1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
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 Rule 14a-12
Callon Petroleum Company
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
2
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET
NATCHEZ, MISSISSIPPI 39120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 4, 2001
To the Shareholders of
Callon Petroleum Company (the "Company"):
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of the Company will be held in Natchez, Mississippi, on
Friday, May 4, 2001, at 9:00 a.m., in the Ballroom of the Isle of Capri Hotel,
645 Canal Street, Natchez, Mississippi 39120, for the following purposes:
1. To elect three Class I directors to hold office until the 2004
Annual Meeting of Shareholders;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December
31, 2001; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on March 23, 2001 will
be entitled to notice of and to vote at, the Annual Meeting, or any adjournment
or adjournments thereof.
Shareholders are cordially invited to attend the Annual Meeting in
person. Those individuals who will not attend and who wish for their shares to
be voted are requested to sign, date and mail promptly the enclosed proxy for
which a postage-prepaid return envelope is provided.
By Order of the Board of Directors
/s/
Robert A. Mayfield
Corporate Secretary
Natchez, Mississippi
April 10, 2001
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. IF YOU
CANNOT ATTEND, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE RETURN ENVELOPE ENCLOSED FOR YOUR USE. NO POSTAGE IS REQUIRED IF
THE ENVELOPE IS MAILED IN THE UNITED STATES.
3
PROXY STATEMENT
---------------------
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET
NATCHEZ, MISSISSIPPI 39120
(601) 442-1601
-----------------
ANNUAL MEETING OF SHAREHOLDERS
FRIDAY, MAY 4, 2001
-----------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Callon Petroleum Company, a
Delaware corporation (the "Company"), from holders ("Shareholders") of the
common stock, $.01 par value per share ("Common Stock"), of the Company for use
at the Annual Meeting of Shareholders of the Company to be held on Friday, May
4, 2001, at 9:00 a.m., in the Ballroom of the Isle of Capri Hotel, 645 Canal
Street, Natchez, Mississippi 39120, and at any adjournment or adjournments
thereof (such meeting or adjournment thereof is referred to herein as the
"Annual Meeting"), for the purpose of considering and voting upon the matters
set forth in the accompanying Notice of Annual Meeting of Shareholders
("Notice").
A proxy in the form accompanying this Proxy Statement (each a "Proxy"),
when properly executed and returned, will be voted in accordance with the
directions specified on the Proxy, and otherwise in accordance with the judgment
of the persons designated therein as proxies. Any Proxy which does not withhold
authority to vote or on which no other instructions are given will be voted for
the election of the nominees named herein to the Board of Directors and in favor
of the other proposals set forth in the Notice. Any Proxy may be revoked at any
time before it is exercised by delivering, to the Secretary of the Company,
written notice of revocation or by duly executing a Proxy bearing a later date,
or by voting in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice and form of Proxy are
being mailed to shareholders on or about April 12, 2001. The Annual Report for
the Company's fiscal year ended December 31, 2000 is also being mailed to
shareholders contemporaneously with this Proxy Statement, although the Annual
Report does not form a part of the material for the solicitation of Proxies.
Proxies will be solicited primarily by mail, but employees of the
Company may also solicit Proxies in person or by telephone. Arrangements may be
made with brokerage firms or other custodians, nominees, and fiduciaries to send
Proxy materials to the beneficial owners of the Common Stock of the Company. All
costs incurred in the solicitation of Proxies will be borne by the Company.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
Unless otherwise indicated, proxies in the form enclosed that are
properly executed, duly returned and not revoked will be voted in favor of:
(1) The election of the three Class I director nominees to the Board
of Directors named herein; and
(2) The ratification of the appointment of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year
ending December 31, 2001.
The Board of Directors is not presently aware of other proposals that
may be brought before the Annual Meeting. In the event other proposals are
brought before the Annual Meeting, the persons named in the enclosed Proxy will
vote in accordance with what they consider to be in the best interests of the
Company and its Shareholders.
4
VOTING REQUIREMENTS
The Board of Directors has fixed the close of business on March 23,
2001 as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting. A
complete list of all shareholders entitled to vote at the Annual Meeting will be
open for examination by any shareholder during normal business hours for a
period of ten days prior to the Annual Meeting at the offices of the Company,
200 North Canal Street, Natchez, Mississippi 39120. Such list will also be
available at the Annual Meeting and may be inspected by any shareholder who is
present. On the Record Date, the Company's outstanding voting securities
consisted of 13,353,223 shares of Common Stock. Holders of Common Stock will be
entitled to one vote per share of Common Stock held of record on the Record Date
for each proposal to be presented at the Annual Meeting.
QUORUM AND OTHER MATTERS
The holders of a majority of the total shares of Common Stock issued
and outstanding on the Record Date, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. For purposes of determining whether a quorum is present under Delaware
law, broker non-votes and abstentions count towards the establishment of a
quorum. The election of directors requires the favorable vote of the holders of
a plurality of shares of Common Stock present and voting, in person or by proxy,
at the Annual Meeting. Abstentions and broker non-votes have no effect on
determinations of plurality except to the extent that they affect the total
votes received by any particular candidate. A majority of the votes represented
by the shareholders present at the Annual Meeting, in person or by proxy, is
necessary for ratification of the Company's independent public accountants.
Abstaining shares will be considered present at the Annual Meeting for this
matter so that the effect of abstentions will be the equivalent of a "no" vote.
With respect to broker non-votes, the shares will not be considered present at
the Annual Meeting for this matter so that broker non-votes will have the
practical effect of reducing the number of affirmative votes required to achieve
a majority vote by reducing the total number of shares from which the majority
is calculated.
2
5
BENEFICIAL OWNERSHIP OF SECURITIES
MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the Record Date, certain
information with respect to the ownership of shares of Common Stock and the
Company's $2.125 Convertible Exchangeable Preferred Stock ("Preferred Stock") as
to (i) all persons known by the Company to be the beneficial owners of 5% or
more of the outstanding Common Stock, (ii) each director, (iii) each nominee for
director, (iv) each of the executive officers named in the Summary Compensation
Table, and (v) all executive officers and directors of the Company as a group.
Information set forth in the table with respect to beneficial ownership of
Common Stock and Preferred Stock has been obtained from filings made by the
named beneficial owners with the Securities and Exchange Commission
("Commission") as of the Record Date or, in the case of executive officers and
directors of the Company, has been provided to the Company by such individuals.
Holders of Preferred Stock are not entitled to vote at the Annual Meeting.
COMMON STOCK PREFERRED STOCK
----------------------------- --------------------------------
BENEFICIAL BENEFICIAL
NAME AND ADDRESS OF OWNERSHIP PERCENT OWNERSHIP PERCENT
BENEFICIAL OWNER (A) (A)
- ----------------------------------------------------------- ---------------- ----------- ---------------- ---------------
Directors:
John S. Callon........................................ 295,704(b) 2.20% 0 --
Fred L. Callon........................................ 752,962(c) 5.53% 0 --
200 North Canal Street
Natchez, Mississippi 39120
Dennis W. Christian................................... 274,135(d) 2.02% 0 --
Leif Dons............................................. 15,000(e) * 0 --
Robert A. Stanger..................................... 60,856(f) * 0 --
John C. Wallace....................................... 1,954,138(g) 14.57% 0 --
65 Vincent Square
London, SW1P 2RX, England
B. F. Weatherly....................................... 60,367(h) * 0 --
Richard O. Wilson..................................... 89,737(i) * 1,000 *
Named Executive Officers:
John S. Weatherly..................................... 248,253(j) 1.83% 0 --
Stephen F. Woodcock................................... 81,131(k) * 0 --
Kathy G. Tilley....................................... 178,967(l) 1.32% 0 --
Directors and Executive Officers:
as a Group (16 persons)............................... 4,279,344(m) 28.72% 1,000 *
Certain Beneficial Owners:
Ganger Rolf ASA....................................... 1,839,386(n) 13.77% 0 --
Fred. Olsensgate 2
0152 Oslo, Norway
Bonheur ASA........................................... 1,839,386(n) 13.77% 0 --
Fred. Olsensgate 2
0152 Oslo, Norway
State Street Research & Management Company............ 824,400(o) 6.17% 0 --
One Financial Center, Thirtieth Floor
Boston, Massachusetts 02111-2690
UBS AG................................................ 759,412(p) 5.69% 0 --
Bahnhofstrasse 45
8021, Zurich, Switzerland
NewSouth Capital Management, Inc...................... 1,256,250(q) 9.41% 0 --
1000 Ridgeway Loop Rd., Suite 233
Memphis, Tennessee 38120
Scudder Kemper Investments, Inc....................... 811,500(r) 6.08% 0 --
345 Park Avenue
New York, New York 10154
Fleet Boston Corporation.............................. 842,718(s) 6.31% 0 --
One Hundred Federal Street
Boston, Massachusetts 02110
*less than 1%
(a) Unless otherwise indicated, each of the above persons may be deemed to
have sole voting and dispositive power with respect to such shares.
3
6
(b) Of the 295,704 shares beneficially owned by John S. Callon, 85,704 are
owned directly by him; 10,000 shares are owned in joint tenancy with
his wife; 105,000 shares are held in a family limited partnership;
90,000 shares are subject to options under the Company's 1994 Stock
Incentive Plan ("1994 Plan") exercisable within 60 days; and 5,000
shares are subject to options under the Company's 1996 Stock Incentive
Plan ("1996 Plan") exercisable within 60 days. Shares indicated as
owned by John S. Callon do not include 43,501 shares of Common Stock
owned by his wife over which he disclaims beneficial ownership.
(c) Of the 752,962 shares beneficially owned by Fred L. Callon, 231,737
shares are owned directly by him; 184,378 shares are held by him as
custodian for certain minor Callon Family members; 80,000 shares are
subject to options under the 1994 Plan exercisable within 60 days;
171,300 shares are subject to options under the 1996 Plan exercisable
within 60 days; and 85,547 shares are held by Fred L. Callon as Trustee
of shares held by the Callon Petroleum Company Employee Savings and
Protection Plan. Shares indicated as owned by Fred L. Callon do not
include 24,939 shares of Common Stock owned by his wife over which he
disclaims beneficial ownership.
(d) Of the 274,135 shares beneficially owned by Dennis W. Christian, 32,685
are owned directly by him; 60,000 shares are subject to options under
the 1994 Plan exercisable within 60 days; and 181,450 shares are
subject to options under the 1996 Plan exercisable within 60 days.
(e) Of the 15,000 shares beneficially owned by Leif Dons, 5,000 shares are
subject to options under the 1994 Plan exercisable in 60 days and
10,000 shares are subject to options under the 1996 Plan exercisable in
60 days.
(f) Of the 60,856 shares beneficially owned by Robert A. Stanger, 856 are
owned directly by him; 25,000 shares are subject to options under the
1994 Plan exercisable within 60 days; and 35,000 shares are subject to
options under the 1996 Plan exercisable within 60 days.
(g) Of the 1,954,138 shares beneficially owned by John C. Wallace, 37,781
shares are owned directly by him; 25,000 shares are subject to options
under the 1994 Plan exercisable within 60 days; 35,000 shares are
subject to options under the 1996 Plan exercisable within 60 days;
16,971 shares are owned by Fred. Olsen, Ltd.; and 1,839,386 shares are
owned by Ganger Rolf ASA ("Ganger Rolf") and Bonheur ASA ("Bonheur").
See note (n).
(h) Of the 60,367 shares beneficially owned by B. F. Weatherly, 367 shares
are owned directly by him; 25,000 shares are subject to options under
the 1994 Plan exercisable within 60 days; and 35,000 shares are subject
to options under the 1996 Plan exercisable within 60 days.
(i) Of the 89,737 shares beneficially owned by Richard O. Wilson, 25,000
shares are subject to options under the 1994 Plan exercisable within 60
days; 35,000 shares are subject to options under the 1996 Plan
exercisable within 60 days; 27,464 shares are held in a family limited
partnership; and 2,273 shares are issuable upon conversion of 1,000
shares of Preferred Stock held in the family partnership.
(j) Of the 248,253 shares beneficially owned by John S. Weatherly, 27,895
are owned directly by him; 218 shares are held as custodian for his
minor children; 60,000 shares are subject to options under the 1994
Plan exercisable within 60 days; and 160,140 shares are subject to
options under the 1996 Plan exercisable within 60 days.
(k) Of the 81,131 shares beneficially owned by Stephen F. Woodcock, 6,611
are owned directly by him and 74,520 shares are subject to options
under the 1996 Plan exercisable within 60 days.
(l) Of the 178,967 shares beneficially owned by Kathy G. Tilley, 23,127 are
owned directly by her; 30,000 shares are subject to options under the
1994 Plan exercisable within 60 days; and 125,840 shares are subject to
options under the 1996 Plan exercisable within 60 days.
(m) Includes 500,000 shares subject to options under the 1994 Plan
exercisable within 60 days and 1,046,370 shares subject to options
under the 1996 Plan exercisable within 60 days.
(n) As disclosed on a Schedule 13D/A, filed with the Commission on
September 12, 2000, by Ganger Rolf, Bonheur, AS Quatro ("Quatro") and
Quatroto AS ("Quatroto"). On August 28, 2000, Ganger Rolf and Bonheur
jointly purchased from Fred. Olsen Energy ASA ("F.O. Energy") an
aggregate of 1,839,386 shares of Common Stock. Ganger Rolf and Bonheur
are currently registered as the joint record owner of, and both possess
shared voting and dispositive power with respect to, all of the
1,839,386 shares of Common Stock formerly owned by F.O. Energy. F.O.
Energy no longer owns
4
7
any Common Stock. Ganger Rolf is the owner of 28.81% of the outstanding
common stock of F.O. Energy. Bonheur is the owner of 28.81% of the
outstanding capital stock of Ganger Rolf. Quatro is the owner of 21.3%
of the outstanding capital stock of Bonheur, and Quatroto is the owner
of 20.8% of the outstanding capital stock of Bonheur. Quatro and
Quatroto disclaim beneficial ownership of the shares of Common Stock
owned by Ganger Rolf and Bonheur. John C. Wallace, one of our
directors, is a director of Ganger Rolf and Bonheur, as well as other
companies associated with Ganger Rolf and Bonheur, and as a result, may
be deemed to share the power to vote and dispose of, and therefore be a
beneficial owner of the shares of common stock of Ganger Rolf and
Bonheur. The principal business address and principal executive offices
of Quatro and Quatroto are located at Fred. Olsensgate 2, 0152 Oslo,
Norway.
(o) Information is based upon a Schedule 13G, filed with the Commission on
February 14, 2001, by State Street Research & Management Company
("State Street"). In this Schedule 13G, State Street represents that it
has sole voting power with respect to 784,400 shares and sole
dispositive power with respect to all of the shares it beneficially
owns.
(p) Information is based on a Schedule 13G, filed with the Commission on
February 13, 2001, by UBS AG and its indirect, wholly-owned subsidiary,
Brinson Partners, Inc. Both UBS AG and Brinson Partners, Inc. represent
that they possess sole voting and shared dispositive power with respect
to all of these shares. Brinson Partners, Inc.'s principal business
office is located at 209 South LaSalle, Chicago, Illinois 60604-1295.
(q) Information is based upon a Schedule 13G, filed with the Commission on
February 9, 2001, by NewSouth Capital Management, Inc.
(r) Information is based upon a Schedule 13G, filed with the Commission on
February 14, 2001 by Scudder Kemper Investments, Inc. ("Scudder"). In
this Schedule 13G, Scudder represents that it has sole voting power
with respect to 478,400 shares, shared voting power with respect to
24,000 shares and sole dispositive power with respect to all of these
shares.
(s) Information is based upon a Schedule 13G, filed with the Commission on
February 14, 2001, by Fleet Boston Corporation ("Fleet Boston"). In
this Schedule 13G, Fleet Boston represents that it has sole voting
power with respect to 723,718 shares and sole dispositive power with
respect to all of these shares.
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
The Company's Certificate of Incorporation provides for a classified
Board of Directors. The Board of Directors is divided into three classes of
nearly equal size, designated as Class I (currently with three directors), Class
II (currently with three directors) and Class III (currently with two
directors). Initially, directors in each class were elected to hold office for
terms of one year, two years and three years, respectively. Upon the date of
each annual meeting after such initial classification, directors elected to
succeed those directors whose terms expire serve for a term which expires on the
date of the third succeeding annual meeting of shareholders after their
election.
The terms of the three Class I directors, Messrs. Robert A. Stanger,
John C. Wallace and Richard O. Wilson, will expire on the date of the Annual
Meeting. Messrs. Robert A. Stanger, John C. Wallace and Richard O. Wilson (the
"Nominees") have been nominated to serve as Class I directors until the 2004
Annual Meeting and until their respective successors have been duly elected and
qualified. Each of the Nominees was nominated by the Board of Directors.
It is intended that all shares of Common Stock represented by the
Proxies will be voted for the election of the Nominees, except where authority
to vote in the election of directors has been withheld. Should the Nominees
become unable or unwilling to serve as directors at the time of the Annual
Meeting, the person or persons exercising the Proxies will vote for the election
of substitute Nominees designated by the Board of Directors, or the Board of
Directors may choose to reduce the number of members of the Board of Directors
to be elected at the Annual Meeting in order to eliminate the vacancy. The
Nominees
5
8
have consented to be nominated and have expressed their intention to serve if
elected. The Board of Directors has no reason to believe that the Nominees will
be unable or unwilling to serve if elected. Only the Nominees or substitute
Nominees designated by the Board of Directors will be eligible to stand for
election as directors at the Annual Meeting. See "Shareholders' Proposals for
2002 Annual Meeting."
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information with respect to the Nominees
and all current directors whose terms will continue after the Annual Meeting and
present executive officers of the Company. Each executive officer has been
elected to serve until his or her successor is duly appointed or elected by the
Board of Directors or their earlier removal or resignation from office.
COMPANY POSITION
NAME AGE SINCE PRESENT COMPANY POSITION
- ------------------------------------- ---------- ------------------ ----------------------------------------------
CLASS I DIRECTORS:
(Term Expires in 2001)
Robert A. Stanger.................. 61 1995 Director; Nominee
John C. Wallace.................... 62 1994 Director; Nominee
Richard O. Wilson.................. 71 1995 Director; Nominee
CLASS II DIRECTORS:
(Term Expires in 2002)
John S. Callon..................... 81 1994 Director; Chairman of the Board
Leif Dons.......................... 51 1999 Director
B. F. Weatherly.................... 56 1994 Director
CLASS III DIRECTORS:
(Term Expires in 2003)
Fred L. Callon..................... 51 1994 Director; President; Chief Executive
Officer
Dennis W. Christian................ 54 1994 Director; Senior Vice President; Chief
Operating Officer
OTHER EXECUTIVE OFFICERS:
James O. Bassi..................... 46 1997 Vice President; Controller
Robert A. Mayfield................. 50 2000 Corporate Secretary
Thomas E. Schwager................. 50 1997 Vice President
H. Clark Smith .................... 48 2001 Corporate Information Officer
Rodger W. Smith.................... 51 1999 Treasurer
Kathy G. Tilley.................... 55 1996 Vice President
John S. Weatherly.................. 49 1994 Senior Vice President; Chief Financial
Officer
Stephen F. Woodcock................ 49 1997 Vice President
The following is a brief description of the background and principal
occupation of each director (including each Nominee) and executive officer:
James O. Bassi is Vice President and Controller of the Company and
Callon Petroleum Operating Company ("Callon Petroleum Operating"). Prior to
being appointed Vice President in November 1997, he had been Controller since
June 1997. Prior thereto he was Manager of the Accounting Department for the
Company and Callon Petroleum Operating. Mr. Bassi has been employed by the
Company and its predecessors for a total of ten years. Prior to his employment
by the Company, he was employed by Arthur Andersen LLP. He received his B.S.
degree in accounting in 1976 from Mississippi State University. He is a member
of the American Institute of Certified Public Accountants and the Mississippi
Society of Certified Public Accountants.
Fred L. Callon has been President and Chief Executive Officer of the
Company and Callon Petroleum Operating since January 1997. Prior to January
1997, he was President and Chief Operating Officer of the Company and had held
that position with the Company or its predecessors since 1984. He has been
employed by the Company or its predecessors since 1976. He graduated from
Millsaps College in 1972 and received his M.B.A. degree from the Wharton School
of Finance in 1974. Following graduation and until his employment by Callon
Petroleum Operating, he was employed by Peat, Marwick, Mitchell & Co., certified
public accountants. He is the nephew of John S. Callon.
6
9
John S. Callon is Chairman of the Board of Directors of the Company and
Callon Petroleum Operating. Effective January 2, 1997, John S. Callon resigned
from his position as Chief Executive Officer of the Company, a position he held
since 1980. Mr. Callon founded the Company's predecessors in 1950, and has held
an executive office with the Company or its predecessors since that time. He has
served as a director of the Mid-Continent Oil and Gas Association and as the
President of the Association's Mississippi-Alabama Division. He has also served
as Vice President for Mississippi of the Independent Petroleum Association of
America. He is a member of the American Petroleum Institute. Mr. Callon is the
uncle of Fred L. Callon.
Dennis W. Christian has been Senior Vice President and Chief Operating
Officer of the Company and Callon Petroleum Operating since January 1997. Prior
to January 1997, he was Senior Vice President of Operations and Acquisitions and
had held that or similar positions with the Company or its predecessors since
1981. Prior to joining Callon Petroleum Operating, he was resident manager in
Stavanger, Norway, for Texas Eastern Transmission Corporation. His previous
experience includes five years with Chevron U.S.A. Inc. Mr. Christian received
his B.S. degree in petroleum engineering in 1969 from Louisiana Polytechnic
Institute.
Leif Dons has since 1997 been Senior Vice President, Business
Development of Fred. Olsen Energy ASA, a publicly held Norwegian company engaged
in the offshore energy service industry. From 1992 until 1997, Mr. Dons was
employed by Kvaerner ASA in various positions, including the fields of
international operations and the commercialization of new technology, and as
resident country manager responsible for Israel and Palestine. From 1983 until
1991, he served as the managing director of Norwegian Oil Consortium A/S & Co.,
an oil company with producing properties in Norway. He negotiated the sale of
that company in 1991. From 1973 until 1983, Mr. Dons held various positions as
an analyst, staff engineer and economist at the Pulp and Paper Research
Institute, Norway and Saga Petroleum ASA. Mr. Dons received a Master of Science
degree in engineering from the Norwegian Institute of Technology in 1973.
Robert A. Mayfield is the Corporate Secretary and oversees Tax Services
for the Company and Callon Petroleum Operating. He was appointed Corporate
Secretary in February 2000. Prior to that, he had served as the Manager of Tax
Services and Securities and Exchange Commission Reporting since 1981. Prior to
joining Callon, he was employed by McCormick Oil and Gas Company in Houston,
Texas, where he served as an assistant to the tax manager. Mr. Mayfield received
a B.S. degree in accounting from Louisiana Tech University in 1972 and is a
member of the American Society of Corporate Secretaries.
Thomas E. Schwager is Vice President of Engineering and Operations for
the Company and Callon Petroleum Operating. Prior to being appointed to the
position in November 1997, he has held engineering positions with the Company
and its predecessors since 1981. Prior to joining the Company, Mr. Schwager held
various engineering positions with Exxon Company USA in Louisiana and Texas. He
received his B.S. degree in petroleum engineering from Louisiana State
University in 1972. He is a registered professional engineer and a member of the
Society of Petroleum Engineers.
H. Clark Smith is Corporate Information Officer for the Company and
Callon Petroleum Operating. He was appointed to this position in March 2001. He
has served as Manager - Information Technology since January 1990 and in other
computer related positions with the Company and its predecessors since 1983. At
Mississippi State University, he majored in Industrial Technology. During his
tenure with the Company, he has received extensive technical and management
training from the University of Southern Mississippi, International Business
Machines, Microsoft, Novell, and Arthur Andersen & Company. He has also served
as Manager - Information Services with Jefferson Davis Regional Medical Center
and as a principal of the consulting firm, Mississippi Computing Consultants.
Rodger W. Smith is the Treasurer for the Company and Callon Petroleum
Operating. Prior to being appointed to that position in April 1999, he had
served as Manager of Budget and Analysis since 1994. Before that, Mr. Smith was
Manager of Exploration and Production Accounting and has been employed by Callon
and its predecessors since 1983. Prior to his employment with Callon, he was
employed by International Paper Company as a plant controller. He received his
B.S. degree in accounting from the University of Southern Mississippi in 1973.
Robert A. Stanger has been the managing general partner since 1978 of
Robert A. Stanger & Company, Inc., a Shrewsbury, New Jersey-based firm engaged
in publishing financial material and providing investment banking services to
the real estate and oil and gas industries. He is a director of Citizens
Utilities, Stamford, Connecticut, a provider of telecommunications, electric,
natural gas, and water services and Electric Lightwaves, Inc., Seattle,
Washington, a regional fiber optic telephone company. Previously, Mr. Stanger
was Vice President of Merrill Lynch & Co. He received his B.A. degree in
7
10
economics from Princeton University in 1961. Mr. Stanger is a member of the
National Association of Securities Dealers and the New York Society of Security
Analysts.
Kathy G. Tilley is Vice President of Business Development for the
Company and Callon Petroleum Operating and has held that position since April
1996. She was employed by Callon Petroleum Operating in December 1989 as Manager
of Acquisitions and prior thereto, held that or similar positions as a
consultant since 1981. Ms. Tilley received her B.A. degree in economics from
Louisiana State University in 1967.
John C. Wallace is a Chartered Accountant having qualified with
PricewaterhouseCoopers in Canada in 1963, after which he joined Baring Brothers
& Co., Limited in London, England. For over fifteen years, he has served as
Chairman of Fred. Olsen Ltd., a London-based corporation which he joined in 1968
and which specializes in the business of shipping and property development. He
is a director of Fred. Olsen Energy ASA, a publicly held Norwegian company
engaged in the offshore energy service industry; Harland & Wolff PLC, Belfast, a
shipbuilding yard for the offshore oil and gas industry; and Ganger Rolf ASA and
Bonheur ASA, Oslo, both publicly-traded shipping companies.
B. F. Weatherly is a principal of Amerimark Capital Group, Houston,
Texas, an investment-banking firm, and has held that position since 1989. He is
also a general partner of CapSource Fund, L.P., Jackson, Mississippi, an
investment fund, and has held that position since 1997. He received a Master of
Accountancy degree from the University of Mississippi in 1967. He has previously
been associated with Arthur Andersen LLP, and has served as a Senior Vice
President of Weatherford International, Inc. B. F. Weatherly and John S.
Weatherly are brothers.
John S. Weatherly is Senior Vice President and Chief Financial Officer
for the Company and Callon Petroleum Operating. Prior to April 1999, Mr.
Weatherly also held the position of Treasurer. Prior to April 1996, he was Vice
President, Chief Financial Officer and Treasurer of the Company and had held
these positions since 1983. Prior to joining Callon Petroleum Operating in 1980,
he was employed by Arthur Andersen LLP since 1974. He received his B.B.A. degree
in accounting in 1973 and his M.B.A. degree in 1974 from the University of
Mississippi. He is a member of the American Institute of Certified Public
Accountants and the Mississippi Society of Certified Public Accountants. John S.
Weatherly and B. F. Weatherly are brothers.
Richard O. Wilson is an Offshore Consultant. In his 45 years of working
in offshore drilling and construction, he spent two years with Zapata Offshore
and 21 years with Brown & Root, Inc. working in various managerial capacities in
the Gulf of Mexico, Venezuela, Trinidad, Brazil, the Netherlands, the United
Kingdom and Mexico. He was a director and senior group vice president of Brown &
Root, Inc. and senior vice president of Halliburton, Inc. For 18 years he was
associated with Fred. Olsen Interests where he served as Chairman of OGC
International PLC, Dolphin A/S and Dolphin Drilling Ltd. Since the sale of OGC
International PLC to Halliburton, Inc. in 1997, he has been a consultant to
Brown & Root, Inc. He holds a B.S. degree in civil engineering from Rice
University. Mr. Wilson is a Fellow in the American Society of Civil Engineers,
is a member of the Institute of Petroleum, London, England, and a Director of
the Museum of Printing History in Houston, Texas. In 2000 he was elected an
Industry Pioneer by the Offshore Energy Center, Houston, Texas.
Stephen F. Woodcock is Vice President of Exploration for the Company
and Callon Petroleum Operating, being appointed to this position in November
1997. Prior to being appointed to this position, Mr. Woodcock had served as
Manager of Geology and Geophysics since his initial employment by the Company
and Callon Petroleum Operating in 1995. Prior thereto, he was manager of
geophysics for CNG Producing Company and division geophysicist for Amoco
Production Company. Mr. Woodcock received a masters degree in geophysics from
Oregon State University in 1975.
All officers and directors (including the Nominees) of the Company are
United States citizens, except Mr. Wallace, who is a citizen of Canada, and Mr.
Dons, who is a citizen of Norway.
STOCKHOLDERS' AGREEMENT
Pursuant to a Stockholders' Agreement ("Stockholders' Agreement") among
certain members of the Callon family ("Callon Family"), NOCO Enterprises, L.P.
("NOCO") and F.O. Energy dated September 16, 1994, the Callon Family, on the one
hand and NOCO and F.O. Energy on the other hand, each elected two directors to
the Company's Board of Directors. Specifically, the Stockholders' Agreement
provided that the Callon Family, NOCO and F.O. Energy would use their best
efforts, including voting the shares of Common Stock which they owned, to cause
the Company's Board of Directors to be composed of at least four members, two of
such members to be selected by the Callon Family and two of such members to be
selected by NOCO and F.O. Energy. Messrs. Wallace and Dons were elected to the
Board as
8
11
representatives of NOCO and F.O. Energy, and Messrs. Fred and John Callon were
elected to the Board as representatives of the Callon Family. The Stockholders'
Agreement expired on September 16, 1999.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Commission and any exchange or other system on which such
securities are traded or quoted, initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten percent shareholders are required by
the Commission's regulations to furnish the Company and any exchange or other
system on which such securities are traded or quoted, with copies of all Section
16(a) forms they file with the Commission.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company during the fiscal year ended December 31,
2000, all of the Company's officers, directors and greater than ten percent
shareholders had complied with all Section 16(a) filing requirements.
INFORMATION CONCERNING THE OPERATION OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Board
of Directors. The Board of Directors meets on a quarterly basis to review
significant developments affecting the Company and to act on matters requiring
Board approval. The Board of Directors may also hold special meetings when an
important matter requires Board action between regularly scheduled meetings.
Each non-employee director receives an annual fee of $10,000 for service on the
Board of Directors. Under the 1994 Plan, each non-employee director received an
annual automatic grant of an option to purchase 5,000 shares of Common Stock for
an exercise price equal to the fair market price on the date of grant and for a
ten-year term. Pursuant to the 1996 Plan, an option to purchase 5,000 shares of
Common Stock is to be granted to each non-employee director on the date he or
she is initially elected or appointed to the Board for an exercise price equal
to the fair market price on the date of grant and for a ten-year term.
Thereafter, for each subsequent year in which the non-employee director is still
serving as director, he or she shall automatically be granted an option to
purchase an additional 5,000 shares on the same terms. On August 23, 1996, the
Compensation Committee authorized a one-time grant to each non-employee director
of an option to purchase 20,000 shares of Common Stock under the 1996 Plan at a
purchase price of $12.00 per share, the fair market value of the Common Stock on
such date. One-fourth of each option vests at each succeeding annual meeting of
directors following each annual shareholders' meeting, beginning with the 1997
Annual Meeting. On July 25, 2000, the Compensation Committee authorized a
one-time grant to each non-employee director of an option to purchase 20,000
shares of Common Stock under the 1996 Plan at a purchase price of $10.50 per
share, the fair market value of the Common Stock on such date. One-fourth of
each option vests on August 23, 2000 and the remaining vests equally at each
succeeding annual meeting of directors following each annual shareholders'
meeting, beginning with the 2001 Annual Meeting.
During 2000, the Board of Directors of the Company met formally eight
times and executed thirteen unanimous written consents. All directors attended
at least 75% of the total number of meetings of the Board of Directors.
In order to facilitate the various functions of the Board of Directors,
the Board of Directors has created an Audit Committee and a Compensation
Committee. The Board of Directors does not have a nominating committee. The
functions customarily performed by a nominating committee are performed by the
entire Board of Directors. Committee members are not remunerated in addition to
their annual Board retainer.
AUDIT COMMITTEE. The Committee monitors the Company's internal
accounting controls, reviews quarterly and annual financial information and
reviews the services and fees of the independent auditors. The Board of
Directors has adopted an Audit Committee Charter that is attached as Appendix I.
Members are Messrs. Robert A. Stanger, Richard O. Wilson and John C. Wallace.
All of the members of the Audit Committee meet the New York Stock Exchange's
independence requirements. The Audit Committee held three meetings during 2000,
and all members of the Audit Committee attended the meetings.
COMPENSATION COMMITTEE. The Compensation Committee establishes and
approves the terms of employment of senior executive officers and reviews and
approves management's recommendations concerning compensation of the other
executive officers and certain other employees. Members are Messrs. B. F.
Weatherly, Chairman, Robert A. Stanger, John C. Wallace and Richard O. Wilson.
The Compensation Committee held three meetings during 2000, and all members of
the Compensation Committee attended all meetings.
9
12
TRANSACTIONS WITH RELATED PERSONS
REGISTRATION RIGHTS. The Callon Family (including John S. Callon and
Fred L. Callon) is party to a Registration Rights Agreement dated September 16,
1994 (the "Registration Rights Agreement"), pursuant to which they are entitled
to require the Company to register Common Stock owned by them with the
Commission for sale to the public in a firm commitment public offering and
generally to include shares owned by them in registration statements filed by
the Company. NOCO and the Company have entered into a similar agreement, which
was subsequently amended to include F.O. Energy. The registration rights
agreement with F.O. Energy also covers Common Stock held by its assignees,
Ganger Rolf and Bonheur.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors assists the board in
overseeing the Company's accounting, auditing and financial reporting practices.
The Company's management has primary responsibility for preparing the Company's
financial statements and implementing its internal accounting controls. The
Audit Committee overseas these activities in order to ensure their quality and
integrity. The Audit Committee has reviewed the audited financial statements in
the Company's Annual Report for the year ended December 31, 2000 with
management. The Audit Committee's discussions with management included a review
of the quality, not just the acceptability, of the accounting principles used to
prepare, the reasonableness of significant judgements with respect to, and the
clarity of disclosures in the Company's financial statements.
The Audit Committee reviewed the quality of the accounting principles
used in preparing our financial statements with Arthur Andersen LLP, the
independent public accountants who are responsible for expressing an opinion on
the conformity of our audited financial statements with generally accepted
accounting principles. The Audit Committee also discussed with Arthur Andersen
LLP such other matters as are required to be discussed with its independent
auditors under generally accepted auditing standards, including Statement on
Auditing Standards No. 61.
AUDIT FEES. For the year ended December 31, 2000, the aggregate fees
billed to the Company by its principal accounting firm, Arthur Andersen LLP, for
services related to Arthur Andersen LLP's audit of the Company's financial
statements and reviews of its Form 10-Qs and Form 10-K for 2000 were $115,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION. The Company
was not billed any amounts during 2000 by Arthur Andersen LLP for operating or
supervising its information system, or designing a hardware or software system
that aggregates data for, or generates information that is significant to, the
Company's financial statements.
ALL OTHER FEES. The aggregate amount of all other fees Arthur Andersen
LLP billed to the Company during 2000 was $29,200.
After reviewing the non-audit services provided by Arthur Andersen LLP
and engaging in discussions with Arthur Andersen LLP regarding their
independence, the Audit Committee determined that the non-audit services
provided to the Company by Arthur Andersen LLP were not inconsistent with Arthur
Andersen LLP's status as independent auditors. The Audit Committee has received
the letter from Arthur Andersen LLP required by Independence Standards Board
Standard No. 1.
Based on its reviews of the Company's audit financial statements and
the discussions with management and Arthur Andersen LLP discussed above, the
Audit Committee recommended to the Board of Directors that the Company's audited
financial statements be included in its Annual Report on Form 10-K for the year
ended December 31, 2000 for filing with the Commission.
Robert A. Stanger
Richard O. Wilson
John C. Wallace
10
13
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information with respect to the Chief
Executive Officer of the Company and the four most highly compensated executive
officers of the Company as to whom the total salary and bonus for the years
ended December 31, 2000, 1999 and 1998 exceeded $100,000.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------ --------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
YEAR ($)(A) ($)(B) ($)(C) ($)(D) (#) ($)(E)
------ ---------- --------- ------------ ------------ ------------- ------------
Fred L. Callon............ 2000 262,650 211,000 -- -- 110,000 30,229
President and Chief 1999 264,616 174,000 -- -- -- 30,298
Executive Officer 1998 242,727 -- -- -- 60,000 27,965
Dennis W. Christian....... 2000 241,638 195,000 -- -- 65,000 28,328
Sr. Vice President 1999 243,446 169,000 -- -- 35,000 28,420
and Chief Operating 1998 221,473 -- -- -- 55,000 26,050
Officer
John S. Weatherly......... 2000 210,120 169,000 -- -- 58,000 25,200
Sr. Vice President 1999 211,692 147,000 -- -- 31,000 25,270
and Chief Financial 1998 195,202 -- -- -- 45,000 23,427
Officer
Kathy G. Tilley........... 2000 178,602 135,000 -- -- 48,000 19,528
Vice President 1999 179,939 133,000 -- -- 25,000 19,535
1998 164,850 -- -- -- 30,000 17,818
Stephen F. Woodcock....... 2000 151,497 100,000 -- -- 44,000 16,562
Vice President 1999 152,630 105,000 -- -- 25,000 16,593
1998 144,200 -- -- 412,500 -- 15,599
(a) The Company issues payroll checks every other Friday. For 1999, there
were twenty-seven payroll checks issued and for 2000, there were
twenty-six payroll checks issued.
(b) The amounts represent that portion of bonuses declared in February 2001
and March 2000 and earned by service during 2000 and 1999,
respectively. Generally, bonus compensation is not payable unless the
executive remains employed by the Company through the date bonus
compensation is declared, which is generally in March of the following
year. These amounts also include amounts deferred.
(c) None of the named executive officers received perquisites or other
personal benefits, securities or property, the aggregate annual amount
of which exceeded the lesser of $50,000 or 10% of the total of annual
salary and bonus reported for the named executive.
(d) On January 6, 1998, 25,000 performance shares were awarded to Stephen
F. Woodcock and 10% of the shares vested on that date. On January 1,
1999, an additional 20% of the shares vested. On February 18, 1999, the
Board of Directors approved, upon the Compensation Committee's
recommendation, the vesting of the balance of the performance shares
granted. The closing price of the Common Stock on the NYSE on January
6, 1998 was $16.50 per share.
(e) Amounts reflect the Company's contribution in 2000, 1999, and 1998 of
$26,265, $26,462, and $24,273 to Fred L. Callon's 401(k) savings plan
and payment of $3,964, $3,836 and $3,692 term life insurance premiums;
$24,164, $24,344 and $22,147 to Mr. Christian's 401(k) savings plan and
payment of $4,164, $4,076 and $3,903 term life insurance premiums;
$21,012, $21,169 and $19,520 to Mr. Weatherly's 401(k) savings plan and
payment of $4,188, $4,101 and $3,907 term life insurance premiums;
$17,860, $17,994 and $16,485 to Ms. Tilley's 401(k) savings plan and
payment of $1,668, $1,541 and $1,333 term life insurance premiums; and
$15,150, $15,283 and $14,420 to Mr. Woodcock's 401(k) savings plan and
payments of $1,412, $1,310 and $1,179 term life insurance premiums.
11
14
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Fred L. Callon, Dennis W. Christian and John S. Weatherly entered into
employment agreements with the Company effective September 1, 1996 that expired
on January 1, 2001. The agreements provided that Mr. Callon, Mr. Christian and
Mr. Weatherly would receive an annual base salary of at least $200,000, $175,000
and $165,000, respectively, and that they would be entitled to participate in
any incentive compensation program established by the Company for its executive
officers.
The Company entered into a consulting agreement with John S. Callon,
effective as of January 2, 1997, the day he retired as Chief Executive Officer
of the Company. The agreement was amended on February 18, 1999. Pursuant to the
agreement, John S. Callon provides consulting services to the Company on matters
pertaining to corporate or financial strategy, investor relations and
public/private financing opportunities. The agreement remains in effect from the
effective date until December 31, 2001, subject to renewal for succeeding
five-year periods unless earlier terminated. As compensation for his services
under the agreement, John S. Callon is paid a fee ("Consultation Fee") of not
less than $190,000 per year increased annually based upon the change in the
Consumer Price Index, as adjusted for inflation. In addition, he will remain
eligible to participate in the Company's major medical and disability coverage,
and will be entitled to participate in all other employee benefit plans (other
than a cash bonus program) provided to full-time executives of the Company. As
an inducement for entering into the agreement, John S. Callon was granted 25,000
restricted shares of Common Stock, 20% of which vests on each of the first five
anniversaries of the effective date of the agreement. On February 18, 1999, the
Board of Directors approved the Compensation Committee's recommendation that all
unvested restricted shares be vested as of such date.
Upon termination of the agreement other than for cause, John S. Callon
or his spouse shall be entitled to receive a termination payment equal to the
Consultation Fee, as adjusted for inflation, to be paid annually until the later
of the death of John S. Callon (if applicable) or his spouse. In lieu of the
termination payment, John S. Callon or his spouse may elect to receive, subject
to the approval of the Board of Directors, a lump sum payment of $1.5 million.
In addition, if the agreement terminates due to the Company's breach, John S.
Callon and his spouse shall be entitled to liquidated damages. The Company may
terminate the agreement for cause. "Cause" is defined generally in the agreement
as willful misconduct or intentional and continual neglect of duties which has
materially and adversely affected the Company.
Pursuant to the 1994 Plan and the 1996 Plan, in the case of a merger or
consolidation where the Company is not the surviving entity, or if the Company
is about to sell or otherwise dispose of substantially all of its assets while
unvested options remain outstanding, the Compensation Committee or other plan
administrator may, in its discretion and without shareholder approval, declare
some or all options exercisable in full before or simultaneously with such
merger, consolidation or sale of assets without regard for prescribed waiting
periods. Alternatively, the Compensation Committee or other plan administrator
may cancel all outstanding options provided option holders are given notice and
a period of 30 days prior to the merger, consolidation or sale to exercise the
options in full.
STOCK-BASED PLANS
The Company currently maintains two Common Stock-based incentive plans
for employees: the Callon Petroleum Company 1994 Stock Incentive Plan and the
Callon Petroleum Company 1996 Stock Incentive Plan. The Company in the past has
used and will continue to use stock options and performance share grants to
attract and retain key employees in the belief that employee stock ownership and
stock related compensation devices encourage a community of interest between
employees and shareholders.
1994 PLAN. The 1994 Plan was adopted on June 30, 1994. Pursuant to the
1994 Plan, 600,000 shares of Common Stock were reserved for issuance upon the
exercise of options or for grants of performance shares. The 1994 Plan is
administered by the Compensation Committee of the Board of Directors. Members of
the Compensation Committee currently are Messrs. Stanger, Wallace, B. F.
Weatherly and Wilson. No awards were granted under the 1994 Plan during 1998
other than automatic grants to non-employee directors. Automatic option grants
to non-employee directors during 1999 were 25,000 shares. In addition, during
1999 the Compensation Committee approved option grants of 38,750 shares to
certain officers and employees. No awards were granted under the 1994 Plan
during 2000. As of March 23, 2001, there were 370 shares of Common Stock
available for grant under the 1994 Plan.
1996 PLAN. On August 23, 1996, the Board of Directors of the Company
approved and adopted the 1996 Plan and granted awards thereunder to various
employees. The 1996 Plan was approved by the shareholders of the Company at the
1997 Annual Meeting. Pursuant to the 1996 Plan, 900,000 shares of Common Stock
were reserved for issuance upon the exercise of options or for grants of
performance
12
15
shares. On August 20, 1998, the Board of Directors amended the 1996 Plan, as
permitted pursuant to the terms of the 1996 Plan, to increase the number of
shares of Common Stock reserved for issuance by 300,000 shares to 1,200,000
shares. During March 1999, the Compensation Committee approved option grants of
206,750 shares to certain officers and employees. During March 2000, the
Compensation Committee approved option grants for 533,000 shares to certain
officers and employees. Pursuant to Proposal II of the 2000 Proxy Statement, the
shareholders approved an increase in the available number of shares of Common
Stock reserved for issuance by 1,000,000 shares to 2,200,000 shares. As of March
23, 2001, there were 235,123 shares of Common Stock available for grant under
the 1996 Plan.
BONUS PLAN. In 1996, the Board of Directors authorized the
establishment of a cash bonus program (the "Bonus Plan") to be administered by
the Compensation Committee in accordance with formulas or procedures determined
by the Compensation Committee on an annual basis. Each year, the Compensation
Committee establishes target level bonuses as a percentage of base salary for
certain officers, managers and staff members. The Committee also establishes
financial and operating goals to be achieved by the Company during the year and
assigns a relative weighting percent to each goal. Cash bonus awards for the
year are then based upon the extent to which such goals were achieved during the
year. See "--Report on Executive Compensation."
1997 EMPLOYEE STOCK PURCHASE PLAN. In 1997, the Board of Directors
authorized the implementation of the Callon Petroleum Company 1997 Employee
Stock Purchase Plan (the "1997 Purchase Plan"), which was approved by the
Company's shareholders at the 1997 Annual Meeting. The Plan provides eligible
employees of the Company with the opportunity to acquire a proprietary interest
in the Company through participation in a payroll deduction-based employee stock
purchase plan. An aggregate of 250,000 shares of Common Stock have been reserved
for issuance over the ten-year term of the 1997 Purchase Plan. The purchase
price per share at which Common Stock will be purchased on the participant's
behalf on each purchase date within an offering period is equal to eighty-five
percent of the fair market value per share of Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the
number and terms of options to purchase Common Stock granted during 2000 to the
Chief Executive Officer and the four most highly compensated executive officers
named in the Summary Compensation Table. The options described below were
granted on March 23, 2000. The exercise price is $10.50 per share and is equal
to the fair market value of the Common Stock at the close of business on the day
prior to grant date. The closing price of the Common Stock on the New York Stock
Exchange on March 22, 2000 was $10.50 per share. Thirty-three percent (33%) of
each grant became vested and exercisable on August 23, 2000. Thirty-four percent
of each grant becomes vested on August 23, 2001 and the remaining thirty-three
percent (33%) becomes vested on August 23, 2002.
OPTION GRANTS IN 2000
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- ------------------------------------------------------------------------------------------------ -----------------------------
NUMBER OF PERCENT
SECURITIES OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE
GRANTED EMPLOYEES IN PRICE
NAME (#) FISCAL YEAR ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- --------------------------- --------------- -------------- ------------ --------------------- ------------- ---------------
Fred L. Callon............. 110,000 17.11 10.50 March 23, 2010 726,373 1,840,773
Dennis W. Christian........ 65,000 10.11 10.50 March 23, 2010 429,221 1,087,729
John S. Weatherly.......... 58,000 9.02 10.50 March 23, 2010 382,997 970,589
Kathy G. Tilley............ 48,000 7.47 10.50 March 23, 2010 316,963 803,246
Stephen F. Woodcock........ 44,000 6.84 10.50 March 23, 2010 290,549 736,309
13
16
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the
number and value of unexercised options to purchase Common Stock by the Chief
Executive Officer and the four most highly compensated executive officers named
in the Summary Compensation Table at December 31, 2000. No stock options were
exercised by such persons in 2000.
AGGREGATED OPTION EXERCISES IN 2000 AND OPTION
VALUES AT DECEMBER 31, 2000
UNEXERCISED OPTIONS AT DECEMBER 31, 2000
--------------------------------------------------
NUMBER OF VALUE OF
UNDERLYING IN-THE-MONEY
VALUE SECURITIES OPTIONS
SHARES ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) ($) UNEXERCISABLE (A) UNEXERCISABLE ($)(B)
- ------------------------------ -------------------- ----------- ---------------------- --------------------------
Fred L. Callon................ -- -- 221,300/103,700 1,365,700/ 634,613
Dennis W. Christian........... -- -- 213,700/ 71,300 1,363,308/ 434,348
John S. Weatherly............. -- -- 195,890/ 63,110 1,245,375/ 382,595
Kathy G. Tilley............... -- -- 137,340/ 50,660 859,495/ 304,693
Stephen F. Woodcock........... -- -- 67,520/ 36,480 413,281/ 215,220
(a) Represents awards granted under the 1994 Plan and the 1996 Plan.
(b) On December 31, 2000, the closing price of the Common Stock on the New
York Stock Exchange was $16.6875.
LONG-TERM INCENTIVE PLAN AWARDS
Other than the 1994 Plan and the 1996 Plan, the Company does not have a
long-term incentive plan for its employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee are Messrs. Robert
A. Stanger, John C. Wallace, B. F. Weatherly and Richard O. Wilson, none of whom
are or have been officers or employees of the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of four non-employee directors
who make recommendations to the Board with respect to the annual base and bonus
compensation of the executive officers of the Company. The Compensation
Committee also administers the Company's employee benefit plans.
COMPENSATION POLICY. The Company's goal with respect to its executive
compensation policy is to attract and retain executives who have the ability to
lead Callon in achieving its business objectives in a highly competitive
industry. To this end, the Company's compensation policy is comprised of three
elements: (1) base compensation, (2) bonus compensation, and (3) stock-based
compensation. Historically, the Company has provided for conservative base
salaries with more aggressive incentive compensation in order to emphasize pay
for performance. In addition, the Committee awards stock-based compensation to
encourage greater executive focus on stockholder value.
In the past, the Company had entered into employment agreements with
certain of its executive officers. These agreements established an initial base
salary subject to upward adjustment by the Board of Directors or the
Compensation Committee and provide that such officers are entitled to
participate in the Company's incentive compensation programs. All of these
agreements expired in early 2001, and the Committee has decided not to enter
into new agreements at this time. The Committee's decision was based on its
belief that employment agreements are not needed in order to retain the
Company's executive officers. In the future, the Committee may determine that
employment or other agreements with its executive officers are necessary in
order to retain key employees and achieve the Company's long-term growth
objectives.
14
17
Currently, the Committee does not intend to award levels of
compensation that would result in a limitation on the deductibility of a portion
of such compensation for federal income tax purposes pursuant to Section 162(m)
of the Internal Revenue Code of 1986, as amended; however, the Committee may
authorize compensation that results in such limitations in the future if it
determines that such compensation is in the best interest of the Company.
BASE COMPENSATION. The Compensation Committee reviews each executive
officer's salary annually. For 2000, the compensation for Messrs. Fred L.
Callon, Dennis W. Christian and John S. Weatherly was subject to outstanding
compensation agreements. The Committee has applied the same principals to
establish base compensation since the Company was formed in 1994, taking into
account both competitive realities and subjective factors. The base compensation
decision has no specific relationship to Company performance. As its primary
consideration, the Committee evaluates compensation set for comparable positions
by the Company's competitors, targeting the median of such compensation. To
determine base salaries paid by such peer group companies, the Committee
analyzes published industry survey data and proxy and annual report information
among energy companies of similar size, complexity and activity. From time to
time, the Company also engages independent compensation consulting firms. With
input from management of the Company, the Committee also takes into account
certain subjective factors such as individual performance and contribution to
the Company's success, seniority, experience level, internal equities within the
Company and general economic and industry conditions. No specific weight,
however, is assigned to these factors if they are considered.
After reviewing the salary levels of the Company's peers, the Company
decided to increase the base salaries of the Company's executive officers for
2000 by 3%. In addition to evaluating salary increases in the industry, the
Committee also took into account a subjective valuation of each individual
officer's contributions to the Company's performance in 1999, potential
contributions during 2000 and general inflationary considerations. This cost of
living increase was intended to match similar increases by the Company's
competitors and reflects the Committee's commitment to maintaining competitive
salary levels.
BONUS COMPENSATION. In 1996, the Board of Directors established the
Bonus Plan in order to tie compensation to certain fiscal targets affecting
short and long-term share price performance. Since that time, bonus compensation
has been awarded under the Bonus Plan as administered by the Compensation
Committee. As prescribed by the Bonus Plan, the Committee adheres to a formal
mechanism for determining annual bonus compensation. At the core of this
mechanism are pre-set financial and operating goals established by the Committee
as determinants of share price over time. For 2000, these goals were set with
respect to cash flow, net income, net reserve additions and finding costs. The
Committee assigns to each goal a relative weighting percent, which is multiplied
at year-end by the percentage by which each such goal was achieved in order to
determine the "Weighted Goal Achieved." The Committee then derives the "Total
Goal Achieved" by adding together each Weighted Goal Achieved. In addition, the
Committee establishes target level bonuses as a percentage of base salary for
officers and other employees. If the Total Goal Achieved at year-end is (i) less
than 80%, no bonuses will be awarded under the Bonus Plan; (ii) between 80% and
120%, bonuses will be awarded at 80% to 120% of the target level; and (iii) more
than 120%, additional bonuses will be awarded at the discretion of the
Committee. For the year ended December 31, 2000, the Total Goal Achieved was
173% of the goals set for 2000. Accordingly, bonus compensation was awarded. The
Compensation Committee anticipates following a similar formula for determining
cash bonuses for 2001, subject to adjustment for 2001 performance goals.
STOCK-BASED COMPENSATION. The Company relies heavily upon stock options
to compensate executive officers. The Committee generally subjects option grants
to a vesting schedule and establishes the exercise price as the fair market
value (based on trading on the New York Stock Exchange) of the Common Stock on
the date of grant. The Committee believes that these terms align the interests
of the Company's executives with those of its stockholders.
To determine the timing and amount of stock-based awards, the
Compensation Committee considers the factors set forth under "Base Compensation"
above as well as the employee's ability to influence the Company's future
performance. The Committee also takes into account the number of outstanding
unvested options held by an executive officer as well as the size of previous
option awards to such executive officer. After reviewing the number of options
granted by its peers to executive officers, the Committee decided to grant
options in 2000 to certain executive officers in order to maintain a competitive
compensation package. The Committee granted these options under the 1996 Plan to
executive officers and other employees of the Company to equalize their position
vis-a-vis their counterparts in the industry.
15
18
In the past, the Committee has issued performance shares to executive
officers. There are no performance shares currently outstanding; however, the
Committee will continue to monitor the Company's stock-based compensation
program to determine if performance shares should be granted in the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Pursuant to the employment
agreement between Fred L. Callon and the Company that was in effect during 2000,
Mr. Callon's annual base salary was set at a floor of $200,000, subject to
increase by the Board of Directors or the Compensation Committee. Mr. Callon's
base salary was increased by the Committee to $262,650 for 2000 as compared to
$255,000 for 1999 in order to keep Mr. Callon's salary level competitive with
the chief executive officer position at peer group companies as well as taking
into account the subjective factors described above under "Base Compensation."
See "Executive Compensation." In particular, the Committee considered Mr.
Callon's leadership role in overseeing the Company's successes during 1999 and
2000 with respect to its drilling and acquisition program, particularly in the
Gulf of Mexico deepwater region, and capital market financing activities.
Under the Bonus Plan formula set by the Compensation Committee, Fred L.
Callon earned a bonus of $211,000 during 2000. Mr. Callon was granted 110,000
additional stock options during 2000.
B. F. Weatherly, Chairman
Robert A. Stanger
John C. Wallace
Richard O. Wilson
16
19
PERFORMANCE GRAPH
The following graph compares the yearly percentage change for the five
years ended December 31, 2000, in the cumulative total shareholder return on the
Company's Common Stock against the cumulative total return for the (i) NASDAQ
Market Value Index, (ii) NYSE Market Value Index and (iii) Media General
Financial Services Industry and Market Index of SIC Group 121 (the "Industry
Group Index") consisting of oil and gas companies.
[COMPARISON OF CUMULATIVE TOTAL RETURN (1) LINE GRAPH]
12/29/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/29/2000
---------- ---------- ---------- ---------- ---------- ----------
Callon Petroleum Company (2) $100 $ 53 $ 61 $ 86 $ 68 $ 60
NASDAQ Market Index (2) $100 $124 $152 $214 $378 $238
NYSE Market Index (2) $100 $120 $158 $189 $206 $211
Industry Group Index $100 $129 $120 $ 78 $109 $158
(1) The comparison of total return on an investment for each of the periods
assumes that $100 was invested on December 29, 1995, in each of the
Company, the NASDAQ Market Index, the NYSE Market Index and the
Industry Group Index, and that all dividends were reinvested.
(2) The Company's Common Stock was traded on the Nasdaq NMS from September
19, 1994 until April 21, 1998. On April 22, 1998, the Company's Common
Stock began trading on the New York Stock Exchange.
17
20
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, for the examination of the accounts and audit of the
financial statements of the Company for the year ending December 31, 2001. At
the Annual Meeting, the Board of Directors will present a proposal to the
shareholders to approve and ratify the engagement of Arthur Andersen LLP. A
representative of Arthur Andersen LLP will be present at the Annual Meeting and
will have the opportunity to make a statement, if he desires, and to respond to
appropriate questions.
Management recommends that the shareholders approve and ratify the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the fiscal year ending December 31, 2001. Unless otherwise
indicated, all properly executed Proxies received by management will be voted
for such ratification at the Annual Meeting. An adverse vote will be considered
as a direction to the Audit Committee of the Board of Directors to select other
auditors in the following year.
SHAREHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING
Shareholders who desire to present proposals at the 2002 Annual Meeting
of Shareholders and to have proposals included in the Company's proxy materials
must submit their proposals to the Company at its principal executive offices
not later than December 11, 2001. If the date of the 2002 Annual Meeting of
Shareholders is changed by more than 30 days from the date of the 2001 Annual
Meeting of Shareholders, the deadline for submitting proposals is a reasonable
time before the Company begins to print and mail its proxy materials for its
2002 Annual Meeting of Shareholders.
The persons named in the Company's form of proxy for the 2002 Annual
Meeting will have discretionary authority to vote any proxies they hold at such
meeting on any matter for which the Company does not receive notice by February
26, 2002, unless the Company changes the date of its 2002 Annual Meeting of
Shareholders by more than 30 days from the date of the 2001 Annual Meeting of
Shareholders, in which case such persons will be able to exercise discretionary
authority if notice of the matter has not been received in a reasonable time
before the Company mails its proxy materials for the 2002 Annual Meeting of
Shareholders.
If the date of the 2002 Annual Meeting of Shareholders is advanced or
delayed by more than 30 calendar days from the date of the 2001 Annual Meeting
of Shareholders, the Company shall, in a timely manner, inform shareholders of
such change, by including a notice, under Item 5, in its earliest possible
quarterly report on Form 10-Q. The notice will include the new deadline for
submitting proposals to be included in the Company's proxy statement and the new
date for determining whether the Company may exercise discretionary voting
authority because it has not received timely notice of a matter.
In order to avoid controversy as to the date on which the Company
receives any such proposal, it is suggested that shareholders submit their
proposals by certified mail, return receipt requested, or other means that
permit them to prove the date of delivery.
18
21
FINANCIAL STATEMENTS
Financial statements of the Company for its most recent fiscal year are
contained in the 2000 Annual Report and the Company's Report on Form 10-K.
Copies of the Company's Annual Report and the Company's Report on FORM 10-K ARE
AVAILABLE TO SHAREHOLDERS UPON WRITTEN REQUEST TO THE INVESTOR RELATIONS
DEPARTMENT, CALLON PETROLEUM COMPANY, 200 NORTH CANAL STREET, NATCHEZ,
MISSISSIPPI 39120.
OTHER BUSINESS
The Board of Directors does not know of any matter to be acted upon at
the Annual Meeting other than those described above. If other business comes
before the Annual Meeting, the persons named on the Proxy will vote the Proxy in
accordance with what they consider to be in the best interests of the Company
and its shareholders.
By order of the Board of Directors
/s/
Fred L. Callon
President and Chief Executive Officer
Natchez, Mississippi
April 10, 2001
19
22
APPENDIX I.
CALLON PETROLEUM COMPANY
AUDIT COMMITTEE CHARTER
The Audit Committee (the "COMMITTEE") of Callon Petroleum Company (the
"COMPANY") is a committee of the Board of Directors. The Committee's function is
to assist the Board of Directors in fulfilling its oversight responsibilities to
shareholders, potential shareholders, and the investment community relating to
corporate accounting and financial reporting practices. In fulfilling this
function, the Committee's primary purposes are to:
1. Serve as an independent and objective party to monitor (a) the
financial information which will be provided to any government body or
the public; (b) the systems of internal controls which management and
the Board of Directors have established; and (c) the Company's
accounting and financial reporting processes.
2. Review and appraise the audit efforts of the Company's independent
accountants.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board of
Directors.
The Committee shall review and reassess the adequacy of this charter annually
and recommend any proposed changes to the Board of Directors for approval.
I. MEETINGS
The Committee will meet at least annually or more frequently as circumstances
dictate. The Committee may ask members of management or others to attend these
meetings and provide pertinent information as necessary. The Committee will meet
not less than once annually with management and the independent accountants in
separate executive sessions to discuss any matters that the Committee or any of
these persons believe should be discussed privately with the Committee.
II. MEMBERSHIP
The members of the Committee shall meet the independence and experience
requirements of the New York Stock Exchange as described in Section 303 of the
New York Stock Exchange's Listed Company Manual. The Board of Directors shall
appoint the members of the Committee.
III. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties, the Committee will:
Independent Accountants
1. Confirm with the independent accountants their ultimate
accountability to the Board of Directors and the Committee, as
representatives of the shareholders.
2. Select and recommend to the Board of Directors the independent
accountants to be engaged (or to be proposed for shareholder approval),
review and evaluate the independent accountants, and recommend to the
Board of Directors the discharge of the independent accountants when
circumstances warrant.
3. Oversee the independence of the independent accountants by, among
other things, (a) receiving from the independent accountants a formal
written statement delineating all relationships between the independent
accountants and the Company, consistent with Independence Standards
Board Standard 1; (b) actively engaging in a dialogue with the
independent accountants with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
accountants; and (c) recommending to the Board of Directors the
appropriate action to be taken in response to the independent
accountants' report to satisfy itself of the independent accountants'
independence.
20
23
Review of Financial Information
4. Review filings with the SEC and other published documents containing
the Company's financial statements and consider whether the information
contained in these documents is consistent with the information
contained in the financial statements.
5. Review with management and the independent accountants at the
completion of the annual examination:
a. The Company's annual financial statements and related
footnotes.
b. The independent accountants' audit of the financial
statements and his or her report thereon.
c. Any significant changes required in the independent
accountants' audit plan.
d. Any serious difficulties or disputes with management
encountered during the course of the audit.
e. Other matters related to the conduct of the audit, which
are required to be communicated to the Committee by Statement
on Auditing Standards No. 61, or otherwise under generally
accepted auditing standards or any other concerns.
6. Report to the Board of Directors whether or not the Committee
recommends that the audited financial statements should be included in
the Company's Annual Report on Form 10-K for the last fiscal year for
filing with the SEC.
7. If warranted, review and discuss with management and the independent
accountants each SEC report prior to its filing with the SEC or prior
to the release of earnings if significant events, transactions and/or
changes in accounting estimates, which were considered by the
independent accountants in performing the quarterly reviews, have
affected the quality of the Company's financial reporting.
Auditing, Accounting and Financial Reporting Processes
8. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
9. Review any analysis prepared by management and the independent
accountants of significant financial reporting issues and judgments
made in connection with the preparation of the Company's financial
statements.
10. Review any major changes to the Company's auditing and accounting
principals and practices as suggested by the independent accountants or
management.
11. Address other matters required to be communicated between the
Committee, management and the independent accountants related to
financial reporting under Statement on Auditing Standards No. 61.
Additional Responsibilities
12. Report actions of the Committee to the Board of Directors with such
recommendations as the Committee may deem appropriate.
13. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be empowered
to retain independent counsel, accountants or others to assist it in
the conduct of any investigation.
14. Perform such other functions as assigned by law, the Company's
charter or bylaws, or the Board of Directors.
21
24
CALLON PETROLEUM COMPANY
200 NORTH CANAL STREET, NATCHEZ, MISSISSIPPI 39120
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING ON MAY 4, 2001
The undersigned hereby constitutes and appoints John S. Callon and Fred L.
Callon and each of them, his true and lawful agents and proxies with full power
of substitution in each, to represent and to vote, as designated on the reverse,
all of the shares of Common Stock of Callon Petroleum Company, held of record by
the undersigned on March 23, 2001, at the Annual Meeting of Shareholders to be
held in the Ballroom of the Isle of Capri Hotel, 645 Canal Street, Natchez,
Mississippi 39120 on May 4, 2001, and at any adjournments thereof, on all
matters coming before said meeting.
IF NO DIRECTION AS TO THE MANNER OF VOTING THIS PROXY IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSAL 2 AS INDICATED
ON THE REVERSE SIDE HEREOF.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(To be signed on reverse side)
25
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
CALLON PETROLEUM COMPANY
MAY 4, 2001
o Please Detach and Mail in the Envelope Provided o
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
authority for all PROPOSAL 2.
1. ELECTION Nominees FOR AGAINST ABSTAIN
OF
DIRECTORS [ ] [ ] NOMINEES: Robert A. Stanger 2. To ratify the appointment [ ] [ ] [ ]
John C. Wallace of Arthur Andersen LLP as
To withhold authority to vote Richard O. Wilson independent public accountants.
for any specific nominee(s),
mark the "FOR" box and write 3. In their discretion, the Proxies are authorized
the name of each such nominee, to vote upon such other business as may properly
on the line provided below. come before the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN
- ------------------------------- THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
DIRECTORS AND "FOR" PROPOSAL 2.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY IN THE STAMPED, PRE-ADDRESSED ENVELOPE
ENCLOSED.
SIGNATURE DATE SIGNATURE DATE
------------------------- -------- -------------------------- ---------
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. when signing as attorney, executor, administrator, trustee or as
guardian, please indicate your full title as such.