Document:

Exhibit 10.35

 

September 3, 1997

 

Mr. Robert C. Lyon

6 Desta Drive, Suite 2025

Midland, Texas  79705

 

RE:         Agreement dated April
23, 1993

 

Dear Bob:

 

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

 

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

 

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

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  /s/ CLAYTON W. WILLIAMS, JR.

  	
   

  
	
   

  	
  Clayton W. Williams, Jr.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed and accepted this

  	
   

  
	
  3rd day of Sept., 1997.

  	
   

  
	
   

  	
   

  
	
    /s/ ROBERT C. LYON

  	
   

  	
   

  
	
  Robert C. Lyon

  	
   

  
				

 

 

ARTICLE I

NET PROFITS INTEREST IN PGL

 

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

 

 

ARTICLE V

ACQUISITION RIGHTS WITH RESPECT TO CWE

 

5.01         Acquisition Rights
With Respect to CWEI Assets.  Except
as set forth below, Lyon shall have the right to acquire upon inception of any
Gas Gathering Asset, acquired or constructed after the CWE Acquisition Date, up
to a ten percent (10%) of CWEI’s equity interest in the same (the “CWE
Acquisition Right”) by making such election at the same time CWE acquires such
asset or determines to undertake construction. 
Thereafter, CWE and Lyon shall cause the Gas Gathering Asset to be
acquired or constructed by a joint venture, the sharing ratios in which Lyon
shall own the Lyon percent and CWE the remainder.  The Joint Operating Agreement for the joint
venture shall have terms and conditions as shall be mutually satisfactory to
CWE and Lyon, but shall in any event provide that principal joint venture
decisions be made by a vote of the venturers in accordance with their sharing
ratios and cash in excess of ordinary working capital requirements of the joint
venture (as determined in the reasonable judgment of PGL or CWE) shall be
distributed monthly.  Should Lyon not
fully exercise the CWE Acquisition Right with respect to a particular project,
the portion of the CWE Acquisition Right with respect to the particular project
not exercised shall terminate.

 

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

 

5.02         Termination of
Acquisition Right.  The CWE
Acquisition Right shall terminate on the date of Lyon’s cessation of employment
with CWE.Exhibit
10.36

 

SECOND
AMENDMENT TO AGREEMENT

 

This is the Second
Amendment to Agreement dated April 23, 1993, as amended by letter agreement
dated September 3, 1997 (herein the “Agreement”) between Prospectors Gas, Ltd.
(“PGL”), Clayton Williams Energy, Inc. (“CWE”), and Robert C. Lyon (“Lyon”).

 

RECITALS

 

WHEREAS, PGL, CWE and
Lyon entered into the Agreement regarding the terms of a net profits agreement;

 

WHEREAS, as anticipated
by the Agreement, the assets of PGL were acquired by CWE and PGL was dissolved
in June of 1993;

 

WHEREAS due to changes in
law relating to relationships between publicly traded companies and employees,
CWE and Lyon desire to amend the Agreement;

 

NOW, THEREFORE, in
consideration of these premises and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:

 

1.  Definitions.  The following terms shall be defined as
follows:

 

a.                                       CWE
shall mean Clayton Williams Energy, Inc., each of its subsidiaries and any partnership,
limited partnership or other entity in which CWE owns a controlling interest.

 

b.                                      Lyon
shall mean Robert C. Lyon and any partnership, limited partnership or other
entity in which Lyon owns a controlling interest.

 

c.                                       Gas
Gathering Asset shall mean any project undertaken for the gathering,
compression, treating, processing, transporting or other handling and related
marketing of natural gas, natural gas liquids and carbon dioxide.

 

d.                                      Material
Interest shall mean any interest in excess of twenty-five percent (25%) of the
total volume of products transported and/or processed for the most recent three
(3) months of production available prior to the Exercise Date.

 

e.                                       Exercise
Date shall mean within ten (10) days of the date on which CWE signs a contract
for the construction or purchase of a Gas Gathering Asset.

 

2.  Article I, Net Profits Interest in PGL.  The provisions of Article I of the Agreement
are hereby deleted and Lyon hereby acknowledges his right to any net profits
interest in PGL terminated effective on the CWE Acquisition Date as defined in
the Agreement.

 

 

3.  Article II, Acquisition Rights with
Respect to PGL Old Assets.  The
provisions of Article II of the Agreement are herby deleted effective on the
CWE Acquisition Date as defined in the Agreement.

 

4.  Article III, Net Profits Interest in CWE.  The provisions of Article III of the
Agreement are hereby terminated and deleted effective on the Effective Date as
defined herein.

 

5.  Article IV, Acquisition Rights with
Respect to PGL New Assets.  The
provisions of Article IV of the Agreement are hereby deleted and Lyon
acknowledges his acquisition rights with respect to PGL new assets terminated
effective on the CWE Acquisition Date as defined in the Agreement.

 

6.  Article V, Acquisition Rights with Respect
to CWE.  The provisions of Article V
of the Agreement are hereby deleted and the following is substituted in lieu
thereof:

 

Article V

 

ACQUISITION RIGHTS
WITH RESPECT TO CWE

 

5.01  Acquisition Right with Respect to CWE Gas
Gathering Assets.  Lyon shall have no
right to acquire an equity interest in any Gas Gathering Asset constructed or
purchased after the Effective Date by CWE if CWE holds a Material Interest in
the product being gathered, treated, compressed, processed, transported, or
otherwise handled by the Gas Gathering Asset.  
If CWE does construct or purchase a Gas Gathering Asset and does not
hold a Material Interest in the product being gathered, treated, compressed,
processed, transported or otherwise handled by the Gas Gathering Asset, Lyon
shall have the right to acquire up to a ten percent (10%) equity interest out
of the interest to be owned by CWE in said Gas Gathering Asset by giving
written notice to CWE prior to the Exercise Date.  Thereafter, CWE and Lyon shall hold their
interests in the Gas Gathering Asset by a joint venture, the sharing ratios in
which Lyon shall own the Lyon percent and CWE the remainder.  The Joint Operating Agreement for the joint
venture shall have terms and conditions as shall be mutually satisfactory to
CWE and Lyon, but shall in any event provide that principal joint venture
decisions be made by a vote of the venturers in accordance with their sharing
ratios and cash in excess of ordinary working capital requirements of the joint
venture (as determined in the reasonable judgment of CWE) shall be distributed
monthly.  Should Lyon not timely exercise
the rights granted herein as to a particular Gas Gathering Asset, Lyon’s right
to participate in that particular Gas Gathering Asset shall terminate.

 

5.02 Limitations
with Respect to Acquisition Right of Acquired Gas Gathering Assets.

 

(a)           Lyon shall not have the acquisition
right described in paragraph 5.01 above when a Gas Gathering Asset is acquired
in a transaction involving assets in addition to the Gas Gathering Asset, if
the fair value of

 

 

the other assets (in the
sole discretion of CWE) exceeds the fair value of the Gas Gathering Assets
being acquired.

 

(b)           If a Gas Gathering Asset is acquired
in a transaction involving assets in addition to the Gas Gathering Assets and
the fair value of the Gas Gathering Assets being acquired exceeds the value of
the other assets, if Lyon exercised the acquisition right, such exercise must
be inclusive of the entire acquisition, not just the Gas Gathering Asset
portion of said acquisition.

 

5.03.  Termination of Acquisition Right.  The acquisition right described in Paragraph
5.01shall terminate on the date of Lyon’s cessation of employment with CWE.

 

6.  Article VII.  Compensation.  In consideration of the execution of this
Second Amendment to Agreement, CWE agrees to increase Lyon’s annual
compensation from $60,000 per annum to $100,000 per annum beginning April 1, 2004.  Lyon’s right to compensation under the terms
hereof shall terminate on the date of Lyon’s cessation of employment with CWE.

 

7.  Exclusion of Mississippi Net Profits
Interest.  CWE and Lyon acknowledge
the terms of the Agreement, as amended herein, do not effect the rights of Lyon
to certain net profits derived from Newman Treating Plant situated in Hinds
County, Mississippi pursuant to the terms of a separate agreement.

 

8.   Mutual Releases

 

(a)           Lyon hereby acknowledges that CWE has
performed all of its obligations pursuant to the Agreement as of the date
hereof and hereby releases CWE from and against any claims which could be made
by Lyon against CWE under the terms of the Agreement.

 

(b)           CWE hereby acknowledges that Lyon has
performed all of its obligations pursuant to the Agreement as of the date
hereof and hereby releases Lyon from and against any claims which could be made
by CWE against Lyon under the terms of the Agreement.

 

9.  Effective Date.  The Effective Date of this Second Amendment
to Agreement shall be the 1st day of April, 2004.

 

	
  CWE

  	
  Lyon

  
	
   

  	
   

  	
   

  
	
  Clayton Williams
  Energy, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
     /s/
  L. Paul Latham

  	
   

  	
  /s/ Robert C. Lyon

  	
   

  
	
  Name:

  	
  L. Paul Latham

  	
  Robert C. Lyon

  
	
  Title:

  	
  Executive Vice
  President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00080-of-00352.parquet"}]]