<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:
------------------------------------------------------------------------
<PAGE>
CLAYTON WILLIAMS ENERGY, INC.
Six Desta Drive, Suite 6500
Midland, Texas 79705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
- -------------------------------------------------------------------------------
To Our Stockholders:
The Annual Meeting of Stockholders of Clayton Williams Energy, Inc., a
Delaware corporation, will be held at the Midland Country Club, 6101 N.
Highway 349, Midland, Texas, on Wednesday, May 12, 1999, at 10:00 A.M., local
time, 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 April 1, 1999, are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Midland, Texas By Order of the Board
April 14, 1999 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 14, 1999,
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 Midland
Country Club, 6101 N. Highway 349, Midland, Texas, on Wednesday, May 12,
1999, at 10:00 A.M., local time, 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 this 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 April 1, 1999, are
entitled to notice of and to vote at the meeting. At the close of business
on such date, the Company had 8,955,082 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.
<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 William P. Clements and Robert L.
Parker 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 2002
WILLIAM P. CLEMENTS, age 81, 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 75, 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 Bank of Oklahoma Financial
Corp.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2000
STANLEY S. BEARD, age 58, 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 44, is Senior Vice President and Chief Financial Officer
and a Director of the Company, having served in such capacities since
September 1991. Mr. Riggs has served as a director since May 1994.
2
<PAGE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2001
CLAYTON W. WILLIAMS, age 67, 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 47, 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.
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 April 1, 1999, 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.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership of Class
- -------------------------------------------- --------------------------- ---------------------------
<S> <C> <C>
Clayton Williams Partnership, Ltd. (1) 3,972,009 44.4%
CWPLCO, Inc. (1) 3,972,009 44.4%
Clayton W. Williams (1) 4,552,062(2) 49.7%
Heartland Advisors, Inc. 876,500(3) 9.8%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors Inc. 464,200(4) 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
L. Paul Latham 8,873(5) *
Mel G. Riggs 6,469(6) *
Stanley S. Beard 15,401(7) *
William P. Clements 43,032(7) *
Robert L. Parker 18,217(7) *
Gerald F. Groner 66,729(8) *
Patrick C. Reesby 14,346(9) *
All officers and directors as a group (10 persons) 4,750,283(10) 51.5%
</TABLE>
- ----------------
* 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
4
<PAGE>
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) 11,044 shares owned by Mr. Williams' spouse,
(c) 588 shares owned by an estate administered by Mr. Williams' spouse,
(d) 277,802 shares owned directly by Mr. Williams (including approximately
10,198 shares held in the Company's 401(k) Plan & Trust over which
Mr. Williams exercises investment control), (e) 21,285 shares owned by
three of Mr. Williams' children residing with him, (f) 60,677 shares in
trusts of which Mr. Williams is the Trustee and (g) the right to acquire
beneficial ownership through presently exercisable options to purchase
208,657 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) Represents shares held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of the DFA
investment Trust Company, a Delaware business trust, or the DFA Group Trust
and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional Fund Advisors Inc. disclaims beneficial
ownership of all such shares.
(5) Includes (a) 1,148 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
7,725 shares of Common Stock granted under the 1993 Stock Compensation
Plan. See "EXECUTIVE COMPENSATION."
(6) Includes (a) 1,087 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 4,000 shares of Common Stock granted under the 1993 Stock
Compensation Plan. See "EXECUTIVE COMPENSATION."
(7) Includes, in the case of Messrs. Beard, Clements and Parker, the right to
acquire beneficial ownership through presently exercisable options to
purchase 7,000 shares each of Common Stock granted under the Outside
Directors Stock Option Plan. See "BOARD OF DIRECTORS AND COMMITTEES."
(8) Includes (a) 1,768 shares held in the Company's 401(k) Plan & Trust over
which Mr. Groner exercises investment control, (b) 46,777 shares owned by
Mr. Groner's wife as her separate property, (c) 1,950 shares owned by Mr.
Groner's children residing with him, and (d) the right to acquire
beneficial ownership through presently exercisable options to purchase
12,675 shares of Common Stock granted under the 1993 Stock Compensation
Plan. See "EXECUTIVE COMPENSATION."
(9) Includes (a) 964 shares held in the Company's 401(k) Plan & Trust over
which Mr. Reesby exercises investment control and (b) the right to acquire
beneficial ownership through presently exercisable options to purchase
8,075 shares of Common Stock under the 1993 Stock Compensation Plan. See
"EXECUTIVE COMPENSATION."
(10) 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.
5
<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
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. As compensation for service on the Board,
employee directors 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 Parker (who presently constitute all of the Outside Directors) each
received options under the plan on January 1, 1998 and January 1, 1999, each
option covering 1,000 shares, at option prices of $15.00 per share and $10.00
per share, respectively. Such options are currently exercisable and expire
in January 2008 and January 2009, respectively.
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 four times during 1998.
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
one time during 1998. 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 five meetings during 1998. All directors,
except for Mr. 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 1998.
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
financial 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, 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 1998, the Williams
Entities paid the Company approximately $664,000, while the Company paid the
Williams Entities approximately $37,000, both pursuant to the Service
Agreement.
OFFICE LEASE. The Company sublet 7,164 square feet from ClayDesta
Corporation, a Williams Entity, pursuant to an agreement which expired
November 15, 1998. During 1998, the Company paid a total of $56,000 in rent
and associated charges to ClayDesta Corporation.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
compensation of the Company's chief executive officer and each of the other
four most highly compensated executive officers during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL ------------------------------------ OPTIONS COMPENSATION
POSITION YEAR SALARY($)(1) BONUS($)(2) (#)(3)(4) ($)(5)
- --------------------------- --------- -------------- ------------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Clayton W. Williams, 1998 $450,000 $30,000 - $5,209
Chairman of the Board, 1997 $450,000 $27,500 150,000 $1,620
President and Chief 1996 $396,100 $11,003 235,000 $1,781
Executive Officer (6)
L. Paul Latham, Executive 1998 $191,885 $22,500 3,850 $26,612
Vice President and Chief 1997 $180,795 $45,338 6,000 $36,403
Operating Officer 1996 $171,860 $14,750 10,300 $35,061
Mel G. Riggs, Senior Vice 1998 $149,350 $21,250 2,888 $5,391
President and Chief 1997 $135,795 $37,753 5,000 $2,000
Financial Officer 1996 $125,254 $13,472 8,000 $1,781
Gerald F. Groner, Vice 1998 $103,193 $2,866 2,207 $3,060
President - Land and 1997 $103,193 $26,261 6,000 $1,032
Lease Administration 1996 $88,333 $7,727 7,300 $1,047
Patrick C. Reesby, Vice 1998 $97,200 $25,200 6,579 $4,788
President - New Ventures 1997 $97,200 $15,326 3,000 $1,296
1996 $97,200 $2,700 - $1,492
</TABLE>
- ----------------
(1) All of Mr. Williams' net salary for 1996, 1997 and 1998 was paid in the
form of Common Stock in lieu of cash pursuant to the Company's Executive
Incentive Stock Compensation Plan.
(2) The amounts shown in this column with respect to Messrs. Groner and Reesby
for 1997 include $10,304 and $9,712, respectively, attributable to 644
shares and 607 shares, respectively, of Common Stock awarded pursuant to
the Company's Bonus Incentive Plan. The amounts shown in this column with
respect to Messrs. Williams, Latham and Riggs include directors fees for
1997 of $15,000 each and 1998 of $17,500 each.
(3) All amounts shown represent the number of option shares granted under the
Company's 1993 Stock Compensation Plan, a description of which follows
"TABLE OF OPTION GRANTS IN 1998."
(4) Amounts shown in 1996 and 1997 include options granted in connection with
repricing transactions.
8
<PAGE>
(5) The amounts shown in this column with respect to Mr. Latham for 1996, 1997
and 1998 include $33,276, $34,732 and $21,298, respectively, of
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 re-instituting either of the arrangements described above.
All other amounts shown in this column relate to contributions made by the
Company pursuant to the Company's 401(k) Plan & Trust.
(6) 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, 1998 of $28,750,000.
The Company has no employment agreements with any of its executive
officers. Although Messrs. Williams and Latham devote a majority of their
time to the Company, both of them are engaged in other business activities.
Mr. Williams devotes a portion of his time to certain Williams Entities. Mr.
Latham is also employed by and devotes a portion of his time to the business
of certain Williams Entities. Both Messrs. Williams and Latham receive
compensation from the Williams Entities which compensation is not borne,
directly or indirectly, by the Company and does not relate to any services
provided to the Company. In addition, Gerald F. Groner, a son-in-law of Mr.
Williams, spends a portion of his time managing JACCK, L.L.C., an entity
owned by the five children of Mr. Williams which is involved in oil and gas
exploration in the Permian Basin area of West Texas and Southeast New Mexico.
TABLE OF OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------- POTENTIAL REALIZED VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---------------- ------------------ ----------------- ---------------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Clayton W. Williams (1)
L. Paul Latham 3,850 3.5% $11.69 3/27/08 $28,278(2) $71,706(2)
Mel G. Riggs 2,888 2.6% $11.69 3/27/08 $21,212(2) $53,789(2)
Gerald F. Groner 2,207 2.0% $11.69 3/27/08 $16,210(2) $41,105(2)
Patrick C. Reesby 2,079 1.9% $11.69 3/27/08 $15,270(2) $38,721(2)
4,500 4.1% $11.50 7/22/08 $32,535(3) $82,485(3)
</TABLE>
- ----------------
(1) Mr. Williams was not granted any options during 1998.
(2) The values shown for 5% and 10% appreciation equate to a stock price of
$19.03 and $30.31, respectively, at the expiration date of the indicated
option.
(3) The values shown for 5% and 10% appreciation equate to a stock price of
$18.73 and $29.83, respectively, at the expiration date of the indicated
options.
9
<PAGE>
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 Common Stock on the Nasdaq Stock Market's National
Market on April 6, 1999 was $5.19 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 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. Options granted in 1998 to Messrs. Latham, Riggs and Groner
vest 100% on March 27, 2001. As to the options granted in 1998 to Mr.
Reesby, 2,079 vest 100% on March 27, 2001 and 4,500 vest one-third annually
beginning July 22, 1999.
TABLE OF AGGREGATED OPTION EXERCISES IN 1998 AND OPTION VALUES AS OF
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1998(#) DECEMBER 31, 1998($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------- ------------------ ------------ --------------------------- ------------------
<S> <C> <C> <C> <C>
Clayton W. Williams - - 199,907/217,500 $365,228/$118,125
L. Paul Latham 5,000 $38,125 8,172/15,000 $57,806/$34,762
Mel G. Riggs 4,605 $35,113 4,000/11,888 $27,000/$27,000
Gerald F. Groner - - 10,850/11,857 $79,538/$24,637
Patrick C. Reesby - - 8,075/9,579 $61,572/$0
</TABLE>
- ----------------
(1) The value of In-the-Money options was computed at $10.00 per share, which
was the market price for the Common Stock on December 31, 1998.
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Compensation Committee consists of Messrs. Beard, Clements and
Parker, all of whom are Outside 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 of Directors its recommendations
relating to the future direction of corporate compensation practices and
benefit programs.
The Compensation Committee has adopted a compensation policy 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 policy takes into account the cyclical
nature of the oil and gas 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 Compensation Committee may award stock options and bonuses
based upon the performance of the Company and efforts of individual officers.
LONG TERM COMPENSATION
In March, the Compensation Committee authorized the grant of stock
options under the 1993 Plan to all officers and employees of the Company,
except for Mr. Williams. Such options were granted based upon
recommendations of management for the purpose of providing stock-based
incentives to encourage continued employment of its personnel. In addition,
the Committee authorized the grant of additional options to one officer in
July 1998 for exceptional service in connection with the Company's
exploration activities. See "TABLE OF OPTION GRANTS IN 1998."
SHORT TERM COMPENSATION
Officers' salaries remained constant throughout 1998. In addition, the
Compensation Committee authorized special cash awards to two officers for
exceptional service in connection with the Company's exploration and
acquisition activities, and authorized year-end cash bonuses to all officers
in proportion to their salaries.
In December 1998, but effective January 1, 1999, due to commodity prices
being significantly reduced, the Committee lowered all officer salaries 10
percent per annum.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In December 1998, due to reduced commodity prices, the Compensation
Committee decided to lower Mr. Williams' salary 10 percent per annum
effective January 1, 1999. The Committee also decided that, consistent with
the compensation strategy and policies of recent years, Mr. Williams' salary
would continue to be paid in shares of Common Stock under the Company's
Executive Incentive Stock Compensation Plan. The Committee believes that
payment of Mr. Williams' salary in shares of Common Stock assists in aligning
Mr. Williams' interests with those of other stockholders, encouraging
improvement of the market price of the Common Stock for the benefit of all of
the Company's stockholders. No stock options were awarded to him in 1998.
11
<PAGE>
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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consisted of Messrs. Clements, Parker and
Beard during 1998, 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
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
total return of the Nasdaq Stock Market's Market Index and a peer group for
the period from December 31, 1993, to December 31, 1998. The peer group is
composed of all the crude petroleum and natural gas companies with stock
trading on the Nasdaq Stock Market's National Market System within SIC Code
1311, consisting of approximately 175 companies. The chart indicates the
value, at the conclusion of each fiscal year from December 31, 1993 to
December 31, 1998, of $100 invested at December 31, 1993 and assumes
reinvestment of all dividends. The Company paid no dividends during this
five-year period.
EDGAR REPRESENTATION PERFORMANCE GRAPH
<TABLE>
<CAPTION>
NASDAQ
MARKET PEER
DATE COMPANY INDEX GROUP
-------- --------- -------- --------
<S> <C> <C> <C>
12/93 100.00 100.00 100.00
12/94 44.00 104.99 104.80
12/95 26.00 136.18 115.26
12/96 139.00 169.23 153.26
12/97 120.00 207.00 155.34
12/98 80.00 291.96 124.43
</TABLE>
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 Robert L.
Parker 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
All stockholder proposals submitted for inclusion in the Company's proxy
statement and form of proxy for the Annual Meeting of Stockholders of the
Company to be held in 2000 must be received at the Company's principal
executive offices, Six Desta Drive, Suite 6500, Midland, Texas 79705,
Attention: Mel G. Riggs, by December 14, 1999. Such proposals must also
comply with the applicable regulations of the Securities and Exchange
Commission. Notice to the Company of all other stockholder proposals (not
submitted for inclusion in the Company's proxy statement and form of proxy)
for the 2000 Annual Meeting will not be considered timely unless received at
the Company's principal executive offices as set forth above on or before
February 27, 2000.
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,
1998, 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 14, 1999
14
<PAGE>
[Proxy Card to Come]
[FOR EDGARIZATION]
<PAGE>
REVOCABLE PROXY
CLAYTON WILLIAMS ENERGY, INC.
PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1999
The undersigned hereby appoints L. Paul Latham and Mel G. Riggs, or either of
them, with full power of substitution, to act as attorneys and proxies for the
undersigned, and to vote all shares of Common Stock of Clayton Williams Energy,
Inc. (the "Company") which the undersigned is entitled to vote at the Meeting of
Stockholders, to be held at the Midland Country Club, 6101 N. Hwy. 349, Midland,
Texas on May 12, 1999 at 10:00 a.m., local time, and at any and all adjournments
thereof.
Proposition No. 1: ELECTION OF DIRECTORS
The Election of two Directors listed below for the term specified in the Proxy
Statement.
BOARD OF DIRECTORS RECOMMENDED: WILLIAM P. CLEMENTS
ROBERT L. PARKER
INSTRUCTION:TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
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 Company's Corporate Secretary
of the 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 14, 1999, and a copy of the Company's 1998 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
this Proxy in the box below.
Date
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
