<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CLAYTON WILLIAMS ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
CLAYTON WILLIAMS ENERGY, INC.
Six Desta Drive, Suite 6500
Midland, Texas 79705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1997
- --------------------------------------------------------------------------------
To Our Stockholders:
The Annual Meeting of Stockholders of Clayton Williams Energy, Inc., a Delaware
corporation, will be held at the Pay Zone Room, Plaza Club, Six Desta Drive,
Midland, Texas, on Wednesday, May 21, 1997, at 10:00 A.M., for the following
purposes:
1. To elect two directors for a term of three years in accordance with
the Certificate of Incorporation of the Company.
2. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 27, 1997, are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Midland, Texas By Order of the Board
April 10, 1997 Mel G. Riggs
Secretary
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE>
CLAYTON WILLIAMS ENERGY, INC.
Six Desta Drive, Suite 6500
Midland, Texas 79705
PROXY STATEMENT
This proxy statement and related proxy are being mailed to stockholders
of Clayton Williams Energy, Inc. (the "Company") on or about April 10, 1997,
in connection with the solicitation by the Company of proxies to be used at
the Annual Meeting of Stockholders of the Company to be held at the Pay Zone
Room, Plaza Club, Six Desta Drive, Midland, Texas, on Wednesday, May 21,
1997, at 10:00 A.M., and at all adjournments thereof.
Any person giving a proxy has the power to revoke it at any time before
it is voted by filing with the Secretary of the Company an instrument
revoking the proxy, by delivering a properly executed proxy of a later date
or attending the meeting and voting in person. The Company will bear the
costs of solicitation of proxies. The Company may also reimburse persons
holding stock in their names or in those of their nominees for their
reasonable expenses in sending proxy material to their principals and
obtaining their proxies. The solicitation is being made by mail and may also
be made by telephone or by telegraph by officers, directors and regular
employees of the Company, who will receive no additional compensation
therefor. Total expenses of the solicitation are expected to be nominal.
Stockholders of record at the close of business on March 27, 1997, are
entitled to notice of and to vote at the meeting. At the close of business
on such date, the Company had 8,945,389 shares of Common Stock $.10 par value
per share (the "Common Stock") outstanding, each share being entitled to one
vote. Shares held by the Company's 401(k) Plan & Trust will be voted by the
Plan Trustee, as provided by the Plan.
Properly executed proxies will be voted in accordance therewith, or if
no direction is indicated thereon, (i) in favor of the nominees for Director
named herein and (ii) in the discretion of the persons appointed as proxies
upon any other business that may properly come before the meeting or any
adjournment thereof. With respect to the election of Directors, a
stockholder may, by properly completing the enclosed proxy, vote in favor of
all nominees or withhold his or her votes as to all nominees or as to
specific nominees. Directors will be elected by the affirmative vote of a
plurality of the shares represented at the meeting in person or by proxy and
entitled to vote on the election of Directors. The Company's Certificate of
Incorporation prohibits cumulative voting in the election of Directors. All
other matters properly coming before the meeting will be decided by the
affirmative vote of a majority of the shares represented at the meeting in
person or by proxy and entitled to vote on such matters, except as otherwise
required by law or by the Company's Certificate of Incorporation or bylaws.
The votes will be counted by one or more inspectors appointed by the
Board of Directors, who will determine, among other things, the number of
votes necessary for the stockholders to take action in accordance with the
foregoing requirements and the votes withheld or cast for and against each
matter. All properly executed proxies and ballots, regardless of the nature
of vote or the absence of a vote indication (but not including broker
non-votes), are counted in determining the number of shares represented at
the meeting. Neither broker non-votes nor abstentions are counted as
affirmative votes, in whole or in part.
1
<PAGE>
PROPOSAL NO. 1 ELECTION OF TWO DIRECTORS
The Board of Directors is composed of three classes of members. One
class of Directors is elected each year to hold office for a three-year term
and until successors of such class are duly elected and qualified. Except
where the authority to do so has been withheld, it is the intention of the
persons named in the proxy to vote to elect Stanley S. Beard and Mel G. Riggs
as Directors for three-year terms. Each of the nominees has consented to
being named in the Proxy Statement and to serve, if elected, but if, for any
unforeseen cause, either of them should decline or be unable to serve, the
proxies will be voted to fill any vacancy so arising in accordance with the
discretionary authority of the persons named in the proxy.
With respect to the nominees for election, and Directors continuing in
office, information regarding age, positions with the Company or other
principal occupations for the past five years, other directorships and the
year each was initially elected a Director of the Company is as follows
(there are no family relationships among the following named persons):
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR THREE-YEAR TERM EXPIRING IN 2000
STANLEY S. BEARD, age 56, is a Director of the Company and a member of the
Compensation and Audit Committees of the Board of Directors. Mr. Beard has
served as a Director since September 1991. Mr. Beard has been an independent
oil and gas operator for over twenty years, and has been a consultant to Mr.
Williams periodically since 1968.
MEL G. RIGGS, age 42, is Senior Vice President and Chief Financial Officer of
the Company, having served in such capacities since September 1991. Mr.
Riggs has served as a Director since May 1994.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1998
CLAYTON W. WILLIAMS, age 65, is Chairman of the Board, President, Chief
Executive Officer and a Director of the Company, having served in such
capacities since September 1991. For more than fifteen years, Mr. Williams
has been the chief executive officer and director of (i) certain companies
previously controlled by Mr. Williams which were consolidated into the
Company in May, 1993 in connection with the Company's initial public offering
(the "Williams Companies"); and (ii) certain entities other than the Williams
Companies which are controlled directly or indirectly by Mr. Williams (the
"Williams Entities").
L. PAUL LATHAM, age 45, is Executive Vice President, Chief Operating Officer
and a Director of the Company, having served in such capacities since
September 1991. Mr. Latham also serves in various capacities with certain of
the Williams Entities.
2
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1999
WILLIAM P. CLEMENTS, age 79, is a Director of the Company and a member of the
Compensation and Audit Committees of the Board of Directors. Mr. Clements
was elected a Director in October 1991. Mr. Clements is a former Governor of
the State of Texas, having served two terms in such office from 1979 to 1983
and from 1987 to 1991 and has been engaged in private investments for more
than the past five years.
ROBERT L. PARKER, age 73, is a Director of the Company and a member of the
Compensation and Audit Committees of the Board of Directors. Mr. Parker was
elected a Director of the Company in October 1991. Mr. Parker is Chairman of
the Board of Parker Drilling Company, a publicly-owned corporation providing
contract drilling services, having served in such capacity for more than the
past five years. He also serves as a director of MAPCO, Inc., a diversified
energy company, Bank of Oklahoma Financial Corp. and Norwest Bank of Texas,
Kerrville, N. A.
3
<PAGE>
INFORMATION CONCERNING SECURITY OWNERSHIP
Under regulations of the Securities and Exchange Commission, persons who
have power to vote or dispose of shares of the Company, either alone or
jointly with others, are deemed to be beneficial owners of such shares. The
following table sets forth certain information regarding the beneficial
ownership of Common Stock as of March 27, 1997, by (i) each person who is the
beneficial owner of 5 percent or more of the outstanding Common Stock (based
upon copies of all Schedule 13Gs and 13Ds provided to the Company), (ii) each
Director of the Company and each nominee for Director, (iii) each executive
officer named in the Summary Compensation Table and (iv) all Officers and
Directors of the Company as a group. Because the voting or dispositive power
of certain shares listed in the following table is shared, the same
securities in such cases are listed opposite more than one name in the table
and the sharing of voting or dispositive power is described in the referenced
footnote. The total number of shares of Common Stock of the Company listed
below for directors and executive officers as a group eliminates such
duplication. Unless otherwise noted, the persons and entities named below
have sole voting and investment power with respect to the shares listed
opposite each of their names.
Amount and Nature of Percent
Name Beneficial Ownership of Class
---- -------------------- --------
Clayton Williams Partnership, Ltd. (1) 3,972,009 44.4%
CWPLCO, Inc. (1) 3,972,009 44.4%
Clayton W. Williams (1) 4,289,799 (2) 47.8%
Heartland Advisors, Inc. 708,600 (3) 7.9%
790 North Milwaukee Street
Milwaukee, WI 53202
L. Paul Latham 7,755 (4) *
Mel G. Riggs 5,951 (5) *
Stanley S. Beard 13,401 (6) *
William P. Clements 41,032 (6) *
Robert L. Parker 13,940 (6) *
All Officers and Directors as a group (10 persons) 4,446,452 (7) 49.3%
- ------------------
* Less than 1 percent of the shares outstanding.
(1) The mailing address of Clayton Williams Partnership, Ltd., CWPLCO,
Inc. and Mr. Williams is Six Desta Drive, Suite 3000, Midland, Texas
79705. Clayton Williams Partnership, Ltd. and CWPLCO, Inc. are
referred to collectively herein as the "Affiliated Holders". CWPLCO,
Inc. is the sole general partner of Clayton Williams Partnership,
Ltd. Mr. Williams shares voting and investment power with respect to
the shares owned by the Affiliated Holders.
(2) Includes (a) an aggregate of 3,972,009 shares owned by the Affiliated
Holders beneficially owned by Mr. Williams due to Mr. Williams'
control of the Affiliated Holders, (b) 3,888 shares owned by
Mr. Williams' spouse, (c) 588 shares owned by an estate administered
by Mr. Williams' spouse, (d) 216,311 shares owned directly by
Mr. Williams (including approximately 7,687 shares held in the
Company's 401(k) Plan & Trust over which Mr. Williams exercises
investment control), (e) 14,514 shares owned by three of Mr. Williams'
children residing with him, (f) 49,434 shares in trusts of which
4
<PAGE>
Mr. Williams is the Trustee and (g) the right to acquire beneficial
ownership through presently exercisable options to purchase 33,055
shares of Common Stock granted under the 1993 Stock Compensation Plan.
See "Executive Compensation."
(3) Represents shares owned by clients of Heartland Advisors, Inc.
(4) Includes (a) 414 shares held in the Company's 401(k) Plan & Trust over
which Mr. Latham exercises investment control and (b) the right to
acquire beneficial ownership through presently exercisable options to
purchase 7,341 shares of Common Stock granted under the 1993 Stock
Compensation Plan. See "Executive Compensation."
(5) Includes (a) 366 shares held in the Company's 401(k) Plan & Trust over
which Mr. Riggs exercises investment control, (b) 1,382 shares over
which Mr. Riggs exercises control under a Power of Attorney and (c)
the right to acquire beneficial ownership through presently
exercisable options to purchase 4,203 shares of Common Stock granted
under the 1993 Stock Compensation Plan. See "Executive Compensation."
(6) Includes, in the case of Messrs. Beard, Clements and Parker, the right
to acquire beneficial ownership through presently exercisable options
to purchase 5,000 shares each of Common Stock granted under the
Outside Directors Stock Option Plan. See "Board of Directors and
Committees."
(7) Includes all rights of directors and executive officers to acquire
beneficial ownership through presently exercisable options to purchase
shares of Common Stock granted under the Outside Directors Stock
Option Plan and the 1993 Stock Compensation Plan.
BOARD OF DIRECTORS AND COMMITTEES
As of the date of this Proxy Statement, compensation for non-employee
directors consists of an annual retainer fee of $10,000 plus a $5,000 fee for
each Board meeting attended, and a $1,000 fee for attending a committee
meeting held on a day other than the same day of a Board meeting. All three
non-employee directors serve on one or more committees of the Board. During
1996, all fees earned by non-employee directors were paid in Common Stock of
the Company under the terms of the Outside Directors Stock Compensation Plan,
which plan was terminated in January 1997. Effective January 1, 1997 as
compensation for service on the Board, employee directors will receive an
annual fee of $5,000 together with an additional $2,500 for each Board
meeting they attend.
The Company has adopted its Outside Directors Stock Option Plan in which
only those Directors who are not employed by the Company or any of its
affiliates, (collectively the "Outside Directors") are eligible to
participate. A total of 86,300 shares of Common Stock has been authorized and
reserved for issuance under the plan, subject to adjustments to reflect
changes in the Company's capitalization resulting from stock splits, stock
dividends and similar events. The plan provides that an option for 1,000
shares of Common Stock of the Company will be granted on January 1 of each
calendar year to each Outside Director in office on that date. The plan
further provides that (i) the exercise price of each option granted under the
plan may not be less than the fair market value of the Common Stock at the
date of grant of such option (ii) the exercise price must be paid in cash
upon exercise of such option, (iii) no option may be exercisable more than
ten years after the date of grant, and (iv) no option is transferable other
than by will or the laws of descent and distribution. In the event that a
participant in the plan ceases to be an Outside Director, other than by
reason of death, such participant may exercise an outstanding option at any
time within 90 days after such termination. In the event of the death of a
participant to whom any option has been granted pursuant to the plan, such
option may be exercised by the legatees of such participant or by his
personal representatives or distributees at any time within one year after
his death. Options granted under the plan are immediately exercisable and
expire not later than ten years from date of grant. Messrs. Beard, Clements
and
5
<PAGE>
Parker (who presently constitute all of the Outside Directors) each received
options under the Plan on January 1, 1995, January 1, 1996 and January 1,
1997, each option covering 1,000 shares, at option prices of $5.50 per share,
$3.25 per share and $18.50 per share, respectively. Such options are
currently exercisable and expire in January 2005, January 2006 and January
2007, respectively.
In 1995, the Company adopted the Outside Directors Stock Compensation
Plan in which only the Outside Directors were eligible to participate. The
plan provided that shares of Common Stock of the Company shall be issued at
the end of each calendar quarter in payment of one-quarter of the annual
retainer and all meeting fees for the preceding quarter, the dollar amount of
such retainer and fees being divided by the closing price per share of Common
Stock as reported on the Nasdaq National Market on the day immediately prior
to the date of issuance of the shares under the Plan. Mr. Parker and Mr.
Beard each received 2,618 shares and Mr. Clements received 2,421 shares of
Common Stock pursuant to this Plan attributable to their participation on the
Board of Directors during 1996. This plan was terminated in January 1997,
and the Company currently compensates its Outside Directors in cash rather
than in shares of Common Stock.
The Board of Directors has two committees. The Compensation Committee
has certain responsibilities relating to compensation of officers and
employee directors and is composed of Messrs. Beard, Clements and Parker,
none of whom is an employee nor eligible for awards under the Company's Bonus
Incentive Plan, the Executive Incentive Stock Compensation Plan or 1993 Stock
Compensation Plan. The Compensation Committee met two times during 1996. The
Compensation Committee administers awards under the Company's Bonus Incentive
Plan, the Executive Incentive Stock Compensation Plan and 1993 Stock
Compensation Plan, takes certain other actions relating to compensation
matters and benefits plans and sets the salaries of all officers.
The Audit Committee, composed of Messrs. Beard, Clements and Parker, met
two times during 1996. The Committee recommended to the Board of Directors
the selection of Arthur Andersen LLP as the Company's independent
accountants; reviewed the annual financial statements and discussed them with
the auditors and financial staff of the Company; reviewed the independence of
the independent accountants conducting the audit; reviewed the services
provided by the independent accountants; discussed with management and the
auditors the Company's accounting system and related systems of internal
control; and consulted as it deemed necessary with the independent
accountants and the Company's internal financial staff.
The Board of Directors held four meetings during 1996. All Directors,
except William P. Clements, attended more than 75 percent of the aggregate of
all meetings of the Board of Directors and the Committees on which they
served during 1996.
6
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
SERVICE AGREEMENT. The Company and the Williams Entities are parties to
an agreement (the "Service Agreement") pursuant to which the Company
furnishes services to, and receives services from, such entities. Under the
Agreement, the Company provides legal, payroll, benefits administration and
accounting services to the Williams Entities, as well as lease operating and
technical services with respect to certain properties owned by the Williams
Entities. The Williams Entities provide tax preparation services, tax
planning services, aircraft usage and business entertainment to or for the
benefit of the Company. To the extent that the Company has provided services
to the Williams Entities at cost under the Service Agreement, the Company
believes that the terms upon which it has provided such services may be less
favorable than the terms the Company could have negotiated with unaffiliated
third parties. Conversely, to the extent that the Company has received
services from the Williams Entities at cost under the Service Agreement, the
Company believes that the terms upon which such services were available to
the Company may be more favorable than the terms the Company could have
negotiated with unaffiliated third parties. During 1996, the Williams
Entities paid the Company approximately $615,000, while the Company paid the
Williams Entities approximately $165,000, both pursuant to the Service
Agreement.
OFFICE LEASE. The Company subleases 7,164 square feet from ClayDesta
Corporation, a Williams Entity, pursuant to an agreement which expires
November 15, 1998. During 1996, the Company paid a total of $70,000 in rent
and associated charges to ClayDesta Corporation.
GAS GATHERING MATTERS. Robert C. Lyon, Vice President Gathering and
Marketing, has a 5 percent net profits interest with respect to the presently
owned and future acquired gas gathering systems of the Company and its
Subsidiaries ("the Company and its Subsidiaries"). Generally, the Company
and its Subsidiaries' net profits from their gas gathering systems are
computed in accordance with generally accepted accounting principles, except
that the Company and its Subsidiaries may charge against such profits an
amount equal to its cost of funds on its net fixed assets after depreciation.
If Mr. Lyon leaves the employment of the Company for any reason other than
being discharged for cause, his net profits interest is reduced to 1.5
percent and terminates seven years after the cessation of his employment.
Mr. Lyon received no payments pursuant to the net profits interest in 1996.
In addition, Mr. Lyon also has the right to acquire 10 percent of the gas
plants and systems of the Company and its Subsidiaries by paying 10 percent
of the acquisition or construction costs concurrently with the Company and
its Subsidiaries' payment of such costs. During 1996, Mr. Lyon exercised his
right to acquire an interest in certain properties acquired by the Company
and paid $60,565 for the exercise of this right.
GATAGA PARTNERSHIP AGREEMENT. Prior to October 1995, the Company owned
a 90 percent interest in a gas plant constructed to process gas, pursuant to
a long-term contract, from two wells in Loving County, Texas which were
substantially owned by certain Williams Entities. Because the plant and the
wells are largely dependent upon each other for their economic viability, the
Company and the Williams Entities contributed their respective interests in
the plant and wells to a partnership effective October, 1995. After
recoupment of certain workover costs borne by the original well owners, the
Partnership was dissolved in 1996, and the Company received an undivided 45
percent interest in the wells, proportionately reduced to the original well
owners' interest, and retained a 45 percent interest in the plant.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table shows the total compensation for the last three
calendar years received by the Company's Chief Executive Officer and the
other executive officers of the Company whose annual compensation exceeded
$100,000 in 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------
SECURITIES ALL OTHER
UNDERLYING COMPEN-
NAME AND PRINCIPAL OPTIONS/ SATION
POSITION YEAR SALARY($)(5) BONUS($) SARS/(#) (1)(2) ($) (3)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Clayton W. Williams, 1996 $396,100 $11,003 235,000 $ 1,781
Chairman of the Board, 1995 396,100 11,003 32,407 5,653
President and Chief 1994 407,750 11,003 32,407 3,852
Executive Officer(4)
L. Paul Latham, Executive 1996 $171,860 $14,750 10,300 $35,061
Vice President and Chief 1995 159,900 11,942 13,022 34,919
Operating Officer 1994 159,750 4,442 13,022 39,087
Mel G. Riggs, Senior Vice 1996 $125,254 $13,472 8,000 $ 1,781
President and Chief 1995 118,752 10,799 9,605 1,695
Financial Officer 1994 117,709 3,299 9,605 1,360
</TABLE>
(1) All amounts shown represent the number of option shares granted under
the Company's 1993 Stock Compensation Plan, a description of which follows
the "Option/SAR Grants in Last Fiscal Year" table.
(2) Messrs. Williams, Latham and Riggs each exchanged options granted in
1993 for new options granted in 1994. The 1994 options were exchanged for
the same number of options in 1995.
(3) The amount shown in this column with respect to Mr. Latham for 1994,
1995 and 1996 relate primarily to distributions made pursuant to two plans
which were discontinued by the Williams Companies during 1991. Until such
time, the Williams Companies assigned overriding royalty interests to
certain employees to reward such employees with incentive compensation
based on the results of drilling activities by the Williams Companies.
Under this arrangement, the Williams Companies assigned overriding royalty
interests in certain oil and gas leases to certain employees who were
employed at the time of the execution of the lease. An individual
employee's overriding royalty interest in a lease was determined in the
discretion of the management of the Williams Companies. Employees
receiving overriding royalty interests were entitled to receive revenues
immediately upon the assignment thereof and such interests were not subject
to forfeiture. The Williams Companies also granted selected employees
working interests in certain of the oil and gas properties of the Williams
Companies. Such working interests were deemed earned by and granted to
such employees upon terms determined in the sole discretion of the
management of the Williams Companies. The Company does not anticipate
reinstituting either of the arrangements described above.
In addition, the amounts shown include contributions made by the
Company for the named individuals during 1996 pursuant to the Company's
401(k) Plan, as follows: Mr. Williams, $1,781; Mr. Latham, $1,785; and Mr.
Riggs, $1,781. Contributions made by the Company for the named individuals
during 1995 pursuant to the Company's 401(k) Plan were as follows:
Mr. Williams, $5,653; Mr. Latham, $2,282; and Mr. Riggs, $1,695.
Contributions made by the Company for the named individuals during 1994
pursuant to the Company's 401(k) Plan were as follows: Mr. Williams,
$3,852; Mr. Latham, $1,673; and Mr. Riggs, $1,360.
8
<PAGE>
(4) Mr. Williams beneficially owns through the Affiliated Holders and
other affiliates 2,875,000 shares of restricted Common Stock with a value
at December 31, 1996, of $49,953,125.
(5) Beginning in 1995, Mr. Williams' salary was paid in the form of Common
Stock in lieu of cash pursuant to the Company's Executive Incentive Stock
Compensation Plan.
The Company has no employment agreements with any of its executive
officers. Although Messrs. Williams and Latham devote a majority of their
time to the Company, both of them are engaged in other business activities.
Mr. Williams devotes a portion of his time to certain Williams Entities. Mr.
Latham is also employed by and devotes a portion of his time to the business
of certain Williams Entities. Both Messrs. Williams and Latham receive
compensation from the Williams Entities which compensation is not borne,
directly or indirectly, by the Company and does not relate to any services
provided to the Company. In addition, Jerry F. Groner, Vice President-Land
and Lease Administration and a son-in-law of Mr. Williams, spends a portion
of his time managing JACCK, L.L.C. , an entity owned by the five children of
Mr. Williams which is involved in oil and gas exploration in the Permian
Basin area of West Texas and Southeast New Mexico.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------
Potential Realized
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ----------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Price Base Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Clayton W. Williams 35,000 10.9% 3.250 3/1/2006 71,400(1) 181,300(1)
200,000 62.2% 15.750 12/5/2006 1,982,000(2) 5,020,000(2)
L. Paul Latham 10,300 3.2% 3.250 3/1/2006 12,012(1) 53,354(1)
Mel G. Riggs 8,000 2.5% 3.250 3/1/2006 16,320(1) 41,440(1)
</TABLE>
(1) The values shown for 5 percent and 10 percent appreciation equate to a
stock price of $5.29 and $8.43, respectively, at the March 1, 2006
expiration date of the indicated options.
(2) The values shown for 5 percent and 10 percent appreciation equate to a
stock price of $25.66 and $40.85 respectively, at the December 5, 2006
expiration date of the indicated option.
The assumed annual rates of stock price appreciation used in showing the
potential realizable value of stock option grants are prescribed by rules of
the Securities and Exchange Commission. The actual realized value of the
options may be significantly greater or less than the amounts shown. The
closing sales price of the Company's common stock on the Nasdaq National
Market on March 18, 1997 was $13.375 per share.
All options shown above have been granted pursuant to the Company's 1993
Stock Compensation Plan which provides for the grant of non-qualified options
to Officers, Directors (other than Outside Directors), employees and advisors
of the Company or a subsidiary of the Company. A total of 898,200 shares of
Common Stock is authorized and reserved for issuance under the plan subject
to adjustments to reflect changes in the Company's capitalization resulting
from stock splits, stock dividends and similar events. The Compensation
Committee has the sole authority to interpret the plan, to determine the
persons to whom options will be granted, to determine the basis upon which
the options will be granted, and to determine the exercise price, duration
and other terms of options to be granted under the plan; provided that (i)
the exercise price of each option granted under
9
<PAGE>
the plan may not be less than the fair market value of the Common Stock at
the date of grant of such option, (ii) the exercise price must be paid in
cash upon exercise of such option, (iii) no option may be exercisable more
than ten years after the date of grant, and (iv) no option is transferable
other than by will or the laws of descent and distribution. No option is
exercisable after an optionee terminates his relationship with the Company or
a subsidiary of the Company, subject to the right of the Compensation
Committee to extend the exercise period for not more than 90 days following
the date of termination of an optionee's employment. If an optionee's
employment is terminated by reason of disability, the Compensation Committee
has the authority to extend the exercise period for not more than one year
following the date of termination of the optionee's employment. If an
optionee dies and has not fully exercised options granted under the plan,
such options may be exercised in whole or in part within 90 days of the
optionee's death by the executors or administrators of the optionee's estate
or by the optionee's heirs. The vesting period, if any, specified for each
option will be accelerated upon the occurrence of a change of control or a
threatened change of control of the Company. Each of the option grants shown
in the preceding table is subject to a vesting schedule which provides that
equal portions of the option representing a fixed number of shares may be
exercised upon each of the first four anniversaries of the dates of grant.
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTIONS/SAR VALUES
- ----------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/ IN-THE-MONEY
SARS AT OPTIONS/SARS AT
FY-END (#) FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Clayton W. Williams 0 0 33,055/234,352 $488,169/$817,311
L. Paul Latham 0 0 7,341/15,981 107,862/232,956
Mel G. Riggs 0 0 4,203/13,402 61,295/195,780
- ----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee consists of Messrs. Beard, Clements and
Parker, all of whom are non-employee directors. The Committee establishes
the salaries of all corporate officers and administers the Company's
incentive compensation plans other than the Outside Directors Stock Option
Plan. The Committee also reviews with the Board its recommendations relating
to the future direction of corporate compensation practices and benefit
programs.
The Compensation Committee has adopted a compensation plan which it
believes to be a balance between fair and reasonable cash compensation and
incentives linked to the Company's overall performance taking into
consideration compensation of individuals with similar duties who are
employed by the Company's peers. The plan takes into account the cyclical
nature of the oil business which may result in traditional performance
standards being skewed due to erratic product prices. An analysis of the
goals for the Company has resulted in a policy which places emphasis on
increasing the Company's proved oil and gas reserves, coupled with
maintaining an acceptable balance between the Company's overhead and profit
margin. The stock options and bonuses which may be awarded annually are
adjusted by the Compensation Committee based upon the performance of the
Company and efforts of individual officers.
In its 1996 review of the Company's 1995 fiscal year, the Compensation
Committee determined that, while the Company's proved oil and gas reserves
had basically remained static in 1995, management had made improvements with
respect to the Company's financial position by reducing bank debt, overhead
costs and finding costs. As a result, the Committee decided to slightly
increase certain officers salaries while keeping Mr. Williams' salary
constant at the 1995 level. The Committee also determined that Mr. Williams'
salary would continue to be paid in shares of Common Stock pursuant to the
Executive Incentive Stock Compensation Plan (the "Executive Plan"). In
addition, as continued incentive to the officers of the Company, the
Committee granted stock options to certain officers under the 1993 Stock
Compensation Plan (the "1993 Plan") during the first quarter of 1996. An
additional stock option was granted to Mr. Williams in the fourth quarter of
1996 in recognition of his activities which resulted in a number of positive
developments for the Company, as discussed below, and as further incentive
for future activities. The Committee believes that the payment of Mr.
Williams' salary in stock and the grant of such stock options assist in the
Company's focus on improving the market price of the Common Stock for the
benefit of all of the Company's stockholders.
In December, 1996, the Compensation Committee reviewed the Company's
1996 operations and noted a number of positive developments with respect to
the Company. There was further reduction in bank debt of approximately $26.8
million and a reduction in overhead costs of approximately $400,000. The
Company's oil and gas reserves increased approximately 15 percent and, for
the first time since the Initial Public Offering, the Company's reserve
additions more than replaced production for the year. In addition, the
market value of the Common Stock increased substantially during 1996 and the
Company successfully completed a secondary offering of Common Stock during
the fourth quarter. Due to management's role in these developments, the
Compensation Committee has determined to increase the salaries of some of the
Company's officers effective January 1, 1997. Mr. Williams' salary will
continue to be paid in Common Stock pursuant to the Executive Plan. In
addition, the Committee granted additional stock options to all officers of
the Company under the 1993 Plan during the first quarter of 1997.
The Compensation Committee believes it has developed an appropriate
structure within which to reward and motivate its officers as they build
value for the Company's stockholders.
Robert L. Parker
William P. Clements
Stanley S. Beard
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Messrs. Clements, Parker and
Beard during 1996, none of whom has a relationship with the Company required
to be disclosed under the rules of the Securities and Exchange Commission.
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
The Company's Common Stock began trading publicly on May 26, 1993. Set
forth below is a line graph comparing the percentage change in the cumulative
total shareholder return on the Company's stock against the total return of
the Nasdaq Market Index and a peer group for the period from May 31, 1993, to
December 31, 1996. The peer group is composed of all the crude petroleum and
natural gas companies with stock trading on the Nasdaq National Market System
within SIC Code 1311, consisting of approximately 200 companies. The chart
indicates the value, at the conclusion of each quarter from May 31, 1993, to
December 31, 1996, of $100 invested at May 26, 1993, and assumes reinvestment
of all dividends.
EDGAR REPRESENTATION PERFORMANCE GRAPH
Nasdaq
Market Peer
Date Company Index Group
----- ------- ----- -----
5/93 100.00 100.00 100.00
12/93 73.53 105.77 96.36
12/94 32.35 111.04 100.99
12/95 19.12 144.03 111.06
12/96 102.21 178.99 147.68
12
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company pursuant to the rules and regulations promulgated
under Section 16(a) of the Securities Exchange Act of 1934 during and with
respect to the Company's last fiscal year and upon certain written
representations received by the Company, the Company is not aware of any
failure by a reporting person of the Company to timely file reports required
under Section 16(a) other than the late filing of a Form 4 by Patrick C.
Reesby, Vice President-Acquisition/New Ventures, relating to one transaction.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP, who have been the Company's independent accountants
since inception, have been selected by the Board of Directors, upon
recommendation of the Audit Committee, to be its independent accountants for
the current year. A representative of this firm will be present at the
Annual Meeting of Stockholders. This representative will have an opportunity
to make a statement if he desires to do so and will be available to respond
to stockholder questions.
RECEIPT OF STOCKHOLDER PROPOSALS
For inclusion in the Company's 1998 proxy statement, all stockholder
proposals for consideration at the Annual Meeting of Stockholders of the
Company to be held in 1998 must be received at the Company's principal
executive offices, Six Desta Drive, Suite 6500, Midland, Texas 79705,
Attention: Mel G. Riggs, by December 10, 1997. Such proposals must also
comply with all other regulations of the Securities and Exchange Commission.
OTHER BUSINESS
The Company knows of no other business to come before the meeting. If,
however, other matters properly come before the meeting, it is the intention
of the persons named in the enclosed proxy to vote the shares represented
thereby in accordance with their best judgment.
13
<PAGE>
AVAILABILITY OF ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31,
1996, which contains the Company's Form 10-K including financial statements,
has been mailed to each stockholder of record on the above-referenced record
date.
By order of the Board of Directors,
Mel G. Riggs
Secretary
Dated: April 10, 1997
14
<PAGE>
/X/ PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE CLAYTON WILLIAMS ENERGY, INC.
FOR WITHHOLD EXCEPT
ANNUAL MEETING OF STOCKHOLDERS / / / / / /
MAY 21, 1997 Proposition No. 1: Election of Directors
The undersigned hereby appoints L. The Election of two Directors
Paul Latham and Mel G. Riggs, or listed below for the term
either of them, with full power of specified in the Proxy Statement.
substitution, to act as attorneys and
proxies for the undersigned, and to BOARD OF DIRECTORS RECOMMENDED:
vote all shares of Common Stock of STANLEY S. BEARD
Clayton Williams Energy, Inc. (the MEL G. RIGGS
"Company") which the undersigned is
entitled to vote at the Meeting of INSTRUCTION: TO WITHHOLD
Stockholders, to be held at the Pay AUTHORITY TO VOTE FOR ANY
Zone Room, Plaza Club, Midland, Texas INDIVIDUAL NOMINEE, MARK
on May 21, 1997 at 10:00 a.m. Local "EXCEPT" AND WRITE THAT NOMINEE'S
time and at any and all adjournments NAME IN THE SPACE PROVIDED BELOW.
thereof.
-----------------------------------
THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, IT WILL BE VOTED FOR THE
DIRECTORS SHOWN ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH
MEETING, THIS PROXY WILL BE VOTED BY
THE PROXY HOLDERS IN THEIR BEST
JUDGMENT. AT THE PRESENT TIME, THE
BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE
MEETING.
THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS
Should the undersigned be present
and elect to vote at the Meeting or
any adjournment thereof, and after
notification to the Corporate
Secretary of the Company at the
meeting of the stockholder's
decision to terminate this proxy,
then the power of said attorneys and
proxies shall be deemed terminated
and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this Proxy, of a Notice of the Meeting, and a Proxy Statement,
both dated April 10, 1997, and a copy of the Company's 1996 Annual Report.
Please sign exactly as your name appears on this proxy card. When signing
as attorney, administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
Please be sure to sign and date Date
this Proxy in the box below.
- ---------------------------------------------
--Stockholder sign above--Co-holder
(if any) sign above--
- --------------------------------------------------------------------------------
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
CLAYTON WILLIAMS ENERGY, INC.
SIX DESTA DRIVE, SUITE 6500
MIDLAND, TEXAS 79705-9963
