Exhibit 10.4


 


SECOND
AMENDMENT TO CONSOLIDATION AGREEMENT


 


This is the Second Amendment to Consolidation
Agreement which was dated as of May 13, 1993 (“Consolidation Agreement”) by and
among Clayton W. Williams, Jr. (“Williams”), Clayton Williams Energy, LLC
(“CWEL”), Clayton Williams Partnership, Ltd. (“Williams Partnership”),
Prospectors Gas Ltd. (“Prospectors”), Clajon Holding Corporation (“CHC”),
Clajon Industrial Gas, Inc. (“Clajon Industrial”), Williams International, Inc.
(“Williams Int’l”), Warrior Gas Co. (“Warrior”) and Clayton Williams Energy,
Inc. (“CWEI”).


 


WHEREAS, since the execution of the
Consolidation Agreement, CWEL, Prospectors, Williams International, Inc. and
various other original parties have either been merged into CWEI or dissolved.


 


WHEREAS, the parties hereto have agreed to
amend the Consolidation Agreement which amendment has been approved by the
Audit Committee of CWEI on March 24, 2004.


 


NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound hereby, the parties hereby agree as follows:


 


1.  Future
Activities Relating to the Excluded Properties.  The provisions of paragraph 12(a) of the Consolidation Agreement
are hereby deleted and the following is substituted in lieu thereof:


 


12(a)                      The Company hereby acknowledges
that following the Effective Date certain of the Williams Entities and Mr.
Williams will continue to own the properties and assets identified in Exhibit F
attached hereto (the “Excluded Properties”) and the Company will not have any
interest therein, except as provided in this Section 12.  The Williams Entities may conduct activities
following the Effective Date on that portion of the Excluded Properties which
consists of developed acreage currently producing oil and gas and undeveloped
acreage held by production (“Unrestricted Acreage”).  For purposes hereof, Unrestricted Acreage shall also include (w)
mineral interests underlying farms, ranches or other surface enterprises where
a mineral interest is acquired by virtue of the acquisition of the surface
estate, and in which the interest in the land was acquired, before or after the
Effective Date, primarily for a surface activity, (x) producing undivided
mineral interests or leasehold interests in land in which an undivided mineral
or leasehold interest is owned by Mr. Williams or a Williams Entity on the date
hereof, (y) minerals or leases acquired on lands in which Mr. Williams or a
Williams Entity had a leasehold interest and has existing liabilities with
respect to such lands to plug or re-plug abandoned wellbores and (z) minerals
or leases acquired after the Effective Date under land in which Mr. Williams or
a Williams Entity owns the


 

















 


surface and the primary use is a surface
activity.  With respect to that portion
of the Excluded Properties which consists of undeveloped acreage not held by
production or undeveloped mineral interests (the “Restricted Acreage”), the
Williams Entities may conduct only such activities thereon as are permitted
under the terms of Section 12(b) hereof. 
In addition, the Williams Entities may sell or otherwise dispose of
their interests in the Restricted Acreage (the “Option Property”) only in
accordance with the terms of Section 12(c) hereof (provided, however, that
nothing contained in this Section 12 shall (i) prohibit the sale or other
disposition of any Option Property pursuant to any judicial order, legal
process, execution or attachment if such sale or other disposition is effected
without the consent or concurrence of the Williams Entities or (ii) prohibit
the sale of mineral interests solely in connection with a sale of the surface
estate with which such mineral interests are associated.)


 


2.                                       Ratification.  The parties hereto ratify and confirm the Consolidation Agreement
as amended herein.


 


Executed this 19th day of May to
be effective the 24th day of March, 2004.


 


 


	
   

  	
  /s/ Clayton W.
  Williams, Jr.

  
	
   

  	
  Clayton
  W. Williams, Jr.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Clayton Williams
  Energy, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L.
  Paul Latham

  Vice President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Warrior Gas Co.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L.
  Paul Latham

  Vice President

  
	
   

  	
   

  



 

















 


	
   

  	
  Clayton Williams
  Partnership, Ltd.

  
	
   

  	
  By:

  	
  CWPL Co., Inc.,
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L. Paul Latham

  Vice President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Clajon Industrial
  Gas, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L. Paul Latham

  Vice Chairman of

  Board of Directors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Clajon Production
  Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L.
  Paul Latham

  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Clajon Holding
  Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
   

  	
  L. Paul Latham

  Vice President