Document:

Exhibit
10.3

 

EMPLOYMENT
AGREEMENT

 

This Employment Agreement
(this “Agreement”) is made by and
between Clayton Williams Energy, Inc., a Delaware corporation (the “Company”), and Mel G. Riggs. (“Employee”) effective as of March 1,
2010 (the “Effective Date”).

 

WHEREAS, the Company desires
to employ Employee and Employee desires to be employed by the Company and to
commit himself to serve the Company on the terms herein provided;

 

NOW, THERFORE, in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.                                      Employment. The Company
shall employ Employee, and Employee accepts employment with the Company, upon
the terms and conditions set forth in this Agreement for the period beginning
on the Effective Date and ending on the third anniversary of such date (the “Initial Term”); provided, however, that (a) on
such third anniversary date (and on the fourth and fifth anniversary dates of
the Effective Date thereafter), the term of this Agreement will automatically
(without any action by either party) be extended for one additional year (each,
a “Renewal Period”), unless, at least
90 days prior to either the third, fourth, or fifth anniversary date of
the Effective Date, as applicable, the Company or Employee has given written
notice to the other party (a “Non-Renewal Notice”)
that the Company or Employee does not wish to extend the term of the Agreement
(a “Non-Renewal”), and (b) the
Initial Term or any Renewal Period, as applicable, may be terminated prior to
the expiration thereof in accordance with Section 4.  Either party may elect not to renew this
Agreement; provided, that, if no Non-Renewal Notice is given, and if
this Agreement is not terminated earlier in accordance with Section 4,
the Agreement will expire by its terms on the sixth anniversary of the
Effective Date, unless extended by mutual agreement of the parties hereto.  The term “Employment
Term” means the period from the Effective Date until the
expiration of the Initial Term and any applicable Renewal Period pursuant to
this Section 1 or in accordance with Section 4 of this
Agreement.

 

2.                                      Position
and Duties.

 

(a)                                  During the
Employment Term, Employee shall hold the title of Senior Vice President —
Finance, Secretary, Treasurer and Chief Financial Officer.  The Company and Employee agree that the
Employee shall have duties and responsibilities consistent with the position
set forth above in a company the size and of the nature of the Company, and
such other duties and authority that are assigned to Employee from time to time
by the Company’s Board of Directors (the “Board”), or
such other officer of the Company as shall be designated by the Board.  Employee shall report to the Board, or to
such other officer of the Company as shall be designated by the Board.

 

(b)                                 Employee shall
devote such of his business time and attention to the business and affairs of
the Company as is required to perform his duties and responsibilities
hereunder.  Employee shall perform his
duties and responsibilities to the best of his abilities in a 

 

1

 

diligent and professional
manner, and agrees to comply with all of the policies of the Company, including
such policies with respect to legal compliance, conflicts of interest,
confidentiality and business ethics as are from time to time in effect.  During the Employment Term, Employee shall
not engage in any business activity which, in the reasonable judgment of the
Board, conflicts or interferes with the duties and responsibilities of Employee
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage, without the prior written approval of the Company or
engage in or be employed by any other business; provided, however,
that the foregoing provisions of this Section 2 shall not limit or
prohibit Employee from (i) engaging in community, charitable and social
activities, personal investment activities and the endeavors set forth on Exhibit A
attached hereto, in each case not interfering with the Employee’s performance
and obligations hereunder or (ii) engaging (including as an employee) in
any business or other activities on behalf of Clayton W. Williams, Jr.,
members of his family and entities owned or controlled by Clayton W.
Williams, Jr. or members of his family. 
For the avoidance of doubt, this Section 2 shall not limit
or prohibit Employee from providing services to or for the benefit of the
Williams Entities pursuant to the Second Amended and Restated Service Agreement
dated as of March 1, 2005 by and among the Company and the Williams
Entities (as defined therein), as amended from time to time.

 

(c)                                  Employee
acknowledges and agrees that Employee owes a duty of loyalty, fidelity and
allegiance to act at all times in the best interests of the Company and to do
no act that would injure the business, interests, or reputation of the Company
or any of its Affiliates.  In keeping
with these duties, Employee shall make full disclosure to the Company of all
significant business opportunities pertaining to the Company’s business and
shall not appropriate for Employee’s own benefit business opportunities
concerning the subject matter of the fiduciary relationship.  Except as set forth in Section 5(d)(ii),
for purposes of this Agreement, the term “Affiliate”
shall mean an individual or entity that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a specified individual or entity.

 

3.                                      Compensation.

 

(a)                                  Base Salary.  During the Employment Term, Employee’s base
salary shall be $317,500 per annum, which salary may be increased (but not
decreased) by the Board (or a designated committee thereof) in its discretion
(the “Base Salary”), which Base
Salary shall be payable in regular installments in accordance with the Company’s
general payroll practices and subject to withholding and other payroll taxes.

 

(b)                                 Annual Bonus.  Employee shall be eligible to receive one or
more bonuses each year during the Employment Term to be determined by the Board
(or a designated committee thereof), in its sole discretion based on
performance or other criteria to be adopted by the Board (or a designated
committee thereof).  Any bonus amount
earned with respect to a calendar year shall be paid in a cash lump sum no
later than March 15 of the following calendar year.

 

(c)                                  Employee
Benefits.  Employee
will be entitled during the Employment Term to receive such welfare benefits
and other fringe benefits (including vacation, medical, dental, life insurance,
401(k) and other employee benefits and perquisites, such as club 

 

2

 

membership dues) as the
Company may offer from time to time to similarly situated executive level
employees, subject to applicable eligibility requirements.  The Company shall not, however, by reason of
this Section 3(c), be obligated to institute, maintain, or refrain
from changing, amending, or discontinuing any such benefit plan or program, so
long as any such changes are similarly applicable to similarly situated
employees of the Company.

 

(d)                                 Business
Expenses.  The Company
shall reimburse Employee for all reasonable expenses incurred by him in the
course of performing his duties under this Agreement to the extent consistent
with the Company’s written policies in effect from time to time with respect to
travel, entertainment and other business expenses, subject to the Company’s
requirements with respect to reporting and documentation of such expenses.  Notwithstanding any provision in this
Agreement to the contrary, the amount of expenses for which Employee is
eligible to receive reimbursement during any calendar year shall not affect the
amount of expenses for which Employee is eligible to receive reimbursement
during any other calendar year within the Employment Term.  Reimbursement of expenses under this Section 3(d) shall
be made no later than the last day of the calendar year following the calendar
year in which the expense was incurred. 
Employee is not permitted to receive a payment or other benefit in lieu
of reimbursement under this Section 3(d).

 

(e)                                  Long Term
Incentive Compensation. 
Employee may, as determined by the Board (or a designated committee
thereof) in its sole discretion, periodically receive grants of, or payments
under, equity or non-equity related awards pursuant to the Company’s long-term
incentive plan(s), including the APO Incentive Plan, the APO Reward Plans, the
SWR Reward Plan, the APO Working Interest Trusts, the APO Working Interest
Grant, or any similar or successor plan(s) (collectively, “Incentive Plans”), subject to the
terms and conditions thereof.  Any grants
previously awarded to Executive pursuant to the Company’s Incentive Plans that
are outstanding on the Effective Date hereof shall, except as otherwise
provided in this Agreement, continue to be governed by the terms and conditions
of the Incentive Plans.

 

(f)                                    Automobile
Allowance.  During the
Employment Term, Employee will be entitled to receive a car allowance in
accordance with the Company’s automobile allowance policy in effect from time
to time.

 

4.                                      Termination
of Employment.  Unless otherwise agreed to in writing by the
Company and Employee, Employee’s employment hereunder may be terminated under
the following circumstances:

 

(a)                                  Death.  Employee’s employment hereunder shall
terminate upon his death.

 

(b)                                 Disability.  Employee’s employment hereunder shall
terminate upon a determination that he has incurred a Disability.  For purposes of this Agreement, “Disability” means, at any time the
Company sponsors a long-term disability plan for the Company’s employees, “disability”
as defined in such long-term disability plan for the purpose of determining a
participant’s eligibility for benefits, provided, that if the long-term
disability plan contains multiple definitions of disability, “Disability” shall
refer to that definition of disability which, if Employee qualified for such
disability benefits, would provide coverage for the longest period of
time.  The determination of whether
Employee has a Disability shall be made in good 

 

3

 

faith by the person or
persons required to make disability determinations under the long-term
disability plan.  If Employee is not
covered under the Company’s long-term disability plan or if the Company does
not sponsor a long-term disability plan at such time, then the term “Disability”
hereunder shall mean a “permanent and total disability” as defined in section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the “Code”),
and, in this case, the existence of any such Disability shall be certified by a
physician acceptable to both the Company and Employee.  In the event the parties are not able to agree
on the choice of a physician, each party shall select a physician who, in turn,
shall select a third physician to render such certification.

 

(c)                                  Termination by
the Company.  The Company
may terminate Employee’s employment with or without Cause.  For purposes of this Agreement, the term “Cause” means Employee (i) has
been convicted of a misdemeanor that involves intentionally dishonest behavior
or that the Company determines in good faith will have a material adverse
effect on the reputation of the Company or any felony, (ii) has engaged in
conduct which is materially injurious (monetarily or otherwise) to the Company
or any of its Affiliates (including misuse of the Company’s or an Affiliate’s funds
or other property), (iii) has engaged in gross negligence or willful
misconduct in the performance of his duties for the Company, (iv) has
willfully refused without proper legal reason to perform his duties for the
Company, (v) has breached any material provision of this Agreement or any
other agreement between the Company and Employee, or (vi) has breached any
material corporate policy maintained and established by the Company that is of
general applicability to executives of the Company; provided, however,
as to clauses (iv), (v) and (vi) contained in this Section 4(c),
if such acts or omissions could be cured by Employee (as reasonably determined
by the Board), the Company must give Employee written notice of the acts or
omissions constituting Cause and, in such case, no termination shall be for
Cause unless and until Employee fails to cure such acts or omissions within
10 days following receipt of such written notice.

 

(d)                                 Termination by
Employee.  Employee
may, upon giving the Company no less than 30 days advance written notice,
terminate Employee’s employment without Good Reason or for Good Reason.  For purposes of this Agreement, the term “Good Reason” shall mean, without the
express written consent of Employee, the occurrence of one of the following: (i) any
action or inaction that constitutes a material breach by the Company of this
Agreement, (ii) a material  reduction in
Employee’s Base Salary, including any series of salary reductions (whether or
not related) that are not agreed to by Employee in writing and that,
individually or in the aggregate, result in a material reduction when compared
to Employee’s Base Salary in effect on the Effective Date or as adjusted after
the Effective Date in accordance with Section 3(a) hereof or with
Employee’s prior written consent, (iii) a material diminution in Employee’s
authority, duties or responsibilities or the assignment of duties to Employee
that are not materially commensurate with Employee’s position with the Company,
or (iv) a change in the geographic location at which Employee must
normally perform services to a location outside of Midland County, Texas.  For the avoidance of doubt, any reduction in
Employee’s Base Salary, regardless of amount, could be material if, in light of
all other facts and circumstances, a reasonable person in the position of
Employee would consider it important.  In
the case of Employee’s allegation of Good Reason, (A) Employee shall
provide notice to the Company of the event alleged to constitute Good Reason
within 60 days of the occurrence of such event, and 

 

4

 

(B) the Company shall
have the opportunity to remedy the alleged Good Reason event within 30 days
from receipt of notice of such allegation.

 

5.                                      Compensation
Upon Termination.

 

(a)                                  For Cause or
Without Good Reason.  In the event
Employee’s employment is terminated by the Company for Cause or by the Employee
without Good Reason, Employee shall be entitled to receive (i) Employee’s
full Base Salary through the Date of Termination at the rate then in effect, (ii) reimbursement
of any expenses to the extent such amounts have accrued through the Date of
Termination, and (iii) such employee benefits, if any, as to which
Employee may be entitled pursuant to the terms governing such benefits (such
amounts set forth in (i), (ii) and (iii) shall be collectively
referred to herein as the “Accrued Rights”).

 

(b)                                 Death or
Disability.  In the
event Employee’s employment terminates by reason of his death or Disability,
Employee (or his estate) shall be entitled to receive the Accrued Rights and
all outstanding equity and non-equity based awards (including any awards or
interests under the Incentive Plans) held by Employee immediately prior to the
Date of Termination shall become fully vested as of such date; provided,
that, notwithstanding the foregoing, any awards or interests held by Employee
as of the Date of Termination under any Incentive Plan shall continue to be
governed by the terms and conditions of such plans relating to the forfeiture
of awards that are fully vested.  In
addition, Employee shall be entitled to receive the following, provided
Employee (or his estate) delivers to the Company, within 45 days following the
Date of Termination, a properly executed release in accordance with Section 8
of this Agreement:

 

(i)                                     a lump sum
payment equal to 18 months’ worth of Employee’s Base Salary in effect on
the Date of Termination (determined without regard to any reduction in Base
Salary imposed by the Company in violation of Section 3(a) hereof),
payable as soon as practicable but no later than the earlier of (A) March 15
following the calendar year in which termination occurs or (B) 90 days
following the Date of Termination; and

 

(ii)                                  Employee (in
the case of a termination due to Disability), his spouse and eligible
dependents (to the extent covered immediately prior to such termination) shall
continue to be eligible to participate in all of the Company’s group health
plans on the same terms and conditions as active employees of the Company for a
period of one (1) year following the Date of Termination.  If benefits are continued pursuant to this Section 5(b)(ii) during
a period when, in the absence of the benefits provided in this Section 5(b)(ii),
Employee or his dependants would not be entitled to continuation coverage under
Section 4980B of the Code, Employee and his dependants shall receive
reimbursement for all medical expenses no later than the end of the calendar
year immediately following the calendar year in which the applicable expenses
were incurred.  The health care
continuation coverage period under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”),
Code Section 4980B, or any replacement or successor provision of United
States tax law, shall run concurrently with the period during which continued
benefits are being provided pursuant to this Section 5(b)(ii).

 

(c)                                  Without Cause,
For Good Reason or Non-Renewal.  In the event Employee’s employment is
terminated by the Company without Cause, by Employee for Good 

 

5

 

Reason or due to a
Non-Renewal that results from a Non-Renewal Notice given by the Company,
Employee shall be entitled to receive payment of the following:

 

(i)                                     the Accrued
Rights;

 

(ii)                                  all outstanding
equity and non-equity based awards (including any awards or interests under the
Incentive Plans) held by Employee immediately prior to the Date of Termination
shall become fully vested as of such date; provided, that,
notwithstanding the foregoing, any awards or interests held by Employee as of
the Date of Termination under any Incentive Plan shall continue to be governed
by the terms and conditions of such plans relating to the forfeiture of awards
that are fully vested;

 

(iii)                               provided
Employee delivers to the Company, within 45 days following the Date of
Termination, a properly executed release in accordance with Section 8
of this Agreement, a lump sum payment equal to the sum of (A) two (2) times
Employee’s annualized Base Salary in effect on the Date of Termination
(determined without regard to any reduction in Base Salary imposed by the
Company in violation of Section 3(a) hereof), (B) two (2) times
the average of the bonus amount(s) actually paid to Employee for the three
(3) calendar years ending prior to the Date of Termination (not including
any amounts paid to Employee pursuant to any of the Company’s Incentive Plans),
(C) the car allowance Employee would have received pursuant to Section 3(f) of
this Agreement had his employment continued for an additional two (2) years,
and (D) the matching contributions that would have been made on behalf of
Employee pursuant to the Company’s 401(k) plan if Employee had
continued participation in such 401(k) plan for an additional two (2) years,
payable as soon as practicable but no later than the earlier of (I) March 15
following the calendar year in which termination occurs or (II) 90 days
following the Date of Termination; and

 

(iv)                              provided
Employee delivers to the Company, within 45 days following the Date of
Termination, a properly executed release in accordance with Section 8
of this Agreement, Employee, his spouse and eligible dependents (to the extent
covered immediately prior to such termination) shall continue to be eligible to
participate in all of the Company’s group health plans on the same terms and
conditions as active employees of the Company for a period of 18 months
following the Date of Termination.  If
benefits continue pursuant to this Section 5(c)(iv) during a
period when, in the absence of the benefits provided in this Section 5(c)(iv),
Employee or his dependants would not be entitled to continuation coverage under
Section 4980B of the Code, Employee and his dependants shall receive
reimbursement for all medical expenses no later than the end of the calendar
year immediately following the calendar year in which the applicable expenses
were incurred. The health care continuation coverage period under COBRA, Code Section 4980B,
or any replacement or successor provision of United States tax law, shall run
concurrently with the period during which continued benefits are being provided
pursuant to this Section 5(c)(iv).

 

(d)                                 Change in
Control.

 

(i)                                     Notwithstanding
any provision contained herein, if Employee’s employment is terminated by the
Company without Cause (other than by reason of death or Disability),  if Employee resigns for Good Reason or in the event of a
Non-Renewal that results 

 

6

 

from a Non-Renewal Notice
given by the Company, in each case, within 24 months following a Change in Control
(as defined below), Employee shall be entitled to receive:

 

A.                                   the Accrued
Rights;

 

B.                                     all outstanding
equity and non-equity based awards (including any awards or interests under the
Incentive Plans) held by Employee immediately prior to the Date of Termination
shall become fully vested as of such date; provided, that,
notwithstanding the foregoing, any awards or interests held by Employee as of
the Date of Termination under any Incentive Plan shall continue to be governed
by the terms and conditions of such plans relating to the forfeiture of awards
that are fully vested;

 

C.                                     provided
Employee delivers to the Company, within 45 days following the Date of
Termination, a properly executed release in accordance with Section 8
of this Agreement, a lump sum payment equal to the sum of (I) three (3) times
Employee’s annualized Base Salary in effect on the Date of Termination
(determined without regard to any reduction in Base Salary imposed by the
Company in violation of Section 3(a) hereof), (II) three (3) times
the average of the bonus amount(s) actually paid to Employee for the three
(3) calendar years ending prior to the Date of Termination (not including
any amounts paid to Employee pursuant to any of the Company’s Incentive Plans),
(III) the car allowance Employee would have received pursuant to Section 3(f) of
this Agreement had his employment continued for an additional three (3) years,
and (IV) the matching contributions that would have been made on behalf of
Employee pursuant to the Company’s 401(k) plan if Employee had
continued participation in such 401(k) plan for an additional three (3) years,
payable as soon as practicable but no later than the earlier of (a) March 15
following the calendar year in which termination occurs or (b) 90 days
following the Date of Termination; and

 

D.                                    provided
Employee delivers to the Company, within 45 days following the Date of
Termination, a properly executed release in accordance with Section 8
of this Agreement, Employee, his spouse and eligible dependents (to the extent
covered immediately prior to such termination) shall continue to be eligible to
participate in all of the Company’s group health plans on the same terms and
conditions as active employees of the Company for a period of 18 months
following the Date of Termination.  If
benefits continue pursuant to this Section 5(d)(i)D during a period
when, in the absence of the benefits provided in this Section 5(d)(i)D,
Employee or his dependants would not be entitled to continuation coverage under
Section 4980B of the Code, Employee and his dependants shall receive
reimbursement for all medical expenses no later than the end of the calendar
year immediately following the calendar year in which the applicable expenses
were incurred. The health care continuation coverage period under COBRA, Code Section 4980B,
or any replacement or successor provision of United States tax law, shall run
concurrently with the period during which continued benefits are being provided
pursuant to this Section 5(d)(i)D.

 

(ii)                                  For purposes of
this Agreement, the term “Change in Control”
shall mean:

 

A.                                   (I) Any “person”
or “group” of related persons (as such terms are used in sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended 

 

7

 

(the “Exchange
Act”)), other than Clayton Williams, Jr. or any Affiliate
or Related Person thereof (each, a “Permitted Holder”),
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 such person or group has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, or more than 35% of the total
voting power of the outstanding capital stock (excluding any debt securities
convertible into equity) normally entitled to vote in the election of directors
(“Voting Stock”) of the Company (or
its successor by merger, consolidation or purchase of all or substantially all
of its assets) (for purposes of this clause, such person or group shall be
deemed to beneficially own any Voting Stock 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 such parent entity);
and (II) the Permitted Holders “beneficially own” (as defined above),
directly or indirectly, in the aggregate less than 25% 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) 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

 

B.                                     The first day
on which a majority of the members of the Board of Directors of the Company are
not, as of any date of determination, either (I) a member of the Board of
Directors of the Company on July 20, 2005, or (II) individuals who
were nominated for election or elected to the Company’s Board of Directors with
the approval of the majority of the directors described in clause (I) (or
approved for nomination or election by the majority of directors described in
clause (I) or (II) hereof) who were members of the Company’s Board of
Directors at the time of such nomination or election; or

 

C.                                     The sale,
lease, transfer, conveyance or other disposition (other than by way of merger
or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Related Subsidiaries
taken as a whole to any “person” (as such term is used in sections 13(d) and
14(d) of the Exchange Act) other than a Permitted Holder; or

 

D.                                    The adoption by
the stockholders of the Company of a plan or proposal for the liquidation or dissolution
of the Company; or

 

E.                                      The resignation
or other removal for any reason of Clayton W. Williams, Jr. from his
current position at the Company, including by reason of the death or Disability
of Clayton W. Williams, Jr.

 

The terms “Affiliate,” “Related
Person” and “Restricted Subsidiary”
as used in the definition of Change in Control shall have the meanings given to
such terms in that certain Indenture, dated July 20, 2005, among the
Company, the Subsidiary Guarantors and Wells Fargo Bank, National Association,
as Trustee, as amended from time to time. 
The term “Disability,” as used in the
definition of Change in Control shall have the meaning given to such term in
that certain Employment Agreement, dated the date hereof, between the Company
and Clayton W. Williams, Jr., as amended from time to time.

 

8

 

(e)                                  No Other
Amounts.  Except as otherwise required
by law (e.g., pursuant to COBRA) or as specifically provided herein, all of
Employee’s rights to Base Salary, severance, fringe benefits and bonuses
hereunder (if any) shall cease upon the termination of the Employment
Term.  Upon termination of the Employment
Term, the sole contractual remedy of Employee and his successors, assigns,
heirs, representatives and estate shall be to receive the amounts described in Sections 5(a),
5(b), 5(c), and 5(d), as applicable.

 

(f)                                    Notice of Termination.  Any termination of Employee’s employment
occurring in accordance with the terms of this Section 5 (other
than by reason of Employee’s death or by reason of a Non-Renewal) shall be
communicated to the other party by written notice that (i) indicates the
specific termination provisions of this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for the termination, and (iii) specifies the Date of Termination (a “Notice of Termination”), and that is
delivered to the other party in accordance with Section 9(f) of
this Agreement.  The failure of a party
to set forth in the Notice of Termination any fact or circumstance that
contributes to a showing of the basis for termination shall not waive any right
of such party hereunder or later preclude such party from asserting such fact
or circumstance in enforcing its rights hereunder.

 

(g)                                 Date of
Termination.  For
purposes of this Agreement, “Date of Termination”
means the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be; provided, however, that if
Employee’s employment is terminated by reason of his death, the Date of
Termination shall be the date of death of Employee and in the event of a Non-Renewal,
the Date of Termination shall be the last day of the Initial Term or applicable
Renewal Period.

 

(h)                                 Deemed
Resignations.  Unless
otherwise agreed to in writing by the Company and Employee prior to termination
of Employee’s employment, any termination of Employee’s employment shall
constitute an automatic resignation of Employee as an officer of the Company
and each Affiliate of the Company, and an automatic resignation of the Employee
from the Board.  Employee agrees to promptly
execute and deliver to the Company all consents and agreements necessary to
effectuate the termination of Employee’s status as an officer and/or Employee’s
resignation from the Board.

 

6.                                      Protection
of Information.

 

(a)                                  Disclosure to
and Property of the Company.  All information, trade secrets, designs,
ideas, concepts, improvements, product developments, discoveries and
inventions, whether patentable or not, that are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during the term
of his employment (whether during business hours or otherwise and whether on
the Company’s premises or otherwise) that relate to the Company’s or any of its
Affiliates’ business, products or services and all writings or materials of any
type embodying any such matters (collectively, “Confidential
Information”) shall be disclosed to the Company, and are and
shall be the sole and exclusive property of the Company or its Affiliates.  Confidential Information does not, however,
include any information that is available to the public other than as a result
of any unauthorized act of Employee.

 

9

 

(b)                                 No Unauthorized
Use or Disclosure.  Employee
agrees that Employee will preserve and protect the confidentiality of all
Confidential Information and work product of the Company and its Affiliates,
and will not, at any time during or after the termination of Employee’s
employment with the Company, make any unauthorized disclosure of, and shall not
remove from the Company premises, and will use reasonable efforts to prevent
the removal from the Company premises of, Confidential Information or work
product of the Company or its Affiliates, or make any use thereof, in each
case, except in the carrying out of Employee’s responsibilities hereunder.  Notwithstanding the foregoing, Employee shall
have no obligation hereunder to keep confidential any Confidential Information
if and to the extent (i) such information becomes generally known to the
public or within the relevant trade or industry other than due to Employee’s
violation of this Section 6(b), or (ii) disclosure thereof is
specifically required by law; provided, however, that in the
event disclosure is required by applicable law and Employee is making such
disclosure, Employee shall provide the Company with prompt notice of such
requirement, and shall use commercially reasonable efforts to give such notice
prior to making any disclosure so that the Company may seek an appropriate
protective order.

 

(c)                                  Remedies.  Employee acknowledges that money damages
would not be a sufficient remedy for any breach of this Section 6
by Employee, and the Company or its Affiliates shall be entitled to enforce the
provisions of this Section 6 by terminating payments then owing to
Employee under this Agreement and/or by specific performance and injunctive
relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach of this Section 6, but shall be in
addition to all remedies available at law or in equity to the Company,
including the recovery of damages from Employee and remedies available to the
Company pursuant to other agreements with Employee.

 

(d)                                 No Prohibition.  Nothing in this Section 6 shall
be construed as prohibiting Employee, following the expiration of the 12 month
period immediately following Employee’s termination of employment with the
Company, from being employed by any Competing Business (as defined below) or
engaging in any Prohibited Activity (as defined below); provided, that
during such employment or engagement Employee complies with his obligations
under this Section 6.

 

7.                                      Non-Competition
and Non-Solicitation.

 

(a)                                  Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

(i)                                     “Competing Business” means any
business, individual, partnership, firm, corporation or other entity engaged in
the exploration for and development and production of oil and natural gas.

 

(ii)                                  “Prohibited Activity” means any
service or activity on behalf of a Competing Business that involves the
planning, management, supervision, or providing of services that are similar in
nature or purpose to those services Employee provided to the Company within the
last 12 months of Employee’s employment with the Company or any other
activities that would involve the use or disclosure of Confidential
Information.

 

10

 

(iii)                               “Restricted Area” means those
geographic regions indentified as areas of current exploration and areas of
development activity in the Company’s most recent Form 10-K and Form 10-Q,
as applicable, filed with the U.S. Securities and Exchange Commission.  The parties stipulate that the forgoing is a
reasonable area restriction because the area identified is the market area with
respect to which Employee will help the Company provide its products and
services, help analyze, and/or receive access to Confidential Information.

 

(b)                                 Protective
Covenants and Restrictions.  Employee agrees that the following protective
covenants are reasonable and necessary for the protection of the Company’s
legitimate business interests, do not create any undue hardship on Employee,
and are not contrary to the public interest:

 

(i)                                     Non-compete.  Employee expressly covenants and agrees that,
during the Employment Term and for 12 months following termination of
Employee’s employment with the Company for any reason, he will not engage,
directly or indirectly, in and he will not and will cause his Affiliates not
to, directly or indirectly, own, manage, operate, join, control or participate
in or be connected with, or loan money to or sell or lease equipment to, any
Competing Business in the Restricted Area, other than pursuant to (A) any
oil and gas properties (I) owned by Employee as of the Effective Date
hereof or (II) acquired by Employee after the Effective Date pursuant to
inheritance, bequest or the laws of descent or distribution, or (B) any
awards or other interests held by Employee, as of the Effective Date hereof or
acquired thereafter, under any Incentive Plan. 
In the event of Employee’s termination of employment by the Company for
Cause or by the Employee without Good Reason, this Section 7(b)(i) shall
cease to apply as of Employee’s Date of Termination, unless the Company
continues to pay Employee his Base Salary in effect as of the Date of
Termination for 12 months following termination of Employee’s employment.

 

(ii)                                  Non-solicitation.  Employee further expressly covenants and
agrees that during the Employment Term and for 24 months following termination
of Employee’s employment with the Company for any reason, he will not and he
will cause his Affiliates not to (A) cause, solicit, induce or encourage
any individual who, on the Date of Termination, is an employee of the Company
or its Affiliates to leave such employment or hire, employ or otherwise engage
any such individual (other than employees of the Company or its Affiliates who
respond to general advertisements for employment in newspapers or other
periodicals of general circulation), or (B) cause, induce or encourage any
actual or material prospective client, customer, supplier, landlord, lessor, or
licensor of the Company or its Affiliates to terminate or modify any such
actual or prospective relationship that exists on the Date of Termination.

 

(c)                                  Permitted
Ownership. 
Notwithstanding any of the foregoing or anything else to the contrary in
this Agreement, (i) Employee may own, for investment purposes only, up to
5% of the outstanding stock or other equity securities of any publicly held
corporation or other entity whose stock or equity securities are either listed
on a national securities exchange or on the NASDAQ National Market System, if
Employee is not otherwise affiliated with such corporation or entity and (ii) Employee
is permitted to engage in the endeavors set forth on Exhibit A
attached hereto and the activities described in clause (ii) of the third
sentence of Section 2(b).

 

11

 

(d)                                 Reasonableness.  Employee and the Company agree and
acknowledge that the limitations as to time, geographical area and scope of
activity to be restrained as set forth in this Section 7 are the
result of arm’s-length bargaining, are fair and reasonable, and do not impose
any greater restraint than is necessary to protect the legitimate business
interests of the Company in light of (i) the nature and wide geographic
scope of the Company’s operations; (ii) Employee’s level of control over
and contact with the Company’s business in the Restricted Area; (iii) the
fact that the Company’s business is conducted throughout the Restricted Area;
and (iv) the amount of compensation that Employee is receiving in
connection with the performance of his duties hereunder.

 

(e)                                  Relief and
Enforcement.  Employee
hereby represents to the Company that he has read and understands, and agrees
to be bound by, the terms of this Section 7.  It is the desire and intent of the parties
hereto that the provisions of this Section 7 be enforced to the
fullest extent permitted under applicable law, whether now or hereafter in
effect.  However, to the extent that any
part of this Section 7 may be found invalid, illegal or
unenforceable for any reason, it is intended that such part shall be
enforceable to the extent that a court of competent jurisdiction shall
determine that such part, if more limited in scope, would have been
enforceable, and such part shall be deemed to have been so written and the
remaining parts shall as written be effective and enforceable in all
events.  Employee and the Company further
agree and acknowledge that, in the event of a breach or threatened breach of
any of the provisions of this Section 7, the Company shall be
entitled to immediate injunctive relief, as any such breach would cause the
Company irreparable injury for which it would have no adequate remedy at
law.  Nothing herein shall be construed
so as to prohibit the Company from pursuing any other remedies available to it
hereunder, at law or in equity, for any such breach or threatened breach.

 

(f)                                    Consulting and
Litigation Assistance. 
Employee agrees that, during the period following Employee’s Date of
Termination during which Employee remains subject to the non-compete provisions
of Section 7(b)(i) above, upon request from the Company,
Employee will assist the Company in a consulting capacity and/or cooperate with
the Company and its Affiliates in the defense of any claims or actions that may
be made by or against the Company or any of its Affiliates that affect Employee’s
prior areas of responsibility, except if Employee’s reasonable interests are
materially adverse to the Company or its Affiliates in such claim or
action.  Notwithstanding anything to the
contrary in the foregoing sentence, in the event the Company requests Employee’s
assistance and/or cooperation pursuant to this Section 7(f),
Employee shall not be required to devote more than five (5) hours per
month to assisting the Company pursuant to this Section 7(f); provided,
that if, at the request of the Company, the Employee agrees to devote in excess
of five (5) hours per month to assisting the Company pursuant to this
Section 7(f), then the Company will compensate Employee for each
additional hour of assistance in excess of five (5) hours at an
hourly rate of $250 per hour.

 

8.                                      Release
of Claims.  Notwithstanding any other provision in this
Agreement to the contrary, in consideration for receiving the severance
benefits described in Sections 5(b), 5(c)(iii), 5(c)(iv),
5(d)(i)C and/or 5(d)(i)D, as applicable, Employee hereby agrees
to execute (and not revoke) a general release of claims against the Company and
its Affiliates (excluding claims for indemnification, claims for coverage under
officer and director policies, and claims as a stockholder of the Company).  If Employee fails to properly execute and
deliver such release (or revokes the release), Employee agrees that Employee
shall not be entitled to receive the 

 

12

 

severance benefits described
in Sections 5(b), 5(c)(iii), 5(c)(iv), 5(d)(i)C
and/or 5(d)(i)D, as applicable. 
For purposes of this Agreement, a release shall be considered to have
been executed by Employee if it is signed by Employee’s legal representative,
in the case of Employee’s Disability, or on behalf of Employee’s estate in the
case of Employee’s death.

 

9.                                      General
Provisions.

 

(a)                                  Amendments and
Waiver.  The terms and provisions of
this Agreement may not be modified or amended, nor may any of the provisions
hereof be waived, temporarily or permanently, except pursuant to a written
instrument executed by the party to be bound by such modification or
amendment.  The failure of any party to
enforce any of the provisions of this Agreement shall in no way be construed as
a waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.

 

(b)                                 Withholding.  The Company shall be entitled to withhold
from any compensation, benefits, or amounts payable under this Agreement all
federal, state, local or other taxes as may be required pursuant to any law or
governmental regulation or ruling.

 

(c)                                  Severability.  It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. 
Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

 

(d)                                 Entire
Agreement.  This
Agreement constitutes the entire agreement of the parties with regard to the
subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to
employment of Employee by the Company. 
Without limiting the scope of the preceding sentence, all understandings
and agreements preceding the date of execution of this Agreement and relating
to the subject matter hereof are hereby null and void and of no further force
and effect.

 

(e)                                  Successors and
Assigns.  Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, permitted
assigns, heirs and personal representatives and estates, as the case may
be.  Anything contained herein to the contrary
notwithstanding, unless otherwise expressly provided in this Agreement, neither
this Agreement nor any right or obligation hereunder of any party may be
assigned or delegated without the prior written consent of the other party
hereto; provided, however, that the Company may assign this
Agreement to any of its Affiliates. 
Except as expressly provided herein, this Agreement shall not confer any
rights or 

 

13

 

remedies upon any person or
legal entity other than the parties hereto and their respective successors and
permitted assigns.

 

(f)                                    Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given (i) when received, if delivered personally
or by courier, (ii) on the date receipt is acknowledged, if delivered by
certified mail, postage prepaid, return receipt requested, or (iii) one
day after transmission, if sent by facsimile transmission with confirmation of
transmission, as follows:

 

	
  If to Employee, at:

  	
   

  	
  6 Desta Drive, Suite 6500

  
	
   

  	
   

  	
  Midland, TX 79705

  
	
   

  	
   

  	
   

  
	
  If to the Company, at

  	
   

  	
  c/o Paul Latham

  
	
   

  	
   

  	
  6 Desta Drive, Suite 6500

  
	
   

  	
   

  	
  Midland, TX 79705

  

 

or to such other address as
either party may furnish to the other in writing in accordance herewith, except
that notices or changes of address shall be effective only upon receipt.

 

(g)                                 Construction.  Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. 
The language used in this Agreement shall be deemed to be the language
chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against any party.   The word “including”
means “including, without limitation.”

 

(h)                                 Governing Law.  The provisions of this agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving effect to any choice of law or conflicting provision or rule.

 

(i)                                     Mutual
Contribution.  The parties
to this Agreement have mutually contributed to its drafting.  Consequently, no provision of this Agreement
shall be construed against any party on the grounds that such party drafted the
provision or caused it to be drafted.

 

[Signature Page Follows]

 

14

 

IN WITNESS WHEREOF, the
parties hereto have executed this Employment Agreement as of the Effective
Date.

 

 

	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
  Name:

  	
  Paul Latham

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Mel G. Riggs

  
	
   

  	
  Mel G. Riggs

  

 

SIGNATURE
PAGE TO EMPLOYMENT AGREEMENT

 

 

EXHIBIT A

 

PERMITTED
ENDEAVORS

 

Oil & Gas.  Ownership and management of any oil and gas
interests (of whatever kind and whether owned directly, through partnership
interest or otherwise) that are owned as of the Effective Date; inherited in
the future; received under any Company Incentive Plan or received under any
incentive plan from a Williams Entity or any entity owned or controlled by
Clayton W. Williams, Jr.

 

Real Estate.  Ownership
and management of any real estate interest (of whatever kind, and whether owned
directly , through partnership interest or otherwise) owned as of the Effective
Date, inherited in the future or received, purchased, or authorized under any
incentive plan or other agreement by a Williams Entity or any entity owned or
controlled by Clayton W. Williams, Jr.

 

Directorships Held.  Currently serving on the board of directors
for the following:

 

·                  Midland Bancshares, Inc.
and Community National Bank, a privately held banking company based in Midland,
Texas.

 

·                  TransAtlantic Petroleum,
Ltd., a publicly traded (NYSE AMEX) company headquartered in Dallas, Texas and
Istanbul, Turkey.Exhibit 10.4

EMPLOYMENT AGREEMENT

 

This Employment Agreement
(this “Agreement”) is made by and
between Clayton Williams Energy, Inc., a Delaware corporation (the “Company”), and Patrick C. Reesby (“Employee”) effective as of March 1,
2010 (the “Effective Date”).

 

WHEREAS, the Company desires
to employ Employee and Employee desires to be employed by the Company and to
commit himself to serve the Company on the terms herein provided;

 

NOW, THERFORE, in
consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             Employment. The Company
shall employ Employee, and Employee accepts employment with the Company, upon
the terms and conditions set forth in this Agreement for the period beginning
on the Effective Date and ending on the third anniversary of such date (the “Initial Term”); provided, however, that (a) on
such third anniversary date (and on the fourth and fifth anniversary dates of
the Effective Date thereafter), the term of this Agreement will automatically
(without any action by either party) be extended for one additional year (each,
a “Renewal Period”), unless, at least
90 days prior to either the third, fourth, or fifth anniversary date of
the Effective Date, as applicable, the Company or Employee has given written
notice to the other party (a “Non-Renewal Notice”)
that the Company or Employee does not wish to extend the term of the Agreement
(a “Non-Renewal”), and (b) the
Initial Term or any Renewal Period, as applicable, may be terminated prior to
the expiration thereof in accordance with Section 4.  Either party may elect not to renew this
Agreement; provided, that, if no Non-Renewal Notice is given, and if
this Agreement is not terminated earlier in accordance with Section 4,
the Agreement will expire by its terms on the sixth anniversary of the
Effective Date, unless extended by mutual agreement of the parties hereto.  The term “Employment
Term” means the period from the Effective Date until the
expiration of the Initial Term and any applicable Renewal Period pursuant to
this Section 1 or in accordance with Section 4 of this
Agreement.

 

2.             Position
and Duties.

 

(a)           During the Employment Term,
Employee shall hold the title of Vice President — New Ventures.  The Company and Employee agree that the
Employee shall have duties and responsibilities consistent with the position
set forth above in a company the size and of the nature of the Company, and
such other duties and authority that are assigned to Employee from time to time
by the Company’s Board of Directors (the “Board”), or
such other officer of the Company as shall be designated by the Board.  Employee shall report to the Board, or to
such other officer of the Company as shall be designated by the Board.

 

(b)           Employee agrees to devote
his best efforts and his full business time and attention to the business and
affairs of the Company.  Employee shall
perform his duties and responsibilities to the best of his abilities in a
diligent and professional manner, and agrees to comply with all of the policies
of the Company, including such policies with respect to legal 

 

1

 

compliance, conflicts of
interest, confidentiality and business ethics as are from time to time in
effect.  During the Employment Term,
Employee shall not engage in any business activity which, in the reasonable
judgment of the Board, conflicts or interferes with the duties and
responsibilities of Employee hereunder, whether or not such activity is pursued
for gain, profit or other pecuniary advantage, without the prior written
approval of the Company or engage in or be employed by any other business; provided,
however, that the foregoing provisions of this Section 2
shall not limit or prohibit Employee from engaging in community, charitable and
social activities, personal investment activities and the endeavors set forth
on Exhibit A attached hereto, in each case not interfering with the
Employee’s performance and obligations hereunder.  For the avoidance of doubt, this Section 2
shall not limit or prohibit Employee from providing services to or for the
benefit of the Williams Entities pursuant to the Second Amended and Restated
Service Agreement dated as of March 1, 2005 by and among the Company and
the Williams Entities (as defined therein), as amended from time to time.

 

(c)           Employee acknowledges and
agrees that Employee owes a duty of loyalty, fidelity and allegiance to act at
all times in the best interests of the Company and to do no act that would
injure the business, interests, or reputation of the Company or any of its
Affiliates.  In keeping with these
duties, Employee shall make full disclosure to the Company of all significant
business opportunities pertaining to the Company’s business and shall not
appropriate for Employee’s own benefit business opportunities concerning the
subject matter of the fiduciary relationship. 
Except as set forth in Section 5(d)(ii), for purposes of
this Agreement, the term “Affiliate”
shall mean an individual or entity that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with a specified individual or entity.

 

3.             Compensation.

 

(a)           Base Salary.  During the Employment Term, Employee’s base
salary shall be $228,800 per annum, which salary may be increased (but not
decreased) by the Board (or a designated committee thereof) in its discretion
(the “Base Salary”), which Base
Salary shall be payable in regular installments in accordance with the Company’s
general payroll practices and subject to withholding and other payroll taxes.

 

(b)           Annual Bonus.  Employee shall be eligible to receive one or
more bonuses each year during the Employment Term to be determined by the Board
(or a designated committee thereof), in its sole discretion based on
performance or other criteria to be adopted by the Board (or a designated
committee thereof).  Any bonus amount
earned with respect to a calendar year shall be paid in a cash lump sum no
later than March 15 of the following calendar year.

 

(c)           Employee Benefits.  Employee will be entitled during the
Employment Term to receive such welfare benefits and other fringe benefits
(including vacation, medical, dental, life insurance, 401(k) and other
employee benefits and perquisites, such as club membership dues) as the Company
may offer from time to time to similarly situated executive level employees,
subject to applicable eligibility requirements. 
The Company shall not, however, by reason of this Section 3(c),
be obligated to institute, maintain, or refrain from 

 

2

 

changing, amending, or
discontinuing any such benefit plan or program, so long as any such changes are
similarly applicable to similarly situated employees of the Company.

 

(d)           Business Expenses.  The Company shall reimburse Employee for all
reasonable expenses incurred by him in the course of performing his duties
under this Agreement to the extent consistent with the Company’s written
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to the Company’s requirements with respect to
reporting and documentation of such expenses. 
Notwithstanding any provision in this Agreement to the contrary, the
amount of expenses for which Employee is eligible to receive reimbursement
during any calendar year shall not affect the amount of expenses for which
Employee is eligible to receive reimbursement during any other calendar year
within the Employment Term. 
Reimbursement of expenses under this Section 3(d) shall
be made no later than the last day of the calendar year following the calendar
year in which the expense was incurred. 
Employee is not permitted to receive a payment or other benefit in lieu
of reimbursement under this Section 3(d).

 

(e)           Long Term Incentive
Compensation.  Employee
may, as determined by the Board (or a designated committee thereof) in its sole
discretion, periodically receive grants of, or payments under, equity or
non-equity related awards pursuant to the Company’s long-term incentive
plan(s), including the APO Incentive Plan, the APO Reward Plans, the SWR Reward
Plan, the APO Working Interest Trusts, the APO Working Interest Grant, or any
similar or successor plan(s) (collectively, “Incentive
Plans”), subject to the terms and conditions thereof.  Any grants previously awarded to Executive
pursuant to the Company’s Incentive Plans that are outstanding on the Effective
Date hereof shall, except as otherwise provided in this Agreement, continue to
be governed by the terms and conditions of the Incentive Plans.

 

(f)            Automobile Allowance.  During the Employment Term, Employee will be
entitled to receive a car allowance in accordance with the Company’s automobile
allowance policy in effect from time to time.

 

4.             Termination
of Employment.  Unless otherwise agreed to in writing by the
Company and Employee, Employee’s employment hereunder may be terminated under
the following circumstances:

 

(a)           Death.  Employee’s employment hereunder shall
terminate upon his death.

 

(b)           Disability.  Employee’s employment hereunder shall
terminate upon a determination that he has incurred a Disability.  For purposes of this Agreement, “Disability” means, at any time the
Company sponsors a long-term disability plan for the Company’s employees, “disability”
as defined in such long-term disability plan for the purpose of determining a
participant’s eligibility for benefits, provided, that if the long-term
disability plan contains multiple definitions of disability, “Disability” shall
refer to that definition of disability which, if Employee qualified for such
disability benefits, would provide coverage for the longest period of
time.  The determination of whether
Employee has a Disability shall be made in good faith by the person or persons
required to make disability determinations under the long-term disability
plan.  If Employee is not covered under
the Company’s long-term disability plan or if the Company does not sponsor a
long-term disability plan at such time, then the term 

 

3

 

“Disability” hereunder shall
mean a “permanent and total disability” as defined in section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the “Code”),
and, in this case, the existence of any such Disability shall be certified by a
physician acceptable to both the Company and Employee.  In the event the parties are not able to
agree on the choice of a physician, each party shall select a physician who, in
turn, shall select a third physician to render such certification.

 

(c)           Termination by the Company.  The Company may terminate Employee’s
employment with or without Cause.  For
purposes of this Agreement, the term “Cause”
means Employee (i) has been convicted of a misdemeanor that involves
intentionally dishonest behavior or that the Company determines in good faith
will have a material adverse effect on the reputation of the Company or any
felony, (ii) has engaged in conduct which is materially injurious
(monetarily or otherwise) to the Company or any of its Affiliates (including
misuse of the Company’s or an Affiliate’s funds or other property), (iii) has
engaged in gross negligence or willful misconduct in the performance of his
duties for the Company, (iv) has willfully refused without proper legal
reason to perform his duties for the Company, (v) has breached any
material provision of this Agreement or any other agreement between the Company
and Employee, or (vi) has breached any material corporate policy
maintained and established by the Company that is of general applicability to
executives of the Company; provided, however, as to clauses (iv),
(v) and (vi) contained in this Section 4(c), if such acts
or omissions could be cured by Employee (as reasonably determined by the
Board), the Company must give Employee written notice of the acts or omissions
constituting Cause and, in such case, no termination shall be for Cause unless
and until Employee fails to cure such acts or omissions within 10 days
following receipt of such written notice.

 

(d)           Termination by Employee.  Employee may, upon giving the Company no less
than 30 days advance written notice, terminate Employee’s employment without
Good Reason or for Good Reason.  For
purposes of this Agreement, the term “Good Reason”
shall mean, without the express written consent of Employee, the occurrence of
one of the following: (i) any action or inaction that constitutes a
material breach by the Company of this Agreement, (ii) a material  reduction in Employee’s Base Salary, including any series
of salary reductions (whether or not related) that are not agreed to by
Employee in writing and that, individually or in the aggregate, result in a
material reduction when compared to Employee’s Base Salary in effect on the
Effective Date or as adjusted after the Effective Date in accordance with Section 3(a) hereof
or with Employee’s prior written consent, (iii) a material diminution in
Employee’s authority, duties or responsibilities or the assignment of duties to
Employee that are not materially commensurate with Employee’s position with the
Company, or (iv) a change in the geographic location at which Employee
must normally perform services to a location outside of Harris County,
Texas.  For the avoidance of doubt, any
reduction in Employee’s Base Salary, regardless of amount, could be material
if, in light of all other facts and circumstances, a reasonable person in the
position of Employee would consider it important.  In the case of Employee’s allegation of Good
Reason, (A) Employee shall provide notice to the Company of the event
alleged to constitute Good Reason within 60 days of the occurrence of such
event, and (B) the Company shall have the opportunity to remedy the
alleged Good Reason event within 30 days from receipt of notice of such
allegation.

 

4

 

5.             Compensation
Upon Termination.

 

(a)           For Cause or Without Good
Reason.  In the event Employee’s
employment is terminated by the Company for Cause or by the Employee without
Good Reason, Employee shall be entitled to receive (i) Employee’s full
Base Salary through the Date of Termination at the rate then in effect, (ii) reimbursement
of any expenses to the extent such amounts have accrued through the Date of Termination,
and (iii) such employee benefits, if any, as to which Employee may be
entitled pursuant to the terms governing such benefits (such amounts set forth
in (i), (ii) and (iii) shall be collectively referred to herein as
the “Accrued Rights”).

 

(b)           Death or Disability.  In the event Employee’s employment terminates
by reason of his death or Disability, Employee (or his estate) shall be
entitled to receive the Accrued Rights and all outstanding equity and
non-equity based awards (including any awards or interests under the Incentive
Plans) held by Employee immediately prior to the Date of Termination shall
become fully vested as of such date; provided, that, notwithstanding the
foregoing, any awards or interests held by Employee as of the Date of Termination
under any Incentive Plan shall continue to be governed by the terms and
conditions of such plans relating to the forfeiture of awards that are fully
vested.  In addition, Employee shall be
entitled to receive the following, provided Employee (or his estate)
delivers to the Company, within 45 days following the Date of Termination, a
properly executed release in accordance with Section 8 of this
Agreement:

 

(i)            a lump sum payment equal to 18
months’ worth of Employee’s Base Salary in effect on the Date of Termination
(determined without regard to any reduction in Base Salary imposed by the
Company in violation of Section 3(a) hereof), payable as soon
as practicable but no later than the earlier of (A) March 15
following the calendar year in which termination occurs or (B) 90 days
following the Date of Termination; and

 

(ii)           Employee (in the case of a
termination due to Disability), his spouse and eligible dependents (to the
extent covered immediately prior to such termination) shall continue to be
eligible to participate in all of the Company’s group health plans on the same
terms and conditions as active employees of the Company for a period of one (1) year
following the Date of Termination.  If
benefits are continued pursuant to this Section 5(b)(ii) during
a period when, in the absence of the benefits provided in this Section 5(b)(ii),
Employee or his dependants would not be entitled to continuation coverage under
Section 4980B of the Code, Employee and his dependants shall receive
reimbursement for all medical expenses no later than the end of the calendar
year immediately following the calendar year in which the applicable expenses
were incurred.  The health care
continuation coverage period under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”),
Code Section 4980B, or any replacement or successor provision of United
States tax law, shall run concurrently with the period during which continued
benefits are being provided pursuant to this Section 5(b)(ii).

 

(c)           Without Cause, For Good
Reason or Non-Renewal.  In
the event Employee’s employment is terminated by the Company without Cause, by
Employee for Good Reason or due to a Non-Renewal that results from a Non-Renewal
Notice given by the Company, Employee shall be entitled to receive payment of
the following:

 

5

 

(i)            the Accrued Rights;

 

(ii)           all outstanding equity and
non-equity based awards (including any awards or interests under the Incentive
Plans) held by Employee immediately prior to the Date of Termination shall
become fully vested as of such date; provided, that, notwithstanding the
foregoing, any awards or interests held by Employee as of the Date of
Termination under any Incentive Plan shall continue to be governed by the terms
and conditions of such plans relating to the forfeiture of awards that are
fully vested;

 

(iii)          provided Employee delivers
to the Company, within 45 days following the Date of Termination, a
properly executed release in accordance with Section 8 of this
Agreement, a lump sum payment equal to the sum of (A) 18 months’
worth of Employee’s annualized Base Salary in effect on the Date of Termination
(determined without regard to any reduction in Base Salary imposed by the
Company in violation of Section 3(a) hereof), (B) 18
months’ worth of the average of the bonus amount(s) actually paid to
Employee for the three (3) calendar years ending prior to the Date of
Termination (not including any amounts paid to Employee pursuant to any of the
Company’s Incentive Plans), (C) the car allowance Employee would have
received pursuant to Section 3(f) of this Agreement had his
employment continued for an additional 18 months, and (D) the
matching contributions that would have been made on behalf of Employee pursuant
to the Company’s 401(k) plan if Employee had continued participation
in such 401(k) plan for an additional 18 months, payable as soon as
practicable but no later than the earlier of (I) March 15 following
the calendar year in which termination occurs or (II) 90 days following
the Date of Termination; and

 

(iv)          provided Employee delivers
to the Company, within 45 days following the Date of Termination, a
properly executed release in accordance with Section 8 of this
Agreement, Employee, his spouse and eligible dependents (to the extent covered
immediately prior to such termination) shall continue to be eligible to
participate in all of the Company’s group health plans on the same terms and
conditions as active employees of the Company for a period of 18 months
following the Date of Termination.  If
benefits continue pursuant to this Section 5(c)(iv) during a
period when, in the absence of the benefits provided in this Section 5(c)(iv),
Employee or his dependants would not be entitled to continuation coverage under
Section 4980B of the Code, Employee and his dependants shall receive
reimbursement for all medical expenses no later than the end of the calendar
year immediately following the calendar year in which the applicable expenses
were incurred. The health care continuation coverage period under COBRA, Code Section 4980B,
or any replacement or successor provision of United States tax law, shall run
concurrently with the period during which continued benefits are being provided
pursuant to this Section 5(c)(iv).

 

(d)           Change in Control.

 

(i)            Notwithstanding any
provision contained herein, if Employee’s employment is terminated by the
Company without Cause (other than by reason of death or Disability),  if Employee resigns for Good Reason or in the event of a Non-Renewal
that results from a Non-Renewal Notice given by the Company, in each case,
within 24 months following a Change in Control (as defined below), Employee
shall be entitled to receive:

 

6

 

A.            the Accrued Rights;

 

B.            all outstanding equity and
non-equity based awards (including any awards or interests under the Incentive
Plans) held by Employee immediately prior to the Date of Termination shall
become fully vested as of such date; provided, that, notwithstanding the
foregoing, any awards or interests held by Employee as of the Date of
Termination under any Incentive Plan shall continue to be governed by the terms
and conditions of such plans relating to the forfeiture of awards that are
fully vested;

 

C.            provided Employee delivers
to the Company, within 45 days following the Date of Termination, a properly
executed release in accordance with Section 8 of this Agreement, a
lump sum payment equal to the sum of (I) two (2) times Employee’s
annualized Base Salary in effect on the Date of Termination (determined without
regard to any reduction in Base Salary imposed by the Company in violation of Section 3(a) hereof),
(II) two (2) times the average of the bonus amount(s) actually
paid to Employee for the three (3) calendar years ending prior to the Date
of Termination (not including any amounts paid to Employee pursuant to any of
the Company’s Incentive Plans), (III) the car allowance Employee would
have received pursuant to Section 3(f) of this Agreement had
his employment continued for an additional two (2) years, and (IV) the
matching contributions that would have been made on behalf of Employee pursuant
to the Company’s 401(k) plan if Employee had continued participation
in such 401(k) plan for an additional two (2) years, payable as
soon as practicable but no later than the earlier of (a) March 15
following the calendar year in which termination occurs or (b) 90 days
following the Date of Termination; and

 

D.            provided Employee delivers
to the Company, within 45 days following the Date of Termination, a properly
executed release in accordance with Section 8 of this Agreement,
Employee, his spouse and eligible dependents (to the extent covered immediately
prior to such termination) shall continue to be eligible to participate in all
of the Company’s group health plans on the same terms and conditions as active
employees of the Company for a period of 18 months following the Date of
Termination.  If benefits continue
pursuant to this Section 5(d)(i)D during a period when, in the
absence of the benefits provided in this Section 5(d)(i)D, Employee
or his dependants would not be entitled to continuation coverage under Section 4980B
of the Code, Employee and his dependants shall receive reimbursement for all
medical expenses no later than the end of the calendar year immediately
following the calendar year in which the applicable expenses were incurred. The
health care continuation coverage period under COBRA, Code Section 4980B,
or any replacement or successor provision of United States tax law, shall run
concurrently with the period during which continued benefits are being provided
pursuant to this Section 5(d)(i)D.

 

(ii)           For purposes of this
Agreement, the term “Change in Control”
shall mean:

 

A.            (I) Any “person” or “group”
of related persons (as such terms are used in sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), other than Clayton Williams, Jr. or any Affiliate
or Related Person thereof (each, a “Permitted Holder”),
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 

 

7

 

deemed
to have “beneficial ownership” of all shares that such person or group has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, or more than 35% of the total
voting power of the outstanding capital stock (excluding any debt securities convertible
into equity) normally entitled to vote in the election of directors (“Voting Stock”) of the Company (or
its successor by merger, consolidation or purchase of all or substantially all
of its assets) (for purposes of this clause, such person or group shall be
deemed to beneficially own any Voting Stock 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 such parent entity);
and (II) the Permitted Holders “beneficially own” (as defined above),
directly or indirectly, in the aggregate less than 25% 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) 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

 

B.            The first day on which a
majority of the members of the Board of Directors of the Company are not, as of
any date of determination, either (I) a member of the Board of Directors
of the Company on July 20, 2005, or (II) individuals who were
nominated for election or elected to the Company’s Board of Directors with the
approval of the majority of the directors described in clause (I) (or
approved for nomination or election by the majority of directors described in
clause (I) or (II) hereof) who were members of the Company’s Board of
Directors at the time of such nomination or election; or

 

C.            The sale, lease, transfer,
conveyance or other disposition (other than by way of merger or consolidation),
in one or a series of related transactions, of all or substantially all of the
assets of the Company and its Related Subsidiaries taken as a whole to any “person”
(as such term is used in sections 13(d) and 14(d) of the
Exchange Act) other than a Permitted Holder; or

 

D.            The adoption by the
stockholders of the Company of a plan or proposal for the liquidation or dissolution
of the Company; or

 

E.             The resignation or other
removal for any reason of Clayton W. Williams, Jr. from his current
position at the Company, including by reason of the death or Disability of
Clayton W. Williams, Jr.

 

The terms “Affiliate,” “Related
Person” and “Restricted Subsidiary”
as used in the definition of Change in Control shall have the meanings given to
such terms in that certain Indenture, dated July 20, 2005, among the
Company, the Subsidiary Guarantors and Wells Fargo Bank, National Association,
as Trustee, as amended from time to time. 
The term “Disability,” as used in the
definition of Change in Control shall have the meaning given to such term in
that certain Employment Agreement, dated the date hereof, between the Company
and Clayton W. Williams, Jr., as amended from time to time.

 

(e)           No Other Amounts.  Except as otherwise required by law (e.g.,
pursuant to COBRA) or as specifically provided herein, all of Employee’s rights
to Base Salary, severance, fringe benefits and bonuses hereunder (if any) shall
cease upon the termination of the 

 

8

 

Employment Term.  Upon termination of the Employment Term, the
sole contractual remedy of Employee and his successors, assigns, heirs,
representatives and estate shall be to receive the amounts described in Sections 5(a),
5(b), 5(c), and 5(d), as applicable.

 

(f)            Notice of Termination.  Any termination of Employee’s employment
occurring in accordance with the terms of this Section 5 (other
than by reason of Employee’s death or by reason of a Non-Renewal) shall be
communicated to the other party by written notice that (i) indicates the
specific termination provisions of this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for
the termination, and (iii) specifies the Date of Termination (a “Notice of Termination”), and that is
delivered to the other party in accordance with Section 9(f) of
this Agreement.  The failure of a party
to set forth in the Notice of Termination any fact or circumstance that
contributes to a showing of the basis for termination shall not waive any right
of such party hereunder or later preclude such party from asserting such fact
or circumstance in enforcing its rights hereunder.

 

(g)           Date of Termination.  For purposes of this Agreement, “Date of Termination” means the date
of receipt of the Notice of Termination or any later date specified therein, as
the case may be; provided, however, that if Employee’s employment
is terminated by reason of his death, the Date of Termination shall be the date
of death of Employee and in the event of a Non-Renewal, the Date of Termination
shall be the last day of the Initial Term or applicable Renewal Period.

 

(h)           Deemed Resignations.  Unless otherwise agreed to in writing by the
Company and Employee prior to termination of Employee’s employment, any
termination of Employee’s employment shall constitute an automatic resignation
of Employee as an officer of the Company and each Affiliate of the Company, and
an automatic resignation of the Employee from the Board.  Employee agrees to promptly execute and
deliver to the Company all consents and agreements necessary to effectuate the
termination of Employee’s status as an officer and/or Employee’s resignation
from the Board.

 

6.             Protection
of Information.

 

(a)           Disclosure to and Property
of the Company.  All
information, trade secrets, designs, ideas, concepts, improvements, product
developments, discoveries and inventions, whether patentable or not, that are
conceived, made, developed or acquired by Employee, individually or in
conjunction with others, during the term of his employment (whether during
business hours or otherwise and whether on the Company’s premises or otherwise)
that relate to the Company’s or any of its Affiliates’ business, products or
services and all writings or materials of any type embodying any such matters
(collectively, “Confidential Information”)
shall be disclosed to the Company, and are and shall be the sole and exclusive
property of the Company or its Affiliates. 
Confidential Information does not, however, include any information that
is available to the public other than as a result of any unauthorized act of
Employee.

 

(b)           No Unauthorized Use or
Disclosure.  Employee
agrees that Employee will preserve and protect the confidentiality of all
Confidential Information and work product of the Company and its Affiliates,
and will not, at any time during or after the termination of 

 

9

 

Employee’s employment with
the Company, make any unauthorized disclosure of, and shall not remove from the
Company premises, and will use reasonable efforts to prevent the removal from
the Company premises of, Confidential Information or work product of the
Company or its Affiliates, or make any use thereof, in each case, except in the
carrying out of Employee’s responsibilities hereunder.  Notwithstanding the foregoing, Employee shall
have no obligation hereunder to keep confidential any Confidential Information
if and to the extent (i) such information becomes generally known to the
public or within the relevant trade or industry other than due to Employee’s
violation of this Section 6(b), or (ii) disclosure thereof is
specifically required by law; provided, however, that in the
event disclosure is required by applicable law and Employee is making such
disclosure, Employee shall provide the Company with prompt notice of such
requirement, and shall use commercially reasonable efforts to give such notice
prior to making any disclosure so that the Company may seek an appropriate
protective order.

 

(c)           Remedies.  Employee acknowledges that money damages
would not be a sufficient remedy for any breach of this Section 6
by Employee, and the Company or its Affiliates shall be entitled to enforce the
provisions of this Section 6 by terminating payments then owing to
Employee under this Agreement and/or by specific performance and injunctive
relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the
exclusive remedies for a breach of this Section 6, but shall be in
addition to all remedies available at law or in equity to the Company,
including the recovery of damages from Employee and remedies available to the
Company pursuant to other agreements with Employee.

 

(d)           No Prohibition.  Nothing in this Section 6 shall
be construed as prohibiting Employee, following the expiration of the 12 month
period immediately following Employee’s termination of employment with the
Company, from being employed by any Competing Business (as defined below) or
engaging in any Prohibited Activity (as defined below); provided, that
during such employment or engagement Employee complies with his obligations
under this Section 6.

 

7.             Non-Competition
and Non-Solicitation.

 

(a)           Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

(i)            “Competing
Business” means any business, individual, partnership, firm,
corporation or other entity engaged in the exploration for and development and
production of oil and natural gas.

 

(ii)           “Prohibited
Activity” means any service or activity on behalf of a Competing
Business that involves the planning, management, supervision, or providing of
services that are similar in nature or purpose to those services Employee
provided to the Company within the last 12 months of Employee’s employment with
the Company or any other activities that would involve the use or disclosure of
Confidential Information.

 

(iii)          “Restricted
Area” means those geographic regions indentified as areas of
current exploration and areas of development activity in the Company’s most
recent Form 10-K and Form 10-Q, as applicable, filed with the U.S.
Securities and Exchange 

 

10

 

Commission.  The parties stipulate that the forgoing is a
reasonable area restriction because the area identified is the market area with
respect to which Employee will help the Company provide its products and
services, help analyze, and/or receive access to Confidential Information.

 

(b)           Protective Covenants and
Restrictions.  Employee
agrees that the following protective covenants are reasonable and necessary for
the protection of the Company’s legitimate business interests, do not create
any undue hardship on Employee, and are not contrary to the public interest:

 

(i)            Non-compete.  Employee expressly covenants and agrees that,
during the Employment Term and for 12 months following termination of
Employee’s employment with the Company for any reason, he will not engage,
directly or indirectly, in and he will not and will cause his Affiliates not
to, directly or indirectly, own, manage, operate, join, control or participate
in or be connected with, or loan money to or sell or lease equipment to, any
Competing Business in the Restricted Area, other than pursuant to (A) any
oil and gas properties (I) owned by Employee as of the Effective Date
hereof or (II) acquired by Employee after the Effective Date pursuant to
inheritance, bequest or the laws of descent or distribution, or (B) any
awards or other interests held by Employee, as of the Effective Date hereof or
acquired thereafter, under any Incentive Plan. 
In the event of Employee’s termination of employment by the Company for
Cause or by the Employee without Good Reason, this Section 7(b)(i) shall
cease to apply as of Employee’s Date of Termination, unless the Company
continues to pay Employee his Base Salary in effect as of the Date of Termination
for 12 months following termination of Employee’s employment.

 

(ii)           Non-solicitation.  Employee further expressly covenants and
agrees that during the Employment Term and for 24 months following termination
of Employee’s employment with the Company for any reason, he will not and he
will cause his Affiliates not to (A) cause, solicit, induce or encourage
any individual who, on the Date of Termination, is an employee of the Company
or its Affiliates to leave such employment or hire, employ or otherwise engage
any such individual (other than employees of the Company or its Affiliates who
respond to general advertisements for employment in newspapers or other
periodicals of general circulation), or (B) cause, induce or encourage any
actual or material prospective client, customer, supplier, landlord, lessor, or
licensor of the Company or its Affiliates to terminate or modify any such
actual or prospective relationship that exists on the Date of Termination.

 

(c)           Permitted Ownership.  Notwithstanding any of the foregoing or
anything else to the contrary in this Agreement, (i) Employee may own, for
investment purposes only, up to 5% of the outstanding stock or other equity
securities of any publicly held corporation or other entity whose stock or
equity securities are either listed on a national securities exchange or on the
NASDAQ National Market System, if Employee is not otherwise affiliated with
such corporation or entity and (ii) Employee is permitted to engage in the
endeavors set forth on Exhibit A attached hereto.

 

(d)           Reasonableness.  Employee and the Company agree and
acknowledge that the limitations as to time, geographical area and scope of
activity to be restrained as set forth in this Section 7 are the
result of arm’s-length bargaining, are fair and reasonable, and do not 

 

11

 

impose any greater restraint
than is necessary to protect the legitimate business interests of the Company
in light of (i) the nature and wide geographic scope of the Company’s
operations; (ii) Employee’s level of control over and contact with the
Company’s business in the Restricted Area; (iii) the fact that the Company’s
business is conducted throughout the Restricted Area; and (iv) the amount
of compensation that Employee is receiving in connection with the performance
of his duties hereunder.

 

(e)           Relief and Enforcement.  Employee hereby represents to the Company
that he has read and understands, and agrees to be bound by, the terms of this Section 7.  It is the desire and intent of the parties
hereto that the provisions of this Section 7 be enforced to the
fullest extent permitted under applicable law, whether now or hereafter in
effect.  However, to the extent that any
part of this Section 7 may be found invalid, illegal or
unenforceable for any reason, it is intended that such part shall be
enforceable to the extent that a court of competent jurisdiction shall
determine that such part, if more limited in scope, would have been
enforceable, and such part shall be deemed to have been so written and the
remaining parts shall as written be effective and enforceable in all
events.  Employee and the Company further
agree and acknowledge that, in the event of a breach or threatened breach of
any of the provisions of this Section 7, the Company shall be
entitled to immediate injunctive relief, as any such breach would cause the
Company irreparable injury for which it would have no adequate remedy at
law.  Nothing herein shall be construed
so as to prohibit the Company from pursuing any other remedies available to it
hereunder, at law or in equity, for any such breach or threatened breach.

 

(f)            Consulting and Litigation
Assistance.  Employee
agrees that, during the period following Employee’s Date of Termination during
which Employee remains subject to the non-compete provisions of Section 7(b)(i) above,
upon request from the Company, Employee will assist the Company in a consulting
capacity and/or cooperate with the Company and its Affiliates in the defense of
any claims or actions that may be made by or against the Company or any of its
Affiliates that affect Employee’s prior areas of responsibility, except if
Employee’s reasonable interests are materially adverse to the Company or its
Affiliates in such claim or action. 
Notwithstanding anything to the contrary in the foregoing sentence, in
the event the Company requests Employee’s assistance and/or cooperation
pursuant to this Section 7(f), Employee shall not be required to
devote more than five (5) hours per month to assisting the Company
pursuant to this Section 7(f); provided, that if, at the
request of the Company, the Employee agrees to devote in excess of five (5) hours
per month to assisting the Company pursuant to this Section 7(f), then
the Company will compensate Employee for each additional hour of assistance in
excess of five (5) hours at an hourly rate of $250 per hour.

 

8.             Release
of Claims.  Notwithstanding any other provision in this
Agreement to the contrary, in consideration for receiving the severance
benefits described in Sections 5(b), 5(c)(iii), 5(c)(iv),
5(d)(i)C and/or 5(d)(i)D, as applicable, Employee hereby agrees
to execute (and not revoke) a general release of claims against the Company and
its Affiliates (excluding claims for indemnification, claims for coverage under
officer and director policies, and claims as a stockholder of the
Company).  If Employee fails to properly
execute and deliver such release (or revokes the release), Employee agrees that
Employee shall not be entitled to receive the severance benefits described in Sections 5(b),
5(c)(iii), 5(c)(iv), 5(d)(i)C and/or 5(d)(i)D, as
applicable.  For purposes of this
Agreement, a release shall be considered to have been executed 

 

12

 

by
Employee if it is signed by Employee’s legal representative, in the case of
Employee’s Disability, or on behalf of Employee’s estate in the case of
Employee’s death.

 

9.             General
Provisions.

 

(a)           Amendments and Waiver.  The terms and provisions of this Agreement
may not be modified or amended, nor may any of the provisions hereof be waived,
temporarily or permanently, except pursuant to a written instrument executed by
the party to be bound by such modification or amendment.  The failure of any party to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.

 

(b)           Withholding.  The Company shall be entitled to withhold
from any compensation, benefits, or amounts payable under this Agreement all
federal, state, local or other taxes as may be required pursuant to any law or
governmental regulation or ruling.

 

(c)           Severability.  It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. 
Accordingly, if any particular provision of this Agreement shall be
adjudicated by a court of competent jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.  Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.

 

(d)           Entire Agreement.  This Agreement constitutes the entire
agreement of the parties with regard to the subject matter hereof, and contains
all the covenants, promises, representations, warranties and agreements between
the parties with respect to employment of Employee by the Company.  Without limiting the scope of the preceding
sentence, all understandings and agreements preceding the date of execution of
this Agreement and relating to the subject matter hereof are hereby null and
void and of no further force and effect.

 

(e)           Successors and Assigns.  Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, permitted assigns, heirs and
personal representatives and estates, as the case may be.  Anything contained herein to the contrary
notwithstanding, unless otherwise expressly provided in this Agreement, neither
this Agreement nor any right or obligation hereunder of any party may be
assigned or delegated without the prior written consent of the other party
hereto; provided, however, that the Company may assign this
Agreement to any of its Affiliates. 
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any person or legal entity other than the parties
hereto and their respective successors and permitted assigns.

 

13

 

(f)            Notices.  For purposes of this Agreement, notices and
all other communications provided for herein shall be in writing and shall be
deemed to have been duly given (i) when received, if delivered personally
or by courier, (ii) on the date receipt is acknowledged, if delivered by
certified mail, postage prepaid, return receipt requested, or (iii) one
day after transmission, if sent by facsimile transmission with confirmation of
transmission, as follows:

 

	
  If to Employee, at:

  	
  700 Rockmead, Suite 159

  
	
   

  	
  Kingwood, TX 77336

  
	
   

  	
   

  
	
  If to the Company, at

  	
  c/o Paul Latham

  
	
   

  	
  6 Desta Drive, Suite 6500

  
	
   

  	
  Midland, TX 79705

  

 

or to such other address as
either party may furnish to the other in writing in accordance herewith, except
that notices or changes of address shall be effective only upon receipt.

 

(g)           Construction.  Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates.  The
language used in this Agreement shall be deemed to be the language chosen by
the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.   The word “including”
means “including, without limitation.”

 

(h)           Governing Law.  The provisions of this agreement shall be
governed by and construed in accordance with the laws of the State of Texas,
without giving effect to any choice of law or conflicting provision or rule.

 

(i)            Mutual Contribution.  The parties to this Agreement have mutually
contributed to its drafting. 
Consequently, no provision of this Agreement shall be construed against
any party on the grounds that such party drafted the provision or caused it to
be drafted.

 

[Signature Page Follows]

 

14

 

IN WITNESS WHEREOF, the
parties hereto have executed this Employment Agreement as of the Effective
Date.

 

 

	
   

  	
  CLAYTON WILLIAMS ENERGY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ L. Paul Latham

  
	
   

  	
  Name:

  	
  Paul Latham

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Patrick C. Reesby

  
	
   

  	
  Patrick C. Reesby

  
				

 

SIGNATURE PAGE TO EMPLOYMENT AGREEMENT

 

 

EXHIBIT A

 

PERMITTED ENDEAVORS

 

Management of the 1/3rd mineral interest owned by Clayton W. Williams, Jr.,
covering lands situated in Jefferson Davis Parish, LA and shaded in red on the
following plat:

 

[Map depicting acreage in
Jefferson Davis PH, LA]

 

As compensation for the
management of these minerals, Mr. Williams grants me the option to
participate in wells drilled on the minerals (or on lands unitized with these
minerals) with a working interest equal to 5% of his 33.33% (or a net working
interest of 1.66%) in any such wells.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00170-of-00352.parquet"}]]