time of exerciseof any Option, the Company may require the optionee to execute any documents ortake any action which may be necessary to comply with the Securities Act of1933, as amended (the “Securities Act”) and the rules and regulationspromulgated thereunder, or any other applicable federal or state lawsregulating the sale and issuance of securities; and the Company may, if itdeems necessary, include provisions in the option agreements authorized underthe Plan to assure such compliance. The Company may, from time to time, changeits requirements with respect to enforcing compliance with federal and statesecurities laws, including without limitation the request for and enforcementof agreements of investment intent, such requirements to be determined by theCompany in its judgment as necessary to assure compliance with such laws. Suchchanges may be made with respect to any particular Option or stock issued uponexercise thereof.”

 

2.             Section17 of the Plan is restated in its entirety as follows:

 

“17.         **Termination of the Plan**. ThePlan shall continue in effect until terminated by the Board of Directors of theCompany pursuant to Section 18 hereof. Options may be granted under this Planat any time and from time to time prior to its termination. Any Optionoutstanding under the Plan at the time of its termination shall remain ineffect until the Option shall have been exercised or shall have expired.”

 

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