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Exhibit 10.2
CWEI AUSTIN CHALK REWARD PLAN
ARTICLE I
Purpose
of Plan
1.1
Purpose
of Plan . The
purpose of the Reward Plan (the “Plan”) is to reward
eligible employees and other service providers listed on
Exhibit A of Clayton Williams Energy, Inc., and its wholly-owned
affiliates (the “Employer”) for continued quality
service to the Employer, and to encourage retention of those
employees and service providers, by providing them the opportunity
to receive bonus payments that are based on profits derived from a
portion of the Employer’s working interest in certain wells
drilled by Employer in the area described on Exhibit
B.
ARTICLE II
Definitions and
Construction
2.1
Definitions
. Where the
following words and phases appear in the Plan, each will have the
respective meaning set forth below, unless the context clearly
indicated to the contrary.
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(a)
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Acquisition Costs: The portion of any costs or
expenses incurred by the Employer that are attributable to
acquiring the Well Interests.
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(b)
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Affiliate : An “Affiliate” of any
specified person means any other person, directly or indirectly,
controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of
this definition, “control” when used with respect to
any person means the power to direct the management and policies of
such person, directly or indirectly, through the ownership of
voting securities, by contract or otherwise, and the terms
“controlling” and “controlled” have
meanings correlative to the foregoing.
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(
c)
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Agreed Rate : 3.88% per annum, compounded
quarterly.
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(d)
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Bonus Award : The right granted to a Participant
to receive payments, if any, under the terms and conditions of the
Plan.
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(e)
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Bonus Percentage : The designated percentage set
forth in each Participant’s Notice of Bonus Award that is
used to calculate the amount of payments, if any, that such
Participant may be entitled to under the Plan.
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(f)
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Change of Control. A “Change
of Control” will be deemed to occur as of (i) the
date any “person” or “group” of
related persons (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is
or becomes the beneficial owner (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that such person or group
shall be deemed to have “beneficial ownership” of all
shares that any such person or group has the right to acquire,
whether such right is exercisable immediately or only after the
passage of
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Austin
Chalk Reward Plan.doc
time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Company (or its successor by
merger, consolidation or purchase of all or substantially all
of its assets) (for the purposes of this clause, such person
or group shall be deemed to beneficially own any Voting Stock
of the Company held by a parent entity, if such
person or group “beneficially owns” (as defined
above), directly or indirectly, more than 35% of the voting
power of the Voting Stock of the Company (or its successor by
merger, consolidation or purchase of all or substantially all
of its assets) or its parent entity and do not have the right
or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of
the Company (or such successor) or its parent entity, or (ii)
the date of death of Clayton W. Williams, Jr.
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(g)
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Code : The Internal Revenue Code of 1986, as
amended from time to time.
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(h)
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Committee: The Compensation
Committee of the Company’s board of directors.
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(i)
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Company: Clayton Williams Energy,
Inc.
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(j)
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Effective Date: June 1, 2007
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(k)
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Eligible Person: Each person who is employed by
Employer or who performs services for the Employer as a consultant
or independent contractor.
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(l)
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Employer: The Company and its wholly-owned
Affiliates.
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(m)
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Exchange Act: The Securities Exchange Act of
1934, as amended.
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(n)
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Full Vesting Date: May 5, 2013
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(o)
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Notice of Bonus Award: The notice provided to
each Participant pursuant to Section 3.1, setting forth, among
other things, the Participant’s Bonus Percentage under the
Plan.
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(p)
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Participant: Each Eligible Person who has been
granted a Bonus Award under the Plan and participates in the Plan
in accordance with the provisions of Article III.
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(q)
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Payment Date: With respect to each Plan Quarter,
the date that payment, if any, is made to eligible Participants
pursuant to Article V.
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(r)
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Permitted Assignee: Each Participant’s
spouse, parents, or natural or adoptive lineal descendants, or one
or more trusts or partnerships established exclusively for the
benefit of each Participant’s spouse, parents or natural or
adoptive lineal descendants.
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Chalk Reward Plan.doc
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(s)
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Permitted Holder: Clayton W. Williams, Jr. and
any Affiliate or Related Person thereof.
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(t)
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Plan: This CWEI Austin Chalk Reward Plan, as
amended from time to time.
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(u)
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Plan Quarter: Each calendar quarter within a
Plan Year.
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(v)
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Plan Year: Each twelve consecutive month period
beginning each January 1.
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(w)
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Quarterly Bonus Amount: This amount, if any, for
each Participant with respect to each Plan Quarter that is
calculated in accordance with the provisions of Section
4.3.
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(x)
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Quarterly Bonus Pool: The bonus pool, if any,
determined as of the end of each Plan Quarter in accordance with
the provisions of Article IV.
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(y)
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Related Person: With respect to any Permitted
Holder, a “Related Person” means:
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(1) any
controlling stockholder or a majority (or more) owned
subsidiary of such Permitted Holder or, in the case of an
individual, any spouse, family member (including adopted
children), heir or descendant of such Permitted Holder, any
trust created for the benefit of such individual or such
individual’s estate, executor, administrator, committee
or beneficiaries; or
(2) any
trust, corporation, partnership or other entity, the
beneficiaries, stockholders, owners or persons beneficially
owning a majority (or more) controlling interest of which
consist of such Permitted Holder and/or such other persons
referred to in the immediately preceding clause
(1).
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(z)
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Sale Transaction: A “Sale
Transaction” will be deemed to occur on (1) any sale,
exchange, or other disposition to a third party (excluding any
Affiliate of the Employer) of (i) the Employer’s Well
Interest or of the Employer’s rights or benefits with respect
to the Well Interest, or (ii) all or substantially all of the
Company’s assets, or (2) a Change of Control.
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(aa)
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Voting Stock:
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All
classes of capital stock of a corporation then outstanding and
normally entitled to vote in the election of
directors.
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(bb)
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Well: A well drilled by the Employer in the area
described on Exhibit A, provided that the well has a spud date on
or after the Effective Date and the primary objective of the well
is the Austin Chalk, Buda or Georgetown formation.
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(cc)
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Well Costs: The Employer’s share of costs
pursuant to any operating agreement for the drilling, completing,
equipping, deepening, or sidetracking the Well, including, without
limitation: (i) the costs of surveying and staking the Well, the
costs of any surface damages, and the costs of clearing, coring,
testing, logging, and evaluating the Well; (ii) the costs of
casing, cement, and cement services for the Well; (iii) the cost of
plugging and abandoning the Well (including standard
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Austin
Chalk Reward Plan.doc
and
customary radiation activities associated therewith), if it is
determined that the Well would not produce in
commercial quantities and should be abandoned; (iv)
all direct charges and overhead chargeable to the Employer
with respect to the Well under any applicable operating
agreement until such time as all operations are carried out as
required by applicable regulations and sound engineering
practices to make such Well ready for production, including
such charges and overhead attributable to the installation and
testing of wellhead equipment, or costs to plug and abandon a
dry hole; (v) all costs incurred by the Employer in
recompleting or plugging back the Well; (vi) all
costs incurred by the Employer in reworking the Well if the
rework is covered by an authority for expenditure under the
applicable operating agreement; (vii) all costs incurred by
the Employer in locating, drilling, completing, equipping,
deepening, or sidetracking any enhanced recovery producer or
injector Well (including the costs of all necessary surface
equipment such as steam generators, compressors, water
treating facilities, injection pumps, flow lines and steam
lines); and (viii) the costs of constructing production
facilities, pipelines and other facilities necessary to
develop property acquired pursuant to the
terms hereof and produce, collect, store, treat,
deliver, market, sell or otherwise dispose of oil, gas, and
other hydrocarbons and minerals therefrom; provided
, that Well Costs will not include any Acquisition
Costs.
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(dd)
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Well Interest:
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7%
of the Employer’s working interest in each Well.
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(ee)
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Well Interest Profits: As of the applicable
measurement date, an amount equal to the cumulative cash proceeds
earned by the Employer with respect to all Well Interests, minus
the sum of (i) Well Costs and other expenses incurred by the
Employer with respect to such Well Interests, plus (ii) an internal
rate of return on such costs equal to the Agreed Rate.
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2.2
Number
and Gender. The masculine gender, when
used herein, includes the feminine gender, and, unless
context indicates otherwise, the singular includes the plural
and the plural the singular.
2.3
Headings.
The headings of Articles and Section herein are
included solely for convenience, and if there is any conflict
between headings and the text of the Plan, the text will
control. All references to Sections and Articles
are to this Plan unless otherwise indicated.
Austin
Chalk Reward Plan.doc
ARTICLE III
Participation
3.1
Selection
of Participants and Grant of Bonus Awards.
The Committee, in its sole discretion, may select
which, if any, Eligible Persons will be granted Bonus Awards
and become Participants in the Plan. Each Participant's Bonus
Percentage will be determined by, and in the sole discretion
of, the Committee. Each Bonus Award granted to a Participant
will be evidenced by a Notice of Bonus Award that will
specify (a) the Participant's Bonus Percentage, (b) the
Participant's effective date of Plan participation, and (c)
such other terms and provisions as the Committee may
determine in its sole discretion.
3.2
Commencement of Participation. Each Eligible
Person will become a Participant upon the effective date of Plan
participation specified in his Notice of Bonus Award, provided that
such Eligible Person returns to the Company an executed Notice of
Bonus Award. Once an Eligible Person becomes a Participant in the
Plan, he will remain a Participant until his Plan participation
terminates in accordance with Section 3.3.
3.3
Termination
of Participation. A Participant's Plan
participation will terminate on the earliest to occur of the
following:
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(a)
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The
date on which such Participant terminates employment or service
with the Employer for any reason, but only if such termination date
occurs prior to the Full Vesting Date; provided, however, that with
respect to a Participant who is a consultant or independent
contractor and who is not actively performing services for the
Employer, such Participant will, for purposes of the Plan, be
deemed to remain in the service of the Employer unless and until
the Committee, in its sole discretion, determines that such service
relationship has been terminated;
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(b)
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The
date on which such Participant forfeits his Bonus Award after the
Full Vesting Date pursuant to Section 6.2;
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(c)
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The
date of death of such Participant if there is no Permitted Assignee
pursuant to Article VII; or
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(d)
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The
date of termination of the Plan or such Participant's Bonus Award
pursuant to Article X.
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From and after the date a
person's Plan participation terminates, such person will not
be entitled to receive any payment under the Plan, pursuant
to a Bonus Award or otherwise.
ARTICLE IV
Quarterly
Bonus Pool and Quarterly Bonus Amounts
4.1
Calculation
of Quarterly Bonus Pool. As soon as
administratively practicable after the last day of each Plan
Quarter, the Committee will calculate the Quarterly Bonus
Pool for such Plan Quarter in the following
manner:
Austin
Chalk Reward Plan.doc
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(a)
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If
Well Interest Profits, determined as of the last day of the
applicable Plan Quarter, equal a negative amount or zero, the
Quarterly Bonus Pool for such Plan Quarter will be deemed to be
equal to zero.
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(b)
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If
Well Interest Profits, determined as of the last day of the
applicable Plan Quarter, equal an amount greater than zero, the
Quarterly Bonus Pool for such Plan Quarter will be an amount equal
to (i) Well Interest Profits determined as of the last day of such
Plan Quarter, minus (ii) the sum of the Quarterly Bonus Pools for
all preceding Plan Quarters (taking into account that a Quarterly
Bonus Pool will be deemed to be equal to zero if it would otherwise
be a negative amount).
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4.2
Calculation
of Quarterly Bonus Pool in the Event of a Sale
Transaction. In the event a Sale
Transaction occurs with respect to a Plan Quarter, the
Quarterly Bonus Pool for such Plan Quarter will be calculated
in the manner described in Section 4.1, except that Well
Interest Profits will be deemed to include the amount of net
sale proceeds from the Sale Transaction that the Committee,
using any reasonable method it deems appropriate, determines
is attributable to the Well Interest. In the event that the
Sale Transaction does not result in the receipt of any net
sale proceeds (for example, a Change of Control), the
Committee will determine a deemed amount of net sale proceeds
attributable to the Well Interest, taking into account the
relevant facts and circumstances and using any reasonable
method it deems appropriate.
4.3
Calculation
of Participants' Quarterly Bonus Amounts. As soon as
administratively practicable after the last day of each Plan
Quarter, the Committee will calculate each Participant's
Quarterly Bonus Amount for such Plan Quarter, which will be
an amount equal to the product of the Participant's Bonus
Percentage multiplied by the Quarterly Bonus Pool for such
Plan Quarter (taking into account that a Quarterly Bonus Pool
will be deemed to be equal to zero if it would otherwise be a
negative amount).
ARTICLE V
Payment
of Quarterly Bonus Amounts
5.1
Payment
of Quarterly Bonus Amounts. With respect
to each Plan Quarter, each Participant whose Plan
participation has not terminated as of the Payment Date for
such Plan Quarter will be entitled to receive a payment, if
any, equal to one hundred percent (100%) of his Quarterly
Bonus Amount for such Plan Quarter. Such payment will be made
by the Employer in cash in a single sum as soon as
administratively practicable following the last day of the
applicable Plan Quarter, but in no event later than two and
one-half (2 1/2) months following the last day of the Plan
Year in which such Plan Quarter ends.
ARTICLE VI
Forfeiture of Bonus
Awa
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