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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X][ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pioneer Natural Resources Company
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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PIONEER NATURAL RESOURCES COMPANY
5205 N. O'Connor Boulevard
Suite 1400
WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BOULEVARD
IRVING, TEXASIrving, Texas 75039
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Pioneer Natural Resources Company:
OurNotice is hereby given that the Annual Meeting of Stockholders of
Pioneer Natural Resources Company (the "Company") will be held in the Miro Room
at the Wyndham Anatole Hotel, 2201 Stemmons Freeway, Dallas, Texas 75207, on
Thursday, May 20, 1999,18, 2000, at 9:00 a.m. The Annual Meeting is being held for the
following purposes:
1. To elect fourtwo directors, each for a term of three years.
2. To ratify the selection of Ernst & Young LLP as the auditors of
the Company for the current year.
3. To amend Pioneer's Long-Term Incentive Plan.
4. To transact such other business as may properly come before the
meeting.
These proposals are described in the accompanying proxy materials. You
will be able to vote at the Annual Meeting only if you are a stockholder of
record at the close of business on April 9, 1999.3, 2000.
YOUR VOTE IS IMPORTANT
Please date, sign, and return the enclosed Proxy promptly so that your
shares may be voted in accordance with your wishes and so we may have a quorum
at the Annual Meeting. Instead of returning the paper proxy, you may vote
through the Internet by accessing our transfer agent's website at
www.continentalstock.com. You will need the control numbers that are printed on
your personalized proxy card.
You are cordially invited to attend the meeting. We request that you
indicate whether you will attend in the space provided on the enclosed form of
Proxy or via the Internet.
By Order of the Board of Directors
/s/ MARK L. WITHROW
Mark L. Withrow, Secretary
Irving, Texas
April 15, 199910, 2000
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PIONEER NATURAL RESOURCES COMPANY
1400 WILLIAMS SQUARE WESTWilliams Square West
5205 NORTH O'CONNOR BOULEVARD
IRVING, TEXASNorth O'Connor Boulevard
Irving, Texas 75039
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PROXY STATEMENT
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19992000 ANNUAL MEETING OF STOCKHOLDERS
The Boardboard of Directorsdirectors of Pioneer Natural Resources Company (the "Board
of Directors") requests your Proxy for the Annual Meeting of Stockholders that
will be held at 9:00 a.m., on Thursday, May 20, 1999,18, 2000, in the Miro Room at the
Wyndham Anatole Hotel, Dallas, Texas 75207.75207 (the "Annual Meeting"). By granting
the Proxy, you authorize the persons named on the Proxy to represent you and
vote your shares at the Annual Meeting. Those persons will also be authorized to
vote your shares to adjourn the meeting from time to time and to vote your
shares at any adjournments or postponements of the meeting.
You may grant your Proxy by signing, dating and returning the enclosed
paper proxy card. Instead of returning the paper proxy card, you may complete a
proxy card electronically through the Internet by accessing the website of the
Company's transfer agent at www.continentalstock.com. You will need the control
numbers that are printed on your personalized paper proxy card. See "Internet
Voting."
If you attend the Annual Meeting, you may vote in person. If you are
not present at the Annual Meeting, your shares canmay be voted only by a person to
whom you have given a proper proxy, such as the accompanying Proxy or the
Internet Proxy. You may revoke the Proxy in writing at any time before it is
exercised at the Annual Meeting by delivering to the Secretary of the Company a
written notice of the revocation, or by signing and delivering to the Secretary
of the Company a proxy with a later date or by submitting your vote
electronically through the Internet with a later date. Your attendance at the
Annual Meeting will not revoke the Proxy unless you give written notice of
revocation to the Secretary of the Company before the Proxy is exercised or
unless you vote your shares in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy are first being sent or given to stockholders of the Company on or about
April 15, 1999.10, 2000.
QUORUM AND VOTING
VOTING STOCK.Voting Stock. The Company has two outstanding classes of securities
that entitle holders to vote generally at meetings of the Company's
stockholders: common stock, par value $.01 per share; and Special Preferred
Voting Stock, par value $.01 per share. A single share (the "Voting Share") of
Special Preferred Voting Stock was issued to Montreal Trust Company of Canada
(the "Trustee") as trustee under a Voting and Exchange Trust Agreement for the
benefit of holders of exchangeable shares issued by the Company's wholly-ownedwholly- owned
subsidiary, Pioneer Natural Resources Canada Inc., in connection with the
Company's December 1997 acquisition of Chauvco Resources Ltd. The common stock
and the Voting Share vote together as a single class on all matters except when
Delaware law requires otherwise. Each share of common stock outstanding on the
record date is entitled to one vote. The Voting Share is entitled to one vote
for each exchangeable share outstanding on the record date. The Trustee is
required to vote the Voting Share in the manner that holders of exchangeable
shares instruct, and to abstain from voting in proportion to the exchangeable
shares for which the Trustee does not receive instructions. Accordingly,
references to "stockholders" in this Proxy Statement include holders of common
stock, the Trustee, and holders of exchangeable shares. The procedures for
holders of exchangeable shares to instruct the Trustee about voting at the
Annual Meeting are explained in the "Information Statement for Holders of
Exchangeable Shares of Pioneer Natural Resources Canada Inc." that is enclosed
with this Proxy Statement only for holders of exchangeable shares.
RECORD DATE.Record Date. The record date for the stockholders entitled to notice of and
to vote at the Annual Meeting is the close of business on April 9, 1999.3, 2000. At the
record date, 94,110,38796,269,736 shares of common stock and
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outstanding and entitled to be voted at the Annual Meeting. At the record date,
6,189,6363,568,562 exchangeable shares were outstanding and entitled to give voting
instructions to the Trustee. Accordingly, 100,300,02399,838,298 votes are eligible to be
cast at the Annual Meeting.
QUORUM AND ADJOURNMENTS.
Quorum and Adjournments. The presence, in person or by proxy, of the
holders of a majority of the votes eligible to be cast at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting.
If a quorum is not present, the stockholders entitled to vote who are
present in person or by proxy at the Annual Meeting have the power to adjourn
the Annual Meeting from time to time, without notice other than an announcement
at the Annual Meeting, until a quorum is present. At any adjourned Annual
Meeting at which a quorum is present, any business may be transacted that might
have been transacted at the Annual Meeting as originally notified.
VOTE REQUIRED.Vote Required. Directors will be elected by a plurality of the votes
present and entitled to be voted at the Annual Meeting. Ratification of the
selection of the Company's auditors and approval of the amendment to the
Company's Long-Term Incentive Plan will each require the affirmative vote of the
holders of a majority of the shares present and entitled to be voted at the
Annual Meeting. An automated system that the Company's transfer agent
administers will tabulate the votes. Brokers who hold shares in street name for
customers are required to vote shares in accordance with instructions received
from the beneficial owners. Brokers are permitted to vote on discretionary items
if they have not received instructions from the beneficial owners, but they are
not permitted to vote (a "broker non-vote") on non-discretionary items absent
instructions from the beneficial owner. Abstentions and broker non-votes will
count in determining whether a quorum is present at the Annual Meeting. Both
abstentions and broker non-votes will not have any effect on the outcome of
voting on director elections. For purposes of voting on the ratification of the
selection of auditors, and approval of the amendment to the Company's Long-Term Incentive
Plan, abstentions will be included in the number of shares
voting and will have the effect of a vote against the proposal, and broker
non-votes will not be included in the number of shares voting and therefore will
have no effect on the outcome of the voting.
DEFAULT VOTING.Default Voting. A Proxy that is properly completed and returned will be
voted at the Annual Meeting in accordance with the instructions on the Proxy. If
you properly complete and return a Proxy, but do not indicate any contrary
voting instructions, your shares will be voted as follows:
-o FOR the election of the fourtwo persons named in this Proxy Statement
as the Board of Directors' nominees for election to the Board of
Directors.
-o FOR the ratification of the selection of Ernst & Young LLP as the
Company's auditors.
- FOR the approval of the amendment to the Company's Long-Term Incentive
Plan.
If any other business properly comes before the stockholders for a vote at the
meeting, your shares will be voted in accordance with the discretion of the
holders of the Proxy. The Board of Directors knows of no matters, other than
those previously stated, to be presented for consideration at the Annual
Meeting.
ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated the following persons for election
as Class IIIII directors of the Company with their terms to expire at the annual
meeting of stockholders in 20022003 when their successors are elected and qualified:
James R. Baroffio
Kenneth A. Hersh
Scott D. Sheffield
Robert L. Stillwell
AllJerry P. Jones
Charles E. Ramsey, Jr.
Both of these nominees are currently serving as directors of the
Company. Their biographical information is contained in "Directors and Executive
Officers."
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The Board of Directors has no reason to believe that anyeither of its
nominees will be unable or unwilling to serve if elected. If a nominee becomes
unable or unwilling to accept nomination or election, either the number of the
Company's directors will be reduced or the persons acting under the Proxy will
vote for the election of a substitute nominee that the Board of Directors
recommends.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEThe Board of Directors recommends that stockholders vote FOR THE ELECTION
OF EACH OF THE NOMINEES.the
election of each of the nominees.
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ITEM TWO
SELECTION OF AUDITORS
The Board of Directors has selected Ernst & Young LLP as the auditors
of the Company for 1999.2000. Ernst & Young LLP audited the Company's financial
statements for 1999 and 1998. The 19981999 audit was completed on February 2, 1999.January 24, 2000.
The Company expects that representatives of Ernst & Young LLP will be present at
the Annual Meeting to respond to appropriate questions and to make a statement
if they desire to do so.
At a meeting held on December 5, 1997, the Board of Directors approved the
engagement of Ernst & Young LLP as the Company's independent auditors for 1998
to replace KPMG Peat Marwick LLP, who were dismissed as auditors of the Company
after completing the audit of the Company for 1997. The Audit Committee of the
Board of Directors approved the change in auditors on December 5, 1997. The
Company's stockholders ratified this change at the 1998 annual meeting of
stockholders.
The report of Ernst & Young LLP on the Company's financial statements
for 1998 did not contain an adverse opinion or a disclaimer of opinion1999 and was not
qualified or modified as to uncertainty, audit scope, or accounting principles.
The report of KPMG Peat Marwick LLP on the Company's financial statements for
19971998 did not contain an adverse opinion or a disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the Company's financial statements for
19981999 and 1997,1998, there were no disagreements with Ernst & Young LLP (1998) or KPMG
Peat Marwick LLP (1997) on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures which, if not resolved to the satisfaction of such
independent accountants, would have caused such independent accountants to make
reference to the matter in their report.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP.
ITEM THREE
APPROVAL OF AMENDMENT TO LONG-TERM INCENTIVE PLAN
The Company is proposing that stockholders approve an amendment to the
Company's Long-Term Incentive Plan to change how non-employee directors
participate in awards under the Plan. The Board of Directors acting on the
recommendationrecommends that stockholders vote FOR
ratification of the Compensation Committee (which administers the Plan), has
approved the amendment subject to stockholder approval.
The stockholders approved the Long-Term Incentive Plan in August 1997. A
summary descriptionselection of the Long-Term Incentive Plan is set forth later in this
Proxy Statement under the caption "Long-Term Incentive Plan." Under the Plan,
the Board of Directors or its Compensation Committee is authorized to award
stock options, stock appreciation rights, restricted stock, and performance
units (payable in cash, stock, or both) to Eligible Individuals. "Eligible
Individuals" includes employees and directors of the Company. However, under
Section 5 of the Plan, the Company's non-employee directors are limited to
receiving only restricted stock awards. Section 5 of the Plan automatically
awards each non-employee director with restricted stock (instead of cash) worth
50% of the director's annual fee, calculated on the last business day of the
month in which the annual meeting of stockholders is held. Each non-employee
director may also elect to receive the remaining portion of the annual fee in
restricted stock. These restricted stock awards vest on the earlier of the next
annual meeting of stockholders or the first anniversary of the date of grant so
long as the person remains a
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director during that period. The Company recognizes a charge to earnings for the
value of the restricted stock awards. The charge is amortized over the vesting
period of the restricted stock. Section 5 says that non-employee directors are
not eligible to receive any other awards under the Long-Term Incentive Plan.
The Company proposes to amend the Long-Term Incentive Plan by deleting
Section 5 of the Plan and any cross-references to that Section in the Plan. One
effect of this amendment is to eliminate automatic awards of restricted stock to
the non-employee directors. The other effect of this amendment is that the Board
of Directors (or the Compensation Committee) will have authority to determine
what awards, if any, non-employee directors will receive and what the terms of
those awards will be. Non-employee directors could, as a result, receive
non-qualified options, stock appreciation rights, restricted stock, or
performance units under the Plan. The primary purpose of the amendment is to
give the Company flexibility to use various forms of consideration to compensate
its non-employee directors. The Company expects to determine the form (or
combination of forms) of consideration each year, based on the economic and
other circumstances at the time and based on its view of which awards will best
align the interests of the stockholders and the directors.
If the amendment is approved, the Board of Directors plans to use stock
options to pay all of the non-employee directors' annual fee for the year after
the 1999 annual stockholders' meeting. It plans to determine the number of
options to be granted by dividing the annual fee by the value of one option on
the last business day of the month in which the fee would normally be paid. The
options would have a fair-market-value exercise price, and the value of each
option would be calculated using the Black-Scholes method based on assumptions
consistent with those used in calculating option values in the Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE COMPANY'S LONG-TERM INCENTIVE PLAN.Ernst & Young LLP.
DIRECTORS AND EXECUTIVE OFFICERS
After the Annual Meeting, assuming the stockholders elect the nominees
of the Board of Directors as set forth in "Item One -- ElectionOne-Election of Directors," the
Board of Directors and executive officers of the Company will be:
NAME AGE POSITION
---- --- --------
I. Jon Brumley.......................... 60 Chairman of the Board of DirectorsName Age Position
Scott D. Sheffield....... 47 Chairman of the Board, President and Chief
Executive Officer
Timothy L. Dove.......... 43 Executive Vice President and Chief Financial
Officer
Dennis E. Fagerstone..... 51 Executive Vice President
Mark L. Withrow.......... 52 Executive Vice President, General Counsel and
Secretary
Danny L. Kellum.......... 45 Vice President - Domestic Operations
James R. Baroffio........ 68 Director
R. Hartwell Gardner...... 65 Director
James L. Houghton........ 69 Director
Jerry P. Jones........... 68 Director
Charles E. Ramsey, Jr.... 63 Director
Robert L. Stillwell...... 63 Director
Scott D. Sheffield...................... 46 President, Chief Executive Officer and Director
Timothy L. Dove......................... 42 Executive Vice President -- Business Development
Dennis E. Fagerstone.................... 50 Executive Vice President
Lon C. Kile............................. 43 Executive Vice President
M. Garrett Smith........................ 37 Executive Vice President and Chief Financial Officer
Mark L. Withrow......................... 51 Executive Vice President, General Counsel and
Secretary
James R. Baroffio....................... 67 Director
R. Hartwell Gardner..................... 64 Director
Kenneth A. Hersh........................ 36 Director
James L. Houghton....................... 68 Director
Jerry P. Jones.......................... 67 Director
Richard E. Rainwater.................... 54 Director
Charles E. Ramsey, Jr. ................. 62 Director
Philip B. Smith......................... 47 Director
Robert L. Stillwell..................... 62 Director
The Company has classified its Board of Directors into three classes.
Directors in each class are elected to serve for three-year terms and until
their successors are elected and qualified. Each year, the directors of one
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class stand for re-election as their terms of office expire. Messrs. Baroffio,
Hersh, SheffieldJones,
Ramsey and StillwellRichard E. Rainwater (who is not standing for re-election) are
designated as Class IIIII directors, and their terms of office expire at the
Annual Meeting. Messrs. Gardner Houghton and Philip SmithHoughton are designated as Class I
directors, and their terms of office expire at the annual meeting of
stockholders in 2001. Messrs. Brumley, Jones,
RainwaterBaroffio, Sheffield and RamseyStillwell are designated
as Class IIIII directors, and their terms of office expire at the annual meeting of
stockholders in 2000. On March 18, 1999,
Mr. Jones, who had previously been designated as a Class II director, was
re-designated as a Class III director in order to satisfy a provision in the
Company's Restated Certificate of Incorporation that requires the number of
directors in each of the three classes to be as nearly equal as possible.2002. Since the last annual meeting of stockholders, three
directors of the Company, T.
Boone Pickens, Arthur L.I. Jon Brumley, Kenneth A. Hersh and Philip B. Smith, and Guy J. Turcotte,
voluntarily resigned as directors of the Company. None of these resignations was
the result of a disagreement with the Company on any matter relating to the
Company's operations, policies or practices. Members ofMr. Rainwater has notified the current
Board of Directors (other thanhis intention not to stand for re-election to the Board due to his
decision to retire effective May 17, 2000. Mr. Baroffio) were
appointed underBrumley resigned to devote his
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full time and attention to his position as President and CEO of Encore
Acquisition Partners, a new independent exploration and production company
founded in 1998. Mr. Hersh and Mr. Smith resigned following the terms of the merger agreement between Parker & Parsley
Petroleum CompanyPrize
transaction. See "Certain Relationships and MESA Inc. Mr. Baroffio became a director in December 1997
under the terms of the combination agreement between the Company and Chauvco
Resources Ltd.Related Transactions."
Executive officers serve at the discretion of the Board of Directors.
Set forth below is biographical information about each of the Company's
directors and executive officers.
I. Jon Brumley. Mr. Brumley, a graduate of the University of Texas with a
B.A. and of the Wharton School of Finance and Commerce with an M.B.A., has
served as Chairman of the Board of Directors of the Company since August 1997.
Mr. Brumley was also an employee of the Company from August 1997 until May 1998.
Mr. Brumley currently serves as Chairman of the Board of Encore Acquisition
Partners Inc., an independent oil and gas company that he founded in April 1998.
Mr. Brumley served as Chairman of the Board of Directors and Chief Executive
Officer of Mesa from August 1996 until August 1997. He also co-founded Cross
Timbers Oil Company and served as its Chairman of the Board from 1986 to
mid-1996. Mr. Brumley served as President and Chief Executive Officer of
Southland Royalty Company from 1974 until 1985.officers named above.
Scott D. Sheffield. Mr. Sheffield, a distinguished graduate of the
University of Texas with a Bachelor of Science degree in Petroleum Engineering,
has been the President and Chief Executive Officer of the Company since August
1997.1997, and assumed the position of Chairman of the Board in August 1999. He was
the President and a director of Parker & Parsley since May 1990 and was the
Chairman of the Board and Chief Executive Officer of Parker & Parsley since
October 1990. Mr. Sheffield was the sole director of Parker & Parsley from May
1990 until October 1990. Mr. Sheffield joined Parker & Parsley Development
Company ("PPDC"), a predecessor of Parker & Parsley, as a petroleum engineer in
1979. Mr. Sheffield served as Vice President --- Engineering of PPDC from
September 1981 until April 1985, when he was elected President and a director.
In March 1989, Mr. Sheffield was elected Chairman of the Board and Chief
Executive Officer of PPDC. Before joining PPDC's predecessor, Mr. Sheffield was
employed as a production and reservoir engineer for Amoco Production Company.
Timothy L. Dove. Mr. Dove became Executive Vice President --- Business
Development of the Company in August 1997.1997, and was elected Executive Vice
President and Chief Financial Officer in February 2000. Mr. Dove joined Parker &
Parsley in May 1994 as Vice President --- International and was promoted to Senior
Vice President --- Business Development in October 1996, in which position he
served until August 1997. Before joining Parker & Parsley, Mr. Dove was employed
with Diamond Shamrock Corp., and its successor, Maxus Energy Corp,Corp., in various
capacities in international exploration and production, marketing, refining, and
planning and development. Mr. Dove earned a Bachelor of Science degree in
Mechanical Engineering from Massachusetts Institute of Technology in 1979 and
received his M.B.A. in 1981 from the University of Chicago.
Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School
of Mines with a B.S. in Petroleum Engineering, became an Executive Vice
President of the Company in August 1997. Mr. Fagerstone served as Executive Vice
President and Chief Operating Officer of Mesa from March 1997 until August 1997.
Mr. Fagerstone served as Senior Vice President and Chief Operating Officer of
Mesa from October 1996 to February 1997, and served as Vice President --- Exploration and
Production of Mesa from May 1991 to 5
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October 1996. Mr. Fagerstone served1996 and as Vice President ---
Operations of Mesa from June 1988 until May 1991.
Lon C. Kile. Mr. Kile, a graduate of Oklahoma State University with a
Bachelor of Business Administration degree in Accounting, became Executive Vice
President of the Company in August 1997. Mr. Kile joined Parker & Parsley in
1985 and was promoted to Senior Vice President -- Investor Relations in October
1996. Previously, he was Vice President and Manager of the Mid-Continent
Division. Prior to that, he held the positions of Vice President -- Equity
Finance & Analysis and Vice President -- Marketing and Program Administration.
Before joining Parker & Parsley, he was employed as Supervisor -- Senior, Audit,
in charge of Parker & Parsley's audit, with Arthur Young.
M. Garrett Smith. Mr. Smith, a graduate of the University of Texas with a
Bachelor of Science degree in Electrical Engineering and Southern Methodist
University with an M.B.A., became Executive Vice President and Chief Financial
Officer of the Company in December 1997. Prior to that he was Senior Vice
President -- Finance of the Company since August 1997. Mr. Smith served as Vice
President -- Corporate Acquisitions of Mesa from January 1997 until August 1997.
From October 1996 to December 1996, Mr. Smith served as Vice President
-- Finance of Mesa and from 1994 to 1996, he served as Director of Financial
Planning of Mesa. Mr. Smith was employed by BTC Partners, Inc. (a former
financial advisor to Mesa) from 1989 to 1994.
Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian
University with a Bachelor of Science degree in Accounting and Texas Tech
University with a Juris Doctorate degree, has been the Executive Vice President,
General Counsel and Secretary of the Company since August 1997. He served as
Vice President --- General Counsel of Parker & Parsley from February 1991 until
January 1995, and served as Senior Vice President, General Counsel of Parker &
Parsley from January 1995 until August 1997. He was Parker & Parsley's Secretary
from August 1992 until August 1997. Mr. Withrow joined PPDC in January 1991.
Before joining PPDC, Mr. Withrow was the managing partner of the law firm of
Turpin, Smith, Dyer, Saxe & MacDonald, Midland, Texas.
Danny L. Kellum. Mr. Kellum, who received a Bachelor of Science degree
in Petroleum Engineering from Texas Tech University in 1979, has served the
Company as Vice President - Domestic Operations since August 1999. From November
1998 until August 1999, Mr. Kellum served as Vice President - Domestic
Operations of Pioneer's subsidiary, Pioneer Natural Resources USA, Inc., and
from August 1997 until November 1998, he served as Vice President of that
company's Permian Division. He served as Spraberry District Manager from 1989
until 1994 and as Vice President of the Spraberry and Permian Divisions for
Parker & Parsley until August of 1997. He joined Parker & Parsley in 1981 in the
capacity of Operations Engineer after a brief career with Mobil Oil Corporation.
James R. Baroffio. Dr. Baroffio received a B.A. in Geology at the
College of Wooster, Ohio, an M.S. in Geology at Ohio State University, and a
Ph.D. in Geology at the UniversityU niversity of Illinois. Before becoming a director of
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the Company in December 1997, Dr. Baroffio enjoyed a long career with Standard
Oil Company of California, the predecessor of Chevron Corporation where he
served as President, Chevron Research and Technology Center from 1980 to 1985
and eventually retiringretired as President of Chevron Canada Resources in 1994. Dr.
Baroffio was President-elect
of the Colorado Petroleum Association, a member of the Board of Directors of the Rocky Mountain Oil & Gas
Association, and Chairman of the U.S. National Committee of the World Petroleum
Congress. His community leadership positions included membership on the Board of
Directors of Glenbow Museum and the Nature Conservancy of Canada, as well as
serving as President of the Alberta Nature Conservancy.
R. Hartwell Gardner. Mr. Gardner became a director of the Company in
August 1997. He served as a director of Parker & Parsley from November 1995
until August 1997. Mr. Gardner graduated from Colgate University with a Bachelor
of Arts degree in Economics and then earned an M.B.A. from Harvard University.
Until October 1, 1995, Mr. Gardner was the Treasurer of Mobil Oil Corporation
and Mobil Corporation from 1974 and 1976, respectively. Mr. Gardner is a member
of the Financial Executives Institute of which he served as Chairman in
1986/1987 and is a Director of Oil Investment Corporation Ltd. and Oil Casualty
Investment Corporation Ltd., Pembroke, Bermuda.
Kenneth A. Hersh. Mr. Hersh, who became a director of the Company in August
1997, has been a Managing Director of Natural Gas Partners ("NGP") since 1989.
NGP is a family of investment funds organized to make equity investments in oil
and gas companies. Previously, he was employed by the investment banking
division of Morgan Stanley & Co. Incorporated where he was a member of the
firm's energy group specializing in oil and gas financing and acquisition
transactions. Mr. Hersh is a director of HS Resources, Inc., Petroglyph Energy,
Inc., Titan Exploration, Inc. and Vista Energy Resources, Inc. Mr. Hersh earned
his M.B.A. from the Stanford University Graduate School of Business, and his
undergraduate degree from Princeton University.
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James L. Houghton. Mr. Houghton is a certified public accountantCertified Public Accountant and a
graduate of Kansas University with a Bachelor of Science degree in Accounting,
as well as a Bachelor of Laws degree. Mr. Houghton has served as a director of
the Company since August 1997, and as a director of Parker & Parsley from
October 1991 until August 1997. Until October 1, 1991, Mr. Houghton was the lead
oil and gas tax specialist for the accounting firm of Ernst & Young, was a
member of Ernst & Young's National Energy Group, and had served as its Southwest
Regional Director of Tax. Mr. Houghton is a member of the American Institute of
Certified Public Accountants, a member of the Oklahoma Society of Certified
Public Accountants and a former Chairman of its Federal and Oklahoma Taxation
Committee, and past President of the Oklahoma Institute on Taxation. He has also
served as a Director for the Independent Petroleum Association of America and as
a member of its Tax Committee.
Jerry P. Jones. Mr. Jones earned a Bachelor of Science degree from West
Texas State College in 1953 and a Bachelor of LawLaws degree from the University of
Texas School of Law in 1959. Mr. Jones has served as a director of the Company
since August 1997, and as a director of Parker & Parsley from May 1991 until
August 1997. Mr. Jones has been an attorney with the law firm of Thompson &
Knight, P.C.L.L.P., Dallas, Texas, since September 1959 and was a shareholder in
that firm until January 1998, when he retired and became of counsel to the firm.
Mr. Jones specialized in civil litigation, especially in the area of energy
disputes.
Richard E. Rainwater. Mr. Rainwater, a graduate of the University of Texas
with a B.A. and the Stanford University Graduate School of Business with an
M.B.A., became a director of the Company in August 1997. He served as a director
of Mesa from July 1996 until August 1997. Since 1986, Mr. Rainwater has been an
independent investor and the sole shareholder and Chairman of Rainwater, Inc.
Mr. Rainwater was the founder of Crescent Real Estate Equities, Inc. in 1994,
and since that time has served as its Chairman of the Board. He was the
co-founder of Mid Ocean Limited in 1991, the founder of Columbia Hospital
Corporation (predecessor to Columbia/HCA Healthcare Corporation) in 1987, and
the founder of ENSCO International, Inc. in 1986. From 1970 until 1986, Mr.
Rainwater served as the Chief Investment Advisor to the Bass Family of Texas.
Charles E. Ramsey, Jr. Mr. Ramsey is a graduate of the Colorado School
of Mines with a Petroleum Engineering degree and a graduate of the Smaller
Company Management program at the Harvard Graduate School of Business
Administration. Mr. Ramsey has served as a director of the Company since August
1997. Mr. Ramsey served as a director of Parker & Parsley from October 1991
until August 1997. Since October 1991, he has operated an independent management
and financial consulting firm. From June 1958 until June 1986, Mr. Ramsey held
various engineering and management positions in the oil and gas industry and,
for six years before October 1991, was a Senior Vice President in the Corporate
Finance Department of Dean Witter Reynolds Inc. (Dallas, Texas office). His
industry experience includes 12 years of senior management experience in the
positions of President, Chief Executive Officer and Executive Vice President of
May Petroleum Inc. Mr. Ramsey is also a former director of MBank Dallas, the
Dallas Petroleum Club and Lear Petroleum Corporation.
Philip B. Smith. Mr. Smith, a graduate of Oklahoma State University with a
B.S. in mechanical engineering and the University of Tulsa with an M.B.A., has
served as a director of the Company since August 1997. He served as a director
of Mesa from July 1996 until August 1997. In 1996, Mr. Smith founded PRIZE
Petroleum, L.L.C., an owner of Sunterra Petroleum, L.L.C. From 1991 until 1996,
Mr. Smith served as President, Chief Executive Officer and a director of Tide
West Oil Company. From 1986 until 1991, he served as Senior Vice President of
Mega Natural Gas Company, and from 1980 until 1986 he held executive positions
with two small exploration and production companies. From 1976 until 1980, Mr.
Smith held various positions with Samson Resources Company, and from 1974 until
1976 he was a production engineer with Texaco Inc. Mr. Smith is a director of HS
Resources, Inc.
Robert L. Stillwell. Mr. Stillwell, a graduate of the University of
Texas with a B.B.A. and the University of Texas School of Law with a J.D., has
served as a director of the Company since August 1997. He served as a director
of Mesa from January 1992 until August 1997, as a member of the Advisory
Committee of Mesa, L.P., a predecessor of Mesa, from December 1985 until
December 1991, and as a director of Mesa in its 7
10
original corporate form from
1968 until January 1987. Mr. Stillwell has beenis a partner in the law firm of Baker &
Botts, L.L.P., for more than five years.
In addition to the directors of the Company, Edward O. Vetter and John S.
Herrington have been serving as Senior Advisors to the Board of Directors, for
which each has been receiving an annual fee of $20,000 cash for his services.
They will cease serving as Senior Advisors to the Board of Directors on May 31,
1999.
Mr. Vetter, a graduate of the Massachusetts Institute of Technology, served
as a director of Parker & Parsley from February 1992 until August 1997, and has
in the past served as director of AMR Corporation, American Airlines, Inc.,
Cabot Corporation, The Western Company of North America and Champion
International Corporation. Since 1977, Mr. Vetter has been President of Edward
O. Vetter & Associates, a management consulting firm in Dallas,Houston, Texas. Mr.
Vetter was the Energy Advisor to the Governor of Texas from 1979 to 1983, was
chairman of the Texas Department of Commerce from 1987 to 1991, and was a
Presidential appointee to the U.S. Competitiveness Policy Council. He is a life
trustee of the Massachusetts Institute of Technology and a former member of the
National Petroleum Council.
Mr. Herrington, a graduate of Stanford University with a B.A. in Economics,
and the University of California Hastings College of Law with a J.D. and L.L.B.,
was a director of the Company from August 1997 until May 1998. He served as a
director of Mesa from January 1992 until August 1997. Since December 1991, Mr.
Herrington has been involved in personal investments and real estate activities.
He was Chairman of the Board of Harcourt Brace Jovanovich, Inc. (publishing)
from May 1990 until November 1991, and served as a director from May 1989 until
May 1990. Mr. Herrington served as the Secretary of the Department of Energy of
the United States from February 1985 until May 1990.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors of the Company held seventen meetings during 1998.1999. No
director attended fewer than 75% of the total number of meetings of the Board of
Directors, except for Mr. Rainwater, who attended five of the seven meetings.Directors. No director attended fewer than 75% of the total number of meetings
of all committees of the Board of Directors on which that director served.
5
The Company's Board of Directors has fourtwo standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee"Audit
Committee" and the Nominating"Compensation Committee."
The Audit Committee makes recommendations to the Board of Directors for
selecting the Company's independent auditors, considers the independence of
auditors before engaging them, reviews with auditors their reports, discusses
internal accounting procedures and financial controls with the Company's
management and auditors, and may initiate and supervise any special
investigations it deems necessary. The members of the Audit Committee are
Messrs. Houghton (Chairman), Gardner and Jones. The Audit Committee held fivefour
meetings during 1998.1999.
The Compensation Committee periodically reviews the compensation,
employee benefit plans and fringe benefits paid to or provided for executive
officers of the Company and approves the annual salaries and bonuses of the
Company's executive officers, and administers the Long-Term Incentive Plan.officers. The members of the Compensation Committee are
Messrs. Ramsey (Chairman), HershBaroffio and Smith.Stillwell. A subcommittee of Messrs.
Ramsey and Baroffio administer the Long-Term Incentive Plan. The Compensation
Committee held five meetings during 1998. The Plan is administered
by a subcommittee of which Messrs. Ramsey and Smith are members.
The Executive Committee approves acquisition and divestiture transactions
by the Company up to $200 million, and acts as a preliminary screening committee
for the Board of Directors on transactions greater than $200 million. The
members of the Executive Committee are Messrs. Brumley (Chairman), Sheffield,
Gardner, Hersh, Ramsey and Smith. The Executive Committee held two meetings
during 1998.
The Nominating Committee recommends candidates for membership to the Board
of Directors. The members of the Nominating Committee are Messrs. Brumley
(Chairman) and Smith. The Nominating Committee held one meeting during 1998.
8
111999.
MANAGEMENT COMPENSATION
The Company began operations upon completion of the merger of Parker &
Parsley and Mesa on August 7, 1997. Information about management compensation
for periods before that date refers to compensation that either of the
predecessor companies paid.
COMPENSATION OF DIRECTORS
Currently, eachCompensation of Directors
Each non-employee director receives an annual retainer fee of $50,000
if the director serves on a committee and $40,000 if he does not. In addition,
each non-employee director is reimbursed for travel expenses to attend meetings
of the Board of Directors or its committees and an additional $2,500 for
services as chairman of a committee. No additional fees are paid for attendance
at board or committee meetings. Executive officers of the Company do not receive
additional compensation for serving on the Board of Directors.
Under the Company's Long-Term Incentive Plan (the "Plan"), non-employee
directors are eligible to receive awards in the form of non-qualified stock
options, stock appreciation rights, restricted stock, or performance units. The
Company uses these awards instead of cash to pay its non-employee directors
their annual retainer fees. The Board of Directors determines the form (or
combination of forms) of consideration each year, based on the economic and
other circumstances at the time and based on its view of which awards will best
align the interests of the stockholders and the directors.
In order for the Directors to participate in the Company's cost
reduction program and to tie 100% of their compensation to the Company's stock
performance, the Board of Directors determined to use non-qualified stock
options to pay all of the non-employee directors' annual fees for the year
following the Company's 1999 annual stockholders' meeting. The number of shares
subject to stock options granted to each non-employee director automatically receives 50% (and
may elect to receive 100%) ofwas determined by
dividing the director's annual retainer fee inby the formvalue of common stock instead of cashan option for one
share on theMay 28, 1999 (the last business day of the month in which the Company's
1999 annual stockholders' meeting was held). The options have a fair-market
value exercise price, and the value of stockholders is held. The number of shares included in each award is determined by dividingoption was calculated using the
applicable percentage of the annual retainer
feeBlack-Scholes method based on assumptions provided by the closing sale price of common stock on the business day immediately
preceding the date of the award. When issued, the shares of common stock awarded
are subject to transfer restrictions that lapse on the earlier of the next
annual meeting of stockholders orCompany's executive
compensation consulting firm. These options vest 25% each quarter with the first
anniversaryvesting date of the award if the
person has continued as a director through that date. If a non-employee
director's services as a director are terminated for any reason before the
earlier of the next annual meeting of stockholders or the first anniversary of
the date of the grant, transfer restrictions on some of the shares will lapse
(and the rest of the shares will be forfeited) based on the number of regularly
scheduled meetings of the Board of Directors that were held since the last
annual meeting and the number of regularly scheduled meetings remaining to be
held before the next annual meeting of stockholders. The vesting of ownership
and the lapse of transfer restrictions may be accelerated upon the death,
disability or retirement of the director or a change in control of the Company.August 31, 1999.
On May 29, 1998,28, 1999, each non-employee director received the following
awards of restricted stock in lieu of cashoptions to compensate him for his annual retainer fees (which were based on a closing
salefee (each
stock option awarded has an exercise price of $22.8125 for the common stock)$10.875): Messrs. Brumley,Baroffio,
Gardner, Jones and HershStillwell each received awards of 2,191options for 10,184 shares; Messrs.
BaroffioBrumley, Houghton and RainwaterRamsey each received awards
of 1,753 shares; Messrs. Houghton, Jones, Ramsey and Smith received awards of
1,095options for 10,693 shares; and Mr.
StillwellRainwater received an option for 8,147 shares. Mr. Brumley subsequently retired
as a director of the Company effective August 31, 1999, and forfeited stock
options to purchase 8,019 shares.
Effective November 18, 1999, each non-employee director received an
award of 876 shares. Messrs.
Brumley, Gardner30,000 non-qualified stock options at an exercise price of $10.25. One
third of these options vest on May 17, 2000, one third vest on May 17, 2001 and
Hershthe remaining one third vest May 17, 2002. The foregoing stock option awards are
6
not regular, annual awards but were granted to bring the only directors who electeddirectors' compensation
package to receive 100%a level competitive with the director compensation of their retainers in restricted stock.
As discussed above under "Item Three -- Approvalthe Company's
peer group used for establishing executive compensation.
Compensation of Amendment to Long-Term
Incentive Plan," if stockholders approve the amendment to the Long-Term
Incentive Plan, then automatic awards will be discontinued. The Board of
Directors (or the Compensation Committee) will determine the nature and amount
of any awards, including awards in lieu of directors' fees.
9
12
COMPENSATION OF EXECUTIVE OFFICERSExecutive Officers
The compensation paid to the Company's executive officers generally
consists of base salaries, annual bonuses, awards under the Long-Term Incentive
Plan, contributions to the Company's 401(k) retirement plan, and miscellaneous
perquisites. The following table summarizes the total compensation for 1999,
1998, 1997, and 19961997 awarded to, earned by or paid to the following persons:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATIONLong-Term Compensation
Awards
Annual Compensation -----------------------
------------------------------------- VALUE OF SHARES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION(B) STOCK(C) OPTIONS(D) COMPENSATION(E)--------------------------------------- Value of Shares
Name and Other Annual Restricted Underlying All Other
Principal Position Year Salary (a) Bonus (b) Compensation (c) Stock (d) Options Compensation (a)
- ------------------ ---- -------- -------- --------------- ---------- --------- ---------------- ---------- -------------------------- ----------------
I. Jon Brumley(f)............ 1998 $225,000 $ -- $ 60,285 $ -- -- $ 36,445
Chairman of the Board 1997 537,525 360,000 121,198 2,234,625 90,000 36,037
1996 180,142 -- -- -- 228,571 18,014
Scott D. Sheffield(g)........Sheffield (f) 1999 $ 480,000 $ 270,000 $ 14,427 $ - 90,000 $69,378
President and 1998 600,000 216,000 16,734 --- 90,000 123,252
President andChief Executive Officer 1997 518,875 360,000 838,075 2,234,625 90,000 105,996
Chief Executive Officer 1996 390,000 375,375 47,770 -- 70,000 87,990
Dennis E. Fagerstone.........Fagerstone 1999 247,500 92,812 8,478 - 35,000 40,564
Executive Vice President 1998 275,000 92,812 8,076 --- 35,000 37,757
Executive Vice President
1997 259,387 123,750 61,985 871,125 35,000 27,149
1996 212,490 90,000 -- -- 71,428 30,249
Mel Fischer(h)............... 1998 285,000 76,950 18,897 -- -- 44,500Mark L. Withrow (f) 1999 225,000 84,376 4,327 - 35,000 38,855
Executive Vice President -- 1997 255,833 128,250 346,438 871,125 56,000 33,787
World Wide Exploration 1996 -- -- -- -- -- --
Mark L. Withrow(g)........... 1998 250,000 84,376 60,882 --- 35,000 61,178
Executive Vice Presidentand General Counsel 1997 228,000 112,500 382,020 871,125 35,000 51,835
and General Counsel 1996 175,000 201,737 33,021 59,500 21,000 43,103Timothy L. Dove 1999 225,000 197,580 4,611 - 35,000 38,394
Executive Vice President 1998 250,000 84,375 4,618 - 35,000 57,713
Business Development 1997 221,750 112,500 484,227 871,125 35,000 39,258
M. Garrett Smith.............Smith (g) 1999 225,000 84,376 8,418 - 35,000 39,362
Executive Vice President 1998 250,000 84,376 7,457 --- 35,000 36,559
Executive Vice President 1997 214,000 105,750 44,386 871,125 35,000 15,812
and Chief Financial Officer 1996 137,490 200,000 -- -- 50,000 33,7491997 214,000 105,750 44,386 871,125 35,000 15,812
- ---------------
(a) Mr. Sheffield voluntarily reduced his 1999 salary 20%, and the other named
executive officers' salaries were voluntarily reduced 10% during 1999.
(b) Represents the amount awarded under the Company's annual bonus program and
bonus awards relatedforgiveness of a Company loan to specific events.Mr. Dove for $113,204 in 1999. The 1999
and 1998 annual bonus was approved
on February 24, 1999, andawards were paid fully in cash. The 1997 annual bonus
was paid one-half in cash and one-half in restricted common stock.stock as
follows:
Restricted Stock Award
----------------------
Number Value
Year Cash Award of Shares of Shares
---- ---------- --------- ---------
Mr. Sheffield............. 1997 $ 179,993 8,045 $180,007
Mr. Fagerstone............ 1997 61,883 2,765 61,867
Mr. Withrow............... 1997 56,249 2,514 56,251
Mr. Dove.................. 1997 56,249 2,514 56,251
Mr. Smith................. 1997 52,878 2,363 52,872
Subject to accelerated lapse in certain circumstances, the ownership of the
stock vests after one year and transfer restrictions lapse on one-thirdone- third of
the shares on each of the first, second and third anniversaries of the date
of grant. In 1996, Mr. Withrow received one-half of a previously established
target level bonus in restricted stock and the other one-half of target
plus any excess above target in cash. The number of shares of restricted stock awarded as annual
bonuses was calculated using the last closing sale price of the common
stock before the date of the award ($22.375 for 1997
and $30.125 for 1996)22.375). Ownership of the restricted stock awarded in 1996
vested on August 13, 1997 and ownership of the restricted
stock awarded for 1997 vested on September 30, 1998, due to the triggering
of a vesting acceleration clause contained in the Long-Term Incentive Plan.
See "Compensation Committee
Report on Executive Compensation -- Elements of Compensation -- Long-term
Incentives."
RESTRICTED STOCK AWARD
----------------------
NUMBER VALUE
YEAR CASH AWARD OF SHARES OF SHARES
---- ---------- --------- ---------
Mr. Brumley.................................... 1998 $ -- -- $ --
1997 179,993 8,045 180,007
1996 -- -- --
Mr. Sheffield.................................. 1998 216,000 -- --
1997 179,993 8,045 180,007
1996 375,375 -- --
Mr. Fagerstone................................. 1998 92,812 -- --
1997 61,883 2,765 61,867
1996 90,000 -- --
10
13
RESTRICTED STOCK AWARD
----------------------
NUMBER VALUE
YEAR CASH AWARD OF SHARES OF SHARES
---- ---------- --------- ---------
Mr. Fischer.................................... 1998 76,950 -- --
1997 64,123 2,866 64,127
1996 -- -- --
Mr. Withrow.................................... 1998 84,376 -- --
1997 56,249 2,514 56,251
1996 102,377 1,307 39,373
Mr. Smith...................................... 1998 84,376 -- --
1997 52,878 2,363 52,872
1996 200,000 -- --
In 1996 Mr. Withrow also received a restricted stock bonus award of 2,436
shares valued at $59,987 on the date of grant for his role in the
divestiture of the Company's Australia and Asia subsidiaries. These shares
vested on April 17, 1997, and the transfer restrictions lapsed one-third on
April 17, 1997, and the remaining two-thirds lapsed on August 7, 1997.
(b)(c) This column includes (i) gross-up payments in 1997 for taxes in connection with the
receipt of restricted stock awarded in 1997 pursuant to the annual bonus
plan as follows: Mr. Brumley $118,805; Mr. Sheffield $118,805; Mr. Fagerstone $40,832; Mr.
Fischer $42,328;Withrow $37,125; Mr. Dove $37,125; and Mr. Withrow $37,125;Smith $34,896; (ii) relocation
and housing cost of living adjustment related to moving corporate
headquarters from Midland, Texas to Irving, Texas as follows: payment for
1998 --- Mr. Withrow $42,290; payments for 1997 --- Mr. Sheffield $432,856; Mr.
Fischer $151,777;Withrow $204,000; and Mr. Withrow $204,000;Dove $290,737; (iii) tax gross-up payments for
relocation and cost of living adjustment: payment for 1998 --- Mr. Withrow
$12,044; payments for 1997 --- Mr. Sheffield $283,781; Mr. Fischer $94,889;Withrow $133,742;
and Mr. Withrow $133,742;Dove $190,458; (iv) temporary housingand a 1997 payment to Mr. Fisher of $15,000 in 1998, and $55,000 in 1997, for housing
in Texas during Mr. Fischer's two year initial employment commitment; (v) a
1998 payment of $44,998 to Mr. Brumley for unused vacation, and 1997
payments to Mr. Fagerstone of
$21,153 and Mr. Smith of $9,490 for unused
vacation; (vi) a cash payment to Mr. Sheffield in 1996 of $47,770, which
was equal to 50% of the federal income tax liability associated with the
cash bonus received in lieu of restricted stock under the annual bonus
program; and (vii) a 1996 gross-up payment to Mr. Withrow of $33,021
related to a restricted stock award he received as part of the annual bonus
plan.$21,153. Amounts not shown represent miscellaneous perquisites.
(c)7
(d) The restricted stock awarded in 1997 represents grants on August 8, 1997 of
59,000 shares of common stock to each of Messrs. Brumley andMr. Sheffield and 23,000 shares of common
stock to each of Messrs. Fagerstone, Fischer,
Withrow, Dove and Smith with vesting
restrictions that were to lapse one-half on August 8, 2000, and one-half on
August 8, 2001. Mr. Brumley's restricted
stock fully vested effective as of May 15, 1998, in connection with his
retirement as an employee of the Company. Messrs. Sheffield, Fischer,
Fagerstone, Withrow, Dove and Smith's
restricted stock fully vested on September 30, 1998 due to the triggering
of a vesting acceleration clause contained in the Plan. See "Compensation Committee Report on Executive
Compensation -- Elements of Compensation -- Long-term Incentives." In 1996
Mr. Withrow received a restricted stock award of 2,000 shares of common
stock with vesting restrictions that were to lapse November 19, 1999. The
merger of Parker & Parsley and Mesa to form the Company accelerated the
lapse of these restrictions to August 7, 1997. The values of the
awards were calculated using the closing sale price of the common stock of
$37.875 on August 7, 1997, and of $29.75 on November 18, 1996.1997. Because all vesting restrictions on all
restricted stock heretofore awarded to each executive officer have lapsed
(either by their terms or through acceleration upon the happening of
certain events) no executive officer held any shares of restricted stock on
December 31, 1998.
(d) Stock options that Mesa awarded to Messrs. Brumley, Fagerstone and Smith
before the merger were converted to options to purchase common stock on a
1-for-7 basis.1999.
(e) For 19981999 this column includes (i) contributions to qualified retirement
plans for Messrs. Brumley, Sheffield, Fagerstone, Fischer, Withrow, Dove and Smith of
$7,916, $16,000, $9,728, $16,000, $16,000$15,814, $15,922, $15,894, and 11
14
$11,222,$15,922 respectively; (ii)
contributions to the Company's non-qualified deferred compensation
retirement plan for Messrs. Brumley, Sheffield, Fagerstone, Fischer, Withrow, Dove and Smith
of $28,529, $61,154, $28,029,
$28,500, $25,481$48,923, $24,750, $22,933, $22,500, and $25,337,$22,933 respectively; (iii) deemed payment for
one-third of the principal and all accrued interest to Mr. Sheffield for
$44,768 and Mr. Withrow for $19,697 related to a 1995 stock acquisition
loan program; and (iv) a
$1,330 premium with respect to a term life insurance policy for the benefit
of Mr. Sheffield.Sheffield; (iv) reimbursement for financial counseling services for
Messrs. Sheffield and Smith for $3,125 and $507 respectively.
(f) Mr. Brumley became an officer of Mesa in August 1996. He ceased to be an
employee of the Company effective May 15, 1998, but continues to serve as
Chairman of the Board of Directors.
(g) See "Management Compensation --- Compensation of Executive Officers ---
Employee Investment Partnerships" for information about Parker &
Parsley-sponsored employee investment partnerships in which Mr. Sheffield
and Mr. Withrow invested their own funds.
(h)(g) Mr. Fischer became an officer of Parker & Parsley in February 1997. Mr.
Fischer retiredSmith resigned from the Company effective February 15, 1999.
LONG-TERM INCENTIVE PLAN.1, 2000.
Long-Term Incentive Plan. The Plan provides for employee and non-employee
director awards in the form of stock options, stock appreciation rights,
restricted stock, and performance units payable in stock or cash. The maximum
number of shares of common stock that may be issued under the Plan is equal to
10% of the total number of shares of common stock and Canadian exchangeable shares outstanding from time to time
minus the total number of shares of stock subject to outstanding awards on the
date of calculation under any other stock-based plan for employees or directors
of the Company and its subsidiaries. The Plan had 5,743,5114,275,311 shares available for
additional awards at December 31, 1998.1999.
Information about restricted stock awards made under the Plan is set forth
in the Summary Compensation Table. No performance units or stock appreciation
rights have been awarded under the Plan.
The following table sets forth information about stock option grants made
during 19981999 to the named executive officers.
OPTION GRANTSOPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------
NUMBER OFIndividual Grants
-----------------------------------------------
Number of % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION GRANT DATE
NAME OPTIONS GRANTED IN FISCAL YEAR PER SHARE(c) DATE VALUE(d)
----of Total
Securities Options Granted Exercise or
Underlying to Employees Base Price Expiration Grant Date
Name Options Granted in Fiscal Year Per Share (c) Date Value (d)
- -------------------- --------------- --------------- ------------ ------------------------------------- ------------- ----------
Mr. Brumley........... -- -- -- -- --Sheffield....... 45,000 (a) 2.27% $ 5.81 2/24/05-06-07 $ 147,150
45,000 (b) 2.27% 12.44 8/23/05-06-07 314,100
Mr. Sheffield......... 45,000(a) 2.10% 17.25 9/30/03 298,800
45,000(b) 2.10% 14.00 11/Fagerstone...... 17,500 (a) 0.88% 5.81 2/24/05-06-07 57,225
17,500 (b) 0.88% 12.44 8/23/04 - 05 - 06 279,00005-06-07 122,150
Mr. Fagerstone........ 17,500(a) 0.81% 17.25 9/30/03 116,200
17,500(b) 0.81% 14.00 11/Withrow......... 17,500 (a) 0.88% 5.81 2/24/05-06-07 57,225
17,500 (b) 0.88% 12.44 8/23/04 - 05 - 06 108,50005-06-07 122,150
Mr. Fischer........... 17,500(a) 0.81% 17.25 9/30/03 116,200
17,500(b) 0.81% 14.00 11/Dove............ 17,500 (a) 0.88% 5.81 2/24/05-06-07 57,225
17,500 (b) 0.88% 12.44 8/23/04 - 05 - 06 108,50005-06-07 122,150
Mr. Withrow........... 17,500(a) 0.81% 17.25 9/30/03 116,200
17,500(b) 0.81% 14.00 11/Smith........... 17,500 (a) 0.88% 5.81 2/24/05-06-07 57,225
17,500 (b) 0.88% 12.44 8/23/04 - 05 - 06 108,500
Mr. Smith............. 17,500(a) 0.81% 17.25 9/30/03 116,200
17,500(b) 0.81% 14.00 11/23/04 - 05 - 06 108,50005-06-07 122,150
- ---------------
(a) These options were granted on August 19, 1998, fully vestedFebruary 24, 1999, vest at the rate of
one-third each year, commencing on September
30, 1998, duethe first anniversary of the grant
date, and have a term of five years from the date of vesting. The
Compensation Committee retains discretion, subject to plan limits, to
modify the triggeringterms of the options. In the event of a vesting acceleration clause containedchange in control of
the Company as defined in the Plan, the options will immediately become
fully vested and expire September 30, 2003. See "Compensation Committee
Report on Executive Compensation -- Elements of Compensation -- Long-term
Incentives."
12
15exercisable in full.
(b) These options were granted on NovemberAugust 23, 1998,1999, vest at the rate of
one-third each year commencing on the first anniversary of the grant date,
and have a term of five years from the date of vesting. The Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of the options. In the event of a change in control of the Company as
defined in the Plan, the options will immediately become fully vested and
exercisable in full.
(c) The exercise price per share is equal to the closing price of the common
stock on the New York Stock Exchange composite tape on the day before the
date of grant.
(d) The estimated grant date value of shares in footnotes (a) and (b) is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
value of the options include the following:
- An interest rate of 5.43%6.59% for footnote (a) and 5.5%6.51% for footnote (b),
which represents the interest rate on a U. S. Treasury security with a
maturity date corresponding to the option term.
- Volatility of .309%50% for footnote (a) and .398%50% for footnote (b) calculated
using daily stock prices for the 120-day period prior to the grant
date.
- Dividends at the rate of $.10 per share representing the annualized
dividends paid with respect to a share of common stock at the date of
grant.8
No other adjustments were made to the model for non-transferability or
risk of forfeiture. The ultimate values of the options will depend on the
future market price of the common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize
upon exercise of an option will depend on the excess of the market value
of the common stock over the exercise price on the date the option is
exercised.
The following table sets forth, for each named executive officer,
information concerning the exercise of stock options during 19981999, and the value
of unexercised stock options as of December 31, 1998.1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES
NUMBER OF UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR END IN-THE-MONEY
ACQUIRED ON VALUE ---------------------------- ------------------------------
EXERCISE REALIZED EXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLENumber of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Shares Options at Fiscal Year End Options at Fiscal Year End
Acquired on Value --------------------------- -------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable (a)
----------- -------- ----------- ------------- ------------- ------------------------ -----------------
Mr. Brumley.......... -- -- 318,571 -- -- --Sheffield...... - $ - 320,000 120,000 $ - $ 140,625
Mr. Sheffield........ -- -- 305,350 45,000 -- --Fagerstone..... - - 138,332 46,666 - 54,688
Mr. Fagerstone....... -- -- 132,498 17,500 -- --Withrow........ - - 106,334 46,666 - 54,688
Mr. Fischer.......... -- -- 73,500 17,500 -- --Dove........... - - 100,334 46,666 - 54,688
Mr. Withrow.......... -- -- 94,500 17,500 -- --
Mr. Smith............ -- -- 106,071 17,500 -- --Smith.......... - - 111,905 46,666 - 54,688
RETIREMENT PLAN.(a) Amounts were calculated by multiplying the number of unexercised options
by $8.9375, which was the closing sale price of the common stock on
December 31, 1999, and subtracting the aggregate exercise price.
Retirement Plan. The Company provides a non-qualified deferred
compensation retirement plan for officers and key employees of the Company. Each
participant is allowed to contribute up to 25% of base salary. The Company
provides a matching contribution of 100% of the participant's contribution
limited to the first 10% of the officer's base salary (or 8% of the key
employee's base salary). The Company matching contribution vests immediately.
In December 1998, the Company received information that an investment fund
group had acquired beneficial ownership of more than 20% of the common stock.
Pursuant to the provisions of the Company's deferred compensation retirement
plan, if a third party acquires 20% or more of the common stock certain change
in control provisions contained in the Plan are triggered. Accordingly, in
December 1998, the Compensation Committee determined that a change in control
had occurred, effective September 30, 1998, under the deferred compensation
retirement plan. Consequently, all of the contributions made to the deferred
13
16
compensation retirement plan from August 1997 to December 15, 1998 were
distributed to the respective officers and key employees.
EMPLOYEE INVESTMENT PARTNERSHIPS.Employee Investment Partnerships. From 1987 through 1991, Parker &
Parsley formed employee partnership programs in which Mr. Sheffield
participated. In 1992 and 1993 Mr. Sheffield and Mr. Withrow participated in a
Direct Investment Partnership formed to invest in all wells drilled by Parker &
Parsley during those years (except in certain circumstances where its
participation would impose additional costs to Parker & Parsley). As of December
31, 1998,1999, the aggregate contributions that have been made to the employee
partnerships and the Direct Investment Partnerships by Mr. Sheffield and Mr.
Withrow and the aggregate distributions that have been received by them from
those partnerships were as follows: Mr. Sheffield contributed $734,955 and
received $1,066,125$1,145,680 ($111,54279,555 of which was received during 1998)1999); and Mr. Withrow
contributed $142,625 and received $138,231$151,437 ($18,41613,206 of which was received during
1998)1999).
SEVERANCE AGREEMENTS.Severance Agreements. On August 8, 1997, the Company entered into
severance agreements with its officers. Salaries and bonuses are set by the
Compensation Committee independent of these agreements, and the Compensation
Committee can increase or reduce base salaries at its discretion.
Either the Company or the officer may terminate the officer's
employment under the severance agreement at any time. The Company must pay the
officer an amount equal to one year's base salary if the officer's employment is
terminated because of death, disability, or normal retirement. The Company must
pay the officer an amount equal to one year's base salary and continue health
insurance for the officer's family for one year if the Company terminates the
officer's employment without cause or if the officer terminates employment for
good reason, which is when reductions in the officer's base annual salary exceed
specified limits or when the officer's responsibilities have been significantly
reduced. If within one year after a change in control of the Company, the
Company terminates the officer without cause, or if the officer terminates
employment for good reason, the Company must pay the officer an amount equal to
2.99 times the sum of the officer's base salary plus target bonus for the year
and continue health insurance for the officer's family for one year. If the
officer terminates employment with the Company without reason between six months
and one year after a change in control, or at any time within one year after a
change in control if the officer is required to move, then the Company must pay
the officer one year's base salary and continue health insurance for the
officer's family for one year. Officers are also entitled to additional payments
for certain tax liabilities that may apply to severance payments following a
change in control.
INDEMNIFICATION AGREEMENTS.9
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and officers, including the named
executive officers. Those agreements require the Company to indemnify the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law and to advance expenses in connection with certain claims
against directors and officers. The Company expects to enter into similar
agreements with persons selected to be directors and officers in the future.
Each indemnification agreement also provides that, upon a potential change in
control of the Company and if the indemnified director or officer so requests,
the Company will create a trust for the benefit of the indemnified director or
officer in an amount sufficient to satisfy payment of all liabilities and suits
against which the Company has indemnified the director or officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kenneth A. HershRobert L. Stillwell is a member of the Compensation Committee and
is a Vice President of Rainwater, Inc. Effective January 1, 1999, the Company entered
into an agreement with Rainwater, Inc., the former general partner of DNR-MESA
Holdings, L.P. ("DNR")Baker & Botts, L.L.P., modifying certain terms of a prior agreement between DNR
and Mesa, which was assumed by the Company upon consummation of the merger
between Parker & Parsley and Mesa. Pursuant to the terms of this agreement, as
modified, the Company will pay Rainwater, Inc. $300,000 per year and reimburse
Rainwater, Inc. for certain expenses in consideration of the provision of
certain consulting and financial analysisprovided limited legal services to
the Company by Rainwater,
Inc. and its representatives.
14
17during 1999. The dollar amount of fees that the Company paid to
Baker & Botts, L.L.P. during the most recent fiscal year of that law firm did
not exceed 5% of that firm's gross revenues. Mr. Stillwell does not serve on the
sub-committee of the Compensation Committee that administers the Company's
Long-Term Incentive Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the "Committee")
submits the following report with respect to the executive compensation program
of the Company.
COMPENSATION PRINCIPLES AND PHILOSOPHYCompensation Principles and Philosophy
The overriding responsibility of the Committee is to maintain the
Company's executive compensation program so that it attracts and retains a
capable and highly motivated senior management team and aligns the compensation
of the Company's executives with the Company's strategic business plan to
increase stockholder value. During 1998,1999, the Committee retained an executive
compensation consulting firm ("Hewitt Associates") to assist and advise it in
its efforts to establish and administer fair and reasonablecompetitive compensation and
incentive policies. These policies emphasize variable compensation, and structure
the annual bonus and long-term incentive awards to be a significant portion of
an executive's total compensation and result in total compensation that is
reflective of Company performance. Stock awards will continue to be emphasized
as part of each executive's compensation package will continue to be emphasized to align stockholder and
executive interests. Other critical elements of the Company's compensation and
incentive policies provide for:
-o Base salaries at or slightly above median levels compared to
industry survey information and peer group proxy analysis.
-o Annual bonuses that are based on both individual and Company
performance.
-o Long-term incentive award levels that are above median.
-o Significant stock ownership by management.
To support the commitment to significant stock ownership, by executives and
the Board of Directors, the Committee adopted the followingCompany's
current stock ownership guidelines effective August 8, 1997:
-are as follows:
o Non-employee directors --- stock value equal to at least three times
each director's annual retainer fee.
-o Chairman of the Board and Chief Executive Officer --- stock value
equal to at least five times base salary.
- ExecutiveIn determining compliance with these guidelines, the Committee
(executive officers named in the summary compensation
table and two other officers) -- stock value equal to at least two and
one-half times base salary.
- All other officers -- stock value equal to at least one and one-half
times base salary.
- Subsidiary company officers -- stock value equal to at least base
salary.
Historically mostconsiders its expectations of the directorslong term value of the Company's stock and officers have beenthe
current trading levels. Mr. Sheffield and all Directors are in compliance with
the guidelines. However, due to the current low stock price, the ownership
levels calculated using the current stock price have fallen below the ownership guidelines.
There have been no significant reductions in actual stock ownership
by directors and officers.
Officers are given three years from the time they are subject to the
guidelines to achieve the expected levels of stock ownership. Officers who
currently do not meet the guidelines have submitted proposals to comply within
the three-year period. If the ownership levels are not achieved, non-complying
officers will be required to hold for a minimum of six months 50% of the shares
acquired through any exercise of stock options, and any subsequent annual bonus
awards will be paid 100% in common stock.10
The Omnibus Budget Reconciliation Act of 1993 ("OBRA93") placed new
restrictions on the deductibility of executive compensation paid by public
companies. Under the restrictions that began to apply in 1994, the Company is
not able to deduct compensation paid to any of the named executive officers in
excess of $1,000,000 unless the compensation meets the definition of
"performance based compensation" in the legislation. Non-deductibility could
result in additional tax costs to the Company. While the Committee cannot assess
with certainty how the Company's compensation program will ultimately be
affected by OBRA93, the Committee generally tries to preserve the deductibility
of all executive compensation if it can do 15
18
so without interfering with the
Company's ability to attract and retain capable and highly motivated senior
management. However, in order to induce certain executive officers of the
Company to relocate to the Company's principal executive offices in Irving,
Texas, after the merger of Parker & Parsley and Mesa in 1997, the Company made
certain relocation reimbursement payments to such officers, which payments were
not wholly deductible by the Company because of the compensation limits of
OBRA93.
ELEMENTS OF COMPENSATIONElements of Compensation
The elements of the compensation program that the Committee administers for
executive officers, including the Chief Executive Officer, consist of base
salaries, annual bonuses, awards made under the Company's Long-TermLong- Term Incentive
Plan (the "Plan"), contributions to the Company's 401(k) retirement plan,
contributions to the Company's deferred compensation retirement plan, and
miscellaneous perquisites. Base salaries, annual bonuses and long-term
incentives are discussed separately below; however, the Committee considers the
aggregate remuneration of executives when evaluating the executive compensation
program.
BASE SALARIES.Base Salaries. An executive's base salary is viewed as a fixed
component of total compensation that should be competitive with companies of
similar size and business to the Company. The Committee has targeted base
salaries at or slightly above the median level for companies of similar size and
business to the Company. The Committee evaluates the base salaries of the
Company's executive officers on the basis of competitive base salary survey data
provided by its consultant and consideration of each officer's duties and
responsibilities,
individual performanceresponsibilities. The Committee views the named executives below the CEO level
as a team with diverse duties but with similar authority and contribution, and the extent and length of tenure
with the Company and its predecessors.responsibility.
Hewitt Associates provides base salary survey data on the majority of the
Company's peer group companies, a group of independent exploration and
production companies with similar asset, revenue and capital investment profiles
as the Company. While the peer group provided by Hewitt Associates includes some
of the members of the Dow Jones Oil -- SecondaryOil-Secondary Index (the "DJ Oil -- SecondaryOil-Secondary
Group") reflected in the performance graph set forth under "Company Performance"
below, it does not include all of the companies in that peer group and includes
other companies with which the Company competes. The Committee determines the
base salary for all named executives, including Mr. Sheffield, using the same
methodology.
The 1998 base salaries for the named executive officers as a group, other
than Mr. Sheffield, were identified by Hewitt Associates as being at
approximately the 50th percentile level. Hewitt Associates has determined that
Mr. Sheffield's 1998 base salary is slightly below the 50th percentile level.
Due to adverse economic conditions that the oil and gas industry experienced
during 1998, and the desire to reduce the Company's 1999 cost structure during a
year of expected low commodity prices, Mr. Sheffield reduced his 1999 base
salary for 1999 by 20% to $480,000, and the other named executive officers' base salaries
were reduced by 10%. For 1999, Mr. Sheffield's and the other named executive'sexecutives'
base salary will besalaries were significantly less than the 50th percentile. Evenpercentile, even though the
Company normally targets the 50th percentile level for base salary. Effective
January 1, 2000, the 1999 salary in light of industry conditions,reduction program expired and base salaries
were restored to the Committee, with the support of1998 levels. Mr. Sheffield's base salary was restored to
$600,000. For 2000, Hewitt Associates determined that merely returning the named
executive officers, electedofficer's salary to reduce
the fixed cost1998 level resulted in base salaries below the
Company's targeted 50th percentile level. Effective January 1, 2000, Mr.
Sheffield's base salary component of total compensation.
ANNUAL BONUSES.was increased to $638,000, which Hewitt has identified
as the 50th percentile level. The other named executive officers' base salaries
were also restored to the 1998 levels and increased to approximately the 50th
percentile level.
Annual Bonuses. Each year the Committee sets a target bonus for each
executive based on the range of the peer group's bonus targets. To maintain
internal equity, the level of responsibility, scope and complexity of the
executive's position are considered. The Committee believes, based on advice
from its consultant, that the established targets are currently slightly below
the 50th percentile for Mr. Sheffield and at about the 55th percentile for the
other named executive officers. Awards may vary from 50% to 150% of target.
16
19
For 1998,2000, the Committee reduced the target bonus opportunity for each named
executive by 5%. Mr. Sheffield's new target bonus will be slightly below the
50th percentile, and the target bonus for the other named executives will be at
approximately the 50th percentile.
For 1999, the Committee awarded Mr. Sheffield a cash bonus of 60% of target
and the other named
executives were awardeda cash bonuses ranging from 60% tobonus of 75% of target. 1998 wasIn addition to the annual bonus award,
the Committee approved the forgiveness of a very difficult year for the industry and the$113,204 Company primarilyloan to Mr. Dove.
As part of his initial hiring package, Mr. Dove received a restricted stock
award which vested in August, 1997 due to falling oilthe merger of Parker & Parsley and
gas prices.MESA. The Company funded the tax liability on the vested stock through a loan
11
because the United States Securities and Exchange Commission ("SEC") rules
prevented Mr. Dove from selling the stock without incurring substantial
penalties. In February 1999 the Committee forgave the loan when it determined
the current value of the award was less than the tax liability triggered by the
merger. In awarding 19981999 bonuses, the Committee considered, among other factors, the reduction in base pay and total
compensation for these executives and the manner in which they responded to
deteriorating industry conditions by selling assets, consolidating offices, and
reducing overhead and operating costs. The Committee also reviewed the following criteria
that are important to the success of the Company's business plan.
- Growth of Cash Flow/Flow per Share Growth
- Debt/Book
- Net Asset Value/Share Growth
- Production Growth - Operating Cost per BOE
- Debt/Book - Reserve Replacement
- Growth of Net Value per Share - Finding & Development Cost per BOE
- Production Growth - Debt/BOE
In determining the named executive officers' annual bonus awards, the
Committee also evaluated the Company's stock performance in relation to its peer
group. The Committee did not employ a formula, specific targets or predetermined
weighting of the above financial or operational performance criteria. The
Committee also evaluates Company performance in light of oil and gas industry
fundamentals and assesses how effectively management adapts to changing industry
conditions and opportunities during the year. The Committee observes and
evaluates the individual performance of executive officers through the year and
discusses the performance of these key executives with Mr. Sheffield.
LONG-TERM INCENTIVES.Long-term Incentives. A significant portion of the named executive
officers' total compensation is comprised of long-term incentive awards, which
are intended to align executive management's interests in long-termlong- term growth and
success more closely with the interests of the Company's stockholders. The
Committee has determined that annual stock option awards should be the primary
method to award long-term incentives. To provide an averaging effect for the
stock option exercise prices, the Committee has elected to make biannualsemiannual stock
option awards of approximately 50% of annual grant levels.
The number of options granted to each executiveMr. Sheffield in 19981999 was determined
by the executive's position within the Company, comparabilitya comparison of option grants made to executivesthe CEO's of the peer group companies. The
other named executive officers were reviewed as a team. The level of options
awarded to each named executive was determined by comparing awards granted to
peer company executives holding similar positions, and their individual potentialaward
levels were averaged to affect corporate
results.determine the actual grants. The award levels were not
influenced by the stock holdings of the executives. These stock option award levels supportThe Company has historically
held to the Company's philosophy of awarding long-term incentives that are above market
averages. Hewitt Associates concluded the 19981999 stock option awards for the
Company's named executive officers, as a group, other thanincluding Mr. Sheffield, are competitive at aboutnow below the
65%50th percentile among the survey group. The Committee applied the same criteria in
awarding Mr. Sheffield's stock option award as the other executives.For 1999, Mr. Sheffield was awarded
90,000 stock options, which, according to Hewitt Associates, placed Mr.
Sheffield atbelow the 50th percentile for long-term incentive awards for chief
executive officers among the survey group.
In December 1998, the Company received information that an investment
fund group had acquired beneficial ownership of more than 20% of the common
stock. Pursuant to the provisions of the Plan, if a third party acquires 20% or
more of the common stock, certain change in control provisions are triggered. In
December 1998, the Committee determined that a change in control had occurred
under the provisions of the Plan, effective September 30, 1998, under the Plan.1998. Consequently,
all stock option awards granted under the Plan from inception in August 1997
through September 30, 1998, were immediately vested, and the restrictions on
restricted stock awards were removed. In addition, all amounts creditedThe Plan has been amended to each officer's and key
employee's deferred compensation retirement plan account were immediately
distributedincrease the
third party ownership to 40% to trigger the individual. The Committee and the Board of Directors
subsequently amended the Plan to set 30% as the threshold for a change of
control.
In connection with Mr. Brumley's retirement as an employee of the Company
effective May 15, 1998, the Company agreed to fully vest Mr. Brumley's stock
options and restricted stock on that date.
17
20in control provisions.
In summary, the Company believes a significant portion of executive
compensation should be variable and performance-based so that an executive's
total compensation is linked to the performance of the individual, the Company
and its stock price. The majority of the named executive officers' total
compensation is variable, at-risk compensation. This structure allows the
Company to administer overall compensation that rises or falls based on the
Company's performance and to maintain a balance between the Company's short-
termshort-term
and long-term objectives.
The Compensation Committee of
the Board of Directors
Charles E.E, Ramsey, Jr., Chairman
Kenneth A. Hersh
Philip B. Smith
18James R. Baroffio
Robert L. Stillwell
12
21
COMPANY PERFORMANCE
The following graph and chart compare the Company's cumulative total
stockholder return on common stock during the period from December 31, 1993,1994 to
December 31, 1998,1999, with cumulative total stockholder return during the same
period for the DJ Oil-Secondary Group and the Standard & Poor's 500 index.Index. The
Company's cumulative total stockholder return for the period from December 31,
1993,1994 to December 31, 1998,1999 consists of Parker & Parsley's operating results prior
to August 8, 1997 and the Company's operating results beginning August 8, 1997.
After the merger of Parker & Parsley and Mesa in 1997, the Company began using
the DJ Oil-Secondary to compare its performance because several members of the
Company's peer group use that index to simplify the evaluation of company
performance and because the DJ Oil-Secondary is more readily available to the
public for comparison purposes. The graph and chart show the value, at December
31 in each of 1994, 1995, 1996, 1997, 1998 and 1998,1999 of $100 invested at December 31,
1993,1994, and assume the reinvestment of all dividends.
COMPARISON OF 5FIVE YEAR CUMULATIVE TOTAL RETURN*RETURN *
AMONG PIONEER NATURAL RESOURCERESOURCES COMPANY, THE S&PSTANDARD & POOR'S 500 INDEX
AND THE DOW JONES OIL --- SECONDARY INDEX
[GRAPH]
PIONEER
NATURAL DOW JONES
MEASUREMENT PERIOD RESOURCES OIL- STANDARD &
(FISCAL YEAR COVERED) COMPANY SECONDARY POOR'S 500
1993 100 100 100
1994 83 97 101
1995 90 112 139
1996 151 138 171
1997 119 147 229
1998 36 107 294Pioneer
Natural Dow Jones Standard
Measurement Resources Oil & Poor's
(Fiscal Year Covered) Company Secondary 500
--------------------- -------- --------- --------
1994 100 100 100
1995 108 116 138
1996 181 143 169
1997 143 152 226
1998
43 111 290
1999 44 125 351
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBERinvested on December 31, 1994 in stock or index.
Including reinvestment of dividends.
Fiscal year ending December 31.
19
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of common stock as of April 1, 1999,3, 2000, by (a) each person who
is known by the Company to own beneficially more than 5% of the outstanding
shares of common stock, (b) each director and nominee for director of the
Company, (c) each executive officer of the Company, and (d) all directors and
executive officers as a group.
PERCENTAGE
NUMBER OF OF CLASS
NAME OF PERSON OR IDENTITY OF GROUP SHARES (1)
----------------------------------- ---------- ----------
Southeastern Asset Management, Inc.(2)...................... 26,434,632 26.4%
Longleaf Partners Fund
O. Mason Hawkins
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
The Prudential Insurance Company of America(3).............. 10,210,987 10.2%
751 Broad Street
Newark, New Jersey 07102-3777
Richard E. Rainwater(4)..................................... 5,518,267 5.9%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
I. Jon Brumley(5)........................................... 687,283 *
Scott D. Sheffield(5)(6).................................... 640,770 *
Timothy L. Dove(5)(7)....................................... 141,795 *
Dennis E. Fagerstone(5)..................................... 163,405 *
Lon C. Kile(5)(8)........................................... 172,965 *
M. Garrett Smith(5)......................................... 129,149 *
Mark L. Withrow(5)(9)....................................... 155,719 *
James R. Baroffio........................................... 4,753 *
R. Hartwell Gardner......................................... 12,489 *
Kenneth A. Hersh............................................ 10,671 *
James L. Houghton(10)....................................... 13,040 *
Jerry P. Jones.............................................. 15,552 *
Charles E. Ramsey, Jr. ..................................... 17,086 *
Philip B. Smith............................................. 42,674 *
Robert L. Stillwell(11)..................................... 6,649 *
All directors and executive officers as a group (16
persons)(12).............................................. 7,732,267 8.3%
Number of Percentage
Name of Person or Identity of Group Shares Of Class (1)
----------------------------------- ---------- ------------
Southeastern Asset Management, Inc. (2)............ 26,593,532 26.6%
Longleaf Partners Fund
O. Mason Hawkins
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
The Prudential Insurance Company of America (3).... 9,775,877 9.8%
751 Broad Street
Newark, New Jersey 07102-3777
Richard E. Rainwater (4) (5)....................... 5,553,654 5.6%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
Scott D. Sheffield (5), (6)........................ 854,679 *
Timothy L. Dove (5), (7)........................... 207,295 *
Dennis E. Fagerstone (5)........................... 238,895 *
13
Danny L. Kellum (5), (8)........................... 110,536 *
Mark L. Withrow (5), (9)........................... 231,643 *
James R. Baroffio (5).............................. 50,937 *
R. Hartwell Gardner (5)............................ 46,075 *
James L. Houghton (5), (10)........................ 53,933 *
Jerry P. Jones (5)................................. 55,736 *
Charles E. Ramsey, Jr. (5)......................... 57,779 *
Robert L. Stillwell (5), (11)...................... 46,833 *
All directors and executive officers as a group
(12 persons) (12) 8,391,537 8.4%
- -----------------------------------
* Does not exceed 1%.
(1) Based on 100,300,02399,838,298 shares of common stock consisting of 94,110,38796,269,736
outstanding shares of common stock and 6,189,6363,568,562 outstanding exchangeable
shares that are exchangeable for the same number of shares of common
stock.
(2) The Schedule 13G/A filed with the SEC on February 10, 1999,9, 2000, which is a
joint statement on Schedule 13G/A filed by Southeastern Asset Management,
Inc. ("Southeastern"), Longleaf Partners Fund ("Longleaf") and O. Mason
Hawkins ("Hawkins"), states that the statement is being filed by
Southeastern as a registered investment adviser, and that all of the
securities covered by the statement are owned legally by Southeastern's
investment advisory clients and none are owned directly or indirectly by
Southeastern. The Schedule 13G/A further states that the statement is also
being filed by Hawkins, Chairman of the Board and C.E.O. of Southeastern,
in the event he could be deemed to be a 20
23
controlling person of that firm as
the result of his official positions with or ownership of its voting
securities. The existence of such control is expressly disclaimed. Hawkins
does not own directly or indirectly any securities covered by the Schedule
13G/A for his own account.
(3) The Schedule 13G/A filed with the SEC on January 27, 199931, 2000 states that The
Prudential Insurance Company of America may have direct or indirect voting
and/or investment discretion over 10,210,9879,775,877 shares or 10.2%9.8% of the
outstanding common stock which are held for the benefit of its clients by
its separate accounts, externally managed accounts, registered investment
companies, subsidiaries and/or other affiliates.
(4) Includes 109,324 shares owned directly by Rainwater, Inc., of which Mr.
Rainwater is the sole shareholder, and 247,710244,950 shares (of which Mr.
Rainwater disclaims beneficial ownership) owned by Mr. Rainwater's spouse.
(5) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 31, 1999:April 3, 2000: Mr. Brumley,
318,571;Rainwater,
38,147; Mr. Sheffield, 305,350;500,350; Mr. Dove, 100,500;176,000; Mr. Fagerstone,
132,498;207,988; Mr. Kile, 101,500;Kellum, 98,000; Mr. Smith, 106,071;Withrow, 170,000; Mr. Baroffio, 40,184;
Mr. Gardner, 40,184; Mr. Houghton, 40,693; Mr. Jones, 40,184; Mr. Ramsey,
40,693; and Mr. Withrow, 94,500;Stillwell, 40,184.
(6) Includes 1,270100 shares held by a minor child of Mr. Sheffield and 76624,845
shares held in Mr. Sheffield's 401(k) account.
(7) Includes 370 shares held in Mr. Dove's 401(k) account.
(8) Includes 586516 shares held in Mr. Kile'sKellum's 401(k) account.
(9) Includes 4,32817,266 shares held in Mr. Withrow's 401(k) account.
(10) Includes 10,9459,666 shares held by two trusts of which Mr. Houghton is a
trustee and over which shares he has sole voting and investment power,
and
1,0002,000 shares held in Mr. Houghton's investment retirement account.account, and 479
shares held by a corporation that is in Mr. Houghton's control.
(11) Includes 758 shares held by Mr. Stillwell's wife.
(12) Includes 1,098,9901,685,107 shares of common stock subject to stock options that
were exercisable at or within 60 days after March 31, 1999.April 3, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The executive officers and directors of the Company are required to
file reports with the Securities and Exchange Commission,SEC, and with the various Canadian provincial securities
commissions (the "Canadian Commissions"), disclosing the amount and nature of
their beneficial ownership in common stock, as well as changes in that
ownership. Pursuant to applicable Canadian policies, the executive officers and
directors of the Company are exempted from filing reports with the Canadian
Commissions, provided that they timely file all reports required to be filed
with the Securities and Exchange Commission.SEC.
Based solely on its review of reports and written representations that
the Company has received, the Company is aware that Scott D. Sheffield, the
President and Chief Executive Officer of the Company, did not timely file three
reports on Form 4 covering six transactions effected in 1998. Other than as
discussed above, the Company believes that all required reports were
filed on time for 1998.1999.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, through its wholly-owned subsidiaries, has in the past
sponsored certain affiliated partnerships, including 22 public and 22 private
drilling partnerships and three public income partnerships, all of which were
formed primarily for the purpose of drilling and completing wells or acquiring
producing properties. In accordance with the terms of the partnership agreements
and the related tax partnership agreements of the affiliated partnerships, the
Company participated in the activities of the sponsored partnerships on a
promoted basis. In 1992, the Company discontinued sponsoring public and private
oil and gas development drilling and income partnerships.
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During each of 1994, 1993 and 1992, the Company formed a Direct
Investment Partnership for the purpose of permitting selected key employees to
invest directly, on an unpromoted basis, in wells that the Company drills. The
partners in the Direct Investment Partnerships formed in 1994, 1993 and 1992 pay
and receive approximately .337%, 1.5375% and 1.865%, respectively, of the costs
and revenues attributable to the Company's interest in the wells in which each
such Direct Investment Partnership participates. The Company discontinued the
formation of Direct Investment Partnerships in 1995.
The Company, through a wholly-owned subsidiary, serves as operator of
properties in which it and its affiliated partnerships have an interest.
Accordingly, the Company receives producing well overhead, drilling well
overhead and other fees related to the operation of the properties. The
affiliated partnerships also reimburse the Company for their allocated share of
general and administrative charges.
Effective January 1, 1999, the Company entered into an agreement with
Rainwater, Inc., the former general partner of DNR that Mr. Rainwater wholly
owns, modifying certain terms of a prior agreement between DNR and Mesa, which
was assumed by the Company upon consummation of the merger between Parker &
Parsley and Mesa. Pursuant to the terms of this agreement, as modified, the
Company will pay Rainwater, Inc. $300,000 per year and reimburse Rainwater, Inc.
for certain expenses in consideration of the provision of certain consulting and
financial analysis services to the Company by Rainwater, Inc. and its
representatives.
Brumley Partners, a Texas general partnership consisting of I. Jon Brumley,
the Company's Chairman of the Board, and a family member, was admitted as a
limited partner with a profits interest in DNR pursuant to the Amended and
Restated Agreement of Limited Partnership of DNR dated November 8, 1996. Until
March 23, 1998, DNR was a major holder of shares of common stock. On March 23,
1998, DNR distributed to its partners most of its common stock holdings, which
resulted in a distribution to Brumley Partners of 310,344 shares of common stock
having a net value of $8,243,513 at the distribution date.
Robert L. Stillwell, a director ofJune 29, 1999, the Company is a partnercompleted the sale of Baker &
Botts, L.L.P., which provided various legal servicescertain United
States oil and gas producing properties, gas plants and other assets primarily
located in the Gulf Coast, Mid Continent and Permian Basin to the Company during 1997.
Baker & Botts, L.L.P. was Mesa's primary outside corporate counsel. The dollar
amount of fees that the Company paid to Baker & Botts, L.L.P. during the most
recent fiscal year of that law firm did not exceed 5% of that firm's gross
revenues for that year.
LONG-TERM INCENTIVE PLAN
The following description summarizes the principal terms of the Pioneer
Natural Resources Company Long-Term Incentive Plan.
GENERAL
The Company may grant awards with respect to shares of common stock under
the Long-Term Incentive Plan to officers, directors, employees and certain
consultants and advisors. All directors and employees are eligible to receive
Awards under the Plan (approximately 1,000 persons)Prize Energy Corp.
("Prize"). The awards under the
Long-Term Incentive Plan include (1) incentive stock options qualified as such
under U.S. federal income tax laws, (2) stock options that do not qualify as
incentive stock options, (3) stock appreciation rights ("SARs"), (4) restricted
stock awards, and (5) performance units. Currently, non-employee directors may
receive only certain restricted stock awards.
The numbersale of shares of common stock that may be subject to outstanding
awards under the Long-Term Incentive Plan at any one time is equal to ten
percent of the total number of outstanding shares of common stock (treating as
outstanding all shares of common stock issuable within 60 days upon conversion
or exchange of outstanding, publicly traded convertible or exchangeable
securities of the Company) minus the total number of shares of common stock
subject to outstanding awards under any other stock-based plan for employees or
directors of the Company. At December 31, 1998, the number of shares available
for awards under the Long-Term Incentive Planthese assets was 5,743,511. The number of
shares authorized under the Long-Term Incentive Plan and the number of shares
subject toinitiated through an award under the Long-Term Incentive Plan will be
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adjusted for stock splits, stock dividends, recapitalizations, mergers, and
other changes affecting the capital stock of the Company.auction process.
The Board of Directors of Prize includes Mr. Philip P. Smith, its
Chief Executive Officer, Mr. Kenneth A. Hersh, and Mr. Lon C. Kile, its
President and Chief Operating Officer. Mr. Hersh, through his association with
Natural Gas Partners V, L.P., owned or any committee designated by it may administer the
Long-Term Incentive Plan. The Compensation Committee administers the plan. The
Committee has broad discretion to administer the Long-Term Incentive Plan,
interpret its provisions,controlled approximately 88% of Prize.
Messrs. Smith and adopt policies for implementing the Long-Term
Incentive Plan. This discretion includes the ability to select the recipientKile owned or controlled approximately 10.5% and .5% of an award, determine the typePrize
respectively. Because Mr. Smith and amount of each award, establish the terms of
each award, accelerate vesting or exercisability of an award, extend the
exercise period for an award, determine whether performance conditions have been
satisfied, waive conditions and provisions of an award, permit the transfer of
an award to family trusts and other persons, and otherwise modify or amend any
award under the Long-Term Incentive Plan.
No awards for more than 250,000 shares or more than $2.5 million in cash
may be granted to any one employee in a calendar year. In addition, despite
other general provisions of the Long-Term Incentive Plan,
- option exercise prices must be at least fair market value on the date of
grant,
- option exercise prices may not be amended to reduce the exercise price,
and
- restrictions on restricted stock may not lapse sooner than three equal
installments over three years, except in very limited circumstances.
The Committee may authorize awards that do not comply with these three
limitations if the aggregate number of shares subject to the noncomplying awards
does not exceed 5% of the shares that are permitted to be subject to awards
under the Plan at that time.
AWARDS
The Committee determines the exercise price of each option granted under
the Long-Term Incentive Plan. The exercise price for an incentive stock option
must not be less than the fair market value of the common stock on the date of
grant, and the exercise price of non-qualified stock options must not be less
than 85% of the fair market value of the common stock on the date of grant.
Stock options may be exercised as the Committee determines, but not later than
ten years from the date of grant in the case of incentive stock options. At the
discretion of the Committee, holders may use shares of stock to pay the exercise
price, including shares issuable upon exercise of the option.
A SAR may be awarded in connection with or separate from a stock option. A
SAR is the right to receive an amount in cash or stock equal to the excess of
the fair market value of a share of the common stock on the date of exercise
over the exercise price specified in the agreement governing the SAR (for SARs
not granted in connection with a stock option) or the exercise price of the
related stock option (for SARs granted in connection with a stock option). A SAR
granted in connection with a stock option will require the holder, upon
exercise, to surrender the related stock option or portion thereof relating to
the number of shares for which the SAR is exercised. The surrendered stock
option or portion will then cease to be exercisable. Such a SAR is exercisable
or transferable only to the extent that the related stock option is exercisable
or transferable. A SAR granted independently of a stock option will be
exercisable as the Committee determines. The Committee may limit the amount
payable upon exercise of any SAR. SARs may be paid in cash or stock, as the
Committee provides in the agreement governing the SAR.
A restricted stock award is a grant of shares of common stock that are
nontransferable or subject to risk of forfeiture until specific conditions are
met. The restrictions will lapse in accordance with a schedule or other
conditions as the Committee determines. During the restriction period, the
holder of a restricted stock award may, in the Committee's discretion, have
certain rights as a stockholder, including the right to vote the stock subject
to the award or receive dividends on that stock. Restricted stock may also be
issued upon exercise or settlement of options, SARs, or performance units.
Performance units are performance-based awards payable in cash, stock, or a
combination of both. The Committee may select any performance measure or
combination of measures as conditions for cash payments or stock issuances under
the Long-Term Incentive Plan, except that performance measures for executive
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officers must be objective measures chosen from among the following choices: (a)
total stockholder return (common stock appreciation plus dividends), (b) net
income, (c) earnings per share, (d) cash flow per share, (e) return on equity,
(f) return on assets, (g) revenues, (h) costs, (i) costs as a percentage of
revenues, (j) increase in the market price of common stock or other securities,
(k) the performance of the Company in any of the items mentioned in clause (a)
through (j) in comparison to the average performance of the companies included
in the Standard and Poor's Corporation 500 Composite Stock Price Index, or (l)
the performance of the Company in any of the items mentioned in clause (a)
through (j) in comparison to the average performance of the companies used in a
self-constructed peer group established before the beginning of the performance
period. The Committee may choose different performance measures if the
stockholders so approve, if tax laws or regulations change so as not to require
stockholder approval of different measures in order to deduct the compensation
related to the award for federal income tax purposes, or if the Committee
determines that it is in the Company's best interest to grant awards not
satisfying the requirements of Section 162(m) of the Internal Revenue Code or
any successor law.
Currently under the Long Term Incentive Plan, each non-employee director
will automatically receive 50% (and may elect to receive 100%) of the amount of
the director's annual retainer fee in the form of restricted stock on the last
business day of the month in which the annual meeting of the stockholders is
held. The number of shares included in each award is determined by dividing the
applicable percentage of the annual retainer fee by the closing sales price of
common stock on the business day immediately preceding the date of the award.
When issued, the shares of common stock awarded are subject to transfer
restrictions that lapse on the earlier of the next annual meeting of
stockholders or the first anniversary date of the award if the person has
continued as a director through that date. If a non-employee director's services
as a director are terminated for any reason before the earlier of the next
annual meeting of stockholders or the first anniversary of the date of grant,
transfer restrictions on some of the shares will lapse (and the rest of the
shares will be forfeited) based on the number of regularly scheduled meetings of
the Board of Directors that have been held since the last annual meeting and the
number of regularly scheduled meetings remaining to be held before the next
annual meeting of the Company's stockholders. The vesting of ownership and the
lapse of transfer restrictions may be accelerated in the event of the death,
disability or retirement of the director or a change in control of the Company.
The Long-Term Incentive Plan requires each non-employee director to make an
election under the Internal Revenue Code to include the value of the stock in
his income in the year of grant and provides for a cash award to the
non-employee director in an amount sufficient to pay the federal income taxes
due with respect to the award and the cash payment. If the stockholders approve
the amendment to the Long-Term Incentive Plan, these automatic awards and
related elections will be eliminated.
OTHER PROVISIONS
At the Committee's discretion and subject to conditions that the Committee
may impose, a participant's tax withholding with respect to an award may be
satisfied by the withholding of shares of common stock issuable pursuant to the
award or the delivery of previously owned shares of the common stock, in either
case based on the fair market value of the shares.
The Committee has discretion to determine whether an award under the
Long-Term Incentive Plan will have change-of-control features. The Committee
also has discretion to vary the change of control features as it deems
appropriate. The following describes the change of control features that the
Company generally expects may apply to awards, if any such feature applies. An
award agreement under the Long-Term Incentive Plan may provide that, upon a
change of control of the Company, (1) the holder of a stock option will be
granted a corresponding cash SAR, (2) all outstanding SARs and options will
become immediately and fully vested and exercisable in full, (3) the restriction
period on any restricted stock award will be accelerated and the restrictions
will expire, and (4) the target payout opportunity attainable under the
performance units will be deemed to have been fully earned for all performance
periods upon the occurrence of the change in control and the holder will be paid
a pro rata portion of all associated targeted payout opportunities (based on the
number of complete and partial calendar months elapsed as of the change of
control) in cash within thirty days following the change of control or in stock
effective as of the change of control, for cash and stock-based performance
units, respectively. The award may also provide that it will remain exercisable
for its original
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term whether or not employment is terminated at or following a change in
control. In general, a change in control of the Company occurs in any of four
situations: (1) a person other than the Company or certain affiliated companies
or benefit plans becomes the beneficial owner of 30% or more of the voting power
of the Company's outstanding voting securities (except acquisitions from or in a
transaction meeting the requirements of the parenthetical exception in clause
(3) below); (2) a majority of the Board of Directors is not comprised of theMr. Hersh were members of the Board of
Directors as of August 8, 1997, and persons whose
elections as directors were approved by those directors or their approved
successors; (3) the Company merges or consolidates with another corporation or
entity (whether the Company or the other entity is the survivor), or the Company
and the holders of the voting securities of such other corporation or entity (or
the stockholders of the Company and such other corporation or entity)
participate inMr. Kile was an Executive Vice President of the
Company prior to initiating the auction process, supervision of the sale process
was placed under the direction of a securities exchange (other than a merger, consolidation or
securities exchange in whichspecial independent committee (comprised of
outside directors unrelated to Prize) of the Company's voting securities areBoard of Directors. The
independent committee reviewed and considered all offers presented to the
Company for the purchase of the assets acquired by Prize. The Prize offer was
approved by the special independent committee as being the best offer presented.
Following approval of the Prize offer by the special independent committee,
Messrs. Smith, Hersh and Kile resigned their positions with the Company.
In accordance with the terms of the Prize purchase and sale agreement,
the Company received net sales proceeds of $245.0 million, comprised of $215.0
million of cash and 2,307.693 shares of six percent convertible preferred stock
having a liquidation preference and fair value of $30.0 million. As a result of
Prize merging with Vista Energy Resources, Inc., the Company's investment in
Prize's six percent convertible preferred stock was exchanged for 4,018,161
shares of Prize Series A convertible preferred stock ("Prize Series A
Preferred"). The Prize Series A Preferred provides for six percent annual
dividend payments, payable quarterly in additional equity shares of Prize
through 2001. Subsequent to 2001, Prize has the option of paying the quarterly
dividends on the Prize Series A Preferred in equity shares or cash. Each share
of the Prize Series A Preferred may, at the option of the Company, be converted
into or continue to represent securities having the majorityone share of voting power in the
surviving company, in which no person other than that surviving company owns 30%
or more of the outstanding shares ofPrize common stock, or votingsubject to certain anti-dilution
adjustments.
The Company has entered into an agreement with Prize to sell effective
March 31, 2000, 1,380,446 shares of the surviving corporation (exceptPrize Series A Preferred back to Prize
for persons with such$18,636,021. Pioneer and Prize have also agreed to convert the remaining
shares of the Prize Series A Preferred to 2,637,715 shares of Prize common
15
stock. If these transactions are completed as planned, the Company's ownership
resulting solelyof outstanding Prize common and preferred voting shares would decline from their ownership in27.4%
to 19.9% and Mr. Sheffield and Mr. Withrow will resign from the Prize Board of
Directors.
In February 1999, the Company, beforeafter approval from the transaction), andCompensation
Committee, forgave an August, 1997 loan to Mr. Dove in which at
least a majority of the board of directors of the surviving corporation were
members of the incumbent board of the Company); or (4) the Company liquidates or
sells all or substantially all of its assets, except sales to an entity having
substantially the same ownership as the Company.
If a restructuring of the Company occurs that does not constitute a change
in control of the Company, the Committee may (but need not) cause the Company to
take any one or more of the following actions: (1) accelerate in whole or in
part the time of vesting and exercisability of any outstanding stock options and
stock appreciation rights in order to permit those stock options and SARs to be
exercisable before, upon, or after the completion of the restructure; (2) grant
each optionholder corresponding cash or stock SARs; (3) accelerate in whole or
in part the expiration of some or all of the restrictions on any restricted
stock award; (4) treat the outstanding performance units as having fully or
partially met their targets and pay, in full or in part, the targeted payout;
(5) if the restructuring involves a transaction in which the Company is not the
surviving entity, cause the surviving entity to assume in whole or in part any
one or more of the outstanding awards under the Long-Term Incentive Plan upon
such terms and provisions as the Committee deems desirable; or (6) redeem in
whole or in part any one or more of the outstanding awards (whether or not then
exercisable) in consideration of a cash payment, adjusted for withholding
obligations. A restructure generally is any merger of the Company or the direct
or indirect transfer of all or substantially all of the Company's assets
(whether by sale, merger, consolidation, liquidation, or otherwise) in one
transaction or a series of transactions.
AMENDMENTS
Without stockholder approval, the Board of Directors may not amend the
Long-Term Incentive Plan to increase materially the aggregate number of shares
of common stock that may be issued under the Long-Term Incentive Plan).
Otherwise, the Board of Directors may at any time and from time to time alter,
amend, suspend or terminate the Long-Term Incentive Plan in whole or in part and
in any way, subject to requirements that may exist in stock exchange rules or in
securities, tax and other laws from time to time. No award may be issued under
the Long-Term Incentive Plan after the tenth anniversary of stockholder approval
of the Plan.
TAX IMPLICATIONS OF AWARDS
Set forth below is a summary of the federal income tax consequences to
employees, directors and other participants in the Long-Term Incentive Plan
("Company Employees") and to the Company as a result of the grant and exercise
of awards under the Long-Term Incentive Plan. This summary is based on statutory
provisions, Treasury regulations thereunder, judicial decisions and IRS rulings
in effect on the date hereof.
Nonqualified Stock Options; Stock Appreciation Rights; Incentive Stock
Options. Company Employees will not realize taxable income upon the grant of a
non-qualified stock option ("NQSO") or a SAR. Upon the exercise of a SAR or
NQSO, a Company Employee will recognize ordinary compensation income (subject to
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withholding by the Company) in an amount equal to the excess of (i) the amount of cash and$113,204,
which funded the fair market value of the common stock received, over (ii) the
exercise price (if any) paid therefor. A Company Employee will generally have a
tax basis in any shares of common stock received pursuant to the exercise of a
SAR, or pursuant to the cash exercise of a NQSO, that equals the fair market
value of such shares on the date of exercise. Subject to the discussion under
"-- Tax Code Limitations on Deductibility," the Company (or a subsidiary) will
be entitled to a deduction for federal income tax purposes that corresponds as
to timing and amount with the compensation income recognized by a Company
Employee under the foregoing rules.
Company Employees eligible to receive an incentive stock option ("ISO")
will not have taxable income on the grant of an ISO. Upon the exercise of an
ISO, a Company Employee will not have taxable income, although the excess of the
fair market value of the shares of common stock received upon exercise of the
ISO ("ISO Stock") over the exercise price will increase the alternative minimum
taxable income of the Company Employee, which may cause such Company Employee to
incur alternative minimum tax. The payment of any alternative minimum tax
attributable to the exercise of an IPO would be allowed as a credit against the
Company Employee's regular tax liability resulting from vesting of his restricted stock in
a later year to the extent the
Company Employee's regular tax liability is in excess of the alternative minimum
tax for that year.
Upon the disposition of an ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the ISO), a Company Employee will generally
recognize capital gain (or loss) equal to the excess (or shortfall) of the
amount receivedAugust 1997 in the disposition over the exercise price paid by the Company
Employee for the ISO Stock. However, if a Company Employee disposesmerger of ISO Stock
that has not been held for the requisite holding period (a "disqualifying
disposition"), the Company Employee will recognize ordinary compensation income
in the year of the disqualifying disposition in an amount equal to the amount by
which the fair market value of the ISO Stock at the time of exercise of the ISO
(or, if less, the amount realized in the case of an arm's length disqualifying
disposition to an unrelated party) exceeds the exercise price paid by the
Company Employee for such ISO Stock. A Company Employee would also recognize
capital gain to the extent the amount realized in the disqualifying disposition
exceeds the fair market value of the ISO stock on the exercise date. If the
exercise price paid for the ISO Stock exceeds the amount realized (in the case
of an arm's-length disposition to an unrelated party), such excess would
ordinarily constitute a capital loss.
The CompanyParker & Parsley and its subsidiaries will generally not be entitled to any
federal income tax deduction upon the grant or exercise of an ISO, unless a
Company Employee makes a disqualifying disposition of the ISO Stock. If a
Company Employee makes a disqualifying disposition, the Company (or a
subsidiary) will then, subject to the discussion below under "-- Tax Code
Limitations on Deductibility," be entitled to a tax deduction that corresponds
as to timing and amount with the compensation income recognized by a Company
Employee under the rules described in the preceding paragraph.
Under current rulings, if a Company Employee transfers previously held
shares of common stock (other than ISO Stock that has not been held for the
requisite holding period) in satisfaction of part or all of the exercise price
of an NQSO or ISO, no additional gain will be recognized on the transfer of such
previously held shares in satisfaction of the NQSO or ISO exercise price
(although a Company Employee would still recognize ordinary compensation income
upon exercise of an NQSO in the manner described above). Moreover, that number
of shares of common stock received upon exercise which equals the number of
shares of previously held the common stock surrendered therefor in satisfaction
of the NQSO or ISO exercise price will have a tax basis that equals, and a
holding period that includes, the tax basis and holding period of the previously
held shares of common stock surrendered in satisfaction of the NQSO or ISO
exercise price. Any additional shares of common stock received upon exercise
will have a tax basis that equals the amount of cash (if any) paid by the
Company Employee, plus the amount of compensation income recognized by the
Company Employee under the rules described above. If a reload option is issued
in connection with a Company Employee's transfer of previously held common stock
in full or partial satisfaction of the exercise price of an ISO or NQSO, the tax
consequences of the reload option will be as provided above for an ISO or NQSO,
depending on whether the reload option itself is an ISO or NQSO.
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Performance Units; Restricted Stock Awards. A Company Employee will
recognize ordinary compensation income upon receipt of cash pursuant to a
performance unit or, if earlier, at the time cash is otherwise made available
for the Company Employee to draw upon it. A Company Employee will not have
taxable income at the time of grant of a stock award in the form of performance
units denominated in common stock ("Stock Unit Award"), but rather, will
generally recognize ordinary compensation income at the time he receives common
stock in satisfaction of the Stock Unit Award in an amount equal to the fair
market value of common stock received. In general, a Company Employee will
recognize ordinary compensation income as a result of the receipt of common
stock pursuant to a restricted stock award or performance unit in an amount
equal to the fair market value of common stock when such stock is received;
provided, however, that if the stock is not transferable and is subject to a
substantial risk of forfeiture when received, a Company Employee will recognize
ordinary compensation income in an amount equal to the fair market value of
common stock (a) when the common stock first becomes transferable or is no
longer subject to a substantial risk of forfeiture in cases where a Company
Employee does not make a valid election under Section 83(b) of the Code or (b)
when common stock is received in cases where a Company Employee makes a valid
Section 83(b) election.
A Company Employee will be subject to withholding for federal, and
generally for state and local, income taxes at the time he recognizes income
under the rules described above with respect to common stock or cash received.
Dividends that are received by a Company Employee prior to the time that common
stock is taxed to the Company Employee under the rules described in the
preceding paragraph are taxed as additional compensation, not as dividend
income. The tax basis of a Company Employee in common stock received will equal
the amount recognized by him as compensation income under the rules described in
the preceding paragraph, and the Company Employee's holding period in those
shares will commence on the date of receipt of the shares.
Subject to the discussion immediately below, the Company (or a subsidiary)
will be entitled to a deduction for federal income tax purposes that corresponds
to timing and amount with the compensation income recognized by a Company
Employee under the foregoing rules.
Tax Code Limitations on Deductibility. In order for the amounts described
above to be deductible by the Company (or a subsidiary), such amounts must
constitute reasonable compensation for services rendered or to be rendered and
must be ordinary and necessary business expenses. The ability of the Company (or
a subsidiary) to obtain a deduction for future payments under the Long-Term
Incentive Plan could also be limited by the golden parachute payment rules of
Section 280G of the Code, which prevent the deductibility of certain excess
parachute payments made in connection with a change in control of an
employer-corporation. Finally, the ability of the Company (or a subsidiary) to
obtain a deduction for amounts paid under the Long-Term Incentive Plan could be
limited by Section 162(m) of the Code, which limits the deductibility, for
federal income tax purposes, of compensation paid to certain executive officers
of the Company to $1 million with respect to any such officer during any taxable
year of the Company. However, an exception applies to this limitation in the
case of certain performance-based compensation. The Long-Term Incentive Plan is
intended to satisfy the requirements for the performance-based exception. The
Company intends to comply with the requirements of the Code with respect to
awards under the Long-Term Incentive Plan so as to be eligible for the
performance-based exception, but the Company may, in its sole discretion,
determine that in one or more cases it is in its best interests to not satisfy
the requirements for the performance-based exception.
PLAN BENEFITS TABLE
The awards, if any, that will be made to eligible participants during 1999
are subject to the discretion of the Compensation Committee and, therefore, are
not determinable at this time. This statement assumes that automatic awards to
non-employee directors will be eliminated pursuant to the Plan amendment
proposed for stockholder approval.
The following table sets forth, for certain executive officers and groups,
the awards that were received under the Plan for 1998. Except for the awards to
non-employee directors, these awards would not have been affected had the
proposed amendment to the Plan been effective in 1998. For more information
about awards to named executive officers and directors, see "Management
Compensation."
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PLAN BENEFITS TABLE
LONG-TERM INCENTIVE PLAN
NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING AWARD
--------------------------- --------------------
I. Jon Brumley, Chairman of the Board of Directors and 2,191
Director..................................................
Scott D. Sheffield, President, Chief Executive Officer and 90,000
Director..................................................
Dennis E. Fagerstone, Executive Vice President.............. 35,000
Mel Fischer, Executive Vice President -- World Wide 35,000
Exploration...............................................
Mark L. Withrow, Executive Vice President, General Counsel 35,000
and Secretary.............................................
M. Garrett Smith, Executive Vice President and Chief 35,000
Financial Officer.........................................
Executive Officer Group..................................... 265,000
Non-Executive Director Group................................ 15,335
Non-Executive Officer Employee Group........................ 1,982,589
MESA.
STOCKHOLDER PROPOSALS
Any stockholder of the Company who desires to submit a proposal for
action at the Company's annual meeting of stockholders for 20002001 and wishes to
have such proposal (a "Rule 14a-8 Proposal") included in the Company's proxy
materials, must submit such Rule 14a-8 Proposal to the Company at its principal
executive offices no later than December 17, 1999,11, 2000, unless the Company notifies
the stockholders otherwise. Only those Rule 14a-8 Proposals that are timely
received by the Company and proper for stockholder action (and otherwise proper)
will be included in the Company's proxy materials.
Any stockholder of the Company who desires to submit a proposal for
action at the annual meeting of stockholders in 2000,2001, but does not wish to have
such proposal (a "Non-Rule 14a-8 Proposal") included in the Company's proxy
materials, must submit such Non-Rule 14a-8 Proposal to the Company at its
principal executive offices no later than March 1, 2000,February 24, 2001, unless the Company
notifies the stockholders otherwise. If a Non-Rule 14a-8 Proposal is not
received by the Company on or before March 1, 2000,February 24, 2001, then the Company intends
to exercise its discretionary voting authority with respect to such Non-Rule
14a-8 Proposal. "Discretionary voting authority" is the ability to vote proxies
that stockholders have executed and returned to the Company, on matters not
specifically reflected in the Company's proxy materials, and on which
stockholders have not had an opportunity to vote by proxy.
Stockholder proposals must also comply with the requirements of Article
Ninth of the Company's Restated Certificate of Incorporation. In general, this
Article requires stockholders to submit a written notice of proposals or
director nominations to the Company's secretary at least 60 days before a
scheduled annual meeting or (if later) 10 days after the first public notice of
the annual meeting is sent to stockholders. The notice must include the name and
address of the stockholder, information about any director nominee required in
SEC filings, the written consent of the nominee to serve as a director, and
other information.
Written requests for inclusion of any stockholder proposal should be
addressed to Corporate Secretary, Pioneer Natural Resources Company, 1400
Williams Square West, 5205 North O'Connor Boulevard, Irving, Texas 75039. The
Company suggests that any such proposal be sent by certified mail, return
receipt requested.
The Nominating CommitteeBoard of Directors will consider any nominee recommended by
stockholders for election at the annual meeting of stockholders to be held in
20002001 if that nomination is submitted in writing, not later than January 15,
2000,10,
2001, to I. Jon Brumley, Chairman of the Nominating Committee,Corporate Secretary, Pioneer Natural Resources Company, 1400 Williams
Square West, 5205 North O'Connor Boulevard, Irving, Texas 75039. Each submission
must include a statement of the qualifications of the nominee, a notarized
consent signed by the nominee evidencing a willingness to serve as a director,
if elected, and a commitment by the nominee to meet personally with members of
the Nominating Committee.Board of Directors.
SOLICITATION OF PROXIES
Solicitation of Proxies may be made by mail, personal interview,
telephone or telegraph and other forms of electronic communication by officers, directors and regular employees of the
Company. The Company may also request banking institutions, brokerage firms,
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the common stock that those companies or persons hold of
record, and the Company will reimburse the forwarding expenses. In addition, the
Company has retained D.F. King & Co.,
28
31 Inc. to assist in solicitation for a fee
estimated not to exceed $7,500. The Company will bear all costs of solicitation.
STOCKHOLDER LIST
In accordance with the Delaware General Corporation Law, the Company
will maintain at its corporate offices in Irving, Texas, a list of the
stockholders entitled to vote at the Annual Meeting. The list will be open to
the examination of any stockholder, for purposes germane to the Annual Meeting,
during ordinary business hours for 10 days before the Annual Meeting.
16
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1998,1999, is being mailed to stockholders concurrently with this Proxy
Statement and does not form part of the proxy solicitation material.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORMcopy of the Company's Annual Report on Form 10-K FOR THE YEAR ENDED
DECEMBERfor the year ended
December 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
SENT TO ANY STOCKHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO
INVESTOR RELATIONS, PIONEER NATURAL RESOURCES COMPANY,1999, as filed with the SEC, will be sent to any stockholder
without charge upon written request addressed to Investor Relations, Pioneer
Natural Resources Company, 1400 WILLIAMS SQUARE
WEST,Williams Square West, 5205 NORTH O'CONNOR BOULEVARD, IRVING, TEXASNorth O'Connor
Boulevard, Irving, Texas 75039. THE ANNUAL REPORT ON
FORMThe Annual Report on Form 10-K IS ALSO AVAILABLE AT THE SEC'S WEB SITE IN ITSis also available
at the SEC's web site in its EDGAR DATABASE
(WWW.SEC.GOV)database (www.sec.gov).
INTERNET VOTING
For shares of stock that are registered in your name, you have the
opportunity to vote through the Internet using a program provided by the
Company's transfer agent, Continental Stock Transfer & Trust Company. Votes
submitted electronically through the Internet under this program must be
received by 6:5:00 p.m., New York time, on Wednesday, May 19, 1999.17, 2000. The giving of
such a proxy will not affect your right to vote in person should you decide to
attend the Annual Meeting. The Company has been advised by counsel that the
Internet voting procedures that have been made available through Continental are
consistent with the requirements of applicable law.
To vote through the Internet, please access Continental Stock Transfer
& Trust Company on the World Wide Web at www.continentalstock.com. Select
"ContinentaLink Proxy Voting" on the screen. At the next screen, you will need
to enter the Company Number, Proxy Number and Account Number that are printed on
your personalized proxy card.
The Internet voting procedures are designed to authenticate
stockholder identities, to allow stockholders to give their voting instructions,
and to confirm that stockholders' instructions have been recorded properly.
Stockholders voting through the Internet should remember that the stockholder
must bear costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies.
***** * * *
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN, AND
RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE OR TO VOTE
THROUGH THE INTERNET.
By Order of the Board of Directors
/s/ MARK L. WITHROW
Mark L. Withrow
Secretary
Irving, Texas
April 15, 1999
2910, 2000
17
32
INFORMATION STATEMENT FOR HOLDERS OF EXCHANGEABLE SHARES
OF
PIONEER NATURAL RESOURCES CANADA INC.Information Statement for Holders of Exchangeable Shares
of
Pioneer Natural Resources Canada Inc.
The enclosed Proxy Statement and related materials pertaining to
Pioneer Natural Resources Company ("Pioneer") have been provided to all holders
of Exchangeable Shares of Pioneer Natural Resources Canada Inc. ("Pioneer
Canada") for the purposes of Pioneer's annual meeting of stockholders (the
"Annual Meeting") to be held on May 20, 199918, 2000 at 9:00 a.m. (Dallas, Texas time),
in the Miro Room at the Wyndham Anatole Hotel, Dallas, Texas 75207. As a holder
of Exchangeable Shares, you are entitled to dividend and other rights designed
to be equivalent to the attributes of the Common Stock of Pioneer, including the
right, through a Voting and Exchange Trust Agreement (the "Voting Agreement"),
to attend and to vote at the Annual Meeting. Given the attributes of the
Exchangeable Shares, you will not receive a Notice, Information Circular or
Proxy for an annual meeting of shareholders of Pioneer Canada, nor will a
meeting of holders of Exchangeable Shares be held.
EXERCISE OF VOTING RIGHTSExercise of Voting Rights
Pursuant to the Voting Agreement, Montreal Trust Company of Canada
(the "Trustee") holds one share of special preferred voting stock of Pioneer
(the "Voting Share") for the benefit of the holders (other than Pioneer and its
subsidiaries) of the Exchangeable Shares. The Voting Share carries a number of
votes, exercisable at any meeting at which Pioneer stockholders are entitled to
vote (including the Annual Meeting), equal to the number of outstanding
Exchangeable Shares (other than shares held by Pioneer and its subsidiaries).
You are entitled to instruct the Trustee to exercise one of the votes attached
to the Voting Share for each Exchangeable Share you hold, or to grant to
Pioneer's management a proxy to exercise such votes in accordance with the
enclosed Proxy Statement. Alternatively, you may instruct the Trustee to grant
to you or your designee a proxy to attend the Annual Meeting and personally
exercise your voting rights. For this purpose, the Trustee has furnished (or
caused Pioneer to furnish) the enclosed Proxy Statement and certain related
materials to you as a holder of Exchangeable Shares.
To instruct the Trustee as to how you want to exercise your voting
rights, you must complete, sign, date and return the enclosed form of direction
(the "Direction") to the Trustee by no later than 12:00 p.m. noon (Calgary time)
on May 18, 199916, 2000 (the "Due Time"). IF THE TRUSTEE DOES NOT RECEIVE YOUR FULLY
COMPLETED DIRECTION BY THE DUE TIME, YOUR VOTING RIGHTS WILL NOT BE EXERCISED.If the Trustee does not receive your fully
completed Direction by the Due Time, your voting rights will not be exercised.
You may revoke or amend your instructions to the Trustee (as indicated in your
Direction) at any time up to and including the Due Time by delivering to the
Trustee a written notice of revocation or by completing, signing and delivering
to the Trustee a new Direction bearing a later date. You may also revoke or
amend your instructions in person at the Annual Meeting prior to 9:00 a.m.
(Dallas, Texas time) on May 20, 1999,18, 2000, by submitting a written amendment or
revocation of your instructions and presenting satisfactory identification to
the Trustee's representatives at the Annual Meeting. In either case, your
instructions of the later date will be binding on the Trustee.
GENERALGeneral
Pioneer Canada and certain of the insiders thereof have been exempted
from certain disclosure and insider trading obligations prescribed by otherwise
applicable Canadian securities legislation pursuant to discretionary orders
granted by each of the provincial securities commissions in Canada. Pursuant to
such orders, Pioneer Canada is not required to prepare and file annual proxy and
related documentation, quarterly reports, certain material change reports or an
annual information form, provided that Pioneer prepares and files United States
continuous disclosure documentation in Canada which is equivalent to such
disclosure and which is set forth in the Multijurisdictional Disclosure System
adopted by the Canadian Securities Administrators.
# # #
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSEDPlease complete, sign and date the enclosed Direction and return it to
the Trustee in the enclosed envelope by no later than 12:00 p.m. noon (Calgary
time) on May 16, 2000.
18
DIRECTION AND RETURN IT TO THE
TRUSTEE IN THE ENCLOSED ENVELOPEGIVEN BY NO LATER THAN 12:00 P.M. NOON (CALGARY TIME)
ON MAY 18, 1999.
-1-
33
DIRECTION FROM HOLDERS OF EXCHANGEABLE
SHARES OF PIONEER NATURAL RESOURCES CANADA INC.
FOR THE MAY 20, 1999,18, 2000 ANNUAL MEETING OF STOCKHOLDERS OF
PIONEER NATURAL RESOURCES COMPANY
The undersigned acknowledges receipt of the Notice and Proxy Statement in
connection with the annual meeting (the "Meeting") of stockholders of Pioneer
Natural Resources Company to be held on May 20, 1999,18, 2000 at 9:00 a.m. (Dallas, Texas
time) at the Wyndham Anatole Hotel, Dallas, Texas 75207. The undersigned hereby
instructs and directs Montreal Trust Company of Canada (the "Trustee"), pursuant
to the provisions of the Voting and Exchange Trust Agreement dated December 18,
1997 among Pioneer, Pioneer Natural Resources Canada Inc. ("Pioneer Canada") and
the Trustee, as follows:
* * * *
(PLEASE NOTE: IF NO DIRECTION IS MADE AND YOU SIGN BELOW, THE TRUSTEE IS HEREBY
AUTHORIZED AND DIRECTED TO VOTE FOR ITEMS(Please note: If no direction is made and you sign below the Trustee is hereby
authorized and directed to vote for items 1 and 2 AND 3 LISTED UNDER ALTERNATIVElisted under Alternative A
BELOW, AND AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING IN
ITS DISCRETION.below, and as to any other matters that may properly come before the Meeting in
its discretion.)
* * * *
(PLEASE SELECT ONE OF(Please select one of A, B ORor C, THEN SIGN AND DATE ON THE REVERSE SIDE.)
A. [ ] Exercise or cause to be exercised, whether by proxy given by the Trustee to a
representative of Pioneer or otherwise, the undersigned's voting rights at the
Meeting, or any postponement or adjournment thereof, as follows:
1. To elect James R. Baroffio, Kenneth A. Hersh, Scott D. Sheffield and Robert L.
Stillwell as Class II Directors of Pioneer. If any such nominees should be
unavailable, the Trustee may vote for substitute nominee(s) at its discretion:
[ ] FOR all nominees listed above (except [ ] TO WITHHOLD authority to vote for all
as marked to the contrary) nominees listed above
[ ] WITHHOLD AUTHORITY for the following nominee(s) only:
---------------------------------------------------------------------------------
2. To ratify the appointment of Ernst & Young LLP as independent auditors for the
fiscal year ending December 31, 1999.
[ ] FOR [ ] AGAINST [
] ABSTAIN
3. To approve the amendment to Pioneer's Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [
] ABSTAIN
4. To transact such other business as may properly come before the Meeting or any
postponement or adjournment thereof.
[ ] FOR [ ] AGAINST [
] ABSTAIN
B. [ ] Deliver a proxy card to the undersigned at the Meeting, with respect to all
Exchangeable Shares of Pioneer Canada held of record by the undersigned on the
record date for the Meeting (and not subsequently disposed of) so that the
undersigned may exercise personally the undersigned's voting rights at the Meeting,
or any postponement or adjournment thereof.
Deliver a proxy card to ------------------------------------ at
C. [ ] ------------------------------------and sign and date on the reverse
side)
A. [ ] Exercise or cause to be exercised, whether by proxy given by the
Trustee to a representative of Pioneer or otherwise, the
undersigned's voting rights at the Meeting, or any postponement
or adjournment thereof, as follows:
1. To elect Jerry P. Jones and Charles E. Ramsey, Jr., as Class III
Directors of Pioneer. If any such nominees should be unavailable,
the Trustee may vote for substitute nominee(s) at its discretion:
[ ] FOR all nominees listed above [ ] TO WITHHOLD authority to
(except as marked to the vote for all nominees
contrary) listed above
[ ] WITHHOLD AUTHORITY for the following nominee(s) only:
----------------------------------------------------
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
Meeting or any postponement or adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
B. [ ] Deliver a proxy card to the undersigned at the Meeting, with
respect to all Exchangeable Shares of Pioneer Canada held of record
by the undersigned on the record date for the Meeting (and not
subsequently disposed of) so that the undersigned may exercise
personally the undersigned's voting rights at the Meeting, or any
postponement or adjournment thereof.
C. [ ] Deliver a proxy card to _________________________________________ at
_______________________________________________, as the designee of
the undersigned to attend and act for and on behalf of the
undersigned at the Meeting with respect to all Exchangeable Shares
of Pioneer Canada held of record by the undersigned on the record
date for the Meeting (and not subsequently disposed of) with all the
powers that the undersigned would possess if personally present and
acting thereat including the power to exercise the undersigned's
voting rights at the Meeting, or any postponement or
adjournment thereof.
19
* * * * 34
Please sign exactly as your name appears on your Exchangeable Share
certificate(s) and return this form in the enclosed envelope. When signing as
executor, administrator, attorney, trustee, guardian or custodian, or for a
corporation, please give the full title as such. If the Exchangeable Shares are
held in a joint account, each joint owner must sign.
Signature: Date:
-------------------------------- ---------------------------------------
Print Name:
-------------------------------
Signature: Date:
-------------------------------- ---------------------------------------
Print Name:
-------------------------------
Signature:_______________________________ Date:_________________________
Print Name:______________________________
Signature:_______________________________ Date:_________________________
Print Name:______________________________
20
35PROXY BY MAIL Please mark your votes like this [ X ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
The Board of Directors recommends a vote FOR Items 1 and 2.
ITEM 1 - ELECTION OF DIRECTORS
Nominees: WITHHELD
FOR FOR ALL
01 Jerry P. Jones [ ] [ ]
02 Charles E. Ramsey, Jr.
WITHHELD FOR: (Write that nominee's name in the space provided below).
- ------------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature________________________ Signature________________________ Date______
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
o You can now vote your shares electronically through the Internet.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
21
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
ELECTRONICALLY
SECURITY CODE:
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PIONEER NATURAL RESOURCES COMPANY
The undersigned hereby appoints I. Jon Brumley, Scott D. Sheffield and Mark L. Withrow as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Pioneer Natural Resources Company standing in the
name of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of the Company to be held May 20, 199918,
2000 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
- --------------------------------------------------------------------------------
o- - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE o
Access to Pioneer shareholder account information and other
shareholder services are now available on the Internet!
Visit Continental Stock Transfer's website at
www.continentalstock.com
for their new Internet Shareholder Service -
ContinentalinkContinentaLink
Through this new service, shareholders can select a Personal Identification
Number or "PIN" to secure, access to personal shareholder records. With a PIN,visit the website listed above. From the home page,
shareholders can change addresses, receive electronic forms, and view account
transaction history and dividend history.
To access this new service, visit the website listed above. From the home page,
select ContinentaLink Full Service. From there, you can either Test Drive the
service (choose "Test Drive" button) or you can Sign-Up (choose "Sign-Up"
button). If you choose to sign-up, enter your taxpayer identification number or
social security number as your ID Number. Your personal Security Code can be
found on the reverse side of this card in the bottom left corner. Enter any four
alphanumeric characters you would like to use for your PIN. Re-enter the same
PIN in the PIN Verification field. Your PIN will be activated overnight, and you
will be able to access your shareholder records the following day.
22
36
PROXY BY MAIL PLEASE MARK
YOUR VOTES [X]
LIKE THIS
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The Board of Directors recommends a
vote FOR Items 1, 2 and 3. FOR AGAINST ABSTAIN
ITEM 1 - ELECTION OF DIRECTORS ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
WITHHELD
Nominees: FOR FOR ALL ITEM 3 - APPROVAL OF AMENDMENT TO LONG-TERM INCENTIVE PLAN [ ] [ ] [ ]
[ ] [ ]
1 James R. Baroffio
2 Kenneth A. Hersh
3 Scott D. Sheffield
4 Robert L. Stillwell
WITHHELD FOR: (Write that nominee's name in the
space provided below).
- -----------------------------------------------
---------------------------------------------------------------------
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
---------------------------------------------------------------------
======================
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
======================
Signature Signature Date
------------------------ ------------------------ ----------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE AND READ THE REVERSE SIDE o
----------------------------------------------------------------
[GRAPHIC] VOTE BY INTERNET [GRAPHIC]
----------------------------------------------------------------
PIONEER NATURAL RESOURCES COMPANY
o You can now vote your shares electronically through the Internet.
o This eliminates the need to return the proxy card.
o Your electronic vote authorizes the named proxies to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
ELECTRONICALLY
SECURITY CODE: