MESA INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 1994
Dallas, Texas
March 30, 1994
To the Stockholders of MESA Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of MESA
Inc. will be held at the Fairmont Hotel, 1717 North Akard, Dallas, Texas 75201
at 10:00 a.m. on Tuesday, May 17, 1994, for the following purposes:
(1) To elect seven persons to serve on the Board of Directors of the
Company;
(2) To approve proposed amendments to the Company's 1991 Stock Option
Plan;
(3) To ratify the appointment of Arthur Andersen & Co. as the Company's
independent public accountants for 1994;
(4) To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on March 21, 1994 will be
entitled to notice of, and to vote at, the Annual Meeting or any postponements
or adjournments thereof.
Stockholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend in person, please sign, date and promptly
mail the enclosed proxy card for which a stamped return envelope is provided.
Stockholders are urged to read carefully the attached Proxy Statement for
additional information concerning the matters to be considered at the Annual
Meeting.
By order of the Board of Directors
William D. Ballew
Controller
MESA INC.
2600 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
PROXY STATEMENT
===============
ANNUAL MEETING OF STOCKHOLDERS
May 17, 1994
This Proxy Statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of MESA Inc. for use
at the Annual Meeting of Stockholders to be held at the Fairmont Hotel, 1717
North Akard, Dallas, Texas 75201 at 10:00 a.m. on Tuesday, May 17, 1994, and
at any postponements or adjournments thereof (the "Annual Meeting"). The
Annual Meeting is being held to consider and act on the matters stated in the
accompanying Notice. Unless the context otherwise requires, references herein
to "the Company" or "MESA" are to MESA Inc. and its subsidiaries and
predecessors viewed as a single entity.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders on or about April 8, 1994. Each proxy will be voted in
accordance with the specifications marked thereon. If no voting specification
is made, shares represented by proxies will be voted (i) FOR the election of
the seven nominees named herein as Directors of the Company, (ii) FOR the
proposed amendments to the Company's 1991 Stock Option Plan, (iii) FOR the
appointment of Arthur Andersen & Co. as the Company's independent public
accountants for 1994, and (iv) in the discretion of the persons named in the
accompanying proxy card in connection with any other business that may properly
come before the Annual Meeting. A stockholder may revoke his proxy by written
notice received by The Corporation Trust Company, the independent collection
agent for the Annual Meeting, at Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, any time before it is voted or by attending the
Annual Meeting and voting in person.
At the close of business on March 21, 1994, the record date for the
determination of stockholders entitled to notice of, and to vote at, the Annual
Meeting (the "Record Date"), there were 47,762,109 shares of Common Stock
outstanding. Each share of Common Stock is entitled to one vote with respect
to the matters to be acted upon at the Annual Meeting, except with respect to
the election of directors in the event there is cumulative voting at the Annual
Meeting. In accordance with the Texas Business Corporation Act, cumulative
voting is allowed in the election of directors at the Annual Meeting only if
a stockholder who intends to cumulate his votes gives written notice of such
intention to the secretary of the Company (at the Company's address above) on
or before the day preceding the date of the Annual Meeting. All stockholders
may cumulate their votes if any stockholder gives the written notice provided
for under the Texas Business Corporation Act. If such notice is properly given
and received, then, under cumulative voting, each stockholder will be entitled
to cast seven votes per share (one vote per share multiplied by the number of
positions on the Board of Directors to be filled) and to cast his or her votes
for a single nominee or for any or all of the nominees, as he or she may see
fit and in any manner he or she desires.
The Board of Directors is also soliciting discretionary authority to
cumulate votes in the event there is cumulative voting in the election of
directors. In such event, the persons named in the accompanying proxy card
will vote the shares covered by proxies received by them with a view to causing
the seven nominees named herein to be elected as members of the Company's Board
of Directors or, if election of all seven does not appear possible, then the
proxies will be voted with a view to causing as many of such nominees to be
elected as possible utilizing the cumulative voting provision. Such persons
may use cumulative voting in any fashion they deem appropriate and may select,
at their discretion, one or more of the seven nominees named herein who will
not receive their votes if it appears unlikely to elect all seven as directors.
A stockholder may, in the manner set forth in the enclosed proxy card, instruct
the proxyholders not to vote that stockholder's shares for one or more of the
named nominees.
If there is cumulative voting and a stockholder wishes to cast such
cumulative votes for the election of directors, such stockholder should clearly
indicate on the proxy card the number of votes such holder wishes to cast for
each nominee. However, by virtue of cumulative voting, the persons named as
proxies will have seven votes for each share held by each stockholder granting
them proxies (unless voting authority is withheld) and could likely offset the
instruction not to vote for one of the seven nominees or the exercise of
cumulative voting by the use of votes granted in other proxies. Delivery of
a signed and dated proxy card specifying cumulative votes to the independent
collection agent will not constitute the notice to the Company required under
the Texas Business Corporation Act to allow cumulative voting.
The Company's Bylaws require the Board of Directors to designate an
independent third party not affiliated with the Company or any other third
party soliciting proxies to collect, count and hold all proxies and ballots
that identify stockholders. Pursuant to this provision, the Board of Directors
has designated The Corporation Trust Company as the independent collection
agent for the Annual Meeting. The Board of Directors believes that the Bylaw
provision requiring independent and confidential collection and counting of
proxies helps assure the integrity of the election process and is in the best
interests of the stockholders and the Company.
The affirmative vote of the holders of a majority of the shares of Common
Stock that are represented in person or by proxy and entitled to vote at the
Annual Meeting will be required to approve each proposal, except that the
election of the directors will be determined by a plurality vote of shares
voted at the Annual Meeting.
Under the Company's articles of incorporation and bylaws, as well as the
Texas Business Corporation Act, the holders of a majority of shares of Common
Stock entitled to vote on a matter, represented in person or by proxy, shall
constitute a quorum as to that matter at the Annual Meeting. In addition, if
a quorum is present at the Annual Meeting, the stockholders represented in
person or by proxy at the Annual Meeting may conduct such business as may be
properly brought before the Annual Meeting, including the three proposals
described herein, until it is adjourned; and, the subsequent withdrawal from
the Annual Meeting of any stockholder or the refusal of any stockholder
represented in person or by proxy to vote shall not affect the presence of a
quorum at the Annual Meeting. Accordingly, at the Annual Meeting, any proxy
cards that include abstentions will be counted as being present for purposes
of determining the existence of a quorum for that matter at the Annual Meeting.
Proxy cards reflecting abstentions with respect to a matter will be so
reflected with respect to that matter in calculating stockholder votes, and
will therefor have the same effect as votes "against." The Company does not
believe that any of the matters to be brought before the Annual Meeting are of
the type that would require brokers and other fiduciaries to refrain from
voting due to lack of specific authority (i.e., "broker non-votes").
The Board of Directors recommends a vote (i) FOR the election of seven
nominees named herein as the directors, (ii) FOR the proposed amendments to the
1991 Stock Option Plan and (iii) FOR the appointment of Arthur Andersen & Co.
as the Company's independent public accountants for 1994.
Management does not intend to bring any matters before the Annual Meeting
other than those set forth in the Notice of Annual Meeting and does not know
of any other matters to be brought before the Annual Meeting by others. The
Bylaws of the Company require advance notice to the Company of proposals by
stockholders for action to be taken at the Annual Meeting and of nominations
by stockholders of persons for election to the Board of Directors. Except as
included herein, no stockholder proposals have been received. If any other
matter should come before the Annual Meeting, it is the intention of the
persons named in the accompanying proxy to vote proxies in accordance with
their judgment on such matters. The proxy card, when properly executed, will
be voted as specified herein by the stockholder. If no specification is made,
this proxy will be voted for proposals (i), (ii) and (iii). With regard to the
election of the Board of Directors, if there is cumulative voting, votes will
be distributed as instructed or in the discretion of the proxy holders as
described in this Proxy Statement.
The Company has retained Morrow & Co., Inc. to solicit proxies in the
enclosed form and will pay such firm a fee of approximately $15,000 plus
reasonable expenses for so acting. In addition, certain officers,
representatives and regular employees of the Company may also contact
stockholders by telephone, telegram or personal interview. The Company will
reimburse brokers and other custodians or nominees for their reasonable
expenses incurred in forwarding the solicitation material to beneficial owners
of Common Stock. The entire cost of this solicitation will be borne by the
Company.
1. ELECTION OF DIRECTORS
=====================
At the Annual Meeting, seven persons will be elected to the Board of
Directors to hold office until the next Annual Meeting of stockholders and
until their respective successors have been duly elected and qualified. The
directors may be elected by means of cumulative voting as described above. The
Company does not contemplate that any of the nominees will become unavailable
for any reason, but if that should occur before the Annual Meeting, the persons
named as proxies in the accompanying proxy card will vote the shares
represented by the proxies for another nominee or nominees to be selected by
management of the Company.
The following table sets forth with respect to each nominee (i) his name
and age, (ii) the period during which he has served as a director and (iii) his
principal occupation over the last five years (including other directorships
and business experience).
Business Experience
Name and Age Over Past Five Years
------------------------ ------------------------------
Boone Pickens, age 65.................. January 1992-Present, Chairman
of the Board of Directors and
Chief Executive Officer of the
Company; October 1985-December
1991, General Partner of Mesa
Limited Partnership (prede-
cessor to the Company and
hereinafter referred to as the
"Partnership"); 1964-January
1987, Chairman of the Board,
President and founder of Mesa
Petroleum Co. (predecessor to
the Partnership, hereinafter
referred to as "Original Mesa").
Paul W. Cain, age 55................... January 1992-Present, Director,
President and Chief Operating
Officer of the Company; August
1986-December 1991, President
and Chief Operating Officer of
the Partnership; Director of
Bicoastal Corporation.
John S. Herrington, age 54............. January 1992-Present, Director
of the Company; December 1991
-Present, personal investments
and real estate activities; May
1990-November 1991, Chairman of
the Board of Harcourt Brace
Jovanovich, Inc. (publishing);
May 1989-May 1990, Director of
Harcourt Brace Jovanovich, Inc.;
February 1985-January 1989,
Secretary of Energy of the
United States.
Wales H. Madden, Jr., age 66........... January 1992-Present, Director
of the Company; December 1985
-December 1991, Member of the
Advisory Committee of the
Partnership; 1964-January 1987,
Director of Original Mesa; Self
-employed attorney and
businessman for more than the
last five years; Director of
Boatmen's First National Bank of
Amarillo; Director of Uniform
Printing and Supply of Boston.
Fayez S. Sarofim, age 65............... January 1992-Present, Director
of the Company; Chairman of the
Board and President of Fayez
Sarofim & Co. (investment
advisor) for more than the last
five years; Director of Teledyne,
Inc., Unitrin, Inc., Argonaut
Group, Inc. and Imperial Holly
Corporation.
Robert L. Stillwell, age 57............ January 1992-Present, Director
of the Company; December 1985
-December 1991, Member of the
Advisory Committee of the Part-
nership; 1969-January 1987,
Director of Original Mesa;
Partner in the law firm of Baker
& Botts, L.L.P., for more than
the last five years.
J.R. Walsh, Jr., age 69................ January 1992-Present, Director
of the Company; December 1985
-December 1991, Member of the
Advisory Committee of the
Partnership; 1982-January 1987,
Director of Original Mesa;
President and Chairman of the
Board of United Mud Service
Company (oil and gas service
company) for more than the last
five years.
Each director of the Company who was not also an employee of the Company
or its subsidiaries received compensation of $20,000 in 1993. Directors who
are also employees of the Company receive no remuneration for their services
as Directors. Mr. Sarofim, a director and member of the Compensation and Stock
Option Committees, is Chairman of the Board, President and owner of a majority
of the outstanding capital stock of Fayez Sarofim & Co., which acts as an
investment advisor to certain employee benefit plans of the Company. During
the year ended December 31, 1993, Fayez Sarofim & Co. received fees, paid by
the employee benefit plans, of $139,687 for such services.
The Board of Directors of the Company held five meetings in 1993, each of
which was attended by all members, except that one director missed one Board
meeting and one Audit Committee meeting. The Board of Directors has the
following standing committees: the Audit Committee, the Compensation Committee
and the Stock Option Committee. It does not have a Nominating Committee.
The Audit Committee is composed of Messrs. Herrington, Madden and Walsh.
Its primary functions are (i) the recommendation of independent public
accountants, (ii) the review of the independence of the independent public
accountants, audit engagement and other professional services of the
independent public accountants and (iii) the provision for the availability to
the independent public accountants of all aspects of the Company's accounting
practices and procedures. The Audit Committee held two meetings in 1993.
The Compensation Committee is composed of Messrs. Sarofim, Stillwell and
Walsh. The Compensation Committee held three meetings in 1993. The Stock
Option Committee, which administers the 1991 Stock Option Plan, is also
composed of Messrs. Sarofim, Stillwell and Walsh. The Stock Option Committee
held three meetings in 1993.
The Board of Directors recommends a vote FOR the Nominees named above.
- ----------------------------------------------------------------------
2. PROPOSED AMENDMENTS TO THE 1991 STOCK OPTION PLAN
=================================================
The Option Plan was approved by shareholders in 1991. Its purpose is to
serve as an incentive to, and aid in the retention of, key executive and other
employees whose training, experience and ability are considered important to
the operations and success of the Company. The Option Plan is administered by
the Stock Option Committee composed of non-employee directors of the Company
who meet the requirements of "disinterested person" in Rule 16b-3(c)(2)(i) of
the Securities Exchange Act of 1934.
The Board of Directors has approved the amendment of the Company's 1991
Stock Option Plan (the "Option Plan") in order to (i) increase from two million
to four million the number of shares of Common Stock of the Company covered by
the Option Plan and (ii) commencing with 1994, limit the number of shares for
which options may be granted in any one year to any single employee to 200,000
shares. Otherwise, the Option Plan will continue unchanged according to its
present terms. See "Executive Compensation -- 1991 Stock Option Plan" below.
The affirmative vote of a majority of the shares of Common Stock represented
in person or by proxy and entitled to vote at the Annual Meeting is required
to approve such amendments. The increase in authorized shares covered by the
Option Plan is considered desirable because fewer than 55,000 shares remain
available for grant to date. The proposed 2,000,000 share increase in the
number of shares issuable under the Option Plan represents approximately 4.2%
of the outstanding Common Stock on the date hereof. The amendment placing a
limit on annual participation by a single grantee is necessary in order to
comply with recent changes to the Internal Revenue Code of 1986, as amended
(the "Code"), and proposed regulations thereunder regarding non-deductibility
of executive compensation under certain circumstances.
Stock Reserved for the Option Plan
----------------------------------
A total of two million shares of Common Stock is currently subject to the
Option Plan, subject to increase to four million shares if the proposed
amendment is approved. The shares to be issued under the Option Plan will
consist of unissued shares or previously issued shares reacquired and held by
the Company. Any shares which remain unsold and which are not subject to
outstanding options at the termination of the Option Plan shall cease to be
reserved for the Option Plan, but until termination of the Option Plan, the
Company will at all times reserve a sufficient number of shares to meet Option
Plan requirements. If any option expires or is cancelled prior to its exercise
in full, the shares of Common Stock subject to such option may again be subject
to subsequent options that may be granted under the Option Plan, except that
option shares relinquished and not required to be issued upon such
relinquishment shall not again be available for options under the Option Plan.
In its discretion, the Option Committee may provide for the acceleration of any
unmatured installments of outstanding options.
Procedures Relating to Options
------------------------------
Shares of Common Stock subject to an option may be purchased at an
exercise price that is equivalent to at least 100% of the fair market value of
such shares of Common Stock on the date the option is granted. The fair market
value of a share of Common Stock on a particular date is defined as the mean
of the highest and lowest sales price per share of the Common Stock on the
principal exchange on which the Common Stock is listed (currently the New York
Stock Exchange); or if there were no sales on such date, the mean price on the
last preceding date on which sales were reported.
The purchase price, payable in full at exercise, of the shares as to which
the option is exercised is payable in cash or in shares of Common Stock
previously held by the optionee for more than six months, valued at their fair
market value (as defined above) on the date of exercise. Subject to Option
Committee approval and to such limitations and conditions as may be imposed by
rules promulgated under Section 16(b) of the Securities Exchange Act of 1934,
an optionee may pay all or any portion of the purchase price by electing on or
before the exercise date to have the Company withhold upon exercise shares of
Common Stock having a fair market value (as defined above) equal to the
purchase price.
Amendment and Termination
-------------------------
The Board of Directors may amend, alter or discontinue the Option Plan,
but no amendment or alteration, other than an amendment to permit exemption
from Section 16(b) of the Exchange Act, may be made which would impair the
rights of any optionee without his consent. Also, without further approval of
the Company's stockholders, the Board of Directors may not (i) increase the
total number of the shares available under the Option Plan, (ii) materially
increase the benefits under the Option Plan or (iii) materially modify the
requirements for eligibility under the Option Plan.
Options Granted During 1993
---------------------------
Options granted to the Chief Executive Officer, the other four most highly
compensated executive officers of the Company, all executive officers of the
Company as a group, non-executive directors as a group, and all other employees
of the Company that are not executive officers as a group, during 1993 are as
follows:
1991 Stock Option Plan(1)
Number of
Shares Underlying
Dollar Options/SARs
Name and Principal Position Value($) Granted(#)
- ------------------------------------------- -------- -----------------
Boone Pickens, -- (2) 275,000
Chairman of the Board of Directors
and Chief Executive Officer
Paul W. Cain, -- (2) 100,000
President and Chief Operating Officer
Dennis E. Fagerstone, -- (2) 10,000
Vice President-Exploration and Production
S. Leonard Hruzek, Jr., (3) -- --
Vice President-Marketing and Land
Andrew J. Littlefair, -- (2) 25,000
Vice President-Public Affairs
Executive Group (7 persons) -- (2) 430,000
Non-Executive Director Group (5 persons) -- --
Non-Executive Officer Employee Group -- (2) 175,950
(51 persons)
(1) Summary of options granted under the 1991 Stock Option Plan during the
year ended December 31, 1993.
(2) Exercise price equals the fair market price of the Company's Common Stock
on the date of grant.
(3) Mr. Hruzek resigned effective February 28, 1994.
Federal Income Tax Consequences
-------------------------------
Options granted under the Option Plan are intended to constitute
nonqualified stock options within the meaning of Section 83 of the Code. An
optionee will not generally recognize any taxable income at the time he is
granted an option under the Option Plan, but ordinary income will be recognized
by the optionee at the time of his exercise of the option in an amount equal
to the excess of the fair market value of the shares of Common Stock on the
date of exercise over the option exercise price thereof.
Under current rulings and proposed regulations, if an employee uses
previously held shares of Common Stock having a value equal to the exercise
price to exercise a nonqualified stock option, no gain will be recognized on
the disposition of such previously held shares and the tax basis (and holding
period) of such shares will be allocated to a number of the shares acquired on
the exercise equal to the number of previously held shares used to pay the
exercise price. The value of any shares received by an employee in excess of
the number of shares used to pay the exercise price will constitute
compensation to the employee, which is includable in his gross income. The
employee's basis in such additional shares will be the same as the amount of
compensation included in his gross income plus any cash paid on exercise. The
holding period for such additional shares shall commence on the date of
exercise of the option.
Upon a subsequent sale of shares acquired pursuant to the exercise of an
option, the employee will generally recognize a long-term or short-term capital
gain or loss, depending upon the holding period of the shares, in an amount
equal to the difference between the amount received by the optionee and the sum
of (i) the option price of the shares as of the date of exercise and (ii) the
amount includable in income with respect to such option, if any (such sum being
his "basis" in the shares). The holding period required for long-term capital
gain or loss is more than one year.
An optionee who receives a right of relinquishment or stock appreciation
right ("SAR") will not recognize any taxable income upon receipt of the SAR but
upon exercise of the SAR, the fair market value of the shares (or the cash in
lieu of shares) received must be treated as ordinary income by the optionee for
that year. Under such circumstances, the Company will, in general, be entitled
to a deduction equal to the amount taxable to the optionee as ordinary income
provided it satisfies the applicable withholding requirements. If the optionee
receives shares upon the exercise of a SAR and thereafter disposes of such
shares in a taxable transaction, the difference between any amount realized on
such disposition and the amount treated as ordinary income upon the exercise
of the SAR will be treated as a capital gain or loss (provided the shares were
held as a capital asset on the date of disposition), which will be a long-term
or short-term capital gain or loss depending on the holding period of the
stock.
An optionee may be required to deposit cash with the Company in an amount
necessary to satisfy applicable federal and state law requirements with respect
to withholding of taxes on wages, or make some other arrangements acceptable
to the Company to comply with such requirements.
The foregoing summary of federal income tax consequences does not
constitute a definitive statement of the tax effects of stock options granted
under the Option Plan and is based on the laws and regulations presently in
effect.
For additional information with respect to the Option Plan and the options
that have been granted thereunder, see "Executive Compensation -- 1991 Stock
Option Plan."
The Board of Directors recommends a vote FOR the adoption of the proposed
amendments to the 1991 Stock Option Plan.
- ----------------------------------------------------------------------------
3. APPROVAL OF SELECTION OF INDEPENDENT ACCOUNTANTS
================================================
The Board of Directors has appointed the firm of Arthur Andersen & Co. as
the Company's independent public accountants for 1994. Arthur Andersen & Co.
has been the Company's independent public accountants since 1964.
A representative of Arthur Andersen & Co. will be available at the Annual
Meeting and will have the opportunity to make a statement if he or she desires
to do so and to respond to appropriate questions.
The Board of Directors recommends a vote FOR the appointment of the
independent public accountants.
- ----------------------------------------------------------------------------
MANAGEMENT OF THE COMPANY
=========================
The following table sets forth the name, age and five-year employment
history of each Executive Officer of the Company.
Business Experience
Name and Age Over Past Five Years
------------------------ ------------------------------
Boone Pickens, age 65.................. January 1992-Present, Chairman
of the Board of Directors and
Chief Executive Officer of the
Company; October 1985-December
1991, General Partner of the
Partnership; 1964-January 1987,
Chairman of the Board, President
and founder of Original Mesa.
Paul W. Cain, age 55................... January 1992-Present, Director,
President and Chief Operating
Officer of the Company; August
1986-December 1991, President
and Chief Operating Officer of
the Partnership; Director of
Bicoastal Corporation.
Dennis E. Fagerstone, age 45........... January 1992-Present, Vice
President-Exploration and
Production of the Company; May
1991-December 1991, Vice
President-Exploration and
Production of the Partnership;
June 1988-May 1991, Vice
President-Operations of the
Partnership.
Andrew J. Littlefair, age 33........... January 1992-Present, Vice
President-Public Affairs of the
Company; August 1987-December
1991, Assistant to the General
Partner of the Partnership;
January 1984-August 1987, Staff
Assistant to the President of the
United States, Washington DC.
Charles L. Carpenter, age 55........... April 1992-Present, General
Counsel and Secretary of the
Company; October 1988-March 1992,
Chief Counsel-Marketing of Oryx
Energy.
William D. Ballew, age 35.............. January 1992-Present, Con-
troller of the Company; May 1991
-December 1991, Controller of the
Partnership; January 1991-May
1991, Manager-Accounting of the
Partnership; December 1988
-December 1990, Assistant to the
Controller of the Partnership;
July 1986-December 1988, Audit
Manager for Price Waterhouse,
Dallas, Texas.
EXECUTIVE COMPENSATION
======================
Compensation of Executive Officers
- ----------------------------------
The table set forth below contains certain information regarding
compensation earned by, awarded to, or paid to the Chief Executive Officer and
the other four most highly compensated executive officers of the Company for
services rendered to the Company during the years 1991-1993.
Summary Compensation Table
--------------------------
Annual Compensation
-------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- -------------------------------- ---- ----------- ----------- ------------
Boone Pickens, 1993 $675,000 $ 0 $ -- (4)
Chairman of the Board of 1992 960,000 0(2) -- (4)
Directors and Chief Executive 1991 -- (1) -- (3) --
Officer
Paul W. Cain, 1993 400,020 225,000 -- (4)
President and Chief Operating 1992 400,020 0(2) -- (4)
Officer 1991 455,748 200,000 --
Dennis E. Fagerstone, 1993 199,980 75,000 -- (4)
Vice President-Exploration 1992 199,980 106,323(2) -- (4)
and Production 1991 170,225 179,442 --
S. Leonard Hruzek, Jr.,(12) 1993 150,000 50,000 -- (4)
Vice President-Marketing 1992 150,000 99,089(2) -- (4)
and Land 1991 135,245 131,141 --
Andrew J. Littlefair, 1993 115,980 75,000 -- (4)
Vice President-Public Affairs 1992 109,980 92,330(2) -- (4)
1991(17) -- -- --
Long-Term
Compensation
Awards-Number
of Shares
Underlying All Other
Name and Principal Position Year Options/SARs Compensation(5)
- -------------------------------- ---- --------------- ---------------
Boone Pickens, 1993 275,000 $ 114,750(6)
Chairman of the Board of 1992 800,000 1,047,707(7)
Directors and Chief Executive 1991 0 -- (18)
Officer
Paul W. Cain, 1993 100,000 106,253(8)
President and Chief Operating 1992 150,000 273,040(9)
Officer 1991 0 -- (18)
Dennis E. Fagerstone, 1993 10,000 46,747(10)
Vice President-Exploration 1992 50,000 72,740(11)
and Production 1991 0 -- (18)
S. Leonard Hruzek, Jr.,(12) 1993 0 34,000(13)
Vice President-Marketing 1992 40,000 58,892(14)
and Land 1991 0 -- (18)
Andrew J. Littlefair, 1993 25,000 32,467(15)
Vice President-Public Affairs 1992 30,000 47,583(16)
1991(17) -- --
(1) As General Partner of the Partnership, Mr. Pickens was not entitled to
an annual salary but was entitled to receive a management fee in an
aggregate amount equal to 1% of the cash distributions to holders of
units of the Partnership, subject to an annual limit. No distributions
on the common units were made in 1991. Accordingly, the General Partner
did not receive management fees for 1991. The Partnership Agreement also
provided that the General Partner was entitled to receive certain fees
in respect of acquisitions and securities gains. The General Partner
received $373,853 of such fees in 1991.
(2) Bonuses paid to the executive officers of the Company in 1992
include bonus payments with respect to performance in 1992 as well as the
unpaid portion of deferred bonuses awarded in 1990 and 1991. The
following amounts were paid to the executive officers of the Company for
services rendered during 1992: $0 to Mr. Pickens; $0 to Mr. Cain;
$28,000 to Mr. Fagerstone; $25,000 to Mr. Hruzek; and $32,000 to Mr.
Littlefair. On July 1, 1992, the Company cancelled the key employee life
insurance policies for certain of its officers and other employees and
collected the aggregate cash surrender value of $1,210,859. At the same
time, the Company accelerated the deferred portion of bonuses awarded in
previous years to such officers and employees. The balance of the 1992
bonus column amounts represents the acceleration of the deferred portion
of bonuses for prior years that were paid to each individual in the above
table in connection with the cancellation of employee life insurance
policies. (See discussion under "Bonus Plan" below.)
(3) Mr. Pickens did not participate in the Company's bonus plan (see
separate discussion below under "Bonus Plan") while serving as General
Partner of the Partnership.
(4) Apart from the compensation set forth in the summary compensation table
and under the plans and pursuant to the transactions described below,
other compensation paid for services during the years ended December 31,
1993 and 1992, respectively, to each individual named in the summary
compensation table aggregated less than 10% of the total salary and bonus
reported for such individual in the summary compensation table, or
$50,000, if lower.
(5) Except as reflected in other notes, "All Other Compensation" consists
principally of three items. First, the Company maintains an Employees
Premium Plan and a Profit Sharing Plan, both of which are retirement
plans (the "Retirement Plans"), for all employees (see separate
discussion below). Employer contributions to these Retirement Plans are
limited by the Code to a total of $30,000 per year. The Company
contributed 17% of each employee's total 1993 compensation to the
Retirement Plans. Second, to the extent that 17% of an employee's total
compensation exceeded $30,000 (all employees with total compensation in
excess of $176,470), the Company, as a matter of policy, paid the excess
amount in cash to such employee. Third, prior to July 1, 1992, the
Company maintained a key employee life insurance program (see separate
discussion below) for each executive officer and certain other key
employees for which the Company paid a major portion of the premiums.
(6) Includes the following: a $30,000 Retirement Plans contribution; an
$84,750 payment for a Retirement Plans contribution in excess of the Code
contribution limitation as described in Note 5 above.
(7) Includes the following: $114,244 of life insurance premiums; a $30,000
Retirement Plans contribution; a $133,200 payment for Retirement Plans
contribution in excess of the Code contribution limitation as described
in Note 5 above. Also includes cancellation of the previous deferred
compensation plan for which $3,590,345 had been previously expensed and
accrued and which was replaced by a split-dollar life insurance program
that was funded in 1992 at a premium cost of $4,360,608. The net amount
attributable to 1992 is reflected in the summary compensation table.
(8) Includes the following: a $30,000 Retirement Plans contribution; a
$76,253 payment for a Retirement Plans contribution in excess of the Code
contribution limitation as described in Note 5 above.
(9) Includes the following: $28,266 of life insurance premiums; a $30,000
Retirement Plans contribution; a $38,003 payment for a Retirement Plans
contribution in excess of the Code contribution limitation as described
in Note 5 above. Also includes cancellation of the previous deferred
compensation plan for which $323,229 had been previously expensed and
accrued and which was replaced by a split-dollar life insurance program
that was funded in 1992 at a premium cost of $500,000. The net amount
attributable to 1992 is reflected in the summary compensation table.
(10) Includes the following: a $30,000 Retirement Plans contribution; a
$16,747 payment for a Retirement Plans contribution in excess of the Code
contribution limitation as described in Note 5 above.
(11) Includes the following: $6,840 of life insurance premiums; a $30,000
Retirement Plans contribution; a $35,900 payment for a Retirement Plans
contribution in excess of the Code contribution limitation as described
in Note 5 above.
(12) Mr. Hruzek resigned effective February 28, 1994.
(13) Includes the following: a $30,000 Retirement Plans contribution; a
$4,000 payment for a Retirement Plans contribution in excess of the Code
contribution limitation as described in Note 5 above.
(14) Includes the following: $3,280 of life insurance premiums; a $30,000
Retirement Plans contribution; a $25,612 payment for a Retirement Plans
contribution in excess of the Code contribution limitation as described
in Note 5 above.
(15) Includes the following: a $30,000 Retirement Plans contribution; a
$2,467 payment for a Retirement Plans contribution in excess of the Code
contribution limitation as described in Note 5 above.
(16) Includes the following: $2,187 of life insurance premiums; a $30,000
Retirement Plans contribution; a $15,396 payment for a Retirement Plans
contribution in excess of the Code contribution limitation as described
in Note 5 above.
(17) Mr. Littlefair was not an executive officer of the Company in 1991.
(18) Other compensation amounts are not required to be reported for the fiscal
years ending before December 15, 1992.
Bonus Plan
- ----------
The Company has a bonus plan (the "Bonus Plan") under which it may award
bonuses to employees for any calendar year. The amount of awards to be made
from the Bonus Plan is within the discretion of the Compensation Committee.
The awards are determined by reference to achievement of certain established
objectives by such individuals for the Bonus Plan year, although awards may be
made even if all such objectives are not fully achieved.
Awards to employees other than officers and certain managers generally
vest and are paid in three annual installments. Participants' interests in the
awards vest on December 31 of each year and awards are generally paid near
year-end or in the first quarter of the following year. Deferred bonus awards
are deemed invested in a money market account earning simple interest. In the
event of an offer to acquire all of the business and assets of the Company (or
any other actual change in the control or management of the Company) that is
not previously approved or authorized by the Board of Directors, all unpaid
bonus award installments would be automatically accelerated and paid in full
without regard to the payment schedule provided for in the Bonus Plan.
In prior years, Bonus Plan awards to officers and certain employees
generally vested and were paid in three installments. However, on July 1,
1992, in conjunction with the cancellation of the key employee life insurance
policies for certain of its officers and other employees, the Company
accelerated the unpaid portion of bonuses awarded in 1990 and 1991 to such
officers and employees. Bonuses for performance in 1993 as reflected in the
summary compensation table were paid to the officers in a lump sum payment in
November 1993.
Employees Premium and Profit Sharing Plans
- ------------------------------------------
MESA maintains the Retirement Plans for the benefit of its employees.
Each year, the Company is required to contribute to the Employees Premium Plan
5% of the total compensation (as defined in the plan) paid to participants and
may also contribute up to 12% of total compensation (as defined) to the Profit
Sharing Plan. Participants become 30% vested in their account balances in the
Retirement Plans after three years of service and 40% vested after four years
of service. Participants become vested an additional 20% for each additional
year of service through year seven.
Effective December 31, 1991, all participants were fully vested in their
account balances in the Retirement Plans as a result of the conversion of the
Partnership to the Company in December 1991 (the "Corporate Conversion").
Participants shall remain fully vested in their 1991 balances, but
contributions in 1992 and future years under the Retirement Plans are subject
to the vesting schedule described above.
Prior years of service with the Company's predecessors are counted in the
vesting schedule. Amounts accumulated are distributable only under certain
circumstances, including termination of the Retirement Plans.
Limitation on Contributions to Benefit Plans
- --------------------------------------------
Total employer contributions to the Retirement Plans for the account of
a participant in any calendar year are limited as specified by the Code. The
Code provides that annual additions to a participant's account not exceed the
lesser of $30,000 or 25% of the amount of the participant's annual
compensation. The Company, in its discretion, may determine to make cash
payment of amounts attributable to an employee's participation in the
Retirement Plans to the extent they exceed the Code limitations. As a matter
of general policy for employees of the Company, the Company makes annual cash
payments directly to employees to the extent that the annual additions to the
account of each such employee pursuant to the Retirement Plans would exceed the
Code limitations.
1991 Stock Option Plan
- ----------------------
The Option Plan was approved by stockholders in connection with the
Corporate Conversion in December 1991. The purpose of the Option Plan and the
options issued thereunder is to serve as an incentive to, and to retain,
certain key persons whose training, experience and ability are important to the
operations and success of the Company. Pursuant to the Option Plan, the Option
Committee is given the authority to designate plan participants (non-employee
directors do not participate in the Option Plan), to determine the terms and
provisions of options granted thereunder and to supervise the administration
of the plan. A total of 2,000,000 shares of Common Stock are currently subject
to the plan, of which options for 1,967,950 shares have been granted. At
December 31, 1993, the following stock options were outstanding:
Number of
Options
---------
Granted.................................................... 1,967,950
Exercised.................................................. (21,000)
Forfeited.................................................. (13,900)
---------
Outstanding at December 31, 1993........................... 1,933,050
=========
See Proposal 2 above with respect to certain proposed amendments to the
Option Plan, including an increase in the total number of shares that may be
subject to options thereunder from 2,000,000 shares to 4,000,000 shares.
Shares of Common Stock subject to an option are awarded at an exercise
price that is equivalent to at least 100% of the fair market value of the
Common Stock on the date the option is granted. The purchase price of the
shares as to which the option is exercised is payable in full at exercise in
cash or in shares of Common Stock previously held by the optionee for more than
six months, valued at their fair market value on the date of exercise. Subject
to Option Committee approval and to certain legal limitations, an optionee may
pay all or any portion of the purchase price by electing to have the Company
withhold a number of shares of Common Stock having a fair market value equal
to the purchase price. Options granted under the Option Plan include a limited
right of relinquishment which permits an optionee, in lieu of purchasing the
entire number of shares subject to purchase thereunder and subject to consent
of the Option Committee, to relinquish all or part of the unexercised portion
of an option, to the extent exercisable, for cash and/or shares of Common Stock
in an amount representing the appreciation in market value of the shares
subject to such options over the exercise price thereof. In its discretion,
the Option Committee may provide for the acceleration of any unvested
installments of outstanding options. The Board of Directors may amend, alter
or discontinue the Option Plan, subject in certain cases to stockholder
approval.
The options granted and outstanding at December 31, 1993 have exercise
prices and vesting schedules as set forth in the following table.
Exercise Vesting Schedule
Number of Price Per --------------------------------------------
Options Share 30% 55% 80% 100%
- --------- --------- -------- -------- -------- --------
1,166,000 $ 6.8125 07/10/92 01/10/93 01/10/94 01/10/95
10,000 4.125 11/19/92 05/19/93 05/19/94 05/19/95
153,000 11.6875 04/02/93 10/02/93 10/02/94 10/02/95
119,050 5.8125 11/18/93 05/18/94 05/18/95 05/18/96
485,000 7.375 05/10/94 11/10/94 11/10/95 11/10/96
Options granted to the Chief Executive Officer and the other four most
highly compensated executive officers of the Company during 1993 are as
follows:
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Number of
Shares Percent of Total
Underlying Options/SARs Exercise
Options/SARs Granted to or Base
Name Granted(#)(1) Employees in 1993 Price
- ------------------------ ------------ ----------------- ----------
Boone Pickens 275,000 45.38% $ 7.375
Paul W. Cain 100,000 16.50% 7.375
Dennis E. Fagerstone 10,000 1.65% 7.375
S. Leonard Hruzek, Jr.(2) -- -- % --
Andrew J. Littlefair 25,000 4.13% 7.375
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Name Expiration Date For Option Term
- ------------------------ ----------------- -----------------------------
5% 10%
---------- ----------
Boone Pickens November 10, 2003 $1,275,477 $3,232,309
Paul W. Cain November 10, 2003 463,810 1,175,385
Dennis E. Fagerstone November 10, 2003 46,381 117,539
S. Leonard Hruzek, Jr.(2) -- -- --
Andrew J. Littlefair November 10, 2003 115,952 293,846
(1) Of the options listed in the above table, 30% will be vested and
exercisable beginning May 10, 1994; 55% will be vested and exercisable
beginning November 10, 1994; 80% will be vested and exercisable beginning
November 10, 1995; and 100% will be vested and exercisable beginning
November 10, 1996.
(2) Mr. Hruzek resigned effective February 28, 1994.
Options exercised in 1993, and the number and value of exercisable and
unexercisable options at December 31, 1993, for the Chief Executive Officer and
the other four most highly compensated executive officers of the Company are
as follows:
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
-----------------------------------------------------------------------
Year Ended December 31, 1993
----------------------------------------------
Number of Shares Acquired
Name on Exercise (#) Value Realized
- ------------------------- ------------------------- --------------
Boone Pickens -- $ --
Paul W. Cain -- --
Dennis E. Fagerstone -- --
S. Leonard Hruzek, Jr. -- --
Andrew J. Littlefair -- --
Value of Unexercised
Number of Shares Underlying In-the-Money
Unexercised Options/SARs at Options/SARs at
December 31, 1993 December 31, 1993
--------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ----------- ------------- ----------- -------------
Boone Pickens 440,000 635,000 $ 0 $ 0
Paul W. Cain 82,500 167,500 0 0
Dennis E. Fagerstone 27,500 32,500 0 0
S. Leonard Hruzek, Jr. 22,000 18,000 0 0
Andrew J. Littlefair 16,500 38,500 0 0
At December 31, 1993, the Company's Common Stock per share closed at
$5.625. The exercise price of the granted options reflected in the above
tables are $6.8125 and $7.375, respectively, per share. Thus, no outstanding
options were in-the-money at such date.
Other
- -----
There were no awards made under any long-term incentive plans from January
1, 1993 through December 31, 1993 that require disclosure in the Long-Term
Incentive Plan Awards table. From January 1, 1993 through December 31, 1993,
no options or stock appreciation rights were repriced (as defined in Item
402(i) of Regulation S-K of the Securities Act of 1933). Furthermore, the
Company does not have any employment contracts or termination or change-in-
control arrangements with the Chief Executive Officer or the other four most
highly compensated executive officers of the Company that would require
disclosure pursuant to Item 402(h) of Regulation S-K.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
Mr. Stillwell, a director and member of the Compensation and Option
Committees, is a partner in the law firm of Baker & Botts, L.L.P. The Company
retained Baker & Botts, L.L.P. and incurred legal fees for services of such
firm in 1993. Baker & Botts, L.L.P. has also been retained to provide legal
services in 1994.
Mr. Sarofim, a director and member of the Compensation and Stock Option
Committees, is Chairman of the Board, President and owner of a majority of the
outstanding capital stock of Fayez Sarofim & Co., which acts as an investment
advisor to certain employee benefit plans of the Company. During the year
ended December 31, 1993, Fayez Sarofim & Co. received fees, paid by the
employee benefit plans, of $139,687 for such services.
Compensation Committee Report
- -----------------------------
The Company's Compensation Committee is composed of the three non-employee
directors named below. The Committee's decisions as to annual base salaries,
bonuses, if any, and stock option grants, if any, for Mr. Pickens, Chairman and
Chief Executive Officer, and the other executive officers of the Company are
based solely on the subjective judgment of the Committee as to (1) a reasonable
value to the Company of the services of Mr. Pickens and the other officers in
their respective capacities; (2) a reasonable competitive market value of the
services of Mr. Pickens and the other officers in such capacities; (3) a
reasonable relationship to compensation levels of chief executive and other
officers of other public companies, including those named in the Company's
"Peer Group" as discussed under "Performance Graph" below; and (4) the
recommendation of senior management as to compensation levels for all officers
other than Mr. Pickens. The Committee's decisions in this regard are not based
on any objective, required or projected performance criteria for the Company
or its securities. Mr. Pickens' salary of $675,000 (compared to $960,000 for
1992) and the 1993 salaries listed in the summary compensation table for the
four other most highly compensated executive officers are the result of such
judgment. The Committee made a similar judgment based on its assessment of the
efforts and contributions of individual officers during the year and on the
above-listed criteria with respect to 1993 bonuses for Mr. Pickens (none per
his request) and the other officers (as listed in the summary compensation
table), as well as stock option grants to such persons.
The Committee has recommended on the same basis and criteria that Mr.
Pickens and other executive officers continue at the same respective base
salaries for 1994.
The Company intends to comply with IRS regulations under Section 162(m)
of the Code dealing with non-deductibility of executive compensation in excess
of one million dollars annually except under certain permitted circumstances
which deal generally with "performance-based compensation."
Submitted by the Compensation Committee:
Fayez S. Sarofim
Robert L. Stillwell
J. R. Walsh, Jr.
Credit Support of Common Unit Purchases
- ---------------------------------------
The Partnership provided credit support by acting as a co-maker on certain
loans made by commercial banks in prior years to Messrs. Cain, Fagerstone,
Hruzek and Littlefair, and certain other employees (not including Mr. Pickens),
the proceeds of which were used to purchase common units of the Partnership in
open market transactions. In conjunction with the Corporate Conversion, the
Company assumed the credit support obligations. The largest amounts
outstanding during 1993 totaled $300,000 to Mr. Cain, $196,244 to Mr.
Fagerstone, $0 to Mr. Hruzek and $0 to Mr. Littlefair. At December 31, 1993,
the unpaid principal balance of such loans totaled $0 to Mr. Cain and $113,731
to Mr. Fagerstone. Principal on the loan is payable by the employee in
quarterly installments and is due and payable in full on December 1, 1994. The
loan bears interest at a rate of approximately 4.1% per annum. The note is
secured by a certificate of deposit issued to the Company by such commercial
bank, bearing interest at an amount of 2.6% per annum and in an aggregate
amount approximately equal to the amount owed under the loan. Pursuant to an
agreement between the employee and the Company, the employee will cause the
Company to be relieved of its obligations under such loan upon the termination
of employment for any reason, including death. As between the employee and the
Company, the employee has sole responsibility and liability for repayment of
all principal and interest under his loan and has agreed to indemnify the
Company from any liability or obligation with respect to or arising out of such
loan. The purpose of these arrangements was to encourage and facilitate
significant equity ownership by such key employees.
Common Stock Purchase Plan
- --------------------------
The Company has established a Common Stock purchase program whereby
employees can buy Common Stock through after-tax payroll deductions. All full-
time employees of the Company and its participating affiliates are eligible to
participate.
Indemnification Arrangements
- ----------------------------
The Company's Bylaws provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with proceedings and claims, to the fullest extent permitted by the Texas
Business Corporation Act. The Company has also entered into indemnification
agreements with its executive officers and directors that contractually provide
for indemnification and expense advancement and include related provisions
meant to facilitate the indemnitees' receipt of such benefits. In addition,
the Company purchased customary directors' and officers' liability insurance
policies for its directors and officers. The Bylaws and agreements with
directors and officers also provide for indemnification for amounts (i) in
respect of the deductibles for such insurance policies, (ii) that exceed the
liability limits of such insurance policies and (iii) that would have been
covered by prior insurance policies of the Company or its predecessors. Such
indemnification may be made even though directors and officers would not
otherwise be entitled to indemnification under other provisions of the Bylaws
or such agreements.
BTC Partners
- ------------
The Company has entered into an agreement with BTC Partners Inc. ("BTC"),
a Delaware corporation, pursuant to which BTC provides certain financial and
advisory services to the Company. BTC regularly functions as part of the
Company's management team with respect to financial and other matters.
Pursuant to the agreement, BTC receives an annual retainer and may, in the
discretion of the Company, be paid additional fees for services it renders in
connection with financing transactions, debt restructuring activities,
acquisitions or dispositions of properties or assets, and other transactions
with respect to which BTC assists the Company. Such amounts are payable in
respect of BTC's services to the Company in evaluating, negotiating and
implementing such transactions. The Company provides BTC certain other
benefits and support services. The agreement may be terminated at any time by
either the Company or BTC. Employees of BTC devote a substantial portion of
their time to the affairs of the Company, but are permitted to engage in
unrelated business activities. The controlling stockholder of BTC is Sidney
Tassin.
PERFORMANCE GRAPH
=================
The graph below compares the Company's cumulative total stockholder return
(the change in stock price plus dividend reinvestment) to the Standard & Poor's
500 Index and an index derived from the performance of a group of independent
oil and gas producers similar to the Company (the "Peer Group"), over the last
five fiscal years. The Peer Group consists of Anadarko Petroleum Corporation,
Apache Corporation, Enron Oil & Gas Company, Louisiana Land and Exploration
Company, Maxus Energy Corporation, Noble Affiliates, Inc., Oryx Energy Company,
and Plains Petroleum Company. The Peer Group was selected from companies of
similar size or with similar assets as the Company. MESA Inc.'s Common Stock
began trading on the New York Stock Exchange on January 2, 1992 upon completion
of the Corporate Conversion. Prior to that time, the common equity securities
of the Company's predecessor (the Partnership) also traded on such exchange.
The five year cumulative total return for MESA shown on the graph below
reflects the trading prices of, and dividends paid with respect to, such
securities for the relevant time periods and is adjusted to give effect
retroactively to the one-for-five reverse stock split effected on December 31,
1991 in connection with the Corporate Conversion.
Management believes the Company's stock is viewed as a leveraged commodity
investment. The Company's stock represents a substantial quantity of
equivalent natural gas reserves offset by a substantial amount of debt. As a
result, management believes that changes in natural gas prices have a magnified
effect on the trading price of the Company's stock. For the past few years
(particularly after the Partnership discontinued cash distributions to
unitholders), the value of the Company's stock declined significantly as
natural gas prices continued to decline. More recently, the Common Stock price
has stabilized somewhat as gas prices have begun to increase. Management
believes that the Company's stock will continue to be significantly affected
by actual and expected changes in natural gas prices.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
===============================================
MESA Inc. S&P 500 Index Peer Group Index
--------- ------------- ----------------
1989......................... $ 73 $132 $161
1990......................... 27 128 136
1991......................... 12 166 115
1992......................... 8 179 129
1993......................... 10 197 158
+* Total Return assumes dividends are reinvested.
+ Assumes $100 invested on December 31, 1988 in MESA Inc., the S&P 500
Index and the Peer Group Index.
+ The Peer Group Index return was based on Common Stock. Each company's
return is weighted according to the respective company's stock market
capitalization.
CERTAIN TRANSACTIONS
====================
The Company permits Mr. Pickens and his affiliates to use MESA's
properties and assets such as equipment, computers, aircraft and other
transportation equipment for noncompany purposes on terms that are not
disadvantageous to the Company; however, such terms may be more favorable to
Mr. Pickens than those otherwise available to him. Mr. Pickens and affiliates
were charged a total of $79,002 in 1993, $125,027 in 1992 and $157,500 in 1991
for the use of these assets (principally use of aircraft).
MESA periodically conducts business meetings and events and hosts
customers and business associates at facilities owned by Mr. Pickens,
principally a ranch and hunting facility. MESA pays for the use of these
facilities at rates comparable to those charged for similar facilities owned
by third parties. MESA paid Mr. Pickens $157,000 in 1993, $149,750 in 1992 and
$131,450 in 1991 for the use of the facilities.
On March 11, 1994, MESA filed a registration statement with the Securities
and Exchange Commission pursuant to which it proposes to sell 23 million shares
of Common Stock in an underwritten public offering. In connection with the
offering, it is anticipated that the underwriters will reserve an aggregate of
three million shares of Common Stock for offering at the initial public
offering price to Boone Pickens, the Chairman and Chief Executive Officer of
the Company, Fayez Sarofim, a Director of the Company, and another individual
unaffiliated with the Company. One million shares will be reserved to be
offered to each such person. No shares will be sold to Mr. Sarofim, who
controls a member firm of the National Association of Securities Dealers, Inc.
("NASD"), if the sale would not comply with the rules of the NASD respecting
"hot issues." Any shares sold to such individuals will be sold at the same
public offering price at which shares will be offered by the underwriters to
the public generally. Such price will be determined by negotiation between the
Company and the underwriters, based principally on market prices at the time
the public offering is made.
On March 2, 1994, the Company issued and sold to FMR Corp. and certain of
its affiliates an aggregate of $48.2 million principal amount at maturity of
the Company's 12-3/4% Secured Discount Notes ("Notes") due 1998 for $42.75
million. The sale price was determined by negotiation between the Company and
FMR Corp., based principally on offered prices quoted by dealers at that time
for publicly traded Notes of the same series. The sale was made pursuant to
a registration statement that had become effective under the Securities Act of
1933. The proceeds of the offering were used to fund MESA's portion of the
settlement of its litigation with Unocal Corporation. See "Security Ownership
of Principal Owners and Management."
SECURITY OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT
=====================================================
Security Ownership of Management
- --------------------------------
The following table presents certain information as to the beneficial
ownership of the Company's Common Stock as of March 30, 1994 by the directors
and officers of the Company, individually and as a group.
Number of
Shares of Percentage
Common of Common
Stock(1) Stock
------------ ----------
Board of Directors:
Paul W. Cain.............................. 160,139 *
John S. Herrington........................ 10,000 *
Wales H. Madden, Jr. ..................... 6,000 *
Boone Pickens(2).......................... 3,397,626 7.0%
Fayez S. Sarofim.......................... 400,000 *
Robert L. Stillwell....................... 26,500 *
J. R. Walsh, Jr.(3)....................... 25,620 *
Officers:
Dennis E. Fagerstone...................... 43,000 *
Andrew J. Littlefair...................... 47,913 *
Charles L. Carpenter...................... 11,000 *
William D. Ballew......................... 29,103 *
Directors and Officers as a group (11 persons). 4,156,901 8.5%
* Less than 1.0%
(1) Includes shares issuable upon the exercise of options that are
exercisable within sixty days of March 30, 1994, as follows: 722,500
shares for Mr. Pickens, 150,000 for Mr. Cain, 43,000 for Mr. Fagerstone,
31,500 for Mr. Littlefair, 11,000 for Mr. Carpenter, 27,000 for Mr.
Ballew and 985,000 for all directors and officers as a group.
(2) The above amount includes 7,545 shares of Common Stock owned by several
trusts for Mr. Pickens' children of which he is a trustee, and over which
shares he has sole voting and investment power, although he has no
economic interest therein. The above amounts exclude 2,798 shares of
Common Stock owned by Mrs. Pickens as her separate property, as to which
Mr. Pickens disclaims beneficial ownership and with respect to which he
does not have or share voting or investment power.
(3) Excludes 1,027 shares of Common Stock owned by Mrs. Walsh as her separate
property, as to which Mr. Walsh disclaims beneficial ownership and with
respect to which he does not have or share voting or investment power.
Certain Beneficial Owners
- -------------------------
The table below sets forth certain information as of March 30, 1994
regarding each person or "group" (as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) known by the Company to own beneficially
more than 5% of the Common Stock. Information is based on the most recent
Schedule 13D or 13G filed by such holder with the Securities and Exchange
Commission (the "SEC"), or other information provided by the holder to the
Company.
Amount and Nature of
Beneficial Ownership
-------------------------------
Number of Percentage
Name and Address of Shares of of Common
Beneficial Owner Common Stock Stock
------------------- ------------ ----------
Boone Pickens.......................... 3,397,626(1) 7.0%
2600 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
FMR Corp. ............................. 4,866,940(2) 12.5%
82 Devonshire Street
Boston, Massachusetts 02109
(1) See notes (1) and (2) to the table under "Security Ownership of Manage-
ment."
(2) The Schedule 13G filed by FMR Corp. states that such firm has the sole
power to vote or to direct the vote of 168,553 shares, and the sole power
to dispose or to direct the disposition of 4,866,940 shares. Furthermore,
various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Common
Stock. The interest of one person, Fidelity Magellan Fund, an investment
company, amounts to 2,047,634 shares, or 5.24% of the total outstanding
shares of Common Stock at December 31, 1993.
OTHER MATTERS
=============
You are respectfully requested to sign, date and return the accompanying
proxy card in the enclosed envelope at your earliest convenience, whether or
not you plan to attend the Annual Meeting in person.
If you desire a copy of the Company's Annual Report on Form 10-K, you
should send a written request to MESA Inc., Stockholder Services, 2600 Trammell
Crow Center, 2001 Ross Avenue, Dallas, Texas 75201 and a copy will be provided
to you without charge.
Any stockholder desiring to have a statement of the Company's 1993
political contributions should send a written request to MESA Inc., Stockholder
Services, 2600 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201.
In September 1990, the Company and Mr. Pickens entered into a consent
decree to settle allegations by the SEC that the Company and Mr. Pickens had
violated Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933 in
connection with a proposal made by the Company in February 1988 to acquire
Homestake Mining Company ("Homestake"). Under the terms of the settlement,
without admitting or denying any of the SEC's allegations, the Company and Mr.
Pickens consented to the entry of a judgment enjoining them from future
violations of such sections. The SEC's allegations related to the Company's
February 1988 press release announcing its offer to acquire Homestake and its
subsequent sales of Homestake shares. The Company deposited $2.3 million in
a fund for disbursement to other persons who purchased Homestake shares at the
time of the 1988 offer.
1995 Stockholder Proposals
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Proposals that stockholders of the Company intend to present for inclusion
in the Company's proxy statement and form of proxy with respect to the 1995
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices in Dallas, Texas, not later than December 1, 1994. In
addition, the Bylaws generally require stockholders to give the Company 80 days
notice in advance of a meeting to present proposals (whether or not such
proposals are to be included in the Company's proxy material) or to nominate
directors, unless the meeting date is not publicly announced at least 90 days
in advance of such meeting, in which case notice must be received within 10
days after the first public announcement of the date of such meeting.
By order of the Board of Directors
/s/ Boone Pickens
----------------------------------
Dallas, Texas Boone Pickens
March 30, 1994 Chairman of the Board and
Chief Executive Officer
PROXY CARD (Side one of card)
==========
MESA INC.
Proxy Solicited by the Board of Directors
for Annual Meeting of Stockholders
to be held May 17, 1994
The undersigned stockholder hereby appoints William D. Ballew and Charles
L. Carpenter, jointly and severally, proxies, with full power of substitution,
to vote, as specified below, all shares of MESA Inc. (the "Company") which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held at the Fairmont Hotel, 1717 North Akard, Dallas, Texas
75201, at 10:00 a.m. on Tuesday, May 17, 1994, or any adjournment or
postponement thereof (the "Meeting"), and directs said proxies to vote as
instructed on the matters set forth below and otherwise at their discretion.
Receipt of a copy of the Notice of said meeting and the accompanying Proxy
Statement is hereby acknowledged.
1. Election of Board of Directors. The Board of Directors recommends a vote
FOR all nominees.
____ FOR all nominees listed below (including the use of cumulative
voting as described in the Company's Proxy Statement).
NOMINEES: Boone Pickens, Paul W. Cain, John S. Herrington, Wales H. Madden,
Jr., Fayez S. Sarofim, Robert L. Stillwell and J. R. Walsh, Jr.
(To withhold authority to vote for any individual nominee, strike a line
through his name above.)
____ WITHHOLD VOTE from all nominees.
(Continue and Sign On Other Side)
- ----------------------------------------------------------------------------
PROXY CARD (Side two of card)
==========
2. Approve the proposed amendment to the MESA Inc. 1991 Stock Option Plan,
as described in the Company's Proxy Statement. The Board of Directors
recommends a vote FOR the amendment of the 1991 Stock Option Plan.
____ FOR ____ AGAINST ____ ABSTAIN
3. Ratify the appointment of Arthur Andersen & Co. as the Company's
independent public accountants for 1994. The Board of Directors
recommends a vote FOR.
____ FOR ____ AGAINST ____ ABSTAIN
4. In their discretion with respect to such other matters as may properly
come before the Meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFIED HEREIN BY THE
STOCKHOLDER. IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2 AND 3. WITH REGARD TO THE ELECTION OF THE BOARD OF DIRECTORS,
IF THERE IS CUMULATIVE VOTING, VOTES WILL BE DISTRIBUTED AS INSTRUCTED OR IN
THE DISCRETION OF THE PROXYHOLDERS AS DESCRIBED IN THE PROXY STATEMENT.
DELIVERY OF A SIGNED AND DATED PROXY CARD TO THE INDEPENDENT COLLECTION AGENT
FOR THE ANNUAL MEETING WILL NOT CONSTITUTE THE NOTICE TO THE COMPANY REQUIRED
UNDER THE TEXAS BUSINESS CORPORATION ACT TO ALLOW CUMULATIVE VOTING IN THE
ELECTION OF DIRECTORS.
Signature ___________________________________ Date ________________, 1994
Please sign EXACTLY as name appears hereon, and in signing as Attorney,
Administrator, Guardian, Trustee or Corporate Officer, please add your title
as such.