-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TsxehZK08AxJkKOeWZ90EXr9oLfyglRyDDtuSUr1W5Z4riWNInfKSCtj6l24rk8R 51zrJbZF9/fmV9yRWHVfEw== 0001104659-05-057059.txt : 20051121 0001104659-05-057059.hdr.sgml : 20051121 20051121171723 ACCESSION NUMBER: 0001104659-05-057059 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20051121 DATE AS OF CHANGE: 20051121 GROUP MEMBERS: CLAJON HOLDINGS, INC. GROUP MEMBERS: CLAYTON WILLIAMS PARTNERSHIP, LTD. GROUP MEMBERS: CWPLCO, INC. FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WILLIAMS CLAYTON W CENTRAL INDEX KEY: 0000908287 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: SIX DESTA DRIVE SUITE 3000 CITY: MIDLAND STATE: TX ZIP: 79705 MAIL ADDRESS: STREET 1: 6 DESTA DR STREET 2: STE 3000 CITY: MIDLAND STATE: TX ZIP: 79705 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CLAYTON WILLIAMS ENERGY INC /DE CENTRAL INDEX KEY: 0000880115 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752396863 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-45053 FILM NUMBER: 051218867 BUSINESS ADDRESS: STREET 1: SIX DESTA DR STREET 2: STE 6500 CITY: MIDLAND STATE: TX ZIP: 79705 BUSINESS PHONE: 9156826324 MAIL ADDRESS: STREET 1: SIX DESTA DRIVE STREET 2: STE 6500 CITY: MIDLAND STATE: TX ZIP: 79705 SC 13D/A 1 a05-20697_1sc13da.htm BENEFICIAL OWNERSHIP OF 5% OR MORE

	UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549
	SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 9)*

CLAYTON WILLIAMS ENERGY, INC.

(Name of Issuer)

COMMON STOCK, $.10 PAR VALUE

(Title of Class of Securities)

96949010

(CUSIP Number)

CLAYTON W. WILLIAMS, JR., PRESIDENT
CLAYTON WILLIAMS ENERGY, INC.
SIX DESTA DRIVE, SUITE 6500
MIDLAND, TEXAS 79705
(915) 682-6324

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

NOVEMBER 11, 2005

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 96949010

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Clayton W. Williams, Jr.

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			ý
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization United States

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power 1,774,198

			8.	Shared Voting Power 4,226,330

			9.	Sole Dispositive Power 1,791,744

			10.	Shared Dispositive Power 4,208,784

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 6,000,528

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 49.7%

	14.	Type of Reporting Person (See Instructions) IN

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Clayton Williams Partnership, Ltd. Tax ID No. 75-2477608

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			ý
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) BK

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Texas

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power —

			8.	Shared Voting Power 4,150,447

			9.	Sole Dispositive Power —

			10.	Shared Dispositive Power 4,150,447

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4,150,447

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 38.4%

	14.	Type of Reporting Person (See Instructions) PN

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) Clajon Holdings, Inc. Tax ID No. 75-1776495

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			ý
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power —

			8.	Shared Voting Power 4,150,447

			9.	Sole Dispositive Power —

			10.	Shared Dispositive Power 4,150,447

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4,150,447

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 38.4%

	14.	Type of Reporting Person (See Instructions) CO

	1.	Names of Reporting Persons. I.R.S. Identification Nos. of above persons (entities only) CWPLCO, Inc. Tax ID No. 75-25703587

	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			ý
		(b)			o

	3.	SEC Use Only

	4.	Source of Funds (See Instructions) OO

	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) o

	6.	Citizenship or Place of Organization Delaware

Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power —

			8.	Shared Voting Power 4,150,447

			9.	Sole Dispositive Power —

			10.	Shared Dispositive Power 4,150,447

	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 4,150,447

	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) o

	13.	Percent of Class Represented by Amount in Row (11) 38.4%

	14.	Type of Reporting Person (See Instructions) CO

INTRODUCTION.

The following is an amendment (this “Amendment”) to that certain Schedule 13D filed by the reporting persons filing this statement (collectively, the “Reporting Persons”), being Clayton W. Williams, Jr. (“Mr. Williams”), Clayton Williams Partnership, Ltd. (“Williams Partnership”), Clajon Holdings, Inc. (“Holdings”) and CWPLCO, Inc. (“CWPLCO”), or their predecessors as follows:

Original Schedule 13D	June 4, 1993
Amendment 1	September 2, 1993
Amendment 2	January 12, 1994
Amendment 3	April 3, 1995
Amendment 4	October 19, 1995
Amendment 5	May 1, 1996
Amendment 6	November 19, 1996
Amendment 7	September 30, 1999
Amendment 8	April 19, 2002

(collectively, the “Original 13D, as amended”), to reflect changes in beneficial ownership of shares of Common Stock, $0.10 par value (the “Common Stock”), of Clayton Williams Energy, Inc. (the “Issuer”) by the Reporting Persons. The changes in beneficial ownership reported herein are the result of shares of Common Stock purchased by Williams Partnership in a negotiated transaction.

Only those items of Schedule 13D, or portions thereof, being amended are included in this Amendment. Except as expressly amended and modified by this Amendment, the Original 13D, as amended, remains unchanged and in full force and effect.

Item 3.

Source and Amount of Funds or Other Consideration

On November 11, 2005 and November 14, 2005, Williams Partnership acquired 259,000 shares and 10,338 shares, respectively, of Common Stock of the Issuer. The aggregate purchase price for such shares was $8,861,459 and was financed with the proceeds of a loan from JPMorgan Chase Bank, N.A. to Williams Partnership pursuant to that certain Revolving Credit Promissory Note attached hereto as Exhibit 7.13.

Since the date of Amendment No. 8 to Schedule 13D filed by the Reporting Persons, Mr. Williams has acquired net beneficial ownership of 1,020,364 shares of Common Stock in addition to the beneficial ownership reflected in Amendment No. 8. Of those additional shares, 269,338 are shares acquired by Williams Partnership described above, 700,000 are shares covered by stock options held by Mr. Williams which were issued and became exercisable after Amendment No. 8, 60,084 are shares issued to Mr. Williams in lieu of cash salary under the Issuer’s Executive Incentive Stock Compensation Plan and in a series of private placements and 4,251 are shares acquired for Mr. Williams’ account in the Issuer’s 401(k) Plan and Trust. Mr. Williams’ change in beneficial ownership of 1,020,364 shares of Common Stock takes into account dispositions of 13,309 shares of Common Stock to family members of Mr. Williams.

Item 4.	Purpose of Transaction
The purpose of the acquisition of shares of Common Stock by Williams Partnership described in Item 3 was to maintain Mr. Williams’ position as a principal stockholder of, and to increase his personal investment in, the Issuer. Following the acquisition described in Item 3, Mr. Williams beneficially owns, either individually or through his affiliates, approximately 49.7% of the Issuer’s outstanding shares of Common Stock (determined as if the shares Mr. Williams has the right to acquire within 60 days are outstanding). Mr. Williams is also Chairman of the Board of Directors and Chief Executive Officer of the Issuer. As a result, Mr. Williams has significant influence in matters voted on by the Issuer’s stockholders, including the election of board members, and in management decisions. Mr. Williams actively participates in all aspects of the Issuers’ business and has a significant impact on both its business strategy and daily operations. Subject to the factors discussed below, the Reporting Persons may purchase additional Common Stock in the open market or otherwise. The Reporting Persons intend to review on a continuing basis various factors relating to their investments in the Issuer, including the Issuer’s business and prospects, the price and availability of Common Stock, subsequent developments affecting the Issuer, other investment and business opportunities available to them and general stock market and economic conditions. Based on these factors, any Reporting Person may decide to pursue or abandon negotiations to purchase additional Common Stock, or may determine to sell all or part of its investment in the Issuer.

Item 5.	Interest in Securities of the Issuer
(a) The aggregate number of shares of Common Stock beneficially owned, through shared control of voting and disposition, by the group consisting of Mr. Williams, Williams Partnership, Holdings and CWPLCO is 4,150,447 shares, which constitutes approximately 38.4% of the issued and outstanding shares of Common Stock. Those 4,150,447 shares are owned of record by Williams Partnership (3,955,663 shares, 36.6%), and CWPLCO (194,784 shares, 1.8%). Additionally, Mr. Williams beneficially owns an additional 1,850,081 shares of Common Stock, including 1,250,500 shares which Mr. Williams has the right to acquire within 60 days hereof through the exercise of stock options. Therefore, Mr. Williams’ total beneficial ownership is 6,000,528 shares of Common Stock, constituting approximately 49.7% of the total outstanding shares of Common Stock (determined as if the shares Mr. Williams has the right to acquire within 60 days are outstanding). The aggregate number of shares of Common Stock beneficially owned by each of the other persons named in Item 2 of the Original 13D, as amended, is as follows: (1) L. Paul Latham, 7,464 shares, including 6,750 shares which Mr. Latham has the right to acquire beneficial ownership within 60 days hereof through the exercise of stock options; (2) T. Mark Tisdale, 10,331 shares, including 3,100 shares which Mr. Tisdale has the right to acquire beneficial ownership within 60 days hereof through the exercise of stock options; (3) Mel G. Riggs, 10,075 shares, including 7,888 shares which Mr. Riggs has the right to acquire within 60 days hereof through the exercise of stock options. The number of shares beneficially owned by each of these three persons, taken individually or as a whole, constitute less than 1% of the total issued and outstanding shares of Common Stock. (b) Mr. Williams, Williams Partnership, Holdings and CWPLCO share the power to vote or to direct the vote and the power to dispose or direct the disposition of all 4,150,447 shares of Common Stock beneficially held by them as a group as described in paragraph (a) of this Item 5. With respect to the 1,850,081 additional shares of Common Stock which Mr. Williams beneficially owns or has the right to acquire, as described in paragraph (a) of this Item 5, Mr. Williams has the sole power to vote and sole

power to dispose of 1,774,198 of those shares and the sole power to dispose of an additional 17,546 of those shares (the power to vote these 17,546 shares is held by the trustee of the Issuer’s 401(k) Plan and Trust). The remaining 58,337 shares are beneficially owned by Mr. Williams through his spouse, his children residing with him and a trust of which Mr. Williams is a trustee, and he shares the power to vote and the power to dispose of those shares. Each of the other persons identified in paragraph (a) of this Item 5 have the sole power to vote and the sole power to dispose of all of the shares beneficially owned by each of them as described in paragraph (a) of this Item 5, except for (i) shares held for the account of each of Mr. Latham (714 shares), Mr. Tisdale (3,159 shares) and Mr. Riggs (805 shares) in the Issuer’s 401(k) Plan and Trust, over which such persons hold dispositive power with the power to vote such shares held by the trustee of said 401(k) Plan and Trust, and (ii) 1,382 shares over which Mr. Riggs has a power of attorney and shares the power to vote and to dispose of those shares. (c) None. (d) None. (e) Not applicable.

Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
In connection with the Term Promissory Note described in Item 3 of this Schedule 13D, Williams Partnership entered into a Collateral Agreement attached hereto as Exhibit 7.14 pursuant to which Williams Partnership has pledged shares of Common Stock to secure the Term Promissory Note. In addition, Mr. Williams entered into a Guaranty pursuant to which Mr. Williams has agreed to guarantee the performance and payment of Williams Partnership’s obligations under the Term Promissory Note. The Collateral Agreement and Guaranty contain standard default provisions.

Item 7.	Material to Be Filed as Exhibits
7.13		Revolving Credit Promissory Note dated October 14, 2005 by and between Clayton Williams Partnership, Ltd. and JPMorgan Chase Bank, N.A.
7.14		Collateral Agreement dated October 14, 2005 by and between Clayton Williams Partnership, Ltd and JPMorgan Chase Bank, N.A.
7.15		Guaranty dated October 14, 2005 by Clayton W. Williams Jr. in favor of JPMorgan Chase Bank, N.A.

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

Date: November 21, 2005	/s/ Clayton W. Williams, Jr.
	Clayton W. Williams, Jr.


Date: November 21, 2005	Clayton Williams Partnership, Ltd.

	By:	CWPLCO, Inc.
		General Partner


	By:	/s/ L. Paul Latham
		L. Paul Latham, Vice President


Date: November 21, 2005	Clajon Holdings, Inc.

	By:	/s/ L. Paul Latham
		L. Paul Latham, Vice President


Date: November 21, 2005	CWPLCO, Inc.

	By:	/s/ L. Paul Latham
		L. Paul Latham, Vice President

EX-7.13 2 a05-20697_1ex7d13.htm REVOLVING CREDIT PROMISSORY NOTE

Exhibit 7.13

REVOLVING CREDIT PROMISSORY NOTE

(LIBOR/PRIME)

$15,000,000

Dated as of October 14, 2005

For value received, Clayton Williams Partnership, Ltd. (the “Borrower”) hereby promises to pay to the order of JPMorgan Chase Bank, N.A. (the “Bank”) at its office at 345 Park Avenue, New York, New York 10154-1002 for the account of the lending office of the Bank, the principal amount of each loan made by the Bank to the Borrower (the “Loans”), up to an aggregate principal amount of Fifteen Million Dollars ($15,000,000) (the “Commitment”) on July 14, 2006 (the “Final Maturity Date”).

The Borrower promises to pay interest on each Interest Payment Date on the unpaid balance of the principal amount of each such Loan from and including the date of such Loan to but excluding the date of its repayment at either (i) a floating rate per annum equal to the Prime Rate applicable to such Loan minus 0.50% (such Loan a “Prime Loan”), or (ii) a fixed rate per annum equal to the Adjusted Libor Rate applicable to such Loan plus 2.25% (such Loan a “Libor Loan”). After the occurrence of an Event of Default, principal shall bear interest from and including the date of such Event of Default until paid in full at a rate per annum equal to the Default Rate, such interest to be payable on demand. Interest shall be payable on the relevant Interest Payment Date and shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Prior to the Final Maturity Date, provided that no Event of Default has occurred, and subject to the terms of this Note, the Borrower may borrow, repay and reborrow under this Note, up to the aggregate principal amount of the Commitment.

All payments hereunder shall be made in lawful money of the United States and in immediately available funds. Any extension of time for the payment of the principal of this Note resulting from the due date falling on a non-Banking Day shall be included in the computation of interest. The date, amount, type and Interest Period of, and the interest rate with respect to, each Loan evidenced hereby and all payments of principal thereof shall be recorded by the Bank on its books and, at the discretion of the Bank prior to any transfer of this Note at any other time, may be endorsed by the Bank on a schedule. Any such endorsement shall be conclusive absent manifest error. The Bank may (but shall not be obligated to) debit the amount of any payment under this Note that is not made when due to any deposit account of the Borrower with the Bank. The Borrower waives presentment, notice of dishonor, protest and any other notice or formality with respect to this Note.

1. Definitions. The terms listed below shall be defined as follows:

“Adjusted Libor Rate” shall mean the Libor Rate for such Loan divided by one minus the Reserve Requirement.

“Banking Day” shall mean any day on which commercial banks are not authorized or required to close in New York City and whenever such day relates to a Libor Loan or notice with respect to any Libor Loan, a day on which dealings in U.S. dollar deposits are also carried out in the London interbank market.

“Default Rate” means a rate per annum equal to: (a) if a Prime Loan, a floating rate of 2% above the rate of interest thereon (including any margin); (b) if a Libor Loan, a fixed rate of 2% above the rate of interest in effect thereon (including any margin) at the time of default until the last day of the Interest Period thereof and, thereafter, a floating rate of 2% above the rate of interest for a Prime Loan (including any margin).

“Event of Default” means an event described in Section 7.

“Facility Documents” shall mean this Note and any other documents, instruments, or agreements delivered as security or collateral for, or a guaranty of, the Loans, or in connection with, or as support for, any of the foregoing, whether by the Borrower or a Third Party, and any updates or renewals thereof.

“Interest Payment Date” shall mean (i) the last Banking Day of each calendar month for Prime Loans, (ii) the last Banking Day of each calendar quarter and on the last day of the Interest Period with respect to Libor Loans (and for any Libor Loan with an Interest Period longer than three months, every three months); and (iii) on any payment of principal.

“Interest Period” shall mean (i) with respect to a Prime Loan, the period commencing on the date such Prime Loan is made and ending on the earlier of the Final Maturity Date or the date recorded by the Bank on its books or if such day is not a Banking Day, then on the immediately succeeding Banking Day, and (ii) with respect to a Libor Loan, the period commencing on the date such Libor Loan is made and ending on the numerically corresponding day One, Two, Three or Six calendar months thereafter, as recorded by the Bank on its books, or if such day is not a Banking Day, then on the immediately succeeding Banking Day; provided that if such Banking Day would fall in the next calendar month, such Interest Period shall end on the immediately preceding Banking Day; and provided, further, that each such Interest Period which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month. No Interest Period may extend beyond the Final Maturity Date.

“Libor Rate” shall mean the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) quoted by the Bank at approximately 11:00 a.m. London time (or as soon thereafter as practicable) two Banking Days prior to the first day of such Loan for the offering by the Bank to leading banks in the London interbank market of U.S. dollar deposits having a term comparable to such Loan and in an amount comparable to the principal amount of such Loan.

“Main Office” shall mean the main office of the Bank, currently located at 1111 Polaris Parkway, Columbus, Ohio 43240.

“Prime Rate” shall mean the rate of interest per annum announced from time to time by the Bank as its prime rate. Each change in the Prime Rate shall be effective from and including the date the change is announced as being effective. The Prime Rate is a reference rate and may not be the Bank’s lowest rate.

“Regulation D” shall mean Regulation D of the Board of Governors of the Federal Reserve System.

“Regulatory Change” shall mean any change after the date of this Note in United States federal, state or municipal laws or any foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, including the Bank, of or under any United States federal, state or municipal laws or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

“Reserve Requirement” shall mean, for any Libor Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during the term of such Loan under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion U.S. dollars, or as otherwise established by the Board of Governors of the Federal Reserve System and any other banking authority to which the Bank is subject, against “Eurocurrency liabilities” (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (x) any category of liabilities which includes deposits by reference to which the Libor Rate is to be determined or (y) any category of extensions of credit or other assets which include Libor Loans. The Reserve Requirement shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Third Party” shall mean any party liable with respect to, or otherwise granting support for, this Note, whether by guaranty, subordination, grant of security or otherwise.

2. Borrowings, Conversions, Renewals and Prepayments. (a) The Borrower shall give the Bank irrevocable notice of each borrowing request by 12:00 noon New York City time three (3) Banking Days prior to each requested borrowing of a Libor Loan and by 12:00 noon New York City time on the date of each requested borrowing of a Prime Loan; provided that no Libor Loan shall be in a minimum amount less than $500,000; provided, further, that no Prime Loan shall be in an amount less than $30,000. Subject to the provisions of this Note, the Borrower shall have the right to (i) convert one type of Loan into another type of Loan on the last day of the Interest Period with respect to a Libor Loan or at any time for a Prime Loan, or (ii) renew any Libor Loan as a Libor Loan on the last day of the Interest Period with respect to such Libor Loan; provided that the Borrower shall give the Bank irrevocable notice by 12:00 noon New York City time three Banking Days prior to conversion into or renewal as a Libor Loan, and by 12:00 noon New York City time on or before the date of conversion into a Prime Loan. If the Borrower shall fail to give notice to the Bank of the renewal of any Libor Loan as provided herein, such Libor Loan shall automatically become a Prime Loan on the last day of the Interest Period thereof; provided that the Bank may renew such Loan as a Libor Loan for an Interest Period equal to that then ending, provided that no such renewal shall be made if the number of months in the renewal period is greater than six.

(b) The Borrower shall have the right to make prepayments of principal at any time or from time to time, provided that: (i) the Borrower shall give the Bank irrevocable notice of each prepayment by 12:00 noon New York City time three Banking Days prior to prepayment of a Libor Loan, and by 12:00 noon New York City time on the date of prepayment of a Prime Loan; (ii) Libor Loans may be prepaid prior to the last day of their Interest Period only if accompanied by payment of the additional compensation calculated in accordance with paragraph 5 below; (iii) all prepayments of Libor Loans shall be in a minimum amount equal to the lesser of $100,000 or the unpaid principal amount of this Note; and (iv) all prepayments of Prime Rate Loans shall be in a minimum amount equal to the lesser of $30,000 or the unpaid principal amount of this Note.

3. Additional Costs. (a) If as a result of any Regulatory Change which (i) changes the basis of taxation of any amounts payable to the Bank under the Note (other than taxes imposed on the overall net income of the Bank or the lending office by the jurisdictions in which the Main Office of the Bank or the lending office are located) or (ii) imposes or modifies any reserve, special deposit, deposit insurance or assessments, minimum capital, capital ratios or similar requirements relating to any extension of credit or other assets of, or any deposits with or other liabilities of the Bank, or (iii) imposes any other condition affecting this Note, the Bank determines (which determination shall be conclusive absent manifest error) that the cost to it of making or maintaining a Libor Loan is increased or any amount received or receivable by the Bank under this Note is reduced, then the Borrower will pay to the Bank on demand an additional amount that the Bank determines will compensate it for the increased cost or reduction in amount.

(b) Without limiting the effect of the foregoing provisions of this Section 3 (but without duplication), the Borrower shall pay to the Bank from time to time on request such amounts as the Bank may determine to be necessary to compensate the Bank for any costs which it determines are attributable to the maintenance by it or any of its affiliates pursuant to any law or regulation of any jurisdiction or any interpretation, directive or request (whether or not having the force of law and whether in effect on the date of this Note or thereafter) of any court or governmental or monetary authority of capital in respect of the Loans hereunder (such compensation to include, without limitation, an amount equal to any reduction in return on assets or equity of the Bank to a level below that which it could have achieved but for such law, regulation, interpretation, directive or request).

4. Unavailability, Inadequacy or Illegality of Libor Rate. Anything herein to the contrary notwithstanding, if the Bank determines (which determination shall be conclusive) that:

(a) quotations of interest rates for the relevant deposits referred to in the definition of Libor Rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for a Libor Loan; or

(b) the definition of Libor Rate does not adequately cover the cost to the Bank of making or maintaining a Libor Loan; or

(c) as a result of any Regulatory Change (or any change in the interpretation thereof) adopted after the date hereof, the Main Office of the Bank or the lending office is subject to any taxes, reserves, limitations, or other charges, requirements or restrictions on any claims of such office on non-United States residents (including, without limitation, claims on non-United States offices or affiliates of the Bank) or in respect of the excess above a specified level of such claims; or

(d) it is unlawful for the Bank or the lending office to maintain any Libor Loan at the Libor Rate;

THEN, the Bank shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, any existing Libor Loan shall bear interest as a Prime Loan and the Bank shall make no Libor Loans.

5. Certain Compensation. If for any reason there is a principal payment of a Libor Loan on a date other than the last day of the applicable Interest Period with respect thereto (whether by prepayment, acceleration, conversion or otherwise), the Borrower will pay to the Bank such amount or amounts as shall be sufficient (in the reasonable opinion of the Bank) to compensate the Bank for any loss, cost or expense which the Bank determines is attributable to such payment.

Without limiting the generality of the preceding paragraph, such compensation shall include an amount equal to the excess, if any of (i) the amount of interest which otherwise would have accrued on the principal amount so paid for the period from the date of such payment to the last day of the applicable Interest Period with respect thereto at a rate per annum equal to the sum of the then applicable Libor Rate (plus any margin) over (ii) the interest component of the amount the Bank would have bid in the Libor interbank market for deposits in U.S. dollars of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by the Bank).

6. Representations. The Borrower represents and warrants that:

(a) the Facility Documents constitute the legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their terms, except as the enforcement hereof and thereof may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights generally and subject to the applicability of general principles of equity;

(b) the execution, delivery and performance by the Borrower of the Facility Documents and all other documents contemplated hereby or thereby, do not and will not (i) conflict with or constitute a breach of, or default under, or require any consent which has not been received under, or result in the creation of any lien, charge or encumbrance upon the property or assets of the Borrower pursuant to any other agreement or instrument (other than any pledge of or security interest granted in any collateral pursuant to any Facility Document) to which the Borrower is a party or is bound or by which its properties may be bound or affected; or (ii) violate any provision of any law, rule, regulation (including, without limitation, Regulation U of the Federal Reserve Board), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Borrower;

(c) no consent, approval or authorization of, or registration, declaration or filing with, any governmental authority or other person or entity is required as a condition to or in connection with the due and valid execution, delivery and performance by the Borrower of any Facility Document;

(d) there are no actions, suits, investigations or proceedings pending or threatened at law, in equity, in arbitration or by or before any other authority involving or affecting: (i) the Borrower that, if adversely determined, are likely to have a material adverse effect on the prospects or condition of the Borrower; (ii) any material part of the assets or properties of the Borrower or any part of the collateral (if any) under any Facility Document; or (iii) any of the transactions contemplated in the Facility Documents. There are currently no material judgments entered against the Borrower and the Borrower is not in default with respect to any judgment, writ, injunction, order, decree or consent of any court or other judicial authority, which default is likely to have or has had a material adverse effect on the prospects or condition of the Borrower; and

(e) it is duly organized, validly existing and in good standing under the laws of the State of Texas, (ii) it is governed solely in accordance with the Amended and Restated Agreement of Limited Partnership dated as of March 1, 1995, as amended (the “Partnership Agreement”), (iii) it has delivered to the Bank a true, complete and accurate copy of the Partnership Agreement, together with all amendments or modifications thereto, and (iv) it has all requisite power and authority to execute, deliver and perform its obligations under this Note, all of which are in furtherance of its purposes and necessary to the conduct of its business.

Each borrowing request by the Borrower under this Note shall constitute a representation and warranty that the statements above are true and correct both on the date of such request and on the date of the borrowing. Each borrowing request shall also constitute a representation that no Event of Default under this Note has occurred and is continuing or would result from such borrowing.

7. Events of Default. If any of the following events of default shall occur (each an “Event of Default”):

(a) the Borrower shall fail to pay the principal of, or interest on, this Note, or any other amount payable under this Note, as and when due and payable;

(b) any representation or warranty made or deemed made by the Borrower in this Note or by the Borrower or any Third Party in any Facility Document to which it is a party, or in any certificate, document, opinion or financial or other statement furnished under or in connection with a Facility Document, shall prove to have been incorrect in any material respect on or after the date hereof;

(c) the Borrower or any Third Party shall fail to perform or observe any term, covenant or agreement contained in any Facility Document on its part to be performed or observed;

(d) the Borrower or any Third Party shall fail to pay when due any of its indebtedness (including, but not limited to, indebtedness for borrowed money) or any interest or premium thereon when due (whether by scheduled maturity, acceleration, demand or otherwise);

(e) the Borrower or any Third Party: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as its debts become due; (ii) shall make an assignment for the benefit of creditors, or petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for its or a substantial part of its assets; (iii) shall commence any proceeding under any law relating to bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have had any such petition filed, or any such proceeding shall have been commenced against it, in which an adjudication is made or order for relief is entered or which remains undismissed for a period of 30 days; (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of its property; or (vi) takes any action effectuating, approving or consenting to any of the events described in clauses (i) through (v);

(f) the Borrower or any Third Party shall be determined or adjudged incompetent or otherwise incapacitated by a court of competent jurisdiction, die, dissolve or for any reason cease to be in existence or shall merge or consolidate; or if the Borrower or any Third Party is a partnership, limited liability partnership or limited liability company, any general partner, partner or member, respectively, shall die, dissolve or for any reason cease to be in existence or cease to be a partner or member, as the case may be, or shall merge or consolidate;

(g) the Borrower or any Third Party is involved in a proceeding which may result in a forfeiture of all or a substantial part of the Borrower’s or any Third Party’s assets or a material judgment is entered against the Borrower or any Third Party;

(h) there is, in the opinion of the Bank, a material adverse change in the business, prospects or financial condition of the Borrower;

(i) any Facility Document granting a security interest at any time and for any reason shall cease to create a valid and perfected first priority security interest in and to the property purported to be subject to the Facility Document or ceases to be in full force and effect or is declared null and void, or the validity or enforceability of any Facility Document is contested by any party to the Facility Document, or such signatory to the Facility Document denies it has any further liability or obligation under the Facility Document;

(j) the Borrower incurs or permits to exist any direct or contingent debt, including guarantees or otherwise becoming contingently liable for the debts or other obligations of any entity, other than debt hereunder or debt as disclosed to the Bank on or before the date hereof;

(k) the Borrower fails to furnish any financial information that the Bank may reasonably request from time to time promptly upon the Bank’s request; or

(l) the Borrower refinances its outstanding indebtedness secured by the Borrower’s interest in the property known as Buildings Number 5 and 7, The Terrace, Austin, Texas, and fails to remit proceeds to the Bank, within 10 days, in the amount necessary to repay all amounts payable under this Note;

THEN, the Bank may, by notice to the Borrower, declare the Commitment terminated and the unpaid principal amount of this Note, accrued interest thereon and all other amounts payable under this Note due and payable whereupon the same shall become and be forthwith due and payable without presentment, demand, protest, notice of acceleration or intention to accelerate or further notice of any kind, all of which are hereby expressly waived by the Borrower, provided that in the case of an Event of Default described in clause (e) above, the Commitment shall be immediately terminated and the unpaid principal amount of this Note, accrued interest and other amounts payable under this Note shall be immediately due and payable.

Bank may also set off any amounts due hereunder against, in any order, any debt owing by the Bank to the Borrower, including but not limited to, any deposit account, which right is hereby granted by the Borrower to the Bank, and exercise any and all other rights under any of the Facility Documents, at law, in equity or otherwise.

8. Expenses. The Borrower agrees to reimburse the Bank on demand for all costs, expenses and charges (including, without limitation, fees and charges of counsel and costs allocated by internal legal counsel) in connection with the preparation or modification of the Facility Documents, performance or enforcement of the Facility Documents, or the defense or prosecution of any rights of the Bank pursuant to any Facility Documents.

9. Jurisdiction. To the maximum extent not prohibited by applicable law, the Borrower hereby irrevocably: (i) submits to the jurisdiction of any New York state or United States federal court sitting in New York City over any action or proceeding arising out of this Note; (ii) agrees that all claims in respect of such action or proceeding may be held and determined in such New York state or federal court; (iii) agrees that any action or proceeding brought against the Bank may be brought only in a New York state or United States federal court sitting in New York county; (iv) consents to the service of process in any such action or proceeding in either of said courts by mailing thereof by the Bank by registered or certified mail, postage prepaid, to the Borrower at its address specified on the signature page hereof, or at the Borrower’s most recent mailing address as set forth in the records of the Bank; and (v) waives any defense on the basis of an inconvenient forum.

The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit or proceeding in such state and hereby waives any defense on the basis of an inconvenient forum. Nothing herein shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against the Borrower or its property in the courts of any other jurisdiction.

10. Waiver of Jury Trial.

THE BORROWER AND THE BANK EACH WAIVE ANY RIGHT TO JURY TRIAL.

11. Miscellaneous. (a) The provisions of this Note are intended to be severable. If for any reason any provisions of this Note shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions thereof in any jurisdiction.

(b) No amendment, modification, supplement or waiver of any provision of this Note nor consent to departure by the Borrower therefrom shall be effective unless the same shall be in writing and signed by the Borrower and the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(c) No failure on the part of the Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

(d) As used herein, the term Borrower shall include all signatories hereto, if more than one. In such event, the obligations, representations and warranties of the Borrower hereunder shall be joint and several. This Note shall be binding on the Borrower and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns, except that the Borrower may not delegate any of its obligations hereunder without the prior written consent of the Bank. With the consent of the Borrower, not to be unreasonably withheld, the Bank may assign all or a portion of its rights and obligations under this Note; provided that such consent shall not be required (i) at any time that an Event of Default has occurred and is continuing, (ii) in connection with any assignment to an affiliate of the Bank, or (iii) in connection with any pledge or assignment to secure obligations to a Federal Reserve Bank.

(e) Anything herein to the contrary notwithstanding, the obligations of the Borrower under this Note shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to the Bank limiting rates of interest which may be charged or collected by the Bank.

(f) Unless otherwise agreed in writing, notices shall be given to the Bank and the Borrower at their telecopier numbers (confirmed by telephone to their telephone numbers) or addresses set forth in the signature page of this Note, or such other telecopier (and telephone) number or address communicated in writing by either such party to the other. Notices to the Bank shall be effective upon receipt.

(g) The obligations of the Borrower under Sections 3, 5, 8, 9 and 10 hereof shall survive the repayment of the Loans.

(h) Each reference herein to the Bank shall be deemed to include its successors, endorsees, and assigns, in whose favor the provisions hereof shall inure. Each reference herein to the Borrower shall be deemed to include the heirs, executors, administrators, legal representatives, successors and assigns of the Borrower, all of whom shall be bound by the provisions hereof.

12. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws principles, and with the laws of the United States of America as applicable.

Address for notices to the
Bank:

JPMorgan Chase Bank, N.A.		JPMorgan Chase Bank, N.A.
345 Park Avenue		300 Crescent Street, 4^th Floor
New York, New York 10154-1002		Dallas, Texas 75201
Attn: Private Banking		Attn: David Sweezey
Telecopier: (212) 464-2505		Telecopier: (214) 758-2152
Telephone: (212) 464-0930		Telephone: (214) 758-2240

CLAYTON WILLIAMS PARTNERSHIP, LTD.
By CWPLCO, Inc., its General Partner


By:
Clayton W. Williams, Jr.
Its: President

Address for notices:

6 Desta Drive, Suite 6500

Midland, TX 70705

Telecopier:

Telephone:

EX-7.14 3 a05-20697_1ex7d14.htm COLLATERAL AGREEMENT

Exhibit 7.14

COLLATERAL AGREEMENT

For value received, and in consideration of one or more loans, letters of credit or other financial accommodations (including, without limitation, entry into derivative or foreign exchange transactions) extended by JPMORGAN CHASE BANK, N.A. or any of its subsidiaries or affiliates (the “Bank”), to CLAYTON WILLIAMS PARTNERSHIP, LTD. (the “Obligor”, and, if more than one, collectively, the “Obligor”), the undersigned and the Bank agree as follows:

1. Definitions.

“Account Assets” means all Deposits, Securities, securities entitlements and any other assets held in trust, or in any custody, subcustody, safekeeping, investment management accounts, or other accounts of the undersigned with the Bank or any other custodian, trustee, Intermediary or Clearing System (all of which shall be considered “financial assets” under the UCC).

“Account Control Agreement” means a securities account control agreement or other similar agreement with any Intermediary and shall specifically include any master securities account control agreement among the Bank and any of its affiliates, as amended from time to time.

“Clearing System” means the Depository Trust Company (“DTC”), Cedel Bank, societe anonyme, the Euroclear system and such other clearing or safekeeping system that may from time to time be used in connection with transactions relating to or the custody of any Securities, and any depository for any of the foregoing.

“Collateral” means: (i) the Deposits, Securities and Account Assets that are listed on Exhibit A; (ii) all additions to, and proceeds, renewals, investments, reinvestments and substitutions of, the foregoing, whether or not listed on Exhibit A; and (iii) all certificates, receipts and other instruments evidencing any of the foregoing.

“Deposits” means the deposits of the undersigned with the Bank or with any other Intermediary (whether or not held in trust, or in any custody, subcustody, safekeeping, investment management accounts, or other accounts of the undersigned with the Bank or any other Intermediary).

“Independent Collateral Requirement” means, with respect to any transaction of the type listed in Exhibit B hereto, the amount set forth in Exhibit B hereto in respect of such transaction.

“Intermediary” means (i) any party acting as a financial intermediary or securities intermediary, including, without limitation, affiliates of the Bank that are parties to any Account Control Agreement from time to time.

“ISDA Master Agreement” means any Master Agreement (Multicurrency – Cross Border) (“1992 Master Agreement form”) or any 2002 Master Agreement (“2002 Master Agreement form”) entered into or deemed entered into, now or hereafter, between the Bank and the Obligor, as may be amended, supplemented, or otherwise modified from time to time.

“Liabilities” means indebtedness, obligations and liabilities of any kind of the Obligor or of the undersigned to the Bank, now or in the future, absolute or contingent, direct or indirect, joint or several, due or not due, arising by operation of law or otherwise, and costs and expenses incurred by the Bank in connection with the Collateral, this Agreement or any Liability Document (including, without limitation, as of any date, the amount, if any, determined by the Bank that would be payable to the Bank by the Obligor in accordance with the provisions of Section 6(e)(i)(4) in the case of the 1992 Master Agreement form or Section 6(e)(i) in the case of the 2002 Master Agreement form, in each case as though such date were an Early Termination Date in respect of all Transactions outstanding under the ISDA Master Agreement, the Obligor were the Defaulting Party and, in the case of 1992 Master Agreement form, notwithstanding whether Loss or Market Quotation is the applicable payment measure, Loss were the applicable payment measure (terms used in this parenthetical that are not otherwise defined in this Agreement have the meanings set forth in the applicable form of ISDA Master Agreement)).

“Liability Document” means any instrument, agreement or document evidencing, governing, or executed or delivered in connection with the Liabilities.

“Securities” means the stocks, bonds and other instruments and securities, whether or not held in trust or in any custody, subcustody, safekeeping, investment management accounts or other accounts of the undersigned with the Bank or any other Intermediary and securities entitlements with respect to the foregoing.

“UCC” means the Uniform Commercial Code in effect in the State of New York. Unless the context otherwise requires, all terms used in this Agreement which are defined in the UCC will have the meanings stated in the UCC.

2. Grant of Security Interest.

As security for the payment of all the Liabilities, the undersigned pledges, transfers and assigns to the Bank and grants to the Bank a security interest in and right of setoff against, the Collateral and hereby agrees to be bound by the terms of any Account Control Agreement among the Bank and its affiliates, as amended from time to time.

3. Agreements of the Undersigned and Rights of the Bank.

The undersigned agrees as follows and irrevocably authorizes the Bank to exercise the rights listed below, at its option, for its own benefit, either in its own name or in the name of the undersigned, and appoints the Bank as its attorney-in-fact to take all action permitted under this Agreement.

(a) Deposits: The Bank may: (i) renew the Deposits on terms and for periods the Bank deems appropriate; (ii) demand, collect, and receive payment of any monies or proceeds due or to become due under the Deposits; (iii) execute any instruments required for the withdrawal or repayment of the Deposits; and (iv) in all respects deal with the Deposits as the owner; provided that, as to (ii) through (iv), until the occurrence of a Default (as defined below), the Bank will only take that action if, in its judgment, failure to take that action would impair its rights under this Agreement or diminish its operational control over Collateral.

(b) Securities: The Bank may: (i) transfer to the account of the Bank any Securities whether in the possession of, or registered in the name of, any Clearing System or held otherwise; (ii) transfer to the account of the Bank with any Federal Reserve Bank any Securities held in book entry form with any such Federal Reserve Bank; and (iii) transfer to the name of the Bank or its nominee any Securities registered in the name of the undersigned and held by the Bank and complete and deliver any necessary stock powers or other transfer instruments; provided that until the occurrence of a Default, the Bank will only take that action if, in its judgment, failure to take that action would impair its rights under this Agreement or diminish its operational control over Collateral, or if such Securities are held in a custody, investment management or similar account.

The undersigned grants to the Bank an irrevocable proxy to vote any and all Securities and give consents, waivers and ratifications in connection with those Securities upon and after the occurrence of a Default.

All payments, distributions and dividends in securities, property or cash shall be paid directly to and, at the discretion of the Bank, retained by the Bank and held by it, until applied as provided in this Agreement, as additional Collateral; provided that until the occurrence of a Default, interest on Deposits and cash dividends on Securities paid in the ordinary course will be paid to the undersigned.

(c) General: The Bank may, in its name, or in the name of the undersigned: (i) execute and file financing statements under the UCC or any other filings or notices necessary or desirable to create, perfect or preserve its security interest, all without notice (except as required by applicable law and not waivable) and without liability except to account for property actually received by it; (ii) demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to, any item of the Collateral (but shall be under no obligation to do so); (iii) make any notification (to the issuer of any certificate or Security, or otherwise, including giving any notice of exclusive control to the Intermediary) or take any other action in connection with the perfection or preservation of its security interest or any enforcement of remedies, and retain any documents evidencing the title of the undersigned to any item of the Collateral; and (iv) issue entitlement orders with respect to any of the Collateral.

The undersigned agrees that it will not file or permit to be filed any termination statement with respect to the Collateral or any financing or like statement with respect to the Collateral in which the Bank is not named as the sole secured party, consent or be a party to any Account Control Agreement to which the Bank is not also a party or sell, assign, or otherwise dispose of, grant any option with respect to, or pledge, or otherwise encumber the Collateral; provided, however, that until the occurrence of a Default, the undersigned may buy and sell Collateral subject to the other provisions of this Agreement, including but not limited to, Section 4. At the request of the Bank the undersigned agrees to do all other things which the Bank may deem necessary or advisable in order to perfect and preserve its security interest, perfection and operational control and to give effect to the rights granted to the

Bank under this Agreement or enable the Bank to comply with any applicable laws or regulations. Notwithstanding the foregoing, the Bank does not assume any duty with respect to the Collateral and is not required to take any action to collect, preserve or protect its or the undersigned’s rights in any item of the Collateral. The undersigned releases the Bank and agrees to hold the Bank harmless from any claims, causes of action and demands at any time arising with respect to this Agreement, the use or disposition of any item of the Collateral or any action taken or omitted to be taken by the Bank with respect thereto. The undersigned releases each Intermediary and agrees to hold each Intermediary harmless from any claims, causes of action and demands at any time arising with respect to any instruction made by Bank to any Intermediary purporting to be made under this Agreement or any Account Control Agreement, it being understood that no Intermediary shall have any duty to investigate Bank’s right to issue any such instruction or any other matter related to any such instruction.

The rights granted to the Bank pursuant to this Agreement are in addition to the rights granted to the Bank in any custody, investment management, trust, Account Control Agreement or similar agreement. In case of conflict between the provisions of this Agreement and of any other such agreement, the provisions of this Agreement will prevail.

4. Loan Value of the Collateral.

The undersigned agrees that at all times the sum of the amount of the Liabilities plus the aggregate amount of any Independent Collateral Requirements may not exceed the aggregate Loan Value of the Collateral. The undersigned will, at the Bank’s option, either supplement the Collateral or make, or cause to be made, any payment under the Liabilities to the extent necessary to ensure compliance with this provision or the Bank may liquidate Collateral to the extent necessary to ensure compliance with this provision. “Loan Value” means the value assigned by the Bank from time to time, in its sole reasonable discretion, to each item of the Collateral. The Loan Value of the Collateral that consists of Clayton Williams Energy, Inc., stock shall be zero at any time during which the trading price or the bid price (whichever is lower) of the stock is less than $15.00 per share. The Bank retains the right to determine the eligibility of the Collateral.

5. Currency Conversion.

For calculation purposes, any currency in which the Collateral is denominated (the “Collateral Currency”) will be converted into the currency of the Liabilities (the “Liability Currency”) at the spot rate of exchange for the purchase of the Liability Currency with the Collateral Currency quoted by the Bank at such place as the Bank deems appropriate (or, if no such rate is quoted on any relevant date, estimated by the Bank on the basis of the Bank’s last quoted spot rate) or another prevailing rate that the Bank deems more appropriate.

6. Representations and Warranties.

The undersigned represents and warrants (which representations and warranties will be deemed to be repeated by the undersigned on each date on which a transaction governed by the ISDA Master Agreement is entered into and on which Collateral is transferred to the Bank) that:

(a) this Agreement constitutes the legal, valid and binding obligation of the undersigned, enforceable against the undersigned in accordance with its terms, except as the enforcement hereof and thereof may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights generally and subject to the applicability of general principles of equity;

(b) the execution, delivery and performance by the undersigned of this Agreement and all other documents contemplated hereby, do not and will not (i) conflict with or constitute a breach of, or default under, or require any consent which has not been received under, or, except as contemplated hereby, result in the creation of any lien, charge or encumbrance upon the property or assets of the undersigned pursuant to any other agreement or instrument to which the undersigned is a party or is bound or by which its properties may be bound or affected; or (ii) violate any provision of any law, rule, regulation (including, without limitation, Regulation U of the Federal Reserve Board), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the undersigned;

material part of the assets or properties of the undersigned or any part of the Collateral; or (iii) any of the transactions contemplated in this Agreement. There are currently no material judgments entered against the undersigned and the undersigned is not in default with respect to any judgment, writ, injunction, order, decree or consent of any court or other judicial authority, which default is likely to have or has had a material adverse effect on the prospects or condition of the undersigned;

(e) in the event the undersigned is not an Obligor, in executing and delivering this Agreement the undersigned has (i) without reliance on the Bank or any information received from the Bank and based upon such documents and information it deems appropriate, made an independent investigation of the transactions contemplated hereby and the Obligor, the Obligor’s business, assets, operations, prospects and condition, financial or otherwise, and any circumstances which may bear upon such transactions, the Obligor or the obligations and risks undertaken herein with respect to the Liabilities; (ii) adequate means to obtain from the Obligor on a continuing basis information concerning the Obligor and the Bank has no duty to provide to the undersigned any such information; (iii) full and complete access to the Liability Documents and any other documents executed in connection with the Liability Documents; (iv) not relied and will not rely upon any representations or warranties of the Bank not embodied herein or any acts heretofore or hereafter taken by the Bank (including but not limited to any review by the Bank of the affairs of the Obligor), and (v) determined that this Agreement will benefit the undersigned directly or indirectly;

(f) it is duly organized, validly existing and in good standing under the laws of the State of Texas, (ii) it is governed solely in accordance with the Amended and Restated Agreement of Limited Partnership dated as of March 1, 1995, as amended (the “Partnership Agreement”), (iii) it has delivered to the Bank a true, complete and accurate copy of the Partnership Agreement, together with all amendments or modifications thereto, and (iv) it has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, all of which are in furtherance of its purposes and necessary to the conduct of its business;

(g) the undersigned is the sole owner of the Collateral and the Collateral is free of all encumbrances except for the security interest in favor of the Bank created by this Agreement;

(h) as to Deposits and Account Assets, the undersigned has not withdrawn, canceled, been repaid or redeemed all or any part of any Deposits or Account Assets other than in compliance with this Agreement and there is no such pending application; and

(i) as to Securities, the Securities have been duly authorized and are fully paid and non-assessable, there are no restrictions on pledge of the Securities by the undersigned nor on sale of the Securities by the Bank (whether pursuant to securities laws or regulations or shareholder, lock-up or other similar agreements) and the Securities are fully marketable by the Bank as pledgee, without regard to any holding period, manner of sale, volume limitation, public information or notice requirements.

7. Default.

Each of the following is an event of default (“Default”):

(i) any sum payable on any of the Liabilities is not paid when due; (ii) any representation and warranty of the undersigned or any party liable on or for any of the Liabilities (including but not limited to the Obligor, a “Liability Party”) in this Agreement or in any Liability Document shall prove to have been incorrect in any material respect on or after the date hereof; (iii) the undersigned or any Liability Party fails to perform or observe any term, covenant, or condition under this Agreement or under any Liability Document; (iv) any indebtedness of the undersigned or any Liability Party or interest or premium thereon is not paid when due (whether by scheduled maturity, acceleration, demand or otherwise); (v) the undersigned or any Liability Party: (a) is generally not, or is unable to, or admits in writing its inability to, pay its debts as its debts become due; (b) makes an assignment for the benefit of creditors, or petitions or applies to any tribunal for the appointment of a custodian, receiver or trustee for its or a substantial part of its assets; (c) commences any proceeding under any law relating to bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation; (d) has any such petition filed, or any such proceeding has been commenced against it, in which an adjudication is made or order for relief is entered or which remains undismissed for a period of 30 days; (e) has a receiver, custodian or trustee appointed for all or a substantial part of its property; or (f) takes any action effectuating, approving or consenting to any of the events described in this section (v); (vi) the undersigned or any Liability Party shall die, dissolve or for any reason cease to be in existence or merge or consolidate; or if the undersigned or any Liability Party is a partnership, limited liability partnership or limited liability company, any general partner, partner or member, respectively, shall die, dissolve or for any reason cease to be in existence or cease to be a partner or member, as the case may be, or shall merge or consolidate; (vii) the undersigned or any Liability Party is involved in a proceeding relating to, or which may result

in, a forfeiture of all or a substantial part of the undersigned’s or any Liability Party’s assets or a material judgment is entered against the undersigned or any Liability Party; (viii) there is, in the opinion of the Bank, a material adverse change in the business, prospects or financial condition of the undersigned or any Liability Party; or (ix) an Event of Default with respect to the Obligor has occurred and is continuing or an Early Termination Date has occurred or been designated as a result of an Event of Default with respect to the Obligor notwithstanding whether any such Event of Default would otherwise constitute a Default under subparts (i) through (viii) of this Section 7 (the terms Event of Default and Early Termination Date as used in this subpart (ix) have the respective meanings set forth in the ISDA Master Agreement).

8. Remedies.

On a Default, the Bank will have the rights and remedies under the UCC and the other rights granted to the Bank under this Agreement and may exercise its rights without regard to any premium or penalty from liquidation of any Collateral and without regard to the undersigned’s basis or holding period for any Collateral.

The Bank may sell in the Borough of Manhattan, New York City, or elsewhere, in one or more sales or parcels, at the price as the Bank deems best, for cash or on credit or for other property, for immediate or future delivery, any item of the Collateral, at any broker’s board or at public or private sale, in any reasonable manner permissible under the UCC (except that, to the extent permissible under the UCC, the undersigned waives any requirements of the UCC) and the Bank or anyone else may be the purchaser of the Collateral and hold it free from any claim or right including, without limitation, any equity of redemption of the undersigned, which right the undersigned expressly waives.

The Bank may also, in its sole discretion: (i) convert any part of the Collateral Currency into the Liability Currency; (ii) hold any monies or proceeds representing the Collateral in a cash collateral account in the Liability Currency or other currency that the Bank reasonably selects; (iii) invest such monies or proceeds on behalf of the undersigned; and (iv) apply any portion of the Collateral, first, to all costs and expenses of the Bank, second, to the payment of interest on the Liabilities and any fees or commissions to which the Bank may be entitled, third, to the payment of principal of the Liabilities, whether or not then due, and fourth, to the undersigned.

The undersigned will pay to the Bank all expenses (including attorneys’ fees and legal expenses incurred by the Bank and the allocated costs of its in-house counsel) in connection with the exercise of any of the Bank’s rights or obligations under this Agreement or the Liability Documents. The undersigned will take any action requested by the Bank to allow it to sell or dispose of the Collateral. Notwithstanding that the Bank may continue to hold Collateral and regardless of the value of the Collateral, the applicable Liability Party will remain liable for the payment in full of any unpaid balance of the Liabilities.

9. Jurisdiction.

To the maximum extent not prohibited by applicable law, the undersigned hereby irrevocably: (i) submits to the jurisdiction of any New York state or United States federal court sitting in New York City over any action or proceeding arising out of this Agreement;(ii) agrees that all claims in respect of such action or proceeding may be held and determined in such New York state or federal court; (iii) agrees that any action or proceeding brought against the Bank may be brought only in a New York state or United States federal court sitting in New York county; (iv) consents to the service of process in any such action or proceeding in either of said courts by mailing thereof by the Bank by registered or certified mail, postage prepaid, to the undersigned at its address specified on the signature page hereof, or at the undersigned’s most recent mailing address as set forth in the records of the Bank; and (v) waives any defense on the basis of inconvenient forum.

The undersigned agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit or proceeding in such state. Nothing herein shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against the undersigned or its property in the courts of any other jurisdiction.

10. Waiver of Jury Trial.

THE UNDERSIGNED AND THE BANK EACH WAIVE ANY RIGHT TO JURY TRIAL.

11. Notices.

Unless otherwise agreed in writing, notices may be given to the Bank and the undersigned at their telecopier numbers (confirmed by telephone to their telephone numbers) or addresses listed on the signature page of

this Agreement, or such other telecopier (and telephone) number or addresses communicated in writing by either party to the other. Notices to the Bank are effective on receipt.

12. Unconditional Obligations.

If the undersigned is not an Obligor, the undersigned’s obligations under this Agreement are absolute and unconditional irrespective of: (a) any change in the amount, time, manner or place of payment of, or in any other term of, all or any of the Liability Documents or the Liabilities, or any other amendment or waiver of or any consent to departure from any of the terms of any Liability Document or the Liabilities; (b) any release or amendment or waiver of, or consent to departure from, any other guaranty or support document, or any exchange, release or non-perfection of any item of the Collateral, for all or any of the Liability Documents or the Liabilities; (c) any present or future law, regulation or order of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend, restructure or otherwise affect any term of any Liability Document or the Liabilities; (d) without being limited by the foregoing, any lack of validity or enforceability of any Liability Document or the Liabilities; and (e) any other defense, setoff or counterclaim whatsoever (in any case, whether based on contract, tort or any other theory) with respect to the Liability Documents or the transactions contemplated thereby which might constitute a legal or equitable defense available to, or discharge of, the Obligor or a guarantor.

13. Miscellaneous.

(a) As used herein, the term undersigned shall include all signatories hereto, if more than one. In such event, the obligations, representations and warranties of the undersigned hereunder shall be joint and several. This Agreement shall be binding on the undersigned and its successors and assigns and shall inure to the benefit of the Bank and its successors and assigns, except that the undersigned may not delegate any of its obligations hereunder without the prior written consent of the Bank.

(b) No amendment or waiver of any provision of this Agreement nor consent to any departure by the undersigned will be effective unless it is in writing and signed by the undersigned and the Bank and will be effective only in that specific instance and for that specific purpose. No failure on the part of the Bank to exercise, and no delay in exercising, any right will operate as a waiver or preclude any other or further exercise or the exercise of any other right.

(c) The rights and remedies in this Agreement are cumulative and not exclusive of any rights and remedies which the Bank may have under law or under other agreements or arrangements with the undersigned or any Liability Party.

(d) The provisions of this Agreement are intended to be severable. If for any reason any provision of this Agreement is not valid or enforceable in whole or in part in any jurisdiction, that provision will, as to that jurisdiction, be ineffective to the extent of that invalidity or unenforceability without in any manner affecting the validity or enforceability in any other jurisdiction or the remaining provisions of this Agreement.

(e) The undersigned hereby waives presentment, notice of dishonor and protest of all instruments included in or evidencing the Liabilities or the Collateral and any other notices and demands, whether or not relating to those instruments.

(f) This Agreement is governed by and construed according to the law of the State of New York, without regard to the conflict of laws principles, and with the laws of the United States of America as applicable.

(g) This Agreement constitutes a Credit Support Document under the ISDA Master Agreement in respect of the Obligor.

(Signature page follows)

IN WITNESS WHEREOF, the undersigned has signed this Agreement as of this day of October, 2005.

ACCEPTED:

JPMorgan Chase Bank, N.A.

By:
	Name:
	Title:

Address for notices to the Bank:

JPMorgan Chase Bank, N.A.		JPMorgan Chase Bank, N.A.
345 Park Avenue		300 Crescent Street, 4^th Floor
New York, New York 10154-1002		Dallas, Texas 75201
Attn: Private Banking		Attn: David Sweezey
Telecopier: (212) 464-2505		Telecopier: (214) 758-2152
Telephone: (212) 464-0930		Telephone: (214) 758-2240

With a copy to:

JPMorgan Chase Bank, N.A.

270 Park Avenue, 41^st Floor

New York, New York 10017-2070

Attention: Legal Department – Derivatives Practice Group

Telecopier: (212) 270-3625

CLAYTON WILLIAMS PARTNERSHIP, LTD.

By CWPLCO, Inc., its General Partner

By:
Clayton W. Williams, Jr.
Its: President

Address for notices:

6 Desta Drive, Suite 6500

Midland, TX 70705

Telecopier:

Telephone:

EXHIBIT A

DESCRIPTION OF THE COLLATERAL

1. Deposits

Type of	Location
Deposit	(NY,	Account,
(CD, TD,	IBF-NY,	Contract or
etc.)	etc.)	Certificate No.

2. Stocks, Bonds and Other Instruments and Securities

Nature of Security		Number of	Certificate
or Obligation	Name of Issuer	Units	Number (if applicable)

Common Stock	Clayton Williams Energy, Inc.	600,000	CW5285

Common Stock	Clayton Williams Energy, Inc.	323,999	CW5735

3. All Assets Held or To Be Held in the Following Custody or Subcustody Accounts, Safekeeping Accounts, Investment Management Accounts and/or other account with Intermediary:

Account Number		(If Collateral is not held by the Bank or its affiliates, CONSULT LEGAL, Control Agreement required, and enter Name of Legal Entity holding Collateral here)

EXHIBIT B

“Independent Collateral Requirement” means, with respect to any transaction between the Bank and the Obligor, the amount as specified in writing for such transaction by the Bank to the Obligor or the undersigned; provided, however, that if the transaction is governed by the ISDA Master Agreement and an amount is not so specified, then the Independent Collateral Requirement shall be 20% of the Notional Amount (as defined in the definitions published by the International Swaps and Derivatives Association, Inc. (“ISDA”) that are applicable to such transaction) for such transaction; provided, further, that:

(i) if such transaction is an FX Transaction or Currency Option Transaction, the Independent Collateral Requirement shall be 10% of the USD amount involved in such transaction (provided, however, that if there is no USD amount involved in such a transaction, then 10% of the USD equivalent, as determined by the Bank in good faith, of the amount payable to the Bank at any time under such transaction (for this purpose, all Currency Option Transactions will be treated as Deliverable Currency Option Transactions and the amount payable to the Bank is determined on the basis that such Currency Option Transaction will be exercised)) (terms used in this subpart (i) and not otherwise defined in this Agreement have the meanings set forth in the 1998 FX and Currency Option Definitions as published by ISDA, the Emerging Market Traders Association and The Foreign Exchange Committee),

(ii) if such transaction is an Equity Option, the Independent Collateral Requirement shall be 30% of the Notional Amount of such transaction if a Notional Amount is involved and otherwise 30% of the product of the Strike Price times the Option Entitlement (if any) times the Number of Options of such transaction (terms used in this subpart (ii) and not otherwise defined in this Agreement have the meanings set forth in the 1996 Equity Derivatives Definitions as published by ISDA),

(iii) if such transaction is a transaction involving a Commodity, the Independent Collateral Requirement shall be an amount equal to 40% times the highest Notional Quantity for a Calculation Period (or if there is only one Calculation Period, the Total Notional Quantity) times the Specified Price on the Trade Date of such transaction (terms used in this subpart (iii) and not otherwise defined in this Agreement have the meanings set forth in the 1993 Commodity Derivatives Definitions, as supplemented by the 2000 Supplement to the 1993 Commodity Derivatives Definitions, as published by ISDA), and

(iv) if such transaction is a Swap Transaction, the Independent Collateral Requirement shall be 10% of the Notional Amount (provided, however, that if there is more than one Notional Amount, then 10% of the Notional Amount applicable to the Obligor) (terms used in this subpart (iv) and not otherwise defined in this Agreement have the meanings set forth in the 2000 ISDA Definitions as published by ISDA).

Except as otherwise provided, if any transaction involves more than one Notional Amount, the higher value will apply for purposes of this calculation. If in any case the relevant amount is not expressed in USD, the USD equivalent thereof, as determined by the Bank, shall be applicable for the purposes of determining the Independent Collateral Requirement.

EX-7.15 4 a05-20697_1ex7d15.htm GUARANTY

Exhibit 7.15

GUARANTY
(Limited)

GUARANTY dated as of October 14, 2005 made by the undersigned (individually, or if more than one, collectively, the “Guarantor”) in favor of JPMorgan Chase Bank, N.A., and/or any of its subsidiaries or affiliates (individually or collectively, as the context may require, the “Bank”).

PRELIMINARY STATEMENTS: The Bank has entered, or may from time to time enter, into agreements or arrangements with Clayton Williams Partnership, Ltd. (the “Borrower”) providing for credit extensions or financial accommodation to the Borrower of any kind whatsoever including, without limitation, the making of loans, advances or overdrafts, whether or not secured, discount or purchase of notes, securities or other instruments or property, creation of acceptances, issuance or confirmation of letters of credit, guaranties or indemnities, entering into foreign exchange or precious metals contracts or interest rate or currency swap or protection agreements, entering into any other derivative transactions under any ISDA Master Agreement or similar agreements between the Bank and the Borrower, or any other kind of lease, contract or agreement under which the Borrower may be indebted to the Bank in any manner (all of the foregoing agreements or arrangements being the “Facilities” and any writing or record evidencing, supporting, securing, or delivered in connection with a Facility, including but not limited to this Guaranty, and including as may subsequently be renewed, extended, amended, modified, substituted and/or replaced, being a “Facility Document”).

THEREFORE, in order to induce the Bank to extend credit or give financial accommodation under the Facilities, the Guarantor agrees (and if more than one, jointly and severally agrees) as follows:

Guaranty of Payments. For value received and in consideration of the Facilities extended by the Bank the Guarantor unconditionally and irrevocably guarantees to the Bank (a) performance and observance of every agreement and condition contained in any Facility Document to be performed or observed by the Borrower, and (b) payment of all sums now owing or which may in the future be owing by the Borrower under the Facilities, when the same are due and payable, whether on demand, at stated maturity, by acceleration or otherwise, and whether for principal, interest, fees, expenses, indemnification or otherwise (the “Liabilities”). The Liabilities include, without limitation, interest accruing after the commencement of a proceeding under bankruptcy, insolvency or similar laws of any jurisdiction at the rate or rates provided in the Facility Documents.

This Guaranty is a guaranty of payment and performance and not of collection only. The Bank shall not be required to exhaust any right or remedy or take any action against the Borrower or any other person or entity or any collateral. The Guarantor agrees that, as between the Guarantor and the Bank, the Liabilities may be declared to be due and payable for the purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any declaration as regards the Borrower and that in the event of a declaration or attempted declaration, the Liabilities shall immediately become due and payable by the Guarantor for the purposes of this Guaranty.

Guaranty Limit. Notwithstanding anything to the contrary set forth herein, for purposes of this Guaranty the Facilities of the Borrower guaranteed shall be limited to those arising under and in connection with the Term Promissory Note of the Borrower in the original principal amount of $15,000,000, dated of even date herewith, together with every renewal, extension, amendment, modification, substitution and/or replacement thereof, each of which together with this Guaranty and any other writing or record evidencing, supporting, securing or delivered in connection with the foregoing shall be considered a Facility Document for purposes of this Guaranty. The obligations of the Borrower to the Bank may at any time and from time to time exceed the liability of the Guarantor hereunder without impairing this Guaranty and the Guarantor and the Bank agree, as between themselves, that all payments and collections received by the Bank from any person or source shall be deemed to be applied first to the portion of the obligations of the Borrower to the Bank which are not guaranteed hereunder and last to the portion of such obligations which are guaranteed hereunder. The liability of the Guarantor hereunder is regardless of any liability of any co-guarantor under this Guaranty or any other agreement.

Guaranty Absolute. The Guarantor guarantees that the Liabilities shall be performed and paid strictly in accordance with the terms of the Facilities. The liability of the Guarantor under this Guaranty is absolute and unconditional irrespective of: (a) any change in the amount, time, manner or place of payment of, or in any other term of, all or any of the Facility Documents or Liabilities, or any other amendment or waiver of or any consent to departure from any of the terms of any Facility Document or Liability; (b) any release or amendment or waiver of, or consent to departure from, any other guaranty or support document, or any exchange, release or non-perfection of any collateral, for all or any of the Facility Documents or Liabilities; (c) any present or future law, regulation or order of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend, restructure or otherwise affect any term of any Facility Document or Liability; (d) without being limited by the foregoing, any lack of validity or enforceability of any Facility Document or Liability; and (e) any other defense, setoff or counterclaim whatsoever (in any case, whether based on contract, tort or any other theory) with respect to the Facility Documents or the transactions contemplated thereby which might constitute a legal or equitable defense available to, or discharge of, the Borrower or a guarantor.

Guaranty Irrevocable. This Guaranty is a continuing guaranty of all Liabilities now or hereafter existing under the Facilities and shall remain in full force and effect until payment in full of all Liabilities and other amounts payable under this Guaranty and until the Facilities are no longer in effect or, if earlier, when the Guarantor has given the Bank written notice that this Guaranty has been revoked; provided that any notice under this Section shall not release the Guarantor from any Liability, absolute or contingent, existing prior to such notice. Such notice shall be effective only after the Bank’s actual receipt of the notice at its address set forth below, and the Bank shall have had a reasonable time to act upon such notice at each of its offices or departments responsible for the Facilities.

Reinstatement. This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Liabilities is rescinded or must otherwise be returned by the Bank on the insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as though the payment had not been made.

Subrogation. The Guarantor shall not exercise any rights against the Borrower which it may acquire by way of subrogation, by any payment made under this Guaranty or otherwise, until all the Liabilities have been paid in full and the Facilities are no longer in effect. If any amount is paid to the Guarantor on account of subrogation rights under this Guaranty at any time when all the Liabilities have not been paid in full, the amount shall be held in trust for the benefit of the Bank and shall be promptly paid to the Bank to be credited and applied to the Liabilities, whether matured or unmatured or absolute or contingent, in accordance with the terms of the Facilities.

Subordination. Without limiting the Bank’s rights under any other agreement, any liabilities owed by the Borrower to the Guarantor in connection with any extension of credit or financial accommodation by the Guarantor to or for the account of the Borrower, including but not limited to interest accruing at the agreed contract rate after the commencement of a bankruptcy or similar proceeding, are hereby subordinated to the Liabilities, and such liabilities of the Borrower to the Guarantor, if the Bank so requests, shall be collected, enforced and received by the Guarantor as trustee for the Bank and shall be paid over to the Bank on account of the Liabilities but without reducing or affecting in any manner the liability of the Guarantor under the other provisions of this Guaranty.

Representations and Warranties. The Guarantor represents and warrants that:

(a) this Guaranty constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as the enforcement hereof and thereof may be limited by bankruptcy, insolvency, or other similar laws affecting the enforcement of creditors’ rights generally and subject to the applicability of general principles of equity;

(b) the execution, delivery and performance by the Guarantor of this Guaranty and all other documents contemplated hereby or thereby, do not and will not (i) conflict with or constitute a breach of, or default under, or require any consent under, or result in the creation of any lien, charge or encumbrance upon the property or assets of the Guarantor pursuant to any other agreement or instrument (other than any pledge of or security interest granted in any collateral pursuant to any Facility Document) to which the Guarantor is a party or is bound or by which its properties may be bound or affected; or (ii) violate any provision of any law, rule, regulation (including, without limitation, Regulation U of the Federal Reserve Board), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to the Guarantor;

(d) there are no actions, suits, investigations or proceedings pending or threatened at law, in equity, in arbitration or by or before any other authority involving or affecting: (i) the Guarantor that, if adversely determined, are likely to have a material adverse effect on the prospects or condition of the Guarantor; (ii) any material part of the assets or properties of the Guarantor or any part of the collateral (if any) under any Facility Document; or (iii) any of the transactions contemplated in this Guaranty. There are currently no material judgments entered against the Guarantor and the Guarantor is not in default with respect to any judgment, writ, injunction, order, decree or consent of any court or other judicial authority, which default is likely to have or has had a material adverse effect on the prospects or condition of the Guarantor; and

(e) in executing and delivering this Guaranty, the Guarantor has (i) without reliance on the Bank or any information received from the Bank and based upon such documents and information it deems appropriate, made an independent investigation of the transactions contemplated hereby and the Borrower, the Borrower’s business, assets, operations, prospects and condition, financial or otherwise, and any circumstances which may bear upon such transactions, the Borrower or the obligations and risks undertaken herein with respect to the Liabilities; (ii) adequate means to obtain from the Borrower on a continuing basis information concerning the Borrower and the Bank has no duty to provide to the Guarantor any such information; (iii) full and complete access to the Facility Documents and any other documents executed in connection with the Facility Documents; (iv) not relied and will not rely upon any representations or warranties of the Bank not embodied herein or any acts heretofore or hereafter taken by the Bank (including but not limited to any review by the Bank of the affairs of the Borrower), and (v) determined that this Guaranty will benefit the Guarantor directly or indirectly.

Remedies Generally. The rights, powers and remedies granted to the Bank in this Guaranty are cumulative and in addition to any rights, powers and remedies to which the Bank may be entitled either by operation of law or in equity or pursuant to any other document or instrument delivered or from time to time to be delivered to the Bank in connection with the Facilities.

Setoff. The Guarantor agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim the Bank may otherwise have, the Bank shall be entitled, at its option, to offset balances (general or special, time or demand, provisional or final) held by it for the account of the Guarantor at any of the Bank’s offices, in U.S. dollars or in any other currency, against any amount payable by the Guarantor under this Guaranty which is not paid when due (regardless of whether such balances are then due to the Guarantor), in which case it shall promptly notify the Guarantor thereof; provided that the Bank’s failure to give such notice shall not affect the validity thereof.

Formalities. The Guarantor waives presentment, notice of dishonor, protest, notice of acceptance of this Guaranty or incurrence of any Liability and to the extent not prohibited by applicable law any other formality with respect to any of the Liabilities or this Guaranty.

Amendments and Waivers. No amendment or waiver of any provision of this Guaranty, nor consent to any departure by the Guarantor therefrom, shall be effective unless it is in writing and signed by the Bank, and then the waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Bank to exercise, and no delay in exercising, any right under this Guaranty shall operate as a waiver or preclude any other or further exercise thereof or the exercise of any other right.

Expenses. The Guarantor shall reimburse the Bank on demand for all costs, expenses and charges (including without limitation fees and charges of external legal counsel for the Bank and costs allocated by its internal legal department) incurred by the Bank in connection with the preparation, performance or enforcement of this Guaranty. The obligations of the Guarantor under this Section shall survive the termination of this Guaranty.

Assignment. This Guaranty shall immediately be binding on, and shall inure to the benefit of the Guarantor, the Bank and their respective heirs, successors and assigns; provided that the Guarantor may not assign or transfer its rights or obligations under this Guaranty.

Captions. The headings and captions in this Guaranty are for convenience only and shall not affect the interpretation or construction of this Guaranty.

Governing Law, Etc. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES, AND WITH THE LAWS OF THE UNITED STATES OF AMERICA AS APPLICABLE. THE GUARANTOR CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF THE STATE OR FEDERAL COURTS LOCATED IN THE CITY OF NEW YORK. SERVICE OF PROCESS BY THE BANK IN CONNECTION WITH ANY SUCH DISPUTE SHALL BE BINDING ON THE GUARANTOR IF SENT TO THE GUARANTOR BY REGISTERED MAIL AT THE ADDRESS SPECIFIED BELOW OR AS OTHERWISE SPECIFIED BY THE GUARANTOR FROM TIME TO TIME. THE GUARANTOR WAIVES ANY RIGHT THE GUARANTOR MAY HAVE TO JURY TRIAL IN ANY ACTION RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY AND FURTHER WAIVES ANY RIGHT TO INTERPOSE ANY COUNTERCLAIM RELATED TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY SUCH ACTION. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER FROM SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OF A JUDGMENT, EXECUTION OR OTHERWISE), THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.

Integration; Effectiveness. This Guaranty alone sets forth the entire understanding of the Guarantor and the Bank relating to the guarantee of the Liabilities and constitutes the entire contract between the parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. This Guaranty shall become effective when it shall have been executed and delivered by the Guarantor to the Bank. Delivery of an executed signature page of this Guaranty by telecopy shall be effective as delivery of a manually executed signature page of this Guaranty.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly executed and delivered as of the date first above written.

Address for notices to the Bank:

JPMorgan Chase Bank, N.A.		JPMorgan Chase Bank, N.A.
345 Park Avenue		300 Crescent Street, 4^th Floor
New York, New York 10154-1002		Dallas, Texas 75201
Attn: Private Banking		Attn: David Sweezey
Telecopier: (212) 464-2505		Telecopier: (214) 758-2152
Telephone: (212) 464-0930		Telephone: (214) 758-2240


Name: Clayton W. Williams, Jr.

Address for notices:

6 Desta Drive, Suite 6500

Midland, TX 70705

Telecopier:

Telephone:

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Under the Securities Exchange Act of 1934 (Amendment No. 9)*

GUARANTY (Limited)

Under the Securities Exchange Act of 1934
(Amendment No. 9)*

GUARANTY
(Limited)