amendserviceagree.htm


    
      
        

      
Exhibit
10.26

     

    AMENDMENT
TO SECOND AMENDED AND RESTATED SERVICE AGREEMENT

     

    This
Amendment to Second Amended and Restated Service Agreement (this “Amendment”) is
made and entered into effective January 1, 2008 (the “Effective Date”) by and
among CLAYTON WILLIAMS ENERGY,
INC., a Delaware corporation (the “Company”), and CLAYTON W. WILLIAMS, JR., CLAYTON
WILLIAMS RANCH HOLDINGS, INC., a Delaware corporation, CLAYDESTA L.P, a Texas limited
partnership, THE WILLIAMS
CHILDREN’S PARTNERSHIP, LTD, a Texas limited partnership (as successor in
interest to Clayton Williams Partnership, Ltd., a Texas limited partnership) and
CWPLCO, INC., a Delaware
corporation (collectively, the “Williams Entities”).

     

    A.           The
Company and the Williams Entities (and their predecessors and certain
affiliates) entered into that certain Second Amended and Restated Service
Agreement, dated as of March 1, 2005 (the “Service Agreement”) pursuant to which
certain services have been furnished and will continue to be furnished between
the parties.

     

    B.           Pursuant
to the Service Agreement, the Williams Entities have provided certain tax
services to the Company.  Since the acquisition by the Company of
Southwest Royalties, Inc. in 2004, an increasing portion of the time and
resources of the tax department of the Williams Entities has been dedicated to
providing these tax services to the Company pursuant to the Service
Agreement.  The Williams Entities and the Company believe that the
personnel and other resources dedicated to providing tax services to the Company
and comparable services to the Williams Entities can be more effectively managed
if all personnel involved in providing such services were employed by the
Company.

     

    C.           The
parties desire to amend the Service Agreement to reflect that from and after the
Effective Date personnel of the tax department of the Williams Entities that
previously provided tax services to the Company shall be employees of the
Company and that the Company shall provide to the Williams Entities certain tax
services that previously were performed by personnel of the tax department of
the Williams Entities.

     

    NOW,
THEREFORE, in consideration of the mutual promises, covenants and agreements set
forth herein and in the Service Agreement, the receipt and sufficiency of which
are hereby acknowledged, and subject to the terms and conditions hereof, the
parties hereto agree as follows:

     

    1.           Amendment of Article
I.  Article I of the Service Agreement is hereby amended to
read in its entirety as follows:

     

    ARTICLE
I

    TAX
SERVICES

    


    The Company agrees to provide to the
Williams Entities “Tax Services” (as that term is defined in this Article I)
commencing on January 1, 2008 pursuant to the following terms and
conditions:

    


    


    
      
        
          
            


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      1.01       Services to be
Provided.  For purposes of this Article I, “Tax Services” shall
mean:



    
      	
               
      

            	
              a.

            	
              the
      preparation of federal and state income and franchise tax returns and
      reports for the Williams Entities and their respective shareholders,
      partners and affiliates;

            


    

    


    
      	
               
      

            	
              b.

            	
              the
      provision of advice requested by the Williams Entities for tax planning;
      and

            


    

    


    
      	
               
      

            	
              c.

            	
              the
      provision of such other services related to (a) or (b) above as the
      Williams Entities shall request, and which the Company has the capability
      to perform.

            


    

    


    1.02       Compensation.

    


    a.           Personnel.  The
Williams Entities shall pay the Company for the use of the Company’s personnel
involved in rendering Tax Services at the Company’s actual cost based on the
salary and benefits received by the persons providing such services assuming a
2,000 hour work year per person, which amounts shall be billed to the Williams
Entities on a per hour basis.

    


    b.           General and Administrative
Expenses.  The Williams Entities shall reimburse the Company
for a proportionate part of the Company’s general and administrative expenses
(office rent, equipment, supplies and other similar items) based on the amount
of personnel expenses charged to the Williams Entities each month compared to
the total personnel expenses of the Company associated with the provision of Tax
Services to the Williams Entities and comparable services to the
Company.

    


    c.           Incidental
Expenses.  The Williams Entities shall reimburse the Company at
the Company’s actual cost for all reasonable expenses incurred by the Company
incident to providing Tax Services, including, without limitation, telephone,
postage, reproduction and other similar expenses.

    


    d.           Date of
Payment.  The Company shall bill the Williams Entities
quarterly for such expenses and reimbursements as the Company may be due
pursuant to the provisions of this Section 1.02.  The Williams
Entities agrees to pay to the Company any invoiced amount not later than
forty-five (45) days from the date of invoice.

    


    1.03       Company
Personnel.  Tax Services shall be provided by Company
personnel.  The Company shall not be required to engage the services
of any third party to provide Tax Services to the Williams
Entities.  Any person employed by the Company who is engaged in
providing Tax Services to the Williams Entities may report to and accept
direction from directors and duly authorized officers, employees and other
constituents of the Williams Entities, during the course of providing such Tax
Services to the Williams Entities subject, in all respects, to the exercise of
his or her professional responsibilities.

    


    


    
      
        
          
            


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    1.04       Term.  The
arrangements contemplated by this Article I shall begin on the Effective Date
and shall continue until terminated by either the Company or the Williams
Entities by providing ninety (90) days advance written notice of termination to
the Williams Entities or the Company, as applicable.

    


    2.           Amendment of Article
X.  Article X of the Service Agreement is amended to add
Section 10.05 which shall read in its entirety as follows:

    


    


    10.05     Disclosure of Tax and Legal
Advice.

     

    a.           No Waiver of
Privilege.  The parties intend that neither the Company or the
Williams Entities nor their respective employees, agents and representatives
shall take any action under this Agreement that might constitute a waiver of the
attorney-client privilege, attorney work product, or tax practitioner privilege
under applicable state and federal law with respect to any tax or legal advice
received by any party to this Agreement without the express prior written
consent of the party to whom the legal or tax advice was rendered.

    


    b.           Prohibition of Disclosure of
Tax and Legal Advice.  Notwithstanding any other provision of
this Agreement, except as reasonably necessary to comply with applicable
securities laws, to file tax returns, or otherwise comply with applicable law,
the Company and the Williams Entities and their respective employees, agents and
representatives may not disclose, permit the disclosure of, release, disseminate
or transfer, whether orally or by any other means, to any and all persons,
without limitation of any kind, any legal or tax advice provided to the Company
or any of the Williams Entities and received by them as a result of this
Agreement, including to any party to this Agreement or their respective
employees, agents and representatives who is not the party to whom the legal or
tax advice was rendered.  The parties do not intend for this Section
to prohibit communication between the employees, agents, and representatives of
one or more of the parties to this Agreement concerning the administration or
implementation of this Agreement.

    


    3.           Amendment of Article
XII.  Section 12.03.b of Article XII is amended to read in its
entirety as follows:

    


    Except as
and to the extent provided in Section 1.03, relating to Tax Services, and
Section 2.03, relating to Legal Services, the employees, agents and independent
contractors of the Company are employees, agents and independent contractors of
the Company for all purposes, and under no circumstances will be deemed to be
employees, agents or independent contractors of the Williams
Entities.

    


    The
employees, agents and independent contractors of the Williams Entities are
employees, agents and independent contractors of the Williams Entities for all
purposes, and under no circumstances will be deemed to be employees, agents or
independent contractors of the Company.  The Company will have no
supervision or control over any such Williams Entities’ employees, agents and
independent contractors and any complaint or requested change in procedure made
by the Company will be transmitted by the Company to the Williams
Entities.  Except as and to the extent expressly provided in Section
1.03, relating to Tax Services, and

    


    
      
        
          
            


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    Section
2.03, relating to Legal Services, the Williams Entities will have no supervision
or control over any such Company employees, agents and independent contractors
and any complaint or requested change in procedure made by the Williams Entities
will be transmitted by the Williams Entities to the Company.

    


    4.           Amendment of Attachment
A.  Attachment A to the Service Agreement is amended to read in
its entirety as set forth in the Annex to this Amendment.

     

    5.           Continuing
Effectiveness.  Except as expressly modified here by, the
Service Agreement, as amended by this Amendment, shall remain in full force and
effect.

     

    IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment
to be effective as of the Effective Date hereof.

     

            THE
COMPANY:

    


            Clayton
Williams Energy, Inc.

     

    
      	
              Date:
      March 11, 2009

            	
              By:    /s/ L.
      PAUL LATHAM

            
	 
      	
              L.
      Paul Latham, Executive Vice President

            
	 
      	 
      
	 
      	
              THE
      WILLIAMS ENTITIES:

            
	 
      	
              CLAYTON
      W. WILLIAMS, JR.

            
	 
      	
              CLAYTON
      WILLIAMS RANCH HOLDINGS, INC.

            
	 
      	
              CLAYDESTA,
      L.P.

            
	 
      	
              CWPLCO,
      INC.

            
	 
      	 
      
	
              Date:
      March 11, 2009

            	
              By:        /s/
      CLAYTON W. WILLIAMS, JR.

            
	 
      	
              Clayton
      W. Williams, Jr.,

            
	 
      	
              individually
      and in the following capacities:

            
	 
      	 
      
	 
      	
              President
      of Clayton Williams Ranch Holdings,

            
	 
      	
              Inc.;
      Manager of Claydesta Operating, L.L.C.,

            
	 
      	
              general
      partner of Claydesta L.P.; President of

            
	 
      	
              CWPLCO,
      Inc.

            
	 
      	 
      
	
              Date:
      March 11, 2009

            	
              THE
      WILLIAMS CHILDREN’S PARTNERSHIP, LTD., a Texas limited
      partnership

            
	 
      	 
      
	 
      	
              By: 
      LPL/Williams GP, LLC, its general partner

            
	 
      	 
      
	 
      	
              By:    /s/ L. PAUL
      LATHAM

            
	 
      	
              L.
      Paul Latham, Sole Member

            


    

    
 

    


    
      
        
          
            


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    Annex

    


    Attachment
A

    Hunting
Lease

    


    


    
      
        
          
            


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    HUNTING
LEASE

    


    
      
        
          
            
              
                
                  	
                          Date:

                        	
                          August
      31, 2008

                        
	 
      	 
      
	
                          Landlord:

                        	
                          Clayton
      Williams Ranch Co.

                        
	 
      	 
      
	
                          Landlord’s
      Address:

                        	
                          6
      Desta Drive, Suite 1100

                        
	 
      	
                          Midland,
      Texas  79705

                        
	 
      	 
      
	
                          Tenant:

                        	
                          Clayton
      Williams Energy, Inc.

                        
	 
      	 
      
	
                          Tenant’s
      Address:

                        	
                          6
      Desta Drive, Suite 3000

                        
	 
      	
                          Midland,
      Texas  79705

                        
	 
      	 
      
	
                          Premises:

                        	
                          SURFACE
      ONLY of the High Lonesome Ranch, situated in Jeff Davis County, Texas, as
      described in Exhibit A
      (“Land”).

                        
	 
      	 
      
	 
      	
                          The
      Premises do not include livestock, crops, or Excluded Improvements located
      on the Land.  Tenant will not be permitted to use the Excluded
      Improvements.

                        
	 
      	 
      
	
                          Excluded
      Improvements:

                        	
                          Any
      structure, improvement, or equipment situated on the Land and constructed
      or installed by any person other than Tenant, except for the
      following:

                        
	 
      	 
      
	 
      	
                          Camp
      Tents

                        
	 
      	
                          Restroom
      Facilities

                        
	 
      	 
      
	
                          Base
      Rent:

                        	
                          $90,862

                        
	 	 
	
                          Term
      (months):

                        	
                          Twelve
      months (12)

                        
	 	 
	
                          Commencement
      Date:

                        	
                          September
      1, 2008

                        
	 	 
	
                          Termination
      Date:

                        	
                          August
      31, 2009

                        
	 	 
	
                          Permitted
      Use:

                        	
                          Solely
      for hunting of the following game:  deer, quail,
      turkey

                        
	 	 
	
                          Definitions:

                        	
                          “Injury”
      means (a) damage to or impairment or loss of property or its use or (b)
      harm to or death of a person.

                        
	 
      	 
      
	 
      	
                          “Landlord”
      means Landlord and its agents, employees, invitees, licensees, or
      visitors.

                        
	 
      	 
      
	 
      	
                          “Rent”
      means Base Rent plus any other amounts of money payable by Tenant to
      Landlord.

                        


                

              

            

          

        

      

    

    


    
      
        
          
            


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              “Tenant”
      means Tenant and its agents, contractors, employees, invitees, licensees,
      or visitors.

            


    

    


    


    Clauses
and Covenants

    A.           Tenant
agrees to –

    1.           Lease
the Premises for the entire Term beginning on the Commencement Date and ending
on the Termination Date.

     

    2.           Accept
the Premises in their present condition “AS IS”, the Premises being suitable for
the Permitted Use.

     

    3.           Obey
all laws, ordinances, orders, rules, and regulations enacted or promulgated by
any governmental authority relating to (a) the Permitted Use; (b) Tenant’s
activities while on the Premises; (c) any existing structure, improvement, or
equipment that Tenant is permitted to utilize pursuant to this lease; or (d) any
structure, improvement, or equipment erected or installed by Tenant on the
Premises in accordance with this lease, including times and manner for hunting
and removing game (and keeping of any applicable records), handling and
discharging firearms, operating motor vehicles, and consuming alcoholic
beverages.

     

    4.           Pay,
in advance, Base Rent to Landlord at Landlord’s Address.

     

    5.           Allow
Landlord to enter the Premises to inspect the Premises and show the Premises to
prospective purchasers or tenants.

     

    6.           Operate
vehicles on the Land in a manner that will not damage existing roads, trails, or
vegetation.

     

    7.           Keep
all gates on the Land closed and locked.

     

    8.           Enter
and exit the Premises only at those places designated by Landlord.

    


    
      
        
          
            


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    9.           Repair
or replace any damage caused by Tenant to the Land, crops, livestock, or
Excluded Improvements.

     

    10.         Vacate
the Premises on the last day of the Term.

     

    11.         Properly
supervise all persons present on the Premises at the invitation or request of
Tenant.

     

    12.         Indemnify,
Defend, and Hold Landlord harmless from any Injury (and any resulting or related
claim, action, loss, liability, or reasonable expense, including attorney’s fees
and other fees and court and other costs) arising from or related to Tenant’s
use of the Premises.  The
indemnity contained in this paragraph  will survive the end of the
Term, and will apply even if an Injury is caused in whole or in part by the
ordinary negligence or strict liability of Landlord but will not apply to the
extent an Injury is caused by the gross negligence or willful misconduct of
Landlord.

     

    B.           Tenant
agrees not to—

    1.           Use
the Premises for any purpose other than the Permitted Use.

     

    2.           Create
or allow a nuisance or permit any waste or injury to the Premises or the crops
or livestock thereon.

     

    3.           Change
Landlord’s lock system.

     

    4.           Alter
the Premises, including clearing new roads or trails, digging ponds or tanks,
moving or erecting any fences, or locating on the Premises any type of
manufactured housing or mobile home.

     

    5.           Allow
a lien to be placed on the Premises.

    


    
      
        
          
            


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    6.           Assign
this lease or sublease any portion of the Premises without Landlord’s written
consent.

     

    C.           Landlord agrees to lease to
Tenant the Premises for the entire Term beginning on the Commencement Date and
ending on the Termination Date.

     

    D.           Landlord
agrees not to –

     

    1.           Allow
any use of the Premises inconsistent with Tenant’s Permitted Use as long as
Tenant is not in default.

     

    E.           Landlord and Tenant agree to the
following:

     

    1.           Alterations.  Any
physical additions or improvements to the Premises made by Tenant will become
the property of Landlord.  Landlord may require that Tenant, at
termination of this lease and at Tenant’s expense, remove any physical additions
and improvements, repair any alterations, and restore the Premises to the
condition existing at the Commencement Date, normal wear excepted.

     

    2.           Abatement. Tenant’s
covenant to pay Rent and Landlord’s covenants are independent.  Except
as otherwise provided, Tenant will not be entitled to an abatement or refund of
Rent for any reason.

     

    3.           Release of
Claims.  Tenant releases Landlord from all claims or
liabilities for any Injury to Tenant while present on the Premises or to
Tenant’s property located on the Premises.  The
release in this paragraph will apply even if the damage or loss is caused in
whole or in part by the ordinary negligence or strict liability of Landlord but
will not apply to the extent the damage or loss is caused by the gross
negligence or willful misconduct of Landlord.

    


    4.           Condemnation/Substantial or Partial
Taking.

    


    
      
        
          
            


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                   a.      If the
      Premises cannot be used for the Permitted Use because of condemnation or
      purchase in lieu of condemnation, this lease will
      terminate.  
      

                


        

        
          	
                     

                	
                   b.      If
      there is a condemnation or purchase in lieu of condemnation and this lease
      is not terminated, the Rent payable during the unexpired portion of the
      Term will be adjusted as may be fair and
  reasonable.

                


        

      

    

    
      
            c.    Tenant
will have no claim to the condemnation award or proceeds in lieu of
condemnation.  
 

         

      

    

    5.           Default by
Landlord/Events.  A default by Landlord is the failure to comply
with any provision of this lease that is not cured within thirty days after
written notice.

     

    6.           Default by Landlord/Tenant’s
Remedies.  Tenant’s remedies for Landlord’s default are to sue for
damages and terminate this lease.

     

    7.           Default by
Tenant/Events.  Defaults by Tenant are (a) failing to pay timely
Rent; (b) abandoning or vacating a substantial portion of the Premises; and (c)
failing to comply within ten (10) days after written notice with any provision
of this lease other than the defaults set forth in (a) and (b)
above.

     

    8.           Default by Tenant/Landlord’s
Remedies.  Landlord’s remedies for Tenant’s default are to (a)
enter and take possession of the Premises, after which Landlord may relet the
premises on behalf of Tenant and receive the Rent directly by reason of the
reletting, and Tenant agrees to reimburse Landlord for any expenditures made in
order to relet; (b) enter the premises and perform Tenant’s obligations; and (c)
terminate this lease by written notice and sue for damages.  Landlord
may enter and take possession of the Premises by self-help, by picking or
changing locks if necessary, and may lock out Tenant or any other person who may
be hunting on the Premises, until the default is cured, without being liable for
damages.

    


    
      
        
          
            


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    9.           Default/Waiver/Mitigation. 
It is not a waiver of default if the nondefaulting party fails to declare
immediately an event of default or delays in taking any
action.  Pursuit of any remedies set forth in this lease does not
preclude pursuit of other remedies in this lease or provided by
law.  Landlord and Tenant have a duty to mitigate
damages.

     

    10.         Holdover.  If
Tenant does not vacate the Premises following termination of this lease, Tenant
will become a tenant at will and must vacate the Premises on receipt of notice
from Landlord.  No holding over by Tenant, whether with or without the
consent of Landlord, will extend the Term.

     

    11.         Alternative Dispute
Resolution.  Landlord and Tenant agree to mediate in good faith
before filing a suit for damages.

     

    12.         Attorney’s Fees.  If
either party retains an attorney to enforce this lease, the party prevailing in
litigation is entitled to recover reasonable attorney’s fees and other fees and
court and other costs.

     

    13.         Venue.  Exclusive
venue is in the county in which the premises are located.

     

    14.           Entire
Agreement.  This lease, together with the attached exhibits and
riders, is the entire agreement of the parties, and there are no oral
representations, warranties, agreements, or promises pertaining to this lease or
to any expressly mentioned exhibits and riders not incorporated in writing in
this lease.

     

    15.           Amendment of Lease. 
This lease may be amended only by an instrument in writing signed by Landlord
and Tenant.

     

    16.           Limitation of
Warranties.  There
are no implied warranties of merchantability, of fitness for a particular
purpose, or of any other kind arising out of this lease, and there are no
warranties that extend beyond those expressly states in this lease.

     

    
 

    
      
        
          
            


            Austin 1048717v.3


          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    17.           Notices.  Any notice
required or permitted under this lease must be in writing.  Any notice
required by this lease will be deemed to be delivered (whether actually received
or not) when deposited with the United States Postal Service, postage prepaid,
certified mail, return receipt requested, and addressed to the intended
recipient at the address shown in this lease. Notice may also be given by
regular mail, personal delivery, courier delivery, facsimile transmission, or
other commercially reasonable means and will be effective when actually
received.  Any address for notice may be changed by written notice
delivered as provided herein.

     

    18.           Mineral Interests.  This
lease is subordinate to any present or future oil, gas, or other mineral
exploration agreements and leases relating to the Land.  Landlord will
not be liable to Tenant for any damages for actions attributable to those
agreements and will receive all consideration paid therefore.

     

    19.           Landlord’s Use. 
Landlord, both for Landlord and for third parties, retains the right to enter on
and use the Land for grazing, farming, erecting telecommunications towers or
antennas, and other uses that do not materially interfere with the Permitted
Use.

     

    20.           Identity.  Landlord
reserves the right to verify the identity of all persons on the
Premises.

    


    
      
        
          
            


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    LANDLORD:                        CLAYTON
WILLIAMS RANCH CO.

    


    By:___________________________

    Name:  L. Paul
Latham

    Title:    Vice
President

    


    


    TENANT:                              CLAYTON
WILLIAMS ENERGY, INC.

    


    By:___________________________

    Name:  L. Paul
Latham

    Title:    Executive Vice
President

    


    


    
      
        
          
            


            Austin 1048717v.3


          

           


        

        
           


          
            

          

        

        
           


        

      

    

    


    EXHIBIT
A

    HIGH
LONESOME RANCH

    


    


    (Description
of Leased Premises)