<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 24, 2000
- -------------------------------------------------------------------------------
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 24, 2000, 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 March 31, 2000, are entitled
to notice of and to vote at the meeting or any adjournments thereof.
Midland, Texas By Order of the Board
April 17, 2000 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 17, 2000, 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 24, 2000, 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
therefore. Total expenses of the solicitation are expected to be nominal.
Stockholders of record at the close of business on March 31, 2000,
are entitled to notice of and to vote at the meeting. At the close of
business on such date, the Company had 9,177,999 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 2003
STANLEY S. BEARD, age 59, 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, a consultant to Mr. Williams
periodically since 1968 and involved in real estate development for the past
13 years.
MEL G. RIGGS, age 45, 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 of the Company since May 1994.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2001
CLAYTON W. WILLIAMS, age 68, 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 48, 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.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2002
WILLIAM P. CLEMENTS, age 83, 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.
2
<PAGE>
ROBERT L. PARKER, age 76, 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. and Norwest Bank Texas, Kerrville, N.A.
JERRY F. GRONER, age 37, is Vice President of Land and Lease Administration
of the Company, having served in such capacity since 1994. Mr. Groner has
served as a Director of the Company since his appointment by the Board in
August 1999.
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 31, 2000, 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 43.3%
CWPLCO, Inc. (1) 3,972,009 43.3%
Clayton W. Williams (1) 4,685,405(2) 49.9%
State Street Research & Management Co. 749,647(3) 8.2%
One Financial Center, 30th Floor
Boston, MA 02111-2690
Dimensional Fund Advisors Inc. 534,600(4) 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
L. Paul Latham 11,483(5) *
Mel G. Riggs 8,500(6) *
Stanley S. Beard 16,401(7) *
William P. Clements 44,032(7) *
Robert L. Parker 21,217(7) *
Jerry F. Groner 50,500(8) *
All officers and directors as a group (10 persons) 4,889,086(9) 52.1%
</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 Clayton Williams Partnership,
Ltd. Mr. Williams shares voting and investment power with respect to
the shares owned by the Affiliated Holders.
4
<PAGE>
(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 a trust of which Mrs. Williams is the
trustee, (d) 418,025 shares owned directly by Mr. Williams (including
approximately 11,524 shares held in the Company's 401(k) Plan & Trust
over which Mr. Williams exercises investment control), (e) 26,310
shares owned by three of Mr. Williams' children, (f) 49,179 shares in
trusts of which Mr. Williams is the Trustee and (g) the right to
acquire beneficial ownership through presently exercisable options to
purchase 208,250 shares of Common Stock granted under the 1993 Stock
Compensation Plan. See "EXECUTIVE COMPENSATION."
(3) Represents shares owned by clients of State Street Research &
Management Co. State Street Research & Management Co. disclaims
beneficial ownership of all such shares.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940,
furnishes investment advice to four investment companies registered
under the Investment Company Act of 1940, and serves as investment
manager to certain other investment vehicles, including commingled
group trusts. (These investment companies and investment vehicles are
the "Portfolios"). In its role as investment advisor and investment
manager, Dimensional possesses both voting and investment power over
these shares. The Portfolios own all 534,600 shares, and Dimensional
disclaims beneficial ownership of such shares.
(5) Includes (a) 1,183 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 9,300 shares of Common Stock granted under the 1993 Stock
Compensation Plan. See "EXECUTIVE COMPENSATION."
(6) Includes (a) 1,118 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 the right to acquire beneficial ownership through presently
exercisable options to purchase shares of Common Stock granted under
the Outside Directors Stock Option Plan, as follows: Mr. Beard - 8,000
shares; Mr. Clements - 4,000 shares; and Mr. Parker - 8,000 shares. See
"BOARD OF DIRECTORS AND COMMITTEES."
(8) Includes (a) 2,039 shares held in the Company's 401(k) Plan & Trust
over which Mr. Groner exercises investment control, (b) 44,025 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 1,825 shares of Common Stock granted under the 1993 Stock
Compensation Plan. See "EXECUTIVE COMPENSATION."
(9) 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 plus a $2,500 fee for each
Board meeting attended.
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, 1999 and January 1, 2000, each
option covering 1,000 shares, at option prices of $10.00 per share and $11.81
per share, respectively. Such options are currently exercisable and expire in
January 2009 and January 2010, 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 1999. 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 1999. 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 1999. 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 1999.
6
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
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 1999, the Williams Entities paid the
Company approximately $788,000, while the Company paid the Williams Entities
approximately $259,000, both pursuant to the Service Agreement.
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
three most highly compensated executive officers who received annual
compensation in excess of $100,000 during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
----------------
SECURITIES
NAME AND PRINCIPAL ANNUAL COMPENSATION UNDERLYING ALL OTHER
-------------------------------- OPTIONS COMPENSATION
POSITION YEAR SALARY($)(1) BONUS($)(2) (#)(3)(4) ($)(5)
- --------------------------- ------ -------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Clayton W. Williams, 1999 $420,000 $36,250 150,000 -
Chairman of the Board, 1998 $450,000 $30,000 - $5,209
President and Chief 1997 $450,000 $27,500 150,000 $1,620
Executive Officer (6)
L. Paul Latham, Executive 1999 $178,942 $50,000 9,850 $14,280
Vice President and Chief 1998 $191,885 $22,500 3,850 $26,612
Operating Officer 1997 $180,795 $45,338 6,000 $36,403
Mel G. Riggs, Senior Vice 1999 $134,622 $43,125 7,888 -
President and Chief 1998 $ 149,350 $21,250 2,888 $5,391
Financial Officer 1997 $135,795 $37,753 5,000 $2,000
Jerry F. Groner, Vice 1999 $96,744 $64,800 8,207 -
President - Land and 1998 $103,193 $2,866 2,207 $3,060
Lease Administration 1997 $103,193 $26,261 6,000 $1,032
</TABLE>
- ------------------
(1) All of Mr. Williams' net salary for 1997, 1998 and 1999 was paid in the
form of Common Stock in lieu of cash pursuant to the Company's Executive
Incentive Stock Compensation Plan.
7
<PAGE>
(2) Amounts shown in this column include directors fees for Messrs. Williams,
Latham and Riggs of $15,000 each for 1997 and $17,500 each for 1998 and
1999. Amounts shown in this column for Mr. Groner include $10,304 in 1997
attributable to 644 shares of Common Stock awarded pursuant to the
Company's Bonus Incentive Plan and $7,500 of directors fees in 1999.
Bonuses paid to Mr. Groner in 1999 also include $50,000 of a $100,000 bonus
granted in 1999, payable $50,000 in November 1999 and $50,000 in January
2000.
(3) All amounts shown represent the number of option shares granted under the
Company's 1993 Stock Compensation Plan.
(4) Amounts shown in 1997 and 1999 include options granted in connection with
repricing transactions.
(5) The amounts shown in this column with respect to Mr. Latham for 1997, 1998
and 1999 include $34,732, $21,298 and $14,280, 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, 1999 of $33,960,938.
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.
All options in the "Summary Compensation Table" 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.
8
<PAGE>
TABLE OF AGGREGATED OPTION EXERCISES IN 1999 AND
OPTION VALUES AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1999(#) DECEMBER 31, 1999($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE(1) UNEXERCISABLE
- ---------------------- ----------------- ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Clayton W. Williams 108,157 $728,159 199,500/109,750 $312,469/$396,859
L. Paul Latham 4,022 $ 22,720 6,725/12,425 $57,583/$84,226
Mel G. Riggs 4,000 $ 25,750 2,000/9,888 $17,125/$66,919
Jerry F. Groner 12,675 $115,622 0/10,032 $0/$67,434
</TABLE>
- ---------------------
(1) The value of In-the-Money options was computed at $11.8125 per share, which
was the market price for the Common Stock on December 31, 1999.
TABLE OF TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE OF EXERCISE PRICE REMAINING AT
OPTIONS STOCK AT TIME OF AT TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED(1) AMENDMENT($) AMENDMENT($) PRICE ($) AMENDMENT
- ------------------- ------- ----------- ---------------- -------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Clayton W. Williams 8-31-94 32,407 $ 7.25 $15.75 $ 7.25 6 years
11-8-95 32,407 $ 2.38 $ 7.25 $ 2.38 5 years
4-16-99 150,000 $ 5.50 $15.88 $ 5.50 8 years
L. Paul Latham 8-31-94 13,022 $ 7.25 $15.75 $ 7.25 6 years
11-8-95 13,022 $ 2.38 $ 7.25 $ 2.38 5 years
5-29-97 6,000 $13.25 $18.63 $14.00 10 years
4-16-99 6,000 $ 5.50 $14.00 $ 5.50 7 years
4-16-99 3,850 $ 5.50 $11.69 $ 5.50 8 years
Mel G. Riggs 8-31-94 9,605 $ 7.25 $15.75 $ 7.25 6 years
11-8-95 9,605 $ 2.38 $ 7.25 $ 2.38 5 years
5-29-97 5,000 $13.25 $18.63 $14.00 10 years
4-16-99 5,000 $ 5.50 $14.00 $ 5.50 7 years
4-16-99 2,888 $ 5.50 $11.69 $ 5.50 8 years
Jerry F. Groner 8-31-94 7,200 $ 7.25 $15.75 $ 7.25 6 years
11-8-95 7,200 $ 2.38 $ 7.25 $ 2.38 5 years
5-29-97 6,000 $13.25 $18.63 $14.00 10 years
4-16-99 6,000 $ 5.50 $14.00 $ 5.50 7 years
4-16-99 2,207 $ 5.50 $11.69 $ 5.50 8 years
</TABLE>
- -------------------
(1) The repricings shown for 1994 and 1995 represent the repricing of
options which were originally granted in 1993, and the repricings shown
for 1997 represent the repricing of options which were granted earlier
in 1997.
In April 1999, the Compensation Committee authorized a repricing of
previously granted stock options held by all officers and employees of the
Company which were not in-the-money, except for options to purchase 200,000
shares held by Mr. Williams at a price of $15.75. All such options were
originally granted in 1997 and 1998. See "REPORT OF COMPENSATION COMMITTEE."
9
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
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 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 April 1999, the Compensation Committee authorized a repricing of
certain previously granted stock options issued pursuant to the 1993 Stock
Compensation Plan to all officers and employees of the Company, except Mr.
Williams (see "COMPENSATION OF CHIEF EXECUTIVE OFFICER"). All options with an
exercise price greater than $5.50 per share (the market value of the Company's
common stock on the date of repricing) were repriced at $5.50 per share. The
previous grants of options were made for the purpose of rewarding exceptional
service and to provide stock-based incentives to encourage continued employment
of key personnel. As the price of the Company's stock fell during 1999 along
with most other energy company stocks due primarily to the fall in crude oil
prices, the Compensation Committee believed the higher exercise prices (i.e.
$14.00 and $11.69) for the stock options no longer provided the desired
incentives. No new stock options were granted to any officer during 1999.
SHORT TERM COMPENSATION
Effective January 1, 1999, the Committee reduced all officers
salaries ten percent (10%) per annum as a part of the efforts by the Company
to reduce operating costs due to the impact of low commodity prices on the
Company's financial condition. On August 30, 1999, the Committee restored the
ten percent (10%) reductions in response to increased commodity prices, which
were reflected in the earnings of the Company. Effective January 1, 2000, the
Committee, upon the recommendation of management, increased the salary of all
officers other than Mr. Williams in percentages ranging from five percent
(5%) to eight percent (8%). In addition, the Committee awarded year-end cash
bonuses to three officers for their efforts in maintaining the stability of
the Company in a volatile year as well as the efforts to see that the
Company's oil and gas reserves were increased during 1999. The Committee
believes that such bonuses serve as both a reward for performance and an
incentive for future extraordinary performance in anticipation of such
recognition.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Effective January 1, 1999 due to reduced commodity prices, the
Compensation Committee decided to lower Mr. Williams' salary 10% per annum.
On August 30, 1999, the Committee restored the ten percent (10%) reduction in
response to increased commodity prices, which were reflected in the Company's
earnings. 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
10
<PAGE>
assists in aligning Mr. Williams' interests with those of the other
stockholders, encouraging improvement of the market price of the Common Stock
for the benefit of all the Company's stockholders.
In April 1999, in connection with the repricing of options for all
officers and employees of the Company, the Compensation Committee authorized
a repricing of options covering 150,000 shares of stock previously granted to
Mr. Williams at an exercise price of $15.88 per share. These options were
repriced at $5.50 per share, which was the market value of the Company's
common stock on the date of repricing. No new stock options were granted to
Mr. Williams during 1999.
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 1999, none of whom has a relationship with the Company required
to be disclosed under the rules of the Securities and Exchange Commission.
11
<PAGE>
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, 1994, to December 31, 1999. 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 134 companies. The chart indicates the
value, at the conclusion of each fiscal year from December 31, 1994 to
December 31, 1999, of $100 invested at December 31, 1994 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> <C>
12/94 100.00 100.00 100.00
12/95 59.09 129.71 109.98
12/96 315.91 161.18 146.24
12/97 272.73 197.16 148.22
12/98 181.82 278.08 118.73
12/99 214.77 490.46 145.03
</TABLE>
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.
12
<PAGE>
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 2001 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, 2000. 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 2001 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, 2001.
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.
AVAILABILITY OF ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December
31, 1999, 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 17, 2000
13
<PAGE>
CLAYTON WILLIAMS ENERGY, INC.
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 24, 2000
10:00 A.M.
MIDLAND COUNTRY CLUB
6101 N. HWY. 349
MIDLAND, TEXAS
- --------------------------------------------------------------------------------
CLAYTON WILLIAMS ENERGY, INC.
SIX DESTA DRIVE, SUITE 6500
MIDLAND, TEXAS 79705-9963 PROXY
----------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING ON MAY 24, 2000.
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 24, 2000 at 10:00 a.m., local time, and at any and all
adjournments thereof.
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 17, 2000, and a copy of the Company's
1999 Annual Report.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
PLEASE DETACH HERE
<TABLE>
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
<S> <C> <C> <C> <C>
1. Election of directors: 01 Stanley S. Beard 02 Mel G. Riggs / / Vote FOR / / Vote WITHHELD
all nominees from all nominees
(except as marked)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, / /
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) / /
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.
Address Change? Mark Box / /
Indicate changes below: Date
---------------------------------------
/ /
/ /
/ /
Signature(s) in Box
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.
</TABLE>
