SCHEDULE 14A
============
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary Proxy Statement
- ---
Confidential, For Use of the Commission Only (Pursuant to Section 240.
- --- 14a-6(e)(2)(ii))
Definitive Proxy Statement
- ---
Definitive Additional Materials
- ---
X Soliciting Materials Pursuant to Sections 240.14a-11(c) or 240.14a-12
- ---
MESA INC.
=========
(Name of Registrant as Specified In Its Charter)
William D. Ballew
-----------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
- ---
$500 per each party to the controversy pursuant to Exchange Act Rule 14a
- --- -6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
- ---
1. Title of each class of securities to which transaction applies: None
2. Aggregate number of securities to which transaction applies: None
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (1) None
4. Proposed maximum aggregate value of transaction: None
5. Total fee paid: None
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
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: Not Applicable
2. Form, Schedule or Registration Statement No.: Not Applicable
3. Filing Party: Not Applicable
4. Date Filed: Not Applicable
July 12, 1995
Participant Information
On Behalf of a Majority of the Board of Directors of MESA Inc.
--------------------------------------------------------------
On June 29, 1995, Dennis R. Washington and Marvin Davis sent a letter
to the Board of Directors of the Company asking the Board to promptly form a
committee consisting of all independent directors, with independent
financial and legal advisors, to explore all alternatives to enhance value
for MESA Inc.'s shareholders. That same day, Messrs. Washington and Davis
made a Schedule 13D filing with the Securities and Exchange Commission
announcing that they were part of a group with Davis Acquisition, L.P.,
Davis Companies, the Marvin and Barbara Davis Revocable Trust, David H.
Batchelder and Dorn Parkinson (collectively, the "13D Group"). The Schedule
13D stated that as of that date the 13D Group beneficially owned an
aggregate of 6 million shares of Common Stock of MESA, including 3.5 million
shares owned by Dennis Washington.
In a July 6, 1995, meeting, the Board of Directors of MESA reaffirmed
its commitment to the Company's previously announced restructuring program,
which had included the proposed sale of its Hugoton field oil and gas
properties. In addition, the Board approved a proposal to expand its review
of strategic alternatives to include consideration of the sale of MESA to
another company and a stock-for-stock merger of MESA with another company
and authorized MESA's financial advisor, Lehman Brothers Inc., to seek
indications of interest of potential buyers and merger partners, both
domestic and foreign. Pursuant to this proposal, the sale/merger
alternatives, like the restructuring alternatives, will be explored for
under the direction of MESA's entire Board of Directors and not by a
separate committee with separate financial and legal advisors. David
Batchelder and Dorn Parkinson, who were elected to the Board as Dennis
Washington's designees, voted against this proposal, stating that their
opposition was based on the fact that the proposal did not contemplate a
separate committee with separate advisors.
Following this meeting, the 13D Group announced that in light of the
refusal of MESA's Board to appoint such a committee of independent
directors, the group members would seek to call a special meeting of the
Company's shareholders for the purpose of electing a majority of directors
who would be committed to exploring all alternatives for maximizing
shareholder value. The Company believes that the 13D Group will seek to
achieve its goal by attempting to remove certain of the current directors of
the Company and/or otherwise to elect its nominees so that they would
constitute a majority of the Board.
While recognizing that it is of course the shareholders' prerogative to
call a special meeting in accordance with the Company's charter and bylaws,
the members of MESA's Board of Directors other than Messrs. Batchelder and
Parkinson (the "Majority Directors") do not support the 13D Group's efforts.
The Majority Directors believe that any such meeting will create significant
distraction from the Company's efforts to explore strategic alternatives.
If a special meeting is held, the Majority Directors expect to oppose the
13D Group's efforts to remove any of the Majority Directors from office
and/or to elect nominees of the 13D Group to the Board at such a meeting.
We are not requesting any revocations of demands or calls or any other
proxy or consent at this time.
- ---------------------------------------------------------------------------
Each of MESA's directors (other than Messrs. Batchelder and Parkinson)
and each of MESA's executive officers could be deemed participants in any
solicitation by the Majority Directors in opposition to the 13D Group.
Information is attached hereto relating to the interests, direct or
indirect, by security holdings or otherwise, of such directors and executive
officers, which information has been excerpted from MESA's Proxy Statement
dated April 4, 1995 relating to the 1995 Annual Meeting.
ATTACHMENT TO JULY 12, 1995
PARTICIPANT INFORMATION ON BEHALF OF A MAJORITY
OF THE BOARD OF DIRECTORS OF MESA INC.
THESE MATERIALS ARE EXCERPTED FROM
MESA'S PROXY STATEMENT DATED APRIL 4, 1995
RELATING TO ITS 1995 ANNUAL MEETING.
The following table sets forth with respect to each MESA director (other
than Messrs. Batchelder and Parkinson) (i) his name and age, (ii) the period
during which he has served as a director, if currently 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 66.................. 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 56................... January 1992-Present, Director,
President, and Chief Operating
Officer of the Company; August
1986-December 1991, President,
Chief Operating Officer of
the Partnership; Director of
Bicoastal Corporation.
John L. Cox, age 70.................... August 1994-Present, Director
of the Company; independent oil
and gas producer for more than
the last five years.
John S. Herrington, age 55............. 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 the
Department of Energy of the
United States.
Business Experience
Name and Age Over Past Five Years
------------------------ ------------------------------
Wales H. Madden, Jr., age 67........... 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.
Fayez S. Sarofim, age 66............... January 1992-Present, Director
of the Company; Chairman of the
Board and President of Fayez
Sarofim & Co. (investment
adviser) for more than the last
five years; Director of
Teledyne, Inc., Unitrin, Inc.,
Argonaut Group, Inc., and
Imperial Holly Corporation.
Robert L. Stillwell, age 58............ 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 70................ 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.
Director Compensation, Certain Relationships, and Committees
- ------------------------------------------------------------
Each director of the Company serving during 1994 who was not also an
employee of the Company or its subsidiaries received compensation of $20,000
in 1994. 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 adviser to certain employee benefit plans of the Company. During
the year ended December 31, 1994, Fayez Sarofim & Co. received fees, paid by
the employee benefit plans, of $135,442 for such services and has been
retained to provide such services in 1995.
Mr. Stillwell, a director and member of the Compensation and Stock
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 such
services in 1994. Baker & Botts, L.L.P. has been retained to provide legal
services in 1995.
Mr. Walsh, a director and member of the Compensation and Stock Option
Committees, is President and Chairman of the Board of United Mud Service
Company. The Company paid United Mud Service Company $82,428 for drilling
mud and services during the year ended December 31, 1994, and expects to use
United Mud Service Company for such products and services in 1995.
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 66.................. 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 56................... January 1992-Present, Director,
President, and Chief Operating
Officer of the Company; August
1986-December 1991, President,
Chief Operating Officer of
the Partnership; Director of
Bicoastal Corporation.
Business Experience
Name and Age Over Past Five Years
------------------------ ------------------------------
Dennis E. Fagerstone, age 46........... 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.
Stephen K. Gardner, age 35............. June 1994-Present, Vice
President, Chief Financial
Officer of the Company; January
1992-May 1994, Vice President
of BTC Partners Inc. (financial
consultant to the Company); May
1988-December 1991, Financial
Analyst of BTC Partners, Inc.;
June 1987-April 1988, Financial
Analyst of the Partnership;
Director of Bicoastal
Corporation.
Andrew J. Littlefair, age 34........... 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,
D.C.
William D. Ballew, age 36.............. 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 1992 through 1994.
Summary Compensation Table
--------------------------
Annual Compensation
----------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation(2)
- -------------------------------- ---- -------- -------- ------------
Boone Pickens, 1994 $675,000 $175,000 $ --
Chairman of the Board of 1993 675,000 0 --
Directors and Chief Executive 1992 960,000 0(1) --
Officer
Paul W. Cain, 1994 400,020 150,000 --
President, Chief Operating 1993 400,020 225,000 --
Officer 1992 400,020 0(1) --
Dennis E. Fagerstone, 1994 199,980 100,000 --
Vice President-Exploration 1993 199,980 75,000 --
and Production 1992 199,980 106,323(1) --
Andrew J. Littlefair, 1994 115,980 100,000 --
Vice President-Public Affairs 1993 115,980 75,000 --
1992 109,980 92,330(1) --
William D. Ballew, 1994 121,230 40,000 --
Controller 1993 115,980 50,000 --
1992 109,980 66,512(1) --
Long-Term
Compensation
Awards-Number
of Shares
Underlying All Other
Name and Principal Position Year Options/SARs Compensation(3)
- -------------------------------- ---- --------------- ---------------
Boone Pickens, 1994 200,000 $1,094,500(4)
Chairman of the Board of 1993 275,000 114,750(5)
Directors and Chief Executive 1992 800,000 1,047,707(6)
Officer
Paul W. Cain, 1994 150,000 93,503(7)
President, Chief Operating 1993 100,000 106,253(8)
Officer 1992 150,000 273,040(9)
Dennis E. Fagerstone, 1994 85,000 50,997(10)
Vice President-Exploration 1993 10,000 46,747(11)
and Production 1992 50,000 72,740(12)
Andrew J. Littlefair, 1994 85,000 36,717(13)
Vice President-Public Affairs 1993 25,000 32,467(14)
1992 30,000 47,583(15)
William D. Ballew, 1994 45,000 27,409(16)
Controller 1993 10,000 28,217(17)
1992 30,000 43,807(18)
(1) 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; $32,000 to Mr. Littlefair; and $21,000 to
Mr. Ballew. 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 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. Bonuses paid to the individuals named in the table
above for 1992 (but not for 1993 or 1994) were paid pursuant to a bonus
plan under which the Company awarded bonuses by reference to the
achievement of certain established objectives by such individuals for
the bonus plan year, although under such plan awards could be made even
if all such objectives were not fully achieved. Under such plan,
awards generally vested and were paid in three annual installments.
Bonuses paid in 1993 and 1994 were awarded based upon the decisions of
the Company's Compensation Committee. See "Compensation Committee
Report" below.
(2) 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, 1994, 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.
(3) Except as reflected in other notes, "All Other Compensation" consists
of the following 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). Total employer contributions to the Retirement
Plans for the account of a participant in any calendar year are limited
as specified by the Internal Revenue Code (the "Code") and the
Retirement Plans. See "Limitation on Contributions to Benefit Plans"
below. The maximum annual amount of employer contributions to the
Retirement Plans totaled $25,500 in 1994 and $30,000 in 1993 and 1992.
The Company contributed 17% of each employee's total 1994 compensation
to the Retirement Plans. Second, to the extent that 17% of an
employee's total compensation exceeded $25,500 in 1994 (all employees
with total compensation in excess of $150,000) and $30,000 in 1993 and
1992 (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. Fourth, Mr. Pickens was
granted a bonus, payment of which has been deferred until his
retirement and subject to his continued employment (except in certain
events) through December 31, 1995, with respect to the Company's 1994
commodities and securities investment activities, which were managed by
Mr. Pickens. See "Compensation Committee Report" below.
(4) Includes the following: a $25,500 Retirement Plans contribution; a
$119,000 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above; a $950,000 bonus
payment which has been deferred until Mr. Pickens' retirement and
subject to his continued employment (except in certain events) through
December 31, 1995, with respect to the Company's 1994 commodities and
securities investment activities managed by him. See "Compensation
Committee Report" below.
(5) Includes the following: a $30,000 Retirement Plans contribution;
an $84,750 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(6) 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 contribution limitation as
described in Note 3 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.
(7) Includes the following: a $25,500 Retirement Plans contribution; a
$68,003 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(8) Includes the following: a $30,000 Retirement Plans contribution; a
$76,253 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 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 contribution limitation as
described in Note 3 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 $25,500 Retirement Plans contribution; a
$25,497 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(11) Includes the following: a $30,000 Retirement Plans contribution; a
$16,747 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(12) 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 contribution limitation as
described in Note 3 above.
(13) Includes the following: a $25,500 Retirement Plans contribution; an
$11,217 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(14) Includes the following: a $30,000 Retirement Plans contribution; a
$2,467 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(15) 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 contribution limitation as
described in Note 3 above.
(16) Includes the following: a $25,500 Retirement Plans contribution; a
$1,909 payment for a Retirement Plans contribution in excess of the
contribution limitation as described in Note 3 above.
(17) Includes a $28,217 Retirement Plans contribution.
(18) Includes the following: $3,360 of life insurance premiums; a $30,000
Retirement Plans contribution; a $10,447 payment for a Retirement
Plans contribution in excess of the contribution limitation as
described in Note 3 above.
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 certain
property dispositions consummated in 1990 and 1991. Participants shall
remain fully vested in their 1991 balances, but contributions in 1992 and
later 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 and vested 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 to the lesser of what is
specified by the Code or by the Retirement Plans. The Code provides that
annual additions to a participant's account may not exceed the lesser of
$30,000 or 25% of the amount of the participant's annual compensation. The
Retirement Plans provide that aggregate annual additions to a participant's
account may not exceed 17% of eligible compensation as defined by the
Retirement Plans. The eligible compensation per the Code was limited to
$150,000 in 1994 and $228,000 in 1993 and 1992. The Company, in its
discretion, may determine to make cash payments of amounts attributable to
an employee's participation in the Retirement Plans to the extent such
amounts 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 1991 Stock Option Plan (the "Option Plan") was approved by
stockholders in 1991 and amended by stockholders in 1994. Its purpose is to
serve as an incentive to, and aid in the retention of, key executives 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. Pursuant
to the Option Plan, the Stock Option Committee is given the authority to
designate plan participants, to determine the terms and provisions of
options granted thereunder, and to supervise the administration of the plan.
A total of 4,000,000 shares of Common Stock are currently subject to the
plan, of which options for 3,042,950 shares have been granted. At December
31, 1994, the following stock options were outstanding:
Number of
Options
---------
Granted.................................................... 3,042,950
Exercised.................................................. (62,720)
Forfeited.................................................. (53,770)
---------
Outstanding at December 31, 1994........................... 2,926,460
=========
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 Stock 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 that permits an optionee, in
lieu of purchasing the entire number of shares subject to purchase
thereunder and subject to consent of the Stock 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 Stock
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, 1994, 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%
- --------- --------- -------- -------- -------- --------
1,126,000 $ 6.8125 07/10/92 01/10/93 01/10/94 01/10/95
142,500 11.6875 04/02/93 10/02/93 10/02/94 10/02/95
107,960 5.8125 11/18/93 05/18/94 05/18/95 05/18/96
475,000 7.3750 05/10/94 11/10/94 11/10/95 11/10/96
75,000 6.1875 12/06/94 06/06/95 06/06/96 06/06/97
1,000,000 4.2500 06/01/95 12/01/95 12/01/96 12/01/97
Options granted to the Chief Executive Officer and the other four most
highly compensated executive officers of the Company during 1994 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 1994 Price
- ------------------------ ------------ ----------------- ----------
Boone Pickens 200,000 18.60% $4.25
Paul W. Cain 150,000 13.95% 4.25
Dennis E. Fagerstone 85,000 7.91% 4.25
Andrew J. Littlefair 85,000 7.91% 4.25
William D. Ballew 45,000 4.19% 4.25
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
Name Expiration Date For Option Term
- ------------------------ ----------------- -----------------------------
5% 10%
---------- ----------
Boone Pickens December 01, 2004 $534,560 $1,354,681
Paul W. Cain December 01, 2004 400,920 1,016,011
Dennis E. Fagerstone December 01, 2004 227,188 575,739
Andrew J. Littlefair December 01, 2004 227,188 575,739
William D. Ballew December 01, 2004 120,276 304,803
(1) Of the options listed in the above table, 30% will be vested and
exercisable beginning June 1, 1995; 55% will be vested and exercisable
beginning December 1, 1995; 80% will be vested and exercisable
beginning December 1, 1996; and 100% will be vested and exercisable
beginning December 1, 1997.
Options exercised in 1994, and the number and value of exercisable and
unexercisable options at December 31, 1994, 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, 1994
----------------------------------------------
Number of Shares Acquired
Name on Exercise Value Realized
- ------------------------- ------------------------- --------------
Boone Pickens -- $ --
Paul W. Cain -- --
Dennis E. Fagerstone -- --
Andrew J. Littlefair -- --
William D. Ballew -- --
Value of Unexercised
Number of Shares Underlying In-the-Money
Unexercised Options/SARs at Options/SARs at
December 31, 1994 December 31, 1994
--------------------------- ------------------------
Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------- ----------- ------------
Boone Pickens 791,250 483,750 $ 0 $125,000
Paul W. Cain 175,000 225,000 0 93,750
Dennis E. Fagerstone 45,500 99,500 0 53,125
Andrew J. Littlefair 37,750 102,250 0 53,125
William D. Ballew 29,500 55,500 0 28,125
At December 31, 1994, the Company's Common Stock per share closed at
$4.875. The exercise price of the three grants of stock options reflected
in the aggregate in the above tables are $6.8125, $7.375, and $4.25,
respectively, per share. Thus, only outstanding options with an exercise
price of $4.25, none of which were exercisable at December 31, 1994, were
in-the-money at such date.
Other
- -----
There were no awards made under any long-term incentive plans from
January 1, 1994, through December 31, 1994, that require disclosure in the
Long-Term Incentive Plan Awards table. From January 1, 1994, through
December 31, 1994, 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. 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 adviser to certain employee benefit plans of the Company. During
the year ended December 31, 1994, Fayez Sarofim & Co. received fees, paid by
the employee benefit plans, of $135,442 for such services and has been
retained to provide such services in 1995.
Mr. Stillwell, a director and member of the Compensation and Stock
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 such
services in 1994. Baker & Botts, L.L.P. has been retained to provide legal
services in 1995.
Mr. Walsh, a director and member of the Compensation and Stock Option
Committees, is President and Chairman of the Board of United Mud Service
Company. The Company paid United Mud Service Company $82,428 for drilling
mud and services during the year ended December 31, 1994, and expects to use
United Mud Service Company for such products and services in 1995.
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, and stock option grants, if any, for Mr. Pickens,
Chairman and Chief Executive Officer, and the other executive officers of
the Company are based 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 and for their respective
contributions; (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 the chief executive and other
officers of other public companies, including those companies named in the
Company's "Peer Group" 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' base salary and the 1994
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 1994 current bonuses for Mr. Pickens and the other
officers (as listed in the summary compensation table), as well as stock
option grants to such persons. The deferred bonus for Mr. Pickens
represents the Committee's subjective judgment as to a reasonable value to
the Company of Mr. Pickens' contribution to the Company's commodities and
securities investment activities, including the hedging of natural gas
production, which are conducted by Mr. Pickens. These activities resulted
in gains to the Company of $17.3 million in 1994, consisting of a $7.6
million realized gain during 1994 and a $9.7 million unrealized gain at
December 31, 1994, which amount was realized in early 1995.
The Company intends to comply with Internal Revenue Service 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 that deal generally with shareholder-approved
"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 certain employees,
including Mr. Fagerstone (but 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 conversion of the Partnership to the
Company in December 1991 (the "Corporate Conversion"), the Company assumed
the credit support obligations. Mr. Fagerstone's largest outstanding
borrowing balance during 1994 was $113,731. At December 31, 1994, all such
loans had been repaid by the 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. The Company pays the brokerage fees for these open
market transactions.
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 had entered into an agreement with BTC Partners Inc.
("BTC"), a Delaware corporation, pursuant to which BTC provided certain
financial and advisory services to the Company. BTC regularly functioned as
part of the Company's management team with respect to financial and other
matters. Pursuant to the agreement, BTC received an annual retainer and, in
the discretion of the Company, was paid additional fees for services it
rendered in connection with financing transactions, debt restructuring
activities, acquisitions or dispositions of properties or assets, and other
transactions with respect to which BTC assisted the Company. Such amounts
were payable in respect of BTC's services to the Company in evaluating,
negotiating, and implementing such transactions. The agreement also
provided that the Company would provide BTC certain other benefits and
support services. The agreement was terminated in June 1994. Stephen K.
Gardner, the Company's Chief Financial Officer, was a Vice President and
shareholder of BTC prior to assuming his current position with the Company.
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 $113,894 in 1994, $79,002 in 1993, and
$125,027 in 1992 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 $127,500 in 1994, $157,000 in 1993,
and $149,750 in 1992 for the use of the facilities.
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 22, 1995, by the
directors, director nominees, and officers of the Company, individually and
as a group:
Number of
Shares of Percentage
Common of Common
Stock(1) Stock
---------- ----------
Directors and Director Nominees:
Paul W. Cain.............................. 215,139 *
John L. Cox............................... 1,133,500 1.8%
John S. Herrington........................ 10,000 *
Wales H. Madden, Jr. ..................... 22,000 *
Boone Pickens(2).......................... 4,885,376 7.5%
Fayez S. Sarofim.......................... 1,400,000 2.2%
Robert L. Stillwell....................... 26,500 *
J. R. Walsh, Jr.(3)....................... 75,620 *
David H. Batchelder(4).................... - *
Dorn Parkinson(4)(5)...................... - *
Officers:
Dennis E. Fagerstone...................... 55,500 *
Stephen K. Gardner........................ 31,229 *
Andrew J. Littlefair(6)................... 60,438 *
William D. Ballew......................... 37,603 *
Directors, Director Nominees, and Officers as a
group (14 persons)............................. 7,952,905 12.2%
* Less than 1.0%
(1) Includes shares issuable upon the exercise of options that are
exercisable within sixty days of March 22, 1995, as follows: 951,250
shares for Mr. Pickens; 205,000 for Mr. Cain; 55,500 for Mr.
Fagerstone; 15,000 for Mr. Gardner; 43,750 for Mr. Littlefair;
35,500 for Mr. Ballew; and 1,306,000 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.
(4) Messrs. Batchelder and Parkinson have been nominated for election to
the Board of Directors pursuant to an agreement with Dennis R.
Washington, a stockholder that beneficially owns 2,854,900 shares of
Common Stock (approximately 4.5% of the outstanding shares). See
"Agreement with Dennis Washington," for additional information.
(5) Excludes 3,800 shares of Common Stock owned by Mr. Parkinson's son as
his separate property, as to which Mr. Parkinson disclaims beneficial
ownership and with respect to which he does not have or share voting or
investment power.
(6) Excludes 1,125 shares of Common Stock owned by Mrs. Littlefair as her
separate property, as to which Mr. Littlefair disclaims beneficial
ownership and with respect to which he does not have or share voting or
investment power.