<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1997
REGISTRATION NO. 333-26951
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
---------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
PIONEER NATURAL RESOURCES COMPANY
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 1311 75-2702753
(State of other jurisdiction of
incorporation (Primary Standard Industrial (I.R.S. Employer
or organization) Classification Code Number) Identification No.)
M. GARRETT SMITH
1400 WILLIAMS SQUARE WEST 1400 WILLIAMS SQUARE WEST
5205 NORTH O'CONNOR BOULEVARD 5205 NORTH O'CONNOR BOULEVARD
IRVING, TEXAS 75039 IRVING, TEXAS 75039
(972) 444-9001 (972) 444-9001
(Address, including zip code, (Address, including zip code,
and telephone and telephone
number, including area code, of number, including area code, of
registrant's registrant's
principal executive offices) principal executive offices)
</TABLE>
---------------------
Copies to:
<TABLE>
<S> <C> <C>
CARLOS A. FIERRO MARK L. WITHROW ROBERT L. KIMBALL
BAKER & BOTTS, L.L.P. VINSON & ELKINS L.L.P.
PARKER & PARSLEY PETROLEUM COMPANY
2001 ROSS AVE. 303 W. WALL, SUITE 101 2001 ROSS AVE.
DALLAS, TEXAS 75201 MIDLAND, TEXAS 79701 DALLAS, TEXAS 75201
(214) 953-6500 (915) 683-4768 (214) 220-7700
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: Upon consummation of the Mergers described in this Registration
Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
<TABLE>
<S> <C> <C>
MESA INC.
1400 WILLIAMS SQUARE WEST
(MESA LOGO) 5205 NORTH O'CONNOR BOULEVARD
IRVING, TEXAS 75039
(972) 444-9001
</TABLE>
June 27, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of stockholders of
MESA Inc. ("Mesa"), which will be held at the Wyndham Anatole Hotel, Wedgwood
Room, 2201 Stemmons Freeway, Dallas, Texas, on August 7, 1997, starting at 2:00
p.m., Dallas time. A notice of the Special Meeting, a proxy card and a proxy
statement/prospectus containing important information about the matters to be
acted upon at the Special Meeting are enclosed.
At the Special Meeting, holders of Mesa capital stock will be asked to
consider and vote upon a proposal to approve and adopt an Amended and Restated
Agreement and Plan of Merger, dated as of April 6, 1997 (the "Merger
Agreement"), among Mesa, its subsidiaries Pioneer Natural Resources Company
("Pioneer") and Mesa Operating Co. ("MOC"), and Parker & Parsley Petroleum
Company ("Parker & Parsley"), which provides for the business combination of
Mesa and Parker & Parsley. As a result of the business combination, Mesa, which
is a Texas corporation, will reincorporate to Delaware by merging into Pioneer
and Parker & Parsley will merge into MOC and thereby will become a wholly-owned
subsidiary of Pioneer.
If the Merger Agreement is approved, when the business combination is
completed, (i) each seven outstanding shares of Mesa Common Stock will be
converted into the right to receive one share of Pioneer Common Stock ("Mesa
Conversion Number"), (ii) each seven outstanding shares of Mesa's Series A 8%
Cumulative Convertible Preferred Stock and Mesa's Series B 8% Cumulative
Convertible Preferred Stock will be converted into the right to receive either
(a) 1.25 shares of Pioneer Common Stock ("Mesa Common Consideration") or (b) one
share of Pioneer's Series A 8% Cumulative Convertible Preferred Stock ("Mesa
Preferred Consideration), in each case as the holder thereof shall elect or be
deemed to elect (provided that if the holders of a majority of the outstanding
Mesa Series A Preferred Stock or Mesa Series B Preferred Stock, each voting as a
separate class, vote in favor of the Merger Agreement, then all holders of the
series for which the vote has been obtained will receive the Mesa Common
Consideration regardless of whether such holders elected to receive Pioneer
Preferred Stock or Pioneer Common Stock) and (iii) each outstanding share of
Parker & Parsley Common Stock will be converted into the right to receive one
share of Pioneer Common Stock ("Parker & Parsley Conversion Number"). The
accompanying proxy statement/prospectus provides you with detailed information
concerning the Merger Agreement (a copy of which is included therein as Appendix
I), the Pioneer Common Stock, the Pioneer Series A Preferred Stock and other
information. Please give all of this information your careful attention.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the Merger Agreement. In addition, the Board retained (i) Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), which has
delivered to the Mesa Board its written opinions each dated April 4, 1997 that,
as of such date and based upon and subject to the factors and assumptions stated
therein, (a) the Mesa Conversion Number and the Parker & Parsley Conversion
Number are fair from a financial point of view to the holders of Mesa Common
Stock and (b) the Mesa Common Consideration is fair from a financial point of
view to the holders of Mesa Common Stock and (ii) Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), which has delivered to the Mesa Board a written
opinion to the effect that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the Mesa Common Consideration and
Mesa Preferred Consideration are fair from a financial point of view to the
holders of Mesa Series A Preferred Stock. Copies of the Merrill Lynch and Morgan
Stanley opinion letters, which set forth the assumptions made, matters
considered and the scope of review undertaken in connection therewith, are set
forth as Appendix II, Appendix III and Appendix IV to the accompanying proxy
statement/prospectus and should be read carefully in their entirety. Your Board
of Directors, by unanimous vote, has determined that the terms of the Merger
<PAGE> 3
Agreement are fair to, and in the best interests of, Mesa and the holders of
Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock (other than Parker & Parsley and its affiliates) and recommends that you
vote FOR the proposal to approve and adopt the Merger Agreement. For a further
discussion of the Board's consideration and evaluation of the Merger Agreement
as well as a discussion of the interests of certain directors and executive
officers of Mesa in the proposed business combination contemplated by the Merger
Agreement, see "The Mergers -- Recommendation of Mesa Board; Mesa's Reasons for
the Mergers" and "-- Interests of Certain Persons in the Mergers" in the proxy
statement/prospectus.
At the Special Meeting, stockholders of Mesa will also be asked to consider
and approve the adoption of the Mesa 1996 Incentive Plan, the Pioneer Long-Term
Incentive Plan and the Pioneer Employee Stock Purchase Plan, the terms of which
are described in the proxy statement/prospectus. Consummation of the business
combination contemplated by the Merger Agreement is not conditioned on approval
of any of these plans. Mesa's board recommends that you vote FOR the approval of
each of the plans.
Whether or not you are personally able to attend the Special Meeting,
please complete, sign and date the enclosed proxy card and return it in the
enclosed prepaid envelope as soon as possible. This action will not limit your
right to vote in person if you wish to attend the Special Meeting and vote
personally. If you have any questions or require additional information with
respect to the proposed business combination, please contact Mesa's information
agent, Morrow & Co. Inc. at 1-800-566-9058.
Sincerely yours,
Brumley Sig
Jon Brumley
Chairman of the Board
PLEASE DO NOT SEND IN ANY CERTIFICATES
FOR YOUR COMMON STOCK AT THIS TIME
2
<PAGE> 4
MESA INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 7, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders (together
with any adjournment or postponement thereof, the "Special Meeting") of MESA
Inc., a Texas corporation ("Mesa"), will be held at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas, starting at 2:00 p.m.,
Dallas time, on Thursday, August 7, 1997, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Amended and Restated Agreement and Plan of Merger, dated as of April 6,
1997 (the "Merger Agreement"), among Mesa, Mesa Operating Co., a Delaware
corporation ("MOC"), Pioneer Natural Resources Company, a Delaware
corporation ("Pioneer"), and Parker & Parsley Petroleum Company, a Delaware
corporation ("Parker & Parsley"). Pursuant to the Merger Agreement, among
other things, (i) Mesa will merge (the "Reincorporation Merger") with and
into Pioneer with the result that Mesa is reincorporated from Texas to
Delaware and (a) each seven outstanding shares (other than any shares held
by Mesa in its treasury or shares held by Parker & Parsley) of Mesa's
common stock, par value $.01 per share ("Mesa Common Stock"), will be
converted into the right to receive one share of common stock, par value
$.01 per share ("Pioneer Common Stock"), of Pioneer and (b) each seven
outstanding shares (other than any shares held by Mesa in its treasury or
shares held by Parker & Parsley) of Mesa's Series A 8% Cumulative
Convertible Preferred Stock, par value $.01 per share ("Mesa's Series A
Preferred Stock"), and Mesa's Series B 8% Cumulative Convertible Preferred
Stock, par value $.01 per share ("Mesa Series B Preferred Stock"), will be
converted into the right to receive either (x) 1.25 shares of Pioneer
Common Stock or (y) one share of Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share ("Pioneer Preferred Stock"), of
Pioneer, in each case as the holder thereof shall elect or be deemed to
elect (provided that if the holders of a majority of the outstanding Mesa
Series A Preferred Stock or Mesa Series B Preferred Stock, each voting as a
separate class, vote in favor of the Merger Agreement, then all holders of
the series for which the vote has been obtained will receive Pioneer Common
Stock regardless of whether such holders elected to receive Pioneer
Preferred Stock or Pioneer Common Stock) and (ii) Parker & Parsley will
merge (the "Parker & Parsley Merger") with and into MOC with the effect
that Parker & Parsley will be a wholly-owned subsidiary of Pioneer and each
outstanding share of common stock, par value $.01 per share (together with
the related common stock purchase rights, the "Parker & Parsley Common
Stock"), of Parker & Parsley (other than any shares held by Parker &
Parsley in its treasury or shares held by Mesa) will be converted into the
right to receive one share of Pioneer Common Stock. The terms of the Merger
Agreement, the Pioneer Common Stock and the Pioneer Preferred Stock are
described in detail in the accompanying Joint Proxy Statement/Prospectus,
and the full text of the Merger Agreement (exclusive of Exhibits and
Schedules) is included as Appendix I thereto.
2. To consider and vote upon a proposal to approve the adoption of the
Mesa 1996 Incentive Plan (the "Mesa 1996 Incentive Plan"), the terms of
which are described in the accompanying Joint Proxy Statement/Prospectus.
The full text of the Mesa 1996 Incentive Plan is included as Appendix VI to
the Joint Proxy Statement/Prospectus.
3. To consider and vote upon a proposal to approve the adoption of the
Pioneer Long-Term Incentive Plan (the "Pioneer Long-Term Incentive Plan"),
the terms of which are described in the accompanying Joint Proxy
Statement/Prospectus. The full text of the Pioneer Long-Term Incentive Plan
is included as Appendix VII to the Joint Proxy Statement/Prospectus.
4. To consider and vote upon a proposal to approve the adoption of the
Pioneer Employee Stock Purchase Plan (the "Pioneer Employee Stock Purchase
Plan"), the terms of which are described in the accompanying Joint Proxy
Statement/Prospectus. The full text of the Pioneer Employee Stock Purchase
Plan is included as Appendix VIII to the Joint Proxy Statement/Prospectus.
5. To transact such other business as may properly come before the
Special Meeting.
<PAGE> 5
Holders of record of shares of Mesa Common Stock, Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock at the close of business on June 27,
1997, the record date (the "Record Date") for the Special Meeting, are entitled
to notice of and to vote at the Special Meeting.
To assure that your interests will be represented at the Special Meeting,
regardless of whether you plan to attend in person, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed return
envelope, which requires no postage if mailed in the United States. This action
will not limit your right to vote in person if you wish to attend the Special
Meeting and vote personally. If you own of record both Mesa Common Stock and
Mesa Series A Preferred Stock, you should complete, date, sign and return both
the proxy card for the Mesa Common Stock and the proxy card for the Mesa Series
A Preferred Stock. Stockholders are urged to read carefully the attached Joint
Proxy Statement/Prospectus for additional information concerning the matters to
be considered at the Special Meeting.
By Order of the Board of Directors,
Garrett Smith Sig
M. Garrett Smith
Vice President, Corporate
Acquisitions
June 27, 1997
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING
2
<PAGE> 6
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PARKER & PARSLEY PETROLEUM COMPANY
303 WALL STREET, SUITE 101
[PARKER & PARSLEY MIDLAND, TEXAS 79701
PETRO LOGO] (915) 683-4768
</TABLE>
June 27, 1997
Dear Stockholder:
You are cordially invited to attend a Special Meeting of stockholders of
Parker & Parsley Petroleum Company ("Parker & Parsley"), which will be held at
Wyndham Anatole Hotel, Peacock Room, 2201 Stemmons Freeway, Dallas, Texas, on
August 7, 1997, starting at 2:00 p.m., Dallas time. A notice of the Special
Meeting, a proxy card and a proxy statement/prospectus containing important
information about the matters to be acted upon at the Special Meeting are
enclosed.
At the Special Meeting, holders of Parker & Parsley Common Stock will be
asked to consider and vote upon a proposal to approve and adopt an Amended and
Restated Agreement and Plan of Merger, dated as of April 6, 1997 (the "Merger
Agreement"), among Parker & Parsley, MESA Inc. ("Mesa") and its subsidiaries
Pioneer Natural Resources Company ("Pioneer") and Mesa Operating Co. ("MOC"),
which provides for the business combination of Parker & Parsley and Mesa. As a
result of the business combination, Mesa, which is a Texas corporation, will
reincorporate to Delaware by merging into Pioneer and Parker & Parsley will
merge into MOC and thereby become a wholly-owned subsidiary of Pioneer.
If the Merger Agreement is approved, when the business combination is
completed, (i) each outstanding share of Parker & Parsley Common Stock will be
converted into the right to receive one share of Pioneer Common Stock ("Parker &
Parsley Conversion Number"), (ii) each seven outstanding shares of Mesa Common
Stock will be converted into the right to receive one share of Pioneer Common
Stock and (iii) each seven outstanding shares of Mesa's Series A 8% Cumulative
Convertible Preferred Stock and Mesa's Series B 8% Cumulative Convertible
Preferred Stock will be converted into the right to receive either (a) 1.25
shares of Pioneer Common Stock ("Mesa Common Consideration") or (b) one share of
Pioneer's Series A 8% Cumulative Convertible Preferred Stock, in each case as
the holder thereof shall elect or be deemed to elect (provided that if the
holders of a majority of the outstanding Mesa Series A Preferred Stock or Mesa
Series B Preferred Stock, each voting as a separate class, vote in favor of the
Merger Agreement, then all holders of the series for which the vote has been
obtained will receive the Mesa Common Consideration). The accompanying proxy
statement/prospectus provides you with detailed information concerning the
Merger Agreement (a copy of which is included therein as Appendix I), the
Pioneer Common Stock, the Pioneer Series A Preferred Stock and other
information. Please give all of this information your careful attention.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the Merger Agreement. In addition, the Board retained Goldman,
Sachs & Co. ("Goldman Sachs"), which have delivered to the Parker & Parsley
Board their written opinion dated April 6, 1997 that, as of such date and based
upon and subject to the factors and assumptions stated therein, the Parker &
Parsley Conversion Number pursuant to the Merger Agreement is fair to holders of
Parker & Parsley Common Stock. A copy of Goldman Sachs' opinion letter, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken in connection therewith, is set forth as Appendix V to the
accompanying proxy statement/prospectus and should be read carefully in its
entirety. Your Board of Directors, by unanimous vote, has determined that the
terms of the Merger Agreement are fair to, and in the best interests of, Parker
& Parsley and the holders of Parker & Parsley Common Stock (other than Mesa and
its affiliates) and recommends that you vote FOR the proposal to approve and
adopt the Merger Agreement. For a further discussion of the Board's
consideration and evaluation of the Merger Agreement as well as a discussion of
the interests of certain directors and executive officers of Parker & Parsley in
the proposed business combination contemplated by the Merger Agreement, see "The
Mergers -- Recommendation of Parker & Parsley Board; Parker & Parsley's Reasons
for the Mergers" and "-- Interests of Certain Persons in the Mergers" in the
proxy statement/prospectus.
<PAGE> 7
At the Special Meeting, holders of Parker & Parsley Common Stock will also
be asked to consider and approve the adoption of the Pioneer Long-Term Incentive
Plan and the Pioneer Employee Stock Purchase Plan, the terms of which are
described in the proxy statement/prospectus. The business combination
contemplated by the Merger Agreement is not conditioned on approval of either of
the plans. Parker & Parsley's Board recommends that you vote FOR the approval of
each of the plans.
Whether or not you are personally able to attend the Special Meeting,
please complete, sign and date the enclosed proxy card and return it in the
enclosed prepaid envelope as soon as possible. This action will not limit your
right to vote in person if you wish to attend the Special Meeting and vote
personally. If you have any questions or require additional information with
respect to the proposed business combination, please contact Parker & Parsley's
information agent, D.F. King & Co., Inc. at 1-800-769-5414
Sincerely yours,
/s/ SCOTT D. SHEFFIELD
Scott D. Sheffield
Chairman of the Board
PLEASE DO NOT SEND IN ANY CERTIFICATES
FOR YOUR COMMON STOCK AT THIS TIME
2
<PAGE> 8
PARKER & PARSLEY PETROLEUM COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders (together
with any adjournment or postponement thereof, the "Special Meeting") of Parker &
Parsley Petroleum Company, a Delaware corporation ("Parker & Parsley"), will be
held at Wyndham Anatole Hotel, Peacock Room, 2201 Stemmons Freeway, Dallas,
Texas, starting at 2:00 p.m., Dallas time, on Thursday, August 7, 1997, for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Amended and Restated Agreement and Plan of Merger, dated as of April 6,
1997 (the "Merger Agreement"), among Parker & Parsley, MESA Inc., a Texas
corporation ("Mesa"), Mesa Operating Co., a Delaware corporation ("MOC"),
and Pioneer Natural Resources Company, a Delaware corporation ("Pioneer").
Pursuant to the Merger Agreement, among other things, (i) Mesa will merge
(the "Reincorporation Merger") with and into Pioneer with the result that
Mesa is reincorporated from Texas to Delaware and (a) each seven
outstanding shares (other than any shares held by Mesa in its treasury or
shares held by Parker & Parsley) of Mesa's common stock, par value $.01 per
share, will be converted into the right to receive one share of common
stock, par value $.01 per share ("Pioneer Common Stock"), of Pioneer and
(b) each seven outstanding shares (other than any shares held by Mesa in
its treasury or shares held by Parker & Parsley) of Mesa's Series A 8%
Cumulative Convertible Preferred Stock, par value $.01 per share ("Mesa
Series A Preferred Stock"), and Mesa's Series B 8% Cumulative Convertible
Preferred Stock, par value $.01 per share ("Mesa Series B Preferred
Stock"), will be converted into the right to receive either (x) 1.25 shares
of Pioneer Common Stock or (y) one share of Series A 8% Cumulative
Convertible Preferred Stock, par value $.01 per share ("Pioneer Preferred
Stock"), of Pioneer, in each case as the holder thereof shall elect or be
deemed to elect (provided that if the holders of a majority of the
outstanding Mesa Series A Preferred Stock or Mesa Series B Preferred Stock,
each voting as a separate class, vote in favor of the Merger Agreement,
then all holders of the series for which the vote has been obtained will
receive Pioneer Common Stock) and (ii) Parker & Parsley will merge (the
"Parker & Parsley Merger") with and into MOC with the effect that Parker &
Parsley will be a wholly-owned subsidiary of Pioneer and each outstanding
share of common stock, par value $.01 per share (together with the related
common stock purchase rights, the "Parker & Parsley Common Stock"), of
Parker & Parsley (other than any shares held by Parker & Parsley in its
treasury or shares held by Mesa) will be converted into the right to
receive one share of Pioneer Common Stock. The terms of the Merger
Agreement, the Pioneer Common Stock and the Pioneer Preferred Stock are
described in detail in the accompanying Joint Proxy Statement/Prospectus,
and the full text of the Merger Agreement (exclusive of Exhibits and
Schedules) is included as Appendix I thereto.
2. To consider and vote upon a proposal to approve the adoption of the
Pioneer Long-Term Incentive Plan (the "Pioneer Long-Term Incentive Plan"),
the terms of which are described in the accompanying Joint Proxy
Statement/Prospectus. The full text of the Pioneer Long-Term Incentive Plan
is included as Appendix VII to the Joint Proxy Statement/Prospectus.
3. To consider and vote upon a proposal to approve the adoption of the
Pioneer Employee Stock Purchase Plan (the "Pioneer Employee Stock Purchase
Plan"), the terms of which are described in the accompanying Joint Proxy
Statement/Prospectus. The full text of the Pioneer Employee Stock Purchase
Plan is included as Appendix VIII to the Joint Proxy Statement/Prospectus.
4. To transact such other business as may properly come before the
Special Meeting.
Holders of record of shares of Parker & Parsley Common Stock, at the close
of business on June 27, 1997, the record date for the Special Meeting, are
entitled to notice of and to vote at the Special Meeting.
<PAGE> 9
To assure that your interests will be represented at the Special Meeting,
regardless of whether you plan to attend in person, please complete, date and
sign the enclosed proxy card and return it promptly in the enclosed return
envelope, which requires no postage if mailed in the United States. This action
will not limit your right to vote in person if you wish to attend the Special
Meeting and vote personally.
By Order of the Board of Directors,
Withrow Sig
Mark L. Withrow
Senior Vice President, General
Counsel
and Secretary
June 27, 1997
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING
2
<PAGE> 10
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 26, 1997
PIONEER NATURAL RESOURCES COMPANY
MESA INC.
PARKER & PARSLEY PETROLEUM COMPANY
JOINT PROXY STATEMENT/PROSPECTUS
This Joint Proxy Statement/Prospectus relates to an Amended and Restated
Agreement and Plan of Merger, dated as of April 6, 1997 (the "Merger
Agreement"), among MESA Inc. ("Mesa"), its subsidiaries Pioneer Natural
Resources Company ("Pioneer") and Mesa Operating Co. ("MOC"), and Parker &
Parsley Petroleum Company ("Parker & Parsley"). The Merger Agreement provides
for each of the following:
- The merger of Mesa with and into Pioneer (the "Reincorporation Merger"),
as a result of which Mesa, which is a Texas corporation, will
reincorporate into Delaware and (i) each seven outstanding shares (other
than any shares held directly by Mesa in its treasury or shares held by
Parker & Parsley) of Mesa's common stock, par value $.01 per share ("Mesa
Common Stock"), will be converted into the right to receive one share of
common stock, par value $.01 per share ("Pioneer Common Stock"), of
Pioneer, and (ii) each seven outstanding shares (other than any shares
held directly by Mesa in its treasury or shares held by Parker & Parsley)
of Mesa's Series A 8% Cumulative Convertible Preferred Stock, par value
$.01 per share ("Mesa Series A Preferred Stock"), and Mesa's Series B 8%
Cumulative Convertible Preferred Stock, par value $.01 per share ("Mesa
Series B Preferred Stock"), will be converted into the right to receive
either (a) 1.25 shares of Pioneer Common Stock ("Mesa Common
Consideration") or (b) one share of Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share ("Pioneer Preferred Stock"), of
Pioneer (the "Mesa Preferred Consideration"), in each case as the holder
thereof shall elect or be deemed to elect (PROVIDED THAT IF THE HOLDERS
OF A MAJORITY OF THE OUTSTANDING MESA SERIES A PREFERRED STOCK OR MESA
SERIES B PREFERRED STOCK, EACH VOTING AS A SEPARATE CLASS, VOTE IN FAVOR
OF THE MERGER AGREEMENT, THEN ALL HOLDERS OF THE SERIES FOR WHICH THE
VOTE HAS BEEN OBTAINED WILL RECEIVE PIONEER COMMON STOCK REGARDLESS OF
WHETHER SUCH HOLDERS ELECTED TO RECEIVE PIONEER PREFERRED STOCK OR
PIONEER COMMON STOCK). ACCORDINGLY, A HOLDER OF MESA SERIES A PREFERRED
STOCK SHOULD ASSUME THAT IF IT VOTES IN FAVOR OF THE MERGERS (AND
ASSUMING HOLDERS OF A MAJORITY OF SUCH SHARES ALSO VOTE IN FAVOR OF THE
MERGERS), SUCH HOLDER WILL RECEIVE SHARES OF PIONEER COMMON STOCK AND NOT
PIONEER PREFERRED STOCK. HOLDERS OF MESA SERIES A PREFERRED STOCK SHOULD
TAKE SUCH ASSUMPTION INTO CONSIDERATION IN MAKING THEIR DECISION AS TO
HOW TO VOTE ON THE MERGERS.
- The merger of Parker & Parsley with and into MOC (the "Parker & Parsley
Merger" and, together with the Reincorporation Merger, the "Mergers") as
a result of which Parker & Parsley will become a wholly-owned subsidiary
of Pioneer and each outstanding share (other than any shares held
directly by Parker & Parsley in its treasury or shares held by Mesa) of
Parker & Parsley common stock, par value $.01 per share (together with
the related common stock purchase rights, the "Parker & Parsley Common
Stock"), will be converted into the right to receive one share of Pioneer
Common Stock. See "The Mergers."
Pioneer has filed a registration statement pursuant to the Securities Act
of 1933 (the "Securities Act") covering the shares of Pioneer Common Stock and
the shares of Pioneer Preferred Stock issuable in connection with the Mergers.
This Joint Proxy Statement/Prospectus constitutes the Prospectus filed as a part
of the registration statement and is being furnished to stockholders of Mesa and
Parker & Parsley in connection with the solicitation of proxies by the
respective Boards of Directors of Mesa and Parker & Parsley for use at their
respective special meetings of stockholders (or any adjournment or postponement
thereof), both scheduled to be held on August 7, 1997 (the "Mesa Special
Meeting" and the "Parker & Parsley Special Meeting" and, collectively, the
"Special Meetings").
Stockholders at the Special Meetings will also be asked to consider and
vote upon separate proposals to approve the adoption of the Pioneer Long-Term
Incentive Plan and the Pioneer Employee Stock Purchase Plan. Additionally,
stockholders at the Mesa Special Meeting will be asked to consider and vote upon
a separate proposal to approve the adoption of the Mesa 1996 Incentive Plan.
The Mesa Common Stock and Mesa Series A Preferred Stock are both listed for
trading on the New York Stock Exchange ("NYSE") under the symbol "MXP" and
"MXPPrA," respectively. The Parker & Parsley Common Stock is listed for trading
on the NYSE under the symbol "PDP." Application has been made to list the
Pioneer Common Stock and Pioneer Preferred Stock on the NYSE. On June 25, 1997,
the closing sales prices of the Mesa Common Stock, the Mesa Series A Preferred
Stock and the Parker & Parsley Common Stock were $5 5/8, $6 1/2 and $34 11/16
per share, respectively.
SEE "RISK FACTORS" BEGINNING ON PAGE 24 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH YOUR DECISION ON WHETHER TO VOTE
FOR THE MERGERS.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGERS HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Joint Proxy Statement/Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of Mesa and Parker & Parsley on or about
June 30, 1997.
---------------------
The date of this Joint Proxy Statement/Prospectus is June , 1997.
<PAGE> 11
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY SOLICITATION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MESA OR PARKER & PARSLEY SINCE
THE DATE HEREOF OR THAT THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 3
Risk Factors................................................ 24
The Mergers................................................. 29
General................................................... 29
The Reincorporation Merger................................ 29
Parker & Parsley Merger................................... 30
Fractional Shares......................................... 31
Election Procedure for Mesa Preferred Stock............... 31
Background................................................ 32
Recommendation of Mesa Board; Mesa's Reasons for the
Mergers................................................. 39
Recommendation of Parker & Parsley's Board of Directors;
Parker & Parsley's Reasons for the Mergers.............. 41
Fairness Opinions......................................... 44
Appraisal or Dissenter's Rights........................... 58
Certain Federal Income Tax Consequences................... 59
Accounting Treatment...................................... 60
Exchange or Conversion of Parker & Parsley MIPS........... 60
Interests of Certain Persons in the Mergers............... 60
NYSE Listing of Pioneer Common Stock and Pioneer Preferred
Stock................................................... 66
Resales of Pioneer Common Stock and Pioneer Preferred
Stock................................................... 66
Information Agents........................................ 67
Governmental and Regulatory Approvals..................... 68
Pioneer..................................................... 69
Mesa........................................................ 78
Parker & Parsley............................................ 101
Ownership of Mesa, Parker & Parsley and Pioneer Common
Stock..................................................... 129
The Special Meetings........................................ 133
Certain Terms of the Merger Agreement....................... 137
Agreements by Mesa Stockholders............................. 148
Comparison of Stockholders' Rights.......................... 148
Description of Pioneer Capital Stock........................ 155
Description of Mesa 1996 Incentive Plan..................... 162
Description of Pioneer Long-Term Incentive Plan............. 167
Description of Pioneer Employee Stock Purchase Plan......... 172
Legal Matters............................................... 174
Experts..................................................... 175
Available Information....................................... 175
Incorporation of Certain Documents by Reference............. 176
Stockholder Proposals....................................... 177
Glossary of Selected Oil and Gas Terms...................... 178
Unaudited Pro Forma Combined Financial Statements........... F-1
</TABLE>
Appendix I -- Merger Agreement
Appendix II -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Conversion Numbers)
Appendix III -- Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
(Mesa Common Consideration)
Appendix IV -- Opinion of Morgan Stanley & Co. Incorporated
Appendix V -- Opinion of Goldman Sachs & Co.
Appendix VI -- Mesa 1996 Incentive Plan
Appendix VII -- Pioneer Long-Term Incentive Plan
Appendix VIII -- Pioneer Employee Stock Purchase Plan
<PAGE> 12
[MAP DEPICTING THE PROPERTIES TO BE HELD BY PIONEER IN KANSAS, OKLAHOMA, NEW
MEXICO, TEXAS, LOUISIANA, MISSISSIPPI AND THE GULF OF MEXICO]
HUGOTON FIELD WEST PANHANDLE
o 3rd Largest Producer o Largest Producer
o One of the Largest Gas o One of the Largest Gas
Processors Processors
o 1996 Operating Cash Flow o 1996 Operating Cash Flow
$122 Million/$11.00 per BOE $62 Million/$9.7 per BOE
o 40 Year Productive Life o 40 Year Productive Life
o 300 Well Council Grove Infill o 600 Well Infill Drilling
Drilling Potential Potential
SPRABERRY FIELD
o Largest Producer and Most
Active Driller
o Largest Gas Processor
o 1996 Operating Cash Flow
$142 Million/15.76 per BOE
o 40 Year Productive Life
o 1,000 Plus Well Infill Drilling
Potential
BENEFITS OF LONG-LIVED
OIL AND GAS RESERVES
o Low Capital Requirement To
Maintain Production Profile
o Stable Production Provides Long Term
Funding for Additional Growth
Opportunities
o Balance Mix Reduces Volatility
Associated with Reliance on a Single
Commodity
TOTAL PROVED RESERVES
<TABLE>
<CAPTION>
LIQUIDS GAS BOE
REGION (MMBBLS) (BCF) (MMBBLS) PERCENT
------ -------- ----- -------- -------
<S> <C> <C> <C> <C>
MID-CONTINENT 106 1,147 297 49%
PERMIAN BASIN 162 407 230 37%
GULF COAST-GOM 19 319 72 12%
OTHER 6 36 12 2%
--- ----- --- ---
TOTAL 293 1,909 611 100%
=== ===== === ===
</TABLE>
GULF COAST - GULF OF MEXICO 1997 CAPEX PROGRAM - $475 MILLION
o Established Operating Position $300 MILLION DEVELOPMENT
Since Mid 1970's $100 MILLION EXPLORATION
$ 75 MILLION ACQUISITIONS
o 61 Offshore Blocks - Over 158,000
Net Acres
o Substantial 3-D Seismic Data Base
o Greenhill Acquisition Additive to
Exploration Inventory with Subsalt
Potential
DEVELOPMENT EXPLORATION
o 700 Well Program o 100 Well Program
o Infill Drilling Programs Focused o Onshore Gulf Coast
on Spraberry and West Panhandle
Fields o East Texas Pinnacle Reef Play
o Greenhill Properties - 200 o Guatemala
Undeveloped Locations
o Greenhill Subsalt Gulf Of Mexico
o Onshore Gulf Coast - Lopeno and
Pawnee o Delaware Basin West Texas
2
<PAGE> 13
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/ Prospectus. Reference is made to, and this summary
is qualified in its entirety by, the more detailed information contained in or
incorporated by reference in this Joint Proxy Statement/Prospectus. Stockholders
are urged to carefully read this Joint Proxy Statement/Prospectus in its
entirety. As used in this Joint Proxy Statement/Prospectus, unless otherwise
required by the context, the term "Mesa" means MESA Inc. and its subsidiaries
taken as a whole, the term "Parker & Parsley" means Parker & Parsley Petroleum
Company and its subsidiaries taken as a whole, and the term "Merger Parties"
means Mesa and Parker & Parsley together. Unless otherwise indicated, all
reserve information is as of December 31, 1996. All information presented for
Pioneer assumes that the Mergers will be consummated in accordance with the
Merger Agreement and all 1997 information with respect to Pioneer is based on
Mesa and Parker & Parsley on a combined basis. Certain terms relating to the oil
and gas business and used herein are defined in the "Glossary of Selected Oil
and Gas Terms" included elsewhere in this Joint Proxy Statement/Prospectus.
Capitalized terms used herein without definition are, unless otherwise
indicated, defined in the Merger Agreement set forth as Appendix I hereto.
THE PIONEER ENTERPRISE
The Mergers will create a preeminent independent oil and gas company by
combining the Merger Parties' long-lived, low cost oil and natural gas reserves,
exploration and exploitation opportunities and state-of-the-art gas processing
facilities. Pioneer will be the third largest independent oil and gas
exploration and production company in the United States, based on total proved
reserves, with a balanced oil and gas reserve base and significant production
and reserve growth potential. Led by a proven management team, Pioneer will have
the financial strength and flexibility to pursue an aggressive growth strategy
through a coordinated balance of exploitation, exploration and acquisition
activities.
Pioneer's principal strengths and strategies will be the following:
Reserves and Production
- Pioneer will have over 611 MMBOE of reserves, comprised of 1.9 Tcf of
natural gas and 293 MMBbls of crude oil and liquids, with an SEC PV10 of
approximately $4.5 billion.
- Pioneer's daily production is expected to be over 64,000 Bbls of oil and
liquids and 459 MMcf of natural gas.
- Pioneer's reserve base will be well balanced, with 52% natural gas and
48% crude oil and liquids, substantially reducing volatility associated
with reliance on a single commodity.
- With an aggregate reserve to production ratio of approximately 12 years,
Pioneer will be one of the few large independent oil and gas companies
that own as principal assets both long-lived gas reserves and long-lived
oil reserves. A significant benefit of owning long-lived reserves is an
enhanced ability to provide long-term funding for additional growth
opportunities.
- More than 85% of Pioneer's total proved reserves will be concentrated in
the Midcontinent region (which includes the Hugoton field of Kansas and
the West Panhandle field of Texas) and in the Permian Basin in West
Texas.
- Pioneer will operate wells representing approximately 85% of its total
proved reserves and will be a dominant operator in the Hugoton, West
Panhandle and Spraberry fields.
Drilling and Growth Opportunities
- Pioneer will benefit from the Merger Parties' substantial experience in
increasing reserves at low finding costs. Over the past three calendar
years, Parker & Parsley has added 288 MMBOE of proved reserves at an
average finding cost of $3.99 per BOE. Mesa has added 48 MMBOE at $2.55
per BOE over the same period.
3
<PAGE> 14
- Pioneer will benefit from the Merger Parties' experience as active
drillers. Over the past three years, Parker & Parsley has consistently
been one of the five most active drilling companies in the United States,
having drilled more than 1,400 wells in that period. Mesa has drilled
over 100 wells during the same period.
- Pioneer's anticipated 1997 capital expenditure budget will be $475
million, which is expected to be funded by internally generated cash
flow. Of that amount, $300 million, or 63%, is expected to be invested in
development drilling and production enhancement activities. An additional
$100 million, or 21%, is expected to be invested in exploration
activities. Acquisitions are targeted to enhance Pioneer's position in
its core areas of operation -- the Midcontinent region, the Permian
Basin, the Gulf Coast and Gulf of Mexico -- and are expected to consume
the balance of the capital budget.
- Pioneer will have in excess of 3,000 drilling locations, primarily in the
Spraberry field, West Panhandle field, Permian Basin and along the Texas
and Louisiana coasts. Management expects those wells to be drilled over
the next five years.
- Pioneer will have more than 787,000 net undeveloped acres (698,000
domestic and 89,000 international).
Management
- Pioneer's management team will be led by Jon Brumley and Scott Sheffield,
the current Chairmen and Chief Executive Officers of the Merger Parties.
Mr. Brumley will serve as Pioneer's Chairman of the Board and Mr.
Sheffield will serve as Pioneer's President and Chief Executive Officer.
Both Jon Brumley and Scott Sheffield are proven leaders in the industry,
with well established records of successfully building oil and gas
companies.
- Mr. Brumley was co-founder and served as Chairman of the Board of Cross
Timbers Oil Company for over ten years before joining Mesa in August
1996, and served as the Chief Executive Officer of Southland Royalty Co.
prior to that time. From the date of Cross Timbers' initial public
offering in May 1993 through December 31, 1995, Mr. Brumley led Cross
Timbers in increasing its total proved reserves from 45.4 MMBOE to 99.7
MMBOE, representing a compound annual growth rate of approximately 30%.
Under Mr. Brumley's leadership from its initial public offering through
June 1996, Cross Timbers' compound annual stockholder return was
approximately 26%. In addition, since he became Chairman of the Board and
Chief Executive Officer of Mesa in August 1996, the market price of Mesa
Common Stock has increased more than 50%.
- Mr. Sheffield has been the Chairman of the Board and Chief Executive
Officer of Parker & Parsley since 1990 where, under his leadership,
Parker & Parsley has increased its total proved reserves from 47.2 MMBOE
as of December 31, 1990 to 302.2 MMBOE as of December 31, 1996, which
represents a compound annual growth rate of more than 36%. In addition,
Parker & Parsley has generated a compound annual stockholder return of
approximately 26% over the five-year period ending December 31, 1996.
- With inside ownership at 17%, significantly higher than its peers,
Pioneer's board of directors' and management team's interests in creating
value will be aligned with those of its stockholders.
Objectives and Growth Strategy
- Increasing stockholder value. Pioneer's goal will be to increase
stockholder value by aggressively pursuing growth opportunities in an
effort to double the cash flow from operations of Pioneer over five
years. To achieve this goal, Pioneer anticipates increasing reserves and
production by adhering to a focused growth strategy. Although Pioneer's
management team believes it can reach this goal, there can be no
assurances that cash flow from operations will double or increase at all.
See "Risk Factors" for a discussion of certain risks associated with
Pioneer's intent to pursue an aggressive growth strategy.
- Developing existing reserves through low-risk development drilling and
production enhancement activities. Pioneer will seek to increase
production and recoverable reserves through the acceleration of
exploitation activities, including infill and development drilling and
recompletions on its core properties and in other areas. Pioneer plans to
invest approximately $300 million in exploitation capital expenditures in
1997. As part of this effort, Pioneer plans to drill approximately 700
development wells,
4
<PAGE> 15
primarily in the Spraberry Trend, the West Panhandle field, the inland
waters of Louisiana, and the onshore Gulf Coast.
- Expanding exploration efforts that expose Pioneer to projects which offer
significant production and reserve potential. Pioneer will expand the
exploration efforts of the Merger Parties by investing $100 million in
1997 on exploratory drilling projects, including some of Pioneer's more
than 70 3-D seismic projects. Pioneer's exploration activities will focus
on using the latest in seismic, horizontal drilling and fracturing
technology to identify and drill sites with high reserve potential, such
as those in the onshore Gulf Coast, the Delaware Basin of West Texas, the
inland waters of the Gulf of Mexico and salt features of offshore Gulf of
Mexico. Pioneer will pursue exploration activities either through its own
initiatives or in joint ventures with other producers, particularly in
the Gulf of Mexico and East Texas.
- Acquiring properties that strengthen Pioneer's position in its core areas
and provide development and exploration opportunities. Pioneer will
pursue strategic acquisitions that either enhance its position in
existing core areas in the Midcontinent region, the Permian Basin, the
Gulf Coast and Gulf of Mexico, or that have the potential of adding or
building new core areas. Opportunities targeted by Pioneer as possible
new core areas include East Texas, Canada, the Rocky Mountains and select
regions in Central and South America. Pioneer will focus its acquisition
efforts on properties that provide opportunities to increase production
and reserves through both exploitation and exploration activities, and
that will provide Pioneer with a high degree of operational control.
- Increasing natural gas processing capacity in core areas. Pioneer intends
to expand the processing capabilities of its state-of-the-art gas
processing facilities in the Hugoton, West Panhandle and Spraberry
fields. Pioneer will also focus its efforts on obtaining additional
dedications of third party gas to these plants. By owning and operating
these processing facilities, Pioneer will be able to retain the
processing margin on the gas it produces as well as capture fees for
processing gas produced by third-parties.
- Maintaining financial strength and flexibility to take advantage of
additional development, exploration and acquisition
opportunities. Pioneer intends to maintain financial strength,
flexibility and an investment grade rating for its senior debt upon
completion of the Mergers. As part of this effort, Pioneer will (i)
actively engage in an ongoing portfolio analysis approach to the
management of its producing assets, including the monetization of
approximately $150 to $200 million of low-margin, marginal growth, or
noncore properties in 1997 and 1998; (ii) to the extent redemption or
conversion of the Parker & Parsley MIPS (as hereinafter defined) has not
already occurred, seek to redeem the Parker & Parsley MIPS for cash or
exchange them into Pioneer Common Stock as soon as practicable in
accordance with their terms; (iii) pursue additional deleveraging of
approximately $200 to $400 million either through acquisitions using
Pioneer Common Stock as an acquisition currency when Pioneer's management
believes such acquisitions are favorable to Pioneer stockholders or
through public equity offerings if market conditions are favorable, or
both, realizing however, there can be no assurance that Pioneer will
complete any acquisitions or equity offerings or any assurance regarding
the terms upon which such acquisitions or offerings could be made; (iv)
use commodity hedging strategies to reduce price risk in supporting its
capital expenditure budget and in connection with its acquisition
activities; and (v) seek to reduce the Merger Parties' current combined
annual general and administrative expenditures by approximately $10 to
$15 million commencing in 1998.
- Aligning the interests of its directors, officers, senior management, key
technical personnel and stockholders. Pioneer believes its greatest
resource is, and its future success is dependent upon, its employees.
Pioneer believes that it is essential to align the interests of
management and employees with those of its stockholders through equity
based compensation plans and ownership of common stock by directors,
officers and employees. To attract, retain and motivate quality
personnel, Pioneer intends to utilize the Pioneer Long-Term Incentive
Plan and the Pioneer Employee Stock Purchase Plan.
Pioneer will be committed to continuing to enhance stockholder value
through adherence to this strategy and believes that its expected inventory of
development, production enhancement and exploratory projects,
5
<PAGE> 16
along with strategic acquisition opportunities that may arise in the future,
will provide ample opportunity for further growth in value. See "Risk
Factors -- Cautionary Statement Regarding Forward-Looking Information."
RISK FACTORS
In evaluating the Mergers, stockholders should take into account the
following risk factors relating to the Mergers, the Merger Parties and Pioneer,
and their respective businesses, which risk factors are discussed at greater
length under the caption "Risk Factors."
- forward looking statements are contained in this Joint Proxy
Statement/Prospectus and, although the Merger Parties believe they are
based on reasonable assumptions, no assurances can be given that actual
results may not differ from such forward looking statements;
- the merger consideration to be received by the stockholders of Mesa and
Parker & Parsley is fixed and will not be adjusted due to market
conditions or in the event of any fluctuations in the price of the stock
of either company;
- prices for oil, natural gas and NGL production and the costs of
acquiring, finding, developing and producing such products are volatile;
- Pioneer will have substantial indebtedness upon consummation of the
Mergers;
- the Merger Parties' reserve information is based upon estimates of proved
reserves and future net cash flows, which may not prove to be accurate;
- Pioneer's success will depend upon replacement of reserves;
- Pioneer's success will depend upon key personnel;
- oil and natural gas operations involve risks that may not be fully
insured;
- governments regulate the oil and natural gas industry extensively;
- oil and natural gas production, development and exploration activities
are competitive;
- certain provisions of Pioneer's charter and bylaws may discourage a
change in control;
- restrictions will exist on the payment of dividends;
- Pioneer Common Stock and Pioneer Preferred Stock will not have a public
market before the Mergers, prices of those stocks may be volatile; and
- holders of Mesa Series A Preferred Stock will receive Pioneer Common
Stock regardless of their individual election if the Mergers are approved
by the holders of a majority of the Mesa Series A Preferred Stock.
THE MERGER PARTIES
Mesa. Mesa is one of the largest independent oil and gas companies in the
United States. Giving effect to recent acquisitions, Mesa had approximately 1.8
Tcfe of proved reserves as of December 31, 1996, with an SEC PV10 of
approximately $2.1 billion. Approximately 93% of Mesa's estimated proved
reserves are proved developed producing with an estimated reserve/production
ratio of over 12 years. Mesa operates wells attributable to approximately 95% of
its reserves. About 86% of Mesa's reserves are concentrated in the Hugoton field
in southwest Kansas and the West Panhandle field in Texas. These fields are
considered to be among the premier natural gas properties in the United States
and are characterized by long-lived reserves and stable, high margin production.
Mesa owns and operates the gas processing facilities that service its reserves
in the two fields and substantially all of the gathering assets related to its
Hugoton reserves. Mesa also has a significant and growing presence offshore in
the Gulf of Mexico, where Mesa has operated since the early 1970's, and has
additional reserves in the inland waters of Louisiana and in the Permian Basin
of West Texas. Approximately 60% of Mesa's total equivalent proved reserves are
natural gas, 30% are NGLs and 10% are oil
6
<PAGE> 17
and condensate. The mailing address and telephone number of Mesa's principal
executive offices are 1400 Williams Square West, 5205 North O'Connor Boulevard,
Irving, Texas 75039, (972) 444-9001.
Parker & Parsley. Parker & Parsley is one of the largest public independent
oil and gas exploration and production companies in the United States. Parker &
Parsley's proved reserves totaled 302.2 million BOE at December 31, 1996,
comprised of 163.9 MMBbls of oil and 829.4 Bcf of natural gas with an SEC PV10
of approximately $2.3 billion. On a BOE basis, 78% of the Parker & Parsley's
total proved reserves at December 31, 1996, are proved developed reserves with
an estimated reserve/production ratio of approximately 12 years. Parker &
Parsley operates approximately 86% of its total proved reserves. Its domestic
oil and gas properties are located principally in the Permian Basin of West
Texas, the onshore Gulf Coast region of South Texas and Louisiana and the
Midcontinent region. Parker & Parsley also owns interests in oil and gas
properties in Argentina and has entered into an exploration farm-in in
Guatemala. Approximately 54% of Parker & Parsley's total equivalent proved
reserves are oil and condensate and 46% are natural gas. The mailing address and
telephone number of Parker & Parsley's principal executive offices are 303 Wall
Street, Suite 101, Midland, Texas 79701, (915) 683-4768.
Pioneer. As a result of the Mergers, Pioneer will be the third largest
independent oil and gas exploration and production company in the United States.
Pioneer is a newly formed Delaware corporation and wholly owned subsidiary of
Mesa that has not, to date, conducted any significant activities other than
those incident to its formation, its execution of the Merger Agreement and its
participation in the preparation of this Joint Proxy Statement/Prospectus. As a
result of the Mergers, the business of Pioneer will be the business currently
conducted by Mesa and Parker & Parsley. Domestic drilling and production
operations will be located in Texas, Kansas, Oklahoma, Louisiana, New Mexico and
offshore Gulf of Mexico. International drilling and production will be located
in Argentina and Guatemala. The mailing address and telephone number of
Pioneer's principal executive offices are 1400 Williams Square West, 5205 North
O'Connor Boulevard, Irving, Texas 75039, (972) 444-9001.
THE SPECIAL MEETINGS
Mesa. The Mesa Special Meeting will be held on Thursday, August 7, 1997 at
2:00 p.m., Dallas time, at the Wyndham Anatole Hotel, Wedgwood Room, 2201
Stemmons Freeway, Dallas, Texas. At the Mesa Special Meeting, the stockholders
of Mesa will be asked to consider and vote upon a proposal to approve and adopt
the Merger Agreement which is summarized below and described in more detail
elsewhere in this Joint Proxy Statement/Prospectus. See "The Merger Agreement."
Holders of capital stock of Mesa will also be asked to approve the adoption of
the Mesa 1996 Incentive Plan, the Pioneer Long-Term Incentive Plan and the
Pioneer Employee Stock Purchase Plan. The consummation of the Mergers is not
conditioned on the approval of the Mesa 1996 Incentive Plan, the Pioneer
Long-Term Incentive Plan or the Pioneer Employee Stock Purchase Plan.
The board of directors of Mesa ("Mesa Board") has established June 27, 1997
("Mesa Record Date") as the date to determine those record holders of Mesa
Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
entitled to notice of and to vote at the Mesa Special Meeting. The affirmative
vote of (i) a majority of the outstanding shares of Mesa Common Stock, voting as
a separate class, (ii) a majority of the outstanding shares of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock, voting as a single class, and
(iii) a majority of the outstanding shares of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock, voting as a single class (in
each case with shares of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock having one vote per share, on an as converted basis), is
required to approve the Merger Agreement. IF A MAJORITY OF THE HOLDERS OF THE
MESA SERIES A PREFERRED STOCK VOTE IN FAVOR OF THE MERGERS, THEN ALL SUCH
HOLDERS SHALL RECEIVE 1.25 SHARES OF PIONEER COMMON STOCK IN EXCHANGE FOR EACH
SEVEN SHARES OF MESA SERIES A PREFERRED STOCK, REGARDLESS OF WHETHER SUCH
HOLDERS ELECTED TO RECEIVE PIONEER PREFERRED STOCK OR PIONEER COMMON STOCK.
ACCORDINGLY, A HOLDER OF THE MESA SERIES A PREFERRED STOCK SHOULD ASSUME THAT IF
IT VOTES IN FAVOR OF THE MERGERS (AND ASSUMING HOLDERS OF A MAJORITY OF SUCH
SHARES ALSO VOTE IN FAVOR OF THE MERGERS), SUCH HOLDER WILL RECEIVE SHARES OF
PIONEER COMMON STOCK AND NOT PIONEER PREFERRED STOCK. HOLDERS OF MESA SERIES A
PREFERRED STOCK SHOULD TAKE SUCH ASSUMPTION INTO CONSIDERATION IN MAKING THEIR
DECISION AS TO HOW TO VOTE ON THE MERGERS. The
7
<PAGE> 18
same majority voting provision applies to the Mesa Series B Preferred Stock;
however, the holder of all of the outstanding shares of Mesa Series B Preferred
Stock has agreed to vote in favor of the approval of the Merger Agreement and to
receive the Mesa Common Consideration pursuant to the Reincorporation Merger.
Approval and adoption of the Mesa 1996 Incentive Plan, the Pioneer
Long-Term Incentive Plan and the Pioneer Employee Stock Purchase Plan requires
that a majority of the shares of Mesa Common Stock, Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock represented in person or by proxy and
entitled to vote at the Mesa Special Meeting, voting as a single class (in each
case with shares of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock having one vote per share, on an as-converted basis), be voted for such
approval.
As of the Mesa Record Date, Mesa directors and executive officers owned an
aggregate of 1,556,012 shares of outstanding Mesa Common Stock, 5,224,707 shares
of outstanding Mesa Series A Preferred Stock and 62,424,436 shares of
outstanding Mesa Series B Preferred Stock, which represent 2%, 55% and 38% of
the voting power in each of the votes described in clauses (i), (ii) and (iii),
respectively, to approve the Merger Agreement and 38% of the voting power in the
vote to approve the Mesa 1996 Incentive Plan, the Pioneer Long-Term Incentive
Plan and the Pioneer Employee Stock Purchase Plan. As of the Mesa Record Date,
certain stockholders beneficially owning an aggregate of 1,500,000 shares of
Mesa Common Stock, 5,138,742 shares of Mesa Series A Preferred Stock and
62,424,436 shares of Mesa Series B Preferred Stock have agreed to vote in favor
of the Merger Agreement, the Mesa 1996 Incentive Plan, the Pioneer Long-Term
Incentive Plan and the Pioneer Employee Stock Purchase Plan, which represent 2%,
54% and 37% of the voting power in each of votes described in clauses (i), (ii)
and (iii), respectively, to approve the Merger Agreement and 37% of the voting
power in the vote to approve the Mesa 1996 Incentive Plan, the Pioneer Long-Term
Incentive Plan and the Pioneer Employee Stock Purchase Plan.
Parker & Parsley. The Parker & Parsley Special Meeting will be held on
Thursday, August 7, 1997 at 2:00 p.m., Dallas time, at the Wyndham Anatole
Hotel, Peacock Room, 2201 Stemmons Freeway, Dallas, Texas. At the Parker &
Parsley Special Meeting, the stockholders of Parker & Parsley will be asked to
consider and vote upon a proposal to approve and adopt the Merger Agreement
which is summarized below and described in more detail elsewhere in this Joint
Proxy Statement/Prospectus. See "The Merger Agreement." Holders of Parker &
Parsley Common Stock will also be asked to approve the adoption of the Pioneer
Long-Term Incentive Plan and the Pioneer Employee Stock Purchase Plan. The
consummation of the Mergers is not conditioned on the approval of the Pioneer
Long-Term Incentive Plan and the Pioneer Employee Stock Purchase Plan.
The board of directors of Parker & Parsley ("Parker & Parsley Board") has
established June 27, 1997 ("Parker & Parsley Record Date") as the date to
determine those record holders of Parker & Parsley Common Stock entitled to
notice of and to vote at the Parker & Parsley Special Meeting. The affirmative
vote of a majority of the outstanding shares of Parker & Parsley Common Stock is
necessary to approve the Merger Agreement. Approval and adoption of the Pioneer
Long-Term Incentive Plan and the Pioneer Employee Stock Purchase Plan requires
that a majority of the shares of Parker & Parsley Common Stock represented in
person or by proxy and entitled to vote at the Parker & Parsley Special Meeting
be voted for that approval.
As of the Parker & Parsley Record Date, Parker & Parsley directors and
executive officers owned an aggregate of 550,868 shares of outstanding Parker &
Parsley Common Stock, which represents 1.6% of the total voting power of shares
of Parker & Parsley Common Stock outstanding on that date.
THE MERGERS
General Description of the Mergers. In the Reincorporation Merger, Mesa
will merge with and into Pioneer with Pioneer being the surviving corporation.
The Reincorporation Merger will have the effect of changing Mesa's state of
incorporation from Texas to Delaware. The Reincorporation Merger is being
effected because of Parker & Parsley's preference that the surviving corporation
in the Mergers be incorporated in Delaware, where Parker & Parsley is
incorporated. The Reincorporation Merger is also being pursued to provide a
mechanism to allow for the conversion of Mesa's Series A and Series B Preferred
Stock into Pioneer Common Stock in order to simplify Pioneer's capital
structure. See " -- Recommendation of Mesa's Board of
8
<PAGE> 19
Directors; Mesa's Reasons for the Merger." Immediately after the Reincorporation
Merger, Parker & Parsley will merge with and into MOC with MOC being the
surviving corporation. As a result, Parker & Parsley will become a wholly-owned
subsidiary of Pioneer.
Consideration to be Received by Mesa Stockholders. Upon consummation of the
Reincorporation Merger, (i) each seven outstanding shares (other than any shares
held directly by Mesa in its treasury or shares held by Parker & Parsley) of
Mesa Common Stock will be converted into the right to receive one share of
Pioneer Common Stock (the "Mesa Conversion Number") and (ii) each seven
outstanding shares (other than any shares held by Mesa in its treasury or shares
held by Parker & Parsley) of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock shall be converted into the right to receive either (a) 1.25
shares of Pioneer Common Stock or (b) one share of Pioneer Preferred Stock, in
each case as the holder thereof shall elect or be deemed to elect as described
below; provided, however, that if the holders of a majority of the outstanding
shares of Mesa Series A Preferred Stock or Mesa Series B Preferred Stock, each
voting as a separate class, vote in favor of the approval of the Merger
Agreement, then all shares of the series for which the vote has been obtained
shall be converted into the right to receive the Mesa Common Consideration
regardless of whether such holders elected to receive Pioneer Preferred Stock or
Pioneer Common Stock. For a description of the Pioneer Common Stock and Pioneer
Preferred Stock, see "Description of Pioneer Capital Stock." For a summary of
the material differences between the rights of holders of Mesa capital stock and
Pioneer capital stock, see "Comparison of Stockholders' Rights." No fractional
shares of Pioneer Common Stock or Pioneer Preferred Stock will be issued to any
stockholder of Mesa upon consummation of the Mergers. Instead, fractional shares
will be aggregated and sold in the open market by American Stock Transfer and
Trust Company (the "Exchange Agent") on behalf of shareholders otherwise
entitled thereto. See "The Mergers -- Fractional Shares."
Consideration to be Received by Parker & Parsley Stockholders. Upon
consummation of the Parker & Parsley Merger, each outstanding share of Parker &
Parsley Common Stock (other than any shares held by Parker & Parsley in its
treasury or shares held by Mesa) will be converted into the right to receive one
share of Pioneer Common Stock (the "Parker & Parsley Conversion Number"). The
Parker & Parsley Common Stock includes the related common stock purchase rights
issued pursuant to the Rights Agreement, dated February 19, 1991, as amended as
of the effective time of the Parker & Parsley Merger (the "Rights Agreement").
For a description of the Pioneer Common Stock, see "Description of Pioneer
Capital Stock." For a summary of the material differences between the rights of
holders of Parker & Parsley capital stock and Pioneer capital stock, see
"Comparison of Stockholders' Rights."
Election Procedures. Each share of Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock outstanding immediately prior to the effective time of
the Reincorporation Merger ("RM Effective Time") will be converted into the
right to receive either Mesa Common Consideration or Mesa Preferred
Consideration, as elected by such holders. Holders of shares of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock who do not make an election
pursuant to the election procedures described herein will be deemed to have
elected to receive the Mesa Preferred Consideration. All such elections are to
be made on a form of election to be mailed to the holders of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock as of the Mesa Record Date.
See "The Mergers -- Election Procedure for Mesa Preferred Stock."
Notwithstanding the foregoing, if the holders of a majority of the outstanding
shares of Mesa Series A Preferred Stock or the holders of a majority of the
outstanding shares of Mesa Series B Preferred Stock, voting separately as a
class, vote in favor of the Merger Agreement, all holders of the series for
which the vote has been obtained will receive the Mesa Common Consideration. In
that case, the individual elections made by holders of such series will be void.
Pursuant to a stockholders agreement, the holder of all of the outstanding
shares of Mesa Series B Preferred Stock has agreed to vote in favor of the
Merger Agreement and to elect to receive the Mesa Common Consideration. See
"Agreements by Mesa Stockholders."
Conditions to the Merger. The respective obligations of the Merger Parties
to consummate the Mergers are subject to the satisfaction of certain conditions,
including (i) the approval of the Merger Agreement by the requisite vote of the
respective stockholders of both of the Merger Parties at the Special Meetings,
(ii) the authorization of the shares of Pioneer Common Stock and Pioneer
Preferred Stock to trade on the NYSE, (iii) the expiration of the relevant
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
9
<PAGE> 20
1976 ("HSR Act"), (iv) the receipt of certain consents and approvals from
Governmental Entities (as hereinafter defined), none of which are known by Mesa
or Parker & Parsley to be required, other than those to be obtained under
applicable securities laws, (v) the Registration Statement having become
effective under the Securities Act, (vi) the absence of any injunction or
similar order preventing consummation of the Mergers, (vii) the receipt of
opinions of legal counsel, dated the closing date of the Mergers, to the effect
that the Mergers will be tax-free reorganizations for Federal income tax
purposes for each party to the Merger Agreement and tax-free to the respective
stockholders of Mesa and Parker & Parsley (other than with respect to cash
received in lieu of fractional shares and certain special circumstances), and
(viii) other conditions customary for transactions of this nature.
Amendment and Waiver. The Merger Agreement may be amended at any time
before or after stockholder approval. After stockholder approval has been
obtained, no amendment may be made that requires further approval of Mesa or
Parker & Parsley stockholders without first obtaining such stockholder approval.
Either Mesa or Parker & Parsley may extend the time for performance of any of
the obligations of the other party or waive compliance with any of the
agreements or conditions contained in the Merger Agreement. Neither Mesa nor
Parker & Parsley currently has any intention to allow for such extension or make
any such waiver.
No Solicitation. Mesa and Parker & Parsley have each agreed that, from and
after the date of the Merger Agreement, such party will not, and will not
authorize or (to the extent within its control) permit any of its officers,
directors, employees, agents, affiliates and other representatives or those of
any of its subsidiaries to, directly or indirectly, solicit or encourage
(including by way of providing information) any prospective acquiror or the
invitation or submission of any inquiries, proposals or offers or any other
efforts or attempts that constitute, or may reasonably be expected to lead to,
any "acquisition proposal" for Mesa or Parker & Parsley, as applicable, from any
person or engage in any discussions or negotiations with respect thereto or
otherwise cooperate with or assist or participate in, or facilitate any such
proposal; provided, however, that (i) the Board of Directors of Mesa or Parker &
Parsley, as applicable, may take and disclose to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (ii)
following receipt from a third party (without any solicitation, initiation or
encouragement, directly or indirectly, by Mesa or Parker & Parsley, as
applicable, or its respective representatives) of a bona fide acquisition
proposal, (a) Mesa or Parker & Parsley, as applicable, may engage in discussions
or negotiations with such third party and may furnish such third party
information concerning it, and its business, properties and assets if such third
party executes a confidentiality agreement in reasonably customary form and (b)
the Board of Directors of Mesa or Parker & Parsley, as applicable, may withdraw,
modify or not make its recommendation to approve the Merger Agreement to its
stockholders or terminate the Merger Agreement in accordance with its terms, but
in each case referred to in the foregoing clauses (i) and (ii), only to the
extent that the Board of Directors of Mesa or Parker & Parsley, as applicable,
shall conclude in good faith based on the advice of its outside counsel that
such action is necessary in order for the Board of Directors of Mesa or Parker &
Parsley, as applicable, to act in a manner that is consistent with its fiduciary
obligations under applicable law. Each party is required to notify the other
party if any such acquisition proposal is received or if discussions or
negotiations are pursued with a third party, including the identity of the
person or group engaging in such discussions or negotiations, requesting
information or making such acquisition proposal, and the material terms and
conditions of any such proposal (subject to certain exceptions). As defined in
the Merger Agreement, the term "acquisition proposal" includes any proposal or
offer that could be reasonably expected to lead to a tender or exchange offer, a
merger, consolidation or other business combination involving Mesa or Parker &
Parsley, as applicable, or any of their respective significant subsidiaries, or
any proposal to acquire in any manner a substantial equity interest in, or any
substantial portion of the assets of, Mesa or Parker & Parsley, as applicable,
or any of its respective significant subsidiaries. See "Certain Terms of the
Merger Agreement -- Certain Covenants; Conduct of Business of Parker & Parsley
and Mesa."
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Reincorporation Merger (i) by mutual consent of the
parties; (ii) by either party if a Governmental Entity issues an injunction
prohibiting the Mergers; (iii) by either party if the stockholders fail to
approve the Mergers at either Special Meeting; (iv) by either party if the
Mergers are not consummated by December 31,
10
<PAGE> 21
1997; (v) by either Mesa or Parker & Parsley if the other party shall have
failed to comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement, or any representation or warranty of the
other party contained in the Merger Agreement shall not be true in all material
respects when made or at the time of termination as if made at such time, or if
after the date of the Merger Agreement there has been any material adverse
change to the business, operations, assets, condition (financial or otherwise)
or results of operations of the other party and its subsidiaries taken as a
whole, except for general economic changes or changes that may affect the
industries of such other party or any of its subsidiaries generally; (vi) by
either Mesa or Parker & Parsley if the other party's board of directors
withdraws or modifies in any manner which is adverse to Mesa or Parker &
Parsley, as applicable, its recommendation of the Mergers or resolves to do so;
(vii) by either Mesa or Parker & Parsley under certain circumstances if it
receives from another party an unsolicited acquisition proposal as described
above under "-- No Solicitation" or the Board of Directors of the other party
shall have recommended to its stockholders any other acquisition proposal or
transaction as described above under "-- No Solicitation;" and (viii) by either
Mesa or Parker & Parsley if the average trading price of Mesa Common Stock for
the fifteen day trading period beginning twenty trading days prior to the date
of the Special Meetings (the "Measurement Period") is less than $5.00 per share.
Based on the August 7, 1997 date for the Special Meetings, the Measurement
Period will begin on July 10, 1997 and end on July 30, 1997. See "Certain Terms
of the Merger Agreement -- Termination."
If the Merger Agreement is terminated under certain circumstances, Mesa or
Parker & Parsley may be required to pay the other party a termination fee of $45
million. See "Certain Terms of the Merger Agreement -- Expenses and Termination
Fee."
PIONEER'S BOARD OF DIRECTORS FOLLOWING THE MERGERS
Upon consummation of the Mergers, I. Jon Brumley, John S. Herrington,
Kenneth A. Hersh, Boone Pickens, Richard E. Rainwater, Philip B. Smith and
Robert L. Stillwell, who are currently directors of Mesa, and R. Hartwell
Gardner, James L. Houghton, Jerry P. Jones, Charles E. Ramsey, Jr., Scott D.
Sheffield, Arthur L. Smith and Michael D. Wortley, who are currently directors
of Parker & Parsley, will be members of the Board of Directors of Pioneer.
RECOMMENDATION OF MESA'S BOARD OF DIRECTORS; MESA'S REASONS FOR THE MERGER
The Mesa Board believes that the terms of the Mergers are fair to and in
the best interests of Mesa and its stockholders and has unanimously approved the
Merger Agreement and the Mergers. The Mesa Board unanimously recommends that
Mesa's stockholders adopt and approve the Merger Agreement.
In reaching its conclusion, the Mesa Board considered a number of
strategic, financial and other factors, including:
- Growth Strategy. The Mesa Board considered how the various aspects of
combining with Parker & Parsley to form Pioneer would achieve the
expansion and growth strategies that the Mesa Board had established,
particularly increasing reserves, production and cash flow by expanding
into new core areas that would provide a large inventory of reinvestment
projects. The Mesa Board believes that the complementary nature of the
two companies will provide a strong foundation for a successful growth
strategy that will benefit Pioneer's stockholders.
- Property Characteristics. The Mesa Board considered many aspects of the
Parker & Parsley properties to be attractive in the context of a merger
with Mesa, specifically the high level of operational control, the
concentration of reserves, the domestic location of the properties and
their long life nature. The Mesa Board believes that these four factors
combine to give reinvestment projects on these properties a better chance
of success.
11
<PAGE> 22
- Benefits of a Larger Enterprise. Pioneer will be a substantially larger
enterprise than Mesa and will have a larger market capitalization than
Mesa. The Mesa Board considered that the Mergers would create a
substantial pool of reserves and production capacity, and considered the
benefits of the potential economies of scale that might arise. In
particular, the Mesa Board considered the benefits of purchasing power
and operational synergies and the fact that the combined entity should
produce significantly greater cash flows than Mesa, which should allow
Mesa's stockholders to participate in opportunities that might not
otherwise be available to Mesa for growth through acquisitions,
development and exploration, and that would have different risk and
reward characteristics.
- Improved Capital Structure. Mesa's Board considered the potential
benefits of a simpler capital structure and a larger public equity float.
In particular, the Mesa Board considered that the conversion of all of
the Mesa Series B Preferred Stock and all or a portion of the Mesa Series
A Preferred Stock into Pioneer Common Stock in the Mergers would lead to
a better understanding of the combined entity's equity value in the
investment community and that elimination of both the preferred stock
overhang on the value of the common stock and the disproportionate voting
rights of the Mesa Series B Preferred Stock in the election of directors
would be seen as a positive step by the investing community. The Mesa
Board also considered that Mesa's stockholders should enjoy enhanced
liquidity as a result of Pioneer's larger stockholder base and the
increased visibility resulting from heightened market research and
institutional investor focus on a larger combined entity.
- Management. The Mesa Board also considered the depth and breadth of
management of Parker & Parsley, including Scott Sheffield, who will serve
as Pioneer's Chief Executive Officer, whom the Mesa Board considers to be
among the most experienced and successful builders of independent oil and
gas companies in the United States.
- Financial. The Mesa Board reviewed a financial analysis of the impact of
the Mergers on the balance sheet and cash flow of the combined company
which showed, among other things, that discretionary cash flow per share
would be accretive to Mesa's shareholders in 1998.
- Merger Agreement. The Mesa Board considered the terms and conditions of
the Merger Agreement, including without limitation, the consideration to
be received by each class of Mesa stockholders in the Mergers (which are
anticipated to be tax free reorganizations) and the stockholder approval
requirements of the Merger Agreement. See "Certain Terms of the Mergers."
- Mesa Preferred Stock Exchange Ratio. In addition to the several matters
described above, in reviewing and considering the determination of the
exchange ratio for preferred stock, the Mesa Board considered (i) the
process undertaken by management in making a recommendation to the Mesa
Board regarding the exchange ratio, including the retention of financial
advisors to render fairness opinions from the point of view of the
holders of Mesa Common Stock and Mesa Series A Preferred Stock; (ii)
information relating to Mesa's capital stock, including, principally the
relative market prices of the Mesa Common Stock and Mesa Series A
Preferred Stock over various time periods; (iii) the matters described
under "The Mergers -- Background;" and (iv) the stock ownership and other
interests of directors and officers in the transaction, as described
under "Ownership of Mesa, Parker & Parsley and Pioneer Common Stock" and
"The Mergers -- Interests of Certain Persons in the Mergers."
The Mesa Board also relied on the opinions of Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") and Morgan Stanley & Co. Incorporated
("Morgan Stanley") described below. See "The Mergers -- Recommendation of Mesa
Board; Mesa's Reasons for the Mergers."
RECOMMENDATION OF PARKER & PARSLEY'S BOARD OF DIRECTORS; PARKER & PARSLEY'S
REASONS FOR THE MERGER
The Parker & Parsley Board believes that the terms of the Merger Agreement
are fair to and in the best interests of Parker & Parsley and its stockholders
and has unanimously approved the Merger Agreement and the Parker & Parsley
Merger. The Parker & Parsley Board unanimously recommends that Parker &
Parsley's stockholders adopt and approve the Merger Agreement.
12
<PAGE> 23
In reaching its conclusion, the Parker & Parsley Board considered a number
of factors, including:
- Benefits of a Larger Enterprise. The Parker & Parsley Board considered
various benefits of holding an ownership interest in Pioneer, which will
be a substantially larger enterprise with a larger market capitalization,
enhanced liquidity and increased visibility resulting from heightened
market research and institutional investor focus. The Parker & Parsley
Board believed that, over time, the significantly larger enterprise value
and market capitalization, coupled with both long-lived oil and gas
reserves, should result in higher trading multiples for Pioneer Common
Stock compared to the historical trading multiples for Parker & Parsley
Common Stock. The Parker & Parsley Board also considered that the
combined entity should produce significantly greater cash flows that
should allow participation in opportunities for growth in oil and gas
reserves and production, either through acquisitions, exploration,
exploitation or entries into new core areas, that might not otherwise be
available to Parker & Parsley.
- Quality and Nature of Mesa's and Pioneer's Assets. The Parker & Parsley
Board considered the favorable financial performance and stable cash
flows generated by Mesa's assets in the Hugoton and West Panhandle
Fields, that Pioneer's reserve base would be well balanced, and that
Pioneer's primary assets would consist of both long-lived gas and
long-lived oil reserves. The Parker & Parsley Board also considered that,
although it appeared that there would be an initial marginal dilution in
cash flow for Parker & Parsley stockholders, there should be an accretion
in cash flow beginning in 1999 and thereafter, due to the nature of
Mesa's long-lived gas reserves and anticipated reinvestment opportunities
using that cash flow. The Parker & Parsley Board also considered the
immediate significant effect that the Mergers would have on the
achievement of certain of Parker & Parsley's strategic goals, including
growth in production and total reserves, growth in market capitalization,
and exposure to a new core area, namely the exploration potential of the
Gulf of Mexico through Mesa's interest in 60 offshore exploration blocks
and in its recent acquisition of Greenhill Petroleum Company.
- Management and Significant Stockholders. The Parker & Parsley Board
considered that the experience of Jon Brumley, who will serve as
Pioneer's Chairman of the Board, and Richard Rainwater, who will be the
largest individual stockholder of Pioneer upon consummation of the
Mergers, could benefit Parker & Parsley's stockholders by quickly and
aggressively building shareholder value.
- Financial. The Parker & Parsley Board reviewed a broad range of financial
information and analysis regarding Mesa, Parker & Parsley and the two
companies on a pro forma combined basis, including a financial comparison
of Mesa and Parker & Parsley, a review of the potential effect of the
Mergers on the balance sheet of the combined company, and a comparison of
the relative contribution made by Mesa and Parker & Parsley to the
combined levels of certain measures of Pioneer's financial and operating
condition.
- Merger Agreement. The Parker & Parsley Board considered the terms and
conditions of the Merger Agreement, including the consideration to be
received by the Parker & Parsley stockholders and the 17% premium the
consideration represented to the trading price of Parker & Parsley's
common stock on the last trading day preceding the execution of the
Merger Agreement. The Parker & Parsley Board also considered that
provisions of the Merger Agreement restrict Mesa's right to solicit or
engage in negotiations or discussions with respect to acquisition
proposals for Mesa, and gave special consideration to the fact that both
Parker & Parsley and Mesa may, in their discretion, terminate the Merger
Agreement if the average trading price for Mesa Common Stock during the
Measurement Period is less than $5.00 per share. The Parker & Parsley
Board considered the established floor value of $35.00 for Parker &
Parsley stockholders at the end of the Measurement Period to be important
because it significantly enhanced the likelihood of conversion or
redemption of the Parker & Parsley MIPS prior to or after the closing of
the Mergers.
- Stockholders Agreements. The Parker & Parsley Board considered the terms
of the agreements of DNR - MESA Holdings, L.P., an affiliate of Richard
E. Rainwater ("DNR"), and Boone Pickens to vote in favor of the Merger
Agreement and to elect to receive the Mesa Common Consideration in the
Reincorporation Merger.
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<PAGE> 24
The Parker & Parsley Board also relied on the opinion of Goldman, Sachs &
Co. ("Goldman Sachs") described below. See "The Mergers -- Recommendation of
Parker & Parsley Board; Parker & Parsley's Reasons for the Mergers."
OPINIONS OF FINANCIAL ADVISORS
Mesa. At the April 3, 1997 meeting of the Mesa Board held to consider
entering into the Merger Agreement, Merrill Lynch, financial advisor to Mesa,
delivered its oral opinions (subsequently confirmed in writing by letter dated
April 4, 1997) that, subject to the factors and assumptions stated therein and
as of such date, (i) the Mesa Conversion Number and the Parker & Parsley
Conversion Number are fair from a financial point of view to the holders of Mesa
Common Stock and (ii) the Mesa Common Consideration is fair from a financial
point of view to the holders of Mesa Common Stock. Also at the April 3, 1997
meeting of the Mesa Board, Morgan Stanley delivered its oral opinion
(subsequently confirmed in writing by letter dated April 4, 1997) that, subject
to the factors and assumptions stated therein and as of such date, the Mesa
Common Consideration and the Mesa Preferred Consideration are fair from a
financial point of view to the holders of Mesa Series A Preferred Stock.
Parker & Parsley. At the April 6, 1997 meeting of the Parker & Parsley
Board held to consider and vote on entering into the Merger Agreement, Goldman
Sachs, financial advisors to Parker & Parsley, delivered their written opinion
that, subject to the factors and assumptions stated therein and as of such date,
the Parker & Parsley Conversion Number pursuant to the Merger Agreement is fair
to the holders of Parker & Parsley Common Stock.
For information on the assumptions made, matters considered and limits of
the reviews by Merrill Lynch, Morgan Stanley and Goldman Sachs, see "The
Mergers -- Fairness Opinions." Stockholders are urged to read in their entirety
the full text of the opinions of Merrill Lynch, Morgan Stanley and Goldman
Sachs, which are set forth as Appendices II, III, IV and V to this Joint Proxy
Statement/Prospectus. See "The Mergers -- Fairness Opinions" for information
concerning compensation paid or payable to those firms in connection with the
Mergers.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the recommendations of the Boards of Directors of the Merger
Parties, stockholders should be aware that certain members of the Boards of
Directors of the Merger Parties and certain executive officers of the Merger
Parties have interests in the Mergers separate from their interests as
stockholders including executive severance arrangements. See "The
Mergers -- Interests of Certain Persons in the Mergers."
CERTAIN UNITED STATES INCOME TAX CONSEQUENCES
The Mergers have been structured to qualify as nontaxable exchanges under
the Internal Revenue Code of 1986, as amended (the "Code"). Mesa received an
opinion from Baker & Botts, L.L.P. and Parker & Parsley received an opinion from
Vinson & Elkins L.L.P. to the effect that no gain or loss will be recognized by
Mesa or Parker & Parsley, respectively, or by their respective stockholders, in
connection with the Mergers (other than with respect to cash received in lieu of
fractional shares and certain special circumstances). It is a condition to the
Mergers that those opinions be delivered again on the closing date of the
Mergers. Neither party intends to waive this condition. See "The
Mergers -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
The Parker & Parsley Merger will be accounted for as a purchase of Mesa by
Parker & Parsley for financial accounting purposes. See "The
Mergers -- Accounting Treatment."
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<PAGE> 25
APPRAISAL OR DISSENTER'S RIGHTS
None of Mesa's or Parker & Parsley's stockholders are entitled to any
appraisal or dissenters' rights under applicable state law in connection with
the Mergers, except for the sole holder of the Mesa Series B Preferred Stock,
which holder has waived in writing such rights.
GOVERNMENTAL AND REGULATORY APPROVALS
Consummation of the Mergers is conditioned upon the expiration or
termination of the waiting period under the HSR Act. The waiting period under
the HSR Act expired on May 21, 1997. Neither Mesa nor Parker & Parsley is aware
of any other governmental or regulatory approval required for consummation of
the Mergers, other than compliance with applicable securities laws. See "The
Mergers -- Governmental and Regulatory Approvals."
STOCK-BASED COMPENSATION PLANS
If the Merger Agreement and the Pioneer Long-Term Incentive Plan are
approved by the stockholders of Mesa and Parker & Parsley, no additional awards
will be granted under the Mesa 1996 Incentive Plan or Parker & Parsley's
Long-term Incentive Plan.
COMPARATIVE MARKET PRICE DATA
Mesa. The Mesa Common Stock and Mesa Series A Preferred Stock are traded on
the NYSE under the symbol "MXP" and "MXPPrA," respectively. The Mesa Series A
Preferred Stock started trading on the NYSE on July 3, 1996. The following table
reflects the high and low sales prices of Mesa Common Stock and Mesa Series A
Preferred Stock by quarter for the periods indicated.
<TABLE>
<CAPTION>
MESA
MESA SERIES A
COMMON PREFERRED
STOCK STOCK
-------------------- --------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1997
Second Quarter (through June 25)............................ $6 $4 5/8 $7 5/8 $5 7/8
First Quarter............................................... 6 1/2 5 7 3/4 5 7/8
1996
Fourth Quarter.............................................. 5 1/2 4 6 5/8 5
Third Quarter............................................... 5 1/2 2 7/8 5 3/8 3 3/8
Second Quarter.............................................. 5 1/2 2 5/8 -- --
First Quarter............................................... 4 2 5/8 -- --
1995
Fourth Quarter.............................................. 4 7/8 3 -- --
Third Quarter............................................... 5 1/2 3 7/8 -- --
Second Quarter.............................................. 6 1/8 3 1/2 -- --
First Quarter............................................... 6 1/8 4 5/8 -- --
</TABLE>
On April 4, 1997, the last trading day before Mesa and Parker & Parsley
publicly announced that they had signed the Merger Agreement, the last reported
sales prices for shares of Mesa Common Stock and Mesa Series A Preferred Stock
were $5 3/4 and $7 1/4 per share, respectively.
Parker & Parsley. The Parker & Parsley Common Stock is traded on the NYSE
under the symbol "PDP." The following table sets forth the high and low sales
prices for Parker & Parsley's Common Stock by quarter for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
Second Quarter (through June 25)............................ $36 $28 1/2
First Quarter............................................... 37 5/8 28 7/8
</TABLE>
15
<PAGE> 26
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
Fourth Quarter.............................................. 37 1/4 26 1/8
Third Quarter............................................... 27 3/4 22 1/4
Second Quarter.............................................. 27 7/8 22 3/4
First Quarter............................................... 23 3/4 19 3/8
1995
Fourth Quarter.............................................. 22 17 1/2
Third Quarter............................................... 23 1/4 17 3/8
Second Quarter.............................................. 22 3/4 18 5/8
First Quarter............................................... 22 7/8 165/16
</TABLE>
On April 4, 1997, the last trading day before Mesa and Parker & Parsley
publicly announced that they had signed the Merger Agreement, the last reported
sales price for shares of Parker & Parsley Common Stock was $29 7/8 per share.
Pioneer. Application has been made to list the Pioneer Common Stock and
Pioneer Preferred Stock on the NYSE.
Dividends. Since the third quarter of 1991, Parker & Parsley has paid a
cash dividend of $.05 per share of Parker & Parsley Common Stock in the first
and third quarters of each calendar year. Parker & Parsley has recorded interest
expense of $12 million, $12 million and $9.1 million during 1996, 1995 and 1994,
respectively, with respect to interest payments on a loan from its subsidiary,
Parker & Parsley Capital LLC ("P&P Capital"), which loan was financed by the
sale of 3,776,400 shares of 6 1/4% Cumulative Guaranteed Monthly Income
Convertible Preferred Shares (the "Parker & Parsley MIPS") of P&P Capital.
Parker & Parsley also distributed common stock purchase rights to the holders of
record of Parker & Parsley Common Stock on February 19, 1991.
Mesa has not paid any dividends or distributions with respect to its equity
securities, including the Mesa Common Stock, since 1990 other than (i) the
distribution of regular 8% annual payable-in-kind ("PIK") dividends paid
quarterly to the holders of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock in accordance with the Statement of Resolution of Mesa
establishing such series of stock, (ii) the distribution of rights to purchase
shares of Mesa Series A Preferred Stock to the holders of record of Mesa Common
Stock on July 3, 1996 in connection with a recapitalization transaction and
(iii) the distribution of preferred stock purchase rights to the holders of Mesa
Common Stock under Mesa's former Shareholder Rights Plan in July 1995.
Mesa's credit facility and debt indentures restrict the payment of
dividends and distributions with respect to Mesa's equity securities, other than
those paid in the form of equity securities. In addition, the Statement of
Resolution establishing the Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock prohibits the payment of dividends with respect to Mesa Common
Stock for so long as any shares of the Mesa Series A Preferred Stock or Mesa
Series B Preferred Stock remain outstanding.
The Statement of Resolution establishing the Pioneer Preferred Stock will
prohibit the payment of dividends with respect to Pioneer Common Stock for so
long as any shares of the Pioneer Preferred Stock remain outstanding. If there
are no shares of Pioneer Preferred Stock outstanding, Pioneer initially intends
to pay a semi-annual dividend of $.05 per share on each share of Pioneer Common
Stock outstanding, subject to compliance with or obtaining waivers or amendments
of restrictions imposed by the outstanding debt of Pioneer.
16
<PAGE> 27
CERTAIN COMPARATIVE PER SHARE DATA
The following table presents comparative per share information for Mesa and
Parker & Parsley on a historical basis and on a pro forma basis for the three
months ended March 31, 1997 and for the year ended December 31, 1996 under each
of the Mesa Series A Preferred Stock conversion scenarios described in the
Unaudited Pro Forma Combined Financial Statements, assuming that the Mergers had
occurred on January 1, 1996 for cash dividends and income (loss) per common
share purposes and as of March 31, 1997 for book value per common share
purposes. The tables should be read in conjunction with the financial statements
of Mesa and Parker & Parsley incorporated by reference in this Joint Proxy
Statement/Prospectus and the unaudited pro forma combined financial statements
and related notes included elsewhere herein. See "Unaudited Pro Forma Combined
Financial Statements."
<TABLE>
<CAPTION>
PIONEER PRO FORMA
--------------------------------
PARKER & SERIES A SERIES A SERIES A
PARSLEY MESA 100% 50% 0%
-------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
Book value per common share at March 31,
1997..................................... $15.59 $(0.04)(b) $22.78(d) $24.27(d) $26.05(d)
Three-months ended March 31, 1997:
Cash dividends per common share(c)....... 0.05 -- -- -- --
Income per common share:
Primary............................... 0.53 0.10 0.15 0.14 0.11
Fully diluted......................... 0.49 0.07 0.15 0.14 0.11
Year ended December 31, 1996:
Cash dividends per common share(c)....... 0.10 -- -- -- --
Income (loss) per common share before
extraordinary item:
Primary............................... 3.92 (0.02) 0.55 0.47 0.38
Fully diluted......................... 3.47 (0.02) 0.55 0.47 0.38
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA EQUIVALENT-MESA(A)
--------------------------------
SERIES A SERIES A SERIES A
100% 50% 0%
-------- -------- --------
<S> <C> <C> <C> <C> <C>
Book value per common share at March 31,
1997..................................... $ 3.25 $ 3.47 $ 3.72
Three-months ended March 31, 1997:
Cash dividends per common share(c)....... -- -- --
Income per common share:
Primary............................... 0.02 0.02 0.02
Fully diluted......................... 0.02 0.02 0.02
Year ended December 31, 1996:
Cash dividends per common share(c)....... -- -- --
Income per common share:
Primary............................... 0.08 0.07 0.05
Fully diluted......................... 0.08 0.07 0.05
</TABLE>
- ---------------
(a) Represents the pro forma amounts divided by the Mesa Conversion Number.
(b) Mesa's book value per common share was calculated by subtracting the
liquidation preference of preferred stock ($2.26 per share multiplied by the
number of outstanding shares of Mesa Series A and Series B Preferred Stock
on the applicable date, which was 124,075,599 at March 31, 1997) from total
shareholders' equity and dividing the results by total common shares
outstanding on the applicable date.
(c) The terms of the Pioneer Preferred Stock, should any shares be outstanding
upon consummation of the Mergers, will prohibit the payment of dividends on
Pioneer Common Stock. The terms of Mesa's credit facility and debt
indentures will limit the payment of dividends on Pioneer Common Stock
unless amended or waived. See "-- Dividends -- Pioneer" and "Risk
Factors -- Restrictions on Dividends."
(d) Pioneer's pro forma book value per common share was calculated by
subtracting the initial stated value of preferred stock ($15.82 per share
multiplied by the number of Pioneer preferred shares, 0, 4,403,654 and
8,807,309 shares for the 100%, 50% and 0% cases respectively) from total pro
forma shareholders' equity and dividing the results by total pro forma
common shares outstanding.
17
<PAGE> 28
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Mesa. The following table sets forth selected financial information of Mesa
for each of the three months ended March 31, 1997 and 1996 and for the five
fiscal years in the period ended December 31, 1996. This data should be read in
conjunction with the Consolidated Financial Statements of Mesa and the related
notes thereto incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
----------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues.......................... $ 94.1 $ 80.6 $ 311.4 $ 235.0 $ 228.7 $ 222.2 $ 237.1
Total operating expenses.......................... 59.4 55.3 214.7 187.0 200.0 200.2 210.9
------- ------- ------- ------- ------- ------- -------
Operating income.................................. 34.7 25.3 96.7 48.0 28.7 22.0 26.2
------- ------- ------- ------- ------- ------- -------
Net interest expense(a)........................... (22.3) (34.5) (113.4) (132.7) (131.3) (131.3) (129.9)
Other income(b)................................... (0.2) 10.3 25.0 27.1 19.2 6.9 14.5
------- ------- ------- ------- ------- ------- -------
Income (loss) from continuing operations(c)....... 12.2 $ 1.1 8.3 $ (57.6) $ (83.4) $(102.4) $ (89.2)
======= ======= ======= ======= =======
Dividends on preferred stock...................... (5.5) (9.5)
------- -------
Income (loss) from continuing operations
applicable to common stock(c)................... $ 6.7 $ (1.2)
======= =======
Income (loss) from continuing operations per
common share(d)................................. $ 0.10 $ 0.02 $ (0.02) $ (0.90) $ (1.42) $ (2.61) $ (2.31)
======= ======= ======= ======= ======= ======= =======
Weighted average common shares and common share
equivalents outstanding......................... 65.8 64.1 64.2 64.1 58.9 39.3 38.6
OTHER FINANCIAL DATA:
EBITDAEX(e)....................................... $ 61.1 $ 70.2 $ 228.6 $ 183.4 $ 160.3 $ 142.4 $ 178.1
Cash flows from operating activities.............. 66.1 (2.2) 101.3 69.2 48.6 32.5 (28.4)
Cash flows from investing activities.............. (98.4) (10.0) (45.0) (41.4) (40.3) 37.5 (17.0)
Cash flows from financing activities.............. 35.8 (21.2) (188.7) (22.1) (3.6) (88.5) (29.5)
Capital expenditures.............................. 97.9 9.8 50.2 42.3 32.6 29.6 69.2
Ratio of earnings to fixed charges(f)............. 1.2 1.0 NM NM NM NM NM
BALANCE SHEET DATA (END OF PERIOD):
Working Capital................................... $ 3.2 $ 52.8 $ 14.8 $ 43.8 $ 115.7 $ 76.2 $ 102.9
Property, plant and equipment, net................ 1,097.2 1,062.0 1,046.4 1,104.8 1,130.4 1,191.8 1,280.3
Total assets...................................... 1,248.9 1,409.1 1,213.9 1,486.8 1,484.0 1,533.4 1,676.5
Long-term debt, including current maturities...... 848.7 1,214.3 808.1 1,236.7 1,223.3 1,241.3 1,286.2
Stockholders' equity.............................. 277.7 68.0 265.5 67.0 124.6 112.1 184.4
</TABLE>
- ---------------
(a) Net interest expense represents total interest expense less interest income.
(b) See "Mesa -- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Other Income (Expense)"
for additional detail.
(c) Loss from continuing operations excludes a $59.4 million ($.92 per common
share) extraordinary loss on debt extinguishment for 1996. Net loss
attributable to common stock was $60.6 million ($.94 per common share) for
the year ended December 31, 1996. Net loss and net loss per share for the
years ended December 31, 1995, 1994, 1993, and 1992 and the three months
ended March 31, 1997 and 1996 are the same as loss from continuing
operations and loss from continuing operations per common share shown above.
(d) Fully diluted earnings per share was $0.07 for the three months ended March
31, 1997. There were no dilutive securities in the other periods presented.
(e) EBITDAEX is presented because of its wide acceptance as a financial
indicator of a company's ability to service or incur debt. EBITDAEX (as used
herein) is calculated by adding interest, depletion, depreciation and
amortization, and exploration costs to loss from continuing operations
applicable to common stock. Interest includes accrued interest expense and
amortization of deferred financing costs. EBITDAEX should not be considered
as an alternative to earnings (loss) or operating earnings (loss), as
defined by generally accepted accounting principles, as an indicator of
Mesa's financial performance, as an alternative to cash flow, as a measure
of liquidity or as being comparable to other similarly titled measures of
other companies.
18
<PAGE> 29
(f) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as loss from continuing operations applicable to common stock
plus fixed charges. Fixed charges consist of interest expense, capitalized
interest and preferred stock dividends. Earnings were inadequate to cover
fixed charges for the years ended December 31, 1996 through 1992 by $1.3
million, $58.5 million, $83.5 million, $105.3 million and $91.6 million,
respectively.
19
<PAGE> 30
Parker & Parsley. The following table sets forth selected consolidated
financial information of Parker & Parsley for the three months ended March 31,
1997 and 1996 and for each of the five fiscal years in the period ended December
31, 1996. This data should be read in conjunction with the Consolidated
Financial Statements of Parker & Parsley and the related notes thereto
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------------------------
1997 1996 1996 1995 1994(B) 1993(A) 1992
----------- ----------- -------- -------- -------- -------- -------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues............... $ 110.6 $ 103.4 $ 420.7 $ 485.8 $ 479.7 $ 328.5 $ 201.8
Total operating expenses(c)............ 74.5 76.2 286.4 587.0 461.8 280.5 163.1
----------- ----------- -------- -------- -------- -------- -------
Operating income (loss)................ 36.1 27.2 134.3 (101.2) 17.9 48.0 38.7
----------- ----------- -------- -------- -------- -------- -------
Other revenues and expenses:
Interest and other income............ 2.1 1.2 17.5 11.4 6.9 4.4 4.2
Gain on disposition of assets, net
(d)................................ .8 13.7 97.1 16.6 9.5 23.2 4.2
Interest expense..................... (9.9) (14.7) (46.2) (65.4) (50.5) (23.3) (14.7)
Other expenses....................... (.4) (.4) (2.4) (11.4) (4.3) (3.9) (2.3)
----------- ----------- -------- -------- -------- -------- -------
(7.4) (.2) 66.0 (48.8) (38.4) .4 (8.6)
----------- ----------- -------- -------- -------- -------- -------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting change.......... 28.7 27.0 200.3 (150.0) (20.5) 48.4 30.1
Income tax benefit (provision)......... (10.1) (12.3) (60.1) 45.9 6.5 (17.0) (3.0)
----------- ----------- -------- -------- -------- -------- -------
Income (loss) before extraordinary item
and cumulative effect of accounting
change............................... 18.6 14.7 140.2 (104.1) (14.0) 31.4 27.1
----------- ----------- -------- -------- -------- -------- -------
Extraordinary item....................... -- -- -- 4.3 (.6) -- --
Cumulative effect of accounting change... -- -- -- -- -- 17.1 --
----------- ----------- -------- -------- -------- -------- -------
Net income (loss)........................ $ 18.6 $ 14.7 $ 140.2 $ (99.8) $ (14.6) $ 48.5 $ 27.1
=========== =========== ======== ======== ======== ======== =======
Income (loss) before extraordinary item
and cumulative effect of accounting
change per share:
Primary.............................. $ .53 $ .41 $ 3.92 $ (2.95) $ (.47) $ 1.13 $ 1.05
=========== =========== ======== ======== ======== ======== =======
Fully diluted........................ $ .49 $ .39 $ 3.47 $ (2.95) $ (.47) $ 1.13 $ 1.05
=========== =========== ======== ======== ======== ======== =======
Net income (loss) per share............
Primary.............................. $ .53 $ .41 $ 3.92 $ (2.83) $ (.49) $ 1.74 $ 1.05
=========== =========== ======== ======== ======== ======== =======
Fully diluted........................ $ .49 $ .39 $ 3.47 $ (2.83) $ (.49) $ 1.74 $ 1.05
=========== =========== ======== ======== ======== ======== =======
Dividends per share.................... $ .05 $ .05 $ .10 $ .10 $ .10 $ .10 $ .10
=========== =========== ======== ======== ======== ======== =======
Weighted average shares outstanding.... 35.4 35.6 35.7 35.3 30.1 27.9 25.8
OTHER FINANCIAL DATA:
EBITDAEX(e)............................ $ 74.9 $ 77.9 $ 381.7 $ 232.5 $ 200.7 $ 155.7 $ 95.0
Cash flows from operating activities... 73.5 64.6 230.1 157.3 129.8 112.2 77.2
Cash flows from investing activities... (67.9) 70.8 13.5 (53.8) (454.9) (386.8) (111.8)
Cash flows from financing activities... (14.9) (124.5) (258.9) (107.5) 331.8 291.7 33.8
Capital expenditures................... 76.6 39.7 228.0 228.9 563.9 572.1 129.7
Ratio of earnings to fixed
charges(f)........................... 3.8 2.8 5.3 NM NM 3.0 2.9
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................ $ 10.7 $ 26.1 $ 26.1 $ 31.5 $ 43.7 $ 39.5 $ 8.0
Property, plant and equipment, net..... 1,072.8 1,040.4 1,040.4 1,121.7 1,349.9 802.0 499.1
Total assets........................... 1,210.1 1,199.9 1,199.9 1,319.2 1,604.9 1,016.9 576.7
Long-term obligations.................. 320.2 329.0 329.0 603.2 727.2 544.3 225.9
Preferred stock of subsidiary.......... 188.8 188.8 188.8 188.8 188.8 -- --
Total stockholders' equity............. 546.2 530.3 530.3 411.0 509.6 348.8 295.0
</TABLE>
- ---------------
(a) Includes amounts relating to the acquisition of certain Prudential-Bache
Energy limited partnerships in July 1993. Also includes results of
operations related to Parker & Parsley's interest in the Carthage gas
20
<PAGE> 31
processing plant that had been deferred in 1992 and 1993 and the gain of
$7.3 million recognized on the sale of that interest on June 30, 1993.
(b) Includes amounts relating to the acquisition of Bridge Oil Limited in July
1994 and the acquisition of properties from PG&E Resources Company in August
1994.
(c) Includes noncash pre-tax charges of $130.5 million in 1995 associated with
the adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."
(d) Includes a gain of $83.3 million in 1996 related to the disposition of
certain wholly-owned subsidiaries.
(e) EBITDAEX is presented because of its wide acceptance as a financial
indicator of a company's ability to service or incur debt. EBITDAEX (as used
herein) is calculated by adding interest, income taxes, depletion,
depreciation and amortization, impairment of oil and gas properties and
natural gas processing facilities and exploration and abandonment costs to
income (loss) before extraordinary item and cumulative effect of accounting
change. Interest includes accrued interest expense and amortization of
deferred financing costs. EBITDAEX should not be considered as an
alternative to earnings (loss) or operating earnings (loss), as defined by
generally accepted accounting principles, as an indicator of the Parker &
Parsley's financial performance, as an alternative to cash flow, as a
measure of liquidity or as being comparable to other similarly titled
measures of other companies.
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, extraordinary item and
cumulative effect of accounting change plus fixed charges net of interest
capitalized. Fixed charges consist of interest expense, interest capitalized
and the portion of rental expense attributable to interest. Parker &
Parsley's 1995 and 1994 earnings were inadequate to cover its fixed charges.
The amount of the deficiencies were $150.0 million in 1995 and $20.5 million
in 1994.
21
<PAGE> 32
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION FOR PIONEER
The unaudited pro forma statements of operations data and other financial
data of Pioneer for the three months ended March 31, 1997 and for the year ended
December 31, 1996, under each of the Mesa Series A Preferred Stock conversion
scenarios described in the Unaudited Pro Forma Combined Financial Statements,
give effect to the Mergers as if they had occurred on January 1, 1996. The
unaudited pro forma balance sheet data of Pioneer as of March 31, 1997, under
each of the Mesa Series A Preferred Stock conversion scenarios described in the
Unaudited Pro Forma Combined Financial Statements, give effect to the Mergers as
if they had occurred on March 31, 1997. This Summary Pro Forma Combined
Financial Information is qualified in its entirety by, and should be read in
conjunction with, the Unaudited Pro Forma Combined Financial Statements included
elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
100% MESA SERIES A 50% MESA SERIES A 0% MESA SERIES A
PREFERRED STOCK CONVERSION PREFERRED STOCK CONVERSION PREFERRED STOCK CONVERSION
--------------------------- --------------------------- ---------------------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues...... $ 217.3 $ 769.0 $ 217.3 $ 769.0 $ 217.3 $ 769.0
Total operating expenses...... 170.3 625.6 171.3 629.7 172.2 633.8
-------- ------- -------- ------- -------- -------
Operating income (loss)....... 47.0 143.4 46.0 139.3 45.1 135.2
Other revenues and expenses:
Interest and other income... 6.0 51.2 6.0 51.2 5.9 51.2
Gain on disposition of
assets, net............... 0.7 12.0 0.7 12.0 0.7 12.0
Interest expense............ (36.2) (141.1) (36.2) (141.1) (36.2) (141.1)
Other expenses.............. (0.6) (4.8) (0.6) (4.8) (0.6) (4.8)
-------- ------- -------- ------- -------- -------
Income from continuing
operations before income
taxes....................... 16.9 60.7 15.9 56.6 14.9 52.5
Income tax provision.......... (6.6) (23.7) (6.2) (22.1) (5.8) (20.5)
-------- ------- -------- ------- -------- -------
Income from continuing
operations.................. 10.3 37.0 9.7 34.5 9.1 32.0
Dividends on preferred
stock....................... -- -- (1.4) (5.4) (2.7) (10.9)
-------- ------- -------- ------- -------- -------
Income from continuing
operations attributable to
common stock................ $ 10.3 $ 37.0 $ 8.3 $ 29.1 $ 6.4 $ 21.1
======== ======= ======== ======= ======== =======
Income per common share:
Primary..................... $ 0.15 $ 0.55 $ 0.14 $ .47 $ 0.11 $ 0.38
======== ======= ======== ======= ======== =======
Fully diluted............... $ 0.15 $ 0.55 $ 0.14 $ .47 $ 0.11 $ 0.38
======== ======= ======== ======= ======== =======
Weighted average shares
outstanding................. 66.8 67.1 61.3 61.6 55.8 56.1
======== ======= ======== ======= ======== =======
OTHER FINANCIAL DATA:
EBITDAEX(a)................... $ 149.1 $ 547.8 $ 149.1 $ 547.8 $ 149.1 $ 547.8
Ratio of earnings to fixed
charges(b).................. 1.5 1.4 1.4 1.4 1.4 1.4
BALANCE SHEET DATA (END OF
PERIOD):
Working capital............... (0.9) (0.9) (0.9)
Property, plant and equipment,
net......................... 3,373.5 3,426.9 3,480.3
Total assets.................. 3,608.8 3,662.3 3,715.7
Long-term obligations......... 1,567.3 1,567.3 1,567.3
Preferred stock of
subsidiary.................. 188.8 188.8 188.8
Total stockholders' equity.... 1,512.1 1,546.8 1,581.6
</TABLE>
22
<PAGE> 33
- ---------------
(a) EBITDAEX is presented because of its wide acceptance as a financial
indicator of a company's ability to service or incur debt. EBITDAEX is
calculated by adding interest, income taxes, depletion, depreciation and
amortization, and exploration and abandonment costs to income from
continuing operations applicable to common stock. Interest includes accrued
interest expense and amortization of deferred financing costs. EBITDAEX
should not be considered as an alternative to earnings or operating
earnings, as defined by generally accepted accounting principles, as an
indicator of Pioneer's financial performance, as an alternative to cash
flow, as a measure of liquidity or as being comparable to other similarly
titled measures of other companies.
(b) For purposes of computing the pro forma ratio of earnings to fixed charges,
earnings consist of income from continuing operations before income taxes
plus fixed charges. Fixed charges consist of interest expense, interest
capitalized and the portion of rental expense attributable to interest.
23
<PAGE> 34
RISK FACTORS
Stockholders should carefully review the following factors together with
the other information contained in this Joint Proxy Statement/Prospectus prior
to voting on the proposals herein.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Joint Proxy Statement/Prospectus includes forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. All statements other than statements of historical fact included
in this Joint Proxy Statement/Prospectus including, without limitation, the
statements under "Summary -- The Pioneer Enterprise," "Pioneer -- Pioneer's
Assets, Strengths and Business Strategy Following the Mergers,"
"Mesa -- Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Parker & Parsley -- Management's Discussion and Analysis of
Financial Condition and Results of Operations" are forward-looking statements.
Although Mesa and Parker & Parsley believe their respective expectations are
based on reasonable assumptions, no assurance can be given that actual results
may not differ materially from those in the forward-looking statements.
Important factors that could cause actual results to differ materially from the
expectations of Mesa and Parker & Parsley include, among other things, the
prices received or demand for oil and gas, the uncertainty of reserve estimates,
operating hazards, competition and the effects of governmental and environmental
regulation, conditions in the capital markets and equity markets, and the
ability of Pioneer to achieve the goals described in "The Mergers -- Mesa's
Reasons for the Mergers" and "-- Parker & Parsley's Reasons for the Mergers," as
well as other factors discussed in or incorporated by reference into this Joint
Proxy Statement/Prospectus.
FIXED MERGER CONSIDERATION
Stockholders of Mesa and Parker & Parsley should consider that the merger
consideration will not be adjusted in the event of an increase or decrease in
the market price of Mesa Common Stock, Mesa Series A Preferred Stock or Parker &
Parsley Common Stock. Holders of Mesa Common Stock will receive one share of
Pioneer Common Stock for each seven shares of Mesa Common Stock held, and
holders of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock will
receive either 1.25 shares of Pioneer Common Stock or one share of Pioneer
Series A Preferred Stock for each seven shares held. Holders of Parker & Parsley
Common Stock will receive one share of Pioneer Common Stock for each share of
Parker & Parsley Common Stock held. However, each of Mesa and Parker & Parsley
have the option to terminate the Merger Agreement if the average trading price
for Mesa Common Stock for the Measurement Period is less than $5.00 per share.
If this is the case, Mesa and Parker & Parsley will each independently determine
whether to terminate the Merger Agreement, waive the option and proceed to the
consummation of the Mergers, or seek to renegotiate the terms upon which the
Mergers will be consummated. Stockholders of Mesa and Parker & Parsley are urged
to obtain current stock market quotations for Mesa Common Stock, Mesa Series A
Preferred Stock and Parker & Parsley Common Stock.
EFFECT OF VOLATILE PRODUCT PRICES AND MARKETS
The future financial condition and results of operations of Pioneer will
depend upon the prices received for oil and natural gas production and NGLs and
the costs of acquiring, finding, developing and producing reserves. Prices for
oil, natural gas and NGLs are subject to fluctuations in response to relatively
minor changes in supply, market uncertainty and a variety of additional factors
that are beyond the control of Pioneer. These factors include worldwide
political instability (especially in the Middle East and other oil-producing
regions), the foreign supply of oil and gas, the price of foreign imports, the
level of consumer product demand, government regulations and taxes, the price
and availability of alternative fuels and the overall economic environment. A
substantial or extended decline in oil, gas or NGL prices would have a material
adverse effect on Pioneer's financial position, results of operations,
quantities of oil and gas that may be economically produced, and access to
capital.
The sale of oil and gas production of Pioneer will depend upon a number of
factors beyond its control, including the availability and capacity of
transportation and processing facilities. A substantial portion of
24
<PAGE> 35
Pioneer's oil and a significant portion of its natural gas will be transported
through gathering systems and pipelines which will not be owned by Pioneer.
Transportation space on such gathering systems and pipelines is occasionally
limited and at times unavailable due to repairs or improvements being made to
such facilities or due to such space being utilized by other oil and gas
shippers that may or may not have priority transportation agreements. Neither
Mesa nor Parker & Parsley has experienced any material inability to market its
proved reserves of oil or natural gas as a result of limited access to
transportation space. If transportation space is materially restricted or is
unavailable in the future, Pioneer's ability to market its oil or natural gas
could be impaired and cash flow from the affected properties could be reduced,
which could have a material adverse effect on Pioneer's financial condition or
results of operations. See "-- Governmental Regulation."
Oil, natural gas and NGL prices have historically been volatile and are
likely to continue to be volatile in the future. Such volatility makes it
difficult to estimate the value of producing properties for acquisition and to
budget and project the financial return on exploration and development projects
involving producing properties. In addition, unusually volatile prices often
disrupt the market for oil and gas properties, as buyers and sellers have more
difficulty agreeing on the purchase price of properties. In particular, from
January 2, 1997 to June 10, 1997, the prices of crude oil have ranged from a
high of $26.62 per Bbl to a low of $18.67 per Bbl and gas prices have ranged
from a high of $3.64 per Mcf to a low of $1.78 per Mcf, in each case as the
reported NYMEX Daily Prompt Month Closing Price.
Both Mesa and Parker & Parsley engage in hedging activities with respect to
portions of their respective projected oil and gas production through a variety
of financial arrangements designed to protect against price declines, including
swaps, collars and futures agreements and Pioneer expects to continue to do so.
To the extent that Pioneer engages in such activities, it may be prevented from
realizing the benefits of price increases above the levels reflected in such
hedges.
SUBSTANTIAL INDEBTEDNESS
Upon consummation of the Mergers, Pioneer will have long-term indebtedness
(including current maturities) of approximately $1.6 billion, consisting of an
estimated $602 million in borrowings under an unsecured revolving bank credit
facility (the "Pioneer Credit Facility"), $188.8 million attributable to the
Parker & Parsley MIPS, $300 million attributable to Parker & Parsley's senior
notes and $488 million attributable to Mesa's senior subordinated notes.
Pioneer's level of indebtedness will have several important effects on its
future operations, including that (i) a portion of Pioneer's cash flow from
operations will be dedicated to the payment of interest on its indebtedness and
will not be available for other purposes, (ii) the covenants contained in the
Pioneer Credit Facility and in the indentures governing the Parker & Parsley
senior notes and the Mesa senior subordinated notes will require Pioneer to meet
certain financial tests and other restrictions, limit its ability to borrow
additional funds, to grant liens, to dispose of assets, and to pay dividends,
and will affect Pioneer's flexibility in planning for and reacting to changes in
its business, including possible acquisition activities, and (iii) Pioneer's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired.
Pioneer's ability to meet its debt service obligations and to reduce its
total indebtedness will be dependent upon Pioneer's future performance, which
will depend in part on oil and gas prices received, Pioneer's level of
production and general economic conditions and financial, business and other
factors affecting the operations of Pioneer, many of which are beyond its
control. There can be no assurance that Pioneer's future performance will not be
adversely affected by such changes in oil and gas prices and production, and by
such economic conditions and financial, business and other factors.
Pioneer may take several courses of action designed to reduce its total
indebtedness following consummation of the Mergers, including a cash redemption
or mandatory conversion of the Parker & Parsley MIPS if they remain outstanding,
a public offering of Pioneer Common Stock, the sale of non-core assets, and
other actions that Pioneer may deem appropriate. There can be no assurance that
Pioneer will take any or all of these actions, that market conditions and other
factors will permit Pioneer to take such actions, or that any of these actions
will be successful if taken. See "The Mergers -- Exchange or Redemption of
Parker & Parsley MIPS."
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RELIANCE ON ESTIMATES OF PROVED RESERVES AND FUTURE NET CASH FLOWS
Information relating to Mesa's and Parker & Parsley's proved oil and gas
reserves set forth in this Joint Proxy Statement/Prospectus and incorporated by
reference herein is based upon engineering estimates. Reserve engineering is a
subjective process of estimating the recovery from underground accumulations of
oil and natural gas that cannot be measured in an exact manner, and the accuracy
of any reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Estimates of
economically recoverable oil and gas reserves and of future net cash flows
necessarily depend upon a number of variable factors and assumptions, such as
historical production from the area compared with production from other
producing areas, the assumed effects of regulations by governmental agencies and
assumptions concerning future oil and gas prices, future operating costs,
severance and excise taxes, development costs and workover and remedial costs,
all of which may in fact vary considerably from actual results. Because all
reserve estimates are to some degree speculative, the quantities of oil and
natural gas that are ultimately recovered, production and operation costs, the
amount and timing of future development expenditures, and future oil and natural
gas sales prices may all vary from those assumed in these estimates. Those
variances may be material. In addition, different reserve engineers may make
different estimates of reserve quantities and cash flows based upon the same
available data.
The present value of estimated future net cash flows should not be
construed as the current market value of the estimated proved oil and gas
reserves attributable to Mesa's or Parker & Parsley's properties. In accordance
with applicable requirements of the Securities and Exchange Commission (the
"Commission"), the estimated discounted future net cash flows from proved
reserves are generally based on prices and costs as of the date of the estimate,
whereas actual future prices and costs may be materially higher or lower. Actual
future net cash flows also will be affected by factors such as the amount and
timing of actual production, supply and demand for oil and gas, curtailments or
increases in consumption by gas purchasers and changes in governmental
regulations or taxation. The timing of actual future net cash flows from proved
reserves, and thus their actual present value, will be affected by the timing of
both the production and the incurrence of expenses in connection with
development and production of oil and gas properties. In addition, the 10%
discount factor, which is required by the Commission to be used to calculate
discounted future net cash flows for reporting purposes, is not necessarily the
most appropriate discount factor based on interest rates in effect from time to
time and risks associated with Mesa's or Parker & Parsley's business or the oil
and gas industry in general.
REPLACEMENT OF RESERVES
Pioneer's future success will depend on its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable. The
proved reserves of Pioneer will generally decline as reserves are depleted,
except to the extent that Pioneer conducts successful exploration or development
activities or acquires properties containing proved reserves, or both. There can
be no assurance that Pioneer's planned development and exploration projects and
acquisition activities will result in significant additional reserves or that
Pioneer will have success drilling productive wells at low finding and
development costs. Furthermore, while Pioneer's revenues may increase if
prevailing oil and gas prices increase significantly, Pioneer's finding costs
for additional reserves could also increase.
DEPENDENCE ON KEY PERSONNEL
Pioneer will be highly dependent upon the efforts of Mr. Brumley and Mr.
Sheffield, its Chairman of the Board and Chief Executive Officer, respectively.
The loss of the services of either of such individuals or of one or more of the
other members of Pioneer's senior management team could impede Pioneer's ability
to achieve its goals. Parker & Parsley currently maintains key-man insurance on
Mr. Sheffield and, after consummation of the Mergers, Pioneer expects to obtain
key-man insurance covering Mr. Brumley and Mr. Sheffield.
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OPERATING HAZARDS; LIMITED INSURANCE COVERAGE
Pioneer's operations will be subject to hazards and risks inherent in
drilling for and production and transportation of natural gas and oil, such as
fires, natural disasters, explosions, encountering formations with abnormal
pressures, blowouts, cratering, pipeline ruptures and spills, any of which can
result in loss of hydrocarbons, environmental pollution, personal injury claims
and other damage to the properties of Pioneer and others. These risks could
result in substantial losses to Pioneer due to injury and loss of life, severe
damage to and destruction of property and equipment, pollution and other
environmental damage and suspension of operations. Moreover, Pioneer's Gulf of
Mexico offshore operations will be subject to a variety of operating risks
peculiar to the marine environment, such as hurricanes or other adverse weather
conditions, to more extensive governmental regulation, including regulations
that may, in certain circumstances, impose strict liability for pollution
damage, and to interruption or termination of operations by governmental
authorities based on environmental or other considerations.
As protection against operating hazards, Mesa and Parker & Parsley have
maintained and Pioneer expects to maintain insurance coverage against some, but
not all, potential losses. Mesa's and Parker & Parsley's coverages include, but
are not limited to, operator's extra expense, physical damage on certain assets,
employer's liability, comprehensive general liability, automobile, workers'
compensation and limited coverage for sudden environmental damages, but the
Merger Parties and Pioneer do not believe that insurance coverage for
environmental damages that occur over time is available at a reasonable cost.
Moreover, the Merger Parties and Pioneer do not believe that insurance coverage
for the full potential liability that could be caused by sudden environmental
damages is available at a reasonable cost. Accordingly, each of the Merger
Parties and Pioneer may be subject to liability or may lose substantial portions
of its properties in the event of environmental damages. The occurrence of an
event that is not fully covered by insurance could have an adverse effect on the
Merger Parties' and Pioneer's financial condition and results of operations.
GOVERNMENTAL REGULATION
General. Pioneer's operations will be affected from time to time in varying
degrees by political developments and federal and state laws and regulations. In
particular, oil and natural gas production, operations and economics are or have
been affected by price controls, taxes and other laws relating to the oil and
natural gas industry, by changes in such laws and by changes in administrative
regulations. The Merger Parties and Pioneer cannot predict how existing laws and
regulations may be interpreted by enforcement agencies or court rulings, whether
additional laws and regulations will be adopted, or the effect such changes may
have on its business or financial condition.
Environmental. Pioneer's operations will be subject to numerous laws and
regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. These laws and regulations
require the acquisition of a permit before drilling commences, restrict the
types, quantities and concentration of various substances that can be released
into the environment in connection with drilling and production activities,
limit or prohibit drilling activities on certain lands lying within wilderness,
wetlands and other protected areas, and impose substantial liabilities for
pollution which might result from Pioneer's operations. Moreover, the recent
trend toward stricter standards in environmental legislation and regulation is
likely to continue. For instance, legislation has been proposed in Congress from
time to time that would reclassify certain crude oil and natural gas exploration
and production wastes as "hazardous wastes" which would make the reclassified
wastes subject to much more stringent handling, disposal and clean-up
requirements. If such legislation were to be enacted, it could have a
significant impact on the operating costs of Pioneer, as well as the oil and gas
industry in general. Initiatives to further regulate the disposal of crude oil
and natural gas wastes pending in certain states could have a similar impact and
Pioneer could incur substantial costs to comply with environmental laws and
regulations. In addition to compliance costs, government entities and other
third parties may assert substantial liabilities against owners and operators of
oil and gas properties for oil spills, discharge of hazardous materials,
remediation and clean-up costs and other environmental damages, including
damages caused by previous property owners. The imposition of any such
liabilities on Pioneer could have a material adverse effect on Pioneer's
financial condition and results of operations.
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The Oil Pollution Act of 1990 imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws or
regulations, including regulations promulgated pursuant to the Oil Pollution Act
of 1990, could have a material adverse effect on Pioneer.
COMPETITION
Pioneer will operate in the highly competitive areas of natural gas and oil
production, development and exploration. Pioneer will also compete with
companies for the acquisition of desirable natural gas and oil properties, as
well as for the equipment and labor required to develop and operate such
properties. Factors affecting Pioneer's ability to compete in the marketplace
include the availability of funds and information relating to a property, the
standards established by Pioneer for the minimum projected return on investment,
the availability of alternate fuel sources and the intermediate transportation
of gas. Pioneer's competitors will include major integrated oil companies and a
substantial number of independent energy companies, many of which may have
substantially larger financial resources, staffs and facilities than Pioneer.
ANTI-TAKEOVER PROVISIONS
Pioneer's Certificate of Incorporation (i) provides for staggered terms of
office for directors; (ii) contains a "fair price" provision; (iii) prohibits
stockholders from acting by written consent; (iv) prohibits stockholders from
calling special meetings of stockholders; (v) requires certain procedures to be
followed and time periods to be met for any stockholder to propose matters to be
considered at annual meetings of stockholders, including nominating directors
for election at those meetings; (vi) limits the ability of stockholders to
interfere with the power of the Board of Directors in other specified ways;
(vii) requires supermajority votes to amend any of the preceding provisions; and
(viii) authorizes the Board of Directors of Pioneer to issue up to 100,000,000
shares of preferred stock without stockholder approval and to set the rights,
preferences, and other designations, including voting rights, of those shares as
the Board of Directors may determine. See "Description of Pioneer Capital
Stock -- Certain Provisions of the Certificate of Incorporation and Bylaws."
These provisions, alone or in combination with each other, may discourage
transactions involving actual or potential changes of control of Pioneer,
including transactions that otherwise could involve payment of a premium over
prevailing market prices to holders of Pioneer Common Stock. Pioneer is also
subject to provisions of the Delaware General Corporation Law that may make some
business combinations more difficult. See "Description of Pioneer Capital
Stock -- Delaware Anti-Takeover Statute."
RESTRICTIONS ON DIVIDENDS
Dividends will be paid on Pioneer common stock only if, as and when
declared by Pioneer's Board of Directors. Pioneer's ability to pay dividends may
be limited by the terms of its credit facilities, debt indentures, and preferred
stock. The Statement of Resolution establishing the Pioneer Preferred Stock will
prohibit the payment of dividends with respect to Pioneer Common Stock for so
long as any shares of Pioneer Preferred Stock are outstanding. Mesa's credit
facility and debt indentures also prohibit or restrict the payment of dividends.
Pioneer intends to refinance Mesa's and Parker & Parsley's credit facilities in
connection with the Mergers and will seek authorization to pay a $0.05 dividend
semi-annually. Pioneer believes that it will be permitted to make that dividend
payment under the financial covenants of Mesa's indentures based on pro forma
financial statements. No assurance can be given about the amount or timing of
dividends, if any, that Pioneer may pay, about whether Pioneer will be permitted
to pay dividends following the Mergers, or about the ability of Pioneer to
obtain waivers or amendments of covenants limiting or prohibiting dividend
payments.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Mergers, there has been no public market for Pioneer Common
Stock or Pioneer Preferred Stock. Following the Mergers, the market price for
Pioneer capital stock may be highly volatile depending on various factors,
including the general economy, stock market conditions, announcements by
Pioneer, its competitors and fluctuations in Pioneer's overall operating
results. In addition, the stock market historically has experienced volatility
which has affected the market price of securities of many companies and which
has sometimes been unrelated to the operating performance of such companies. The
trading price of the Pioneer
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capital stock could also be subject to significant fluctuations in response to
variations in quarterly results of operations, changes in earnings estimates by
analysts, governmental regulatory action, general trends in the industry and
overall market conditions, and other factors. No assurance can be given or
prediction made as to the relationship between trading prices for Mesa Common
Stock, Mesa Series A Preferred Stock and Parker & Parsley Common Stock prior to
the completion of the Mergers and future trading prices for Pioneer Common Stock
and Pioneer Preferred Stock following the Mergers.
ISSUANCE OF PIONEER COMMON STOCK TO MESA SERIES A PREFERRED STOCK HOLDERS
If a majority of the holders of the Mesa Series A Preferred Stock vote in
favor of the Mergers, then all such holders shall receive 1.25 shares of Pioneer
Common Stock in exchange for each seven shares of Mesa Series A Preferred Stock,
regardless of whether such holders elected to receive Pioneer Preferred Stock or
Pioneer Common Stock. Accordingly, a holder of the Mesa Series A Preferred Stock
should assume that if it votes in favor of the Mergers (and assuming holders of
a majority of such shares also vote in favor of the Mergers), such holder will
receive shares of Pioneer Common Stock and not Pioneer Preferred Stock. Holders
of Mesa Series A Preferred Stock should take such assumption into consideration
in making their decision as to how to vote on the Mergers.
THE MERGERS
GENERAL
Mesa, Pioneer, MOC and Parker & Parsley have entered into the Merger
Agreement which provides that, subject to the satisfaction of the conditions
thereof (see "Certain Terms of the Merger Agreement -- Conditions to the
Mergers"), the Reincorporation Merger and the Parker & Parsley Merger (together,
the "Mergers") will be effected. THE DESCRIPTION OF THE MERGER AGREEMENT
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS INCLUDED AS APPENDIX I
TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED IN ITS ENTIRETY
HEREIN BY REFERENCE.
THE REINCORPORATION MERGER
The Merger Agreement calls for the merger of Mesa into Pioneer with Pioneer
being the surviving corporation. The Reincorporation Merger will have the effect
of reincorporating Mesa from Texas to Delaware. See "Comparison of Stockholders'
Rights." In the Reincorporation Merger, (i) each seven outstanding shares (other
than any shares held directly by Mesa in its treasury or shares held by Parker &
Parsley) of Mesa Common Stock will be converted into the right to receive one
share of Pioneer Common Stock and (ii) each seven outstanding shares (other than
any shares held directly by Mesa in its treasury or shares held by Parker &
Parsley) of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
shall be converted into the right to receive either (a) 1.25 shares of Pioneer
Common Stock or (b) one share of Pioneer Preferred Stock, in each case as the
holder thereof shall elect or be deemed to elect (provided that if the holders
of a majority of the outstanding shares of Mesa Series A Preferred Stock or Mesa
Series B Preferred Stock, voting separately as a class, vote in favor of the
Merger Agreement, then all holders of the series for which the vote has been
obtained will receive the Mesa Common Consideration, regardless of whether such
holders elected to receive Pioneer Preferred Stock or Pioneer Common Stock).
Each employee or director stock option to purchase Mesa Common Stock issued by
Mesa that is outstanding at the effective time of the Reincorporation Merger
will automatically be converted into an option to purchase, on the same terms
and conditions as were applicable to such options, the number of shares of
Pioneer Common Stock equal to the number of shares of Mesa Common Stock
purchasable pursuant to such option multiplied by one-seventh.
As a result of the Mergers, stock certificates representing (i) seven
shares of Mesa Common Stock will represent, for all purposes, one share of
Pioneer Common Stock and (ii) seven shares of Mesa Series A Preferred Stock or
Mesa Series B Preferred Stock will represent, for all purposes, either 1.25
shares of Pioneer Common Stock or one share of Pioneer Preferred Stock.
Stockholders of Mesa may exchange stock certificates formerly representing
shares of capital stock of Mesa for stock certificates representing shares of
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Pioneer after completion of the Mergers. HOLDERS OF MESA COMMON STOCK, MESA
SERIES A PREFERRED STOCK AND MESA SERIES B PREFERRED STOCK SHOULD NOT SUBMIT
CERTIFICATES REPRESENTING THEIR SHARES FOR EXCHANGE UNTIL AFTER COMPLETION OF
THE MERGERS.
The closing of the Reincorporation Merger ("RM Closing") will occur within
five days after all of the conditions to the Mergers contained in the Merger
Agreement have been satisfied or waived unless another date is agreed to by Mesa
and Parker & Parsley. As soon as practicable after the RM Closing, Articles of
Merger with respect to the Reincorporation Merger will be filed with the
Secretary of State of the State of Texas and a Certificate of Merger with
respect to the Reincorporation Merger will be filed with the Secretary of State
of the State of Delaware, and the Reincorporation Merger will become effective
at such time as is provided in the Certificate of Merger and Articles of Merger
for the Reincorporation Merger (the "RM Effective Time"), which time shall be
10:00 a.m., Dallas, Texas time, on the date of the RM Closing ("Closing Date").
Pursuant to the Merger Agreement, the Certificate of Incorporation and
Bylaws of Pioneer as in effect immediately prior to the RM Effective Time shall
be the Certificate of Incorporation and Bylaws of Pioneer after the RM Effective
Time. The directors and officers of Pioneer will be the directors named in the
Merger Agreement and the officers selected in accordance with the Merger
Agreement. See "Pioneer -- Management of Pioneer."
PARKER & PARSLEY MERGER
The Merger Agreement provides for the merger of Parker & Parsley into MOC.
MOC will be the surviving corporation. In the Parker & Parsley Merger, each
outstanding share of Parker & Parsley Common Stock (other than any shares held
directly by Parker & Parsley in its treasury or shares held by Mesa) will be
converted into the right to receive one share of Pioneer Common Stock. The
Parker & Parsley Common Stock includes the related common stock purchase rights
issued pursuant to the Rights Agreement. Each employee stock option to purchase
Parker & Parsley Common Stock issued by Parker & Parsley that is outstanding at
the effective time of the Parker & Parsley Merger will automatically be
converted into an option to purchase, on the same terms and conditions as were
applicable to such options, the number of shares of Pioneer Common Stock equal
to the number of shares of Parker & Parsley Common Stock purchasable pursuant to
such option.
As a result of the Mergers, stock certificates representing shares of
Parker & Parsley Common Stock will represent, for all purposes, a like number of
shares of Pioneer Common Stock. Stockholders of Parker & Parsley may exchange
stock certificates formerly representing shares of Parker & Parsley Common Stock
for stock certificates representing Pioneer Common Stock after completion of the
Mergers. HOLDERS OF PARKER & PARSLEY COMMON STOCK SHOULD NOT SUBMIT CERTIFICATES
REPRESENTING THEIR SHARES OF PARKER & PARSLEY COMMON STOCK FOR EXCHANGE UNTIL
AFTER COMPLETION OF THE MERGERS.
As soon as practicable after the closing of the Parker & Parsley Merger
(together with the RM Closing, the "Closing"), a Certificate of Merger with
respect to the Parker & Parsley Merger will be filed with the Secretary of State
of the State of Delaware, and the Parker & Parsley Merger will become effective
at such time as is provided in the Certificate of Merger ("P&P Effective Time"),
which time shall be 10:01 a.m., Dallas, Texas time, on the Closing Date.
Accordingly, the P&P Effective Time will be one minute after the RM Effective
Time.
Pursuant to the Merger Agreement, the Certificate of Incorporation and
Bylaws of MOC as in effect immediately prior to the P&P Effective Time shall be
the Certificate of Incorporation and Bylaws of MOC after the P&P Effective Time.
The directors and officers of MOC at the P&P Effective Time will be the
directors and officers selected in accordance with the Merger Agreement. See
"Pioneer -- Management of Pioneer."
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FRACTIONAL SHARES
No fractional shares of Pioneer Common Stock or Pioneer Preferred Stock
will be issued to any stockholder of Mesa or Parker & Parsley upon consummation
of the Mergers. For each fractional share that would otherwise be issued,
Pioneer will pay by check an amount equal to a pro rata portion of the net
proceeds of the sale by the Exchange Agent of shares of Pioneer Common Stock or
Pioneer Preferred Stock, as the case may be, representing the aggregate of all
such fractional shares and the aggregate dividends or other distributions (if
any) that are payable with respect to such shares of Pioneer Common Stock or
Pioneer Preferred Stock, as the case may be. Such sale is to be executed by the
Exchange Agent as soon as practicable after the Effective Time at then
prevailing prices on the NYSE.
ELECTION PROCEDURE FOR MESA PREFERRED STOCK
Each record holder of shares of Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock shall be entitled to elect to receive in respect of
each such share either the Mesa Common Consideration or the Mesa Preferred
Consideration. If a record holder expresses no preference as between Mesa Common
Consideration or Mesa Preferred Consideration (a "Non-Election") with respect to
such holder's shares of Mesa Series A Preferred Stock or Mesa Series B Preferred
Stock (collectively, "Non-Election Shares"), such shares shall be deemed to be
shares in respect of which elections for Mesa Preferred Consideration have been
made.
All elections are to be made on an election form ("Election Form") to be
mailed to holders of record of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock at least 20 business days prior to the Mesa Special Meeting.
Stockholders may also obtain copies of the Election Form upon request from the
Exchange Agent either in writing by mail to Continental Stock Transfer & Trust
Company, 2 Broadway, New York, New York 10004, Attn: Reorganization Department,
or by telephone at (212) 509-4000. Any beneficial owner whose shares of Mesa
Series A Preferred Stock are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee will need to contact such
nominee in order to provide instructions regarding this election if such holder
desires to make an election to receive the Mesa Common Consideration or the Mesa
Preferred Consideration. Mesa will issue a public announcement of the
anticipated Closing Date as soon as practicable, but in no event less than five
trading days prior to the Closing Date.
Election Forms must be received by the Exchange Agent at its designated
office no later than 5:00 p.m., New York City time, on the trading day
immediately preceding the Closing Date (the "Election Deadline"). For an
Election Form to be effective, holders of Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock must properly complete, sign and submit such Election
Form, and such form must be received by the Exchange Agent at Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004, Attn:
Reorganization Department, and not withdrawn, by the Election Deadline. Any
holder of shares of Mesa Series A Preferred Stock or Mesa Series B Preferred
Stock that does not submit an effective Election Form prior to the Election
Deadline shall be deemed to have made a Non-Election.
Completing the Election Form. To make a proper election, a holder of shares
of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock must have
delivered to the Exchange Agent at the address specified above prior to the
Election Deadline the following:
(i) an Election Form properly completed in accordance with the
instructions thereon and signed by the record holder of the shares of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock as to which such
election is being made; and
(ii) either (a) the certificates for such shares or (b) an appropriate
guarantee of delivery of certificates for such shares.
Holders of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
who hold such shares as nominees, trustees or in other such representative
capacities may submit multiple election forms.
A form of the guarantee of delivery accompanies the Election Form, and,
unless stock certificates are submitted with the Election Form, a guarantee of
delivery must be properly executed by a firm which is a member of any registered
national securities exchange or a member of the National Association of
Securities
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Dealers, Inc. or a bank, broker, dealer, credit union, savings association or
other entity that is a member in good standing with the Securities Transfer
Agent's Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, and certificates for
the shares covered by such guarantee must in fact be received by the Exchange
Agent by the time specified in such guarantee for a valid Election Form to have
been deemed submitted.
Book Entry Procedures. Shares of Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock that are held through the facilities of the Depository
Trust Company ("DTC") should make a proper election by completing and delivering
an Election Form in accordance with "-- Completing the Election Form" above and
by properly executing and delivering to the Exchange Agent, with the Election
Form, a DTC Exchange Form. Copies of the DTC Exchange Form may be obtained from
the Information Agent.
Withdrawal and Change of Elections. Any holder of Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock may revoke his or her elections by
submitting to the Exchange Agent written notice and a properly completed and
signed revised Election Form, by withdrawing his or her certificates for shares
of Mesa Series A Preferred Stock or Mesa Series B Preferred Stock, or by
withdrawing the guarantee of delivery of such certificates previously deposited
with the Exchange Agent, provided that the Exchange Agent receives all necessary
materials prior to the Election Deadline. Upon any such revocation, unless a
duly completed Election Form is thereafter submitted, such shares will be
Non-Election Shares.
All elections will be revoked automatically if the Exchange Agent is
notified in writing by Mesa or Pioneer that the Merger Agreement has been
terminated.
Discretionary Authority. Mesa or Pioneer will determine in its sole and
absolute discretion whether an Election Form has been properly completed, signed
and submitted and/or revoked. The determinations of Mesa or Pioneer in such
matters will be conclusive and binding.
Vote of a Majority Binding. IF A MAJORITY OF THE OUTSTANDING SHARES OF MESA
SERIES A PREFERRED STOCK VOTE IN FAVOR OF THE MERGER AGREEMENT, THEN EACH SEVEN
SHARES OF MESA SERIES A PREFERRED STOCK SHALL BE CONVERTED INTO A RIGHT TO ONLY
RECEIVE THE MESA COMMON CONSIDERATION, REGARDLESS OF WHETHER SOME OF SUCH
HOLDERS ELECTED TO RECEIVE THE MESA PREFERRED CONSIDERATION. SEE "RISK
FACTORS -- ISSUANCE OF PIONEER COMMON STOCK TO MESA SERIES A PREFERRED STOCK
HOLDERS." Additionally, if a majority of the outstanding shares of Mesa Series B
Preferred Stock vote in favor of the Merger Agreement, then each seven shares of
Mesa Series B Preferred Stock shall be converted into a right to only receive
the Mesa Common Consideration, regardless of whether some of such holders
elected to receive the Mesa Preferred Consideration. The holder of all of the
shares of Mesa Series B Preferred Stock has agreed to vote in favor of the
approval of the Merger Agreement and to receive the Mesa Common Consideration.
See "Agreements by Mesa Stockholders."
BACKGROUND
In August of 1996, Mesa completed a recapitalization of its balance sheet
by issuing new equity and repaying and refinancing substantially all of its then
existing long-term debt (the "Recapitalization"). The Recapitalization was
undertaken by Mesa in an effort to deleverage and recapitalize Mesa through the
issuance of additional equity and through the refinancing of substantially all
of Mesa's $1.2 billion debt existing prior to the Recapitalization. The
Recapitalization provided Mesa with an improved financial condition due to (i) a
significant reduction in total debt outstanding, (ii) a reduction in annual cash
interest expense of approximately $75 million, (iii) cost savings programs which
reduced general and administrative and other overhead expenses by approximately
$10 million annually, and (iv) the extension of maturities on Mesa's long term
debt, which eliminated Mesa's then existing liquidity concerns. The
Recapitalization included (i) the sale by private placement of shares of a new
class of Mesa Series B Preferred Stock for $133 million to DNR, whose sole
general partner is Rainwater, Inc., a Texas corporation owned by Richard E.
Rainwater, (ii) the sale of $132 million of a new class of Mesa Series A
Preferred Stock to Mesa's then existing stockholders through a rights offering,
(iii) the establishment of a new bank credit facility and (iv) the issuance of
two new series of senior subordinated notes. Prior to the time of the
Recapitalization, there was no affiliation between Mr. Rainwater and Parker &
Parsley or Mesa.
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The terms of the Mesa Series B Preferred Stock provided DNR with the right
to elect a majority of the Board of Directors of Mesa. In connection with the
Recapitalization, DNR stated its intent to implement an orderly transition and
succession plan for Mesa's senior management. In this regard, DNR requested that
Boone Pickens, then Chairman of the Board and Chief Executive Officer of Mesa,
assist DNR in identifying and retaining a new Chief Executive Officer and that
he resign as an officer when such person was retained. Mr. Pickens, who
continues to serve on the Mesa Board, agreed to assist with the transition.
Accordingly, following the Recapitalization, DNR and Mesa began the process of
seeking candidates for Mesa's Chief Executive Officer.
In early August 1996, prior to the election of Jon Brumley as Mesa's new
Chairman of the Board and Chief Executive Officer, Lon C. Kile, Senior Vice
President and Timothy L. Leach, Executive Vice President -- Operations of Parker
& Parsley met with Ken Hersh, a Mesa director, and M. Garrett Smith, the Vice
President -- Finance of Mesa, regarding the possible availability of certain
Mesa assets for sale. The discussions at the meeting also included reviews of
each company's current status, philosophies and strategies for the future. The
meeting was exploratory in nature, and no definitive proposals were made or
agreed upon. Mesa's interest in the meeting was stimulated in part by DNR's
consideration of possible merger candidates to address growth objectives as well
as to further its search for the Mesa Chief Executive Officer position.
Following the initial discussions, the management of each of the Merger Parties,
acting independently, began to consider the possibility of some type of business
combination or transaction with the other.
On August 22, 1996, Jon Brumley joined Mesa as Chairman of the Board and
Chief Executive Officer and began developing a new strategy to increase
shareholder value by expanding Mesa's reserve base and increasing its production
and cash flow per share. The new strategy included seeking acquisitions of
producing properties or business combinations with other oil and gas companies,
increasing its exploration efforts, expanding the exploitation of its existing
properties and any acquired properties, and expanding its gas processing
business. In respect of acquisitions, Mesa's strategy included seeking to
acquire producing properties or to combine with companies that provided one or
more of the following characteristics: (i) opportunities to increase production
and reserves through both exploitation and exploration activities, (ii)
geographic diversity, which would establish new core areas of operation, (iii) a
greater percentage of oil reserves in order to diversify Mesa's current reserve
mix and commodity price exposure and (iv) a high degree of operational control.
In early September 1996, a meeting was held that included Mr. Brumley,
Scott Sheffield, the Chairman and Chief Executive Officer of Parker & Parsley,
and Richard Rainwater. At the meeting, the parties shared their outlooks for the
energy industry and for Parker & Parsley and Mesa, respectively, including
strategies for growth, attitudes toward leverage, management philosophies and
other matters. At this meeting, the idea of combining the two companies was
broached, and Mr. Sheffield and Mr. Brumley agreed to informally discuss the
idea with some of their respective directors to see if there was any interest in
continuing the dialogue. It was agreed that Mr. Brumley and Mr. Sheffield would
confirm mutual interest with each other, and thereafter execute a
confidentiality agreement and exchange information. Subsequently, Mesa and
Parker & Parsley executed a confidentiality agreement dated October 1, 1996.
Following the September meeting with the Mesa representatives, Parker &
Parsley's management executive committee added the active consideration of a
possible business combination with Mesa to its alternatives for growth
opportunities (which consisted of property acquisitions, stock acquisitions of
smaller companies, and joint ventures for exploration projects) and began some
initial analysis of the financial and operational effect of such a combination.
Once a mutual interest in further discussions was confirmed, a meeting
between the parties, including their Chief Executive Officers, was held on
October 7, 1996. The purpose of the meeting was for each company to review with
the other its business strategies, operations, principal properties, financial
statements, capital budgets and related matters. The presentations were designed
to be informational in nature and were not designed to set forth the parameters
of a possible business combination. Following this meeting, each company
prepared preliminary financial projections for a combined company and exchanged
these projections.
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There were no further discussions between Mesa and Parker & Parsley
relating to a proposed combination until mid-November 1996, when Mr. Brumley
initiated contact with Mr. Sheffield. At that time, both companies agreed to
move forward with their preliminary discussions, with a focus on combining the
two companies in a stock-for-stock merger transaction.
Parker & Parsley retained Goldman Sachs as its financial advisor in
connection with the possible transaction, and, after discussions with Goldman
Sachs, management presented an analysis of Mesa and of a potential combination
with Mesa at a Parker & Parsley Board meeting on November 18, 1996. At the
meeting Parker & Parsley management was authorized to continue discussions with
Mesa regarding a potential stock-for-stock transaction.
While pursuing the possibility of other acquisitions internally, Mesa
continued to work toward a possible combination with Parker & Parsley. At a
November 19, 1996 meeting of the Mesa Board, management presented its analysis
of Parker & Parsley and of the potential of a merger with Parker & Parsley. At
this meeting, management asked for and obtained authority to continue
discussions with Parker & Parsley regarding a merger proposal. Subsequent to
this meeting, Mesa engaged Merrill Lynch as its financial advisor in
anticipation of making a merger proposal to Parker & Parsley.
In further discussions later in November, Mr. Sheffield indicated to Mr.
Brumley that he would only consider approaching the Parker & Parsley Board with
a proposal from Mesa that constituted a premium to the then trading price for
Parker & Parsley Common Stock.
Between November 19, 1996 and the next meeting of the Mesa Board on
December 5, 1996, representatives of Mesa and Parker & Parsley, including their
financial advisors and legal counsel for Mesa, held several meetings to discuss
each company's business, legal, tax and accounting issues, possible transaction
structures and financial analyses regarding the possible merger.
At the December 5, 1996 Mesa Board meeting, Merrill Lynch and management
made presentations regarding a merger proposal, and management recommended that
Mesa make a proposal to Parker & Parsley for a stock for stock merger. The
strategic rationale for a merger of Mesa and Parker & Parsley included, among
other things, an expansion of Mesa's reserve base to add additional core areas
of operations, the balancing of Mesa's reserve mix between natural gas and oil,
continuing improvement of Mesa's balance sheet as a result of the overall
deleveraging of Mesa through the merger and the increased public float that
would inure to the benefit of stockholders. Specifically, Jon Brumley requested
and received authority from the Mesa Board to offer up to seven shares of Mesa
Common Stock for each share of Parker & Parsley Common Stock in a stock for
stock merger, which, based on the respective 30-trading day average closing
sales prices for the Mesa Common Stock and Parker & Parsley Common Stock of
approximately $4.81 and $29.75 per share as of such date, would have represented
a premium for the Parker & Parsley shares of approximately 13%.
At the meeting, during the discussion regarding the proposed merger, the
desirability of making an exchange offer or taking other action to convert the
Mesa Series A and Series B Preferred Stock into Mesa Common Stock, whether or
not in the context of a merger transaction, was raised and discussed by the Mesa
Board. At the meeting, management discussed with the Mesa Board the facts that
(i) because the Mesa Preferred Stock comprised two-thirds of Mesa's equity
capital base, it created a substantial overhang on the market for Mesa Common
Stock, (ii) the limited public float of the Mesa Common Stock likely had a
dampening effect on its trading characteristics (for liquidity reasons), and
(iii) the attractiveness of the Mesa Common Stock as acquisition currency to a
merger or acquisition candidate was limited somewhat by the dominance of the two
series of Mesa Preferred Stock in the capital structure and by the majority
voting rights inherent in the Mesa Series B Preferred Stock.
In prior discussions, Parker & Parsley had also expressed concern about the
Mesa Series A and Series B Preferred Stock, as well as a strong preference that
both series be exchanged into common stock in the context of a merger.
Following the December 5, 1996 Mesa Board meeting, Mr. Brumley approached
Mr. Sheffield with a proposal for a stock-for-stock merger in which holders of
Parker & Parsley Common Stock would receive seven shares of Mesa Common Stock
for each Parker & Parsley share held. The proposal also provided that
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the current Mesa Board would continue to constitute a majority of the Mesa Board
after the merger, Mr. Brumley would remain Chairman of the Board and Chief
Executive Officer of Mesa and that, after one year, Mr. Sheffield would succeed
Mr. Brumley as Mesa's Chief Executive Officer. After consideration, Mr.
Sheffield rejected Mesa's merger proposal, citing the lack of adequate premium
based on the then current trading prices of each company's common shares, the
potential cash flow per share dilution that would occur to Parker & Parsley
stockholders in the transaction, and the structure of the proposal as an
acquisition by Mesa. Parker & Parsley then ceased all activity with respect to a
transaction with Mesa until Mr. Brumley contacted Mr. Sheffield again to
schedule the meeting held on March 7, 1997.
Following the termination of these merger discussions, Parker & Parsley
continued to consider alternatives for growth opportunities, which consisted of
property acquisitions, stock acquisitions of smaller companies and joint
ventures for exploration projects. Parker & Parsley also considered methods to
convert the Parker & Parsley MIPS into Parker & Parsley Common Stock, including
calling the Parker & Parsley MIPS for redemption in order to force conversion.
In this regard, Parker & Parsley filed a shelf registration statement with the
Commission covering $400 million in equity and debt securities (of which $127.9
million represented the unused portion of Parker & Parsley's previous shelf
registration statement), primarily to fund the possible redemption. The shelf
registration statement became effective on February 12, 1997.
Following the termination of these merger discussions, Mesa continued to
consider acquisition opportunities, as well as opportunities to access the
capital markets. In this regard, Mesa filed a shelf registration statement with
the Commission covering $500 million in equity and debt securities which became
effective on February 5, 1997.
During February 1997, Mesa agreed to make two acquisitions. On February 6,
1997, Mesa purchased all of the liquids production interests of MAPCO, Inc. in
the West Panhandle field of Texas for $66 million; and on February 7, 1997, Mesa
entered into a Stock Purchase Agreement with Western Mining Corporation (USA)
for the acquisition of all of the outstanding capital stock of Greenhill
Petroleum Corporation ("Greenhill") for $270 million. See "Mesa -- Business
Description -- Recent Developments." In connection with these acquisitions, Mesa
announced that it would seek to make a public offering of Mesa Common Stock
using its shelf registration statement. Prior to beginning the marketing process
for the stock offering, Mesa determined to contact Parker & Parsley again to
explore the possibility of a merger transaction.
Mr. Brumley contacted Mr. Sheffield and, on March 7, 1997 met with him to
discuss again a possible merger transaction. The preliminary proposal involved
the merger of Parker & Parsley with Mesa, pursuant to which holders of Parker &
Parsley Common Stock would receive seven shares of Mesa Common Stock for each
Parker & Parsley share held. The discussions contemplated that Mr. Brumley would
be the Chairman of the Board of Mesa and that Mr. Sheffield would become Mesa's
Chief Executive Officer. Mr. Sheffield indicated that, in light of the Merger
Parties' stock price changes since December 1996 and the change in the proposed
corporate and management structure, he was favorably inclined to pursue
discussions.
On the afternoon of March 13, 1997, the Parker & Parsley Board met to
discuss these developments and authorized Mr. Sheffield to continue the
discussions with Mesa. Mr. Sheffield then called Mr. Brumley to relay this
information to him. Later that same afternoon, the Mesa Board met to discuss
these developments and authorized Mr. Brumley to continue the discussions with
Parker & Parsley.
From March 14 through March 17, 1997, representatives of Mesa and Parker &
Parsley, including their financial advisors and legal counsel, held several
meetings to discuss the terms of the merger, including issues regarding the
consideration to be paid, the structure of the transaction, board, management
and employee matters, and the treatment of the Mesa Series A and Series B
Preferred Stock in the transaction, as well as business, legal, tax and
accounting issues. Representatives of Mesa and Parker & Parsley and their legal
counsel also met to negotiate the form of merger agreement. On March 17, 1997,
Parker & Parsley set forth a number of matters that it would require in any
combination with Mesa. These matters included (i) the reincorporation of Mesa
from Texas to Delaware, (ii) a classified board of directors in which Mesa would
not designate a majority of the directors (iii) the adoption of employee benefit
plans substantially similar to those of Parker & Parsley, (iv) a change in the
name of Mesa, (v) the conversion or exchange of the Mesa Series A and Series B
Preferred Stock into common stock of the new entity at an exchange ratio
acceptable to Parker &
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Parsley, (vi) the agreement of DNR and Mr. Pickens, as stockholders, to vote in
favor of the merger transaction and (vii) the qualification of the transaction
as a pooling of interests for financial accounting purposes. Later that day, the
parties tabled negotiations to consider more thoroughly the possible accounting
treatment of the merger and the effect thereof on the projected financial
performance of the combined entity.
Prior to the halt of discussions on March 17, Mesa approached Morgan
Stanley to discuss engaging such firm to render a fairness opinion, from the
point of view of the holders of Mesa Series A Preferred Stock, on the exchange
ratio to be established for the conversion or exchange of the Mesa Series A and
Series B Preferred Stock into common stock of the new entity. Mesa also
requested that Merrill Lynch consider and render a fairness opinion, from the
point of view of the holders of Mesa Common Stock, on the exchange ratio to be
established. At that time, Mesa indicated to representatives of both Merrill
Lynch and Morgan Stanley that in considering the appropriate exchange ratio,
management and the Mesa Board would likely consider, among other things, the
relative market prices of the Mesa Common Stock and Mesa Series A Preferred
Stock over various time periods, the discounted present value of the future
dividend stream payable on the Mesa Series A and Series B Preferred Stock
(making various assumptions regarding when dividends would become payable in
cash), the liquidation value of the Mesa Series A and Series B Preferred Stock
and the relative rights and preferences of the Mesa Common Stock and the Mesa
Series A and Series B Preferred Stock. Mesa also indicated that, as required by
the Statement of Resolution establishing the Mesa Series A and Series B
Preferred Stock, the Mesa Series A and Series B Preferred Stock would be treated
identically in the exchange, and that no premium would be payable to DNR as the
holder of the Mesa Series B Preferred Stock in respect of the voting rights it
would forfeit in the transaction.
At a meeting held on March 18, 1997, Mr. Sheffield notified the Parker &
Parsley Board of the moratorium on negotiations until the possible accounting
treatment of the transaction was considered thoroughly.
On March 22, 1997, Mr. Brumley and Mr. Sheffield met to discuss the
proposed transaction. After speaking with various of their respective directors,
Mr. Brumley and Mr. Sheffield confirmed the continuing interest of Mesa and
Parker & Parsley in pursuing merger discussions, regardless of the accounting
treatment of the transaction. In deciding to proceed, Mr. Sheffield and the
various Parker & Parsley directors with whom he spoke considered it significant
that Mr. Brumley had indicated that Mesa would be willing to discuss the use of
a mechanism to fix the effective value of the consideration to be received by
Parker & Parsley stockholders within a range acceptable to Parker & Parsley.
On March 24, 1997, representatives of Mesa and Parker & Parsley met to
discuss the consideration to be paid in the Mergers, including the potential use
of a mechanism to fix the effective value of the consideration to be received by
Parker & Parsley stockholders within a specified range. Ultimately, Mesa and
Parker & Parsley agreed to institute an effective exchange ratio of seven shares
of Mesa Common Stock for each share of Parker & Parsley Common Stock, subject to
a bilateral provision in which the parties agreed that if, for the 15 trading
days starting 20 trading days prior to the stockholders meetings, the average
closing sales price of the Mesa Common Stock was less than $5.00, each of Mesa
and Parker & Parsley would have the option to terminate the Merger Agreement.
The Parker & Parsley Board met on March 25, 1997. Members of management and
representatives of Goldman Sachs and Parker & Parsley's independent accountants
led the board members in a discussion of the terms of, the accounting treatment
for, and possible market reaction to, the proposed transaction. The Parker &
Parsley Board authorized its management to continue discussions with Mesa. Mr.
Brumley was invited to address the meeting and answered questions of the Parker
& Parsley directors.
From March 26 through April 4, 1997, representatives of Mesa and Parker &
Parsley, including their financial advisors and legal counsel, held meetings to
conduct their due diligence investigations of the other party, and
representatives of Mesa and Parker & Parsley and their legal counsel held
numerous meetings to determine the structure of the mergers and to negotiate the
form of merger agreement and related documents. When discussions were renewed,
the structure of the Mergers was established to provide that (i) Mesa would
merge into a new Delaware corporation to effect the reincorporation of Mesa from
Texas to Delaware, (ii) Parker & Parsley would merge into Mesa Operating Co.,
Mesa's principal operating subsidiary, and
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(iii) the holders of Mesa Series A and Series B Preferred Stock would have the
option of receiving either shares of common stock or shares of a new Series A
Preferred Stock (with rights and preferences substantially identical to those of
the Mesa Series A Preferred Stock) of the new Delaware corporation, subject to
the possibility that all shares of Mesa Series A and Series B Preferred Stock
would be converted into common stock of the new entity if certain class votes of
the holders of Mesa Series A and/or Series B Preferred Stock with respect to the
Mergers were obtained. In connection with these discussions, DNR indicated that
it would agree to convert its shares of Mesa Series B Preferred Stock into
common stock on the basis recommended by the Mesa Board.
At a March 27, 1997 meeting, the ratio at which the Mesa Series A and
Series B Preferred Stock would be converted into common stock of the new entity
was discussed by representatives of Parker & Parsley and Mesa and both
recognized that the preferred stock exchange ratio would impact the percentage
interests in the new entity that the stockholders of Parker & Parsley and Mesa,
respectively, would receive in the Mergers. The larger the exchange ratio, the
smaller the percentage equity interest of the new entity to be received by the
stockholders of Parker & Parsley and the holders of Mesa Common Stock. Parker &
Parsley urged that the exchange ratio be based on the relative market prices of
the Mesa Common Stock and Mesa Series A Preferred Stock over a specified period
of time ending on the last trading day prior to the execution of the Merger
Agreement, but did not otherwise insist on any particular reference period. Over
the next week, Mesa's management considered the appropriateness of various
reference periods on which the exchange ratio could be based. Ultimately, on
April 3, 1997, management determined and recommended to the Mesa Board that the
most appropriate period would be the period beginning after Mesa's execution of
its agreement to acquire Greenhill, because that period reflected the market's
assessment of Mesa and its securities after the implementation of its strategy
to increase reserves, production and cash flow, as evidenced by its liquids
acquisition from MAPCO, Inc. and its agreement to buy Greenhill. Based on this
period, Mesa management estimated that the exchange ratio through the last
trading day prior to the execution of the Merger Agreement would be 1.25
(rounded to the nearest hundredth) shares of Mesa Common Stock per share of Mesa
Series A and/or Series B Preferred Stock (or 1.25 shares of Pioneer Common Stock
for each seven shares of Mesa Series A and/or Series B Preferred Stock). Mesa
management informed Merrill Lynch and Morgan Stanley that it would recommend
that exchange ratio to the Mesa Board and asked such firms to consider the
fairness of that exchange ratio in connection with their respective fairness
opinion analyses.
On April 3, 1997, a special meeting of the Parker & Parsley Board was
convened for the principal purpose of reviewing the status and progress of
discussions with Mesa. Prior to the meeting, each member of the Parker & Parsley
Board was furnished with materials prepared by members of management concerning
Mesa and the proposed transaction. At the meeting legal counsel advised the
Parker & Parsley Board of its legal duties relating to the proposed transaction.
The members of management attending the meeting led the board members in a
discussion of Mesa's assets and the assets of the combined entity if the
proposed transaction were consummated, a financial and credit analysis of Mesa
and the combined entity, the terms of the proposed form of Merger Agreement,
developments since the previous board meeting about management and board
positions for the new entity, the effect of the proposed merger on conversion of
the Parker & Parsley MIPS, and the recent grant of options by the Mesa Board. In
addition, representatives of Goldman Sachs presented an analysis of Mesa and of
the proposed combination with Mesa, and an analysis of the proposed ratio at
which shares of Parker & Parsley Common Stock would be converted into Pioneer
Common Stock in the Parker & Parsley Merger. After a full discussion and review,
the Parker & Parsley Board adjourned to allow further consideration by the
directors of these matters and the management's written materials presented at
the meeting.
On April 3, 1997, a special meeting of the Mesa Board was convened for the
principal purpose of reviewing the status and progress of discussions with
Parker & Parsley. Prior to the meeting, materials concerning Parker & Parsley
and the proposed transaction were furnished to the Mesa Board. At such meeting,
legal counsel advised the Mesa Board of its legal duties relating to the merger
proposal and management reviewed the background of the transaction and the
proposed terms of the Merger Agreement. In addition, representatives of Merrill
Lynch made a presentation regarding its valuation analyses of Mesa and Parker &
Parsley, as well as its financial analysis of the Mergers, copies of which were
provided to members of
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the Mesa Board at such meeting. Merrill Lynch also delivered its oral opinions
that, as of that date and subject to the factors and assumptions reviewed with
the Mesa Board, the Mesa Conversion Number and the Parker & Parsley Conversion
Number (together, the "Conversion Numbers") are fair from a financial point of
view to the holders of Mesa Common Stock and (ii) the Mesa Common Consideration
is fair from a financial point of view to the holders of Mesa Common Stock. At
such meeting, representatives of Morgan Stanley also presented an analysis of
matters related to the ratio at which shares of Mesa Series A and Series B
Preferred Stock would be converted into Pioneer Common Stock in the
Reincorporation Merger, copies of which were provided to the Mesa Board. Morgan
Stanley also delivered its oral opinions that, as of that date and subject to
the factors and assumptions reviewed with the Mesa Board, the Mesa Common
Consideration and Mesa Preferred Consideration are fair from a financial point
of view to the holders of Mesa Series A Preferred Stock. In connection with
their deliberations, at the meeting the directors were advised of the stock
ownership of each director and certain other interests of the directors in the
proposed transaction. The Mesa Board also approved indemnification agreements
for officers and directors at the meeting and considered a proposal regarding a
management severance plan and related matters. See "The Mergers -- Interests of
Certain Persons in the Mergers" and "Ownership of Mesa, Parker & Parsley and
Pioneer Common Stock." After a full discussion and review, the Mesa Board
adjourned to allow further consideration of these matters and the written
materials by the directors, after first scheduling a subsequent meeting to be
held on the next day.
On April 4, 1997, the Mesa Board reconvened for the purpose of considering
the adoption and approval of the Merger Agreement and the Mergers on the terms
set forth in this Joint Proxy Statement/Prospectus, including the ratio at which
the Mesa Series A and Series B Preferred Stock would be converted into Pioneer
Common Stock in the Reincorporation Merger. On that date, Merrill Lynch and
Morgan Stanley delivered their written opinions, dated April 4, confirming the
oral opinions delivered at the April 3 meeting. At the Mesa Board meeting, among
other things, Mesa's directors unanimously approved the terms of the Merger
Agreement and the Mergers and authorized the execution of the Merger Agreement
by Mesa. Meeting separately, the compensation committee of the Mesa Board
approved the proposed severance plan, as well as the vesting of outstanding
employee stock options upon completion of the Mergers.
On April 6, 1997, a special meeting of the Parker & Parsley Board was
convened for the purpose of considering the adoption and approval of the Merger
Agreement and the Parker & Parsley Merger on the terms set forth in the Merger
Agreement, including the ratio at which the Parker & Parsley Common Stock would
be converted into Pioneer Common Stock in the Parker & Parsley Merger. Goldman
Sachs delivered its written opinion dated April 6, 1997 that, as of the date of
such opinion and subject to the factors and assumptions reviewed with the Parker
& Parsley Board, the Parker & Parsley Conversion Number is fair to the holders
of Parker & Parsley Common Stock. After a discussion of the terms of the
transaction with representatives of Goldman Sachs, the Parker & Parsley Board
unanimously approved the terms of the Merger Agreement and the Parker & Parsley
Merger and authorized the execution of the Merger Agreement by Parker & Parsley.
On the evening of April 6, 1997, Mesa and Parker & Parsley executed the
Merger Agreement and DNR and Boone Pickens executed stockholders agreements
pursuant to which they agreed, among other things, to vote in favor of the
approval of the Merger Agreement at the Mesa Special Meeting and to elect to
receive the Mesa Common Consideration pursuant to the Reincorporation Merger.
See "Certain Terms of the Merger Agreement" and "Agreements by Mesa
Stockholders."
On April 6, 1997, Mesa and Parker & Parsley publicly announced the
execution of the Merger Agreement.
On June 24, 1997, the Mesa Board met for the purpose of considering the
adoption and approval of an amended and restated Merger Agreement and the
Mergers on the terms set forth in the amended and restated Merger Agreement and
to establish the Mesa Record Date and the date for the Mesa Special Meeting. The
Mesa Board considered that the changes to the Merger Agreement were minor and
consisted of (i) elimination of a requirement to select a fifteenth, independent
director before the closing of the Mergers, (ii) clarification that severance
agreements, if not superseded by new severance agreements, would be assumed in
the Mergers as provided by law, (iii) minor clarifications and corrections in
the Merger
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Agreement, and (iv) changes of the defined terms for the Merger Parties' names
to conform to the use in this Joint Proxy Statement/Prospectus in order to avoid
stockholder confusion. The Mesa Board approved the terms of the amended and
restated Merger Agreement and the Mergers and authorized the execution of the
amended and restated Merger Agreement by Mesa. The Mesa Board established June
27, 1997 as the Mesa Record Date and August 7, 1997 as the date for the Mesa
Special Meeting.
On June 26, 1997, a special meeting of the Parker & Parsley Board was
convened for the purpose of considering the adoption and approval of an amended
and restated Merger Agreement and the Parker & Parsley Merger on the terms set
forth in the amended and restated Merger Agreement and to establish the Parker &
Parsley Record Date and the date for the Parker & Parsley Special Meeting. The
Parker & Parsley Board considered that the changes to the Merger Agreement were
minor. The Parker & Parsley Board approved the terms of the amended and restated
Merger Agreement and the Parker & Parsley Merger and authorized the execution of
the amended and restated Merger Agreement by Parker & Parsley. The Parker &
Parsley Board established June 27, 1997 as the Parker & Parsley Record Date and
August 7, 1997 as the date for the Parker & Parsley Special Meeting.
On June 26, 1997, Mesa and Parker & Parsley executed the amended and
restated Merger Agreement.
RECOMMENDATION OF MESA BOARD; MESA'S REASONS FOR THE MERGERS
THE MESA BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF MESA COMMON STOCK AND
MESA SERIES A AND SERIES B PREFERRED STOCK VOTE IN FAVOR OF THE REINCORPORATION
MERGER AND THE MERGER AGREEMENT.
The Mesa Board believes that the Mergers and the terms of the Merger
Agreement are fair and in the best interest of Mesa and its stockholders.
Accordingly, the Mesa Board has unanimously approved the Mergers and the Merger
Agreement and recommends approval thereof by the stockholders of Mesa. In making
the determination to recommend approval of the Mergers and the Merger Agreement,
the Mesa Board did not quantify or otherwise attempt to assign relative weights
to the specific factors it considered while making its determination except as
set forth under "-- Mesa Preferred Stock Exchange Ratio". In reaching this
determination, the Mesa Board reviewed presentations from, and discussed the
terms and conditions of the Mergers and the Merger Agreement with, Mesa senior
management, representatives of its legal counsel and representatives of Merrill
Lynch and Morgan Stanley, its financial advisors. The Mesa Board considered a
number of strategic, financial and other factors, including those described
below.
Growth Strategy. In determining to recommend the Mergers and the Merger
Agreement, the Mesa Board considered how the various aspects of combining with
Parker & Parsley to form Pioneer would achieve the expansion and growth
strategies that the Mesa Board had established. The Mesa Board considered that,
notwithstanding the fact that Mesa's principal properties in the Hugoton and
West Panhandle field would provide a predictable source of cash flow over an
extended period of time, these properties are, in general, fully developed and
have limited reinvestment prospects. The Mesa Board had established an objective
of increasing reserves, production and cash flow by seeking to acquire
additional properties and expanding into new core areas that would provide a
large inventory of reinvestment projects. The Mesa Board considered the quality
and nature of Parker & Parsley's assets, as well as those of Pioneer following
the Mergers, and concluded that the effect of the Merger would be to combine an
efficient source of cash flow with an excellent portfolio of reinvestment
projects that was attractively balanced as between development and exploitation
projects and exploration opportunities. The Mesa Board believes that the
complementary nature of the two companies will provide a strong foundation for a
successful growth strategy that will benefit Pioneer's stockholders.
Property Characteristics. The Mesa Board considered many aspects of the
Parker & Parsley properties to be attractive in the context of a merger with
Mesa. Specifically the Mesa Board considered the high level of operational
control, the concentration of reserves, the domestic location of the properties
and their long life nature. The Mesa Board believes that these four factors
combine to give reinvestment projects on these properties a better chance of
success. The Mesa Board also considered that Pioneer's reserve base would be
well balanced, with 52% of its reserves comprised of natural gas and 48% of its
reserves comprised of crude oil,
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condensate and natural gas liquids. Mesa's Board believes that a balanced
exposure to both commodities will reduce the volatility associated with
substantial dependence on a single commodity and broaden the pool of investment
opportunities that Pioneer will have in the future. Finally the board considered
that Pioneer would have both long-lived gas and long-lived oil reserves.
Benefits of a Larger Enterprise. Pioneer will be a substantially larger
enterprise than Mesa and will have a larger market capitalization than Mesa. The
Mesa Board considered that the Mergers would create a substantial pool of
reserves and production capacity, and considered the benefits of the potential
economies of scale that might arise. In particular, the Mesa Board considered
the benefits of purchasing power and operational synergies. The Mesa Board also
considered that the combined entity should produce significantly greater cash
flows than Mesa, which should allow Mesa's stockholders to participate in
opportunities that might not otherwise be available to Mesa for growth through
acquisitions, development and exploration, and that would have different risk
and reward characteristics. Mesa's Board also considered the potential benefits
that a larger enterprise might realize in attracting and retaining management,
operating and technical personnel. Finally, the Mesa Board considered that the
stocks of larger enterprises often experience higher trading multiples in
relation to various standard measures (e.g., net cash flow or net present value
of oil and gas reserves) and the effect that higher trading multiples would have
on the equity value of Pioneer.
Improved Capital Structure. Mesa's Board considered the potential benefits
of a simpler capital structure and a larger public equity float. In particular,
the Mesa Board considered that the conversion of all of the Mesa Series B
Preferred Stock and all or a portion of the Mesa Series A Preferred Stock into
Pioneer Common Stock in the Mergers would lead to a better understanding of the
combined entity's equity value in the investment community and that elimination
of both the preferred stock overhang on the value of the common stock and the
disproportionate voting rights of the Mesa Series B Preferred Stock in the
election of directors would be seen as a positive step by the investing
community. The Mesa Board also considered that Mesa's stockholders should enjoy
enhanced liquidity as a result of Pioneer's larger stockholder base and the
increased visibility resulting from heightened market research and institutional
investor focus on a larger combined entity. Enhanced liquidity should lead to
lower transaction costs and appeal to a broader spectrum of investors. Finally,
the Mesa Board considered that increased float should enhance Pioneer's ability
to use its common stock as currency in future acquisitions and combinations, as
well as broaden the set of potential candidates that would consider such
consideration attractive in either a property sale or business combination
context.
Management. The Mesa Board considers Scott Sheffield, who will serve as
Pioneer's Chief Executive Officer, to be among the most experienced and
successful builders of independent oil and gas companies in the United States.
The Mesa Board also considered the depth and breadth of management of Parker &
Parsley. In particular, Parker & Parsley's operational and technical expertise
was considered to be of significant potential benefit to Mesa's stockholders, as
was the transactional experience of the Parker & Parsley management team.
Financial. The Mesa Board reviewed a financial analysis of the impact of
the Mergers on the balance sheet and cash flow of the combined company. An
analysis prepared by Merrill Lynch and presented to the Mesa Board showed that
discretionary cash flow per share would be accretive to Mesa's shareholders in
1998. In addition, the Mergers would imply that the credit ratios of Pioneer
will be better than those of Mesa alone. The Mesa Board considered the primary
potential benefits of better credit ratios to be a lower cost of capital and a
better ability to withstand downturns in commodity prices and the business
cycle.
Merger Agreement. The Mesa Board considered the terms and conditions of the
Merger Agreement, including without limitation, the consideration to be received
by each class of Mesa stockholders in the Mergers (which are anticipated to be
tax free reorganizations) and the stockholder approval requirements of the
Merger Agreement. See "Certain Terms of the Mergers."
Fairness Opinions. The Mesa Board considered analyses provided by Merrill
Lynch and Morgan Stanley. In reviewing and considering the financial rationale
for the Mergers and the exchange ratio to be established for the conversion of
Mesa Series A and Series B Preferred Stock into Pioneer Common Stock in the
Reincorporation Merger, the Mesa Board reviewed the analysis prepared by Merrill
Lynch which included discounted cash flow analyses, a comparable trading value
analysis, a recent comparable transaction analysis and various conversion ratio
analyses. The Mesa Board considered the presentations made by representatives
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of Merrill Lynch at the meeting of the Mesa Board held on April 3, 1997
regarding its valuation analysis of Mesa and Parker & Parsley as well as its
financial analysis of the Mergers. The Mesa Board also considered the oral
opinions of Merrill Lynch delivered on April 3, 1997 and confirmed in writing on
April 4, 1997, that, as of such date and based upon and subject to the factors
and assumptions set forth therein, (i) the Mesa Conversion Number and the Parker
& Parsley Conversion Number were fair from a financial point of view to the
holders of Mesa Common Stock and (ii) the Mesa Common Consideration that may be
received by holders of Mesa Series A and Series B Preferred Stock was fair from
a financial point of view to the holders of Mesa Common Stock. See "-- Fairness
Opinions -- Merrill Lynch Fairness Opinions."
In addition Mesa's Board, in reviewing and considering the exchange ratio
to be established for the conversion of Mesa Series A and Series B Preferred
Stock into Pioneer Common Stock, considered the oral presentation made by Morgan
Stanley at the April 3, 1997 Mesa Board meeting. The presentation included an
analysis of the market trading prices for both Mesa Series A Preferred Stock and
Mesa Common Stock over different periods of time which considered, among other
things, the value of future dividends to be paid on the Mesa Series A Preferred
Stock under varying assumptions. The Mesa Board also considered the written
opinion of Morgan Stanley delivered on April 4, 1997, that, as of such date and
based upon and subject to the various conditions set forth in the opinion, the
Mesa Common Consideration and the Mesa Preferred Consideration that may be
received by holders of Mesa Series A Preferred Stock was fair from a financial
point of view to the holders of Mesa Series A Preferred Stock. See "-- Fairness
Opinions -- Morgan Stanley Fairness Opinions."
Copies of the written Merrill Lynch opinions and Morgan Stanley opinion to
the Mesa Board are attached hereto as Appendices II, III and IV, respectively,
and are incorporated herein by reference in their entirety.
Mesa Preferred Stock Exchange Ratio. In addition to the several matters
described above, in reviewing and considering the determination of the preferred
stock exchange ratio, the Mesa Board considered (i) the process undertaken by
management in making a recommendation to the Mesa Board regarding the exchange
ratio, including the retention of financial advisors to render fairness opinions
from the point of view of the holders of Common Stock and Mesa Series A
Preferred Stock; (ii) the matters separately considered by management in making
a recommendation to the Mesa Board, including, in descending order of
importance, the relative market prices of the Mesa Common Stock and Mesa Series
A Preferred Stock over various time periods, the discounted present value of the
future dividend stream payable on the Mesa Series A and Series B Preferred Stock
(making various assumptions regarding when dividends would become payable in
cash), the liquidation value of the Mesa Series A and Series B Preferred Stock
and the relative rights and preferences of the Mesa Common Stock and the Mesa
Series A and Series B Preferred Stock; (iii) the matters described above under
"-- Background," including the positions set forth by Parker & Parsley relating
to the exchange ratio; and (iv) the stock ownership and other interests of
directors and officers in the transaction, as described under "Ownership of
Mesa, Parker & Parsley and Pioneer Common Stock" and "-- Interests of Certain
Persons in the Mergers."
RECOMMENDATION OF PARKER & PARSLEY'S BOARD OF DIRECTORS; PARKER & PARSLEY'S
REASONS FOR THE MERGER
THE PARKER & PARSLEY BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF PARKER &
PARSLEY COMMON STOCK VOTE IN FAVOR OF THE PARKER & PARSLEY MERGER AND THE MERGER
AGREEMENT.
The Parker & Parsley Board believes that the Parker & Parsley Merger and
the terms of the Merger Agreement are fair and in the best interest of Parker &
Parsley and its stockholders. Accordingly, the Parker & Parsley Board has
unanimously approved the Parker & Parsley Merger and the Merger Agreement and
recommends approval thereof by the stockholders of Parker & Parsley. In making
the determination to recommend approval of the Parker & Parsley Merger and the
Merger Agreement, the Parker & Parsley Board did not quantify or otherwise
attempt to assign relative weights to the specific factors it considered while
making its determination. In reaching this determination, the Parker & Parsley
Board reviewed presentations from, and discussed the terms and conditions of the
Parker & Parsley Merger and the Merger Agreement
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with, Parker & Parsley senior management, representatives of its legal counsel
and representatives of Goldman Sachs, its financial advisor. The Parker &
Parsley Board considered a number of factors, including those described below.
Benefits of a Larger Enterprise. The Parker & Parsley Board considered
various benefits to Parker & Parsley's stockholders of holding an ownership
interest in Pioneer, which will be a substantially larger enterprise than Parker
& Parsley. The Parker & Parsley Board considered that Pioneer will have a larger
market capitalization than Parker & Parsley and that Parker & Parsley's
stockholders should enjoy enhanced liquidity as a result of Pioneer's larger
stockholder base and the increased visibility resulting from heightened market
research and institutional investor focus on a larger entity. The Parker &
Parsley Board also considered that the combined entity should produce
significantly greater cash flows than Parker & Parsley, which should allow
Parker & Parsley's stockholders to participate in opportunities for growth in
oil and gas reserves and production, either through acquisitions, exploration,
exploitation or entries into new core areas, that might not otherwise be
available to Parker & Parsley. In addition, the Parker & Parsley Board
considered that the stocks of larger enterprises often experience higher trading
multiples in relation to various standard measures (e.g., net cash flow or net
present value of oil and gas reserves) and that Pioneer's stock trading
multiples may be higher than those of Parker & Parsley. If Pioneer Common Stock
trades at higher multiples than Parker & Parsley Common Stock, Pioneer will have
a greater ability than Parker & Parsley to use its common stock as currency in
future acquisitions.
Quality and Nature of Assets. In developing its recommendation, the Parker
& Parsley Board considered the quality and nature of Mesa's assets, the nature
and scope of its operations and its financial condition, as well as those of
Pioneer following the Mergers. In its review of the quality and nature of Mesa's
assets, the Parker & Parsley Board considered the favorable financial
performance and stable cash flows generated by Mesa's assets in the Hugoton and
West Panhandle Fields. The Parker & Parsley Board also considered that Pioneer's
reserve base would be well balanced, with 52% of its reserves comprised of
natural gas and 48% of its reserves comprised of crude oil and liquids. In
addition, Pioneer would be one of the few large independent oil and gas
exploration and production companies in the United States whose primary assets
consist of both long-lived gas and long-lived oil reserves. The Parker & Parsley
Board also considered the immediate significant impact that the Mergers would
have on the achievement of certain of Parker & Parsley's strategic goals,
including growth in total reserves, growth in market capitalization, and
exposure to the exploration potential of the Gulf of Mexico through Mesa's
interest in 60 offshore exploration blocks and in Mesa's recent acquisition of
Greenhill.
Management and Significant Stockholders. The Parker & Parsley Board
considers Jon Brumley, who will serve as Pioneer's Chairman of the Board, to be
among the most experienced and successful builders of independent oil and gas
companies in the United States. The Parker & Parsley Board also considered the
benefits to Parker & Parsley's stockholders of the continued ownership by
Richard Rainwater of Pioneer Common Stock and Mr. Rainwater's continued
participation as a Pioneer director in Pioneer's strategic planning. Mr.
Rainwater, who will be the largest individual stockholder of Pioneer upon
consummation of the Mergers, has a record of quickly and aggressively building
shareholder value in companies operating in a wide variety of industries.
Financial. The Parker & Parsley Board reviewed a broad range of financial
information and analysis regarding Mesa, Parker & Parsley and the two companies
on a pro forma combined basis, including a financial comparison of Mesa and
Parker & Parsley and a review of the potential impact of the Mergers on the
balance sheet of the combined company prepared by Goldman Sachs. Goldman Sachs'
analysis included, among other matters, a comparison of the relative
contribution made by Mesa and Parker & Parsley to the combined levels of certain
measures of Pioneer's financial and operating condition, including total assets,
proved reserves and production. This analysis showed that the relative
contribution made by Parker & Parsley on the majority of the measures did not
exceed the majority ownership interest in Pioneer to be held by Parker & Parsley
stockholders after the Mergers. The Parker & Parsley Board also considered that
accounting for the Parker & Parsley Merger as a purchase of Mesa by Parker &
Parsley would decrease Pioneer's earnings below the levels it would achieve if
Pioneer could account for the Mergers as a pooling, and Goldman Sachs' advice
that, based on current market conditions, if Pioneer had positive earnings, the
reduction in earnings due to the impact of
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purchase accounting should not by itself have a material adverse effect on the
stock price of Pioneer Common Stock. Goldman Sachs also advised that more
relevant variables currently used to measure the market valuations of Parker &
Parsley and Mesa and similar companies include, among other things,
discretionary cash flows, discounted present values of future expected cash
flows, the estimated value of reserves and the estimated productive lives of
reserves. The Parker & Parsley Board reviewed an analysis which showed that if
oil and gas commodity prices on the date of the Merger Agreement remained
constant, Pioneer would have positive earnings in 1997 on a pro forma combined
basis. The Parker & Parsley Board also considered that the established floor
value of $35.00 for Parker & Parsley stockholders at the end of the Measurement
Period as provided by the Merger Agreement might cause the price of Parker &
Parsley Common Stock to rise to levels which would allow Parker & Parsley to
effect an exchange of the Parker & Parsley MIPS for Parker & Parsley Common
Stock, increasing Parker & Parsley's equity and decreasing its leverage, even if
the Merger Agreement were subsequently terminated. If this exchange occurred,
Pioneer's leverage would be within a range that is considered acceptable in the
oil and gas industry and would be at a level which is not materially greater
than Parker & Parsley's. The Parker & Parsley Board also considered that Pioneer
would succeed to Mesa's approximately $600 million of net operating loss carry
forwards. Subject to certain limitations set forth in the Code, these net
operating loss carry forwards could be used to reduce the federal income taxes
that would otherwise be assessed on Pioneer's earnings. In considering the
financial rationale for the Mergers, the Parker & Parsley Board also reviewed
the terms of several recent transactions in which long-lived natural gas
reserves were acquired by public exploration and production companies.
Merger Agreement. The Parker & Parsley Board considered the terms and
conditions of the Merger Agreement, including the consideration to be received
by the Parker & Parsley stockholders in the Parker & Parsley Merger (which is
anticipated to be a tax free reorganization). The Parker & Parsley Board
considered that both Parker & Parsley and Mesa may, in their discretion,
terminate the Merger Agreement if the average trading price for Mesa Common
Stock during the Measurement Period is less than $5.00 per share. Because the
Merger Agreement provides that each seven shares of Mesa Common Stock
outstanding will be converted into one share of Pioneer Common Stock, and that
each share of Parker & Parsley Common Stock outstanding will be converted into
one share of Pioneer Common Stock, Parker & Parsley can terminate the Merger
Agreement unless it appears, at the end of the Measurement Period, that each
share of Pioneer Common Stock has a value of at least $35.00. Under these
circumstances, the $35.00 in value received in exchange for each share of Parker
& Parsley Common Stock would represent a 17.15% premium over $29.875, which was
the NYSE closing price per share of Parker & Parsley Common Stock on April 4,
1997, the last trading day prior to the execution of the Merger Agreement. If
the average trading price for Mesa Common Stock during the Measurement Period is
less than $5.00, the Parker & Parsley Board will determine whether to terminate
the Merger Agreement, waive this right and proceed to the consummation of the
Parker & Parsley Merger or seek to renegotiate the Conversion Numbers. The
Parker & Parsley Board also considered the provisions of the Merger Agreement
which prohibit Mesa and its officers, directors, employees, agents, affiliates
and other representatives, and those of Mesa's subsidiaries, from soliciting or
encouraging any Mesa Acquisition Proposal (as hereinafter defined) or, subject
to the fiduciary duties of the Mesa Board, from engaging in any discussions or
negotiations with any third parties with respect to a Mesa Acquisition Proposal.
The Parker & Parsley Board further considered the provisions of the Merger
Agreement which require Mesa to pay to Parker & Parsley a fee of $45 million
under certain circumstances described in the Merger Agreement.
Stockholders Agreements. The Parker & Parsley Board considered the terms of
the Stockholders Agreements (as hereinafter defined), pursuant to which, among
other things, DNR (which owns 100% of the outstanding shares of Mesa Series B
Preferred Stock) and Boone Pickens (who owns 2% of the outstanding shares of
Mesa Common Stock and 8% of the outstanding shares of Mesa Series A Preferred
Stock) each agreed (i) to vote their shares of Mesa capital stock in favor of
the Reincorporation Merger and the other transactions contemplated in the Merger
Agreement, (ii) not to solicit or encourage any Mesa Acquisition Proposal or
engage in any discussions or negotiations with respect thereto, and (iii) to
elect to receive Pioneer Common Stock upon conversion of their shares in the
Mesa Merger.
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Fairness Opinion. The Parker & Parsley Board held discussions with Goldman
Sachs at the meetings of the Parker & Parsley Board held on April 3 and April 6,
1997, as well as considered the written opinion of Goldman Sachs, rendered on
April 6, 1997, that, as of such date, the Parker & Parsley Conversion Number is
fair to the holders of Parker & Parsley Common Stock. A copy of Goldman Sachs'
written opinion to the Parker & Parsley Board dated as of April 6, 1997 is
attached hereto as Appendix V and is incorporated herein by reference. See
"-- Fairness Opinions -- Goldman Sachs Fairness Opinion -- Parker & Parsley."
FAIRNESS OPINIONS
Merrill Lynch Fairness Opinions -- Mesa Common Stock
Mesa retained Merrill Lynch to act as its financial advisor in connection
with the Mergers. On April 3, 1997, Merrill Lynch delivered to the Mesa Board
its oral opinions, which were subsequently confirmed in writing by letters dated
April 4, 1997 (the "Merrill Lynch Opinions"), that, as of such date and based
upon and subject to the factors and assumptions set forth therein, (i) the
Conversion Numbers were fair from a financial point of view to the holders of
Mesa Common Stock and (ii) the Mesa Common Consideration was fair from a
financial point of view to the holders of Mesa Common Stock. THE FULL TEXT OF
THE MERRILL LYNCH OPINIONS, WHICH SET FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED, QUALIFICATIONS AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY MERRILL
LYNCH, ARE ATTACHED AS APPENDICES II AND III TO THIS JOINT PROXY STATEMENT/
PROSPECTUS AND ARE INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE MERRILL
LYNCH OPINIONS SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINIONS. NO LIMITATIONS
WERE IMPOSED BY THE MESA BOARD UPON MERRILL LYNCH WITH RESPECT TO INVESTIGATIONS
MADE OR PROCEDURES FOLLOWED BY MERRILL LYNCH IN RENDERING THE MERRILL LYNCH
OPINIONS. STOCKHOLDERS OF MESA ARE URGED TO READ CAREFULLY THE MERRILL LYNCH
OPINIONS IN THEIR ENTIRETY.
The Merrill Lynch Opinions were provided to the Mesa Board for its
information, are directed only to the fairness from a financial point of view of
the Conversion Numbers and the Mesa Common Consideration to the holders of Mesa
Common Stock and do not constitute a recommendation to any Mesa stockholder as
to how such stockholder should vote at the Mesa Special Meeting. The Conversion
Numbers and the Mesa Common Consideration were determined through negotiations
between Parker & Parsley and Mesa and were unanimously approved by the Mesa
Board. Merrill Lynch provided advice to Mesa during the course of such
negotiations but did not make a recommendation with respect to the Conversion
Numbers or the Mesa Common Consideration. The Merrill Lynch Opinions were
necessarily based upon market, economic and other conditions as they existed and
could be evaluated as of the date of the Merrill Lynch Opinions.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch Opinions or the presentation made
by Merrill Lynch to the Mesa Board. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. Accordingly,
Merrill Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinions. Merrill Lynch
considered the results of all such analyses and did not assign relative weights
to its analyses in preparing its opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Mesa or Parker & Parsley. Any estimates contained in the analyses performed by
Merrill Lynch are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which such businesses
or securities might actually be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. In addition, as described
above, the Merrill Lynch Opinions delivered to the Mesa Board and Merrill
Lynch's presentation to the Mesa Board were among several factors taken into
consideration by the Mesa Board in making its determination to approve the
Merger Agreement. Consequently, the Merrill Lynch analyses
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described below should not be viewed as determinative of the decision of the
Mesa Board or Mesa's management with respect to the fairness of the Conversion
Numbers or the Mesa Common Consideration.
In arriving at the Merrill Lynch Opinions, Merrill Lynch, among other
things: (1) reviewed certain publicly available business and financial
information relating to Mesa and Parker & Parsley that Merrill Lynch deemed to
be relevant; (2) reviewed certain reserve reports as of December 31, 1996 (the
"Parker & Parsley Reserve Reports") prepared by Parker & Parsley and audited by
its independent petroleum engineers (the "Parker & Parsley Petroleum
Engineers"); (3) reviewed certain reserve reports as of December 31, 1996
(together with the Parker & Parsley Reserve Reports, the "Reserve Reports")
prepared by Mesa and by Mesa's independent petroleum engineers (together with
the Parker & Parsley Petroleum Engineers, the "Petroleum Engineers"); (4)
reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flow, assets, liabilities and prospects of Parker &
Parsley and Mesa, furnished to Merrill Lynch by Parker & Parsley and Mesa,
respectively; (5) conducted discussions with members of senior management of
Mesa and Parker & Parsley concerning their respective businesses and prospects
before and after giving effect to the Mergers; (6) conducted discussions with
representatives of Arthur Andersen LLP, the independent certified public
accountants for Mesa; (7) reviewed the market prices and valuation multiples for
Mesa Common Stock and Parker & Parsley Common Stock and compared them with those
of certain publicly traded companies that Merrill Lynch deemed to be relevant;
(8) reviewed the results of operations of Mesa and Parker & Parsley and compared
them with those of certain companies that Merrill Lynch deemed to be relevant;
(9) compared the proposed financial terms of the Mergers with the financial
terms of certain other transactions which Merrill Lynch deemed to be relevant;
(10) reviewed the potential pro forma impact of the Mergers; (11) reviewed
drafts dated April 3, 1997 of the Merger Agreement and the Stockholders
Agreements (as hereinafter defined); and (12) reviewed such other financial
studies and analyses and took into account such other matters as Merrill Lynch
deemed necessary, including Merrill Lynch's assessment of general economic,
market and monetary conditions.
In preparing the Merrill Lynch Opinions, Merrill Lynch assumed and relied
on the accuracy and completeness of all information supplied or otherwise made
available to it or publicly available or discussed with or reviewed by or for
it, and Merrill Lynch did not assume any responsibility for independently
verifying such information or undertaking an independent evaluation or appraisal
of any of the assets or liabilities of Mesa or Parker & Parsley and was not
furnished with any such evaluation or appraisal other than the Reserve Reports.
In addition, Merrill Lynch did not conduct any physical inspection of the
properties or facilities of Mesa or Parker & Parsley. With respect to the
financial forecast information furnished to or discussed with Merrill Lynch by
Mesa or Parker & Parsley, Merrill Lynch assumed that they had been reasonably
prepared and reflected the best currently available estimates and judgment of
the management of Mesa or Parker & Parsley as to the expected future financial
performance of Mesa or Parker & Parsley, as the case may be. In addition,
Merrill Lynch assumed that the Reserve Reports had been reasonably prepared and
reflected the best currently available estimates and judgments of Mesa and
Parker & Parsley and their respective Petroleum Engineers as to their respective
reserves, their future hydrocarbon production volume and associated costs.
Merrill Lynch further assumed that the Parker & Parsley Merger will be accounted
for as a purchase under generally accepted accounting principles and that each
of the Mergers will qualify as a tax-free reorganization for U.S. federal income
tax purposes. Merrill Lynch also assumed that the final form of the Merger
Agreement would be substantially similar to the last draft reviewed by Merrill
Lynch. In addition, Merrill Lynch was not asked to consider, and the Merrill
Lynch Opinions do not in any manner address, the price at which shares of
Pioneer Common Stock or Pioneer Preferred Stock will actually trade following
consummation of the Mergers.
The following is a summary of the analyses performed by Merrill Lynch in
connection with the preparation of its opinions dated April 4, 1997 and
presented to the Mesa Board on April 3 and 4, 1997.
Discounted Cash Flow Analysis of Mesa. Using a discounted cash flow
analysis, Merrill Lynch calculated the present value of the after-tax future
cash flows that Mesa could be expected to generate after January 1, 1997 based
upon (a) the Mesa Reserve Reports and (b) oil, gas and NGL price forecasts under
two distinct pricing scenarios, Case I and Case II.
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The natural gas price forecasts were based on Henry Hub equivalent
forecasts for spot market sales and on a standard heating value of 1,000 British
Thermal Units per cubic foot of gas. Adjustments were made to the natural gas
price forecasts to reflect transportation charges and quality differentials. In
Case I, spot market gas prices per Mcf for the years 1997 to 2001 were assumed
to be $2.15, $1.95, $2.00, $2.00 and $2.00, respectively, and were assumed to
escalate at 4% per annum thereafter. In Case II, gas prices per Mcf for the
years 1997 to 2001 were assumed to be $2.15, $2.00, $2.10, $2.20 and $2.25,
respectively, and were assumed to escalate at 6% per annum thereafter. The
unadjusted natural gas prices were capped at $5.00 and $6.00 per Mcf in the
later years for Case I and Case II, respectively.
The oil price forecasts were based on West Texas Intermediate ("WTI")
equivalent forecasts for spot market sales, as adjusted for the transportation
and quality of Mesa's crude oil. In Case I, unadjusted WTI oil prices per barrel
for the years 1997 to 2001 were assumed to be $21.00, $20.00, $20.50, $20.50 and
$20.50, respectively, and were assumed to escalate at 4% per annum thereafter.
In Case II, unadjusted WTI oil prices per barrel for the years 1997 to 2001 were
assumed to be $21.50, $20.50, $21.00, $21.00 and $21.00, respectively, and were
assumed to escalate at 6% per annum thereafter. The unadjusted oil prices were
capped at $50.00 and $60.00 per barrel in the later years for Case I and Case
II, respectively.
The NGL price forecasts were based on 70% of the oil price forecast and
were adjusted for the transportation and quality of Mesa's NGLs. In Case I,
unadjusted NGL prices per barrel for the years 1997 to 2001 were assumed to be
$14.70, $14.00, $14.35, $14.35 and $14.35, respectively, and were assumed to
escalate at 4% per annum thereafter. In Case II, unadjusted NGL prices per
barrel for the years 1997 to 2001 were assumed to be $15.05, $14.35, $14.70,
$14.70 and $14.70, respectively, and were assumed to escalate at 6% per annum
thereafter. The unadjusted NGL prices were capped at $40.00 per barrel in the
later years for both Case I and Case II.
Production forecasts and associated production costs were supplied by Mesa.
Operating expenses and maintenance capital expenditures necessary to lift and
produce the proved, probable and possible reserves estimated in the engineering
reports were assumed to increase at a rate of 3% per annum. The after-tax cash
flows were discounted at rates ranging from 8% to 13% for proved reserves and
from 15% to 20% for probable reserves.
By discounting all the after-tax cash flows generated by Mesa's proved,
probable and possible reserves as of January 1, 1997, adding assessed value for
undeveloped acreage and other assets, and adding after-tax cash flows from gas
processing plants discounted at rates ranging from 8% to 11% and adjusting for
estimated total debt, net operating loss carry forwards, hedging positions and
working capital, Merrill Lynch arrived at an equity value range per share for
Mesa Common Stock of $2.02 to $3.68 in Case I and $2.64 to $4.47 in Case II. In
each case, per share amounts were determined based on 216.3 million shares
outstanding, which assumes a conversion of an aggregate of 121.6 million shares
Mesa Series A Preferred Stock and Mesa Series B Preferred Stock into Mesa Common
Stock on a 1.25 to 1 basis.
Discounted Cash Flow Analysis of Parker & Parsley. Using a discounted cash
flow analysis, Merrill Lynch calculated the present value of the after-tax
future cash flows that Parker & Parsley could be expected to generate after
January 1, 1997, based upon (a) reserve reports prepared by Parker & Parsley and
audited by its Petroleum Engineers (containing proved reserve estimates for
Parker & Parsley and the production profiles relating to such reserves); (b)
Merrill Lynch's oil and gas price forecasts under the same two pricing scenarios
that were applied to Mesa's reserves, Case I and Case II.
Production forecasts and associated production costs were supplied by
Parker & Parsley. Operating expenses and maintenance capital expenditures
necessary to lift and produce the proved, probable and possible reserves
estimated in the engineering reports, were assumed to increase at a rate of 3%
per annum. The after-tax cash flows were discounted at rates ranging from 9% to
15% for proved reserves. Probable reserves were estimated to be 10% of proved
reserve value.
By discounting all the after-tax cash flows generated by Parker & Parsley's
proved reserves as of January 1, 1997, adding assessed value for undeveloped
acreage and book value for NGLs, other assets and international assets and
adjusting for estimated net total debt, net operating loss carry forwards,
hedging
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positions, working capital and proceeds from the exercise of stock options,
Merrill Lynch arrived at an equity value range per share for Parker & Parsley
Common Stock of $28.45 to $34.70 in Case I and $31.34 to $38.06 in Case II. In
each case, per share amounts were determined based on 43.2 million shares of
Parker & Parsley Common Stock outstanding, including approximately 1.4 million
options and 6.7 million shares underlying the Parker & Parsley MIPS.
Analysis of Selected Comparable Acquisition Transactions. Merrill Lynch
reviewed publicly available information about the following acquisitions that
involved oil and gas properties similar to the operations of Mesa and Parker &
Parsley and consideration in excess of $100 million and that were announced
between June 1993 and March 1997: Vintage Petroleum, Inc./Burlington Resources,
Inc., Lomak Petroleum, Inc./ American Cometra, KCS Energy, Inc./InterCoast
Energy Company, Devon Energy Corporation/ Kerr-McGee Corporation, Enron Capital
& Trade Corporation/Hardy Oil & Gas, HS Resources, Inc./Tide West Oil Company,
HS Resources, Inc./Basin Exploration, Inc., National Energy Group,
Inc./Alexander Energy Corporation, Enron Capital & Trade Corporation/Coda Energy
Company, Barrett Resources Corporation/Plains Petroleum Company, Enserch
Exploration, Inc./DALEN Resources Corporation, Parker & Parsley/PG&E Resources,
Perez Companc/YPF Sociedad Anonima, Union Pacific Resources Group Inc./ Amax Oil
& Gas, Burlington Resources, Inc./Permian Basin Royalty Trust, Parker &
Parsley/Graham Resources and Samson Energy Corporation/Grace Petroleum
Corporation.
Merrill Lynch calculated multiples based on the consideration attributable
to oil and gas reserves for each of the transactions to, among other things,
such acquired companies' respective proved reserves. In particular, Merrill
Lynch calculated offer value expressed in terms of dollars per Mcfe of proved
reserves. Merrill Lynch derived an aggregate $0.89 to $1.00 per Mcf equivalent
reserve multiple for Mesa and an aggregate $0.80 to $0.91 per Mcf equivalent
reserve multiple for Parker & Parsley, from its analysis of the comparable
acquisition transactions and applied such multiples to Mesa's 1,855.1 Bcf
equivalent proved reserves and Parker & Parsley's 1,813.0 Bcf equivalent proved
reserves to calculate the aggregate oil and gas reserve values for each of Mesa
and Parker & Parsley. Merrill Lynch then adjusted the aggregate oil and gas
reserve values for each company's natural gas and NGL processing plants and
acreage position and for corporate items such as total debt and cash to arrive
at aggregate and (assuming 216.3 million shares of Mesa Common Stock and 43.2
million shares of Parker & Parsley Common Stock outstanding) per share equity
values for each company. These imputed equity values for Mesa ranged from $782
million, or $3.62 per share, to $997 million, or $4.61 per share. The imputed
equity values for Parker & Parsley ranged from $1,414 million, or $32.73 per
share, to $1,684 million, or $38.98 per share.
No company utilized in the comparable acquisition transaction analysis was
identical to Mesa or Parker & Parsley. Accordingly, an analysis of the results
of the foregoing is not purely mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable acquired companies and other factors, such as
total consideration paid in relation to a company's reserves, total oil and gas
reserves, reserve life index and location of the reserves acquired, that could
affect the acquisition value of such companies, Mesa and Parker & Parsley.
Analysis of Selected Publicly Traded Comparable Companies. Merrill Lynch
calculated the market capitalization and market value for Mesa and Parker &
Parsley and for each of the following publicly traded companies: Anadarko
Petroleum Corporation ("APC"), Apache Corporation, Burlington Resources, Inc.,
Enron Oil & Gas Company, Enserch Exploration, Inc., Louisiana Land & Exploration
Company, Noble Affiliates, Inc., Seagull Energy Corporation, and United Meridian
Corp. ("UMC") (collectively, the "Comparable Companies" and, collectively but
excluding APC and UMC, the "Other Comparable Companies"). For this purpose,
Merrill Lynch defined "market capitalization" as market value of the relevant
company's common equity plus total debt less cash and cash equivalents. Merrill
Lynch then calculated the market capitalization of each of Mesa, Parker &
Parsley, and the Comparable Companies as a multiple of each such company's 1996
SEC Value; estimated 1997 earnings before interest, taxes, depreciation,
depletion, exploration expense and amortization ("EBITDE") and estimated 1998
EBITDE. For Mesa and Parker & Parsley, the multiples yielded by such calculation
were (i) with respect to 1996 SEC Value, $1.11 and $0.65, respectively, (ii)
with respect to estimated 1997 EBITDE, 9.3x and 5.5x, respectively, and (iii)
with respect to estimated 1998 EBITDE, 11.0x and 5.2x, respectively. The average
of the multiples yielded by such calculations for the Comparable Companies and
the Other Comparable Companies were (i) with respect to
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1996 SEC Value, $0.90 and $0.84, respectively, (ii) with respect to estimated
1997 EBITDE, 7.1x and 6.6x, respectively, and (iii) with respect to estimated
1998 EBITDE, 6.5x and 6.6x, respectively. Merrill Lynch also calculated the
market value of each of Mesa, Parker & Parsley and the Comparable Companies as a
multiple of estimated 1997 discretionary cash flow ("DCF") and estimated 1998
DCF. The multiples yielded by such calculation for Mesa and Parker & Parsley
were (i) with respect to estimated 1997 DCF, 6.9x and 4.1x, respectively, and
(ii) with respect to estimated 1998 DCF, 8.1x and 3.9x, respectively. The
average multiples yielded by such calculations for the Comparable Companies and
the Other Comparable Companies were (i) with respect to estimated 1997 DCF, 5.9x
and 5.4x, respectively, and (ii) with respect to estimated 1998 DCF, 5.5x and
5.4x respectively. These analyses yielded an equity value range per share of
$3.59 to $4.98 for Mesa Common Stock (assuming 216.3 million shares outstanding)
and $33.43 to $42.69 for Parker & Parsley Common Stock (assuming 43.2 million
shares outstanding).
No company utilized in the above comparable companies analysis is identical
to either Mesa or Parker & Parsley. Accordingly, an analysis of the results of
the foregoing is not purely mathematical. Rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies or company to which they
are being compared.
Pro Forma Merger Consequences Analysis. Merrill Lynch analyzed certain pro
forma effects that could result from the Mergers. In connection with such
analyses, Merrill Lynch reviewed the projections provided by the management of
Mesa with respect to the future financial performance of Mesa for the years
1997, 1998 and 1999, and, after discussing such projections with such
management, made certain adjustments. Similarly, Merrill Lynch reviewed the
projections provided by the management of Parker & Parsley with respect to the
future financial performance of Parker and Parsley for the years 1997, 1998 and
1999, and, after discussing such projections with the management of both Parker
& Parsley and Mesa, made certain adjustments. Assuming that the Parker & Parsley
Merger would be given purchase accounting treatment, Merrill Lynch then analyzed
the pro forma effects of the Mergers. This analysis indicated that the
discretionary cash flow per share of the combined company would be approximately
10% lower for Mesa in 1997, but approximately 15% higher in 1998, while the pro
forma earnings per share would be significantly diluted, although still
positive, in 1997 but accretive by approximately 20% in 1998. For the purposes
of such analysis, Merrill Lynch defined discretionary cash flow per share as (a)
net income to common stock plus depletion, depreciation, amortization and
exploration expenses, plus deferred taxes and other non-cash charges, but not
including changes in working capital, divided by (b) the pro forma shares
outstanding.
Merrill Lynch reviewed the relative contributions of Mesa and Parker &
Parsley. Merrill Lynch reviewed (a) estimates of proved reserves as of December
31, 1996 ("Reserves"); (b) estimated EBITDE for 1997 and 1998; and (c) estimated
DCF for 1997 and 1998. Merrill Lynch estimated that Mesa contributed 51% of
Reserves, 49% of estimated 1997 EBITDE, 44% of estimated 1998 EBITDE, 45% of
estimated 1997 DCF and 38% of estimated 1998 DCF.
Conversion Ratio Analysis. Merrill Lynch analyzed the relative trading
value of the Mesa Series A Preferred Stock to the historical trading value of
the Mesa Common Stock and calculated the present value of the Mesa Series A
Preferred Stock assuming: (i) that the 8% paid-in-kind dividend is converted
into a cash pay dividend on September 30, 2000, and (ii) that the Mesa Series A
Preferred Stock is redeemed during the third quarter of 2006. Merrill Lynch ran
a valuation sensitivity analysis assuming growth rates in the Mesa Common Stock
price ranging from 8% to 18% and discount rates ranging from 10% to 15%. Based
on this analysis, Merrill Lynch determined that on a per share basis, the Mesa
Series A Preferred Stock could be valued at a range of from a 22% discount to a
177% premium to Mesa's Common Stock trading price of $6.00 at March 31, 1997.
The Mesa Common Consideration represents a 25% premium to the Mesa Common Stock
trading price at March 31, 1997 and the equivalent of an approximate 10% annual
growth rate in the Mesa Common Stock trading price and an approximate 11.5%
discount rate or an approximate 12% annual growth rate in the Mesa Common Stock
trading price and an approximate 13.5% discount rate. Merrill Lynch also
calculated the public market trading premium of the Mesa Series A Preferred
Stock price versus the Mesa Common Stock trading price at March 31, 1997. The
trading premium for the Mesa Series A Preferred Stock
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on that date was approximately 27%. The average trading premium for the
preceding 10-, 20-, 30- and 60-day periods ending on March 31, 1997 was
approximately 27%, 27%, 25% and 22%, respectively.
The summary set forth above does not purport to be a complete description
of the analyses conducted by Merrill Lynch or Merrill Lynch's presentation to
the Mesa Board. Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all factors and analyses, could create an incomplete
view of the process underlying its opinion. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In performing its analyses, Merrill Lynch made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
Mesa or Parker & Parsley. Any estimates contained in the analyses performed by
Merrill Lynch are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. In addition, analyses relating to the value of the business do
not purport to be appraisals or to reflect the prices at which businesses may
actually be sold. Accordingly such analyses and estimates are inherently subject
to substantial uncertainty.
Merrill Lynch is an internationally recognized investment banking firm
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions and for other purposes. Mesa selected Merrill Lynch to
act as its financial advisor in connection with the Merger because of its
international reputation and its substantial experience and expertise in
transactions similar to the Merger. Merrill Lynch, as part of its investment
banking business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of its business, Merrill Lynch and its
affiliates may actively trade the debt and equity securities of Mesa and Parker
& Parsley for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Mesa Financial Advisor Fee. In connection with Merrill Lynch's services as
financial advisor to Mesa, Mesa has agreed to pay Merrill Lynch, as compensation
for its services, a $450,000 advisory fee plus an additional fee of $7.55
million payable upon the closing of the Mergers. No separate fee was payable to
Merrill Lynch in connection with rendering its opinion. Mesa has also agreed to
reimburse Merrill Lynch for its expenses incurred in connection with the Mergers
(including reasonable fees and expenses of its legal counsel) and to indemnify
Merrill Lynch and certain related persons against certain liabilities and
expenses in connection with the Mergers, including certain liabilities under the
federal securities laws.
Morgan Stanley Fairness Opinion -- Mesa Series A Preferred Stock Financial
Opinion Letter
Mesa retained Morgan Stanley to render a financial opinion letter as to
whether the Mesa Common Consideration and the Mesa Preferred Consideration
pursuant to the Merger Agreement are fair from a financial point of view to the
holders of the Mesa Series A Preferred Stock in connection with the Mergers.
Morgan Stanley was selected by the Mesa Board to provide such opinion letter
based on Morgan Stanley's qualifications, expertise and reputation. On April 3,
1997, Morgan Stanley rendered to the Mesa Board its oral opinion which was
confirmed in writing by a letter dated April 4, 1997 that, as of such date and
based upon and subject to the various considerations set forth in the opinion,
the Mesa Common Consideration and the Mesa Preferred Consideration pursuant to
the Merger Agreement were fair from a financial point of view to the holders of
Mesa Series A Preferred Stock. No limitations were imposed by the Mesa Board
upon Morgan Stanley with respect to the investigations made or the procedures
followed by it in rendering its fairness opinion. Morgan Stanley was not
authorized to solicit, and did not solicit, interest from any party with respect
to the acquisition of Mesa Series A Preferred Stock or any of Mesa's assets. The
Mesa Board does not intend to obtain any further opinion of Morgan Stanley in
respect of the Mergers.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION, DATED AS OF APRIL 4,
1997, WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS
ATTACHED AS APPENDIX IV TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF MESA SERIES A PREFERRED STOCK ARE
URGED TO, AND SHOULD, READ THE OPINION CAREFULLY
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AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED TO THE MESA BOARD,
ADDRESSES ONLY THE FAIRNESS OF THE MESA COMMON CONSIDERATION AND THE MESA
PREFERRED CONSIDERATION FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF MESA
SERIES A PREFERRED STOCK, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGERS
NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER OF MESA AS TO HOW
SUCH STOCKHOLDER SHOULD VOTE AT THE MESA SPECIAL MEETING. THE SUMMARY OF MORGAN
STANLEY'S OPINION, DATED AS OF APRIL 4, 1997, SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things: (i) analyzed certain publicly available financial statements and other
information of Parker & Parsley and Mesa; (ii) analyzed certain internal
financial statements and other financial and operating data concerning Parker &
Parsley prepared by the management of Parker & Parsley; (iii) analyzed certain
financial projections prepared by the management of Parker & Parsley; (iv)
discussed the past and current operations and financial condition and the
prospects of Parker & Parsley with senior executives of Parker & Parsley; (v)
analyzed certain internal financial statements and other financial operating
data concerning Mesa prepared by the management of Mesa; (vi) analyzed certain
financial projections prepared by the management of Mesa; (vii) discussed the
past and current operations and financial condition and the prospects of Mesa
with senior executives of Mesa, and analyzed the pro forma impact of the Mergers
on Mesa's earnings per share, cash flow per share, consolidated capitalization
and financial ratios; (viii) reviewed the reported prices and trading activity
for Parker & Parsley Common Stock, Mesa Common Stock and Mesa Series A Preferred
Stock; (ix) compared the financial performance of Parker & Parsley and the
prices and trading activity of Parker & Parsley Common Stock with that of
certain other comparable publicly-traded companies and their securities; (x)
compared the financial performance of Mesa and the prices and trading activity
of Mesa Common Stock with that of certain other comparable publicly-traded
companies and their securities; (xi) compared the prices and trading activity of
Mesa Common Stock with that of the Mesa Series A Preferred Stock; (xii) reviewed
the financial terms, to the extent publicly available, of certain comparable
acquisition transactions; (xiii) reviewed the Merger Agreement, and certain
related documents (including the agreement of the holder of the Mesa Series B
Preferred Stock to vote in favor of the Reincorporation Merger and elect to
receive Pioneer Common Stock); (xiv) reviewed the Statement of Resolution
establishing series of shares designated Series A 8% Cumulative Convertible
Preferred Stock and Series B 8% Cumulative Convertible Preferred Stock of Mesa;
and (xv) performed such other analyses as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for purposes of its opinion. With respect to the
financial projections, Morgan Stanley assumed that they were reasonably prepared
on bases reflecting the best currently available estimates and judgments of the
future financial performance of Mesa and Parker & Parsley, respectively. Morgan
Stanley did not make any independent valuation, or appraisal of, the assets or
liabilities of Mesa or Parker & Parsley, however, Morgan Stanley reviewed
reserve reports provided by Parker & Parsley management with respect to the oil
and gas reserves of Parker & Parsley and reserve reports provided by Mesa
management with respect to the oil and gas reserves of Mesa. Morgan Stanley
assumed that the Mergers will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code and that the rights and preferences of the Pioneer
Preferred Stock as evidenced in a Certificate of Designation or any other
instrument governing the rights and preferences of the Pioneer Preferred Stock
will be identical in all material respects to the rights and preferences of the
Mesa Series A Preferred Stock. In addition, Morgan Stanley assumed that the
Mergers would be consummated in accordance with the terms set forth in the Draft
Merger Agreement dated April 1, 1997. Morgan Stanley's opinion was necessarily
based on economic, market and other conditions in effect on, and the information
available to Morgan Stanley as of the respective dates thereof.
The following is a brief summary of certain analyses performed by Morgan
Stanley and reviewed with the Mesa Board on April 3, 1997, in connection with
Morgan Stanley's presentation and oral opinion to the Mesa Board on such date
and its written opinion dated as of April 4, 1997.
Comparable Company Analysis. As part of its analysis, Morgan Stanley
compared certain financial information of Mesa with that of a group of publicly
traded exploration and production companies, including
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Apache Corporation, Burlington Resources, Inc., Cross Timbers Oil Company, Devon
Energy Corporation, Enron Oil & Gas Company, Lomak Petroleum, Inc., Louis
Dreyfus Natural Gas Corp., Noble Affiliates, Inc. and Vintage Petroleum, Inc.
(collectively, the "Comparables"). Such financial information included analysis
of financial ratios such as price to forecasted 1997 cash flow per share, the
multiple of aggregate value to last twelve months ("LTM") EBITDA and adjusted
price per Mcfe. Morgan Stanley noted that (i) based on a compilation of cash
flow projections obtained from Morgan Stanley research, the Comparables traded
at multiples of share price (as of March 27, 1997) to forecasted 1997 cash flow
per share in a range of 5.3 times to 9.6 times, compared to 8.9 times for Mesa
and 4.8 times for Parker & Parsley, and (ii) based on publicly available
information, the Comparables traded at multiples of Adjusted Price per Mcfe from
$0.85/Mcfe to $2.32/Mcfe compared to $1.28/Mcfe for Mesa and $1.13/Mcfe for
Parker & Parsley. Morgan Stanley also noted that the Comparables traded at
multiples of aggregate value to LTM EBITDA from 6.1 times to 10.4 times,
compared to 9.5 times and 6.6 times for Mesa and Parker & Parsley, respectively.
No company utilized in the comparable company analysis is identical to Mesa
or Parker & Parsley. In evaluating the Comparables, Morgan Stanley made
judgments and assumptions with regard to industry performance, general business,
economic, market and financial conditions and other matters, many of which are
beyond the control of Mesa and Parker & Parsley such as the impact of
competition on the business of Mesa and Parker & Parsley and the industry
generally, industry growth and the absence of any adverse material change in the
financial condition and prospects of Mesa or Parker & Parsley or the industry or
in the financial markets in general. Mathematical analysis (such as determining
the average or median) of the financial ratios of the Comparables is not in
itself a meaningful method of using comparable company data.
Analysis of Selected Precedent Transactions. Morgan Stanley considered
certain publicly announced pending or completed business combinations in the oil
and gas exploration and production sector for which terms were publicly
available, including the following five transactions: HS Resources, Inc.'s
acquisition of Tide West Oil Company, Contour Production Co.'s acquisition of
Kelley Oil & Gas Corp., Apache Corporation's acquisition of Aquila Energy
Resources, Enron Capital and Trade Resources Corp.'s acquisition of Coda Energy,
Inc. and Barrett Resources Corp.'s acquisition of Plains Petroleum Co. For these
transactions the multiple of Adjusted Price per Mcfe ranged from $0.62/Mcfe to
$1.21/Mcfe, with a mean of $0.87/Mcfe and a median of $0.85/Mcfe, compared to
$1.28/Mcfe for Mesa and $1.13/Mcfe for Parker & Parsley. For three of these
transactions (HS Resources, Inc.'s acquisition of Tide West Oil Company, Enron
Capital and Trade Resources Corp.'s acquisition of Coda Energy, Inc. and Barrett
Resources Corp.'s acquisition of Plains Petroleum Co.), there was sufficient
public market data available to evaluate LTM EBITDA and cash flow multiples. For
these transactions (i) the multiple of aggregate value to LTM EBITDA ranged from
8.1 times to 11.0 times, with a mean of 9.5 times and a median of 9.3 times, and
(ii) the multiple of announced value to LTM cash flow ranged from 11.0 times to
12.4 times, with a mean of 11.6 times and a median of 11.3 times. Mesa and
Parker & Parsley traded at multiples of aggregate value to LTM EBITDA of 9.5
times and 6.6 times, respectively, and at multiples of share price to forecasted
1997 cash flow per share of 8.9 times and 4.8 times, respectively.
Morgan Stanley also considered certain recent oil and gas property
acquisition transactions for which terms were publicly available including the
following ten transactions: Mesa's acquisition of Greenhill Petroleum
Corporation from Western Mining Corporation (USA), Titan Resources L.P.'s
acquisition of property from Mobil Exploration and Producing U.S., Lomak
Petroleum, Inc.'s acquisition of property from American Cometra, Inc., Devon
Energy Corporation's acquisition of property from Kerr-McGee Corp., Louis
Dreyfus Natural Gas Corp.'s acquisition of property from American Exploration
Co., Cross Timbers Oil Company's acquisition of property from Santa Fe Minerals,
Inc., Apache Corporation's acquisition of property from Texaco Inc., Parker &
Parsley's acquisition of property from PG&E Resources Company, Meridian Oil
Production's acquisition of property from Parker & Parsley, and Louis Dreyfus
Natural Gas Corp.'s acquisition of property from Parker & Parsley. For these
transactions the multiple of announced price per Mcfe ranged from $0.63/Mcfe to
$1.50/Mcfe, with a mean of $0.94/Mcfe and a median of $0.81/Mcfe, compared to
$1.28/Mcfe for Mesa and $1.13/Mcfe for Parker & Parsley.
No transaction utilized in the precedent transaction analysis is identical
to the Mergers. In evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to industry perform-
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ance, general business, economic, market and financial conditions and other
matters, many of which are beyond the control of Mesa and Parker & Parsley such
as the impact of competition on the business of Mesa and Parker & Parsley and
the industry generally, industry growth and the absence of any adverse material
change in the financial condition and prospects of Mesa or Parker & Parsley or
the industry or in the financial markets in general. Mathematical analysis (such
as determining the average or median) is not in itself a meaningful method of
using precedent transaction data.
Pro Forma Analysis of the Merger. Morgan Stanley analyzed the pro forma
impact of the Mergers on Mesa's cash flow per share ("CFPS") for the fiscal
years ended 1997 and 1998. The analysis was performed utilizing securities
research analyst estimates for the fiscal years ended 1997 and 1998 for Mesa and
Parker & Parsley respectively, and incorporating certain financial projections
prepared by the managements of Mesa and Parker & Parsley. Based on these
forecasts, the Mergers will be accretive to Mesa cash flow per share in the
first year after the consummation of the Mergers.
Theoretical Relative Valuation Model. Morgan Stanley developed a model (the
"Model") to estimate the theoretical value of the Mesa Series A Preferred Stock
relative to the Mesa Common Stock assuming pay-in-kind ("PIK") dividends are
paid to the Mesa Series A Preferred Stock holders through June 30, 2000, cash
dividends are paid to the Mesa Series A Preferred Stock holders from September
30, 2000 to June 30, 2006, and the Mesa Series A Preferred Stock is redeemed at
June 30, 2006. The Model discounted (a) the assumed value at June 30, 2000, of
the underlying common interest held by the Mesa Series A Preferred Stock holders
as represented by the Mesa Series A Preferred Stock shares outstanding as of
June 30, 1997, at a one for one conversion ratio of Mesa Series A Preferred
Stock for Mesa Common Stock, at 13.4%, the estimated cost of equity capital
based on the unlevered median Beta of the comparable companies, based on the
Betas reported in the Barra U.S. Equity Beta Book as of January, 1997, relevered
to reflect the debt at Mesa as of December 31, 1996, as restated for the
acquisition of Greenhill Petroleum Corporation and (b)(i) the value at June 30,
2000, of the common interest to be obtained by the Mesa Series A Preferred Stock
through the PIK dividends, and (ii) the cash dividends assumed to paid from
September 30, 2000 through June 30, 2006, at a range of discount rates from
13.4% to 30% reflecting the uncertainty of receiving the PIK and cash dividends.
This resulting value range was further discounted by 0% to 10% to reflect market
liquidity and other discounts. The resulting value of the Mesa Series A
Preferred Stock was divided by the current value of the Mesa Common Stock to
arrive at a Mesa Common Consideration ranging from 1.10 times and 1.38 times.
No model developed for purposes of the theoretical valuation analysis is
able to exactly replicate the performance of the Mesa Series A Preferred Stock
under all possible events. In evaluating the Model, Morgan Stanley made
judgments and assumptions with regard to the risks and impact of various events,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Mesa and
Parker & Parsley such as the impact of competition on the business of Mesa and
Parker & Parsley and the industry generally, industry growth and the absence of
any adverse material change in the financial condition and prospects of Mesa or
Parker & Parsley or the industry or in the financial markets in general. Relying
on the output of the Model without considering the impact and relevance of
various judgments and assumptions is not in itself a meaningful method of using
the Model.
Analysis of Market Trading Levels: Morgan Stanley compared the proposed
Mesa Common Consideration to the historical trading levels of the Mesa Series A
Preferred Stock relative to the Mesa Common Stock. Since the Mesa Series A
Preferred Stock began trading on August 5, 1996, the average ratio of the price
of the Mesa Series A Preferred Stock to the price of the Mesa Common Stock has
been 1.19x. This ratio has averaged 1.20x and 1.26x over the last three months
and last one month, respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, Morgan Stanley considered the results of all its
analyses as a whole and did not attribute any particular weight to any
particular analysis or factor considered by it. Furthermore, selecting any
portion of Morgan Stanley's analyses or factors considered by it, without
considering all analyses and factors, would create an incomplete view of the
process underlying its opinion. In addition, Morgan Stanley may have deemed
various assumptions more or less probable than other assump-
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tions, so that the ranges of valuations resulting from any particular analysis
described above should therefore not be taken to be Morgan Stanley's view of the
actual value of Mesa or Parker & Parsley.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Mesa or Parker & Parsley.
The analyses performed by Morgan Stanley are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
a part of Morgan Stanley's analyses of the fairness from a financial point of
view of the Mesa Preferred Consideration and Mesa Common Consideration to the
holders of Mesa Series A Preferred Stock and were conducted in connection with
the delivery of Morgan Stanley's opinion dated April 4, 1997. The analyses do
not purport to be appraisals or to reflect the prices at which Mesa or Parker &
Parsley actually may be valued in the marketplace. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty.
In addition, as described above, Morgan Stanley's opinion and presentation
to the Mesa Board was one of many factors taken into consideration by the Mesa
Board in making its determination to recommend approval of the Mergers.
Consequently, the Morgan Stanley analyses described above should not be viewed
as determinative of the opinion of the Mesa Board or the view of the management
of Mesa with respect to the value of Mesa or of whether the Mesa Board would
have been willing to agree to a different conversion number. The Mesa Common
Consideration and Mesa Preferred Consideration were determined through
negotiations between Mesa and Parker & Parsley and were approved by the Mesa
Board. Morgan Stanley provided advice to Mesa during the course of such
negotiations; however, the decision to enter into the Merger Agreement and to
accept the Mesa Preferred Consideration and Mesa Common Consideration was solely
that of the Mesa Board.
The Mesa Board retained Morgan Stanley based on its experience and
expertise. Morgan Stanley is an internationally recognized investment banking
and advisory firm. As part of its investment banking business, Morgan Stanley is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations, for estate, corporate and other purposes. Morgan
Stanley is a full-service securities firm engaged in securities trading and
brokerage activities, as well as providing investment banking and financial
advisory services. In the course of its market-making and other trading
activities, Morgan Stanley may, from time to time, have a long or short position
in, and buy and sell, securities of Mesa or Parker & Parsley.
Pursuant to a letter agreement dated March 17, 1997, between Mesa and
Morgan Stanley, Mesa has agreed to pay to Morgan Stanley (i) US$500,000 payable
at the time the opinion was delivered, and (ii) US$500,000 at the time this
Joint Proxy Statement/Prospectus is mailed to the holders of Mesa Series A
Preferred Stock. Mesa has also agreed to reimburse Morgan Stanley for its
out-of-pocket and legal expenses and to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and employees and each
person, if any, controlling Morgan Stanley or any of its affiliates against
certain liabilities, including liabilities under federal securities laws, and
expenses, related to Morgan Stanley's engagement.
Goldman Sachs Fairness Opinion -- Parker & Parsley.
On April 6, 1997, Goldman Sachs delivered its written opinion to the Parker
& Parsley Board that as of the date of such opinion the Parker & Parsley
Conversion Number pursuant to the Merger Agreement was fair to the holders of
Parker & Parsley Common Stock. THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN
SACHS DATED APRIL 6, 1997, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS
ATTACHED HERETO AS APPENDIX V TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF PARKER & PARSLEY ARE URGED TO,
AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
(i) the Merger Agreement; (ii) the Annual Reports on Form 10-K of Parker &
Parsley and Mesa for the five years ended December 31, 1996; (iii) certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Parker &
Parsley
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and Mesa; (iv) the Prospectus Supplement dated August 17, 1995 relating to
$150,000,000 of 8 1/4% Senior Notes due 2007 of Parker & Parsley; (v) the
Prospectus Supplement dated April 5, 1995 relating to $150,000,000 of 8 7/8%
Senior Notes due 2005 of Parker & Parsley; (vi) the Offering Circular dated
March 22, 1994 relating to the Parker & Parsley MIPS, guaranteed by Parker &
Parsley and convertible into Parker & Parsley Common Stock; (vii) the
Registration Statement and Prospectus dated June 25, 1996 relating to
$325,000,000 of 10 5/8% Senior Subordinated Notes due 2006 and $264,000,000 of
11 5/8% Senior Subordinated Discount Notes due 2006 of MOC; (viii) the
Prospectus dated July 3, 1996 relating to the public rights offering of
58,599,252 shares of Mesa Series A Preferred Stock; (ix) the Mesa Proxy
Statement filed on Schedule 14A dated May 24, 1996; (x) the Statement of
Resolution with respect to the Mesa Series A and Series B Preferred Stock; (xi)
certain other communications from Parker & Parsley and Mesa to their respective
stockholders; and (xii) certain internal financial analyses and forecasts for
Parker & Parsley and Mesa prepared by their respective managements and reviewed
by Parker & Parsley, including certain internal forecasts for Parker & Parsley
and Mesa on a combined basis, after giving effect to the Mergers. Goldman Sachs
held discussions with the senior managements of Parker & Parsley and Mesa
regarding the strategic rationale for, and the benefits of, the Mergers and the
past and current business operations, financial condition and future prospects
of their respective companies, on a standalone basis and as combined in the
Mergers. Goldman Sachs reviewed certain information provided by Parker & Parsley
and Mesa relating to their respective oil and gas reserves, including year-end
reserve reports for Parker & Parsley, prepared by Parker & Parsley and audited
by independent petroleum engineers, and year-end reserve reports for Mesa
prepared by independent petroleum engineers and discussed the reserve
information with the respective managements of Parker & Parsley and Mesa.
Goldman Sachs held discussions with members of senior management of Parker &
Parsley regarding their due diligence examination of such reserve information
for Mesa. In addition, Goldman Sachs reviewed the reported price and trading
activity for Parker & Parsley Common Stock and Mesa Common Stock, compared
certain financial and stock market information for Parker & Parsley and Mesa
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the oil and gas industry specifically and in other industries
generally and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and has assumed such accuracy for
purposes of its opinion. For purposes of rendering its opinion, Goldman Sachs
assumed, with Parker & Parsley's consent, that the consummation of the Mergers
will not result in a change of control of Parker & Parsley. Goldman Sachs has
not made an independent evaluation or appraisal of the assets and liabilities of
Parker & Parsley or Mesa or any of their subsidiaries and, except for the
reserve information referred to above, Goldman Sachs has not been furnished with
any such evaluation or appraisal. With respect to such reserve information,
Goldman Sachs is not an expert in the evaluation of oil and gas properties and,
with the consent of Parker & Parsley, has relied solely upon the reserve reports
and internal estimates prepared by the independent petroleum engineers and
managements of Parker & Parsley and Mesa and reviewed by Parker & Parsley.
Goldman Sachs has assumed with Parker & Parsley's consent that such information
and the financial forecasts provided to Goldman Sachs and discussed with Goldman
Sachs with respect to Parker & Parsley and Mesa after giving effect to the
Mergers have been reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Parker & Parsley and that
such forecasts will be realized in the amounts and at the times contemplated
thereby. Goldman Sachs' opinion was based upon economic and market conditions
existing on the date of such opinion.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in its presentation to the Parker & Parsley Board on April 3, 1997
and in connection with providing its written opinion to the Parker & Parsley
Board on April 6, 1997.
Historical Stock Trading Analysis. Goldman Sachs reviewed the daily
historical closing prices for shares of Parker & Parsley Common Stock and Mesa
Common Stock during the period from March 28, 1996 to March 31, 1997, and on
April 4, 1997. For the periods from January 2, 1997 to March 31, 1997; September
30, 1996 to March 31, 1997; March 31, 1996 to March 31, 1997; and March 31, 1994
to March 31, 1997; Goldman Sachs reviewed the volume of shares of Parker &
Parsley Common Stock and Mesa Common
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Stock traded at a range of prices, the weighted average price of Parker &
Parsley Common Stock and Mesa Common Stock and the total number of shares of
Parker & Parsley Common Stock and Mesa Common Stock traded as a percentage of
outstanding shares. Goldman Sachs reviewed the daily historical closing prices
for shares of Mesa Common Stock and Mesa Series A Preferred Stock from August 5,
1996 to March 31, 1997, and on April 4, 1997. For the periods from January 2,
1997 to March 31, 1997; September 30, 1996 to March 31, 1997; and August 5, 1996
to March 31, 1997; Goldman Sachs reviewed the volume of shares of Mesa Series A
Preferred Stock traded at a range of prices, the weighted average price of Mesa
Series A Preferred Stock and the total number of shares of Mesa Series A
Preferred Stock traded as a percentage of outstanding shares. Goldman Sachs also
reviewed a ratio of daily closing stock prices for Mesa Series A Preferred Stock
to daily closing stock prices for Mesa Common Stock for the period from August
5, 1996 through March 31, 1997.
In addition, Goldman Sachs reviewed the ratio of the closing price of
Parker & Parsley Common Stock to the closing price of Mesa Common Stock on April
1, 1997, which resulted in an implied exchange ratio of 4.98. Goldman Sachs also
compared the 7.0 implied exchange ratio for the Mergers to the ratios of the
weighted average of the closing prices of Parker & Parsley Common Stock to the
weighted average of the closing prices of Mesa Common Stock for the 10-day,
20-day, 30-day, 60-day, 90-day, 180-day, one-year and two-year periods
immediately prior to April 1, 1997 which resulted in exchange ratios of 4.96,
5.03, 4.95, 5.54, 5.85, 6.36, 6.29 and 5.35, respectively.
Selected Companies Analysis. Goldman Sachs reviewed and compared certain
financial information relating to Parker & Parsley and Mesa to corresponding
financial information, ratios and public market multiples for eleven exploration
and production ("E&P") companies: Anadarko Petroleum Corporation; Apache Corp.;
Burlington Resources, Inc.; Enron Oil & Gas Company; Louisiana Land &
Exploration Company; Noble Affiliates, Inc.; Oryx Energy Corp.; Seagull Energy
Corporation; Union Texas Petroleum Holdings, Inc.; Union Pacific Resources Group
Inc.; and Vastar Resources, Inc. (the "Selected Companies"). The Selected
Companies were chosen because they are publicly traded companies with operations
that for purposes of analysis may be considered similar to Parker & Parsley and
Mesa. Apache Corp., Burlington Resources, Inc., Noble Affiliates, Inc., and
Union Pacific Resources Group, Inc. (the "Selected Large Cap Companies") were
isolated by Goldman Sachs for further comparison as the Selected Large Cap
Companies may for purposes of analysis be considered similar to the combined
company following the Mergers as each company has a large market capitalization,
does not have a large controlling stockholder and has relatively long-lived
domestic reserves. Goldman Sachs calculated and compared various financial
multiples and ratios. The multiples of Parker & Parsley and Mesa were calculated
using prices per share of Parker & Parsley Common Stock and Mesa Common Stock of
$29.88 and $6.00, respectively, the closing prices on the NYSE on April 1, 1997.
The projections for Parker & Parsley and Mesa were prepared by their respective
managements and reviewed by Parker & Parsley and were based on fully diluted
shares outstanding (excluding executive stock options). The multiples and ratios
for the Selected Companies were based on Goldman Sachs research estimates and
latest public information.
Goldman Sachs considered (i) price as a multiple of discretionary cash flow
("DCF") (net income plus depreciation, depletion, amortization, deferred taxes,
exploration expenses and any other non-cash items) for 1996 (the "1996 P/DCF
Multiple") and as estimated for the 1997 (the "1997E P/DCF Multiple") and 1998
(the "1998E P/DCF Multiple") calendar years; (ii) price as a multiple of
earnings per share for 1996 (the "1996 P/E Multiple") and as estimated for the
1997 (the "1997E P/E Multiple") and 1998 (the "1998E P/E Multiple") calendar
years; (iii) enterprise value (equity market capitalization plus book value of
debt less cash) as a multiple of debt adjusted DCF plus interest expense for
1996 (the "1996 EV/DACF Multiple") and as estimated for the 1997 (the "1997E
EV/DACF Multiple") and 1998 (the "1998E EV/DACF Multiple") calendar years; (iv)
enterprise value-to-1996 barrel of oil equivalents ("BOE"); (v) enterprise
value/1996 SEC 10 ("1996 SEC 10") (estimated value of total reserves for company
at December 31, 1996 based on oil and gas prices at December 31, 1996 and
applying a 10% discount rate, calculated based on guidelines promulgated by the
Commission) ratios for 1996; and (vi) reserve-to-production ratios ("R/P
Ratios"). Goldman Sachs' analyses indicated (a) 1996 P/DCF Multiples that ranged
from (i) 3.5x to 11.3x for the Selected Companies with a median of 5.8x and (ii)
5.8x to 7.1x for the
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Selected Large Cap Companies with a median of 6.5x, compared with 4.7x for
Parker & Parsley and 7.1x for Mesa, (b) 1997E P/DCF Multiples that ranged from
(i) 3.3x to 9.4x for the Selected Companies with a median of 4.5x and (ii) 4.4x
to 6.8x for the Selected Large Cap Companies with a median of 5.8x, compared
with 4.1x for Parker & Parsley and 7.1x for Mesa, (c) 1998E P/DCF Multiples that
ranged from (i) 2.9x to 8.2x for the Selected Companies with a median of 5.1x
and (ii) 4.3x to 6.7x for the Selected Large Cap Companies with a median of
5.5x, compared to 3.9x for Parker & Parsley and 7.3x for Mesa, (d) 1996 P/E
Multiples that ranged from (i) 10.6x to 24.1x for the Selected Companies with a
median of 20.4x and (ii) 19.5x to 24.1x for the Selected Large Cap Companies
with a median of 22.1x, compared to 18.1x for Parker & Parsley, (e) 1997E P/E
Multiples that ranged from (i) 10.2x to 25.5x for the Selected Companies with a
median of 19.5x and (ii) 17.8x to 21.1x for the Selected Large Cap Companies
with a median of 19.5x, compared to 16.1x for Parker & Parsley, (f) 1998E P/E
Multiples that ranged from (i) 9.5x to 22.5x for the Selected Companies with a
median of 19.5x and (ii) 17.3x to 22.5x for the Selected Large Cap Companies
with a median of 20.0x, compared to 16.1x for Parker & Parsley, (g) 1996 EV/DACF
Multiples that ranged from (i) 4.8x to 11.6x for the Selected Companies with a
median of 7.0x and (ii) 7.0x to 7.6x for the Selected Large Cap Companies with a
median of 7.3x, compared to 5.6x for Parker & Parsley and 7.9x for Mesa, (h)
1997E EV/DACF Multiples that ranged from (i) 4.6x to 9.8x for the Selected
Companies with a median of 5.6x and (ii) 5.3x to 7.4x for the Selected Large Cap
Companies with a median of 6.5x, compared to 5.1x for Parker & Parsley and 8.3x
for Mesa, (i) 1998E EV/DACF Multiples that ranged from (i) 4.2x to 8.4x for the
Selected Companies with a median of 5.8x and (ii) 5.2x to 7.4x for the Selected
Large Cap Companies with a median of 6.2x, compared to 4.9x for Parker & Parsley
and 9.2x for Mesa, (j) EV/1996 BOE that ranged from (i) $4.85 to $12.80 for the
Selected Companies with a median of $7.42 and (ii) $6.06 to $12.80 for the
Selected Large Cap Companies with a median of $9.01, compared to $4.98 for
Parker & Parsley and $9.18 for Mesa, (k) EV/1996 SEC 10 ratios that ranged from
(i) 77% to 141% for the Selected Companies with a median of 81% and (ii) 81% to
141% for the Selected Large Cap Companies with a median of 103%, compared to 64%
for Parker & Parsley and 134% for Mesa, and (l) R/P Ratios that ranged from (i)
6.5 to 13.3 for the Selected Companies with a median of 7.8 and (ii) 6.5 to 12.6
for the Selected Large Cap Companies with a median of 8.3, compared to 11.1 for
Parker & Parsley and 11.3 for Mesa.
Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses of the
financial impact of the Mergers. Using historical earnings and discretionary
cash flow for 1996, financial projections prepared by the managements of Parker
& Parsley and Mesa and reviewed by Parker & Parsley for the calendar years 1997,
1998 and 1999 and assuming reinvestment of free cash flow using a reinvestment
template provided by Parker & Parsley which included new reserve acquisitions,
exploration and follow-up development, Goldman Sachs compared the DCF per share
of Parker & Parsley Common Stock, on a standalone basis, to the DCF per share of
the common stock of the combined company on a pro forma basis. Goldman Sachs
performed this analysis based on a transaction price per share of Parker &
Parsley Common Stock of $42.00 and assuming $10 million in pretax synergies
annually for the combined company beginning in 1998. Based on such analyses, the
proposed transaction would be dilutive to Parker & Parsley stockholders on a DCF
per share basis in 1996, 1997, 1998 and would be accretive to Parker & Parsley
stockholders on a DCF per share basis in 1999.
Equity Ownership Analysis of the Combined Company Following the
Merger. Goldman Sachs performed an analysis of the equity ownership of the
combined company following the Mergers, assuming that 100% of the shares of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock are exchanged into
common stock of the combined company and that 100% of the Parker & Parsley MIPS
are converted into common stock of the combined company. Such analysis indicated
that, on a fully diluted basis (excluding executive stock options), (i) Parker &
Parsley stockholders will own approximately 57% of the combined company with (a)
holders of Parker & Parsley Common Stock owning approximately 48% and (b)
holders of the Parker & Parsley MIPS owning approximately 9%; and (ii) Mesa
stockholders will own approximately 43% of the combined company with (a) holders
of Mesa Common Stock owning approximately 13%, (b) holders of Mesa Series A
Preferred Stock owning approximately 15% and (c) holders of Mesa Series B
Preferred Stock owning approximately 15%.
Contribution Analysis. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including, among other
things, equity market capitalization, leveraged market capitalization, unlevered
cash flow, DCF, book value, total assets, 1996 Production (Bcfe), 1996 SEC 10
Value, debt
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adjusted 1996 SEC 10 Value (the SEC Value plus working capital minus total
debt), SEC 10 Value based on oil and gas prices approximating those at April 1,
1997; debt adjusted SEC 10 Value based on oil and gas prices approximating those
at April 1, 1997 (the SEC 10 Value based on oil and gas prices approximating
those at April 1, 1997 plus working capital minus total debt) and proved
reserves) for Parker & Parsley, Mesa and the pro forma combined entity
(excluding expected synergies) resulting from the Mergers based on publicly
available information and forecasts for Parker & Parsley and Mesa prepared by
their respective managements and reviewed by Parker & Parsley. The analysis
indicated that Parker & Parsley stockholders, which will receive approximately
57% of the equity interest in the combined company, would contribute (i) 48% of
the equity market capitalization of the combined company; (ii) 40% of the
levered market capitalization of the combined company; (iii) 57%, 50% and 53%,
respectively, of the unlevered cash flow of the combined company in 1996 and for
the estimated 1997 and 1998 calendar years; (iv) 80%, 58% and 62%, respectively,
of the DCF of the combined company in 1996 and for the estimated 1997 and 1998
calendar years; (v) 67% of the book value of the combined company; (vi) 50% of
the total assets of the combined company; (vii) 53% of 1996 Production (Bcfe) of
the combined company; (viii) 51% of the 1996 SEC 10 Value of the combined
company; (ix) 65% of the debt adjusted 1996 SEC 10 Value of the combined
company; (x) 49% of the SEC 10 Value based on oil and gas prices approximating
those at April 1, 1997 of the combined company; (xi) 78% of the debt adjusted
SEC 10 Value based on oil and gas prices approximating those at April 1, 1997 of
the combined company; and (xii) 56%, 43% and 49%, respectively, of the Oil &
NGLs reserves, the gas reserves and the total reserves of the combined company.
Analysis of Post-Merger Credit Considerations. Goldman Sachs performed an
analysis of post-Merger credit considerations for the combined company following
the Merger based on projections for Parker & Parsley and Mesa prepared by their
respective managements and reviewed by Parker & Parsley for balance sheet and
income statement items for the combined company following the Merger, assuming
reinvestment of free cash flow using a reinvestment template provided by Parker
& Parsley which included new reserve acquisitions, exploration and follow-up
development. EBITDA (earnings before interest expense, income taxes,
depreciation and amortization and other income (expenses)) as a multiple of
interest would be 2.7x, 4.6x, 5.2x and 6.1x, respectively, for the combined
company for 1996 and as estimated for the 1997, 1998 and 1999 calendar years,
compared to 8.7x and 1.4x, respectively, for Parker & Parsley and Mesa on a
standalone basis in 1996; EBIT (earnings before interest expense and income tax)
as a multiple of interest would be 1.3x, 1.9x, 2.0x and 2.5x, respectively, for
the combined company for 1996 and as estimated for the 1997, 1998 and 1999
calendar years, compared to 4.3x and 0.7x, respectively, for Parker & Parsley
and Mesa on a standalone basis in 1996; the debt-to-total capital ratio would be
47%, 42%, 41% and 41%, respectively, for the combined company for 1996 and as
estimated for the 1997, 1998 and 1999 calendar years, compared to 38% and 81%,
respectively, for Parker & Parsley and Mesa on a standalone basis in 1996; debt
as a multiple of EBITDA would be 3.0x, 2.2x, 2.1x and 1.9x, respectively, for
the combined company for 1996 and as estimated for the 1997, 1998 and 1999
calendar years, compared to 1.2x and 5.5x, respectively, for Parker & Parsley
and Mesa on a standalone basis in 1996; assuming total reserves each year grow
at the same rate as production, debt/BOE would be $2.56, $1.97, $1.73, and
$1.60, respectively, for the combined company for 1996 and as estimated for the
1997, 1998 and 1999 calendar years, compared to $1.20 and $3.77, respectively,
for Parker & Parsley and Mesa on a standalone basis in 1996; and net debt (total
debt minus working capital (current assets less current liabilities)) as a
multiple of DCF would be 4.7x, 2.7x, 2.4x and 2.0x, respectively, for the
combined company for 1996 and as estimated for the 1997, 1998 and 1999 calendar
years, compared to 1.3x and 19.3x, respectively, for Parker & Parsley and Mesa
on a standalone basis in 1996.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Parker & Parsley or Mesa or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs' providing its opinion to the
Parker & Parsley Board as to the fairness of the Parker & Parsley Conversion
Number to the holders of Parker & Parsley Common Stock and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon
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forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Parker & Parsley, Mesa, Goldman Sachs or any
other person assumes responsibility if future results are materially different
from those forecast. As described above, Goldman Sachs' opinion to the Parker &
Parsley Board was one of many factors taken into consideration by the Parker &
Parsley Board in making its determination to approve the Merger Agreement.
Goldman Sachs' opinion was provided to the Parker & Parsley Board for the
information and assistance of the Parker & Parsley Board in connection with its
consideration of the Mergers, and such opinion does not constitute a
recommendation as to how any holder of Parker & Parsley Common Stock should vote
with respect to the Parker & Parsley Merger. The foregoing summary does not
purport to be a complete description of the analysis performed by Goldman Sachs
and is qualified by reference to the written opinion of Goldman Sachs set forth
in Appendix V hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Parker & Parsley
selected Goldman Sachs as its financial advisor because it is a nationally
recognized investment banking firm that has substantial experience in
transactions similar to the Mergers. Goldman Sachs is familiar with Parker &
Parsley having provided certain investment banking services to Parker & Parsley
from time to time, including having acted as underwriters of public offerings of
Parker & Parsley Common Stock in 1994 and $150,000,000 of 8 7/8% Senior Notes
due 2005 of Parker & Parsley in April 1995; having acted as managing
underwriters of a private offering of 3,776,400 Parker & Parsley MIPS in March
1994; having acted as financial advisor in connection with the purchase by
Parker & Parsley of certain Prudential-Bache Energy Income LP limited
partnership units in November 1993; and having acted as financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Merger Agreement. Goldman Sachs has also provided certain investment
banking services to Mesa from time to time. Furthermore, Goldman Sachs may
provide investment banking services to the combined company in the future.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Parker & Parsley, Mesa, MOC, and Pioneer for its own account or
for the account of customers. As of April 6, 1997, Goldman Sachs, for its own
account, had a long position of 42,000 shares of Parker & Parsley Common Stock,
a long position of 1,000 Parker & Parsley MIPS, a long position of 770,702
shares of Mesa Series A Preferred Stock, a short position of 715,000 shares of
Mesa Common Stock, a $2,000,000 short position in 10 5/8% Senior Subordinated
Notes due 2006 of MOC and a $1,000,000 short position in 11 5/8% Senior
Subordinated Discount Notes due 2006 of MOC.
Pursuant to a letter agreement dated March 25, 1997 (the "Goldman Sachs
Engagement Letter"), Parker & Parsley engaged Goldman Sachs to act as its
financial advisor in connection with the Mergers. Pursuant to the terms of the
Goldman Sachs Engagement Letter, Parker & Parsley has agreed to pay Goldman
Sachs upon consummation of the Mergers a transaction fee of $7,300,000. No
additional fee was payable to Goldman Sachs in connection with rendering its
opinion. Parker & Parsley has agreed to reimburse Goldman Sachs for certain
expenses, including attorney's fees, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
APPRAISAL OR DISSENTER'S RIGHTS
None of Mesa or Parker & Parsley's stockholders are entitled to any
appraisal or dissenter's rights under applicable state law in connection with
the Mergers, except for the sole holder of the Mesa Series B Preferred Stock,
which holder has waived in writing such rights.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of the material United States federal
income tax consequences of the Mergers and is not intended to be a complete
discussion of all potential tax effects that might be relevant to the Mergers.
Such discussion deals only with persons that are citizens or residents of the
United States or are entities formed under the laws of the United States (or any
state or locality thereof). This summary assumes that the holders of Mesa Common
Stock, Mesa Series A Preferred Stock, Mesa Series B Preferred Stock and Parker &
Parsley Common Stock have held such stock as a capital asset. The discussion
does not address all aspects of Federal income taxation that may be important to
particular stockholders and may not be applicable to certain special classes of
stockholders, including without limitation, stockholders who are not citizens or
residents of the United States, stockholders who acquired their stock pursuant
to the exercise of employee stock options or otherwise as compensation,
stockholders that are corporations subject to the alternative minimum tax,
insurance companies, tax-exempt organizations, financial institutions,
securities dealers, broker-dealers, or foreign partnerships or foreign
corporations. Moreover, the state, local, foreign and estate tax consequences of
the Mergers are not discussed.
This summary is based on laws, regulations, rulings, and judicial decisions
in effect at the date of this Joint Proxy Statement/Prospectus. Future
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to stockholders as described herein. EACH STOCKHOLDER IS URGED TO
CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO
SUCH HOLDER OF THE MERGERS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGES TO APPLICABLE TAX
LAWS.
General. The Reincorporation Merger and the Parker & Parsley Merger will
each qualify as a reorganization within the meaning of Section 368(a) of the
Code.
Mesa has received a tax opinion of Baker & Botts, L.L.P., counsel to Mesa,
and Parker & Parsley has received a tax opinion of Vinson & Elkins L.L.P.,
counsel to Parker & Parsley, each to the effect that the Reincorporation Merger
and the Parker & Parsley Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. An opinion is not binding on the Internal
Revenue Service or the courts and, therefore, the delivery of such tax opinions
cannot assure that the Internal Revenue Service or the courts will treat each of
the Reincorporation Merger and the Parker & Parsley Merger as a reorganization
within the meaning of Section 368(a) of the Code. These tax opinions (as well as
the description of tax consequences set forth herein) are based, among other
things, on assumptions relating to certain facts and circumstances of, and the
intentions of the parties to, the Mergers, which assumptions either (i) have
been made with the consent of Mesa, MOC, Pioneer or Parker & Parsley or (ii) are
based upon certain representations of fact made by Mesa, MOC, Pioneer or Parker
& Parsley, or certain stockholders or members of management of Mesa, MOC,
Pioneer or Parker & Parsley. It is a condition to the Mergers that these
opinions be delivered again on the Closing Date. Neither party intends to waive
this condition. If this condition is waived, both Mesa and Parker & Parsley will
deliver supplemental proxy materials to their respective stockholders to
disclose the waiver of this condition and provide all related material
disclosures, including risks to the respective stockholders.
The principal Federal income tax consequences of the Reincorporation Merger
and the Parker & Parsley Merger to Mesa, MOC, Pioneer, Parker & Parsley, and
their respective stockholders, will be as follows.
Mesa, MOC, Pioneer and Parker & Parsley. No gain or loss will be recognized
by Mesa, MOC, Pioneer, Parker & Parsley or any of their respective subsidiaries
as a result of the consummation of either the Reincorporation Merger or the
Parker & Parsley Merger.
Consequences to Holders of Mesa Common Stock. Except with respect to cash
received in lieu of fractional shares, no gain or loss will be recognized by
holders of Mesa Common Stock upon the receipt of Pioneer Common Stock in the
Reincorporation Merger. The tax basis of the Pioneer Common Stock received will
be equal to the tax basis of the Mesa Common Stock surrendered in exchange
therefor. The holding
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period of the Pioneer Common Stock received will include the holding period of
the Mesa Common Stock surrendered in exchange therefor.
Consequences to Holders of Mesa Preferred Stock. Except with respect to
cash received in lieu of fractional shares, no gain or loss will be recognized
to holders of Mesa Series A Preferred Stock or Mesa Series B Preferred Stock
upon the receipt of Pioneer Common Stock in the Reincorporation Merger.
Similarly, except with respect to cash received in lieu of fractional shares, no
gain or loss will be recognized to holders of Mesa Series A Preferred Stock or
Mesa Series B Preferred Stock upon the receipt of Pioneer Preferred Stock in the
Reincorporation Merger. The tax basis of the Pioneer Common Stock or Pioneer
Preferred Stock received will be equal to the tax basis of the Mesa Series A
Preferred Stock or Mesa Series B Preferred Stock surrendered in exchange
therefor. The holding period of the Pioneer Common Stock or Pioneer Preferred
Stock received will include the holding period of the Mesa Series A Preferred
Stock or Mesa Series B Preferred Stock surrendered in exchange therefor.
Consequences to Holders of Parker & Parsley Common Stock. No gain or loss
will be recognized by holders of Parker & Parsley Common Stock upon the receipt
of Pioneer Common Stock in the Parker & Parsley Merger. The tax basis of the
Pioneer Common Stock received will be equal to the tax basis of the Parker &
Parsley Common Stock surrendered in exchange therefor. The holding period of the
Pioneer Common Stock received will include the holding period of the Parker &
Parsley Common Stock surrendered in exchange therefor.
Fractional Shares. A holder of Mesa Common Stock, Mesa Series A Preferred
Stock or Mesa Series B Preferred who, pursuant to the Reincorporation Merger,
receives cash in lieu of a fractional share of Pioneer Common Stock or Pioneer
Preferred Stock will be treated as having received that fractional share of
stock pursuant to the Reincorporation Merger and then as having received the
cash in a redemption of the fractional share of stock. Such a holder will
generally recognize capital gain or loss on the deemed redemption equal to the
difference between the amount of cash received and the holder's adjusted tax
basis in the fractional share of Pioneer Common Stock or Pioneer Preferred Stock
deemed surrendered in exchange therefor.
ACCOUNTING TREATMENT
The Parker & Parsley Merger will be accounted for as a purchase of Mesa by
Parker & Parsley for financial accounting purposes. For presentation of certain
anticipated effects of the accounting treatment on the consolidated financial
position and results of operations of Pioneer after giving effect to the
Mergers, see "Unaudited Pro Forma Combined Financial Statements."
EXCHANGE OR CONVERSION OF PARKER & PARSLEY MIPS
The Merger Agreement provides that Parker & Parsley and its subsidiaries
shall use their reasonable best efforts to cause the redemption of the Parker &
Parsley MIPS for cash (in connection with a standby underwriting of Parker &
Parsley Common Stock) or the exchange of the Parker & Parsley MIPS into Parker &
Parsley Common Stock as soon as practicable in accordance with the terms of the
Parker & Parsley MIPS and to complete such redemption or exchange prior to the
RM Effective Time. Beginning April 1, 1997 Parker & Parsley may redeem the
Parker & Parsley MIPS at an initial price of $29.36 in accordance with the terms
thereof. Parker & Parsley expects it can obtain a standby underwriting
commitment to purchase shares of Parker & Parsley Common Stock in order to fund
any redemption of the Parker & Parsley MIPS. Parker & Parsley, at its option,
may cause the Parker & Parsley MIPS to be exchanged, in whole or in part, for
shares of Parker & Parsley Common Stock so long as both (a) the closing price of
the Parker & Parsley Common Stock on any 20 trading days in the period of 30
trading days ending on the trading day immediately preceding Parker & Parsley's
exercise of such option and (b) the closing price of the Parker & Parsley Common
Stock on the trading day immediately preceding Parker & Parsley's exercise of
such option, equal or exceed $35 5/32.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the recommendations of the Mesa Board and the Parker &
Parsley Board with respect to the Mergers, stockholders should be aware that
certain members of the Mesa Board, the management of
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Mesa, the Parker & Parsley Board and the management of Parker & Parsley have the
following interests in the Mergers separate from their interests as stockholders
of Mesa and Parker & Parsley.
Composition of Pioneer Management. In connection with the Mergers, Jon
Brumley, John S. Herrington, Kenneth A. Hersh, Boone Pickens, Richard E.
Rainwater, Philip B. Smith and Robert L. Stillwell, who are currently directors
of Mesa, and R. Hartwell Gardner, James L. Houghton, Jerry P. Jones, Charles E.
Ramsey, Jr., Scott D. Sheffield, Arthur L. Smith and Michael D. Wortley, who are
currently directors of Parker & Parsley, will be elected as directors of Pioneer
effective as of the P&P Effective Time. The directors of Pioneer will be
entitled to compensation for their services. Additionally, certain executive
officers of Mesa and Parker & Parsley will become executive officers of Pioneer
and will be entitled to compensation for their services. See
"Pioneer -- Management of Pioneer."
Mesa Severance Plan. In April 1997, the Mesa Board adopted the Management
Severance Plan ("Mesa Severance Plan") which covers 26 officers and other
employees ("Mesa Participants") of Mesa. The Mesa Severance Plan provides for
severance benefits in the event that (i) any time prior to a Mesa Change in
Control (as hereinafter defined), the Mesa Participant's employment is
involuntarily terminated, other than for Cause (as hereinafter defined) or there
is a Constructive Termination (as hereinafter defined) or a death or disability,
(ii) at any time at least six months but not more than one year after a Mesa
Change in Control, the voluntary termination of a Mesa Participant other than
because of Constructive Termination and (iii) at any time within one year of a
Mesa Change in Control, the Mesa Participant is involuntarily terminated or
subject to Constructive Termination, other than for Cause. In the event of (i)
and (ii) above, the Mesa Participant will be entitled to, among other benefits,
a severance payment equal to one year of such participant's highest base salary,
and in the event of (iii) above, the Mesa Participant will be entitled to, among
other benefits, a severance payment equal to 2.99 times total pay (including
bonus) or two times such participant's highest base salary depending on the
level of the participant. Mesa Participants will also be entitled to additional
payments for certain tax liabilities that may apply to severance payments
following a Mesa Change of Control.
"Mesa Change of Control" means (i) the acquisition by a person of 35% or
more of the common stock or voting power of Mesa, unless the transaction is
approved by the Mesa Board, (ii) a change in the majority of the composition of
the Mesa Board, (iii) the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of Mesa, except if the owners of the outstanding common stock or voting
stock of Mesa immediately prior to the transaction beneficially own more than
65% of the outstanding common stock or voting power of the outstanding voting
securities of the surviving corporation immediately after the transaction, no
person owns more than 35% of the outstanding common stock or voting power of the
surviving corporation immediately after the transaction and the composition of
the Mesa Board is maintained at certain levels or (iv) the approval of a plan of
liquidation or dissolution of Mesa. The consummation of the Mergers will result
in a Mesa Change of Control because Mesa's current stockholders will own less
than 65% of the voting power of Pioneer outstanding capital stock. "Cause" means
the failure of the Mesa Participant to perform such participant's duties with
Mesa or engaging in illegal conduct or gross misconduct. "Constructive
Termination" means the voluntary termination of a Mesa Participant within 30
days following (i) a material reduction in the Mesa Participant's authority,
power, functions, duties or responsibilities; (ii) a reduction in the Mesa
Participant's base salary to less than 80% of the highest base salary ever paid
to such participant, (iii) the Mesa Participant's required relocation following
a Mesa Change in Control or (iv) a successor's failure to honor the Mesa
Severance Plan after a Mesa Change in Control.
Parker & Parsley Severance Agreements. On January 1, 1996, Parker & Parsley
entered into severance agreements (each, a "Parker & Parsley Severance
Agreement") with its officers to replace such officers' employment agreements
that expired at the end of 1995. Under each Parker & Parsley Severance
Agreement, either of Parker & Parsley or any such officer may terminate the
officer's employment at any time. Parker & Parsley has agreed to pay each such
officer an amount equal to one year's base salary if the officer's employment is
terminated because of his death, disability or normal retirement. Parker &
Parsley has also agreed to pay each such officer an amount equal to one year's
base salary and to continue health insurance coverage for the officer and the
officer's family for one year if (i) the officer's employment is terminated by
Parker & Parsley and such termination is not a Termination for Cause (as defined
below) or (ii) the officer
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terminates his employment and such termination is a Termination for Good Reason
(as defined below). If, within one year after a Parker & Parsley Change in
Control (as defined below), there occurs a termination by Parker & Parsley and
such termination is not a Termination for Cause or the officer terminates his
employment and such termination is a Termination for Good Reason, Parker &
Parsley 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 coverage for the officer and the officer's family for one year. If (i)
the officer terminates his employment with Parker & Parsley between six months
and one year after a Parker & Parsley Change in Control and such termination is
not a Termination for Good Reason, or (ii) the officer terminates his employment
with Parker & Parsley at the time of, or at any time within one year following,
a Parker & Parsley Change in Control because he is required to relocate, then
Parker & Parsley must pay the officer one year's base salary and continue health
insurance coverage for the officer and 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 Parker & Parsley Change in
Control.
"Termination for Cause" means a termination by Parker & Parsley of the
officer's employment due to a failure by the officer to (i) perform such
officer's duties, (ii) such officer's engaging in misconduct that is materially
injurious to Parker & Parsley or (iii) a violation by such officer of certain
agreements regarding confidentiality of non-public information. "Termination for
Good Reason" means a termination of employment by an officer within thirty days
following notice of (i) a material reduction in such officer's authorities,
powers, functions, duties or responsibilities, (ii) a reduction in such
officer's base annual salary which exceeds certain limits, or (iii) the failure
of Parker & Parsley to obtain from certain of its successors an agreement to
assume its obligations under the Parker & Parsley Severance Agreement. "Parker &
Parsley Change in Control" means the occurrence of one or more of the following:
(i) any person becomes the beneficial owner of 50% or more of the voting power
of Parker & Parsley, (ii) a change in the composition of a majority of the
Parker & Parsley Board, (iii) a tender or exchange offer by any person for 50%
or more of the voting power of Parker & Parsley if the Parker & Parsley Board
approves or fails to oppose such tender or exchange offer, or (iv) the approval
by Parker & Parsley stockholders of certain types of business combinations or a
plan of liquidation or dissolution of Parker & Parsley. The consummation of the
Mergers will result in a Parker & Parsley Change of Control because Pioneer will
own over 50% of the voting power of Parker & Parsley.
Pioneer Severance Agreements. At the Closing, Pioneer plans to enter into a
Severance Agreement (each, a "Pioneer Severance Agreement") with those Mesa
Participants and those officers of Parker & Parsley who are currently parties to
a Parker & Parsley Severance Agreement and in both cases who are employed by
Pioneer or a subsidiary of Pioneer after the Mergers. Each Pioneer Severance
Agreement is identical to the Parker & Parsley Severance Agreements except as
noted below.
The definition of "Change in Control" under a Pioneer Severance Agreement
means the occurrence of one or more of the following: (i) a person other than
Pioneer or certain affiliated companies or benefit plans becomes the beneficial
owner of 20% or more of the voting power of Pioneer's outstanding voting
securities (except acquisitions from Pioneer or in a transaction meeting the
requirements of the parenthetical exception in clause (iii) below); (ii) a
majority of the Board of Directors of Pioneer is not comprised of the members of
the Board of Directors of Pioneer immediately following the Mergers and persons
whose elections as directors were approved by those directors or their approved
successors; (iii) Pioneer merges or consolidates with another corporation or
entity (whether Pioneer or the other entity is the survivor), or Pioneer and the
holders of the voting securities of such other corporation or entity (or the
stockholders of Pioneer and such other corporation or entity) participate in a
securities exchange (other than a merger, consolidation or securities exchange
in which Pioneer's voting securities are converted into or continue to represent
securities having the majority of voting power in the surviving company, in
which no person other than that surviving company owns 20% or more of the
outstanding shares of common stock or voting shares of the surviving corporation
(except persons whose ownership of that amount results solely from their
ownership in Pioneer before that transaction), and in which at least a majority
of the board of directors of the surviving corporation were members of the
incumbent board of Pioneer); (iv) Pioneer liquidates or sells all or
substantially all of its assets, except sales to an entity having substantially
the same ownership as Pioneer; or (v) consummation of a business combination not
otherwise constituting a change in control but pursuant to which the Chief
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Executive Officer is removed from, or replaced in, such capacity with respect to
the corporation resulting from the business combination. The definition of a
"Termination for Good Reason" under a Pioneer Severance Agreement means a
termination of employment by the officer within 30 days following notice of (i)
the demotion of the officer to a non-officer position or to an officer position
junior to the position specified in the relevant Pioneer Severance Agreement,
(ii) a reduction in such officer's base annual salary which exceeds certain
limits, or (iii) the failure by Pioneer to obtain from certain of its successors
an agreement to assume its obligations under the Pioneer Severance Agreement.
Each Pioneer Severance Agreement executed by a Mesa Participant will provide
that (i) Pioneer will assume Mesa's obligation under the Mesa Severance Plan to
pay a severance benefit upon the termination of such Mesa Participant's
employment within one year after consummation of the Reincorporation Merger, and
(ii) the Pioneer Severance Agreement will supersede and replace all other terms
and provisions of the Mesa Severance Plan, except for the right to receive such
payment. Each Pioneer Severance Agreement executed by an officer of Parker &
Parsley will provide that (i) Pioneer will assume Parker & Parsley's obligation
under such officer's Parker & Parsley Severance Agreement to make certain
payments upon the termination of such officer's employment within one year after
consummation of the Parker & Parsley Merger, and (ii) the Pioneer Severance
Agreement will supersede and replace all other terms and provisions of the
Parker & Parsley Severance Agreement to which such officer is a party, except
for the right to receive such payment. In addition, unless a Change in Control
of Pioneer has occurred or is pending or contemplated, beginning on the fifth
anniversary of the P&P Effective Time, Pioneer can terminate or amend each
Pioneer Severance Agreement, upon sixty days notice, without the officer's
consent so long as such amendment or termination is made to all Pioneer
Severance Agreements covering all such similarly situated officers of Pioneer.
The definition of "Change in Control" under a Pioneer Severance Agreement
includes a phrase relating to the sale of "all or substantially all" of the
assets of Pioneer. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a stockholder of
Pioneer to determine when a Change in Control has occurred may be uncertain.
Mesa Stock Options. Pursuant to the Merger Agreement, each outstanding
option granted by Mesa pursuant to its Mesa 1991 Incentive Plan, whether vested
or unvested, will be assumed by Pioneer at the RM Effective Time. Pursuant to
the Merger Agreement, if the Mesa 1996 Incentive Plan is approved, employee
stock options granted under the Mesa 1996 Incentive Plan will be assumed by
Pioneer at the RM Effective Time. Each such option granted pursuant to the Mesa
1991 Incentive Plan and the Mesa 1996 Incentive Plan will be deemed an option to
acquire, on the same terms and conditions as were applicable under the Mesa 1991
Incentive Plan or the Mesa 1996 Incentive Plan, as the case may be, a number of
shares of Pioneer Common Stock equal to the number of shares of Mesa Common
Stock multiplied by one-seventh. Mesa employee stock options for 3,750,000
shares of Mesa Common Stock were granted pursuant to the Mesa 1996 Incentive
Plan, subject to stockholder approval thereof. The stockholders of Mesa are
being asked to consider and approve the adoption of the Mesa 1996 Incentive Plan
at the Mesa Special Meeting.
On April 4, 1997, the Stock Option Committee of the Mesa Board passed a
resolution providing for the acceleration of the vesting of all stock options
issued pursuant to Mesa stock option plans upon a Mesa Change of Control, as
defined in the Mesa Severance Plan. The Mergers will constitute a Mesa Change of
Control and all options to be assumed by Pioneer will become immediately
exercisable in full. The aggregate number of shares of Mesa Common Stock that
are covered by options, including those subject to stockholder approval, that
are held by all officers as a group is 4,435,850 shares and by the executive
officers of Mesa are as follows: 1,600,000 shares for Jon Brumley; 560,000
shares for Dennis E. Fagerstone; 223,000 shares for Edwin E. Hance; and 375,000
shares for M. Garrett Smith. The exercise prices of these stock options range
from $3.25 to $11.6875 per share.
Parker & Parsley Stock Options. Pursuant to the Merger Agreement, each
outstanding option granted by Parker & Parsley pursuant to an employee stock
option plan, whether vested or unvested, will be assumed by Pioneer at the P&P
Effective Time. Each such option will be deemed an option to acquire, on the
same terms and conditions as were applicable under the Parker & Parsley stock
option plan, a number of shares of Pioneer Common Stock equal to the number of
shares of Parker & Parsley Common Stock.
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The Parker & Parsley stock option plans contain provisions providing that
upon a change of control, as defined in the Parker & Parsley Long-Term Incentive
Plan, each holder of options shall be granted tandem stock appreciation rights
and all outstanding stock appreciation rights and options will immediately
become fully vested and exercisable. The Mergers will constitute a change of
control, and all options and stock appreciation rights will become immediately
exercisable in full. The number of shares of Parker & Parsley Common Stock
covered by options held by all officers of Parker & Parsley as a group is
360,500 shares and by the executive officers of Parker & Parsley are as follows:
170,000 shares for Scott D. Sheffield; 42,000 shares for Mark L. Withrow; and
48,000 shares for Timothy L. Dove. The exercise prices of these stock options
range from $13.125 to $29.75 per share.
Mesa Chairman's Employment Agreement. Jon Brumley, Mesa's Chairman and
Chief Executive Officer, is a party to an Employment Agreement, dated as of
August 22, 1996 (the "Employment Agreement"), with Mesa. The Employment
Agreement provides that if Mr. Brumley's employment is terminated prior to the
expiration of the two-year term other than for "cause" (as defined in the
Employment Agreement) or if Mr. Brumley terminates his employment for "good
reason," then Mr. Brumley shall be entitled, in addition to the payment of his
salary, to a severance payment of $1.6 million if the termination occurs within
one year of the date of the agreement, $1.2 million if the termination occurs
more than one year but less than 18 months after the date of the agreement or
$800,000 if the termination occurs after 18 months after the date of the
agreement. "Good reason" is defined in the Employment Agreement as (i) a
reduction or diminution of his position, titles, offices, duties,
responsibilities or status with Mesa without cause and without his express
written consent, (ii) a reduction by Mesa in his base salary in effect at the
time, (iii) relocation of Mesa's executive offices to a site outside Dallas
County or Tarrant County, Texas or (iv) any other breach by Mesa of its
obligations under the Employment Agreement, which Mesa fails to cure within a
reasonable period of time. Upon consummation of the Mergers, there will be "good
reason" because Mr. Brumley will no longer be chief executive officer.
Incentive Payment for Mesa Chairman. Brumley Partners, a Texas general
partnership consisting of Jon Brumley, Mesa's Chairman and Chief Executive
Officer, 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-Mesa Holdings, L.P. dated November 8, 1996 (the "DNR
Agreement"). The profits interest held by Brumley Partners entitles it to
receive approximately 3.76% of the profits of DNR after the occurrence of
"payout" (which is the receipt by the other partners of partnership
distributions equal to such partners' original capital contributions plus an 8%
rate of return). The profits interest issued to Brumley Partners is the
post-payout equivalent of a $5 million capital contribution to DNR, but will be
increased or decreased upon the occurrence of certain events, which include the
termination of Jon Brumley's employment or Mesa's consummation of a substantial
transaction before certain dates. The consummation of the proposed Mergers will
result in an increase in the Brumley Partners' profits interest in DNR. The
profits interest will be approximately 5.64% (the post payout equivalent of a
$7.5 million capital contribution to DNR) if the closing of the Mergers occurs
before August 22, 1997, or 4.89% (the post payout equivalent of a $6.5 million
capital contribution to DNR) if the closing of the Mergers occurs after August
22, 1997, but before August 22, 1998.
DNR Consulting Fee. Pursuant to the terms of the stock purchase agreement
through which DNR bought the shares of Mesa Series B Preferred Stock, Mesa
agreed to pay DNR $400,000 per year (and up to $50,000 per year to cover
expenses) in consideration of the provision of investment analysis to Mesa by
DNR and its representatives. Upon the Closing Date of the Mergers, Pioneer will
assume Mesa's obligation with respect to payment of such fee.
Mesa Indemnification Agreements. Mesa has entered into Indemnification
Agreements (the "Mesa Indemnification Agreements") with its directors and
certain of its officers (the "Mesa Indemnitees"), a form of which is filed with
the Commission as an exhibit to the Registration Statement of which this Joint
Proxy Statement/Prospectus is a part. Under the terms of the Mesa
Indemnification Agreements, Mesa has generally agreed to indemnify, and advance
expenses to, each Mesa Indemnitee to the fullest extent permitted by applicable
law on the date of such agreements and to such greater extent as applicable law
may thereafter permit. In addition, the Mesa Indemnification Agreements contain
specific provisions pursuant to which Mesa has agreed to indemnify each Mesa
Indemnitee (i) if such person is, by reason of his or her status as a
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director, officer, employee, agent or fiduciary of Mesa or of any other
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise with which such person was serving at the
request of Mesa (any such status being hereinafter referred to as a "Mesa
Corporate Status"), made or threatened to be made a party to any threatened,
pending or completed action, suit, arbitration, investigation, alternative
dispute resolution mechanism, administrative hearing or other proceeding (each,
a "Mesa Proceeding"), except that no indemnification shall be made in respect of
any claim, issue or matter in such Mesa Proceeding as to which such Mesa
Indemnitee shall have been adjudged to be liable to Mesa for willful or
intentional misconduct in the performance of his or her duty to Mesa unless
applicable law so permits (unless and only to the extent that a court shall
otherwise determine), (ii) against reasonable expenses actually incurred by such
person or on his or her behalf in connection with any Proceeding to which such
Indemnitee was or is a party by reason of his or her Mesa Corporate Status and
in which such Mesa Indemnitee is successful, on the merits or otherwise, (iii)
against expenses actually and reasonably incurred by such person or on his or
her behalf in connection with a Mesa Proceeding to the extent that such Mesa
Indemnitee is, by reason of his or her Mesa Corporate Status, a witness or
otherwise participates in any Mesa Proceeding at a time when such person is not
a party in the Mesa Proceeding, and (iv) against expenses actually and
reasonably incurred by such person in any judicial adjudication of or any award
in arbitration to enforce his or her rights under the Mesa Indemnification
Agreements.
Furthermore, under the terms of the Mesa Indemnification Agreements, Mesa
has agreed to pay all reasonable expenses incurred by or on behalf of a Mesa
Indemnitee in connection with any Mesa Proceeding in advance of any
determination with respect to entitlement to indemnification and within ten days
after the receipt by Mesa of a written request from such Indemnitee for such
payment. In the Mesa Indemnification Agreements, each Mesa Indemnitee has agreed
that he or she will reimburse and repay Mesa for any expenses so advanced to the
extent that it shall ultimately be determined that he or she is not entitled to
be indemnified by Mesa against such expenses.
The Mesa Indemnification Agreements also include provisions that specify
the procedures and presumptions which are to be employed to determine whether a
Mesa Indemnitee is entitled to indemnification thereunder. In some cases, the
nature of the procedures specified in the Indemnification Agreements varies
depending on whether there has occurred a "change in control" (as defined in the
Mesa Indemnification Agreements) of Mesa. The Mergers will constitute a change
of control under the Mesa Indemnification Agreements.
Parker & Parsley Indemnification Agreements. Parker & Parsley has entered
into indemnification agreements with each of its directors and officers. These
agreements require Parker & Parsley to indemnify its 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. Each indemnification agreement also provides that, upon a potential
change in control or change in control of Parker & Parsley and if the
indemnified director or officer so requests, Parker & Parsley 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 Parker
& Parsley has indemnified the director or officer.
Pioneer Indemnification. Pursuant to the Merger Agreement, from and after
the P&P Effective Time, Pioneer will indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the date hereof or who
becomes prior to the P&P Effective Time, an officer or director of Mesa or
Parker & Parsley or any of their respective subsidiaries or an employee of Mesa
or Parker & Parsley or any of their respective subsidiaries or who acts as a
fiduciary under any employee benefit plans of Mesa or Parker & Parsley or
pension plans of Mesa or Parker & Parsley (the "Pioneer Indemnified Parties")
against all losses, claims, damages, costs, expenses (including attorneys'
fees), liabilities or judgments or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer, or such
employee of Mesa or Parker & Parsley or any of their respective subsidiaries
whether pertaining to any matter existing or occurring at or prior to the P&P
Effective Time and whether asserted or claimed prior to, or at or after, the P&P
Effective Time ("Pioneer Indemnified Liabilities"), including all Pioneer
Indemnified
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Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to the Merger Agreement or the transactions contemplated hereby,
in each case to the fullest extent permitted under applicable law (and Pioneer
will pay expenses in advance of the final disposition of any such action or
proceeding to each Pioneer Indemnified Party to the fullest extent permitted by
law). Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Pioneer Indemnified Parties
(whether arising before or after the P&P Effective Time), (i) the Pioneer
Indemnified Parties may retain counsel reasonably satisfactory to them and
Pioneer shall pay all fees and expenses of such counsel for the Pioneer
Indemnified Parties; and (ii) Pioneer will use all commercially reasonable
efforts to assist in the vigorous defense of any such matter, provided that no
party shall be liable for any settlement effected without its written consent,
which consent shall not be unreasonably withheld. Mesa, MOC, Pioneer and Parker
& Parsley have agreed that all rights to indemnification, including provisions
relating to advances of expenses incurred in defense of any action or suit,
existing in favor of the Pioneer Indemnified Parties in the charter and bylaws
of Mesa and Parker & Parsley with respect to matters occurring through the P&P
Effective Time, shall survive the Mergers and shall continue in full force and
effect for a period of six years from the P&P Effective Time; provided, however,
that all rights to indemnification in respect of any Pioneer Indemnified
Liabilities asserted or made within such period shall continue until the
disposition of such Pioneer Indemnified Liabilities.
Pursuant to the Merger Agreement, Pioneer is obligated to maintain certain
directors' and officers' liability insurance for the people who are directors
and officers of the Merger Parties immediately prior to the P&P Effective Time
for six years after the P&P Effective Time.
NYSE LISTING OF PIONEER COMMON STOCK AND PIONEER PREFERRED STOCK
It is a condition to the Mergers that the shares of Pioneer Common Stock
and Pioneer Preferred Stock be authorized for listing on the NYSE, subject to
official notice of issuance. Application has been made for these listings.
RESALES OF PIONEER COMMON STOCK AND PIONEER PREFERRED STOCK
Rule 145
The shares of Pioneer Common Stock and Pioneer Preferred Stock to be issued
to the stockholders of Mesa and Parker & Parsley pursuant to the Merger
Agreement are being registered under the Securities Act pursuant to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part.
However, because some stockholders of Mesa or Parker & Parsley are or may be
affiliates of Mesa or Parker & Parsley and may be deemed to be affiliates of
Pioneer, such persons will not be able to resell the Pioneer Common Stock and
Pioneer Preferred Stock received by them in the Mergers unless the Pioneer
Common Stock or Pioneer Preferred Stock, as the case may be, is sold in
compliance with an exemption from the registration requirements of the
Securities Act or is sold in compliance with Rule 145 under the Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Pioneer Common
Stock and Pioneer Preferred Stock acquired by such former Mesa and Parker &
Parsley stockholders pursuant to the Mergers will be subject to certain
restrictions. Such persons may sell Pioneer Common Stock or Pioneer Preferred
Stock under Rule 145 only if (i) Pioneer has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months,
(ii) Pioneer Common Stock or Pioneer Preferred Stock is sold in a "brokers
transaction," which is defined in Rule 144 under the Securities Act as a sale in
which (a) the seller does not solicit or arrange for orders to buy the
securities, (b) the seller does not make any payment other than to the broker,
(c) the broker does no more than execute the order and receive a nominal
commission and (d) the broker does not solicit customer orders to buy the
securities, and (iii) such sale and all other sales made by such person within
the preceding three months do not collectively exceed the greater of (x) 1% of
the outstanding shares of Pioneer Common Stock or Pioneer Preferred Stock, as
the case may be, and (y) the average weekly trading volume of Pioneer Common
Stock or Pioneer Preferred Stock, as the case may be, on all national securities
exchanges during the four-week period preceding the sale.
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Persons who may be deemed affiliates of Mesa or Parker & Parsley generally
include individuals or entities which control, are controlled by, or are under
common control with, Mesa or Parker & Parsley, as the case may be, and may
include certain officers and directors of Mesa or Parker & Parsley, as well as
principal stockholders of Mesa or Parker & Parsley, as the case may be. The
Merger Agreement requires both Mesa and Parker & Parsley to use its reasonable
best efforts to cause each of its affiliates to execute a written agreement to
the effect that the affiliate will not offer or sell or otherwise dispose of any
shares of Pioneer Common Stock or Pioneer Preferred Stock issued to the
affiliate in or pursuant to the Mergers in violation of the Securities Act or
the rules and regulations promulgated by the Commission thereunder.
Registration Rights Agreement
Mesa and DNR have entered into a Registration Rights Agreement (the
"Registration Rights Agreement") covering (i) the shares of Mesa Series A
Preferred Stock issuable in exchange for shares of Mesa Series B Preferred Stock
held by DNR, (ii) the shares of Mesa Common Stock issuable upon conversion or
redemption of shares of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock and (iii) any securities issued or issuable in respect of any
such shares by way of any stock split or stock dividend (including dividends
paid in kind in accordance with the terms of the Mesa Series B Preferred Stock)
or in connection with any combination of shares, recapitalization, merger,
consolidation, reorganization or otherwise (the "Registrable Securities").
Shares of Pioneer Common Stock to be received by DNR in the Reincorporation
Merger will be Registrable Securities and the Registration Rights Agreement will
be binding on Pioneer.
The Registration Rights Agreement provides that the holders of at least a
majority of the Registrable Securities outstanding may at any time (subject to
customary "black-out" periods) require Mesa to effect the registration under the
Securities Act of Registrable Securities by means of a "shelf" registration
statement for an offering to be made on a continuous basis under the Securities
Act, subject to certain limitations. The Registration Rights Agreement also
provides certain "piggyback" registration rights to the holders of Registrable
Securities whenever Mesa proposes to register an offering of any of its capital
stock under the Securities Act (including on behalf of any stockholder of Mesa
other than a holder of Registrable Securities), subject to certain exceptions,
including pro rata reduction if, in the reasonable opinion of the managing
underwriter(s) of the offering, such a reduction is necessary to prevent an
adverse effect on the marketability or offering price of all the securities
proposed to be offered in the offering.
The Registration Rights Agreement contains customary provisions regarding
the payment of expenses by Mesa and regarding mutual indemnification agreements
between Mesa and the holders of Registrable Securities for certain securities
law violations.
INFORMATION AGENTS
Mesa and Pioneer have appointed Morrow & Co., Inc. as their Information
Agent, and Parker & Parsley has appointed D. F. King & Co., Inc. as its
Information Agent with respect to the Mergers. Any questions or requests for
additional copies of this Joint Proxy Statement/Prospectus, a Proxy Card, or
Election Forms may be directed to the respective Information Agent at the
following addresses and telephone numbers:
<TABLE>
<S> <C>
Morrow & Co., Inc. D. F. King & Co., Inc.
909 Third Avenue 77 Water Street
New York, New York 10022 New York, New York 10005
Telephone: (800) 566-9058 (800) 769-5414
</TABLE>
Any stockholder of Mesa or Parker & Parsley whose shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
may also receive copies of this Joint Proxy Statement/ Prospectus, a Proxy Card
or, in the case of holders of Mesa Series A Preferred Stock, Election Forms by
contacting such nominee.
Mesa and Parker & Parker will each pay the fees and expenses of its
respective Information Agent and each has also agreed to indemnify its
respective Information Agent from certain liabilities that it may incur in
connection with the Mergers.
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Mesa has also engaged Morrow & Co., Inc. and Parker & Parsley has engaged
D.F. King & Co., Inc. to assist in the solicitation of proxies. See "The Special
Meetings -- Solicitation of Proxies."
GOVERNMENTAL AND REGULATORY APPROVALS
The HSR Act and the rules and regulations promulgated thereunder provide
that certain transactions may not be consummated until required information and
materials have been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and certain waiting periods have expired or terminated. The respective
obligations of Mesa and Parker & Parsley to consummate the Mergers are
conditioned upon all waiting periods (and extensions thereof) applicable to the
consummation of the Mergers under the HSR Act having expired or been terminated.
See "-- Certain Terms of the Merger Agreement -- Conditions to the Merger." Mesa
and Parker & Parsley made the requisite filings under the HSR Act on April 22,
1997 in connection with the Mergers. The required waiting period under the HSR
Act expired at 11:59 p.m. on May 21, 1997. At any time before or after the RM
Effective Time or the P&P Effective Time, and notwithstanding that the HSR Act
waiting period has expired or terminated, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
advisable in the public interest, including seeking to enjoin the consummation
of the Mergers or seeking divestiture of assets or businesses of Mesa or Parker
& Parsley.
At any time before or after the RM Effective Time or P&P Effective Time,
and notwithstanding that the HSR Act waiting period has expired or terminated,
any state could take such action under its antitrust laws as it deems necessary
or desirable in the public interest. Such action could include seeking to enjoin
the consummation of the Mergers or seeking divestiture of assets or businesses
of Mesa or Parker & Parsley. Private parties may also seek to take legal action
under antitrust laws under certain circumstances.
Based on information available to them, Mesa and Parker & Parsley believe
that the Mergers can be effected in compliance with federal and state antitrust
laws. However, there can be no assurance that a challenge to the consummation of
the Mergers on antitrust grounds will not be made or that, if such a challenge
were made, Mesa and Parker & Parsley would prevail or would not be required to
accept certain conditions, possibly including certain divestitures in order to
consummate the Mergers.
Neither Mesa nor Parker & Parsley is aware of any other governmental or
regulatory filings or approvals required in connection with the Mergers, other
than compliance with applicable securities laws.
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PIONEER
GENERAL
Pioneer will be the third largest independent oil and gas exploration
company in the United States. Pioneer is a newly formed Delaware corporation and
wholly owned subsidiary of Mesa that has not, to date, conducted any significant
activities other than those incident to its formation, its execution of the
Merger Agreement and its participation in the preparation of this Joint Proxy
Statement/Prospectus. To date, Pioneer has no material assets or liabilities,
other than its rights and obligations under the Merger Agreement, and has not
generated any material revenues or expenses. The business of Pioneer will be the
business currently conducted by Mesa and Parker & Parsley. Domestic drilling and
production operations will be located in Texas, Kansas, Oklahoma, Louisiana, New
Mexico and offshore Gulf of Mexico. International drilling and production
operations will be located in Argentina and Guatemala.
THE PIONEER ENTERPRISE
The Mergers will create a preeminent independent oil and gas company by
combining the Merger Parties' long-lived, low cost oil and natural gas reserves,
exploration and exploitation opportunities and state-of-the-art gas processing
facilities. Pioneer will be the third largest independent oil and gas
exploration and production company in the United States, based on total proved
reserves, with a balanced oil and gas reserve base and significant production
and reserve growth potential. Led by a proven management team, Pioneer will have
the financial strength and flexibility to pursue an aggressive growth strategy
through a coordinated balance of exploitation, exploration and acquisitions.
Pioneer's principal strengths and strategies will be the following:
Reserves and Production
- Pioneer will have over 611 MMBOE of reserves, comprised of 1.9 Tcf of
natural gas and 293 MMBbls of crude oil and liquids, with an SEC PV10 of
approximately $4.5 billion.
- Pioneer's daily production is expected to be over 64,000 Bbls of oil and
liquids and 459 MMcf of natural gas.
- Pioneer's reserve base will be well balanced, with 52% natural gas and
48% crude oil and liquids, substantially reducing volatility associated
with reliance on a single commodity.
- With an aggregate reserve to production ratio of approximately 12 years,
Pioneer will be one of the few large independent oil and gas companies
that owns as principal assets both long-lived gas reserves and long-lived
oil reserves. A significant benefit of owning long-lived reserves is an
enhanced ability to provide long-term funding for additional growth
opportunities.
- More than 85% of Pioneer's total proved reserves will be concentrated in
the Midcontinent region (which includes the Hugoton field of Kansas and
the West Panhandle field of Texas) and in the Permian Basin in West
Texas.
- Pioneer will operate wells representing approximately 85% of its total
proved reserves and will be a dominant operator in the Hugoton, West
Panhandle and Spraberry fields.
Drilling and Growth Opportunities
- Pioneer will benefit from the Merger Parties' substantial experience in
increasing reserves at low finding costs. Over the past three calendar
years, Parker & Parsley has added 288 MMBOE of proved reserves at an
average finding cost of $3.99 per BOE. Mesa has added 48 MMBOE at $2.55
per BOE over the same period.
- Pioneer will benefit from the Merger Parties' experience as active
drillers. Over the past three years, Parker & Parsley has consistently
been one of the five most active drilling companies in the United
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States, having drilled more than 1,400 wells in that period. Mesa has
drilled over 100 wells during the same period.
- Pioneer's anticipated 1997 capital expenditure budget will be $475
million, which is expected to be funded by internally generated cash
flow. Of that amount, $300 million, or 63%, is expected to be invested in
development drilling and production enhancement activities. An additional
$100 million, or 21%, is expected to be invested in exploration
activities. Acquisitions are targeted to enhance Pioneer's position in
its core areas of operation -- the Midcontinent region, the Permian
Basin, the Gulf Coast and Gulf of Mexico -- and are expected to consume
the balance of the capital budget.
- Pioneer will have in excess of 3,000 drilling locations, primarily in the
Spraberry field, West Panhandle field, Permian Basin and along the Texas
and Louisiana coasts. Management expects those wells to be drilled over
the next five years.
- Pioneer will have more than 787,000 net undeveloped acres (698,000
domestic and 89,000 international).
Management
- Pioneer's management team will be led by Jon Brumley and Scott Sheffield,
the current Chairmen and Chief Executive Officers of the Merger Parties.
Mr. Brumley will serve as Pioneer's Chairman of the Board and Mr.
Sheffield will serve as Pioneer's President and Chief Executive Officer.
Both Jon Brumley and Scott Sheffield are proven leaders in the industry,
with well established records of successfully building oil and gas
companies.
- Mr. Brumley was co-founder and served as Chairman of the Board of Cross
Timbers Oil Company for over ten years before joining Mesa in August
1996, and served as the Chief Executive Officer of Southland Royalty Co.
prior to that time. From the date of Cross Timbers' initial public
offering in May 1993 through December 31, 1995, Mr. Brumley led Cross
Timbers in increasing its total proved reserves from 45.4 MMBOE to 99.7
MMBOE, representing a compound annual growth rate of approximately 30%.
Under Mr. Brumley's leadership from its initial public offering through
June 1996, Cross Timbers' compound annual stockholders return was
approximately 26%. In addition, since he became Chairman of the Board and
Chief Executive Officer of Mesa in August 1996, the market price of Mesa
Common Stock has increased more than 50%.
- Mr. Sheffield has been the Chairman of the Board and Chief Executive
Officer of Parker & Parsley since 1990 where, under his leadership,
Parker & Parsley has increased its total proved reserves from 47.2 MMBOE
as of December 31, 1990 to 302.2 MMBOE as of December 31, 1996, which
represents a compound annual growth rate of more than 36%. In addition,
Parker & Parsley has generated a compound annual stockholder return of
approximately 26% over the five-year period ending December 31, 1996.
- With inside ownership at 17%, significantly higher than its peers,
Pioneer's board of directors' and management team's interests in creating
value will be aligned with those of its stockholders.
Objectives and Growth Strategy
- Increasing stockholder value. Pioneer's goal will be to increase
stockholder value by aggressively pursuing growth opportunities in an
effort to double the cash flow from operations of Pioneer over five
years. To achieve this goal, Pioneer anticipates increasing reserves and
production by adhering to a focused growth strategy. Although Pioneer's
management team believes it can reach this goal, there can be no
assurances that cash flow from operations will double or increase at all.
See "Risk Factors" for a discussion of certain risks associated with
Pioneer's intent to pursue an aggressive growth strategy.
- Developing existing reserves through low-risk development drilling and
production enhancement activities. Pioneer will seek to increase
production and recoverable reserves through the acceleration of
exploitation activities, including infill and development drilling and
recompletions on its core properties
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and in other areas. Pioneer plans to invest approximately $300 million in
exploitation capital expenditures in 1997. As part of this effort,
Pioneer plans to drill approximately 700 development wells, primarily in
the Spraberry Trend, the West Panhandle field, the inland waters of
Louisiana, and the onshore Gulf Coast.
- Expanding exploration efforts that expose Pioneer to projects which offer
significant production and reserve potential. Pioneer will expand the
exploration efforts of the Merger Parties by investing $100 million in
1997 on exploratory drilling projects, including some of Pioneer's more
than 70 3-D seismic projects. Pioneer's exploration activities will focus
on using the latest in seismic, horizontal drilling and fracturing
technology to identify and drill sites with high reserve potential, such
as those in the onshore Gulf Coast, the Delaware Basin of West Texas, the
inland waters of the Gulf of Mexico and salt features of offshore Gulf of
Mexico. Pioneer will pursue exploration activities either through its own
initiatives or in joint ventures with other producers, particularly in
the Gulf of Mexico and East Texas.
- Acquiring properties that strengthen Pioneer's position in its core areas
and provide development and exploration opportunities. Pioneer will
pursue strategic acquisitions that either enhance its position in
existing core areas in the Midcontinent region, the Permian Basin, the
Gulf Coast and Gulf of Mexico, or that have the potential of adding or
building new core areas. Opportunities targeted by Pioneer as possible
new core areas include East Texas, Canada, the Rocky Mountains and select
regions in Central and South America. Pioneer will focus its acquisition
efforts on properties that provide opportunities to increase production
and reserves through both exploitation and exploration activities, and
that will provide Pioneer with a high degree of operational control.
- Increasing natural gas processing capacity in core areas. Pioneer intends
to expand the processing capabilities of its state-of-the-art gas
processing facilities in the Hugoton, West Panhandle and Spraberry
fields. Pioneer will also focus its efforts on obtaining additional
dedications of third party gas to these plants. By owning and operating
these processing facilities, Pioneer will be able to retain the
processing margin on the gas it produces as well as capture fees for
processing gas produced by third-parties.
- Maintaining financial strength and flexibility to take advantage of
additional development, exploration and acquisition
opportunities. Pioneer intends to maintain financial strength,
flexibility and an investment grade rating for its senior debt upon
completion of the Mergers. As part of this effort, Pioneer will (i)
actively engage in an ongoing portfolio analysis approach to the
management of its producing assets, including the monetization of
approximately $150 to $200 million of low-margin, marginal growth, or
noncore properties in 1997 and 1998; (ii) to the extent redemption or
conversion of the Parker & Parsley MIPS has not already occurred, seek to
redeem the Parker & Parsley MIPS for cash or exchange them into Pioneer
Common Stock as soon as practicable in accordance with their terms; (iii)
pursue additional deleveraging of approximately $200 to $400 million
either through acquisitions using Pioneer Common Stock as an acquisition
currency when Pioneer's Management believes such acquisitions are
favorable to Pioneer stockholders or through public equity offerings if
market conditions are favorable, or both, realizing however, there can be
no assurance that Pioneer will complete any acquisitions or equity
offerings or any assurance regarding the terms upon which such
acquisitions or offerings could be made; (iv) use commodity hedging
strategies to reduce price risk in supporting its capital expenditure
budget and in connection with its acquisition activities; and (v) seek to
reduce the Merger Parties' combined current annual general and
administrative expenditures by approximately $10 to $15 million
commencing in 1998.
- Aligning the interests of its directors, officers, senior management, key
technical personnel and stockholders. Pioneer believes its greatest
resource is, and its future success is dependent upon, its employees.
Pioneer believes that it is essential to align the interests of
management and employees with those of its stockholders through equity
based compensation plans and ownership of common stock by directors,
officers and employees. To attract, retain and motivate quality
personnel, Pioneer intends to utilize the Pioneer Long-Term Incentive
Plan and the Pioneer Employee Stock Purchase Plan.
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Pioneer will be committed to continuing to enhance stockholder value
through adherence to this strategy and believes that its expected inventory of
development, production enhancement and exploratory projects, along with
strategic acquisition opportunities that may arise in the future, will provide
ample opportunity for further growth in value. See "Risk Factors -- Cautionary
Statement Regarding Forward-Looking Information."
NEW CREDIT FACILITY
Concurrently with the consummation of the Mergers, Pioneer expects to enter
into the Pioneer Credit Facility. The Merger Parties have had discussions with
several banks regarding the Pioneer Credit Facility, and expect that such
Facility will be of sufficient size to meet Pioneer's current funding
requirements. MOC, which will be a wholly owned subsidiary of Pioneer upon
consummation of the Mergers and will hold a significant portion of Pioneer's
assets following the Subsidiary Mergers, is expected to be the borrower under
the Pioneer Credit Facility, and all borrowings are expected to be unsecured and
unconditionally guaranteed by Pioneer. The loan documents governing the Pioneer
Credit Facility are expected to contain customary covenants and restrictions
relating to Pioneer's operations, but should not restrict the payment of a $.10
annual dividend on Pioneer Common Stock.
The closing of the Pioneer Credit Facility, if obtained, is expected to be
conditioned upon, among other things, the consummation of the Mergers, the
satisfaction of certain financial requirements and the lenders' receipt of and
satisfaction with certain reports regarding Pioneer's assets and operations.
MANAGEMENT OF PIONEER
Directors and Executive Officers
Set forth below is certain information concerning the directors and
executive officers of Pioneer at the P&P Effective Time.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR CLASS POSITION
---- --- -------------- --------
<S> <C> <C> <C>
I. Jon Brumley......................... 58 III Chairman of the Board
Scott D. Sheffield..................... 44 II Director, President and Chief
Executive Officer
Timothy L. Dove........................ 40 Executive Vice President --
Business Development
Dennis E. Fagerstone................... 48 Executive Vice President
Mel Fischer............................ 63 Executive Vice President --
World Wide Exploration
Mark L. Withrow........................ 49 Executive Vice President --
General Counsel
Lon C. Kile............................ 41 Senior Vice President --
Investor Relations
M. Garrett Smith....................... 36 Senior Vice President --
Finance
R. Hartwell Gardner.................... 62 I Director
John S. Herrington..................... 57 I Director
Kenneth A. Hersh....................... 34 II Director
James L. Houghton...................... 66 I Director
Jerry P. Jones......................... 65 II Director
Boone Pickens.......................... 68 III Director
Richard E. Rainwater................... 52 III Director
Charles E. Ramsey, Jr.................. 60 III Director
</TABLE>
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<TABLE>
<CAPTION>
NAME AGE DIRECTOR CLASS POSITION
---- --- -------------- --------
<S> <C> <C> <C>
Arthur L. Smith........................ 44 III Director
Philip B. Smith........................ 45 I Director
Robert L. Stillwell.................... 60 II Director
Michael D. Wortley..................... 49 I Director
</TABLE>
Pioneer's Certificate of Incorporation provides for a classified Board of
Directors, divided into three classes. The Class I directors' terms will expire
at Pioneer's 1998 annual stockholders' meeting, the Class II directors' terms
will expire at Pioneer's 1999 annual stockholders' meeting and the Class III
directors' terms will expire at Pioneer's 2000 annual stockholders' meeting.
Each director elected at each such meeting will serve for a term ending on the
date of the third annual stockholders' meeting after his election or until his
earlier death, resignation or removal. The class designation of each of
Pioneer's directors is indicated in the list of directors above.
Edward O. Vetter, who has served as a director of Parker & Parsley since
1992, will become a Senior Advisor to both Pioneer's Chairman and Chief
Executive Officer at least through 1998 and will not serve as a director of
Pioneer. Mel Fischer, another director of Parker & Parsley, will become
Executive Vice President -- World Wide Exploration for Pioneer and, because of
Pioneer's commitment to limiting the number of employee directors serving at any
given time, will not serve as a director of Pioneer while so employed.
Set forth below is a description of the backgrounds of the future
directors, executive officers and advisor of Pioneer:
MR. BRUMLEY, a graduate of the University of Texas with a B.A. and of the
Wharton School of Finance and Commerce with a M.B.A., has served as Chairman of
the Board of Directors and Chief Executive Officer of Mesa since August 1996.
From 1986 to mid-1996, Mr. Brumley cofounded and served as Chairman of the Board
of Directors of Cross Timbers Oil Company and from 1974 to 1985, Mr. Brumley
served as President and Chief Executive Officer of Southland Royalty Company.
MR. SHEFFIELD, a distinguished graduate of the University of Texas with a
B.S. in Petroleum Engineering, has been the President and a director of Parker &
Parsley since May 1990 and has been the Chairman of the Board and Chief
Executive Officer 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.
MR. DOVE joined Parker & Parsley in May 1994 as Vice
President -- International and was promoted to Senior Vice President -- Business
Development in October 1996. Prior to joining Parker & Parsley, Mr. Dove was
employed with Diamond Shamrock Corp., and its successor, Maxus Energy Corp, in
various capacities in international exploration and production, marketing,
refining and marketing, 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 Masters of Business Administration in 1981
from the University of Chicago.
MR. FAGERSTONE, a graduate of the Colorado School of Mines with a B.S. in
Petroleum Engineering, has served as Executive Vice President and Chief
Operating Officer of Mesa since March 1, 1997. From October 1996 to February
1997, Mr. Fagerstone served as Senior Vice President and Chief Operating Officer
of Mesa and from May 1991 to October 1996, Mr. Fagerstone served as Vice
President -- Exploration and Production of Mesa. From June 1988 to May 1991, Mr.
Fagerstone served as Vice President -- Operations of Mesa.
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MR. FISCHER, a graduate of the University of California at Berkeley with a
Masters degree in Geology, was elected a director of Parker & Parsley in
November 1995. Prior to joining the Company as a director, Mr. Fischer worked in
the petroleum industry for 32 years, starting as a Petroleum Geologist with
Texaco in 1962, and retiring from the position of President, Occidental
International Exploration and Production Company, in March, 1994. For the 10
years prior to becoming President of Occidental International, Mr. Fischer held
the position of Executive Vice President, WorldWide Exploration with Occidental
Oil and Gas Corporation. He is a registered geologist in the State of
California, a member of the American Association of Petroleum Geologists and an
emeritus member of the Board of Advisors for the Earth Sciences Research
Institute at the University of Utah. Effective February 1, 1997, Mr. Fischer
expanded his duties with Parker & Parsley when he was appointed to serve as
Executive Vice President -- World Wide Exploration for the Company.
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, was Vice President -- General Counsel of Parker & Parsley from January
1991, when he joined Parker & Parsley, to January 1995, when he was appointed
Senior Vice President, General Counsel. He has been Parker & Parsley's Secretary
since August 1992. Before joining Parkey & Parsley, Mr. Withrow was the managing
partner of the law firm of Turpin, Smith, Dyer, Saxe & MacDonald, Midland,
Texas.
MR. KILE, a graduate of Oklahoma State University with a Bachelor of
Business Administration degree in Accounting, joined Parker & Parsley in 1985
and was recently 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 position of Vice President -- Equity Finance
& Analysis and Vice President -- Marketing and Program Administration. Prior to
joining Parker & Parsley, he was employed as Supervisor -- Senior, Audit, in
charge of Parker & Parsley's audit, with Ernst & Young.
MR. SMITH (M. GARRETT), 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., has served as Vice President -- Corporate
Acquisitions of Mesa since January 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) as Vice President from 1992
to 1994.
MR. GARDNER, elected a director of Parker & Parsley in November 1995,
graduated from Colgate University with a B.A. in Economics and then earned a
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.
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.,
has served as a director of Mesa since January 1992. 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 to November 1991 and served as a director from May 1989 to May
1990. Mr. Herrington served as the Secretary of the Department of Energy of the
United States from February 1985 to May 1990.
MR. HERSH, a graduate of Princeton University with a B.A. and Stanford
University Graduate School of Business with a MBA, has served as a director of
Mesa since July 1996. Since 1994, he has served as Chief Investment Officer and
director of Rainwater, Inc. and as a Managing Partner of Natural Gas Partners
investment funds. From 1989 to 1994, he served as a Managing Partner of Natural
Gas Partners, L.P. and from 1985 to 1987, as a member of the energy group of
Morgan Stanley & Co. investment banking division. Mr. Hersh is a director of HS
Resources, Inc. and Titan Exploration Inc.
MR. HOUGHTON is a certified public accountant and a graduate of Kansas
University with a B.S. in Accounting, as well as a L.L.B. Mr. Houghton was
elected a director of Parker & Parsley in October 1991. Until October 1, 1991,
Mr. Houghton was the lead oil and gas tax specialist for the accounting firm of
Ernst &
74
<PAGE> 85
Young, was a member of Ernst & Young's National Energy Group, and had served as
the 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. Since 1990, Mr. Houghton has
served as trustee of the J.E. and L.E. Mabee Foundation, Inc.
MR. JONES earned a B.S. from West Texas State College in 1953 and a L.L.B.
from the University of Texas School of Law in 1959. Elected a director of Parker
& Parsley in May 1991, Mr. Jones has been an attorney with the law firm of
Thompson & Knight, P.C., Dallas, Texas since September 1959 and is a shareholder
in the firm. He has specialized in civil litigation, particularly in the area of
energy disputes.
MR. PICKENS, the founder of Mesa, is a graduate of Oklahoma State
University with a B.S. in geology and has served as a director of Mesa since its
inception. From January 1992 to August 1996, he served as Chairman of the Board
of Directors and Chief Executive Officer. From October 1985 to December 1991,
Mr. Pickens served as General Partner of Mesa, L.P., predecessor of Mesa, and as
Director of Pickens Operating Co. (the corporate general partner of Mesa, L.P.).
From 1964 to January 1987, Mr. Pickens served as Chairman of the Board and
President of Mesa in its original corporate form. Mr. Pickens is currently the
Chairman of the Board of BP Capital LLC and Pickens Fuel Corp.
MR. RAINWATER, a graduate of the University of Texas with a B.A. and the
Stanford University Graduate School of Business with a M.B.A., has served as a
director of Mesa since July 1996. Since 1986, Mr. Rainwater has been an
independent investor and the sole shareholder, President and a director of
Rainwater, Inc. Mr. Rainwater was the founder of Crescent Real Estate Equities,
Inc. in 1994 and since that time has served as 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 to 1986, Mr. Rainwater
served as the Chief Investment Advisor to the Bass Family of Texas.
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. In October 1991, Mr.
Ramsey was elected a director of Parker & Parsley and began operating 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 prior to October 1, 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.
MR. SMITH (ARTHUR L.) has a B.A. from Duke University, and is a graduate of
New York University's Stern School of Business with a M.B.A. in Economics. Mr.
Smith, who has been serving as a director of Parker & Parsley since August 1991,
is Chairman and Chief Executive Officer of John S. Herold, Inc., a petroleum
research and consulting firm based in Stanford, Connecticut. Mr. Smith acquired
control of John S. Herold, Inc. in 1984 after nine years on Wall Street in
institutional equity research and corporate finance with Oppenheimer and
Company, Inc., The First Boston Corporation and Argus Research Corp. From 1988
to 1993, he served on the Board of Directors of the New York Society of Security
Analysts. Mr. Smith holds the Chartered Financial Analyst (CFA) designation.
MR. SMITH (PHILIP B.), a graduate of Oklahoma State University with a B.S.
in mechanical engineering and the University of Tulsa with a M.B.A., has served
as a director of Mesa since July 1996. In 1996, Mr. Smith founded PRIZE
Petroleum, L.L.C. From 1991 to 1996, Mr. Smith served as President, Chief
Executive Officer and a director of Tide West Oil Company. From 1986 to 1991, he
served as Senior Vice President of Mega Natural Gas Company and from 1980 to
1986, he held executive positions with two small exploration and production
companies. From 1976 to 1980, Mr. Smith held various positions with
75
<PAGE> 86
Samson Resources Company and from 1974 to 1976, he was a production engineer
with Texaco, Inc. Mr. Smith is a director of HS Resources, Inc.
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 Mesa
since January of 1992, as a member of the Advisory Committee of Mesa, L.P., a
predecessor the Company, from December 1985 to December 1991 and from 1969 to
January 1987, he served as a director of the Company in its original corporate
form. Mr. Stillwell has been a partner in the law firm of Baker & Botts, L.L.P.
for more than the last five years.
MR. WORTLEY, a graduate of Southern Methodist University with a B.A. in
Political Science, the University of North Carolina at Chapel Hill with a
Masters degree in Regional Planning, and Southern Methodist University School of
Law with a J.D., became a director of Parker & Parsley in April 1991. Mr.
Wortley, a partner with the law firm of Vinson & Elkins L.L.P. (Dallas, Texas
office), specializes in acquisitions and securities matters and serves as the
co-head of the Corporate Finance and Securities Section of the firm. He served
on the Board of Directors of Johnson & Wortley, P.C., from May 1994 until
December 1994 and from April 1990 to May 1993, as President and Chairman of the
Board from November 1991 to May 1993 and as the Managing Director from February
1992 to May 1993. From January 1989 until November 1991, he served as the
Chairman of the Corporate/Securities Department.
MR. VETTER is a graduate of the Massachusetts Institute of Technology. Mr.
Vetter, who has been serving as a director of Parker & Parsley since February
1992, 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, Texas. Mr.
Vetter was the Energy Advisor to the Governor of Texas from 1979 to 1983, was
chairman of the Texas Deparment 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.
Compensation of Directors
As compensation for services as a director of Pioneer, each non-employee
director will receive an annual retainer fee, which is paid 50% in cash and 50%
in the form of Pioneer Common Stock, or at the election of the director, 100% in
Pioneer Common Stock. See "Description of Pioneer Long-Term Incentive Plan." The
amount of the annual retainer fee is $40,000, or $50,000 for such directors that
serve on committees. In addition, each non-employee director will be reimbursed
for travel expenses incurred in connection with attending meetings of the Board
of Directors or its committees and an additional $2,500 for services as chairman
of a committee. No additional fees will be paid for attending board or committee
meetings. Executive officers of Pioneer who serve as directors will not receive
additional compensation for serving on the Board of Directors.
Indemnification
Pioneer will enter into indemnification agreements with each of its
directors and officers. These agreements will require Pioneer to indemnify its
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. Each indemnification agreement also will provide
that, upon a potential change in control or change in control of Pioneer and if
the indemnified director or officer so requests, Pioneer 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 Pioneer has
indemnified the director or officer.
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<PAGE> 87
Committees of the Board of Directors
The Board of Directors of Pioneer has established two standing committees:
the Audit Committee and the Compensation Committee. Messrs. Herrington,
Houghton, Gardner and Jones serve on the Audit Committee and Messrs. Hersh,
Ramsey, Smith (Arthur L.) and Smith (Philip B.) serve on the Compensation
Committee. The functions of the Audit Committee will be to recommend to the
Board of Directors the appointment of independent auditors, to review the plan
and scope of any audit of Pioneer's financial statements and to review Pioneer's
significant accounting policies and other matters. The functions of the
Compensation Committee will be to set the compensation of all officers and to
administer the Pioneer Long-Term Incentive Plan and the Pioneer Employee Stock
Purchase Plan, provided where necessary to comply with certain tax and
securities provisions, a subcommittee of Messrs. Ramsey, Smith (Arthur L.) and
Smith (Philip B.) will be formed in order to obtain the benefit of certain tax
provisions.
77
<PAGE> 88
MESA
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial information of Mesa for
each of the three months ended March 31, 1997 and 1996 and the five fiscal years
in the period ended December 31, 1996. This data should be read in conjunction
with the Consolidated Financial Statements of Mesa and the related notes thereto
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues............... $ 94.1 $ 80.6 $ 311.4 $ 235.0 $ 228.7 $ 222.2 $ 237.1
Total operating expenses............... 59.4 55.3 214.7 187.0 200.0 200.2 210.9
-------- -------- -------- -------- -------- -------- --------
Operating income....................... 34.7 25.3 96.7 48.0 28.7 22.0 26.2
-------- -------- -------- -------- -------- -------- --------
Net interest expense(a)................ (22.3) (34.5) (113.4) (132.7) (131.3) (131.3) (129.9)
Other income(b)........................ (0.2) 10.3 25.0 27.1 19.2 6.9 14.5
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations(c)........................ 12.2 $ 1.1 8.3 $ (57.6) $ (83.4) $ (102.4) $ (89.2)
======== ======== ======== ======== ========
Dividends on preferred stock........... (5.5) (9.5)
-------- --------
Income (loss) from continuing
operations applicable to common
stock(c)............................. $ 6.7 $ (1.2)
======== ========
Income (loss) from continuing
operations per common share(d)....... $ 0.10 $ 0.02 $ (0.02) $ (0.90) $ (1.42) $ (2.61) $ (2.31)
======== ======== ======== ======== ======== ======== ========
Weighted average common shares and
common share equivalents
outstanding.......................... 65.8 64.1 64.2 64.1 58.9 39.3 38.6
OTHER FINANCIAL DATA:
EBITDAEX(e)............................ $ 61.1 $ 70.2 $ 228.6 $ 183.4 $ 160.3 $ 142.4 $ 178.1
Cash flows from operating activities... 66.1 (2.2) 101.3 69.2 48.6 32.5 (28.4)
Cash flows from investing activities... (98.4) (10.0) (45.0) (41.4) (40.3) 37.5 (17.0)
Cash flows from financing activities... 35.8 (21.2) (188.7) (22.1) (3.6) (88.5) (29.5)
Capital expenditures................... 97.9 9.8 50.2 42.3 32.6 29.6 69.2
Ratio of earnings to fixed
charges(f)........................... 1.2 1.0 NM NM NM NM NM
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................ $ 3.2 $ 52.8 $ 14.8 $ 43.8 $ 115.7 $ 76.2 $ 102.9
Property, plant and equipment, net..... 1,097.2 1,062.0 1,046.4 1,104.8 1,130.4 1,191.8 1,280.3
Total assets........................... 1,248.9 1,409.1 1,213.9 1,486.8 1,484.0 1,533.4 1,676.5
Long-term debt, including current
maturities........................... 848.7 1,214.3 808.1 1,236.7 1,223.3 1,241.3 1,286.2
Stockholders' equity................... 277.7 68.0 265.5 67.0 124.6 112.1 184.4
</TABLE>
- ---------------
(a) Net interest expense represents total interest expense less interest income.
(b) See "-- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations -- Other Income (Expense)"
for additional detail.
(c) Loss from continuing operations excludes a $59.4 million ($.92 per common
share) extraordinary loss on debt extinguishment for the year ended December
31, 1996. Net loss attributable to common stock was $60.6 million ($.94 per
common share) for the year ended December 31, 1996. Net loss and net loss
per share for the year ended December 31, 1995, 1994, 1993, and 1992 and the
three months ended March 31, 1997 and 1996 are the same as loss from
continuing operations and loss from continuing operations per common share
shown above.
(d) Fully diluted earnings per share was $0.07 for the three months ended March
31, 1997. There were no dilutive securities in the other periods presented.
(e) EBITDAEX is presented because of its wide acceptance as a financial
indicator of a company's ability to service or incur debt. EBITDAEX (as used
herein) is calculated by adding interest, depletion, depreciation and
amortization, and exploration costs to loss from continuing operations
applicable to common stock. Interest includes accrued interest expense and
amortization of deferred financing costs. EBITDAEX should not be considered
as an alternative to earnings (loss) or operating earnings (loss), as
78
<PAGE> 89
defined by generally accepted accounting principles, as an indicator of
Mesa's financial performance, as an alternative to cash flow, as a measure
of liquidity or as being comparable to other similarly titled measures of
other companies.
(f) For purposes of calculating the ratio of earnings to fixed charges, earnings
are defined as loss from continuing operations applicable to common stock
plus fixed charges. Fixed charges consist of interest expense, capitalized
interest and preferred stock dividends. Earnings were inadequate to cover
fixed charges for each of the years ended December 31, 1996 through 1992 by
$1.3 million, $58.5 million, $83.5 million, $105.3 million and $91.6
million, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Recent Developments
On February 7, 1997 Mesa entered into a stock purchase agreement to
purchase 100% of the outstanding capital stock of Greenhill (the "Greenhill
Acquisition"). Mesa paid $277 million for Greenhill at the closing of the
transaction on April 15, 1997 net of the cash acquired. The Greenhill
Acquisition will be accounted for under the purchase method of accounting.
However, because the purchase agreement provided for an effective date of
January 1, 1997, Mesa received the benefits of all Greenhill production and cash
flow from the effective date to the closing date as part of the assets acquired.
Under the purchase agreement, Mesa paid interest on the $270 million purchase
price (less the $15 million deposit paid into escrow on February 7, 1997) at an
annual rate of 10% from the effective date to the closing date. The purchase
price was subject to adjustment for certain title and environmental matters, and
the final adjusted purchase price paid was $277 million exclusive of the cash
acquired.
On February 6, 1997, Mesa purchased all of MAPCO Inc.'s ("MAPCO")
condensate and natural gas liquids production in the West Panhandle field for
$66 million, effective as of January 1, 1997 (the "Liquids Acquisition"). The
Liquids Acquisition has been accounted for under the purchase method of
accounting.
For additional discussion of these acquisitions, see "-- Business -- Recent
Developments."
Results of Operations
Three Months ended March 31, 1997 and 1996
Mesa reported net income applicable to common stock of $6.7 million in the
first quarter of 1997 compared with $1.1 million in the first quarter of 1996.
The following table presents a summary of the results of operations of Mesa
for the three months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN MILLIONS)
<S> <C> <C>
Revenues.................................................... $ 94.1 $ 80.6
Operating and administrative costs.......................... (33.7) (24.5)
Depreciation, depletion and amortization.................... (25.7) (30.8)
------ ------
Operating income............................................ 34.7 25.3
Interest expense, net of interest income.................... (22.3) (34.5)
Other....................................................... (0.2) 10.3
------ ------
Net income.................................................. $ 12.2 $ 1.1
Dividends on Preferred Stock................................ (5.5) --
------ ------
Net income applicable to common stock....................... $ 6.7 $ 1.1
====== ======
</TABLE>
Revenues
The table below presents, for the three months ended March 31, 1997 and
1996, the revenues, production and average prices received from sales of natural
gas, natural gas liquids and oil and condensate.
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<PAGE> 90
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Revenues (in millions):
Natural gas............................................... $ 54.6 $ 50.6
Natural gas liquids....................................... 30.0 23.1
Oil and condensate........................................ 6.4 4.3
Other..................................................... 3.1 2.6
------ ------
Total............................................. $ 94.1 $ 80.6
====== ======
</TABLE>
Natural Gas Production (MMcf):
Hugoton................................................... 10,828 12,942
West Panhandle............................................ 5,276 5,471
Gulf Coast................................................ 3,013 3,697
Other..................................................... 2 1
------ ------
Total............................................. 19,119 22,111
====== ======
Natural Gas Liquids Production (MBbls):
Hugoton................................................... 742 870
West Panhandle............................................ 912 840
Gulf Coast................................................ 32 12
Other..................................................... 1 1
------ ------
Total............................................. 1,687 1,723
====== ======
Oil and Condensate Production (MBbls):
Hugoton................................................... -- --
West Panhandle............................................ 217 34
Gulf Coast................................................ 92 198
Other..................................................... 21 12
------ ------
Total............................................. 330 244
====== ======
Weighted average sales price (1):
Natural gas (per Mcf)..................................... $ 2.90 $ 2.26
Natural gas liquids (per Bbl)............................. $17.80 $13.82
Oil and condensate (per Bbl).............................. $19.33 $17.61
(1) Includes $0.15, $0.03 and $(0.08) from hedging natural gas, natural gas
liquids and oil and condensate, respectively, in the first quarter of 1997.
Mesa's natural gas equivalent production was 8% lower in the first quarter
of 1997 than in the same period of 1996. Hugoton field production was lower due
to high production rates in the first quarter of 1996 resulting from compression
installed in late 1995 at the Ulysses Station. Present Hugoton production rates
have equalized with second quarter 1996 levels, and it is anticipated that total
1997 volumes will approximate total 1996 volumes as a result of a field
compression expansion program currently underway. Gulf Coast production was
lower due to natural production decline; however, production from five wells at
East Cameron 322 which will come on stream in the second quarter is expected to
offset the decline in the first quarter of 1997. West Panhandle condensate and
NGL production increased as a result of new processing arrangements at the Fain
plant as well as from the acquisition of condensate and NGL interests from MAPCO
effective January 1, 1997. Mesa anticipates total production of 157 Bcfe in
1997, up from 128 Bcfe in 1996, due to (i) the above mentioned activities in
Hugoton and the Gulf Coast, (ii) development activities in the West Panhandle
Field, and (iii) expected production of 17 Bcfe for the remainder of 1997 from
the recently closed Greenhill Acquisition, which includes approximately 3 Bcfe
from planned development activities on those properties.
Prices for all of Mesa's production increased significantly in the first
quarter of 1997 in comparison to the first quarter of 1996. The higher
recognized prices reflect the increase in energy commodity prices beginning in
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<PAGE> 91
the fourth quarter of 1996 as well as Mesa's hedging activities. The first
quarter natural gas price is the highest realized gas price for Mesa since the
first quarter of 1984.
The following table shows the effects of Mesa's hedging activities on its
natural gas prices for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31
--------------
1997 1996
----- -----
<S> <C> <C>
Natural gas prices (per Mcf):
Actual price received for production...................... $2.75 $2.26
Effect of hedging activities.............................. .15 --
----- -----
Average price............................................... $2.90 $2.26
===== =====
</TABLE>
Costs and Expenses
Mesa's aggregate costs and expenses increased by approximately 7% in the
first quarter of 1997 compared to the same period in 1996. Lease operating
expenses increased 39% as a result of higher production costs under certain
contracts in the West Panhandle field and workovers in the Gulf Coast.
Exploration charges increased reflecting the dry hole costs associated with
Vermilion 348. General and administrative expenses decreased 32% primarily as a
result of lower legal expenses and a significant reduction in personnel in
Mesa's natural gas vehicle equipment business and administrative functions.
Depreciation, depletion and amortization, which is calculated quarterly on a
unit-of-production basis, decreased primarily due to impairment of long-lived
assets of approximately $6.8 million in accordance with the adoption of a new
accounting requirement (SFAS No. 121) in the first quarter of 1996.
Other Income (Expense)
Interest income and interest expense in the first quarter of 1997 decreased
from such income and expense during the same period in 1996 as average cash
balances and aggregate debt outstanding decreased.
Summarized long-term debt (in millions) and quarter-end interest rates are
as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
------------------- ---------------------
AVERAGE AVERAGE
INTEREST INTEREST
BALANCE RATE BALANCE RATE
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Fixed rate debt....................................... $ 488.4 10.96% $ 1,157.9 11.73%
Variable rate debt.................................... 355.0 7.52% 51.1 7.92%
Other................................................. 5.3 N/A 5.3 N/A
-------- ----- ---------- -----
Total....................................... $ 848.7 $ 1,214.3
======== ==========
</TABLE>
Results of operations for the three months ended March 31, 1997 and 1996,
include certain items which are either non-recurring or are not directly
associated with Mesa's oil and gas producing operations. The following table
sets forth the amounts of such items for the periods indicated (in thousands):
<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Gains from investments...................................... $ -- $ 8.8
Other....................................................... (0.2) 1.5
----- -----
Total Other Income................................ $(0.2) $10.3
===== =====
</TABLE>
The gains from investments relate to Mesa's investments in marketable
securities and energy futures contracts, which included NYMEX futures contracts,
commodity price swaps and options that are not accounted for as hedges of future
production. Mesa's investments in marketable securities and futures contracts
are valued at market prices at each reporting date with gains and losses
included in the statement of operations for such reporting period whether or not
such gains or losses have been realized. Since April 10,
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<PAGE> 92
1996, Mesa has not engaged in speculative investments. Such investments are
expected to be limited in the future.
Years Ended December 31, 1996, 1995 and 1994
The following table presents a summary of the results of operations of Mesa
for the years indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Revenues................................................... $ 311.4 $ 235.0 $ 228.7
Operating and administrative costs......................... (111.4) (101.2) (106.3)
Depreciation, depletion and amortization................... (103.3) (85.8) (93.7)
------- ------- -------
Operating income........................................... 96.7 48.0 28.7
------- ------- -------
Interest expense, net of interest income................... (113.4) (132.7) (131.3)
Other...................................................... 25.0 27.1 19.2
------- ------- -------
Net income (loss) before extraordinary item................ 8.3 (57.6) (83.4)
Extraordinary loss on debt extinguishment.................. (59.4) -- --
------- ------- -------
Net loss................................................... $ (51.1) $ (57.6) $ (83.4)
======= ======= =======
</TABLE>
Revenues, Production and Average Price Data
The table below presents, for the years indicated, the revenues, production
and average prices received from sales of natural gas, natural gas liquids and
oil and condensate.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues (in millions):
Natural gas......................................... $ 184.6 $ 129.6 $ 139.6
Natural gas liquids................................. 97.5 75.3 72.7
Oil and condensate.................................. 18.2 19.6 7.9
Helium and other.................................... 11.1 10.5 8.5
------- ------- -------
Total....................................... $ 311.4 $ 235.0 $ 228.7
======= ======= =======
Natural Gas Production (MMcf):
Hugoton............................................. 46,821 48,871 51,986
West Panhandle...................................... 19,268 20,357 22,983
Gulf of Mexico...................................... 17,909 8,073 7,359
Other............................................... 3 11 11
------- ------- -------
Total....................................... 84,001 77,312 82,339
======= ======= =======
Natural Gas Liquids Production (MBbls):
Hugoton............................................. 3,315 3,524 3,430
West Panhandle...................................... 2,978 2,994 3,423
Gulf of Mexico...................................... 163 48 53
Other............................................... 4 5 5
------- ------- -------
Total....................................... 6,460 6,571 6,911
======= ======= =======
Oil and Condensate Production (MBbls):
Hugoton............................................. -- -- --
West Panhandle...................................... 211 118 164
Gulf of Mexico...................................... 665 1,025 337
Other............................................... 63 52 45
------- ------- -------
Total....................................... 939 1,195 546
======= ======= =======
</TABLE>
82
<PAGE> 93
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Weighted average sales prices:
Natural gas (per Mcf)
Hugoton.............................................. $ 2.06 $ 1.32 $ 1.57
West Panhandle....................................... 2.23 1.83 1.80
Gulf of Mexico....................................... 2.58 1.59 1.81
Other................................................ 0.77 0.54 1.29
Average(a)................................... 2.19 1.65 1.67
Natural gas liquids (per Bbl)
Hugoton.............................................. $14.60 $10.76 $10.03
West Panhandle....................................... 16.06 12.33 11.06
Gulf of Mexico....................................... 15.51 11.37 11.52
Other................................................ 13.96 8.77 8.58
Average...................................... 15.21 11.48 10.55
Oil and condensate (per Bbl)
Hugoton.............................................. -- -- --
West Panhandle....................................... $18.74 $14.13 $13.38
Gulf of Mexico....................................... 19.95 16.57 15.18
Other................................................ 20.07 16.48 14.43
Average...................................... 19.39 16.32 14.58
</TABLE>
- ---------------
(a) Includes the effects of hedging activities. See "-- Natural Gas Prices"
below.
Total revenues from sales of natural gas, NGLs and oil and condensate
increased from 1995 to 1996 primarily due to increased prices received in 1996.
The increase in total revenues from sales of natural gas, NGLs, and oil and
condensate from 1994 to 1995 is primarily attributable to increased oil and
condensate production in 1995, increased liquids prices in 1995 and
approximately $12.7 million of natural gas hedge gains recognized in 1995. These
factors offset the decrease in natural gas and natural gas liquids production
and the lower market prices for natural gas production in 1995.
Natural Gas Revenues
Natural gas revenues increased by 42% from 1995 to 1996. Average prices
were significantly higher in 1996 than in 1995. The average price received for
market price-based production was $0.81 per Mcf, or 61%, higher in 1996 than in
1995. Mesa's hedge losses decreased the reported prices for such production by
$0.02 per Mcf in 1996. The higher market prices in 1996 were the result of
increased demand primarily due to a colder than normal 1995/1996 winter. Natural
gas production from the Gulf of Mexico increased 122% from 1995 to 1996 due to
the South Marsh Island drilling program. Natural gas revenues decreased by 7%
from 1994 to 1995. In 1995 production was lower in both the Hugoton and West
Panhandle fields due to timing and duration of equipment maintenance and
weather-related reduction in demand, respectively. Average natural gas prices
were slightly lower in 1995 than in 1994. The average price received for market
price-based production was $0.22 per Mcf, or 14%, lower in 1995 than in 1994.
Mesa's hedge gains increased the reported prices for such production by $0.20
per Mcf in 1995. The lower market prices in 1995 were a function of a surplus
supply of natural gas. See "-- Natural Gas Prices" below.
NGL Revenues
NGL revenues increased by 29% from 1995 to 1996. Average prices in 1996
were 32% higher than in 1995 due to improved market conditions. The increase in
prices was partially offset by a 2% decline in production. NGL revenues
increased by 4% in 1995 compared to 1994. Hugoton field NGL production was
slightly higher despite lower natural gas production reflecting improved yields
from the Satanta Plant. West Panhandle field NGL production decreased in 1995 in
proportion to the lower natural gas production. The lower production was offset
by higher average prices in 1995 due to improved market conditions for NGLs.
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<PAGE> 94
Oil and Condensate Revenues
Oil and condensate revenues were slightly lower in 1996 than in 1995. Oil
production in the Gulf of Mexico was down 35% due to natural oil production
decline from the successful drilling in 1994. The production decrease was offset
by an increase of 19% in average prices received in 1996 than 1995 due to
improved market conditions. Oil and condensate revenues increased approximately
150% from 1994 to 1995. Gulf of Mexico production increased in late 1994 due to
successful drilling results. Average oil and condensate prices were also higher
in 1995 by $1.74 per Bbl.
Natural Gas Prices
Substantially all of Mesa's natural gas production is sold under short or
long-term sales contracts. The following table shows Mesa's natural gas
production sold under fixed price contracts and production sold at market
prices:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Natural Gas Production (MMcf):
Sold under fixed price contracts........................ 5,198 15,212 13,935
Sold at market prices................................... 78,803 62,100 68,404
------ ------ ------
Total production................................ 84,001 77,312 82,339
====== ====== ======
Percent sold at market prices............................. 94% 80% 83%
</TABLE>
In addition to its fixed price contracts, Mesa will, when circumstances
warrant, hedge the price received for its market-sensitive production through
natural gas futures contracts, swaps and other financial instruments as well as
physical sales arrangements. The following table shows the effects of Mesa's
fixed price contracts and hedging activities on its natural gas prices:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Average Natural Gas Prices (per Mcf):
Fixed price contracts..................................... $ 3.21 $2.12 $2.16
Market prices received.................................... 2.14 1.33 1.55
Hedge gains (losses)...................................... (0.02) 0.20 0.01
------ ----- -----
Total market prices............................... $ 2.12 $1.53 $1.56
------ ----- -----
Total average prices........................................ $ 2.19 $1.65 $1.67
====== ===== =====
</TABLE>
The average natural gas prices under fixed price contracts increased in
1996 due to the expiration of certain lower priced contracts in 1995.
Gains and losses from hedging activities are included in natural gas
revenues when the applicable hedged natural gas is produced. Mesa recognized
losses from hedging activities of $1.8 million in 1996, and gains of $12.7
million in 1995 and $895,000 in 1994.
Costs and Expenses
Mesa's aggregate costs and expenses increased by approximately 15% from
1995 to 1996. Lease operating expenses increased 10% from 1995 to 1996 due to
higher production and fuel costs in the West Panhandle and Hugoton fields and
slightly higher overall production. Production and other taxes increased 9% from
1995 to 1996 due to increased revenues partially offset by lower tax rates for
Hugoton field production. Exploration charges in 1996 were lower than in 1995
due to a greater emphasis being placed on lower risk development drilling
throughout 1996. General and administrative ("G&A") expenses increased in 1996
due to a $9.3 million charge relating to a reduction in personnel associated
with the recapitalization of Mesa's balance
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<PAGE> 95
sheet in August 1996, partially offset by lower costs resulting from the
personnel reduction and lower legal expenses. The charge includes over $4.9
million in severance costs paid to the former chief executive officer in 1997.
Depreciation, depletion and amortization ("DD&A") expense, which is calculated
quarterly on a unit-of-production basis, was higher primarily due to a decrease
in estimated reserves and an impairment of long-lived assets of approximately
$6.8 million in connection with the adoption of a new accounting standard (SFAS
No. 121).
Mesa's aggregate costs and expenses declined by approximately 7% from 1994
to 1995. Lease operating expenses declined marginally due to decreased
production. Production and other taxes decreased 14% from 1994 to 1995 due to
decreased production in the Hugoton and West Panhandle fields and lower tax
rates for Hugoton field production in 1995. Exploration charges in 1995 were
greater than in 1994 reflecting increased exploration activities in the Gulf of
Mexico and consist primarily of exploratory dry-hole expense. G&A expenses were
lower in 1995 than in 1994 primarily due to lower legal expenses and a reduction
in employee benefit expenses. DD&A expense was lower in 1995 than in 1994
primarily due to lower equivalent production in 1995, oil and gas reserve
increases in the Hugoton and West Panhandle fields in the fourth quarters of
1994 and 1995, and additional reserve discoveries in the Gulf of Mexico in 1994
and 1995.
See "-- Business Description -- Production Costs."
The table below presents Mesa's total production costs (lease operating
expenses and production and other taxes) by area of operation for each of the
years ended December 31 (in millions, except per Mcf of natural gas equivalent
data):
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
TOTAL PER MCFE TOTAL PER MCFE TOTAL PER MCFE
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Lease operating expense:
Hugoton...................................... $13.5 $0.20 $12.7 $0.18 $12.6 $0.17
West Panhandle............................... 28.9 0.75 26.0 0.67 26.9 0.60
Gulf Coast................................... 10.5 0.46 9.9 0.68 11.1 1.15
Other........................................ 1.5 3.79 0.9 2.57 0.6 2.00
----- ----- -----
54.4 0.42 49.5 0.40 51.2 0.40
----- ----- -----
Production and other taxes:
Hugoton...................................... 16.3 0.24 15.0 0.21 17.5 0.24
West Panhandle............................... 3.5 0.09 3.2 0.08 3.1 0.07
Gulf Coast................................... -- -- 0.1 -- 0.1 0.01
Other........................................ 0.3 0.70 0.1 0.42 0.6 2.04
----- ----- -----
20.1 0.16 18.4 0.15 21.3 0.17
----- ----- -----
Total production costs............... $74.5 $0.58 $67.9 $0.55 $72.5 $0.57
===== ===== =====
</TABLE>
Other Income (Expense)
Interest expense in 1996 was $27.5 million lower than in 1995 due to lower
average aggregate debt outstanding at lower average interest rates. Average
aggregate debt outstanding and average interest rates fell to $1,036.0 million
and 11.34%, respectively, from $1,246.9 million and 11.64% in 1995. Interest
expense in 1995 was not materially different from 1994 as average aggregate debt
outstanding and average interest rates did not change materially. Non-cash
interest expense representing accretion of discount on long-term debt totaled $8
million, $39 million and $79 million in 1996, 1995 and 1994, respectively.
Interest income decreased $8.2 million from 1995 to 1996 due to lower
average cash balances in 1996. Interest income increased from $13.5 million in
1994 to $15.9 million in 1995 as a result of higher average cash balances and
higher average interest rates earned on these cash balances in 1995.
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<PAGE> 96
Results of operations for the years 1994, 1995 and 1996 include certain
items which are either non-recurring or are not directly associated with Mesa's
oil and gas producing operations. The following table sets forth the amounts of
such items (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Gains from investments...................................... $ 9.4 $18.4 $ 6.7
Gains from collections from Bicoastal Corporation........... 2.5 6.4 16.6
Gain from adjustment of contingency reserve................. 15.0 -- --
Other....................................................... (1.9) 2.4 (4.0)
----- ----- -----
Total other income................................ $25.0 $27.2 $19.3
===== ===== =====
</TABLE>
The gains from investments relate primarily to energy futures contracts,
which include New York Mercantile Exchange ("NYMEX") futures contracts,
commodity price swaps and options that are not accounted for as hedges of future
production. Mesa's investments in marketable securities and futures contracts
are valued at market prices at each reporting date with gains and losses
included in the statement of operations for such reporting period whether or not
such gains or losses have been realized. Gains from collections from Bicoastal
Corporation represent returns on Mesa's investment in Bicoastal subsequent to
the confirmation of its bankruptcy plan. No additional payments from Bicoastal
are expected. In the second quarter of 1996, Mesa revalued certain contingencies
associated primarily with contracts which were settled in the mid-to-late
1980's. As a result of the revaluation, Mesa recorded a gain of $15 million in
the second quarter of 1996.
Production Allocation Agreement
Effective January 1, 1991, Mesa entered into the Production Allocation
Agreement (the "PAA") with Colorado Interstate Gas Company ("CIG") which
allocates 77% of the production from the West Panhandle field to Mesa and 23% to
CIG. During 1994, 1995, and 1996, Mesa produced and sold 69%, 71%, and 72%,
respectively, of total production from the field; the balance of field
production was sold by CIG. Mesa records its 77% ownership interest in natural
gas production as revenue. The difference between the net value of production
sold by Mesa and the net value of its 77% entitlement is accrued as a gas
balancing receivable. The revenues and costs associated with such accrued
production are included in results of operations.
The following table presents the incremental effect on production and
results of operations from entitlement production recorded in excess of actual
sales as a result of the PAA (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues accrued.......................................... $ 8.1 $ 4.3 $ 8.7
Costs and expenses accrued................................ (2.8) (1.6) (3.1)
------ ------ ------
Recorded to receivable.................................... 5.3 2.7 5.6
Depreciation, depletion and amortization.................. (2.5) (1.7) (3.7)
------ ------ ------
Total........................................... $ 2.8 $ 1.0 $ 1.9
====== ====== ======
Production accrued:
Natural gas (MMcf)...................................... 1,734 1,155 2,386
Natural gas liquids (MBbls)............................. 269 171 355
</TABLE>
At December 31, 1996, the long-term gas balancing receivable under the PAA
due from CIG was $47.9 million, net of accrued costs, which is included in
"Other assets" in the consolidated balance sheet. Approximately $18 million of
the long-term gas balancing receivable relating to the PAA is attributed to
MAPCO's interest in liquids purchased by Mesa pursuant to the Liquids
Acquisition. The provisions of the PAA allow for periodic and ultimate cash
balancing to occur. The PAA also provides that CIG may not take in excess of its
23% share of ultimate production.
86
<PAGE> 97
Capital Resources and Liquidity
In August of 1996, Mesa completed a recapitalization (the
"Recapitalization") of its balance sheet by issuing new equity and repaying and
refinancing substantially all of its then existing long-term debt. The
Recapitalization included (i) a sale by private placement of approximately 58.8
million shares of a new class of Series B Preferred Stock for $133 million to
DNR-Mesa Holdings L.P., a Texas limited partnership whose sole general partner
is Rainwater, Inc., a Texas corporation owned by Richard E. Rainwater, and (ii)
the issuance to Mesa's then existing stockholders of rights (the "Rights
Offering") to purchase a new class of Series A Preferred Stock. The Rights
Offering was substantially over subscribed and resulted in such stockholders'
purchase of approximately 58.6 million shares of Series A Preferred Stock for
$132 million. In addition, as part of the Recapitalization, Mesa entered into
the new seven-year $525 million Credit Facility with a group of banks, issued
and sold $475 million of senior subordinated notes consisting of $325 million of
10 5/8% senior subordinated notes due 2006 (the "Senior Subordinated Notes") and
$150 million initial accreted value of 11 5/8% senior subordinated discount
notes due 2006 (the "Senior Discount Notes").
The Recapitalization enhances Mesa's ability to compete in the oil and gas
industry by substantially increasing its cash flow available for investment and
improving its ability to attract capital. The ability to redirect cash flow to
acquisition, exploitation and exploration activities and plant expansion rather
than debt service allows Mesa to pursue its aggressive growth strategy.
Specifically, Mesa's financial condition improved significantly as a result of
the Recapitalization due to (i) a significant reduction in total debt
outstanding (see table below), (ii) a reduction in annual cash interest expense
through lower debt balances and lower interest rates, and (iii) the extension of
maturities on its long-term debt.
MOC, a Delaware corporation and a wholly-owned subsidiary of Mesa, is the
borrower under a revolving bank credit facility (the "MOC Credit Facility") and
the issuer under the Senior Subordinated Notes and the Senior Discount Notes.
Mesa is the guarantor on the MOC Credit Facility and on both the Senior
Subordinated Notes and the Senior Discount Notes.
The MOC Credit Facility is secured by liens on substantially all of Mesa's
assets and matures on June 30, 2003. Borrowings under the MOC Credit Facility
bear interest, at Mesa's option, at Interbank Eurodollar rates plus 1 1/2%, CD
rates plus 1 1/2%, Fed Funds rates plus 1% or the prime rate plus 1/2%. Mesa
has entered into a two-year interest rate swap ending on August 28, 1998, that
fixes the interest rate on $250 million of borrowings under the MOC Credit
Facility at approximately 7 3/4%. The borrowing base for the MOC Credit Facility
is determined based on the value of Mesa's proved oil and gas reserves and was
initially set at $525 million. The borrowing base at December 31, 1996 was $525
million and, as of such date, $319 million was outstanding under the MOC Credit
Facility. Mesa recently amended and restated the MOC Credit Facility in April
1997 to increase the total amount of the MOC Credit Facility to $650 million in
connection with the Greenhill Acquisition. Borrowings under the MOC Credit
Facility were used to fund the Greenhill Acquisition. The MOC Credit Facility
restricts, among other things, Mesa's ability to incur additional indebtedness,
create liens, pay dividends, acquire stock or make investments, loans or
advances.
The amounts outstanding under the Senior Subordinated Notes and the Senior
Discount Notes at December 31, 1996 were approximately $325 million and $159
million, respectively, and both the Senior Subordinated Notes and the Senior
Discount Notes are unsecured and mature in 2006. The Senior Subordinated Notes
bear interest at a rate of 10 5/8%, payable semiannually. The Senior Discount
Notes do not accrue interest until July 1, 2001, however, the accreted value of
such notes will increase at a rate of 11 5/8% compounded semiannually until such
date. Beginning July 1, 2001, the Senior Discount Notes will bear interest at a
rate of 11 5/8% compounded semiannually. Prior to July 1, 1999, Mesa may, at its
option, on any one or more occasions, redeem up to 33 1/3% of the aggregate
principal amount of each of the Senior Subordinated Notes and the Senior
Discount Notes at a redemption price equal to 110% of the principal amount or
accreted value thereof with proceeds of equity offerings.
The indentures governing the Senior Subordinated Notes and the Senior
Discount Notes contain certain covenants that, among other things, limit the
ability of Mesa and its restricted subsidiaries to incur additional indebtedness
and issue redeemable stock, pay dividends, make investments, make certain other
restricted
87
<PAGE> 98
payments, enter into certain transactions with affiliates, dispose of assets,
incur liens and engage in mergers and consolidations.
Summarized long-term debt (in millions) and year-end interest rates are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------- --------------------
AVERAGE INTEREST AVERAGE INTEREST
BALANCE RATE BALANCE RATE
------- -------- -------- --------
<S> <C> <C> <C> <C>
Fixed Rate Debt................................ $483.8 11.0% $1,170.3 11.7%
Variable Rate Debt............................. 319.0 7.0 61.1 8.3%
Other.......................................... 5.3 N/A 5.3 N/A
------ --------
Total................................ $808.1 $1,236.7
====== ========
</TABLE>
A primary component of Mesa's strategy is to expand its development and
exploration activities. Mesa has budgeted $130 million for development,
exploration and gas processing in 1997 (assuming a market price of $20.00 per
Bbl of oil and $2.10 per Mcf of natural gas), an increase of 160% over 1996
expenditures of $50 million. Of the 1997 total, $86 million is planned for
development, $32 million for exploratory drilling, seismic and lease
acquisition, and $12 million for gas plant and facility expansions. The 1997
budget includes work planned for the Greenhill properties. The timing of most of
Mesa's capital expenditures is discretionary with no material long-term capital
expenditure commitments. Consequently, Mesa has a significant degree of
flexibility to adjust the level of such expenditures as circumstances warrant.
In addition to developing its existing reserves, Mesa will attempt to
increase its reserve base, production and operating cash flow by engaging in
strategic acquisitions of oil and natural gas properties. Mesa does not have a
specific acquisition budget because of the unpredictability of the timing and
size of forthcoming acquisition activities. There is no assurance that Mesa will
be able to identify suitable acquisition candidates in the future, or that Mesa
will be successful in the acquisition of producing properties. Further, there
can be no assurances that any future acquisitions made by the Company will be
integrated successfully into the Company's operations or will achieve desired
profitability objectives.
Management believes that cash from operating activities, together with the
availability under the Credit Facility will be sufficient for Mesa to meet its
debt service obligations and scheduled capital expenditures, to fund the
Greenhill Acquisition and to fund its working capital needs for the next several
years. In order to finance any possible future acquisitions, Mesa will either
use borrowings available under the Credit Facility or Mesa may seek to obtain
additional debt or equity financing in the public or private capital markets. In
February 1997, Mesa filed a shelf registration statement for $500 million of
debt securities and/or common stock with the Commission. In addition, Mesa may
seek to use its equity securities as an acquisition currency. The availability
and attractiveness of these sources of financing will depend upon a number of
factors, some of which will relate to the financial condition and performance of
Mesa, and some of which will be beyond Mesa's control, such as prevailing
interest rates, oil, natural gas and NGL prices, the availability of properties
for acquisition and other market conditions. There can be no assurance that
additional debt or equity financing will be available or be available on terms
attractive to Mesa. In addition, the ability of Mesa to incur any additional
indebtedness and grant security interests with respect thereto will be subject
to the terms of the Credit Facility and the indentures governing its Senior
Subordinated Notes and Senior Discount Notes.
Price Risk Management
In order to mitigate the potential negative effects of volatile commodity
prices, Mesa entered into over-the-counter commodity and natural gas basis swap
agreements with financial institutions and gas marketing companies. A commodity
swap has the effect of fixing the absolute price or setting a trading range for
a specific product. A natural gas basis swap "fixes" the differential between
Mesa's physical gas delivery points and the NYMEX Henry Hub.
Through financial swaps and fixed price sales contracts Mesa fixed the
price on approximately 90% of its first quarter 1997 natural gas production at
$2.90 per MMBtu. As a result of physical sales contracts and other
88
<PAGE> 99
hedging arrangements, Mesa's estimated fixed price profile for the balance of
1997 is as follows: 42% of expected natural gas production is hedged at an
average of $2.24 per MMBtu; 11% of expected natural gas liquids production is
hedged at an average $17.13 per Bbl; and 27% of expected oil and condensate
production is hedged at an average of $22.15 per Bbl. Mesa has entered into
various option contracts to limit the price risk on an additional 6% of its
expected natural gas production in the third and fourth quarters of 1997.
In connection with acquisitions, Mesa has and expects to continue to enter
into hedging arrangements for all or a portion of the production on the acquired
properties. Regarding the Greenhill acquisition, Mesa hedged approximately 100%
of its 1997 expected natural gas production at approximately $2.60 per MMBtu and
approximately 30% of Greenhill's projected crude oil production at approximately
$22.60 per barrel. Through the use of a collar, Mesa created a $19.25 floor and
a $25.50 cap for approximately 20% of the 1997 expected Greenhill crude oil
production. For the year 1998, Mesa fixed approximately 40% of the projected
Greenhill natural gas production around $2.35. With respect to the MAPCO
acquisition, Mesa sold approximately 100% of the crude oil and natural gas
liquids at a net price of $21.00 per barrel and $18.66 per barrel, respectively,
for the first three quarters of 1997.
In addition to these hedges, Mesa entered into an eight year agreement for
13,000 MMBtus of natural gas per day beginning in early 1997. Under this
agreement, Mesa will receive NYMEX Henry Hub plus $0.52 per MMBtu for the first
two years and 10% of NYMEX WTI crude oil price for the remaining six years.
Other
See Mesa's Annual Report on Form 10-K/A for the year ended December 31,
1996, which is incorporated by reference herein, for information regarding the
status of certain pending litigation.
Management does not anticipate that inflation will have a significant
effect on Mesa's operations.
Mesa believes that the costs for compliance with current environmental laws
and regulations have not had and will not have a material effect on Mesa's
financial position or results of operation.
Net Operating Loss Carryforwards.
At December 31, 1996, Mesa had a regular tax net operating loss
carryforward of approximately $560 million and an alternative minimum tax loss
carryforward available to offset future alternative minimum taxable income of
approximately $535 million. If not used, these carryforwards will expire between
2007 and 2011. As a result of the Recapitalization, Mesa's ability to utilize
these carryforwards is subject to the limitations of Code Section 382 (which, in
general, limits the utilization of net operating loss ("NOL") carryforwards
subsequent to a substantial change (generally more than 50%) in corporate stock
ownership). In particular, under Code Section 382, Mesa's ability to carry
forward its existing NOLs ("Pre-change NOLs") to offset future taxable income
and gain is limited to the sum of (i) an annual allowance determined, in part,
by reference to Mesa's "value" immediately prior to the ownership change
("Valuation Date") and (ii) the amount of any net unrealized gain inherent in
Mesa's assets as of the Valuation Date recognized over a five year period. The
imposition of the above restrictions on Mesa's Pre-change NOLs could result in a
portion of those NOLs expiring before Mesa is able to utilize them.
Cash Flow from Operating Activities
Net cash provided by operating activities increased 46% from 1995 to 1996
primarily as a result of sales of investments and a reduction in net loss as
compared to 1995 before extraordinary, non-operating, loss on debt
extinguishment. Net cash provided by operating activities increased 30% from
1994 to 1995 primarily as a result of the $43 million litigation settlement in
1994.
BUSINESS DESCRIPTION
Mesa is one of the largest independent oil and gas companies in the United
States and has undergone a transformation over the last twelve months that
positions it for renewed growth. From 1991 through 1996, significant leverage
and weak commodity prices forced Mesa to focus on servicing and restructuring
its debt
89
<PAGE> 100
rather than expanding its business. In mid-1996, Mesa completed the
Recapitalization led by Richard E. Rainwater who, along with existing
shareholders, injected $265 million of equity into Mesa. This equity infusion
enabled Mesa to substantially reduce its overall debt level and debt service
requirements. The Recapitalization has enhanced Mesa's ability to compete in the
oil and gas industry by substantially increasing its cash flow available for
investment, as well as improving its ability to attract capital.
Having completed a successful financial turnaround, Mesa's Board of
Directors elected a new management team led by Jon Brumley, Mesa's Chairman and
Chief Executive Officer. Mesa is now positioned to increase its reserve base,
production and cash flows by pursuing strategic acquisitions, increasing
exploration activities, exploiting its existing and acquired properties and
expanding its processing facilities to accommodate increased third party
processing arrangements. Mesa's highly developed, long lived reserve base
provides it with a long-term stable source of cash flow to fund this strategy.
As a first step, Mesa purchased all of the outstanding capital stock of
Greenhill from Western Mining Corporation (USA) for $277 million (the "Greenhill
Acquisition") and acquired additional condensate and NGL interests in the West
Panhandle field of Texas from MAPCO for $66 million.
Mesa had approximately 1.6 Tcfe of proved reserves as of December 31, 1996,
with an SEC PV10 of approximately $1.8 billion. Approximately 93% of Mesa's
estimated proved reserves are proved developed producing with an estimated
reserve life in excess of 12 years. Mesa operates the wells attributable to 95%
of its reserves. Currently, about 95% of Mesa's reserves are concentrated in the
Hugoton field in southwest Kansas and the West Panhandle field in Texas. These
fields are considered to be among the premier natural gas properties in the
United States and are characterized by long lived reserves and stable, high
margin production. Mesa owns and operates substantially all of the gas
processing facilities that service its reserves in the two fields and
substantially all of the gathering assets related to its Hugoton reserves. Mesa
also has a significant and growing presence offshore in the Gulf of Mexico,
where Mesa has operated since the early 1970's. Mesa currently has interests in
56 blocks in the Gulf of Mexico, covering an aggregate of approximately 141,000
net acres, much of which is covered by 3-D seismic data. The Greenhill and
Liquids Acquisitions further strengthen Mesa's asset base as well as provide
Mesa with a new core area in the inland waters of Louisiana. After giving effect
to the Greenhill and Liquids Acquisitions, approximately 60% of Mesa's total
equivalent proved reserves are natural gas, 30% are NGLs and 10% are oil and
condensate.
Recent Developments
Greenhill Acquisition. On April 15, 1997, Mesa acquired all of the
outstanding capital stock of Greenhill from Western Mining Corporation (USA) for
$277 million exclusive of the cash acquired. The Greenhill properties, which are
concentrated in four producing areas, had estimated proved reserves of 30 MMBOE
as of December 31, 1996, with a net present value of estimated future net cash
flows before income taxes, discounted at 10%, of approximately $300 million.
These properties have had cumulative historical production of over 930 MMBOE.
As of December 31, 1996, Greenhill's properties had estimated proved
reserves of approximately 23 MMBbls of oil and 42 Bcf of gas or an aggregate of
approximately 30 MMBOE. The estimated future net cash flows before income taxes
from the Greenhill reserves, as of December 31, 1996, aggregated approximately
$441 million and had a net present value, discounted at 10%, of approximately
$300 million. For the year ended December 31, 1996, production from the
Greenhill reserves was 2.5 MMBbls of oil and 6.0 Bcf of gas. Pro forma for the
Greenhill Acquisition, Mesa's average daily production is expected to increase
by approximately 16%, and its proved reserves are expected to increase by 11%.
The Greenhill properties are concentrated in the inland waters of
Louisiana, the Texas Gulf Coast, offshore in the Gulf of Mexico and in the
Permian Basin, with approximately 48% of the reserves in inland waters of
Louisiana, 12% in the Texas Gulf Coast, 11% offshore in the Gulf of Mexico and
28% in the Permian Basin. Greenhill operates over 90% of its properties. The
Greenhill properties include 522 producing wells, over 200 development projects,
significant exploration potential, including a number of subsalt and deeper zone
drilling prospects, and extensive 3-D seismic data on approximately 52,800 gross
acres (49,000 net acres).
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Mesa has currently identified 45 development wells and 132 recompletions on
the Greenhill properties, and expects to initiate 44 of these projects in 1997
and at least 25 in 1998. The projects will require an investment of at least $65
million during 1997 and 1998. With the additional development projects, Mesa
expects to increase production from the Greenhill properties from the current
9,300 BOE per day, to over 12,000 BOE per day in 1998. In addition, Mesa has
identified a number of exploration opportunities, including a deeper zone and
two subsalt prospects, which Mesa expects to evaluate further with advanced 3-D
seismic data processing.
The three fields located in Louisiana, Timbalier Bay, Grand Bay and Delta
Farms, are considered giant fields by industry standards having historical
cumulative production of more than 100 MMBOE each with Timbalier Bay being the
third largest field in Louisiana having historical cumulative production of more
than 390 MMBOE. The Timbalier Bay and Grand Bay fields both lie on the flanks of
the Terrebonne Trough, the most prolific depositional basin in Louisiana. This
Miocene basin has produced over 24 Tcf and 13 billion barrels of oil
historically. The combination of the size and structural and stratigraphic
complexity of these fields has resulted in large numbers of distinct reservoirs
and fault blocks in each field, which lend themselves to further exploration and
exploitation using 3-D seismic data.
The Eugene Island 208 field, located in federal waters offshore, is a salt
dome with complex faulting separating the producing reservoirs. Mesa expects to
use 3-D seismic data to identify and exploit hydrocarbon accumulations in each
of these fields.
The Texas Gulf Coast properties are concentrated in three areas: the Rich
Ranch area located in Liberty County and the Linscomb and Bobcat Run areas
located in Orange County. A new 3-D survey is under evaluation over the Rich
Ranch field which is expected to assist in defining additional structural and
stratigraphic opportunities. The Permian Basin interests consist of five active
water flood field units and four other non-unitized leases in Lea County, New
Mexico, and Andrew and Yoakum Counties, Texas, three of which hold potential for
increased oil recovery through CO2 flooding.
The Greenhill properties include more than 150 square miles of proprietary
modern 3-D seismic data covering Timbalier Bay and Grand Bay fields, a
speculative seven square mile 3-D survey over the Linscomb and Bobcat Run fields
and a newly shot 11 square mile 3-D seismic survey at Rich Ranch. Mesa plans to
conduct further 3-D seismic surveys over the Greenhill properties to assist in
its exploitation and exploration efforts.
Liquids Acquisition. On February 6, 1997 Mesa purchased all of MAPCO's
condensate and NGL production interests in the West Panhandle field for $66
million. The Liquids Acquisition, effective as of January 1, 1997, increases
Mesa's interest in NGLs produced from the West Panhandle field properties that
Mesa operates to approximately 96%. Mesa has been recovering such NGLs at its
Fain plant since December 1996 and Mesa believes that the Liquids Acquisition is
an important step in Mesa's strategic objective of expanding its NGL and gas
processing business. The transaction is expected to result in 850,000 Bbls of
additional production in 1997 and the addition of an estimated 11 MMBbls of
proved reserves in 1997.
Recent Lease Sale. At the March 5, 1997 Central Gulf of Mexico lease sale,
Mesa was the high bidder on 4 of the 10 blocks on which it bid. Mesa exposed
$2.3 million and will spend $0.7 million if the Minerals Management Service
("MMS") awards all four leases to Mesa. These blocks are: Eugene Island 207,
South Marsh Island 120, Vermilion 206 and West Cameron 627. If the bids are
approved by the MMS, Mesa's offshore lease inventory, which now covers 56 blocks
on nearly 141,000 net acres, would increase to 60 blocks and 158,000 net acres.
Properties
Approximately 95% of Mesa's estimated proved reserves as of December 31,
1996 were concentrated in the Hugoton field of southwest Kansas and the West
Panhandle field of Texas. These fields, which produce gas from depths of 3,500
feet or less, are characterized by stable, long lived, low cost production.
Mesa's Gulf of Mexico properties have significant exploitation and exploration
potential.
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<PAGE> 102
Reserves. The following table summarizes the estimated proved reserves and
estimated future cash flows associated with Mesa's oil and gas properties, by
major areas of operation and the Greenhill Acquisition, in each case as of
December 31, 1996, as estimated in accordance with Commission guidelines,
including, without limitation, the definitional requirements under Rule 4-10(a)
of Regulation S-X promulgated under the Securities Act.
<TABLE>
<CAPTION>
MESA PROPERTIES
-----------------------------------------------------
WEST GULF OF GREENHILL PRO FORMA
HUGOTON PANHANDLE MEXICO OTHER TOTAL ACQUISITION COMBINED
---------- --------- ------- ------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Proved reserves:
Natural gas (MMcf).............. 691,412 288,444 27,332 30,534 1,037,722 41,897 1,079,619
Natural gas liquids (MBbls)..... 45,418 42,498 120 15 88,051 -- 88,051
Oil and condensate (MBbls)...... -- 3,971 2,188 704 6,863 23,430 30,293
Natural gas equivalents
(MMcfe)....................... 963,920 567,258 41,180 34,848 1,607,206 182,477 1,789,683
% Developed..................... 99.9% 91.8% 82.1% 34.2% 95.2% 84.5% 94.1%
% Natural gas................... 71.7% 50.8% 66.4% 87.6% 64.6% 23.0% 60.3%
Present value of future net cash
flows, before income taxes,
discounted at 10% (in
millions)..................... $ 1,129.7 $ 611.4 $ 67.6 $ 26.9 $ 1,835.6 $ 300.3 $ 2,135.9
</TABLE>
The following table summarizes Mesa proved reserves, as estimated in
accordance with the Commission guidelines, associated with Mesa's oil and gas
properties as of December 31, 1996, 1995 and 1994 by total reserves and reserve
components.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Natural gas (MMcf)................................ 1,037,722 1,218,029 1,303,187
Natural gas liquids (MBbls)....................... 88,051 101,897 84,397
Oil and condensate (MBbls)........................ 6,863 9,521 5,031
Natural gas equivalents (MMcfe)................... 1,607,206 1,886,537 1,839,755
Present value of future net cash flows, before
income tax, discounted at 10% (in millions)..... $1,835.6 $1,040.4 $988.3
Present value of future net cash flows, after
income tax, discounted at 10% (in millions)..... $1,393.7 $ 966.2 $934.2
</TABLE>
The estimates of Mesa's proved reserves as of December 31, 1996, are based
upon (i) the report of Williamson Petroleum Consultants, Inc. ("Williamson"),
independent reserve engineers, with respect to Mesa's reserves in the Hugoton
and West Panhandle fields, which represents approximately 95% of Mesa's total
proved reserves, and (ii) the report of Mesa's internal reserve engineers with
respect to Mesa's Gulf of Mexico and other properties.
Information relating to Mesa's proved oil and gas reserves is based upon
engineering estimates. Estimates of economically recoverable oil and gas
reserves and of future net revenues depend upon a number of factors and
assumptions, such as historical production performance, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
gas prices, future operating costs, severance and excise taxes, development
costs and workover costs, all of which may in fact vary considerably from actual
future conditions. The accuracy of any reserve estimate is a function of the
quality of the available data, of engineering and geological interpretation and
of subjective judgment. For these reasons, estimates of the economically
recoverable quantities of oil and gas reserves attributable to any particular
group of properties, classifications of such reserves based on risk of recovery
and estimates of future net revenues expected therefrom prepared by different
engineers or by the same engineers at different times may vary materially.
Actual production, revenues, and expenditures with respect to Mesa's reserves
will likely vary from estimates, and such variances may be material.
Each year, Mesa files reserve estimates as of the end of the preceding
fiscal year with the Energy Information Administration of the Department of
Energy (the "EIA"). During 1996, Mesa filed
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Form EIA-23, which included reserve estimates as of December 31, 1995, with the
EIA. Such reserve estimates did not vary from Mesa's reserve estimates at
December 31, 1995 contained herein by more than 5%.
Hugoton Field. The Hugoton field in southwest Kansas is one of the largest
producing gas fields in the continental United States. Mesa's Hugoton properties
represent approximately 13% of the proved reserves in the field and are located
on over 230,000 net acres, covering approximately 400 square miles. Mesa's
properties are concentrated in the central fairway of the field and benefit from
better reservoir characteristics, including thicker productive zones, higher
porosity and higher permeability than properties on the edges of the field.
Management believes that, as a result, Mesa's Hugoton properties will have a
longer productive life and higher natural gas recoveries than properties located
near the edge of the Hugoton field. Mesa has working interests in approximately
1,100 wells in the Hugoton field, 950 of which it operates, and royalty
interests in approximately 800 wells. Mesa owns substantially all of the
gathering and processing facilities which service its production from the
Hugoton field, which allows Mesa to control the production, gathering,
processing and sale of its gas and associated NGLs to various major intrastate
and interstate pipelines through its direct interconnects.
Mesa's Hugoton properties are capable of producing approximately 200 MMcf
of wet gas per day (i.e., gas production at the wellhead before processing and
before reduction for royalties). Substantially all of Mesa's Hugoton production
is processed through its Satanta plant. Production in the Hugoton field is
subject to allowables set by state regulators. Mesa estimates that it and other
major producers in the Hugoton field produced at or near capacity in 1996 and
expects such practice to continue.
Mesa's Hugoton properties accounted for approximately 60% of its equivalent
proved reserves and 62% of the present value of estimated future net cash flows
determined as of December 31, 1996, in accordance with Commission guidelines.
The Hugoton properties accounted for approximately 53%, 47% and 49% of Mesa's
oil and gas revenues for the years ended December 31, 1994, 1995, and 1996,
respectively. The percentage of revenues from the Hugoton field has been less
than the percentage of equivalent proved reserves due primarily to the longer
life of the Hugoton properties compared to Mesa's other properties.
Mesa has invested over $78 million in capital expenditures in its Hugoton
properties since 1992 to construct the Satanta Plant and related facilities, and
to upgrade gathering and compression facilities, production equipment and
pipeline interconnects in order to maintain production capacity and marketing
flexibility. See "-- Production -- Hugoton Field." Additionally, Mesa intends to
submit an application to the Kansas Corporation Commission (the "KCC") to allow
infill drilling into the Council Grove Formation. Mesa believes that such infill
drilling could increase production from its Hugoton properties. There can be no
assurance that the application will be approved or as to the timing of receipt
of such approval if such approval is obtained.
West Panhandle Field. The West Panhandle properties are located in the
Texas panhandle. Natural gas from these properties is produced from
approximately 600 wells, all of which Mesa operates, on over 185,000 net acres.
All of Mesa's West Panhandle production is processed through Mesa's Fain natural
gas processing plant.
Mesa's West Panhandle reserves are owned and produced pursuant to contracts
with CIG, the first of which was executed in 1928 by predecessors of both
companies. An amendment to these contracts, the PAA, allocates 77% of the
production from the West Panhandle field properties to Mesa and 23% to CIG,
effective as of January 1, 1991. Under the associated agreements, Mesa operates
the wells and production equipment and CIG owns and operates the gathering
system by which Mesa and CIG's production is delivered to the Fain plant. CIG
also performs certain administrative functions. Each party reimburses the other
for its respective share of certain costs and expenses incurred for the joint
account.
As of December 31, 1996, Mesa's West Panhandle properties represented
approximately 35% of Mesa's equivalent proved reserves and approximately 33% of
the present value of estimated future net cash flows, determined in accordance
with Commission guidelines. Production from the West Panhandle properties
accounted for approximately 36%, 33% and 31% of Mesa's oil and gas revenues for
the years ended
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December 31, 1994, 1995 and 1996, respectively. Mesa has identified over 100
locations that have additional production potential in new areas or deeper
zones, of which Mesa plans to redrill 58 in 1997 and the balance in 1998. See
"-- Production -- West Panhandle Field." Additionally, Mesa has identified
approximately 500 locations that have potential for infill drilling. Mesa
intends to apply to the Texas Railroad Commission for approval of such infill
drilling, but there can be no assurance that Mesa will be able to obtain such
regulatory approval or as to the timing of receipt of such approval if such
approval is obtained.
Gulf of Mexico. Mesa's Gulf of Mexico Properties are located offshore Texas
and Louisiana, and represent approximately 3% of Mesa's equivalent proved
reserves and approximately 4% of the present value of estimated future net cash
flows as determined in accordance with Commission guidelines at December 31,
1996. The Gulf of Mexico properties accounted for approximately 9%, 13% and 20%
of Mesa's oil and gas revenues for the years ended December 31, 1994, 1995 and
1996, respectively. Mesa has owned and operated properties in the Gulf of Mexico
since 1970. Beginning in late 1994, Mesa began to direct a greater portion of
its capital spending towards exploration and development in the Gulf of Mexico.
Since that time, Mesa has successfully completed 21 out of 24 wells adding 63
Bcfe to proved reserves. As a result, Mesa's offshore production increased by
approximately 50% on an Mcfe basis from 1994 to 1995, and by an additional 58%
on an Mcfe basis from 1995 to 1996. Mesa currently plans to drill up to seven
exploratory wells on its existing properties in the remainder of 1997. Because
Mesa has existing production facilities offshore, it has been able to bring new
wells on production quickly and at a lower cost than could be achieved
otherwise. Mesa currently owns interests in 56 blocks in the Gulf of Mexico,
which cover an aggregate of approximately 141,000 net acres.
The Company owns approximately 600 square miles of 3-D seismic data in and
around its existing Gulf of Mexico properties. Mesa plans to acquire an
additional 100 square miles of 3-D seismic data covering these properties in
1997. After the procurement of additional 3-D seismic data, Mesa will have 3-D
seismic data covering approximately 90% of its existing Gulf of Mexico
properties. Application of 3-D seismic technology to Mesa's Gulf of Mexico
acreage represents a significant future opportunity to increase reserves and
cash flow through exploratory and development drilling.
Mesa currently anticipates spending approximately $53 million on currently
identified development and exploration projects on its existing Gulf of Mexico
properties during 1997. In 1996, Mesa purchased 11 blocks covering 57,340 gross
(39,685 net) acres in the Gulf of Mexico. Mesa paid $1.7 million for its share
of the 11 blocks, 6 of which are located in areas where Mesa has producing
interests. Mesa was apparent high bidder on four blocks covering 17,500 acres in
the March 1997 federal lease sale in the Gulf of Mexico, but there can be no
assurance that Mesa will be awarded these blocks by the MMS. Mesa will spend
approximately $0.7 million if the MMS awards all four leases to Mesa.
Other. Mesa's other producing properties are located in the Rocky Mountain
area of the United States, which accounted for less than 1% of Mesa's total
production in 1996.
Mesa's non-oil and gas tangible properties include buildings, leasehold
improvements, and office equipment, primarily in Amarillo and Irving, Texas, and
certain other assets. Non-oil and gas tangible properties represent
approximately 1% of the net book value of Mesa's properties.
Production
Mesa's Hugoton and West Panhandle fields are both mature reservoirs that
are substantially developed and have long life production profiles. Natural gas
production is subject to numerous state and federal laws and Federal Energy
Regulatory Commission (the "FERC") regulations. Certain other factors affecting
production in Mesa's various fields are discussed in greater detail below.
Hugoton Field. The KCC is the state regulatory agency that regulates oil
and gas production in Kansas. The KCC is responsible for the determination of
market demand (allowables) for the Hugoton field and the allocation of
allowables among the more than 9,000 wells in the field.
Twice each year, the KCC sets the field wide allowable production at a
level estimated to be necessary to meet the Hugoton market demand for the summer
and winter production periods. The field wide allowable is
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<PAGE> 105
then allocated among individual wells determined by a series of calculations
that are principally based on each well's pressure, deliverability and acreage.
The allowables assigned to individual wells are affected by the relative
production, testing, and drilling practices of all producers in the field, as
well as the relative pressure and deliverability performance of each well.
Generally, field wide allowables are influenced by overall gas market
supply and demand in the United States as well as specific nominations for gas
from the parties who produce or purchase gas from the field. Since 1987, field
wide allowables have increased in each year except 1991. The total Hugoton field
allowable in 1996 was 600 Bcf of wellhead gas.
In 1994 the KCC issued an order establishing new field rules which modified
the formulas used to allocate allowables among wells in the Chase formation
portion of the Hugoton field. The standard pressure used in each well's
calculated deliverability was reduced by 35%, greatly benefitting Mesa's high
deliverability wells. Also, the new rules assign a 30% greater allowable to 640
acre units with infill wells than to similar units without infill wells.
Substantially all of Mesa's Hugoton infill wells have been drilled. Mesa's share
of the allowables from the field increased from approximately 10% in late 1993
to approximately 14% after the new field rules were implemented in 1994. Mesa's
share of the field allowable averaged 13% in 1996.
Mesa's net Hugoton field production decreased to approximately 67 Bcfe in
1996 compared with 70 Bcfe in 1995 as a result of equipment maintenance in 1996.
Mesa expects its Hugoton field production will decline slightly from 1996 levels
each year through 1998. Beginning in 1999, Mesa expects annual production
declines due to normal depletion.
West Panhandle Field. Mesa's production of wellhead gas from the West
Panhandle field is governed by the PAA and other contracts with CIG. Mesa was
contractually limited to take wellhead gas production up to a maximum of 32 Bcf
in 1996, but actually took only 27 Bcf primarily due to a weather-related
decrease in demand in 1996. Beginning in 1997 Mesa is not subject to annual
contractual production limitations and will have the right to take and market as
much gas as it can produce, subject to specific CIG seasonal and daily
entitlements as provided for under the contracts. Assuming continuation of
existing economic and operating conditions, Mesa expects production from its
existing West Panhandle properties will be 37 Bcf of wellhead gas in 1997.
The PAA contains provisions which allocate 77% of ultimate production after
January 1, 1991 to Mesa and 23% to CIG. As a result, Mesa records 77% of total
annual West Panhandle production as sales, regardless of whether Mesa's actual
deliveries are greater or less than the 77% share. The difference between Mesa's
77% entitlement and the amount of production actually sold by Mesa to its
customers is recorded monthly as production revenue with corresponding accruals
for operating costs, production taxes, depreciation, depletion and amortization,
and gas balancing receivables. At December 31, 1996, Mesa had cumulative
production which was less than its 77% entitlement since January 1, 1991, and a
long-term gas balancing receivable of $48 million was recorded in Mesa's balance
sheet in other assets. In future years, as Mesa sells to customers more than its
77% entitlement share of field production, this receivable will be realized.
Natural Gas Processing
Through its natural gas processing plants, Mesa extracts raw NGLs and crude
helium from the wellhead natural gas stream. The NGLs are then transported and
fractionated into their constituent hydrocarbons such as ethane, propane, normal
butane, isobutane, and natural gasolines. The NGLs and helium are then sold
pursuant to contracts providing for market-based prices.
Mesa processes its natural gas production for the extraction of NGLs and
helium to enhance the market value of the gas stream. In recent years Mesa has
made substantial capital investments to enhance its natural gas processing and
helium extraction capabilities in the Hugoton and West Panhandle fields. Mesa
owns and operates its processing facilities, which allows Mesa to (i) capture
the processing margin, as third-party processing agreements generally available
in the industry result in retention of a significant portion of the processing
margin by the contract processor, (ii) control the quality of the residue gas
stream, permitting it to deliver gas directly to pipelines for sales to local
distribution companies, marketing companies and end users,
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<PAGE> 106
and (iii) realize value from premium products such as crude helium. Mesa
believes that the ability to control its production stream from the wellhead
through its processing facilities to disposition at central delivery points
enhances its marketing opportunities and competitive position in the industry.
Satanta Natural Gas Processing Plant. The Satanta plant was built in 1993
and has the capacity to process 250 MMcf of natural gas per day, enabling Mesa
to extract NGLs from substantially all of the gas produced from its Hugoton
field properties as well as third party producers' gas. The Satanta plant also
has the ability to extract helium from the gas stream. In 1996 the Satanta plant
averaged 193 MMcf per day of inlet gas and produced a daily average of 10.6
MBbls of NGLs, 706 Mcf of contained helium and 144 MMcf of residue natural gas.
In November 1996, Mesa commenced a natural gas processing alliance with
Anadarko Petroleum Corporation ("Anadarko") and Western Resources Midcontinent
Market Center, which provides for Mesa to process up to 55 MMcf per day of
Anadarko's gas at Mesa's Satanta plant. Such agreement filled excess capacity at
the Satanta plant. Mesa is also focusing its efforts on obtaining additional
dedications of third party natural gas to the Satanta plant and, if successful,
plans to expand the plant's processing capacity.
Fain Natural Gas Processing Plant. The Fain plant, which was built in the
1960's and had its most recent substantial upgrade in 1993, currently has inlet
capacity of 140 MMcf per day. In 1996 the Fain plant averaged 77 MMcf per day of
inlet gas and produced a daily average of 8.2 MBbls of NGLs and condensate, 14
Mcf of contained helium and 59 MMcf of residue natural gas.
In December 1996, Mesa entered into a natural gas processing agreement with
CIG and MAPCO, which provides for Mesa to initially process approximately 8.5
Bcf of natural gas per year of third party gas at the Fain Plant. The agreement
has a primary term through December 2009. Effective January 1, 1997, Mesa
purchased from MAPCO and its affiliates all of their liquids attributable to the
processing agreement above as well as rights to condensate from CIG's gathering
system. It is expected that this purchase will increase Mesa's condensate and
NGL production by approximately 850 MBbls in 1997. Such arrangements have filled
excess capacity at the Fain plant. Mesa plans to install a nitrogen rejection
unit at the Fain plant in early 1998 to improve the quality of the residue
natural gas stream and increase NGL and helium recoveries.
Sales and Marketing
Following the processing of wellhead gas, Mesa sells the dry (or residue)
natural gas, helium, condensate and NGLs pursuant to various short term and
long-term sales contracts. Substantially all of Mesa's gas and NGL sales are
made under short term contracts at market prices, with the exception of certain
West Panhandle field volumes. Due to a number of market forces, including the
seasonal demand for natural gas, both sales volumes from Mesa's properties and
sales prices received vary on a seasonal basis. Sales volumes and price
realizations for natural gas are generally higher during the first and fourth
quarters of each calendar year.
West Panhandle Gas Sales Contracts. Most of Mesa's West Panhandle field
residue natural gas is sold pursuant to gas purchase contracts with two major
customers in the Texas Panhandle area.
Approximately 9 Bcf per year of residue natural gas is sold to a gas
utility that serves residential and commercial customers in Amarillo, Texas,
under the terms of a long-term agreement dated January 2, 1993, which supersedes
the original contract that had been in effect since 1949. The agreement contains
a pricing formula for the five year period from 1993 through 1997 whereby 70% of
the volumes sold to the gas utility are sold at fixed prices and the other 30%
of volumes sold are priced at a regional market index based on spot prices plus
$0.10 per Mcf. The fixed portion of the price formula was $2.85 per Mcf in 1994,
$2.99 per Mcf in 1995, $3.21 per Mcf in 1996 and escalates to $3.45 per Mcf in
1997. Prices for 1998 and beyond will be determined by renegotiation. Mesa
provides the gas utility with peaking service, granting it the right to take, on
a daily basis, residue gas attributable to 100 Mmcf per day of Mesa's production
under the PAA. The average price received by Mesa for natural gas sales to the
gas utility in 1996 was $2.94 per Mcf.
Effective January 1, 1996, Mesa entered into a four-year contract with a
marketing company which serves the local electric power generation facility and
various other markets within and outside Amarillo,
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Texas. The contract provides for the sale of Mesa's West Panhandle field gas
which is in excess of the volumes sold to the gas utility and other existing
industrial customers. The price for gas sold under this contract is a regional
market index determined monthly based on spot prices plus $0.02 per MMBtu. In
1996, Mesa sold approximately 8 Bcf of residue natural gas to the marketing
company for an average of $1.95 per Mcf.
Prior to 1993, Mesa's right to sell natural gas produced from the West
Panhandle field was based, in part, upon contractual requirements to serve
customers in Amarillo, Texas, and its environs. An amendment to the PAA in 1993
removed this restriction, and Mesa now has the right to market its production
elsewhere. Mesa believes that the right to market production outside the
Amarillo area will ensure that Mesa receives competitive terms for its West
Panhandle field production. Through 1999, Mesa's West Panhandle field production
is under contract to customers as described above.
NGL and Helium Sales. NGL production from both the Satanta and Fain plants
are sold by component pursuant to a contractual arrangement with MAPCO, a major
transporter and marketer of NGLs, through 2008 at the greater of Midcontinent or
Gulf of Mexico prices at the time of sale. Crude helium is sold to an industrial
gas company under a long-term agreement that provides for annual price
adjustments based on market prices.
Major Customers. In 1996 revenues include sales to MAPCO of $95.1 million
(30.8%) and Western Resources, Inc. ("WRI") of $48.5 million (15.7%). Mesa does
not believe that the loss of any customer would have a material adverse effect
on its financial condition or results of operations.
Production Costs
The table below presents Mesa's total production costs (lease operating
expenses and production and other taxes) by area of operation for each of the
last three years ended December 31 (in millions, except per Mcf of natural gas
equivalent data):
<TABLE>
<CAPTION>
1996 1995 1994
---------------- ---------------- ----------------
TOTAL PER MCFE TOTAL PER MCFE TOTAL PER MCFE
----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Lease operating expense:
Hugoton........................... $13.5 $0.20 $12.7 $0.18 $12.6 $0.17
West Panhandle.................... 28.9 0.75 26.0 0.67 26.9 0.60
Gulf Coast........................ 10.5 0.46 9.9 0.68 11.1 1.15
Other............................. 1.5 3.79 0.9 2.57 0.6 2.00
----- ----- -----
54.4 0.42 49.5 0.40 51.2 0.40
----- ----- -----
Production and other taxes:
Hugoton........................... 16.3 0.24 15.0 0.21 17.5 0.24
West Panhandle.................... 3.5 0.09 3.2 0.08 3.1 0.07
Gulf Coast........................ -- -- 0.1 -- 0.1 0.01
Other............................. 0.3 0.70 0.1 0.42 0.6 2.04
----- ----- -----
20.1 0.16 18.4 0.15 21.3 0.17
----- ----- -----
Total production costs.............. $74.5 $0.58 $67.9 $0.55 $72.5 $0.57
===== ===== =====
</TABLE>
Mesa's lease operating expenses consist of lease maintenance, gathering and
processing costs and have a significant fixed-cost component. As a result, the
production cost per Mcfe in the table above is affected by changes in the volume
of oil and gas produced. Production tax rates in Kansas, where Mesa's Hugoton
field properties are located, are assessed on wellhead value. These rates were
reduced from 6% in 1994 to 5% in 1995 and 5% in the first half of 1996 and 4.33%
in the last half of 1996.
See "-- Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations."
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Drilling Activities
The following table shows the results of Mesa's drilling activities for the
last three years:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
GROSS NET GROSS NET GROSS NET
----- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Exploratory wells:
Productive............................ 1 1.0 1 0.3 -- --
Dry................................... -- -- 4 4.0 -- --
Development wells:
Productive............................ 48 35.5 20 14.0 31 24.5
Dry................................... -- -- -- -- 1 0.8
-- ---- -- ---- -- ----
Total................................... 49 36.5 25 18.3 32 25.3
== ==== == ==== == ====
</TABLE>
At December 31, 1996, Mesa was participating in the drilling of 2 gross
(0.9 net) wells.
Significant 1996 Drilling and Leasing Activities
During 1996, Mesa participated in 49 (Mesa 36.5 net) wells, 48 development
wells and one exploratory well, a 96% increase over 1995's well total of 25. The
Company's 1996 drilling programs achieved an overall success rate of 100%. A
summary of significant 1996 activities follows.
Gulf of Mexico. At December 31, 1996, Mesa had a 56.2% average interest in
56 offshore blocks and ownership in 32 platforms of which it operates 15.
The South Marsh Island 155/156 (Mesa 37%) blocks are located 90 miles
offshore Louisiana in 250 feet of water. Discovered in 1979, these leases have
recorded 61.6 Bcf of natural gas and 4.8 MMBbls of oil and condensate cumulative
production. Prior to the 1996 drilling program, production had declined to 4
MMcf of natural gas and 300 barrels of condensate per day. Five new development
wells were drilled and completed from the existing platform. Production was
immediately brought on-line as the necessary facilities were already in place.
The combined gross producing rate as of December 31, 1996 for this block was 27
MMcf of natural gas and 650 Bbls of condensate per day.
The South Pass 78 (Mesa 25%) federal lease is situated 10 miles off
Louisiana's Mississippi River delta in water depth of 225 feet. It has been
producing since 1981 with cumulative gross production through 1996 of 225 Bcfe.
A four-well development program on this offshore block was initiated in 1995,
and all of the wells were successfully completed in 1996. With the platform and
production facilities already in existence, production commenced immediately
after completion of the wells. As of December 31, 1996, these four wells alone
produced 13 Bcf of gas and had a combined gross production rate of 29 MMcf of
natural gas per day. Additional drilling on the South Pass 78 block is planned
for 1997.
The East Cameron 322/323 (Mesa 100%) federal leases, located 95 miles
offshore Louisiana in 220 feet of water, are another mature field being further
developed. Cumulative production from these blocks from 1975 through year-end
1996 totaled 6.4 MMBbls of oil and condensate and 17.9 Bcf of natural gas.
Drilling began January 23, 1997 on the first of five Phase II development wells.
Target depths range from 3,600 feet to 5,200 feet. The initial three wells were
successful in finding multiple productive sands and have been cased to total
depth in preparation for completion after the remaining two wells are drilled.
The complete program should be finalized by the end of the second quarter. Phase
I took place in 1994 with the drilling of four successful wells that produced up
to a combined gross daily rate of 4 MMcf of gas and 3,200 barrels of oil. Total
drilling and completion costs were recovered in 13 months. Similar results are
anticipated for this new phase of development which has potential reserves of 19
Bcfe.
Mesa, bidding alone and with partners, was the successful bidder on 11 out
of 15 offshore blocks for which it submitted bids in two 1996 Gulf of Mexico
outer continental shelf lease sales. The MMS awarded Mesa six blocks in the
Central Gulf of Mexico Lease Sale held on April 24, 1996 and five blocks in the
Western Gulf of Mexico Lease Sale on September 25, 1996. These new leases cover
57,340 gross acres
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(39,685 net) and were acquired at a net cost of $1,664,760, or $41.95 per net
acre. Six blocks are located near production facilities in which Mesa has an
interest, thereby providing an opportunity to expedite production. Of the eleven
tracts, five are located offshore Texas in the High Island and Galveston areas,
and six are offshore Louisiana in the Eugene Island, West Delta and South Pass
areas. Mesa has 100% interest in the five leases off Texas and the one at Eugene
Island. Mesa's interest is 25% in the remaining five blocks which offset South
Pass 78 discussed above. It is anticipated that drilling will begin on one or
more of these blocks during 1997.
West Panhandle Field. During 1996, 24 Brown Dolomite wells and 12 Red Cave
wells were drilled. By year-end, 34 of these wells were completed and producing,
increasing initial deliverability approximately 20 MMcf per day. The two
remaining wells were completed in January 1997.
Significant 1997 Drilling and Leasing Activities
Mesa anticipates spending roughly $118 million on currently identified
development and exploration projects during 1997, of which approximately $40
million will be allocated toward properties acquired in the Greenhill
Acquisition. Mesa is planning to drill 10 exploratory wells and approximately
100 development wells.
Phase II drilling began at East Cameron 322/323 (Mesa 100%) in late January
1997 on the first of five development wells. Five wells have been drilled and
cased for completion after encountering multiple oil and gas sands between 3,700
and 5,300 feet. East Cameron 322/323 is a mature field that began production for
Mesa in 1975, and has benefited from application of new exploration and drilling
technology to identify and develop remaining reserves. Mesa successfully
completed Phase I of East Cameron 322/323 in 1995. The completion phase of Phase
II of the program should be concluded by the end of the second quarter.
Drilling began at Vermilion 348 (Mesa 75%) in early January 1997. This well
tested objectives to a depth of 14,900 feet on the northeast flank of a salt
dome. It logged 170 net feet of sand, but found an insufficient accumulation of
hydrocarbons to support commercial development. The well was consequently
plugged and abandoned. Findings are being incorporated into Mesa's 3-D seismic
interpretation to evaluate remaining potential on the lease.
At the March 5, 1997 Central Gulf of Mexico lease sale, Mesa was high
bidder on 4 of 10 blocks. The company exposed $2.3 million and will spend $0.7
million if the MMS awards all 4 leases to Mesa. These blocks are: Eugene Island
207, South Marsh Island 120, Vermilion 206 and West Cameron 627. If the bids are
approved by the MMS, Mesa's offshore lease inventory, which now covers 56 blocks
on nearly 141,000 net acres, would increase to 60 blocks and 158,000 net acres.
1997 Exploration Outlook
Mesa's exploration strategy is to expand geographically and to identify
potential prospects with the likelihood of significant follow-up development
drilling. Mesa is seeking such opportunities in the Gulf Coast, Midcontinent,
Permian Basin and Rocky Mountain regions. Mesa will grow in these areas in
conjunction with its reserve acquisition program. In-house prospect generation
will be supplemented with joint ventures, seismic options and farm-in
opportunities.
Mesa has a large inventory of Gulf of Mexico prospects under evaluation.
Mesa has 100% interest in 15 blocks and 25% interest in five others, all
acquired since 1994 in federal lease sales. Additional undrilled exploratory
prospects are located on 10 producing leases where Mesa's interest varies from
5% to 100%.
The 1997 exploration budget is $32 million, a 129% increase over 1996. This
amount includes $8 million for acquisition of leases and seismic data and $24
million for exploratory drilling.
Blocks budgeted for drilling in 1997 include High Island A-299 (Mesa 100%),
High Island A-326 (Mesa 100%) High Island A-546 (Mesa 100%), South Pass 57/58
(Mesa 33%), South Pass 78 area (Mesa 25%) and West Delta 61 (Mesa 10%). Each of
these plays is based on interpretation of 3-D seismic data.
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From time to time, Mesa will seek to fund high-risk exploration through
joint ventures, giving up a percentage interest in a project to a partner who
agrees to fund a portion of the costs incurred from exploratory drilling or from
the acquisition and interpretation of 3-D seismic surveys. These arrangements
allow Mesa to share the risk of an exploratory play with another party while
benefiting from any success of the project.
Producing Acreage and Wells, Undeveloped Acreage
Mesa's interests in oil and gas acreage held by production, producing wells
and undeveloped oil and gas acreage as of December 31, 1996, is set forth in the
following table:
<TABLE>
<CAPTION>
PRODUCING ACREAGE PRODUCING WELLS UNDEVELOPED ACREAGE
------------------ ---------------- --------------------
GROSS NET GROSS NET GROSS NET
------- ------- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Onshore U.S.:
Kansas................................ 258,801 231,312 1,432 990.0 5,880 5,880
Texas................................. 241,218 185,550 616 463.9 480 156
Wyoming............................... 11,477 4,365 2 -- 14,570 9,035
North Dakota.......................... 4,661 3,532 20 3.8 3,771 2,488
Other................................. 2,564 2,142 13 1.3 16,123 6,518
------- ------- ----- ------- ------- -------
Total onshore.................. 518,721 426,901 2,083 1,459.0 40,824 24,077
------- ------- ----- ------- ------- -------
Offshore U.S.:
Louisiana............................. 82,024 45,180 192 43.4 48,750 30,783
Texas................................. 73,808 18,848 68 12.4 46,080 46,080
------- ------- ----- ------- ------- -------
Total offshore................. 155,832 64,028 260 55.8 94,830 76,863
------- ------- ----- ------- ------- -------
Grand total............................. 674,553 490,929 2,343 1,514.8 135,654 100,940
======= ======= ===== ======= ======= =======
</TABLE>
Mesa has interests in 2,167 gross (1,492.7 net) producing gas wells and 176
gross (22.1 net) producing oil wells in the United States. Mesa also owns
approximately 84,722 net acres of producing minerals and 43,568 net acres of
nonproducing minerals in the United States.
Competition
The oil and gas business is highly competitive in the search for,
acquisition of, and sale of oil and gas. Mesa's competitors in these endeavors
include the major oil and gas companies, independent oil and gas concerns and
individual producers and operators, as well as major pipeline companies, many of
which have financial resources greatly in excess of those of Mesa's.
Mesa is one of the largest owners of natural gas reserves in the United
States. Production from Mesa's properties can be delivered to a substantial
portion of the major metropolitan markets in the United States through numerous
pipelines and other purchasers. Mesa is not dependent upon any single purchaser
or small group of purchasers.
Mesa believes that its competitive position is enhanced by its substantial
long-life reserve holdings and related deliverability, its flexibility to sell
such reserves in a diverse number of markets and its ability to produce its
reserves at a low cost. Mesa further believes that its competitive position is
affected by, among other things, price, contract terms and quality of service.
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PARKER & PARSLEY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Parker & Parsley. The following table sets forth selected consolidated
financial information of Parker & Parsley for the three months ended March 31,
1997 and 1996 and for each of the five fiscal years in the period ended December
31, 1996. This data should be read in conjunction with the Consolidated
Financial Statements of Parker & Parsley and the related notes thereto
incorporated herein by reference.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
--------------------- ----------------------------------------------------
1997 1996 1996 1995 1994(B) 1993(A) 1992
--------- --------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues......................... $ 110.6 $ 103.4 $ 420.7 $ 485.8 $ 479.7 $ 328.5 $ 201.8
Total operating expenses(c)...................... 74.5 76.2 286.4 587.0 461.8 280.5 163.1
-------- -------- -------- -------- -------- -------- --------
Operating income (loss).......................... 36.1 27.2 134.3 (101.2) 17.9 48.0 38.7
-------- -------- -------- -------- -------- -------- --------
Other revenues and expenses:
Interest and other income...................... 2.1 1.2 17.5 11.4 6.9 4.4 4.2
Gain on disposition of assets, net(d).......... .8 13.7 97.1 16.6 9.5 23.2 4.2
Interest expense............................... (9.9) (14.7) (46.2) (65.4) (50.5) (23.3) (14.7)
Other expenses................................. (.4) (.4) (2.4) (11.4) (4.3) (3.9) (2.3)
-------- -------- -------- -------- -------- -------- --------
(7.4) (.2) 66.0 (48.8) (38.4) 0.4 (8.6)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes, extraordinary
item and cumulative effect of accounting
change......................................... 28.7 27.0 200.3 (150.0) (20.5) 48.4 30.1
Income tax benefit (provision)................... (10.1) (12.3) (60.1) 45.9 6.5 (17.0) (3.0)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary item and
cumulative effect of accounting change......... 18.6 14.7 140.2 (104.1) (14.0) 31.4 27.1
-------- -------- -------- -------- -------- -------- --------
Extraordinary item............................... -- -- -- 4.3 (.6) -- --
Cumulative effect of accounting change........... -- -- -- -- -- 17.1 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................................ $ 18.6 $ 14.7 $ 140.2 $ (99.8) $ (14.6) $ 48.5 $ 27.1
======== ======== ======== ======== ======== ======== ========
Income (loss) before extraordinary item and
cumulative effect of accounting change per
share:
Primary........................................ $ .53 $ .41 $ 3.92 $ (2.95) $ (.47) $ 1.13 $ 1.05
======== ======== ======== ======== ======== ======== ========
Fully diluted.................................. $ .49 $ .39 $ 3.47 $ (2.95) $ (.47) $ 1.13 $ 1.05
======== ======== ======== ======== ======== ======== ========
Net income (loss) per share
Primary........................................ $ .53 $ .41 $ 3.92 $ (2.83) $ (.49) $ 1.74 $ 1.05
======== ======== ======== ======== ======== ======== ========
Fully diluted.................................. $ .49 $ .39 $ 3.47 $ (2.83) $ (.49) $ 1.74 $ 1.05
======== ======== ======== ======== ======== ======== ========
Dividends per share.............................. $ .05 $ .05 $ .10 $ .10 $ .10 $ .10 $ .10
======== ======== ======== ======== ======== ======== ========
Weighted average share outstanding............... 35.4 35.6 35.7 35.3 30.1 27.9 25.8
CASH FLOW DATA:
EBITDAEX(e)...................................... $ 74.9 $ 77.9 $ 381.7 $ 232.5 $ 200.7 $ 155.7 $ 95.0
Cash flows from operating activities............. 73.5 64.6 230.1 157.3 129.8 112.2 77.2
Cash flows from investing activities............. (67.9) 70.8 13.5 (53.8) (454.9) (386.8) (111.8)
Cash flows from financing activities............. (14.9) (124.5) (258.9) (107.5) 331.8 291.7 33.8
Capital expenditures............................. 76.6 39.7 228.0 228.9 563.9 572.1 129.7
Ratio of earnings to fixed charges(f)............ 3.8 2.8 5.3 NM NM 3.0 2.9
BALANCE SHEET DATA (END OF PERIOD):
Working capital.................................. $ 10.7 $ 26.1 $ 26.1 $ 31.5 $ 43.7 $ 39.5 $ 8.0
Property, plant and equipment, net............... 1,072.8 1,040.4 1,040.4 1,121.7 1,349.9 802.0 499.1
Total assets..................................... 1,210.1 1,199.9 1,199.9 1,319.2 1,604.9 1,016.9 576.7
Long-term obligations............................ 320.2 329.0 329.0 603.2 727.2 544.3 225.9
Preferred stock of subsidiary.................... 188.8 188.8 188.8 188.8 188.8 -- --
Total stockholders' equity....................... 546.2 530.3 530.3 411.0 509.6 348.8 295.0
</TABLE>
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- ---------------
(a) Includes amounts relating to the acquisition of certain Prudential-Bache
Energy limited partnerships in July 1993. Also includes results of
operations related to Parker & Parsley's interest in the Carthage gas
processing plant that had been deferred in 1992 and 1993 and the gain of
$7.3 million recognized on the sale of that interest on June 30, 1993.
(b) Includes amounts relating to the acquisition of Bridge Oil Limited in July
1994 and the acquisition of properties from PG&E Resources Company in August
1994.
(c) Includes noncash pre-tax charges of $130.5 million in 1995 associated with
the adoption of Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of."
(d) Includes a gain of $83.3 million in 1996 related to the disposition of
certain wholly-owned subsidiaries.
(e) EBITDAEX is presented because of its wide acceptance as a financial
indicator of a company's ability to service or incur debt. EBITDAEX (as used
herein) is calculated by adding interest, income taxes, depletion,
depreciation and amortization, impairment of oil and gas properties and
natural gas processing facilities and exploration and abandonment costs to
income (loss) before extraordinary item and cumulative effect of accounting
change. Interest includes accrued interest expense and amortization of
deferred financing costs. EBITDAEX should not be considered as an
alternative to earnings (loss) or operating earnings (loss), as defined by
generally accepted accounting principles, as an indicator of Parker &
Parsley's financial performance, as an alternative to cash flow, as a
measure of liquidity or as being comparable to other similarly titled
measures of other companies.
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, extraordinary item and
cumulative effect of accounting change plus fixed charges net of interest
capitalized. Fixed charges consist of interest expense, interest capitalized
and the portion of rental expense attributable to interest. Parker &
Parsley's 1995 and 1994 earnings were inadequate to cover its fixed charges.
The amount of the deficiencies were $150.0 million in 1995 and $20.5 million
in 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
Financial Performance For the Three Months Ended March 31, 1997. Parker &
Parsley reported net income of $18.6 million or $.53 per share for the first
quarter of 1997 as compared to net income of $14.7 million or $.41 per share for
the same period in 1996. Excluding production from Parker & Parsley's
Australasian subsidiaries which were sold in 1996 and production from
nonstrategic domestic assets which were sold in 1996, average daily oil
production increased 12% to 31,912 Bbls per day for the first quarter of 1997
from 28,558 Bbls per day for the first quarter of 1996, and average daily gas
production increased 17% to 208,173 Mcf per day from 177,750 Mcf per day for the
same period. As discussed more fully in "Results of Operations" below, Parker &
Parsley's financial performance for the first quarter of 1997 was positively
affected by the following items: (i) improved oil and gas prices, (ii) decreases
in production costs due to ongoing cost reduction efforts, and (iii) a decrease
in interest expense due to a decrease in Parker & Parsley's outstanding
long-term indebtedness.
Net cash provided by operating activities increased 14% to $73.5 million
for the first quarter of 1997 as compared to $64.7 million for the same period
in 1996. This increase was primarily attributable to improved commodity prices
during 1997, declining production costs due to the improvements made in the
overall cost structure of Parker & Parsley during 1996 and decreased interest
expense due to a decrease in long-term debt.
Parker & Parsley strives to maintain its outstanding indebtedness at a
moderate level in order to provide sufficient financial flexibility to fund
future opportunities. Parker & Parsley's total book capitalization at March 31,
1997 was $1.1 billion, consisting of total long-term debt of $316 million,
stockholders' equity of $546 million and preferred stock of subsidiary of $189
million. Debt as a percentage of total capitalization was 30% at March 31, 1997,
down slightly from 31% at December 31, 1996.
Financial Performance For the Year Ended December 31, 1996. Parker &
Parsley reported net income of $140.2 million ($3.92 per share) for the year
ended December 31, 1996 as compared to a net loss of $99.8 million ($2.83 per
share) for the year ended December 31, 1995. Parker & Parsley's net income for
the year ended December 31, 1996 was positively affected by the following items:
(i) improved oil and gas prices,
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<PAGE> 113
(ii) decreases in production costs due to certain cost reduction efforts
initiated in 1995 and 1996, (iii) a decrease in oil and gas property depletion
expense as a result of significant increases in Parker & Parsley's oil and gas
reserves during 1995 and 1996, (iv) a decrease in general and administrative
expenses primarily resulting from the implementation of measures during 1995
intended to reduce overall general and administrative expenses, and (v) a
decrease in interest expense due to a decrease in Parker & Parsley's outstanding
long-term indebtedness. Net income for the year ended December 31, 1996 also
includes the following after-tax nonoperating items: (i) aggregate gains of
$76.3 million related to the disposition of Parker & Parsley's Australasian
assets and certain nonstrategic domestic assets (see "-- Disposition of
Australasian Assets" and "-- Asset Dispositions"), (ii) income of $7.4 million
related to the settlement of several litigation matters involving Parker &
Parsley's Hooker Natural Gas Processing Plant and related assets (see "-- Legal
Actions"), (iii) a loss of $2.8 million associated with the write-off of certain
tax attributes related to litigation contingencies that are no longer available
and (iv) income of $400,000 from the operations of the Australian assets and
nonstrategic domestic assets prior to their sale in 1996. Net income for
December 31, 1995 includes the following after-tax nonoperating items: (i)
noncash charges of $84.8 million associated with the adoption of SFAS 121 (as
defined in "Depletion Expense" below), (ii) charges of $6.9 million associated
with the amortization of deferred compensation awarded in 1993 and
organizational changes designed to reduce overall general and administrative
expenses, (iii) charges of $4.4 million consisting of previously capitalized
financing fees and expenses associated with certain legal matters, and (iv) net
gains of $10.8 million associated with the disposition of nonstrategic assets
(see "-- Asset Dispositions").
Net cash provided by operating activities increased 46% to $230.1 million
for the year ended December 31, 1996 as compared to $157.3 million for the year
ended December 31, 1995. This increase was primarily attributable to improved
commodity prices during 1996, declining production costs due to the improvements
made in the overall cost structure of Parker & Parsley during 1995 and 1996 and
decreased interest expense due to a decrease in long-term debt.
Long-term debt has been reduced by $265.6 million to $320.9 million at
December 31, 1996 from $586.5 million at December 31, 1995 due principally to
the application of substantially all of the proceeds from the disposition of
Parker & Parsley's Australasian and certain domestic assets to Parker &
Parsley's outstanding indebtedness, as described below. Consequently, Parker &
Parsley's long-term debt to total capitalization has been reduced to 31% at
December 31, 1996 from 49% at December 31, 1995.
Significant Activities for the Three Months Ended March 31, 1997
Drilling and Acquisition Activities. Parker & Parsley's 1997 capital
expenditure budget has been set at $270 million, reflecting planned expenditures
of $170 million for exploitation activities, $67 million for exploration
activities and $33 million for oil and gas property acquisitions in Parker &
Parsley's core areas of Texas, Oklahoma, New Mexico and Louisiana. During the
first quarter of 1997, Parker & Parsley participated in the completion of 95
gross exploration and development wells, including 66 in the Spraberry Division,
15 in the Permian Division, seven in the Gulf Coast Division, six in the
MidContinent Division and one in Argentina. Of these wells, 59 were in progress
at December 31, 1996. Of the total wells completed during the three months ended
March 31, 1997, 86 were completed successfully which resulted in a 90% success
rate. In addition to the wells completed in the first quarter of 1997, Parker &
Parsley had 122 wells in progress at March 31, 1997. In total during 1997,
Parker & Parsley plans to drill 500 development wells and 100 exploratory wells
and to perform recompletions on over 150 wells.
In addition, the Gulf Coast Division completed the acquisition of a
majority interest in the Maude Traylor and Olivia fields in Calhoun County,
Texas for approximately $8.8 million in February 1997. The acquisition
represented an average working interest of 87% in approximately 1,840 acres and
five wells which produce from the upper and lower Frio formations. Since Parker
& Parsley assumed operations, the gross gas production rate has doubled to
approximately 3.1 MMcf of gas per day, and the gross oil production rate has
tripled to 166 Bbls per day. Parker & Parsley plans to drill up to nine
additional wells during 1997 and 1998 on this acreage utilizing existing 3-D
seismic information.
Also during February 1997, the Texas Railroad Commission (which regulates
oil and gas production) entered a favorable order on Parker & Parsley's
application to allow administrative approval of uncontested
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applications to increase the density of the drilling in the Spraberry field from
one well per 80 acres to one well in 40. Parker & Parsley believes such reduced
spacing may provide in excess of 1,000 additional drilling locations which have
the potential to add 70 million equivalent barrels to Parker & Parsley's reserve
base.
Asset Dispositions. For the three months ended March 31, 1997, Parker &
Parsley's asset disposition activity primarily consisted of the sale of Parker &
Parsley's Turkish oil and gas properties for proceeds of $1.7 million which
resulted in the recognition of a gain of $756 thousand. During the first quarter
of 1996, Parker & Parsley sold certain wholly-owned Australasian subsidiaries
for proceeds of $108.3 million and a pre-tax gain of $11 million and certain
nonstrategic domestic assets which resulted in the recognition of a pre-tax net
gain of $2.7 million.
Significant Activities in 1996
Exploration and Development Activities. Parker & Parsley continues to
realize the benefits of its focused activities in the exploration and
development of its existing core areas. Since completing two major acquisitions
in 1994, Parker & Parsley has devoted its efforts to exploitation and
exploration of its existing property base and Parker & Parsley believes that
substantial additional opportunities remain.
Drilling Activities. As was the case in 1994 and 1995, Parker & Parsley's
1996 development drilling activities focused primarily on Parker & Parsley's
Permian Basin oil properties and Gulf Coast gas properties. During 1996, Parker
& Parsley participated in the drilling and completion of 599 gross exploration
and development wells (482 of which were operated by Parker & Parsley),
including 326 in the Spraberry Division, 177 in the Permian Division, 48 in the
Midcontinent Division, 38 in the Gulf Coast Division and 10 in other areas.
Parker & Parsley's total capital expenditures during 1996 were $233 million,
approximately $212 million of which was spent on exploration and development
activities.
During 1996, Parker & Parsley announced several discoveries and
developments in domestic locations. In November 1996, Parker & Parsley announced
a significant oil discovery in the War-Wink West field in the Delaware Basin of
West Texas. This Parker & Parsley operated well, the University 18-34 #1, tested
at rates of up to 720 barrels of oil per day and is currently producing at its
expected allowable rate of approximately 270 barrels of oil per day and 374
thousand cubic feet of gas per day. Parker & Parsley and Enserch Exploration,
Inc. each own a 50% working interest in this well, which is the first in their
joint exploration and development of the 4,500 acre War-Wink prospect. During
1997, Parker & Parsley plans to continue its development of this prospect by
drilling two confirmation wells and an additional two to four development wells.
Parker & Parsley and Enserch also control approximately 30,000 additional acres
in the Delaware Basin play in southeastern New Mexico and West Texas where they
intend to drill eight exploratory wells in 1997. In addition, on November 25,
1996, Parker & Parsley announced the successful completion of three development
wells in the South Texas Lopeno field in which Parker & Parsley owns a 50%
working interest. The three wells, operated by Parker & Parsley, are currently
producing a total of 20 MMcf of natural gas per day. On December 19, 1996,
Parker & Parsley announced the successful completion of the S.E. Turner Gas Unit
#2 in its Central Texas Gulf Coast Pawnee field in which Parker & Parsley owns a
100% working interest. The dual lateral horizontal unstimulated producer is
currently flowing at a rate of 3.1 MMcf per day. As a result of this successful
activity, Parker & Parsley has identified an additional six horizontal prospects
in the Pawnee field and plans to begin developmental activity on these prospects
in the first quarter of 1997.
During 1996, Parker & Parsley participated in several discoveries in the
Confluencia Sur field in the Nuequen Basin of Central Argentina in which Parker
& Parsley owns a 14.42% interest. In early 1996, Parker & Parsley announced the
successful completion of two exploratory wells (the Naco x-1 and the Sierra de
Reyes x-1) and, in January 1997, Parker & Parsley announced the successful
completion of three development wells, also in the Confluencia Sur field. The
three wells, the Sierra de Reyes 2, 3 and 4, operated by Petrolera Argentina San
Jorge S.A., collectively tested 3,727 barrels of oil per day. Parker & Parsley
expects to drill an additional two to three development wells in the Confluencia
Sur field during the first six months of 1997 in order to increase daily oil
production to 6,000 barrels (865 barrels net to Parker & Parsley's interest).
During 1997, Parker & Parsley will continue with its emphasis on core
development exploration and production activities, with a primary focus on the
exploitation of its current portfolio of drilling locations. This
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portfolio was significantly enhanced and expanded by the major acquisitions
completed in 1994 and the 1995 and 1996 drilling programs which have added a
large number of new locations to which proved reserves have been assigned.
Parker & Parsley believes that its current portfolio of undeveloped prospects
provides attractive development and exploration opportunities for at least the
next three to five years. Of the total 1997 capital expenditure budget of $270
million, Parker & Parsley has allocated $170 million to exploitation activities,
$67 million to exploration activities and $33 million to oil and gas property
acquisitions. Parker & Parsley anticipates that the $237 million exploration and
development budget will be spent by its operating divisions as follows: $88
million in the Spraberry Division, $45 million in the Permian Division, $45
million in the Gulf Coast Division, $23 million in the Midcontinent Division and
$36 million in Argentina and other international areas. This capital expenditure
budget reflects Parker & Parsley's plans to drill approximately 600 oil and gas
wells, over 400 of which will be drilled in the Spraberry and Permian Divisions.
Parker & Parsley currently expects to fund its 1997 capital expenditure budget
primarily with internally generated cash flow.
Proved Reserves. Parker & Parsley's proved reserves totaled 302.2 million
BOE at December 31, 1996, 296.8 million BOE at December 31, 1995 and 282.5
million BOE at December 31, 1994. Parker & Parsley achieved these annual
increases in reserves despite having sold reserves of 45.8 million BOE in 1996
and 34.8 million BOE in 1995. Excluding these sold reserves, total proved
reserves increased 21% in 1996 and 28% in 1995. Oil reserves at year-end 1996
were 163.9 million Bbls compared to 147.3 million Bbls at year-end 1995 and
144.5 million Bbls at year-end 1994 (an 11% increase from 1995 to 1996 and a 2%
increase from 1994 to 1995). Natural gas reserves at year-end 1996 were 829.4
Bcf, compared to 896.9 Bcf at year-end 1995 and 827.5 Bcf at year-end 1994 (an
8% decrease from 1995 to 1996 and an 8% increase from 1994 to 1995).
Reserve Replacement. For the eighth consecutive year, Parker & Parsley was
able to replace its annual production volumes with proved reserves of crude oil
and natural gas, stated on an energy equivalent basis. During 1996, Parker &
Parsley added 75 million BOE resulting in reserve replacement of 314% of total
production. Of the 75 million BOE reserve additions, 71.1 million BOE were added
through exploration and development drilling activities, 2.2 million BOE were
added through acquisitions of proved properties and 1.7 million BOE were the net
result of revisions. Reserves added by development drilling are primarily from
the identification of additional infill drilling locations and new secondary
recovery projects. Reserve revisions result from several factors including
changes in existing estimates of quantities available for production and changes
in estimates of quantities which are economical to produce under current pricing
conditions. Parker & Parsley's reserves as of December 31, 1996 were estimated
using a price of $24.55 per Bbl and $3.97 per Mcf. Should prices decline in
future years, reserves may be revised downward for quantities which may be
uneconomical to produce at lower prices.
Parker & Parsley's 1996 reserve replacement rate on a barrel of oil
equivalent basis was 314%, which included reserve replacement rates for oil and
natural gas of 398% and 239%, respectively. Previous reserve replacement
performance rates were 281% in 1995 (263% for oil and 297% for gas) and 537% in
1994 (549% for oil and 526% for gas). For the three-year period ended December
31, 1996, the three-year average reserve replacement rate was 377%. Through
1994, Parker & Parsley's reserve replacement rate was primarily the product of
its acquisition activities. Beginning in 1995, and to a greater extent in 1996,
the reserve replacement rates have been influenced more by exploration and
development activities and less by acquisition activities. Parker & Parsley
seeks to achieve an annual reserve replacement rate of at least 150% through the
emphasis on its exploration and development activities.
Finding Cost. Parker & Parsley's acquisition and finding cost for 1996 was
$3.10 per BOE as compared to the 1995 and 1994 acquisition and finding costs of
$2.87 and $5.11 per BOE, respectively. The average acquisition and finding cost
for the three-year period from 1994 to 1996 was $3.99 per BOE representing an
18% decrease from the 1995 three-year average rate of $4.84.
Disposition of Australasian Assets. On March 28, 1996, Parker & Parsley
completed the sale of certain wholly-owned Australian subsidiaries to Santos
Ltd., and on June 20, 1996, Parker & Parsley completed the sale of another
wholly-owned subsidiary, Bridge Oil Timor Sea, Inc., to Phillips Petroleum
International Investment Company. During the year ended December 31, 1996,
Parker & Parsley received aggregate consideration of $237.5 million for these
combined sales which consisted of $186.6 million of proceeds for the
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<PAGE> 116
equity of such entities, $21.8 million for reimbursement of certain intercompany
cash advances, and the assumption of such subsidiaries' net liabilities,
exclusive of oil and gas properties, of $29.1 million. The proceeds, after
payment of certain costs and expenses, were utilized to reduce Parker &
Parsley's outstanding bank indebtedness and for general working capital
purposes. Parker & Parsley recognized an after-tax gain of $67.3 million from
the disposition of these subsidiaries.
Cost Reductions. Production costs per BOE declined 5% (from $4.83 to $4.61)
for the year ended December 31, 1996 as compared to the year ended December 31,
1995. This decline is despite a 47% or $.29 per BOE increase in production taxes
resulting from oil and gas prices that were considerably higher in 1996 as
compared to 1995. The significant decline in the remaining components of
production costs, primarily lease operating expense, is the result of Parker &
Parsley's emphasis on cost control efforts and the disposition of certain high
cost domestic nonstrategic oil and gas properties during 1995 and 1996. During
1995, Parker & Parsley initiated programs to study specific opportunities for
significant future reductions in its entire cost structure. These programs have
continued in 1996, and Parker & Parsley expects production costs per BOE to
continue to decline as specific programs for further cost reductions are
implemented.
Asset Dispositions. From time to time, Parker & Parsley disposes of
nonstrategic assets in order to raise capital for other activities, reduce debt
or eliminate costs associated with nonstrategic assets. During the year ended
December 31, 1996, Parker & Parsley sold certain domestic nonstrategic oil and
gas properties, gas plants and other related assets for aggregate proceeds of
approximately $58.4 million. The proceeds from the asset dispositions were
initially used to reduce Parker & Parsley's outstanding bank indebtedness and
subsequently to provide funding for a portion of Parker & Parsley's 1996 capital
expenditures, including purchases of oil and gas properties in Parker &
Parsley's core areas.
Commodity Prices. Parker & Parsley benefited from the significantly higher
oil and gas prices during 1996. In 1996, Parker & Parsley received an average
oil price of $19.96 per Bbl and an average gas price of $2.27 per Mcf
representing increases of 18% and 23%, respectively, from 1995. The oil and gas
prices that Parker & Parsley reports are based on the market price received for
the commodities adjusted by the results of Parker & Parsley's hedging
activities. Parker & Parsley periodically enters into commodity derivative
contracts (swaps, futures and options) in order to (i) reduce the effect of the
volatility of price changes on the commodities Parker & Parsley produces and
sells, (ii) support Parker & Parsley's annual capital budgeting and expenditure
plans and (iii) lock in prices to protect the economics related to certain
capital projects. During 1996, Parker & Parsley's hedging activities reduced the
average price received for oil and gas sales 6% and 5%, respectively, as
discussed below.
Natural Gas. Parker & Parsley employs a policy of hedging gas production
based on the index price upon which the gas is actually sold in order to
mitigate the basis risk between NYMEX prices and actual index prices. The
average gas prices per Mcf that Parker & Parsley reports includes the effects of
Btu content, gathering and transportation costs, gas processing and shrinkage
and the net effect of the gas hedges. Parker & Parsley reported an average gas
price of $2.27 per Mcf for the year ended December 31, 1996. Parker & Parsley's
average realized price for physical gas sales (excluding hedge results) for the
same period was $2.39 per Mcf. The comparable average NYMEX prompt month closing
for the year ended December 31, 1996 was $2.50 per Mcf. At December 31, 1996,
Parker & Parsley had 28.9 Bcf of future gas production hedged at a weighted
average NYMEX price of $2.17 per Mcf.
Crude Oil. All material purchase contracts governing Parker & Parsley's oil
production are tied directly or indirectly to NYMEX prices. The average oil
prices per Bbl that Parker & Parsley reports includes the effects of oil
quality, gathering and transportation costs and the net effect of the oil
hedges. Parker & Parsley reported an average oil price of $19.96 per Bbl for the
year ended December 31, 1996. Parker & Parsley's average realized price for
physical oil sales (excluding hedge results) for the same period was $21.33 per
Bbl. The comparable average NYMEX prompt month closing for the year ended
December 31, 1996 was $22.03 per Bbl. At December 31, 1996, Parker & Parsley had
6.2 million barrels of future oil production hedged at a weighted average NYMEX
price of $19.39 per Bbl.
Capitalization. Parker & Parsley strives to maintain its outstanding
indebtedness at a moderate level in order to provide sufficient financial
flexibility for future opportunities. Parker & Parsley's total book
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<PAGE> 117
capitalization at December 31, 1996 was $1 billion, consisting of total
long-term debt of $326 million, stockholders' equity of $530 million and
preferred stock of subsidiary of $189 million. Parker & Parsley attempts to
maintain a debt to total capitalization ratio of 40% to 45% in order to achieve
its goal of financial flexibility. Debt as a percentage of total capitalization
was 31% at December 31, 1996, down from 49% at December 31, 1995. This decrease
is primarily the result of the application of the net proceeds from the
disposition of Parker & Parsley's Australian assets and the disposition of
certain other nonstrategic domestic assets described above to Parker & Parsley's
outstanding indebtedness.
Legal Actions. On August 1, 1996, Dorchester Hugoton, Ltd. ("DHL"), Damson
Master Limited Partnership ("DMLP"), a wholly-owned subsidiary of Parker &
Parsley, and their related entities entered into a settlement agreement
resolving all outstanding litigation between the parties that had arisen in
connection with DMLP's Hooker Plant, the Hooker Gathering System and certain
other matters. Parker & Parsley recognized other income of $11.4 million ($7.0
million of which was received in cash) associated with the settlement of these
litigation matters. Additionally, Parker & Parsley will receive an annual
formula-based production payment with the first annual payment to begin in
February 1997 and to continue thereafter annually through February 2026. Parker
& Parsley estimates the total value of the production payments to be at least
$5.0 million, although such payments are dependent on future gas prices and
related transportation costs. The production payments will be recognized as
other income over the term of the production payment contract.
Parker & Parsley believes that the costs for compliance with environmental
laws and regulations have not and will not have a material effect on Parker &
Parsley's financial position or results of operations.
Results of Operations
For the Three Months Ended March 31, 1997 and 1996
Oil and Gas Production
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
(IN THOUSANDS,
EXCEPT AVERAGE
PRODUCTION, PRICE
AND COST DATA)
<S> <C> <C>
Revenues:
Oil and gas............................................... $103,779 $ 98,025
Gain on disposition of oil and gas properties, net(a)..... 705 463
-------- --------
104,484 98,488
-------- --------
Costs and expenses:
Oil and gas production.................................... (28,081) (30,494)
Depletion................................................. (26,369) (28,596)
Exploration and abandonments.............................. (5,402) (1,524)
Geological and geophysical................................ (2,213) (2,827)
-------- --------
(62,065) (63,441)
-------- --------
Operating profit (excluding general and administrative
expenses and income taxes)........................... $ 42,419 $ 35,047
======== ========
</TABLE>
- ---------------
(a) The 1996 amount does not include the gain related to the disposition of
certain of Parker & Parsley's wholly-owned Australasian subsidiaries.
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<PAGE> 118
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
-------- --------
(IN THOUSANDS,
EXCEPT AVERAGE
PRODUCTION, PRICE
AND COST DATA)
<S> <C> <C>
Worldwide:
Production:
Oil (MBbls)............................................ 2,872 3,116(a)
Gas (MMcf)............................................. 18,736 19,735(a)
Total (MBOE)........................................... 5,995 6,405
Average daily production:
Oil (Bbls)............................................. 31,912 34,243(a)
Gas (Mcf).............................................. 208,173 216,869(a)
Average oil price (per Bbl)............................... $ 19.99 $ 18.37
Average gas price (per Mcf)............................... $ 2.47 $ 2.07
Costs (per BOE):
Lease operating expense................................ $ 3.24 $ 3.69
Production taxes....................................... $ 1.05 $ .73
Workover costs......................................... $ .40 $ .34
-------- --------
Total production costs............................ $ 4.69 $ 4.76
======== ========
Depletion.............................................. $ 4.40 $ 4.46
</TABLE>
- ---------------
(a) Includes 517 Mbls (5,685 Bbls per day) and 3.6 Bcf (39,119 Mcf per day) of
production associated with certain nonstrategic assets which were sold
during 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
----------- -----------
(IN THOUSANDS,
EXCEPT AVERAGE PRODUCTION,
PRICE AND COST DATA)
<S> <C> <C>
Domestic:
Production:
Oil (MBbls)............................................ 2,838 2,767(a)
Gas (MMcf)............................................. 18,736 17,808(a)
Total (MBOE)........................................... 5,961 5,735
Average daily production:
Oil (Bbls)............................................. 31,536 30,402(a)
Gas (Mcf).............................................. 208,173 195,693(a)
Average oil price (per Bbl)............................... $ 19.94 $ 18.22
Average gas price (per Mcf)............................... $ 2.47 $ 2.08
Costs (per BOE):
Lease operating expense................................ $ 3.21 $ 3.55
Production taxes....................................... $ 1.05 $ .82
Workover costs......................................... $ .40 $ .37
-------- --------
Total production costs............................ $ 4.66 $ 4.74
======== ========
Depletion.............................................. $ 4.35 $ 4.30
</TABLE>
- ---------------
(a) Includes 168 MBbls (1,844 Bbls per day) and 1.6 Bcf (17,943 Mcf per day) of
production associated with certain nonstrategic domestic assets which were
sold during 1996.
Oil and Gas Revenues. Revenues from oil and gas operations totaled $103.8
million in the first quarter of 1997 compared to $98 million in the first
quarter of 1996, representing an increase of 6%. The increase is
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<PAGE> 119
primarily attributable to the higher average prices being received for both oil
and gas production and increases in production due to Parker & Parsley's
successful exploitation and exploration activities in 1996 and the first quarter
of 1997, offset by the decreased production resulting from the 1996 sale of
Parker & Parsley's Australasian subsidiaries and the 1996 sales of certain
domestic assets. The average oil price received for the three months ended March
31, 1997 increased 9% (from $18.37 to $19.99 for the three months ended March
31, 1996 and 1997, respectively), while the average gas price received increased
19% (from $2.07 to $2.47 for the three months ended March 31, 1996 and 1997,
respectively).
Excluding production from Parker & Parsley's Australasian subsidiaries
which were sold in 1996 and production from the nonstrategic domestic assets
which were sold in 1996, average daily oil production increased 12% from 28,558
Bbls for the first quarter of 1996 to 31,912 Bbls for the first quarter of 1997
and average daily gas production increased 17% from 177,750 Mcf to 208,173 Mcf
for the same period.
Hedging Activities
The oil and gas prices that Parker & Parsley reports are based on the
market price received for the commodities adjusted by the results of Parker &
Parsley's hedging activities. Parker & Parsley periodically enters into
commodity derivative contracts (swaps, futures and options) in order to (i)
reduce the effect of the volatility of price changes on the commodities Parker &
Parsley produces and sells, (ii) support Parker & Parsley's annual capital
budgeting and expenditure plans and (iii) lock in prices to protect the
economics related to certain capital projects. During the first quarter of 1997,
Parker & Parsley's hedging activities reduced the average price received for oil
and gas sales 9% and 13%, respectively, as discussed below.
Crude Oil. All material purchase contracts governing Parker & Parsley's oil
production are tied directly or indirectly to NYMEX prices. The average oil
price per Bbl that Parker & Parsley reports includes the effects of oil quality,
gathering and transportation costs and the net effect of the oil hedges. Parker
& Parsley's average realized price for physical oil sales (excluding hedge
results) for the three months ended March 31, 1997 was $21.86 per Bbl. The
comparable average NYMEX prompt month closing for the same period was $22.86 per
Bbl.
Natural Gas. Parker & Parsley employs a policy of hedging gas production
based on the index price upon which the gas is actually sold in order to
mitigate the basis risk between NYMEX prices and actual index prices. The
average gas price per Mcf that Parker & Parsley reports includes the effects of
Btu content, gathering and transportation costs, gas processing and shrinkage
and the net effect of the gas hedges. Parker & Parsley's average realized price
for physical gas sales (excluding hedge results) for the three months ended
March 31, 1997 was $2.83 per Mcf. The comparable average NYMEX prompt month
closing for the same period was $2.37 per Mcf.
Production Costs. While total production costs per BOE decreased slightly
to $4.69 during the three months ended March 31, 1997 as compared to production
costs per BOE of $4.76 during the same period in 1996, the primary component of
production costs, lease operating expense, decreased 12% from $3.69 per BOE in
the first quarter of 1996 to $3.24 per BOE for the same period in 1997. These
reductions are primarily due to Parker & Parsley's concentrated efforts to
evaluate and reduce all operating costs and the sale of certain high operating
cost properties during 1996. The success of these cost reduction efforts is
particularly evident in light of the fact that production costs per BOE have
declined despite a 44% or $.32 per BOE increase in average production taxes per
BOE resulting from higher commodity prices.
Depletion Expense. Depletion expense per BOE declined to $4.40 during the
first quarter of 1997 from $4.46 per BOE during the first quarter of 1996. The
slight decrease in depletion expense per BOE during 1997 is primarily due to the
1996 sale of Parker & Parsley's Australian oil properties which had average
depletion rates at $5.84 per BOE, offset by increases in the depletion per BOE
for domestic properties resulting from decreases in oil and gas reserves due to
declines in oil and gas prices from March 31, 1996 to March 31, 1997.
Exploration and Abandonments/Geological and Geophysical Costs. Exploration
and abandonments/ geological and geophysical costs increased to $7.6 million
during the first quarter of 1997 from $4.4 million during the same period in
1996. The increase is largely the result of increased domestic activity, both in
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<PAGE> 120
exploratory drilling and geological and geophysical activity, resulting from
Parker & Parsley's increased focus on exploration activities. The domestic
exploratory dry hole costs are primarily related to five unsuccessful
exploratory wells in the Gulf Coast Division and four unsuccessful exploratory
wells in the MidContinent Division at a total cost of $3.2 million and $1.1
million, respectively. These domestic increases are offset by a decrease in
foreign geological and geophysical activity primarily due to the sale in March
1996 of Parker & Parsley's Australasian subsidiaries. The following table sets
forth the components of Parker & Parsley's 1997 and 1996 first quarter expense:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Exploratory dry holes:
United States............................................. $4,517 $ 315
Foreign................................................... 394 580
Geological and geophysical costs:
United States............................................. 1,655 1,205
Foreign................................................... 558 1,622
Leasehold abandonments and other............................ 491 629
------ ------
$7,615 $4,351
====== ======
</TABLE>
Approximately 25% of Parker & Parsley's 1997 capital budget will be spent
on exploratory projects (compared to 16.7% in 1996 and 13.3% in 1995). Parker &
Parsley currently anticipates that its 1997 exploration efforts will be
concentrated in the Gulf Coast Division, the Permian Division and its interests
in Argentina. Parker & Parsley continues to review opportunities involving
exploration joint ventures in domestic or international areas outside Parker &
Parsley's existing core operating areas.
Natural Gas Processing
Natural gas processing revenues increased 28% to $6.9 million for the three
months ended March 31, 1997 as compared to $5.4 million for the same period in
1996, and natural gas processing costs increased 9% to $3.5 million from $3.2
million for the first quarters of 1997 and 1996, respectively. The increases in
natural gas processing revenues and costs are primarily due to increases in the
prices of NGL's and residue gas. The average price per Bbl of NGL's increased
10% in the first quarter of 1997 compared to the first quarter of 1996 (from
$13.38 in 1996 to $14.69 in 1997), and the average price per Mcf of residue gas
increased 55% during the same period (from $1.92 in 1996 to $2.98 in 1997).
During the first quarter of 1996, Parker & Parsley recognized noncash
pre-tax charges of $635 thousand related to abandonments of certain of Parker &
Parsley's gas processing facilities and the cancellation of certain gas
processing contracts.
General and Administrative Expense
General and administrative expense was $6.7 million for the quarter ended
March 31, 1997 as compared to $6.4 million for the quarter ended March 31, 1996,
representing a 5% increase.
Interest Expense
Interest expense for the quarter ended March 31, 1997 decreased to $9.9
million as compared to $14.7 million for the comparable period in 1996. The
decrease is due to a decrease of $245.6 million in the weighted average
outstanding balance of Parker & Parsley's indebtedness for the three months
ended March 31, 1997 as compared to the three months ended March 31, 1996. The
decrease in the weighted average outstanding balance of Parker & Parsley's
indebtedness was primarily the result of the application of proceeds from the
sale of Parker & Parsley's Australasian subsidiaries and the sales of certain
domestic assets during 1996 to the outstanding balance of the Parker & Parsley's
bank credit facility. This decrease is slightly
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<PAGE> 121
offset by an increase in the weighted average interest rate on Parker &
Parsley's indebtedness from 7.82% during the first quarter of 1996 to 7.88%
during the first quarter of 1997.
During the three months ended March 31, 1997, Parker & Parsley recorded a
reduction in interest expense of $390 thousand related to a series of interest
rate swap agreements which effectively convert $150 million of Parker &
Parsley's fixed rate borrowings into floating rate obligations.
Income Taxes
Parker & Parsley's income tax provisions of $10.1 million and $12.3 million
for the quarters ended March 31, 1997 and March 31, 1996, respectively, reflect
the net provision resulting from the separate tax calculation prepared for each
tax jurisdiction in which Parker & Parsley is subject to income taxes.
For the Years Ended December 31, 1996, 1995 and 1994
Oil and Gas Production
The following table describes the results of Parker & Parsley's oil and gas
production activities during 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS, EXCEPT AVERAGE PRICE AND
COST DATA)
<S> <C> <C> <C>
Revenues:
Oil and gas........................................ $396,931 $375,720 $337,602
Gain on disposition of oil and gas properties,
net(a).......................................... 7,786 16,847 9,175
-------- -------- --------
404,717 392,567 346,777
-------- -------- --------
Costs and expenses:
Oil and gas production............................. 110,334 130,905 127,118
Depletion.......................................... 102,803 145,468 131,702
Impairment of oil and gas properties............... -- 129,745 --
Exploration and abandonments....................... 12,653 16,431 12,345
Geological and geophysical......................... 9,054 11,121 8,402
-------- -------- --------
234,844 433,670 279,567
-------- -------- --------
Operating profit (loss) (excluding general and
administrative expense and income taxes)........ $169,873 $(41,103) $ 67,210
======== ======== ========
Worldwide:
Production:
Oil (MBbls)..................................... 11,275 12,902 12,147
Gas (MMcf)...................................... 75,851 85,295 79,674
Total (MBOE).................................... 23,916 27,118 25,426
Average daily production:
Oil (Bbls)...................................... 30,805 35,348 33,279
Gas (Mcf)....................................... 207,244 233,685 218,285
Average oil price (per Bbl)........................ $ 19.96 $ 16.96 $ 15.40
Average gas price (per Mcf)........................ $ 2.27 $ 1.84 $ 1.89
Costs:
Lease operating expense (per BOE)............... $ 3.43 $ 3.99 $ 4.10
Production taxes (per BOE)...................... $ .91 $ .62 $ .67
Workover costs (per BOE)........................ $ .27 $ .22 $ .23
-------- -------- --------
Total production costs (per BOE)........... $ 4.61 $ 4.83 $ 5.00
======== ======== ========
Depletion (per BOE)............................. $ 4.30 $ 5.36 $ 5.18
</TABLE>
111
<PAGE> 122
(continued from previous page)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS, EXCEPT AVERAGE PRICE AND
COST DATA)
<S> <C> <C> <C>
Domestic:
Production:
Oil (MBbls)..................................... 10,872 11,328 11,267
Gas (MMcf)...................................... 73,924 76,669 75,040
Total (MBOE).................................... 23,193 24,106 23,774
Average daily production:
Oil (Bbls)...................................... 29,705 31,036 30,868
Gas (Mcf)....................................... 201,979 210,052 205,589
Average oil price (per Bbl)........................ $ 19.96 $ 16.70 $ 15.26
Average gas price (per Mcf)........................ $ 2.27 $ 1.84 $ 1.89
Costs:
Lease operating expense (per BOE)............... $ 3.39 $ 3.97 $ 4.11
Production taxes (per BOE)...................... $ .94 $ .70 $ .72
Workover costs (per BOE)........................ $ .28 $ .25 $ .25
-------- -------- --------
Total production costs (per BOE)........... $ 4.61 $ 4.92 $ 5.08
======== ======== ========
Depletion (per BOE)............................. $ 4.25 $ 5.19 $ 5.07
</TABLE>
- ---------------
(a) The 1996 amount does not include the gain related to the disposition of
Parker & Parsley's Australasian assets.
Oil and Gas Revenues. Revenues from oil and gas operations totaled $396.9
million in 1996, $375.7 million in 1995 and $337.6 million in 1994, representing
a 6% increase from 1995 to 1996 and an 11% increase from 1994 to 1995. The
increase from 1995 to 1996 is primarily attributable to the higher average
prices being received for both oil and gas production and increases in
production due to Parker & Parsley's successful exploitation and exploration
activities in 1995 and 1996, offset by the decreased production resulting from
the 1996 sale of Parker & Parsley's Australasian assets and the 1995 and 1996
sales of certain domestic assets. The average oil price received for the year
ended December 31, 1996 increased 18% (from $16.96 in 1995 to $19.96 in 1996),
while the average gas price received increased 23% (from $1.84 in 1995 to $2.27
in 1996). The increase from 1994 to 1995 is primarily due to (i) a full year of
production in 1995 from properties purchased in 1994 offset by the production
lost from those properties sold in 1995, (ii) an increase in the average oil
price received of 10% (from $15.40 per Bbl in 1994 to $16.96 per Bbl in 1995),
and (iii) Parker & Parsley's successful development drilling activities during
1994 and 1995, which resulted in increased production in 1995.
Excluding production from Parker & Parsley's Australasian assets which were
sold in 1996 and production from the nonstrategic domestic assets which were
sold in 1995 and 1996, average daily oil production increased 13% from 25,718
Bbls for the year ended December 31, 1995 to 29,100 Bbls for the year ended
December 31, 1996 and average daily gas production increased 13% from 170,979
Mcf to 193,246 Mcf for the same period.
Production Costs. Production costs per BOE decreased in 1996 and 1995 by
approximately 5% and 3%, respectively (from $5.00 in 1994 to $4.83 in 1995 to
$4.61 in 1996). These reductions are primarily due to Parker & Parsley's
concentrated efforts to evaluate and reduce all operating costs and the sale of
certain high operating cost properties (see "Asset Dispositions" above). The
success of these cost reduction efforts is particularly evident in light of the
fact that production costs per BOE declined in 1996 despite a 47% or $.29 per
BOE increase in average production taxes per BOE resulting from higher commodity
prices. The primary component of production costs, lease operating expense,
decreased 14% from $3.99 per BOE in 1995 to $3.43 per BOE in 1996. These costs
represent the majority of the oil and gas property operating expenses over which
Parker & Parsley has control and the costs on which Parker & Parsley has focused
its reduction efforts.
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<PAGE> 123
Depletion Expense. Depletion expense per BOE decreased 20% in 1996 and
increased 3% in 1995. The decrease in depletion expense per BOE in 1996 is
primarily the result of the following factors: (i) the significant increase in
oil and gas reserves during 1995 and 1996 resulting from Parker & Parsley's
exploration and development drilling activities, including revisions, and (ii) a
reduction in Parker & Parsley's net depletable basis from charges taken in 1995
in accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("SFAS 121") (see "-- Impairment of Oil and Gas Properties").
The increase in depletion expense per BOE during 1995 is primarily the result of
increased depletion rates resulting from the relatively short lives of the
properties acquired as part of the Bridge Oil Limited acquisition, when compared
to Parker & Parsley's other properties, and the application of such increased
rates to the book basis allocated to the proved oil and gas properties acquired.
The increase in depletion expense from 1994 to 1995 was mitigated by Parker &
Parsley's adoption of SFAS 121 in 1995 and the significant increase in oil and
gas reserves at December 31, 1995.
Impairment of Oil and Gas Properties. Parker & Parsley adopted SFAS 121
effective as of April 1, 1995, and, as a result of the review and evaluation of
its long-lived assets for impairment, Parker & Parsley recognized noncash
pre-tax charges of $129.7 million ($84.3 million after-tax) related to its oil
and gas properties during 1995.
Exploration and Abandonments/Geological and Geophysical Costs. Exploration
and abandonments/geological and geophysical costs increased from $20.7 million
in 1994 to $27.6 million in 1995 and decreased to $21.7 million in 1996. The
decrease in 1996 is largely the result of decreased activity, both in
exploratory drilling and geological and geophysical activity, resulting from the
sale in March 1996 of Parker & Parsley's Australasian assets (see
"-- Disposition of Australasian Assets"), offset by increases in geological and
geophysical activity in the United States as a result of Parker & Parsley's
increased focus on exploitation and exploration activities. The increase from
1994 to 1995 is largely the result of increased expenses, both in exploratory
drilling and geological and geophysical costs, brought about by Parker &
Parsley's continued evaluation of certain domestic and international exploratory
projects acquired as part of the Bridge Oil Limited acquisition. The following
table sets forth the components of Parker & Parsley's 1996, 1995 and 1994
exploration and abandonments/geological and geophysical costs:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Exploratory dry holes:
United States....................................... $ 6,256 $ 2,491 $ 523
Australia and other foreign......................... 3,431 9,636 3,571
Geological and geophysical costs:
United States....................................... 7,042 2,302 3,834
Australia and other foreign......................... 2,012 8,819 4,568
Leasehold abandonments and other.................... 2,966 4,304 8,251
------- ------- -------
$21,707 $27,552 $20,747
======= ======= =======
</TABLE>
Approximately 25% of Parker & Parsley's 1997 capital budget will be spent
on exploratory projects (compared to 16.7% in 1996 and 13.3% in 1995). Parker &
Parsley currently anticipates that its 1997 exploration efforts will be
concentrated in the Gulf Coast Division, the Permian Division and its interests
in Argentina. Parker & Parsley continues to review opportunities involving
exploration joint ventures in domestic or international areas outside Parker &
Parsley's existing core operating areas.
Natural Gas Processing
Natural gas processing revenues were $23.8 million in 1996, $33.3 million
in 1995 and $39.1 million in 1994; and natural gas processing costs were $12.5
million in 1996, $25.9 million in 1995 and $33.6 million in
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<PAGE> 124
1994. The 1996 natural gas processing revenues and costs decreased 29% and 52%,
respectively, when compared to the 1995 amounts primarily due to the sale of
four gas plants during 1995 and the sale of one gas plant during 1996. The 1995
natural gas processing revenues and costs decreased 15% and 23%, respectively,
when compared to the 1994 amounts primarily as a result of the cancellation of
certain gas processing contracts related to four gas plants during 1994 and the
sale of four plants during 1995. The average price per Bbl of NGLs increased
each year, by 30% in 1996 and 6% in 1995 (from $10.97 in 1994 to $11.59 in 1995
to $15.10 in 1996), while the average price per Mcf of residue gas increased by
55% in 1996 and declined by 16% in 1995 (from $1.66 in 1994 to $1.39 in 1995 to
$2.15 in 1996).
During January 1996, Parker & Parsley realized proceeds of $2.1 million
from sales of gas plants and related assets which resulted in Parker & Parsley
recognizing a net gain of $639 thousand. In addition, in October 1995, Parker &
Parsley sold its interests in the Cargray and Schafer plants located in Carson
County, Texas. Parker & Parsley received net proceeds of $9.5 million from the
disposition of such plants which resulted in Parker & Parsley recognizing a net
gain of $4.6 million.
During 1996 and 1994, Parker & Parsley recognized noncash pre-tax charges
of $1.3 million and $4.5 million, respectively, related to abandonments of
certain of Parker & Parsley's gas processing facilities and the cancellation of
certain gas processing contracts. Additionally, during 1995, Parker & Parsley
recognized a noncash pre-tax impairment charge of $748,000 related to a natural
gas processing facility.
General and Administrative Expense
General and administrative expense was $28.4 million in 1996, $37.4 million
in 1995 and $28.9 million in 1994, representing a 24% decrease from 1995 to 1996
and a 29% increase from 1994 to 1995. The decrease from 1995 to 1996 is
primarily due to 1995 including pre-tax charges of $10.6 million associated with
the amortization of deferred compensation awarded in 1993 and organizational
changes implemented by Parker & Parsley that were designed to reduce overall
general and administrative expenses and 1996 reflecting the benefits of those
organizational changes as well as additional cost reduction efforts in 1996. The
significant increase in general and administrative expense from 1994 to 1995 is
partially attributable to significant nonrecurring general and administrative
expenses included in each year. The 1995 amount includes the nonrecurring items
noted above while the 1994 amount includes $6 million of nonrecurring general
and administrative expenses resulting from the acquisition of Bridge Oil
Limited, some of which were eliminated as Parker & Parsley consolidated Bridge
Oil Limited's United States operations with its own during the latter part of
1994.
Not only did total general and administrative expense decrease for the year
ended December 31, 1996 as compared to the year ended December 31, 1995, general
and administrative costs per BOE declined significantly as well, from $1.38 per
BOE in 1995 to $1.19 per BOE in 1996, a 14% reduction. This decrease results
from Parker & Parsley's improvements in operating efficiencies and increases in
its oil and gas production.
Interest Expense
Interest expense was $46.2 million in 1996, $65.4 million in 1995 and $50.6
million in 1994. The decrease from 1995 to 1996 is due to a decrease of $226.3
million in the weighted average outstanding balance of Parker & Parsley's
indebtedness for the year ended December 31, 1996 as compared to the year ended
December 31, 1995, resulting primarily from the application of proceeds from the
sale of Parker & Parsley's Australasian assets and the sales of certain domestic
assets during 1995 and 1996, and a decrease in the weighted average interest
rate on Parker & Parsley's indebtedness from 8.02% in 1995 to 7.83% in 1996. The
increase from 1994 to 1995 was due primarily to (i) an increase of $109.2
million in the weighted average outstanding balance of Parker & Parsley's
indebtedness due to the additional borrowings required to finance the
acquisition of Bridge Oil Limited and the properties acquired from PG&E
Resources in 1994, (ii) an increase in the weighted average interest rate from
7.15% in 1994 to 8.02% in 1995 and (iii) a full year of interest expense in 1995
versus six months in 1994 associated with certain pre-acquisition obligations of
Bridge Oil Limited. In addition, the 1996, 1995 and 1994 amounts include $12
million, $12 million and $9.1 million of interest,
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<PAGE> 125
respectively, associated with the preferred stock of Parker & Parsley's
subsidiary, P&P Capital. The 1996, 1995 and 1994 amounts also include $1.3
million, $2 million and $2.3 million, respectively, of amortization of
capitalized loan fees.
During each of the years 1996, 1995 and 1994, Parker & Parsley was a party
to various interest rate swap agreements. As a result, Parker & Parsley recorded
a reduction in interest expense of $787 thousand for the year ended December 31,
1996 and additional interest expense of $532 thousand and $2.2 million for the
years ended December 31, 1995 and 1994, respectively.
Income Taxes
Parker & Parsley's income tax provision of $60.1 million for 1996 and its
income tax benefit of $45.9 million and $6.5 million (both of which exclude the
tax effects related to extraordinary items) for 1995 and 1994, respectively,
reflect the net provision or benefit, resulting from the separate tax
calculation prepared for each tax jurisdiction in which Parker & Parsley is
subject to income taxes. For 1996, 1995 and 1994 Parker & Parsley had effective
total tax rates of approximately 30%, 31% and 32%, respectively. In 1996, the
effective tax rate is lower than the applicable tax rate as a result of the tax
effects of the 1996 sale of certain of Parker & Parsley's subsidiaries. The
effective tax rates in 1995 and 1994 are lower than the applicable tax rate for
each year because the effective rates reflect the amortization of foreign
permanent differences.
Extraordinary Items
In October 1995, Parker & Parsley transferred cash and certain oil and gas
properties with an aggregate estimated value of $1.1 million in full
satisfaction of a non-recourse note secured by the properties, the balance of
which was approximately $7.7 million. As a result, Parker & Parsley recognized
an extraordinary gain on the early extinguishment of debt of $4.3 million (net
of related tax expense of $2.3 million).
In 1994, Parker & Parsley acquired Bridge Oil Limited, and as a result of
this acquisition, Parker & Parsley assumed the obligations of certain indentures
issued by that company. Upon a change in control of Bridge Oil Limited, those
indentures were redeemable for cash at the option of the holder at a one percent
premium. The majority of the holders chose to exercise their call option which
resulted in the recognization of an after-tax loss on early extinguishment of
debt of $628 thousand.
Capital Commitments, Capital Resources and Liquidity
Capital Commitments. Parker & Parsley's primary needs for cash are for
exploration, development and acquisitions of oil and gas properties, repayment
of principal and interest on outstanding indebtedness and working capital
obligations.
Parker & Parsley's cash expenditures during the first quarter of 1997 for
additions to oil and gas properties totaled $76.6 million. This amount includes
$12.4 million for the acquisition of properties and $64.2 million for
development and exploratory drilling. Parker & Parsley's acquisition activities
during the first quarter of 1997 primarily consisted of an 87% average working
interest in the Maude Traylor and Olivia fields in Calhoun County, Texas for
approximately $8.8 million. Significant drilling expenditures in the first
quarter of 1997 included $27.1 million in the unitized portion of the Spraberry
field of the Permian Basin (including $14 million in the Driver unit, $7 million
in the Merchant unit and $2.4 million in the Shackelford unit) and $5.7 million
in other portions of the Spraberry field, $9.6 million in other areas of the
Permian Basin, $12.5 million in the onshore Gulf Coast region, $7.7 million in
the MidContinent region and $1.6 million in Argentina.
The Permian Division has continued to develop its 38% working interest in
its War-Wink field discovery in the Delaware Basin and spent $1 million drilling
three wells in this area during the first quarter of 1997. The War Wink 18-37 #2
and the 18-33 B #1 tested at gross rates of 639 and 876 Bbls of oil per day,
respectively, and 503 and 876 Mcf per day, respectively, and both wells are
expected to produce at a top allowable rate of 267 Bbls of oil per day. The
third well is being completed at this time. Parker & Parsley plans to drill an
additional eight to ten wells in this area before year-end and to expand its
acreage position as well. In the
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<PAGE> 126
MidContinent Division, the Carolyn #1 well in the Verden field, in which Parker
& Parsley owns a 23% interest, was completed in February 1997 and tested at 9
MMcf of natural gas per day.
Parker & Parsley's cash expenditures during 1996, 1995 and 1994 for
additions to oil and gas properties (including individual property acquisitions,
but not including company acquisitions) totaled $219.4 million, $215.7 million
and $247.1 million, respectively. The 1996 amount includes $198.4 million for
development and exploratory drilling, and, as in 1994 and 1995, Parker &
Parsley's drilling activities were focused primarily in the Spraberry field of
the Permian Basin. Significant drilling expenditures in 1996 included $87.1
million in the unitized portion of the Spraberry field of the Permian Basin
(including $46.2 million in the Driver unit, $16.1 million in the Shackelford
unit, $7.9 million in the North Pembrook unit, $4.4 million in the Preston unit
and $4.1 million in the Merchant unit), $18.2 million in other portions of the
Spraberry field, $35.4 million in other areas of the Permian Basin, $31.7
million in the onshore Gulf Coast region, $14.1 million in the Midcontinent
region and $11.9 million in Argentina and Australia (prior to its sale in March
1996). Additions to natural gas processing facilities during 1996, 1995 and 1994
primarily represented costs associated with Parker & Parsley's Spraberry natural
gas processing facilities.
Parker & Parsley's 1997 capital expenditure budget has been set at $270
million (assuming a realized price of $19.55 per Bbl of oil and $2.12 per Mcf of
natural gas), reflecting planned expenditures of $170 million for exploitation
activities, $67 million for exploration activities and $33 million for oil and
gas property acquisitions in Parker & Parsley's core areas of Texas, Oklahoma,
New Mexico and Louisiana. Parker & Parsley budgets its capital expenditures
based on projected internally-generated cash flows and routinely adjusts the
level of its capital expenditures in response to anticipated changes in cash
flows.
Funding for Parker & Parsley's working capital obligations is provided by
internally-generated cash flows. Funding for the repayment of principal and
interest on outstanding debt may be provided by any combination of
internally-generated cash flows, proceeds from the disposition of nonstrategic
assets or alternative financing sources as discussed in "Capital Resources"
below.
Capital Resources. Parker & Parsley's primary capital resources are net
cash provided by operating activities, proceeds from financing activities and
proceeds from sales of nonstrategic assets. Parker & Parsley expects that these
resources will be sufficient to fund its capital commitments in 1997.
Operating Activities. Net cash provided by operating activities increased
14% to $73.5 million during the first quarter of 1997 compared to $64.7 million
for the same period in 1996. This increase is primarily attributable to higher
oil and gas prices in the first quarter of 1997. Net cash provided by operating
activities increased 46% in 1996 and 21% in 1995 (from $129.8 million in 1994 to
$157.3 million in 1995 to $230.1 million in 1996). These increases are primarily
attributable to stronger oil and gas prices combined with declining production
costs due to improvements in Parker & Parsley's overall cost structure in 1995
and 1996.
Financing Activities. Parker & Parsley had no outstanding balance under its
bank facility at March 31, 1997, leaving approximately $349.4 million of unused
borrowing base immediately available, net of outstanding letters of credit of
$617 thousand. The weighted average interest rate for the three months ended
March 31, 1997 on Parker & Parsley's indebtedness was 7.88% as compared to 7.82%
for the three months ended March 31, 1996 (taking into account the effect of
interest rate swaps). On July 31, 1996, Parker & Parsley entered into an Amended
and Restated Credit Agreement, which has a current borrowing base of $350
million. Interest rates on the facility vary depending on the amount
outstanding. The outstanding balance under such Credit Agreement at December 31,
1996 was $9 million leaving approximately $340.1 million of unused borrowing
base immediately available, net of outstanding letters of credit of $872
thousand. Parker & Parsley, through its subsidiaries, has other long-term
indebtedness, consisting primarily of a $10 million fixed-rate building loan.
The weighted average interest rate for the year ended December 31, 1996 on
Parker & Parsley's indebtedness was 7.83% as compared to 8.02% for the year
ended December 31, 1995 and 7.15% for the year ended December 31, 1994 (taking
into account the effect of interest rate swaps).
In October 1996, Parker & Parsley announced an odd-lot repurchase program
for shareholders who, as of October 7, 1996, individually owned 99 or fewer
shares of Parker & Parsley Common Stock. Parker & Parsley
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<PAGE> 127
purchased a total of 772,986 shares for $23.3 million which were added to Parker
& Parsley's shares held in treasury.
During 1995, Parker & Parsley completed two public issuances of senior
notes. The aggregate net proceeds from the two senior note issuances of
approximately $295.9 million were utilized to repay a portion of Parker &
Parsley's outstanding U.S. bank indebtedness. At December 31, 1996, the
outstanding balances on the notes totaled $299.3 million.
During 1994, Parker & Parsley accessed the capital markets on three
occasions: the issuance of 3,776,400 6 1/4% Cumulative Guaranteed Monthly Income
Convertible Preferred Shares by Parker & Parsley's special purpose finance
subsidiary in March 1994, which resulted in net proceeds of $182.2 million; the
issuance of 2,360,000 shares of common stock in June 1994, which resulted in net
proceeds of approximately $57.6 million; and the issuance of 4,500,000 shares of
common stock in November 1994, which resulted in net proceeds of approximately
$107 million. The net proceeds of each of these offerings were used by Parker &
Parsley to reduce the outstanding balance of its bank indebtedness.
As Parker & Parsley continues to pursue its strategy, it may utilize
alternative financing sources, including the issuance for cash of fixed rate
long-term public debt, convertible securities or preferred stock. Parker &
Parsley may also issue securities in exchange for oil and gas properties, stock
or other interests in other oil and gas companies or related assets. Additional
securities may be of a class preferred to common stock with respect to such
matters as dividends and liquidation rights and may also have other rights and
preferences as determined by Parker & Parsley's Board of Directors.
On February 12, 1997, Parker & Parsley completed a shelf registration
statement with the Securities and Exchange Commission, which provides for the
issuance of up to $400 million of common stock, preferred stock, warrants to
acquire preferred stock, depository shares representing fractional interests in
preferred stock, debt securities and warrants to acquire debt securities, or any
combination thereof which Parker & Parsley may offer from time to time. The $400
million includes $127.9 million which remained unused from a 1994 shelf
registration statement. The net proceeds from any such offering will be used for
general corporate purposes, which may include repayment of indebtedness,
redemption or repurchase of securities of Parker & Parsley or any subsidiary,
additions to working capital and capital expenditures, including acquisitions
and drilling.
Sales of Nonstrategic Assets. During the three months ended March 31, 1997
and 1996, proceeds from the sale of domestic nonstrategic assets totaled $5.7
million and $3.8 million, respectively. In addition, during the first quarter of
1996, Parker & Parsley sold certain Australasian subsidiaries resulting in cash
proceeds of $108.3 million.
During 1996, 1995 and 1994, proceeds from the sale of domestic nonstrategic
assets totaled $58.4 million, $175.1 million and $109 million, respectively. In
addition, during 1996, Parker & Parsley sold certain subsidiaries resulting in
cash proceeds of $183.2 million. The proceeds from these sales were utilized to
reduce Parker & Parsley's outstanding bank indebtedness and for general working
capital purposes. Parker & Parsley anticipates that it will continue to sell
nonstrategic properties from time to time to increase capital resources
available for other activities and to achieve administrative efficiencies.
Liquidity. At March 31, 1997, Parker & Parsley had $9.4 million of cash and
cash equivalents on hand, compared to $18.7 million at December 31, 1996 and
$19.9 million at December 31, 1995. Parker & Parsley's ratio of current assets
to current liabilities was 1.13 at March 31, 1997, 1.29 at December 31, 1996 and
1.28 at December 31, 1995.
BUSINESS DESCRIPTION
Parker & Parsley is one of the largest public independent oil and gas
exploration and production companies in the United States. Parker & Parsley was
formed in May 1990 as a Delaware corporation and began operations on February
19, 1991. Parker & Parsley's business activities are conducted through wholly-
owned subsidiaries. Prior to 1991, Parker & Parsley conducted its business
activities through two partnerships that were under common control.
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<PAGE> 128
Parker & Parsley had approximately 302.2 million BOE of proved reserves at
December 31, 1996 with an SEC PV10 of approximately $2.3 billion. Oil reserves
at year-end 1996 were 163.9 million Bbls and natural gas reserves at year-end
1996 were 829.4 Bcf. On a BOE basis, 78% of Parker & Parsley's total proved
reserves at December 31, 1996 are proved developed reserves. Parker & Parsley
operates 86% of its total proved reserves. Based on reserve information as of
December 31, 1996 and using Parker & Parsley's reserve report production
information for 1997, the reserve-to-production ratio associated with Parker &
Parsley's proved reserves is 12.1 years on a BOE basis. Parker & Parsley's
domestic oil and gas properties are located principally in the Permian Basin of
West Texas, the onshore Gulf Coast region of South Texas and Louisiana and the
Midcontinent region. Parker & Parsley also owns interests in oil and gas
properties in Argentina.
Recent Developments
Disposition of Australasian Assets. On March 28, 1996, Parker & Parsley
completed the sale of certain wholly-owned Australian subsidiaries to Santos
Ltd., and on June 20, 1996, Parker & Parsley completed the sale of another
wholly-owned subsidiary, Bridge Oil Timor Sea, Inc., to Phillips Petroleum
International Investment Company. Parker & Parsley received aggregate
consideration of $237.5 million for these combined sales which consisted of
$186.6 million of proceeds for the equity of such entities, $21.8 million for
reimbursement of certain intercompany cash advances, and the assumption of such
subsidiaries' net liabilities, exclusive of oil and gas properties, of $29.1
million. The proceeds, after payment of certain costs and expenses, were
utilized to reduce Parker & Parsley's outstanding bank indebtedness and for
general working capital purposes. Parker & Parsley recognized an after-tax gain
of $67.3 million from the disposition of these subsidiaries.
Domestic Asset Dispositions. During 1996, Parker & Parsley also realized
proceeds of approximately $58.4 million from the divestiture of nonstrategic
domestic assets comprised of $55.2 million from the disposition of oil and gas
properties and $3.2 million from the disposition of gas processing facilities
and other nonstrategic assets. The proceeds from the asset dispositions were
used to reduce Parker & Parsley's outstanding bank indebtedness and to provide
funding for a portion of Parker & Parsley's capital expenditures, including
purchases of oil and gas properties in Parker & Parsley's core areas. Although
Parker & Parsley has no formal divestiture plan for 1997, it will continue to
perform ongoing reviews of its asset base in order to identify nonstrategic
assets for disposition.
Acquisition Activities. During 1996, Parker & Parsley reduced its previous
emphasis on major acquisitions and, instead, concentrated its efforts on
maximizing the value from its existing properties. However, Parker & Parsley
continued its program of smaller acquisitions of properties that exhibit one or
more of the following characteristics: properties that are near or otherwise
complement Parker & Parsley's existing properties, properties that represent
additional working interests in Parker & Parsley-operated properties or
properties that provide Parker & Parsley with strategic exploitation or
exploration opportunities. In 1996, aggregate expenditures to acquire such
interests and properties amounted to approximately $21 million.
Financial Management
Parker & Parsley strives to maintain its outstanding indebtedness at a
moderate level in order to provide sufficient financial flexibility for future
exploration, development and acquisition opportunities. While Parker & Parsley
may occasionally incur higher levels of debt to take advantage of opportunities,
management's objective is to maintain a flexible capital structure and to
strengthen Parker & Parsley's financial position by reducing debt through an
increase in equity capital or through the divestiture of nonstrategic assets. In
order to achieve this objective, Parker & Parsley attempts to maintain a debt to
total capitalization ratio of 40% to 45%.
As with any organization, Parker & Parsley has experienced various debt
levels in recent years as it has responded to strategic opportunities. In 1994,
Parker & Parsley's debt level increased as a result of borrowing the funds
necessary to complete the acquisition of Bridge Oil Limited and the acquisition
of oil and gas properties from PG&E Resources. Beginning in 1995 and continuing
through 1996, Parker & Parsley took deliberate actions to reduce its debt levels
or extend its debt maturities in order to improve its financial flexibility and
enable it to take advantage of future strategic opportunities.
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<PAGE> 129
During 1996, Parker & Parsley reduced its debt level significantly through
the application of proceeds from dispositions of assets which Parker & Parsley
had identified as nonstrategic. In 1996, Parker & Parsley received total cash
proceeds of $241.6 million related to the disposition of Parker & Parsley's
Australasian assets and the disposition of certain other domestic nonstrategic
assets. Application of these proceeds to Parker & Parsley's outstanding bank
indebtedness reduced such indebtedness to $9 million at December 31, 1996, and,
correspondingly, reduced Parker & Parsley's interest expense significantly, from
$65.4 million in 1995 to $46.2 million in 1996. As a result, Parker & Parsley's
debt as a percentage of total capitalization was 31% at December 31, 1996, down
from 49% at December 31, 1995.
Properties
Reserves. Parker & Parsley's proved reserves totaled 302.2 million BOE at
December 31, 1996, with an SEC PV10 of approximately $2.3 billion. Parker &
Parsley achieved these annual increases in reserves despite having sold reserves
of 45.8 million BOE in 1996. Excluding these sold reserves, total proved
reserves increased 21% in 1996. Oil reserves at year-end 1996 were 163.9 million
Bbls (an 11% increase from 1995 to 1996). Natural gas reserves at year-end 1996
were 829.4 Bcf (an 8% decrease from 1995 to 1996).
On a BOE basis, 78% of Parker & Parsley's total proved reserves at December
31, 1996 are proved developed reserves. Parker & Parsley operates 86% of its
total proved reserves based on the December 31, 1996 SEC PV10. Based on reserve
information as of December 31, 1996 and using Parker & Parsley's reserve report
production information for 1997, the reserve-to-production ratio associated with
Parker & Parsley's proved reserves is 12.1 years on a BOE basis.
In addition, proved NGLs of 12.6 million Bbls were attributable to Parker &
Parsley's interests in gas processing rights in reserves contractually or
economically dedicated to Parker & Parsley's natural gas processing plants at
December 31, 1996. The SEC PV10 from those dedicated proved reserves was $44.3
million at December 31, 1996 (using a constant weighted average price of $11.46
per Bbl and a 10% discount rate). For the year ended December 31, 1996, average
daily production from Parker & Parsley's interests in natural gas processing
plants was 2,327 Bbls of NGLs.
The following table summarizes the estimated proved reserves and estimated
future cash flows associated with Parker & Parsley's oil and gas properties, by
major areas of operation as of December 31, 1996, as estimated in accordance
with the definitional requirements under rule 4-10(a) of Regulation S-X.
<TABLE>
<CAPTION>
1996 AVERAGE
PROVED RESERVES AS OF DECEMBER 31, 1996 DAILY PRODUCTION(A)
---------------------------------------- -------------------------
NATURAL SEC 10 NATURAL
OIL GAS VALUE OIL GAS
(MBBLS) (MMCF) MBOE (000) (BBLS) (MCF) BOE
------- ------- ------- ---------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
United States:
Spraberry............... 112,301 284,576 159,730 $1,119,950 17,638 42,182 24,668
Permian................. 41,391 119,710 61,343 515,461 8,606 35,481 14,520
Gulf Coast.............. 4,345 252,335 46,401 445,337 2,166 92,309 17,551
Midcontinent............ 2,769 167,120 30,622 238,400 1,294 31,813 6,596
Other................... 2,030 4,527 2,785 18,180 1 194 33
------- ------- ------- ---------- ------ ------- ------
162,836 828,268 300,881 2,337,328 29,705 201,979 63,368
Australia(b)............ -- -- -- -- 955 5,265 1,833
Argentina............... 1,105 1,108 1,290 8,041 145 -- 145
------- ------- ------- ---------- ------ ------- ------
Total......... 163,941 829,376 302,171 $2,345,369 30,805 207,244 65,346
======= ======= ======= ========== ====== ======= ======
</TABLE>
- ---------------
(a) The 1996 average daily production is calculated using a 366-day year and
without making pro forma adjustment for any acquisitions, divestitures or
drilling activity that occurred during the year.
(b) Represents production associated with Parker & Parsley's Australian
subsidiaries prior to their divestiture in 1996.
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The estimates of Parker & Parsley's proved reserves as of December 31,
1996, are based upon (i) reserve reports audited by Netherland, Sewell &
Associates, Inc., independent reserve engineers, for Parker & Parsley's major
domestic properties (representing approximately 52% of the total SEC PV10 of
Parker & Parsley's domestic proved reserves at December 31, 1996) and (ii)
reserve reports prepared by Parker & Parsley's engineers for all other domestic
properties and Parker & Parsley's Argentine properties. The estimate of the
reserves related to Parker & Parsley's interests in natural gas processing
rights for proved reserves contractually or economically dedicated to Parker &
Parsley's natural gas processing plants is based on evaluations prepared by
Parker & Parsley's engineers.
Numerous uncertainties exist in estimating quantities of proved reserves
and in projecting future rates of production and timing of development
expenditures, including many factors beyond Parker & Parsley's control. This
Joint Proxy Statement/Prospectus contains estimates of Parker & Parsley's proved
oil and gas reserves and the related future net revenues therefrom, which are
based on various assumptions, including those prescribed by the Commission.
Actual future production, oil and gas prices, revenues, taxes, capital
expenditures, operating expenses, geologic success and quantities of recoverable
oil and gas reserves may vary substantially from those assumed in the estimates
and such variances may be material. In addition, Parker & Parsley's reserves may
be subject to downward or upward revisions based on production performance,
purchases or sales of properties, results of future development, prevailing oil
and gas prices and other factors. Therefore, estimates of the SEC PV10 of proved
reserves contained in this Joint Proxy Statement/Prospectus should not be
construed as estimates of the current market value of Parker & Parsley's proved
reserves.
Parker & Parsley did not provide estimates of total proved oil and gas
reserves during 1996 to any federal authority or agency, other than the
Commission.
Reserve Replacement. For eight consecutive years, Parker & Parsley has been
able to replace its annual production volumes with proved reserves of crude oil
and natural gas, stated on an energy equivalent basis. During 1996, Parker &
Parsley added 75 million BOE resulting in reserve replacement of 314% of total
production. Of the 75 million BOE reserve additions, 71.1 million BOE were added
through exploration and development drilling activities, 2.2 million BOE were
added through acquisitions of proved properties and 1.7 million BOE were the net
result of revisions. Reserves added by development drilling are primarily from
the identification of additional infill drilling locations and new secondary
recovery projects. Reserve revisions result from several factors including
changes in existing estimates of quantities available for production and changes
in estimates of quantities which are economical to produce under current pricing
conditions. Parker & Parsley's reserves as of December 31, 1996 were estimated
using a price of $24.55 per Bbl and $3.97 per Mcf. Should prices decline in
future years, reserves may be revised downward for quantities which may be
uneconomical to produce at lower prices.
Parker & Parsley's 1996 reserve replacement rate on a barrel of oil
equivalent basis was 314%, which included reserve replacement rates for oil and
natural gas of 398% and 239%, respectively. Previous reserve replacement
performance rates were 281% in 1995 (263% for oil and 297% for gas) and 537% in
1994 (549% for oil and 526% for gas). For the three year period ended December
31, 1996, the three year average reserve replacement rate was 377%, as compared
to a three year average replacement rate of 412% in 1995 and 496% in 1994.
Through 1994, Parker & Parsley's reserve replacement rate was primarily the
product of its acquisition activities. Beginning in 1995, and to a greater
extent in 1996, the reserve replacement rates have been influenced more by
exploration and development activities and less by acquisition activities.
Parker & Parsley seeks to achieve an annual reserve replacement rate of at least
150% through the emphasis on its exploration and development activities.
Description of Properties
Parker & Parsley manages its domestic oil and gas properties based upon
their geographic area, and, as a result, Parker & Parsley has divided its
domestic operations into four operating divisions: the Spraberry Division, the
Permian Division, the Gulf Coast Division, and the Midcontinent Division. In
addition, Parker & Parsley has an international division that manages Parker &
Parsley's ownership in oil and gas properties
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<PAGE> 131
outside the United States. At December 31, 1996, Parker & Parsley's only
properties outside the U.S. are located in Argentina.
Spraberry Division. The Spraberry field was discovered in 1949 and
encompasses eight counties in West Texas. The field is approximately 150 miles
long and 75 miles wide at its widest point. The oil produced is West Texas
Intermediate Sweet, and the gas produced is casinghead gas with an average Btu
content of 1,400 Btu per Mcf. The oil and gas is produced from three formations,
the upper and lower Spraberry and the Dean, at depths ranging from 6,700 feet to
9,200 feet. The center of the Spraberry field was unitized in the late 1950's
and early 1960's by the major oil companies but until the late 1980's
experienced very limited development activity. Since 1989, Parker & Parsley has
focused acquisition and development drilling activities in the unitized portion
of the Spraberry field due to the dormant condition of the properties and the
high net revenue interests available. Parker & Parsley believes the area offers
excellent opportunities to enhance oil and gas reserves because of the hundreds
of undeveloped infill drilling locations and the ability to reduce operating
expenses through economies of scale. In February 1997, the Texas Railroad
Commission (which regulates oil and gas production) entered a favorable order on
Parker & Parsley's application to allow administrative approval of uncontested
applications to increase the density of drilling in the Spraberry field from one
well per 80 acres to one well in 40. Parker & Parsley believes such reduced
spacing may provide in excess of 1,000 additional drilling locations which based
on Parker & Parsley's drilling results on 40-acre spacing to date, have the
potential to add 70 million equivalent barrels to Parker & Parsley's reserve
base.
Parker & Parsley continues to realize the benefits of its focus on the
Spraberry field through significant reserve additions due to development
drilling and identification of a large number of new drilling locations each
year. As a result, Parker & Parsley plans to continue to devote a great deal of
its capital budget and operating resources to the ongoing development of the
Spraberry field. Specifically, Parker & Parsley has allocated $88 million, or
37%, of its 1997 exploration and development budget to drill approximately 225
development wells and to perform approximately 50 recompletions in the Spraberry
field.
Permian Division. Since the early 1960's, Parker & Parsley has been
involved in acquisition and development activities in the Permian Division which
includes all of West Texas and Southeastern New Mexico except for the Spraberry
field. The Iatan field in Mitchell County, Texas, the Lusk and Dagger Draw
fields in Eddy County, New Mexico, the Abell (Devonian) field in Crane and Pecos
Counties of Texas and the Ozona field in Crockett and Sutton Counties of Texas
are core areas for Parker & Parsley's Permian Division operations in terms of
existing production, production and reserve growth, and identification of
additional drilling locations. During 1996, the Permian Division expanded its
growth strategy to include significant emphasis on exploration activities in
order to produce a more balanced portfolio. In November 1996, Parker & Parsley
announced a significant oil discovery in the War-Wink West Field in the Delaware
Basin of West Texas. This Parker & Parsley operated well, the University 18-34
#1, tested at rates of up to 720 barrels of oil per day and is currently
producing at its expected allowable rate of approximately 270 barrels of oil per
day and 374 thousand cubic feet of gas per day. Parker & Parsley and Enserch
Exploration, Inc. ("Enserch") each own a 50% working interest in this well,
which is the first in their joint exploration and development of the 4,500 acre
War-Wink prospect. In addition, during 1996, Parker & Parsley experienced
successful results from its exploratory efforts in the Permian reef play of the
Southeastern Shelf of the Midland Basin.
Parker & Parsley will continue to focus on the development of the existing
properties utilizing waterflood procedures and secondary recovery technologies
as these efforts have consistently resulted in increased production, reserve
additions due to development drilling, and new drilling locations. In addition,
all of the fields in this operational group have been screened for feasibility
for carbon dioxide (CO2) flood implementation, and Parker & Parsley plans to
move forward in utilizing this technology in 1997. During 1997, Parker & Parsley
plans to continue its development of the War-Wink prospect by drilling two
confirmation wells and an additional two to four development wells. Parker &
Parsley and Enserch also control approximately 30,000 additional acres in the
Delaware Basin play in Southeastern New Mexico and West Texas where they intend
to drill eight exploratory wells in 1997. Also during 1997, Parker & Parsley
plans to perform additional 3-D seismic data interpretation in order to exploit
the Midland Basin successes.
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<PAGE> 132
In total, Parker & Parsley anticipates spending $45 million in 1997 in this
area to drill approximately 220 wells and to perform recompletions on
approximately 90 targeted wells. Eighty percent of these planned expenditures
are devoted to development activities.
Gulf Coast Division. The Gulf Coast Division includes onshore oil and gas
properties located in South and East Texas, Louisiana, Mississippi and Alabama.
The primary producing formations in this region include the Wilcox, Frio and
Yegua formations in Texas and the Cretaceous formation in Mississippi. The
addition of the domestic properties acquired as a part of the Bridge Oil Limited
acquisition (primarily in South Texas and Louisiana), positioned Parker &
Parsley to be better able to pursue and realize future economic growth in this
area.
The strategy for the Gulf Coast Division has been to emphasize the growth
of natural gas reserves. To accomplish this, Parker & Parsley has devoted most
of its domestic exploration efforts to this region as well as its investment in
and utilization of 3-D seismic technology. In addition, Parker & Parsley is
successfully employing newer drilling techniques such as drilling horizontal
wells. Utilization of 3-D seismic technology during 1996 yielded substantial
results in Parker & Parsley's Lopeno field which produces from the Wilcox
formation. Gross gas production increased from 14 MMcf per day to 38 MMcf per
day in 1996 in this area as a result of drilling six development wells, most of
which were identified through the 3-D project, and Parker & Parsley has
identified several additional drilling locations after interpreting 3-D seismic
data. In addition, Parker & Parsley experienced successful results in its
Central Texas Pawnee field which produces from the Edwards formation after
drilling a successful horizontal well in late 1996. This well, the S.E. Turner
Gas Unit #2, in which Parker & Parsley owns a 100% working interest, is
currently flowing at a rate of 3.1 MMcf per day. Parker & Parsley plans to drill
two additional horizontal wells and to initiate a 3-D project in this field
during 1997 in order to exploit the 1996 successes.
Overall, Parker & Parsley plans to continue its emphasis on exploration
activities in the Gulf Coast Division with a total budget of $45 million being
devoted to drilling approximately 25 exploratory wells and 40 development wells.
Midcontinent Division. The Midcontinent Division includes properties
located in the Texas Panhandle and Oklahoma. In past years, Parker & Parsley has
aggressively engaged in both acquisitions and divestitures of oil and gas
properties in order to position this portfolio of properties for significant
growth through development and exploratory drilling opportunities. During 1997,
Parker & Parsley plans to spend approximately $23 million in the Midcontinent
Division on exploitation and exploration activities. This activity includes
drilling approximately 45 development wells and performing recompletions on
approximately 20 targeted wells.
International. Parker & Parsley owns interests in Argentina consisting of a
14.42% interest in the Confluencia block and a 15% interest in the China Muerta
block, both in the Neuquen Basin of Central Argentina. During 1996, Parker &
Parsley participated in several discoveries in the Confluencia Sur field in the
Confluencia block. In early 1996, Parker & Parsley announced the successful
completion of two exploratory wells (the Naco x-1 and the Sierra de Reyes x-1),
and, in January 1997, Parker & Parsley announced the successful completion of
three development wells, also in the Confluencia Sur field. The three wells, the
Sierra de Reyes 2, 3 and 4, operated by Petrolera Argentina San Jorge S.A.,
collectively tested 3,727 barrels of oil per day, and current gross production
for the field is at a facility-constrained rate of 2,520 Bbls of oil per day.
Parker & Parsley expects to drill an additional two to three development wells
in the Confluencia Sur field during the first six months of 1997 in order to
increase daily oil production to 6,000 barrels (865 barrels net to Parker &
Parsley's interest).
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<PAGE> 133
Finding Cost
Parker & Parsley's acquisition and finding cost for 1996 was $3.10 per BOE
as compared to the 1995 and 1994 acquisition and finding costs of $2.87 and
$5.11 per BOE, respectively. The average acquisition and finding cost for the
three-year period from 1994 to 1996 was $3.99 per BOE representing an 18%
decrease from the 1995 three-year average rate of $4.84.
Oil and Gas Mix
Parker & Parsley seeks to maintain a strategic balance between oil and
natural gas reserves and production. While Parker & Parsley's reserve and
production mix may vary somewhat on a short-term basis as Parker & Parsley takes
advantage of market conditions and specific acquisition and development
opportunities, management believes that a relative mix of approximately 50% oil
and 50% natural gas is in the best long-term interests of Parker & Parsley and
its stockholders. Parker & Parsley's reserve mix was 54% oil and 46% gas at
December 31, 1996, and its production mix was 47% oil and 53% gas during 1996.
Production
Since it began operations, Parker & Parsley has focused its efforts toward
increasing its average daily production of oil and gas through development
drilling and production enhancement activities and acquisitions of producing
properties. Average daily oil and gas production have each increased every year
since Parker & Parsley's inception with the exception of 1996 when average daily
production declined due to significant property dispositions. In spite of
production decreases due to property sales, Parker & Parsley's efforts towards
production growth have been largely successful as illustrated by the five-year
average daily production growth rates. Comparing 1992 to 1996, average daily oil
production has increased 138% and average daily gas production has increased
208%, while production costs per BOE have declined 21%. Production, price and
cost information with respect to Parker & Parsley's properties for each of 1996,
1995 and 1994 is set forth under See "-- Production Costs."
Drilling Activities
Parker & Parsley seeks to increase its oil and gas reserves, production and
cash flow by concentrating on drilling low-risk development wells and by
conducting additional development activities such as recompletions. From the
beginning of 1992 through the end of 1996, Parker & Parsley drilled 2,006 gross
(1,327 net) wells, 96% of which were successfully completed as productive wells,
at a total cost (net to Parker & Parsley's interest) of $658 million. During
1996, Parker & Parsley drilled 599 gross wells for a total cost (net to Parker &
Parsley's interest) of approximately $212 million, 82% of which was spent on
development wells and related facilities. Parker & Parsley's current 1997
capital expenditure budget is $270 million which Parker & Parsley has allocated
as follows: $170 million to exploitation activities, $67 million to exploration
activities and $33 million to oil and gas property acquisitions. This capital
expenditure budget reflects Parker & Parsley's plans to drill approximately 500
development wells and 100 exploratory wells and to perform recompletions on over
150 wells.
Parker & Parsley believes that its current property base, which has been
significantly enhanced and expanded by the development of properties acquired in
prior years, provides a substantial inventory of prospects for continued
reserve, production and cash flow growth. Parker & Parsley currently has a
portfolio of over 800 domestic drilling locations to which proved reserves have
been assigned. Parker & Parsley's domestic reserves as of December 31, 1996
include proved undeveloped and proved developed nonproducing reserves of 43
million Bbls of oil and 239.6 Bcf of gas. Development of these reserves is
anticipated to occur principally in 1997 and 1998. Parker & Parsley believes
that its current portfolio of undeveloped prospects provides attractive
development and exploration opportunities for at least the next three to five
years.
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<PAGE> 134
The following table sets forth the number of gross and net productive and
dry wells in which Parker & Parsley had an interest that were drilled and
completed during the years ended December 31, 1996, 1995 and 1994. This
information should not be considered indicative of future performance, nor
should it be assumed that there is necessarily any correlation between the
number of productive wells drilled and the oil and gas reserves generated
thereby or the costs to Parker & Parsley of productive wells compared to the
costs of dry wells.
<TABLE>
<CAPTION>
GROSS WELLS NET WELLS
----------------------- -------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- -------------------------
1996(B) 1995 1994 1996(B) 1995 1994
------- ---- ---- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States:
Productive wells:
Development................... 535 432 282 362.9 307.0 193.4
Exploratory................... 37 30 6 24.2 18.0 3.5
Dry holes:
Development................... 7 7 2 4.4 2.1 1.9
Exploratory................... 10 16 3 6.0 4.7 1.6
--- --- --- ----- ----- -----
589 485 293 397.5 331.8 200.4
--- --- --- ----- ----- -----
Australia:
Productive wells:
Development................... 2 6 1 .3 1.4 .2
Exploratory................... -- 1 2 -- .3 .5
Dry holes:
Development................... 1 -- -- .2 -- --
Exploratory................... 1 9 3 .2 2.8 2.5
--- --- --- ----- ----- -----
4 16 6 .7 4.5 3.2
--- --- --- ----- ----- -----
Argentina:
Productive wells:
Development................... 3 -- -- .4 -- --
Exploratory................... -- 1 -- -- .1 --
Dry holes:
Development................... -- -- -- -- -- --
Exploratory................... 3 7 -- .4 1.0 --
--- --- --- ----- ----- -----
6 8 -- .8 1.1 --
--- --- --- ----- ----- -----
Total.................... 599 509 299 399.0 337.4 203.6
=== === === ===== ===== =====
Success ratio(a)................... 96% 92% 97% 97% 97% 97%
</TABLE>
- ---------------
(a) Represents those wells that were successfully completed as productive wells.
(b) The 1996 amounts include only three months of activity related to Parker &
Parsley's Australian properties. The remaining foreign drilling activities
primarily relate to Parker & Parsley's interests in Argentine oil and gas
properties.
The following table sets forth information about Parker & Parsley's wells
that were in progress at December 31, 1996.
<TABLE>
<CAPTION>
GROSS WELLS NET WELLS
----------- ---------
<S> <C> <C>
United States:
Development............................................... 74 56.1
Exploratory............................................... 9 6.3
-- ----
Total............................................. 83 62.4
== ====
Argentina:
Exploratory............................................... 2 .3
== ====
</TABLE>
124
<PAGE> 135
Exploratory Activities
Prior to the acquisition of Bridge Oil Limited in July 1994, Parker &
Parsley spent a small percentage of its annual capital budget on exploratory
projects. However, the acquisition of Bridge Oil Limited provided Parker &
Parsley with a significant inventory of exploratory projects in the United
States, Australia and Argentina. As a result, since 1994, Parker & Parsley has
spent an increasing percentage of its annual capital budget on exploratory
projects, 2.8% in 1994, 13.3% in 1995 and 16.7% in 1996. Parker & Parsley has
determined that it will continue to allocate resources to increasing its
exploration opportunities with a focus on generating a portfolio of short to
medium term impact projects. Parker & Parsley currently anticipates that
approximately 25% of its 1997 capital budget will be spent on exploratory
projects. The majority of the 1997 exploratory budget is allocated to domestic
activities within the onshore Gulf Coast and Permian Basin areas. Parker &
Parsley's international exploration efforts will primarily be devoted to Central
and South America. Exploratory drilling involves greater risks of dry holes or
failure to find commercial quantities of hydrocarbons than development drilling
or enhanced recovery activities. See "Risk Factors -- Replacement of Reserves."
Parker & Parsley is currently involved in 47 3-D seismic projects, covering
approximately 900 square miles. These projects are located in the following
areas: 22 in the Gulf Coast region, 13 in the Permian Basin, seven in other
domestic locations and five in international locations. Over the past four
years, Parker & Parsley participated in the drilling of 75 wells as a result of
3-D seismic interpretation, 62 of which were successfully completed as
productive wells. Most of Parker & Parsley's 3-D seismic projects are related to
exploration activity.
Marketing of Production
General. Production from Parker & Parsley's properties is marketed
consistent with industry practices, which include the sale of oil at the
wellhead to third parties and the sale of gas to third parties. Sales prices for
both oil and gas production are negotiated based on factors normally considered
in the industry such as the spot price for gas or the posted price for oil,
price regulations, distance from the well to the pipeline, well pressure,
estimated reserves, quality of gas and prevailing supply conditions.
Gas Marketing. Effective January 1, 1996, Parker & Parsley, along with
Apache Corporation and Oryx Energy Company, formed Producers Energy Marketing,
LLC ("ProEnergy"), a natural gas marketing company organized to create a direct
link between gas producers and purchasers. The venture is structured to flow
through the benefits arising out of the expanded services and the economies of
scale from the aggregation of substantial volumes of gas. For a period of five
years, Parker & Parsley is obligated to sell to ProEnergy all gas production
(subject to certain exclusions relative to immaterial volumes) that is owned or
controlled by Parker & Parsley, or any affiliate, in North America (onshore and
offshore), which is not subject to a binding and enforceable gas sales contract
in effect on July 1, 1996. The consummation of the Mergers will constitute an
event which gives Parker & Parsley the right to terminate its agreement with Pro
Energy. If the Mergers are consummated, Pioneer will consider all of the options
available to it at the time and determine whether to terminate this agreement,
waive this right and continue to abide by this agreement or seek to renegotiate
the terms of this agreement. Parker & Parsley currently owns 9.59% of ProEnergy
which markets approximately 1.8 MMBtu per day. As a result, as of January 1,
1996, Parker & Parsley no longer has any revenues or expenses associated with
third party gas marketing activities.
Significant Purchasers. Parker & Parsley's two primary purchasers of crude
oil are Mobil Oil Corporation ("Mobil") and Genesis Crude Oil, L.P. ("Genesis"),
both of which purchase oil pursuant to contracts that provide for prices that
are based on prevailing market prices. Approximately 22% and 28% of Parker &
Parsley's 1996 oil and gas revenues were attributable to sales to Mobil and
Genesis, respectively. During 1996, Parker & Parsley marketed its natural gas,
including natural gas products, to a variety of purchasers, none of which
accounted for 10% or more of Parker & Parsley's oil and gas revenues. Parker &
Parsley is of the opinion that the loss of any one purchaser would not have an
adverse effect on its ability to sell its oil and gas production or natural gas
products.
Hedging Activities. Parker & Parsley periodically enters into commodity
derivative contracts (swaps, futures and options) in order to (i) reduce the
effect of the volatility of price changes on the commodities
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<PAGE> 136
Parker & Parsley produces and sells, (ii) support Parker & Parsley's annual
capital budgeting and expenditure plans and (iii) lock in prices to protect the
economics related to certain capital projects. During 1996, Parker & Parsley's
hedging activities reduced the average price received for oil and gas sales 6%
and 5%, respectively, as discussed below.
Natural Gas. Parker & Parsley employs a policy of hedging gas production
based on the index price upon which the gas is actually sold in order to
mitigate the basis risk between NYMEX prices and actual index prices. The
average gas prices per Mcf that Parker & Parsley reports includes the effects of
Btu content, gathering and transportation costs, gas processing and shrinkage
and the net effect of the gas hedges. Parker & Parsley reported an average gas
price of $2.27 per Mcf for the year ended December 31, 1996. Parker & Parsley's
average realized price for physical gas sales (excluding hedge results) for the
same period was $2.39 per Mcf. The comparable average NYMEX prompt month closing
for the year ended December 31, 1996 was $2.50 per Mcf. At December 31, 1996,
Parker & Parsley had 28.9 Bcf of future gas production hedged at a weighted
average NYMEX price of $2.17 per Mcf for the period from January 1997 through
April 1999.
Crude Oil. All material purchase contracts governing Parker & Parsley's oil
production are tied directly or indirectly to NYMEX prices. The average oil
prices per Bbl that Parker & Parsley reports includes the effects of oil
quality, gathering and transportation costs and the net effect of the oil
hedges. Parker & Parsley reported an average oil price of $19.96 per Bbl for the
year ended December 31, 1996. Parker & Parsley's average realized price for
physical oil sales (excluding hedge results) for the same period was $21.33 per
Bbl. The comparable average NYMEX prompt month closing for the year ended
December 31, 1996 was $22.03 per Bbl. At December 31, 1996, Parker & Parsley had
6.2 million barrels of future oil production hedged at a weighted average NYMEX
price of $19.39 per Bbl for the period from January 1997 through December 1998.
Production, Price and Cost Data
The table below sets forth production, price and cost data with respect to
Parker & Parsley's properties for the years ended December 31, 1996, 1995 and
1994. These amounts are calculated without making pro forma adjustments for any
acquisitions, divestitures or drilling activity that occurred during the
respective years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------- ------------------------------- -------------------------------
AUSTRALIA(A)
UNITED AND UNITED UNITED
STATES ARGENTINA TOTAL STATES AUSTRALIA TOTAL STATES AUSTRALIA TOTAL
-------- ------------ -------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Production Information:
Annual production:
Oil (MBbls).......... 10,872 403 11,275 11,328 1,574 12,902 11,267 880 12,147
Gas (MMcf)........... 73,924 1,927 75,851 76,669 8,626 85,295 75,040 4,634 79,674
Total (MBOE)..... 23,193 723 23,916 24,106 3,012 27,118 23,774 1,652 25,426
Average daily
production:
Oil (Bbls)........... 29,705 1,100 30,805 31,036 4,312 35,348 30,868 2,411 33,279
Gas (Mcf)............ 201,979 5,265 207,244 210,052 23,633 233,685 205,589 12,696 218,285
Total (BOE)...... 63,368 1,978 65,346 66,045 8,251 74,296 65,133 4,527 69,660
Average prices:
Oil (per Bbl)........ $ 19.96 $19.81 $ 19.96 $ 16.70 $ 18.78 $ 16.96 $ 15.26 $ 17.12 $ 15.40
Gas (per Mcf)........ $ 2.27 $ 1.95 $ 2.27 $ 1.84 $ 1.88 $ 1.84 $ 1.89 $ 1.89 $ 1.89
Revenue (per BOE).... $ 16.61 $16.21 $ 16.60 $ 13.69 $ 15.21 $ 13.85 $ 13.20 $ 14.43 $ 13.28
Average costs:
Production Costs (per
BOE):
Lease operating
expense.......... $ 3.39 $ 4.75 $ 3.43 $ 3.97 $ 4.12 $ 3.99 $ 4.11 $ 3.89 $ 4.10
Production taxes... .94 -- .91 .70 -- .62 .72 -- .67
Workover........... .28 -- .27 .25 -- .22 .25 -- .23
-------- ------ -------- -------- ------- -------- -------- ------- --------
Total............ $ 4.61 $ 4.75 $ 4.61 $ 4.92 $ 4.12 $ 4.83 $ 5.08 $ 3.89 $ 5.00
Depletion expense (per
BOE)................... $ 4.25 $ 5.73 $ 4.30 $ 5.19 $ 6.74 $ 5.36 $ 5.07 $ 6.77 $ 5.18
</TABLE>
- ---------------
(a) Represents production associated with Parker & Parsley's Australian
subsidiaries prior to their divestiture in 1996.
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<PAGE> 137
Productive Wells(a)
The following table sets forth the number of productive oil and gas wells
attributable to Parker & Parsley's properties as of December 31, 1996, 1995 and
1994.
<TABLE>
<CAPTION>
GROSS PRODUCTIVE WELLS NET PRODUCTIVE WELLS
---------------------- ---------------------
OIL GAS TOTAL OIL GAS TOTAL
----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
United States..................................... 5,572 1,393 6,965 3,119 650 3,769
Argentina......................................... 5 -- 5 1 -- 1
----- ----- ------ ----- ----- -----
Total..................................... 5,577 1,393 6,970 3,120 650 3,770
===== ===== ====== ===== ===== =====
Year ended December 31, 1995:
United States..................................... 6,138 2,137 8,275 3,198 680 3,878
Australia and Other Foreign....................... 112 450 562 27 54 81
----- ----- ------ ----- ----- -----
Total..................................... 6,250 2,587 8,837 3,225 734 3,959
===== ===== ====== ===== ===== =====
Year ended December 31, 1994:
United States..................................... 8,096 3,225 11,321 4,423 1,652 6,075
Australia and Other Foreign....................... 83 542 625 19 70 89
----- ----- ------ ----- ----- -----
Total..................................... 8,179 3,767 11,946 4,442 1,722 6,164
===== ===== ====== ===== ===== =====
</TABLE>
- ---------------
(a) Productive wells consist of producing wells and wells capable of production,
including shut-in wells. One or more completions in the same well bore are
counted as one well. Any well in which one of the multiple completions is an
oil completion is classified as an oil well. As of December 31, 1996, Parker
& Parsley owned interests in 73 wells containing multiple completions.
Leasehold Acreage. The following table sets forth information about Parker
& Parsley's developed, undeveloped and royalty leasehold acreage as of December
31, 1996.
<TABLE>
<CAPTION>
DEVELOPED ACREAGE UNDEVELOPED ACREAGE ROYALTY
----------------------- ----------------------- -------
GROSS ACRES NET ACRES GROSS ACRES NET ACRES ACREAGE
----------- --------- ----------- --------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
United States...................... 1,174,911 517,385 1,029,883 597,210 435,618
Argentina(a)....................... 5,718 825 1,816,429 262,111 --
--------- ------- --------- ------- -------
Total...................... 1,180,629 518,210 2,846,312 859,321 435,618
========= ======= ========= ======= =======
</TABLE>
- ---------------
(a) Effective February 22, 1997, Parker & Parsley relinquished its interests in
the Laguna Blanca and Las Lajas blocks in the Neuquin Basin of Central
Argentina which represents 1,199,670 gross and 173,113 net undeveloped acres
at December 31, 1996.
Competition and Markets
Competition. The oil and gas industry is highly competitive. A large number
of companies and individuals engage in the exploration for and development of
oil and gas properties, and there is a high degree of competition for oil and
gas properties suitable for development or exploration. Acquisitions of oil and
gas properties have been an important element of Parker & Parsley's growth, and
Parker & Parsley intends to continue to acquire oil and gas properties. The
principal competitive factors in the acquisition of oil and gas properties
include the staff and data necessary to identify, investigate and purchase such
properties and the financial resources necessary to acquire and develop them.
Many of Parker & Parsley's competitors are substantially larger and have greater
financial and other resources than Parker & Parsley.
Markets. Parker & Parsley's ability to produce and market oil and gas
profitably depends on numerous factors beyond Parker & Parsley's control. The
effect of these factors cannot be accurately predicted or anticipated. In recent
years, worldwide oil production capacity and gas production capacity in certain
areas of the United States have exceeded demand, with resulting declines in the
price of oil and gas. Although Parker & Parsley cannot predict the occurrence of
events that may affect oil and gas prices or the degree to which oil
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<PAGE> 138
and gas prices will be affected, it is possible that prices for any oil or gas
Parker & Parsley produces will be lower than those currently available. Any
significant decline in the price of oil or gas would adversely affect Parker &
Parsley's revenues, profitability and cash flow and could, under certain
circumstances, result in a reduction in the carrying value of Parker & Parsley's
oil and gas properties.
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OWNERSHIP OF MESA, PARKER & PARSLEY AND PIONEER COMMON STOCK
MESA
The following table sets forth (i) as of May 31, 1997, the number and
percentage of the outstanding shares of Mesa Common Stock that is beneficially
owned by the directors and executive officers of Mesa, as well as by each person
or entity known by Mesa to beneficially own more than 5% of the Common Stock and
(ii) the number and percentage of the outstanding shares of Pioneer Common Stock
owned by such persons after the Mergers. Except as otherwise indicated below,
Mesa believes that each individual or entity named has sole investment and
voting power with respect to shares of Mesa Common Stock indicated as
beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF PIONEER
SHARES OF MESA COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
--------------------------------------- -----------------------
FULLY DILUTED
NUMBER(2) PERCENTAGE PERCENTAGE NUMBER(3) PERCENTAGE
---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
DNR-MESA Holdings L.P.(4)............... 62,424,436 49.28% 33.14% 11,147,221 16.80%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
FMR Corp.(5)............................ 8,213,201 11.93% 4.36% 1,336,072 2.01%
82 Devonshire Street
Boston, Massachusetts 02109
The Prudential Insurance Company of
America(6)............................ 7,870,843 11.68% 4.18% 1,236,039 1.86%
751 Broad Street
Newark, New Jersey 07102-3777
BKP Partners L.P.(7).................... 4,738,900 7.04% 2.52% 784,450 1.18%
One Sansome Street, Suite 3900
San Francisco, CA 94104
Caxton International Limited(8)......... 4,095,537 6.17% 2.17% 659,917 *
c/o Leeds Management Services Limited
129 Front Street, Penthouse
Hamilton HM12, Bermuda
The Capital Group Companies, Inc. and
Capital Research and Management
Co.(9)................................ 3,801,035 5.74% 2.02% 611,792 *
333 South Hope Street
Los Angeles, CA 90071
I. Jon Brumley(10)...................... 480,000 * * 228,571 *
John S. Herrington...................... 27,571 * * 4,566 *
Kenneth A. Hersh........................ -- * * -- *
Boone Pickens(11)....................... 7,713,742 10.95% 4.07% 1,285,490 1.93%
Richard E. Rainwater(4)................. 62,424,436 49.28% 33.14% 11,147,221 16.78%
Philip B. Smith......................... -- * * -- *
Robert L. Stillwell..................... 25,434 * * 4,542 *
Dennis E. Fagerstone.................... 241,729 * * 85,088 *
Edwin E. Hance.......................... 87,878 * * 32,715 *
M. Garrett Smith........................ 135,005 * * 54,286 *
Directors and Officers as a group (16
persons).............................. 71,403,505 53.24% 37.91% 12,936,185 19.29%
</TABLE>
- ---------------
* Less than 1.0%
(1) Includes shares of Mesa Common Stock issuable upon conversion of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock. In accordance
with the rules of the Commission, the "Percentages" set forth above
include, for each person, options or shares of Preferred Stock assuming
exercise or exchange only by that person. The "Fully Diluted Percentage"
assumes all holders of options and Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock exercise or convert such securities.
(2) Includes shares issuable upon the exercise of options that are exercisable
within sixty days of May 31, 1997, as follows: 480,000 for Mr. Brumley;
210,000 for Mr. Fagerstone; 83,000 for Mr. Hance; 130,000
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<PAGE> 140
for Mr. Smith; 1,075,000 shares for Mr. Pickens; and 2,188,350 for all
current directors and officers as a group.
(3) Upon consummation of the Mergers, all options granted to officers of Mesa
will immediately become exercisable in full. Includes shares of Pioneer
Common Stock issuable upon exercise of options as follows: 228,571 shares
for Mr. Brumley; 80,000 shares for Mr. Fagerstone; 31,857 shares for Mr.
Hance; 53,571 shares for Mr. Smith; 153,571 shares for Mr. Pickens; and
633,692 shares for all current directors and officers as a group. See "The
Mergers -- Interests of Certain Persons in the Mergers -- Mesa Stock
Options."
(4) Represents shares of Mesa Common Stock issuable upon conversion of shares
of Mesa Series B Preferred Stock held by DNR. Mr. Rainwater is the sole
shareholder and President of Rainwater, Inc., the sole general partner of
DNR, and, as such, may be deemed to beneficially own the shares of stock to
be held by DNR.
(5) The Schedule 13G filed with the Commission on February 12, 1997, by FMR
Corp. states that as of December 31, 1996, Fidelity Management & Research
Company ("Fidelity"), a wholly owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, is the beneficial owner of 8,123,844 shares or 11.82% of Mesa
Common Stock as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940. The ownership of one investment company, Fidelity Capital &
Income Fund ("Fund"), amounted to 5,011,840 shares or 7.29% of Mesa Common
Stock outstanding. The foregoing share totals are as of December 31, 1996
and exclude the March 31, 1996 preferred stock dividend. Edward C. Johnson,
III, chairman of FMR Corp., FMR Corp., through its control of Fidelity, and
the Fund each has sole power to dispose of the 8,213,201 shares owned by
the Fund. Abigail Johnson is a director of and owns 24.5% of the aggregate
outstanding voting stock of FMR Corp. and has entered into a shareholders'
voting agreement with other holders of FMR Corp. stock. Accordingly, the
Johnson family may be deemed, under the Investment Company Act of 1940, to
be a controlling group with respect to FMR Corp. The total number of shares
beneficially owned by FMR Corp. includes 4,557,201 shares of Mesa Common
Stock issuable upon the conversion of Mesa Series A Preferred Stock.
(6) Based on the Schedule 13G/A filed with the Commission on January 27, 1997,
includes 3,125,723 shares of Mesa Common Stock issuable upon the conversion
of Mesa Series A Preferred Stock.
(7) Based on the Schedule 13D filed with the Commission on March 18, 1997, Mr.
Bob K. Pryt is the sole stockholder of BKP Capital Management ("BKPCM").
BKPCM and Mr. Pryt are the general partners of BKP Partners, L.P., which is
an investment partnership. As a result of the foregoing, Mr. Pryt may be
deemed to beneficially own the Mesa Common Stock owned by BKP Partners,
L.P. Includes 3,009,000 shares of Mesa Common Stock issuable upon the
conversion of Mesa Series A Preferred Stock.
(8) Mr. Bruce S. Kovner is the Chairman and sole shareholder of Caxton
Corporation, the manager and majority owner of Caxton Associates, LLC. As
trading advisor to Caxton International, Caxton Associates, LLC has voting
and dispositive power with respect to investments made by Caxton
International. As a result of the foregoing, Mr. Kovner may be deemed to
beneficially own the common shares owned by Caxton International. Includes
2,095,537 shares of Mesa Common Stock issuable upon the conversion of Mesa
Series A Preferred Stock.
(9) Based on the Schedule 13G filed with the Commission on February 14, 1996,
includes 1,926,035 shares of Mesa Common Stock issuable upon the conversion
of Mesa Series A Preferred Stock.
(10) Mr. Brumley is a general partner of Brumley Partners, a Texas general
partnership and a limited partner of DNR. Mr. Brumley disclaims beneficial
ownership of any of the shares of stock held by DNR.
(11) Includes 7,103 shares of Mesa Common Stock owned by several trusts for Mr.
Pickens' children of which he is a trustee, and over which shares he has
sole voting and investment power, although he has no economic interest
therein. Excludes 5,538 shares of Mesa Common Stock owned by Mrs. Pickens
as her separate property, as to which Mr. Pickens disclaims beneficial
ownership and with respect to which he does not have or share voting or
investment power. Includes 5,138,742 shares of Mesa Common Stock issuable
upon the conversion of Mesa Series A Preferred Stock.
As used in this Joint Proxy Statement/Prospectus, except as otherwise
noted, the number of "fully diluted" shares of Mesa Common Stock includes shares
issuable upon conversion of Mesa Series A Preferred
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<PAGE> 141
Stock and Mesa Series B Preferred Stock, but excludes (i) shares issuable
pursuant to employee stock options and (ii) unless otherwise indicated, shares
issuable as dividends on the Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock.
PARKER & PARSLEY
The following table sets forth (i) as of June 25, 1997, the number and
percentage of the outstanding shares of Parker & Parsley Common Stock that is
beneficially owned by the directors and executive officers of Parker & Parsley,
as well as by each person or entity known by Parker & Parsley to beneficially
own more than 5% of the Common Stock and (ii) the number and percentage of the
outstanding shares of Pioneer Common Stock to be owned by such persons after the
Mergers. Except as otherwise indicated below, Parker & Parsley believes that
each individual or entity named has sole investment and voting power with
respect to shares of Parker & Parsley Common Stock indicated as beneficially
owned by them.
<TABLE>
<CAPTION>
SHARES OF PARKER & SHARES OF PIONEER
PARSLEY COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
---------------------- ----------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Denver Investment Advisors LLC(1).................... 2,234,000 6.4% 2,234,000 3.4%
1225 17th Street, 26th Floor
Denver, Colorado 80202
FMR Corp.(1)......................................... 3,006,933 8.6% 3,006,933 4.5%
82 Devonshire Street
Boston, Massachusetts 02109
Mackay-Shields Financial Corporation(1).............. 1,792,950 5.1% 1,792,950 2.7%
9 West 57th Street
New York, New York 10019
Scott D. Sheffield(2)(3)............................. 381,331 1.1% 484,665 *
Mark L. Withrow(2)(4)................................ 38,314 * 75,980 *
Timothy L. Dove(2)................................... 36,282 * 67,282 *
Hermann Eben(2)...................................... 35,756 * 51,256 *
Lon Kile(2).......................................... 61,856 * 94,856 *
Larry Paulsen(2)..................................... 27,973 * 50,973 *
Mel H. Fischer....................................... 7,890 * 7,890 *
R. Hartwell Gardner.................................. 9,340 * 9,340 *
James L. Houghton(5)................................. 12,066 * 12,066 *
Jerry P. Jones....................................... 13,978 * 13,978 *
Charles E. Ramsey, Jr................................ 15,662 * 15,662 *
Arthur L. Smith...................................... 8,653 * 8,653 *
Edward O. Vetter(6).................................. 12,623 * 12,623 *
Michael D. Wortley................................... 6,144 * 6,144 *
Directors and Officers as a group(7) (14 persons).... 667,868 1.9% 911,368 1.4%
Directors, Officers and Key contributors as a
group(8) (73 persons).............................. 890,929 2.5% 1,651,000 2.5%
</TABLE>
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<PAGE> 142
- ---------------
* Less than 1%.
(1) Based on a report prepared by D.F. King & Co., Inc. reporting the shares
such institution holds at March 31, 1997.
(2) Parker & Parsley Common Stock beneficially owned includes the following
number of shares subject to stock options that were exercisable at or
within 60 days of June 25, 1997; Mr. Sheffield, 66,666; Mr. Withrow, 4,334;
Mr. Dove, 17,000; Mr. Eben, 4,000; Mr. Kile, 16,000; and Mr. Paulsen,
9,000. Upon consummation of the Mergers, all options will become
exercisable in full. Accordingly, shares of Pioneer Common Stock
beneficially owned includes the following number of shares subject to stock
options that will be exercisable at or within 60 days of the effective date
of the Mergers: Mr. Sheffield, 170,000; Mr. Withrow, 42,000; Mr. Dove,
48,000; Mr. Eben, 19,500; Mr. Kile, 49,000; and Mr. Paulsen, 32,000.
(3) Includes 400 shares held in an IRA account by Mr. Sheffield and 100 shares
held by a minor child of Mr. Sheffield.
(4) Includes 2,000 shares held in an SEP account by Mr. Withrow.
(5) Includes 4,004 shares held by Mr. Houghton's wife.
(6) Includes 9,970 shares held by a family trust of which Mr. Vetter is a
trustee.
(7) Parker & Parsley Common Stock beneficially owned includes 117,000 shares
subject to stock options granted under the Parker & Parsley Long-Term
Incentive Plan that were exercisable at or within 60 days after June 25,
1997. Upon consummation of the Mergers, all options will become exercisable
in full. Accordingly, shares of Pioneer Common Stock beneficially owned
includes 360,500 shares subject to stock options that will be exercisable
at or within 60 days of the effective date of the Mergers.
(8) Parker & Parsley Common Stock beneficially owned includes 259,396 shares
subject to stock options granted under the Parker & Parsley Long-Term
Incentive Plan that were exercisable at or within 60 days after June 25,
1997. Upon consummation of the Mergers, all options will become exercisable
in full. Accordingly, shares of Pioneer Common Stock beneficially owned
includes 1,019,467 shares subject to stock options that will be exercisable
at or within 60 days of the effective date of the Mergers.
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<PAGE> 143
THE SPECIAL MEETINGS
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies (i) from the holders of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock by the Mesa Board for use at
the Mesa Special Meeting and (ii) from the holders of Parker & Parsley Common
Stock by the Parker & Parsley Board for use at the Parker & Parsley Special
Meeting.
MESA SPECIAL MEETING
The Mesa Special Meeting will be held on August 7, 1997 at 2:00 p.m.,
Dallas time, at the Wyndham Anatole Hotel, Wedgwood Room, 2201 Stemmons Freeway,
Dallas, Texas.
At the Mesa Special Meeting, the stockholders of Mesa will be asked to
consider and vote upon the following four proposals (the "Mesa Proposals"):
1. To consider and vote upon a proposal to approve and adopt the
Merger Agreement. Pursuant to the Merger Agreement, among other things, (i)
Mesa will merge with and into Pioneer with the result that Mesa is
reincorporated from Texas to Delaware and (a) each seven outstanding shares
(other than any shares held directly by Mesa in its treasury or shares held
by Parker & Parsley) of Mesa Common Stock will be converted into the right
to receive one share of Pioneer Common Stock and (b) each seven outstanding
shares (other than any shares held by Mesa in its treasury or shares held
by Parker & Parsley) of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock will be converted into the right to receive either (x) 1.25
shares of Pioneer Common Stock or (y) one share of Pioneer Preferred Stock,
in each case as the holder thereof shall elect or be deemed to elect
(provided that if the holders of a majority of the outstanding shares of
Mesa Series A Preferred Stock or Mesa Series B Preferred Stock, each voting
as a separate class, vote in favor of the Merger Agreement, then all
holders of the series for which the vote has been obtained will receive the
Mesa Common Consideration regardless of whether such holders elected to
receive Pioneer Preferred Stock or Pioneer Common Stock) and (ii) Parker &
Parsley will merge with and into MOC with the effect that Parker & Parsley
will be a wholly-owned subsidiary of Pioneer and each outstanding share of
Parker & Parsley Common Stock (other than any shares held by Parker &
Parsley in its treasury or shares held by Mesa) will be converted into the
right to receive one share of Pioneer Common Stock. See "The Mergers."
2. To consider and vote upon a proposal to approve the adoption of the
Mesa 1996 Incentive Plan. See "Description of Mesa 1996 Incentive Plan."
3. To consider and vote upon a proposal to approve the adoption of the
Pioneer Long-Term Incentive Plan. See "Description of Pioneer Long-Term
Incentive Plan."
4. To consider and vote upon a proposal to approve the adoption of the
Pioneer Employee Stock Purchase Plan. See "Description of Pioneer Employee
Stock Purchase Plan."
Approval of the Merger Agreement will constitute approval of the Mergers.
See "The Mergers." A copy of the Merger Agreement is attached hereto as Appendix
I.
Copies of the Mesa 1996 Incentive Plan, the Pioneer Long-Term Incentive
Plan and the Pioneer Employee Stock Purchase Plan are attached hereto as
Appendix VI, Appendix VII and Appendix VIII, respectively.
THE MESA BOARD HAS UNANIMOUSLY APPROVED THE MESA PROPOSALS AND RECOMMENDS
THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF EACH OF THE MESA PROPOSALS.
PARKER & PARSLEY SPECIAL MEETING
The Parker & Parsley Special Meeting will be held on August 7, 1997 at 2:00
p.m., Dallas time, at the Wyndham Anatole Hotel, Peacock Room, 2201 Stemmons
Freeway, Dallas, Texas.
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<PAGE> 144
At the Parker & Parsley Special Meeting, the stockholders of Parker &
Parsley will be asked to consider and vote upon the following three proposals
(the "Parker & Parsley Proposals"):
1. To consider and vote upon a proposal to approve and adopt the
Merger Agreement. Pursuant to the Merger Agreement, among other things, (i)
Mesa will merge with and into Pioneer with the result that Mesa is
reincorporated from Texas to Delaware and (a) each seven outstanding shares
(other than any shares held by Mesa in its treasury or shares held by
Parker & Parsley) of Mesa Common Stock will be converted into the right to
receive one share of Pioneer Common Stock and (b) each seven outstanding
shares (other than any shares held directly by Mesa in its treasury or
shares held by Parker & Parsley) of Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock will be converted into the right to receive either
(x) 1.25 shares of Pioneer Common Stock or (y) one share of Pioneer Series
A Preferred Stock, in each case as the holder thereof shall elect or be
deemed to elect (provided that if the holders of a majority of the
outstanding shares of Mesa Series A Preferred Stock or Mesa Series B
Preferred Stock, each voting as a separate class, vote in favor of the
Merger Agreement, then all holders of the series for which the vote has
been obtained will receive Mesa Common Consideration) and (ii) Parker &
Parsley will merge with and into MOC with the effect that Parker & Parsley
will be a wholly-owned subsidiary of Pioneer and each outstanding share of
Parker & Parsley Common Stock (other than any shares held by Parker &
Parsley in its treasury or shares held by Mesa) will be converted into the
right to receive one share of Pioneer Common Stock. See "The Mergers."
2. To consider and vote upon a proposal to approve the adoption of the
Pioneer Long-Term Incentive Plan. See "Description of Pioneer Long-Term
Incentive Plan."
3. To consider and vote upon a proposal to approve the adoption of the
Pioneer Employee Stock Purchase Plan. See "Description of Pioneer Employee
Stock Purchase Plan."
Approval of the Merger Agreement will constitute approval of the Mergers.
See "The Mergers." A copy of the Merger Agreement is attached hereto as Appendix
I.
A copy of the Pioneer Long-Term Incentive Plan and the Pioneer Employee
Stock Purchase Plan is attached hereto as Appendix VII and Appendix VIII,
respectively.
THE PARKER & PARSLEY BOARD HAS UNANIMOUSLY APPROVED THE PARKER & PARSLEY
PROPOSALS AND RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF EACH OF
THE PARKER & PARSLEY PROPOSALS.
QUORUM
The presence, in person or by proxy, of the holders of a majority of (i)
the outstanding shares of Mesa Common Stock, (ii) the outstanding shares of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock and (iii) the
outstanding shares of Mesa Common Stock, Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock is necessary to constitute a quorum at the Mesa Special
Meeting. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Parker & Parsley Common Stock is necessary to
constitute a quorum at the Parker & Parsley Special Meeting.
VOTE REQUIRED
Mesa. The affirmative vote of (i) a majority of the outstanding shares of
Mesa Common Stock, voting as a separate class, (ii) a majority of the
outstanding shares of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock, voting as a single class, and (iii) a majority of the outstanding shares
of Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock, voting as a single class (in each case with shares of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock having one vote per share, on
an as converted basis) is required to approve the Merger Agreement. Approval of
the Merger Agreement constitutes approval of the Mergers and the other
transactions contemplated by the Merger Agreement. IN ADDITION, IF AS A PART OF
THE FOREGOING APPROVALS A MAJORITY OF THE OUTSTANDING SHARES OF MESA SERIES A
PREFERRED STOCK VOTE IN FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT, THEN ALL
HOLDERS OF MESA SERIES A PREFERRED STOCK WILL RECEIVE THE MESA COMMON
CONSIDERATION IN THE REINCORPORATION MERGER
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<PAGE> 145
REGARDLESS OF WHETHER SUCH HOLDERS ELECTED TO RECEIVE PIONEER PREFERRED STOCK OR
PIONEER COMMON STOCK. The same majority voting provision applies to the Mesa
Series B Preferred Stock; however, the holder of all of the outstanding shares
of Mesa Series B Preferred Stock has agreed to vote in favor of the approval of
the Merger Agreement and to receive the Mesa Common Consideration pursuant to
the Reincorporation Merger.
Approval and adoption of the Mesa 1996 Incentive Plan, the Pioneer
Long-Term Incentive Plan and the Pioneer Employee Stock Purchase Plan require
that a majority of the shares of Mesa Common Stock, Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock represented in person or by proxy and
entitled to vote at the Mesa Special Meeting, voting as a single class (in each
case with shares of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock having one vote per share on an as converted basis) are voted for such
approval.
Parker & Parsley. The affirmative vote of a majority of the outstanding
shares of Parker & Parsley Common Stock is necessary to approve the Merger
Agreement. Approval and adoption of the Pioneer Long-Term Incentive Plan and the
Pioneer Employee Stock Purchase Plan require that a majority of the shares of
Parker & Parsley Common Stock represented in person or by proxy and entitled to
vote at the Parker & Parsley Special Meeting are voted for such approval.
RECORD DATE; STOCK ENTITLED TO VOTE
Mesa. The Mesa Board has established June 27, 1997 as the date to determine
those record holders of Mesa Common Stock, Mesa Series A Preferred Stock and
Mesa Series B Preferred Stock entitled to notice of and to vote at the Mesa
Special Meeting. On that date, there were 64,279,568 shares, 61,651,163 shares
and 62,424,436 shares of Mesa Common Stock, Mesa Series A Preferred Stock and
Mesa Series B Preferred Stock, respectively, outstanding. Holders of Mesa Common
Stock are entitled to one vote with respect to the Mesa Proposals for each share
held. Holders of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
(i) when voting as a separate class or as a single class, are entitled to one
vote for each share held and (ii) when voting with shares of Mesa Common Stock,
are entitled to one vote per share on an as converted basis. On the Mesa Record
Date, each share of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock would be able to convert into one share of Mesa Common Stock.
Certain stockholders of Mesa have agreed to vote for approval and adoption
of the Merger Agreement, the Mesa 1996 Incentive Plan, the Pioneer Long-Term
Incentive Plan and the Pioneer Employee Stock Purchase Plan. See "Agreements by
Mesa Stockholders."
Parker & Parsley. The Parker & Parsley Board has established June 27, 1997
as the date to determine those record holders of Parker & Parsley Common Stock
entitled to notice of and to vote at the Parker & Parsley Special Meeting. On
that date, there were 35,038,821 shares of Parker & Parsley Common Stock
outstanding. Holders of Parker & Parsley Common Stock are entitled to one vote
with respect to the Parker & Parsley Proposals for each share held.
VOTING OF PROXIES
Shares represented by all properly executed proxies received in time for
each respective Special Meeting will be voted at such meeting in the manner
specified by the holders thereof. If no instructions are indicated, such proxies
will be voted FOR approval and adoption of the Merger Agreement, the Pioneer
Long-Term Incentive Plan, the Pioneer Employee Stock Purchase Plan, and in the
case of Mesa stockholders, the Mesa 1996 Incentive Plan. A properly executed
proxy marked "ABSTAIN," although counted for purposes of determining whether
there is a quorum and for purposes of determining the aggregate voting power and
number of shares represented and entitled to vote at the applicable Special
Meeting, will not be voted. Accordingly, abstentions will have the same effect
as a vote against each proposal. Shares represented by "broker non-votes" (i.e.,
shares held by brokers or nominees which are represented at a meeting but with
respect to which the broker or nominee is not empowered to vote on a particular
proposal) will be counted for purposes of determining whether there is a quorum
at the applicable Special Meeting, but will not be included for purposes of
determining the aggregate voting power and number of shares represented at the
applicable Special Meeting. Accordingly, "broker non-votes" will have the same
effect as a vote against the proposal to
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<PAGE> 146
adopt the Merger Agreement and will have no effect on the other proposals. It is
not expected that any matter other than those referred to herein will be brought
before either of the Special Meetings. If, however, other matters are properly
presented at any such meeting, the persons named as proxies will vote in
accordance with their judgment with respect to such matters. The persons named
as the proxies will not use discretionary authority to vote to adjourn either
Special Meeting with respect to shares for which the related proxy card
instructs the proxies to vote against approval and adoption of the Merger
Agreement.
If a quorum is not present at either Special Meeting, the stockholders
entitled to vote who are present or represented by proxy at such Special Meeting
have the power to adjourn such Special Meeting from time to time without notice
until a quorum is present. At any such adjourned meeting at which a quorum is
present, any business may be transacted that may have been transacted at such
Special Meeting had a quorum originally been present; provided, that if the
adjournment is for more than 30 days or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the adjourned
meeting. Proxies solicited by this Joint Proxy Statement/Prospectus may be used
to vote in favor of any motion to adjourn the Special Meetings. The persons
named on the proxies intend to vote in favor of any motion to adjourn such
Special Meeting to a subsequent day if, prior to such Special Meeting, such
persons have not received sufficient proxies to approve the proposals described
in this Joint Proxy Statement/Prospectus. If such a motion is approved but
sufficient proxies are not received by the time set for the resumption of such
Special Meeting, this process will be repeated until sufficient proxies to vote
in favor of the proposals to be presented to the stockholders at such Special
Meeting have been received or it appears that sufficient proxies will not be
received.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS.
CONFIDENTIAL VOTING
Mesa's Bylaws require the Mesa Board to designate an independent third
party not affiliated with Mesa or with any other third party soliciting proxies
to collect, count, and hold all proxies and ballots that identify stockholders.
Pursuant to this provision, the Mesa Board has designated The Corporation Trust
Company as the independent collection agent for the Mesa Special Meeting.
REVOCATION OF PROXIES
Any holder of Mesa Common Stock, Mesa Series A Preferred Stock or Mesa
Series B Preferred Stock has the unconditional right to revoke his or her proxy
at any time prior to the voting thereof at the Mesa Special Meeting by (i)
filing a written revocation with the Corporate Secretary of Mesa prior to the
voting of such proxy, (ii) giving a duly executed proxy bearing a later date or
(iii) attending the Mesa Special Meeting and voting in person. Attendance by a
stockholder of Mesa at the Mesa Special Meeting will not by itself revoke his or
her proxy.
Any holder of Parker & Parsley Common Stock has the unconditional right to
revoke his or her proxy at any time prior to the voting thereof at the Parker &
Parsley Special Meeting by (i) filing a written revocation with the Corporate
Secretary of Parker & Parsley prior to the voting of such proxy, (ii) giving a
duly executed proxy bearing a later date or (iii) attending the Parker & Parsley
Special Meeting and voting in person. Attendance by a stockholder of Parker &
Parsley at the Parker & Parsley Special Meeting will not by itself revoke his or
her proxy.
SOLICITATION OF PROXIES
Solicitation of proxies for use at the Mesa Special Meeting and the Parker
& Parsley Special Meeting may be made in person or by mail, telephone, telecopy
or telegram. Each of Mesa and Parker & Parsley will bear the cost of
solicitation of proxies from its own stockholders, except that Mesa and Parker &
Parsley will share equally the Registration Statement filing fees and the cost
of printing this Joint Proxy Statement/Prospectus. In addition to solicitation
by mail, the directors, officers and regular employees of each company and its
subsidiaries may solicit proxies from stockholders of such company by telephone,
telecopy or
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<PAGE> 147
telegram or in person. Mesa and Parker & Parsley have requested banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries to
forward solicitation materials to the beneficial owners of Mesa Common Stock,
Mesa Series A Preferred Stock, Mesa Series B Preferred Stock or Parker & Parsley
Common Stock held of record by such entities, and Mesa and Parker & Parsley, as
the case may be, will, upon the request of such record holders, reimburse
reasonable forwarding expenses. In addition, Mesa and Parker & Parsley have
engaged Morrow & Co., Inc. and D.F. King & Co., Inc., respectively, to assist in
the solicitation of proxies. Mesa and Parker & Parsley anticipate that they will
incur total fees of approximately $50,000 and $7,500, respectively, plus
reimbursement of certain out-of-pocket expenses for this service, with each
company to pay for its own solicitation costs.
CERTAIN TERMS OF THE MERGER AGREEMENT
THE FOLLOWING DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS
ATTACHED AS APPENDIX I TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED BY REFERENCE HEREIN.
CONDITIONS TO THE MERGER
Conditions to Obligation of Each Party to Effect the Merger
The respective obligation of each party to effect the Mergers is subject to
the satisfaction prior to the Closing of the following conditions:
Parker & Parsley Stockholder Approval. The Merger Agreement and the Parker
& Parsley Merger shall have been approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Parker & Parsley Common
Stock entitled to vote thereon.
Mesa Stockholder Approval. The Merger Agreement and the Reincorporation
Merger shall have been approved and adopted by the affirmative vote of (i) a
majority of the outstanding shares of Mesa Common Stock, voting as a separate
class, (ii) a majority of the outstanding shares of Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock, voting as a single class and (iii) a
majority of the outstanding shares of Mesa Common Stock, Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock, voting as a single class (in each case
with shares of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
having one vote per share, on an as converted basis).
NYSE Listing. The shares of Pioneer Common Stock and Pioneer Series A
Preferred Stock issuable to Parker & Parsley and Mesa stockholders pursuant to
the Merger Agreement in the Mergers shall have been authorized for listing on
the NYSE upon official notice of issuance. Application is being made for these
listings.
Other Approvals. The waiting period applicable to the consummation of the
Mergers under the HSR Act shall have expired or been terminated and all filings
required to be made prior to the RM or P&P Effective Time, as applicable, with,
and all consents, approvals, permits and authorizations required to be obtained
prior to the RM or P&P Effective Time, as applicable, from, any Governmental
Entity (as defined in the Merger Agreement) in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby shall have been made or obtained (as the case may be),
except for such consents, approvals, permits and authorizations the failure of
which to be obtained would not, in the aggregate, be reasonably likely to result
in a Material Adverse Effect (as defined in the Merger Agreement) on Pioneer
(assuming the Mergers have taken place) or to materially adversely affect the
consummation of the Mergers, and no such consent, approval, permit or
authorization shall impose terms or conditions that would have, or would be
reasonably likely to have, a Material Adverse Effect on Pioneer (assuming the
Mergers have taken place). Unless otherwise agreed to by Mesa and Parker &
Parsley (which agreement shall not be unreasonably withheld), no such consent,
approval, permit or authorization shall then be subject to appeal. The waiting
period under the HSR Act has expired. Neither Mesa nor Parker & Parsley is aware
of any other governmental or regulatory approval required to complete the
Mergers, other than compliance with applicable securities loans.
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The Registration Statement. The Registration Statement of which this Joint
Proxy Statement/Prospectus forms a part shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceeding
seeking a stop order.
No Injunctions or Restraints. No temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction, no order of any Governmental Entity having jurisdiction over any
party hereto, and no other legal restraint or prohibition shall be in effect (an
"Injunction") preventing or making illegal the consummation of either of the
Mergers.
Additional Conditions to Obligation of Mesa, Pioneer and MOC
The obligations of Mesa, Pioneer and MOC to effect the Mergers are subject
to the satisfaction of the following conditions, any or all of which may be
waived in whole or in part by Mesa:
Representations and Warranties. Each of the representations and warranties
of Parker & Parsley set forth in the Merger Agreement shall be true and correct
in all material respects (provided that any representation or warranty of Parker
& Parsley contained therein that is qualified by a materiality standard or a
Material Adverse Effect qualification shall not be further qualified thereby) as
of the date of the Merger Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date, and Mesa shall have received
a certificate signed on behalf of Parker & Parsley by the Chief Executive
Officer and the Chief Financial Officer of Parker & Parsley to such effect.
Performance of Obligations of Parker & Parsley. Parker & Parsley shall have
performed in all material respects all obligations required to be performed by
it under the Merger Agreement at or prior to the Closing Date, and Mesa shall
have received a certificate signed on behalf of Parker & Parsley by the Chief
Executive Officer and the Chief Financial Officer of Parker & Parsley to such
effect.
Tax Opinion. Mesa shall have received an opinion, in form and substance
reasonably satisfactory to Mesa, dated the Closing Date, a copy of which will be
furnished to Parker & Parsley, of Baker & Botts, L.L.P., counsel to Mesa, to the
effect that, if each of the Mergers is consummated in accordance with the terms
of the Merger Agreement, each of the Mergers will be treated as a reorganization
within the meaning of Section 368(a) of the Code, no gain or loss will be
recognized for federal income tax purposes by Mesa, Pioneer, MOC or Parker &
Parsley as a result of either of the Mergers, and no gain or loss will be
recognized for federal income tax purposes by a stockholder of Parker & Parsley
or Mesa as a result of either of the Mergers upon the conversion of shares of
Parker & Parsley Common Stock, Mesa Common Stock, Mesa Series A Preferred Stock
or Mesa Series B Preferred Stock into shares of Pioneer Common Stock or Pioneer
Preferred Stock, as applicable, except with respect to (i) cash, if any,
received in lieu of fractional shares of Pioneer Common Stock or Pioneer
Preferred Stock or (ii) a stockholder in special circumstances, such as a
stockholder who acquired Parker & Parsley Common Stock or Mesa Common Stock
through exercise of employee stock options or otherwise as compensation for
employment. Mesa has received such a tax opinion from Baker & Botts, L.L.P.,
dated June 26, 1997. Mesa does not intend to waive the condition that the tax
opinion be delivered again on the Closing Date.
Letters from Rule 145 Affiliates. Parker & Parsley will cause to be
prepared and delivered to Mesa a list identifying all persons who, at the time
of the Parker & Parsley Special Meeting, may be deemed to be "affiliates" of
Parker & Parsley, as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act (the "Parker & Parsley Rule 145 Affiliates"). Mesa
shall have received from each person identified as a Parker & Parsley Rule 145
Affiliate a written agreement that such person will not sell, pledge, transfer
or otherwise dispose of any shares of Pioneer Common Stock issued to such Parker
& Parsley Rule 145 Affiliate pursuant to the Parker & Parsley Merger, except
pursuant to an effective registration statement or in compliance with Rule 145
or an exemption from the registration requirements of the Securities Act.
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Additional Conditions to Obligation of Parker & Parsley
The obligation of Parker & Parsley to effect the Parker & Parsley Merger is
subject to the satisfaction of the following conditions, any or all of which may
be waived in whole or in part by Parker & Parsley:
Representations and Warranties of Mesa, Pioneer and MOC. Each of the
representations and warranties of Mesa, Pioneer and MOC set forth in the Merger
Agreement shall be true and correct in all material respects (provided that any
representation or warranty of Mesa, Pioneer and MOC contained therein that is
qualified by a materiality standard or a Material Adverse Effect qualifications
shall not be further qualified thereby) as of the date of the Merger Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date, and Parker & Parsley shall have received a certificate signed on behalf of
Mesa by the Chief Executive Officer and the Chief Financial Officer of Mesa to
such effect.
Performance of Obligations of Mesa. Mesa, Pioneer and MOC shall have
performed in all material respects all obligations required to be performed by
them under the Merger Agreement at or prior to the Closing Date, and Parker &
Parsley shall have received a certificate signed on behalf of Mesa by the Chief
Executive Officer and the Chief Financial Officer of Mesa to such effect.
Tax Opinion. Parker & Parsley shall have received an opinion, in form and
substance reasonably satisfactory to Parker & Parsley, dated the Closing Date, a
copy of which will be furnished to Mesa, of Vinson & Elkins L.L.P., counsel to
Parker & Parsley, to the effect that, if each of the Mergers is consummated in
accordance with the terms of the Merger Agreement, each of the Mergers will be
treated as a reorganization within the meaning of Section 368(a) of the Code, no
gain or loss will be recognized for federal income tax purposes by Mesa,
Pioneer, MOC or Parker & Parsley as a result of either of the Mergers upon the
conversion of shares of Parker & Parsley Common Stock, Mesa Common Stock, Mesa
Series A Preferred Stock or Mesa Series B Preferred Stock into shares of Pioneer
Common Stock or Pioneer Preferred Stock, as applicable, except with respect to
(i) cash, if any, received in lieu of fractional shares of Pioneer Common Stock
or Pioneer Preferred Stock or (ii) a stockholder in special circumstances, such
as a stockholder who acquired shares of Parker & Parsley Common Stock or Mesa
Common Stock through the exercise of employee stock options or otherwise as
compensation for employment. Parker & Parsley has received such a tax opinion
from Vinson & Elkins L.L.P. dated June 26, 1997. Parker & Parsley does not
intend to waive the condition that the tax opinion be delivered again on the
Closing Date.
Letters from Rule 145 Affiliates. Mesa will cause to be prepared and
delivered to Parker & Parsley a list identifying all persons who, at the time of
the Mesa Special Meeting, may be deemed to be "affiliates" of Mesa, as that term
is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Mesa Rule 145 Affiliates"). Parker & Parsley shall have received from each
person identified as a Mesa Rule 145 Affiliate a written agreement that such
person will not sell, pledge, transfer or otherwise dispose of any shares of
Pioneer Common Stock or Pioneer Preferred Stock issued to such Mesa Rule 145
Affiliate pursuant to the Reincorporation Merger, except pursuant to an
effective registration statement or in compliance with Rule 145 or an exemption
from the registration requirements of the Securities Act.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Parker & Parsley, Mesa, Pioneer and MOC relating to, among other things,
(i) each of their and certain of their respective subsidiaries organization and
similar corporate matters, (ii) each of their capital structures, (iii) the
authorization, execution, delivery, performance and enforceability of the Merger
Agreement and related matters, and the absence of conflicts, violations of or
defaults under the charters, as amended, or By-Laws, as amended, of each of
Parker & Parsley and Mesa, or any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parker & Parsley or Mesa or any of their respective
subsidiaries or any of their respective properties or assets, (iv) the documents
and reports filed by each of them with the Commission and the accuracy of the
information contained therein, (v) the accuracy of the information provided by
each of them with respect to the Registration Statement and this Joint Proxy
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Statement/Prospectus, (vi) the absence of certain events, changes or effects,
(vii) the absence of undisclosed material liabilities, (viii) compliance with
certain laws, (ix) litigation, (x) taxes, (xi) retirement and other employee
plans and matters relating to the Employee Retirement Income Security Act of
1974, as amended, (xii) labor matters, (xiii) intellectual property matters,
(xiv) environmental matters, (xv) the maintenance of insurance, (xvi) fairness
opinions, (xvii) the stockholder vote required to approve the Merger Agreement,
(xviii) the beneficial ownership of the other party's common stock, (xix)
broker's or similar fees, and (xx) certain tax matters. The Merger Agreement
also contains representations and warranties by Parker & Parsley regarding the
rights agreement relating to the Parker & Parsley Common Stock Purchase Rights,
and representations and warranties by Mesa relating to the interim operations of
Pioneer and MOC.
CERTAIN COVENANTS; CONDUCT OF BUSINESS OF PARKER & PARSLEY AND MESA
During the period from the date of the Merger Agreement and continuing
until the P&P or RM Effective Time, as applicable, (i) Parker & Parsley agrees
as to itself and its subsidiaries that (except as expressly contemplated or
permitted by the Merger Agreement, or to the extent that Mesa shall otherwise
consent in writing) and (ii) Mesa agrees as to itself and its subsidiaries that
(except as expressly contemplated or permitted by the Merger Agreement, or to
the extent that Parker & Parsley shall otherwise consent in writing) (for
purposes of this Section, Parker & Parsley and Mesa each being a "Party"):
Ordinary Course. Each Party and its subsidiaries shall carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and shall use all commercially reasonable efforts
to preserve intact its present business organizations, keep available the
services of its current officers and employees (subject to certain provisions of
the Merger Agreement), and endeavor to preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect
at the P&P or RM Effective Time, as applicable.
Dividends, Changes in Stock. Except as contemplated by the Merger Agreement
and for transactions solely among a Party and its subsidiaries, a Party shall
not and it shall not permit any of its Subsidiaries to: (i) declare or pay any
dividends on or make other distributions in respect of any of its capital stock
or partnership interests, except (x) in the case of Parker & Parsley, for the
declaration and payment of regular cash dividends with respect to Parker &
Parsley's first and third fiscal quarters not in excess of $.05 per share of
Parker & Parsley Common Stock with usual record and payment dates, regular
monthly cash dividends on the Parker & Parsley MIPS paid by Parker & Parsley LLC
in accordance with their terms and dividends from a subsidiary of Parker &
Parsley to Parker & Parsley or another subsidiary of Parker & Parsley and (y) in
the case of Mesa, for the declaration and payment of regular quarterly
payment-in-kind dividends with respect to the Mesa Series A Preferred Stock and
Mesa Series B Preferred Stock in accordance with their terms, upon the
conversion of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
into Mesa Common Stock and/or Mesa Series A Preferred Stock, as the case may be,
in accordance with their terms, and dividends from a subsidiary of Mesa to Mesa
or another subsidiary of Mesa; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of such
Party's capital stock; or (iii) repurchase, redeem or otherwise acquire, or
permit any of its subsidiaries to purchase, redeem or otherwise acquire, any
shares of its capital stock, except as required by the terms of its securities
outstanding on the date hereof or as contemplated by any existing employee
benefit plan and except that Parker & Parsley LLC may redeem the Parker &
Parsley MIPS for cash and/or Parker & Parsley may cause the exchange of the
Parker & Parsley MIPS for Parker & Parsley Common Stock, in each case in
accordance with the terms of the Parker & Parsley MIPS.
Issuance of Securities. A Party shall not and it shall not permit any of
its subsidiaries to, issue, deliver or sell, or authorize or propose to issue,
deliver or sell, any shares of its capital stock of any class, any Voting Debt
(as defined in the Merger Agreement) or other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, Voting Debt, other voting securities or convertible securities,
other than: (i) in the case of Parker & Parsley, (x) the issuance of Parker &
Parsley Common Stock and accompanying Parker & Parsley Rights (as defined in the
Merger Agreement) upon the exercise of stock options granted under the Parker &
Parsley Stock Plans (as defined in the Merger Agreement) that are
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outstanding on the date hereof, or in satisfaction of stock grants or stock
based awards made prior to the date hereof pursuant to the Parker & Parsley
Stock Plans, (y) issuances by a wholly owned subsidiary of Parker & Parsley of
such subsidiary's capital stock to its parent, and (z) the issuance of Parker &
Parsley Series A Preferred Stock (as defined in the Merger Agreement) or Parker
& Parsley Common Stock upon the exchange of the Parker & Parsley MIPS in
accordance with their terms and the issuance of Parker & Parsley Common Stock
upon the conversion of the Parker & Parsley Series A Preferred Stock in
accordance with its terms; and (ii) in the case of Mesa (x) the issuance of Mesa
Common Stock upon the exercise of stock options granted under the Mesa Stock
Plans (as defined in the Merger Agreement) that are outstanding on the date
hereof, or in satisfaction of stock grants or stock based awards made prior to
the date hereof pursuant to Mesa Stock Plans, (y) issuances by a wholly owned
subsidiary of Mesa of such subsidiary's capital stock to its parent and (z)
issuances upon the conversion of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock into Mesa Common Stock and/or Mesa Series A Preferred Stock, as
the case may be, in accordance with their terms.
Governing Documents. Except as contemplated by the Merger Agreement, no
Party shall amend or propose to amend its certificate or articles of
incorporation or bylaws.
No Acquisitions. Other than acquisitions previously disclosed to the other
party or acquisitions as to which the purchase price is not in excess of $50
million in the aggregate, a Party shall not, and it shall not permit any of its
subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or any of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof.
No Dispositions. Other than: (i) as may be necessary or required by law to
consummate the transactions contemplated by the Merger Agreement or (ii) sales,
leases, encumbrances or other dispositions in the ordinary course of business
consistent with past practice that are not material, individually or in the
aggregate, to a Party and its subsidiaries taken as a whole, a Party shall not,
and it shall not permit any of its subsidiaries to, sell, lease, encumber or
otherwise dispose of, or agree to sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, any of its
material assets, except in the case of Mesa, for encumbrances related to the
increase in Mesa's bank credit facility.
No Dissolution, Etc. Except as otherwise permitted or contemplated by the
Merger Agreement, neither Party shall authorize, recommend, propose or announce
an intention to adopt a plan of complete or partial liquidation or dissolution
of such Party or any of its Significant Subsidiaries (as defined in the Merger
Agreement).
Accounting. Neither Party shall, nor shall either Party permit any of its
subsidiaries to, make any changes in their accounting methods which would be
required to be disclosed under the rules and regulations of the Commission,
except as required by law, rule, regulation or generally accepted accounting
principles.
Affiliate Transactions. Neither Party shall, nor shall either Party permit
any of its subsidiaries to, enter into any agreement or arrangement with any of
their respective Affiliates (as such term is defined in Rule 405 under the
Securities Act, an "Affiliate"), other than with wholly owned subsidiaries of
such Party, on terms less favorable to such Party or such subsidiary, as the
case may be, than could be reasonably expected to have been obtained with an
unaffiliated third party on an arm's-length basis.
Insurance. Each Party shall, and shall cause its subsidiaries to, use
commercially reasonable efforts to maintain with financially responsible
insurance companies insurance in such amounts and against such risks and losses
as are customary for companies engaged in their respective businesses.
Tax Matters. Neither Party shall (i) make or rescind any material express
or deemed election relating to Taxes (as defined in the Merger Agreement) unless
it is reasonably expected that such action will not materially and adversely
affect Parker & Parsley or Mesa, including elections for any and all joint
ventures, partnerships, limited liability companies, working interests or other
investments where Parker & Parsley or Mesa, as appropriate, has the capacity to
make such binding election, (ii) settle or compromise any material claim,
action, suit, litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, except where such settlement or compromise will
not materially and adversely affect Parker & Parsley or
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Mesa, or (iii) change in any material respect any of its methods of reporting
income or deductions for federal income tax purposes from those employed in the
preparation of its federal income Tax Returns (as defined in the Merger
Agreement) that have been filed for prior taxable years, except as may be
required by applicable law or except for changes that are reasonably expected
not to materially and adversely affect Parker & Parsley or Mesa.
Certain Employee Matters. Except as otherwise permitted by the Merger
Agreement, a Party shall not and it shall not permit any of its subsidiaries to:
(i) grant any increases in the compensation of any of its directors, officers or
employees, except increases to employees who are not directors or officers made
in the ordinary course of business and in accordance with past practice; (ii)
pay or agree to pay any material pension, retirement allowance or other employee
benefit not required or contemplated by any of the existing Parker & Parsley
Employee Benefit Plans (as defined in the Merger Agreement) or Parker & Parsley
Pension Plans (as defined in the Merger Agreement) or Mesa Employee Benefit
Plans (as defined in the Merger Agreement) or Mesa Pension Plans (as defined in
the Merger Agreement), as applicable, in each case as in effect on the date
hereof to any such director, officer or employee, whether past or present; (iii)
amend or modify in any material respect or receive any assets from the Parker &
Parsley Pension Plan; (iv) enter into any new, or amend any existing, material
employment or severance or termination agreement with any director, officer or
employee; (v) grant any options or other awards under the Parker & Parsley Stock
Plans or Mesa Stock Plans, as applicable; or (vi) become obligated under any new
Parker & Parsley Employee Benefit Plan or Parker & Parsley Pension Plan, or any
new Mesa Employee Benefit Plan or Mesa Pension Plan, which was not in existence
or approved by the Board of Directors of Parker & Parsley or Mesa, as
applicable, prior to the date hereof, or amend any such plan or arrangement in
existence on the date hereof if such amendment would have the effect of
materially enhancing any benefits thereunder.
Indebtedness; Leases; Capital Expenditures. No Party shall, nor shall any
Party permit any of its subsidiaries to, (i) incur any indebtedness for borrowed
money (except (x) to finance any transactions or capital or other expenditures
permitted by the Merger Agreement and regular borrowings under credit facilities
made in the ordinary course of such Party's cash management practices, (y)
refinancings of existing debt and (z) immaterial borrowings that, in each such
case, permit prepayment of such debt without penalty (other than LIBOR breakage
costs), or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of such Party or any of its
subsidiaries or guarantee any debt securities of others, (ii) except in the
ordinary course of business, enter into any material lease (whether such lease
is an operating or capital lease) or create any material mortgages, liens,
security interests or other encumbrances on the property of such Party or any of
its subsidiaries in connection with any indebtedness thereof, or (iii) make or
commit to make aggregate capital expenditures not described in the Parker &
Parsley or Mesa periodic reports filed with the Commission in excess, in the
case of each of Parker & Parsley and Mesa, of an amount equal to the sum of (A)
capital expenditures budgeted by such Party for the fiscal year ending December
31, 1997 as set forth in the capital expenditure budgets delivered to the other
Party, less any budgeted capital expenditures expended prior to the date of the
Merger Agreement, plus (B) capital expenditures (not otherwise included in
budgeted capital expenditures) that may be incurred in connection with the
acquisitions by Parker & Parsley and Mesa, as applicable, permitted by the
Merger Agreement.
Agreements. No Party shall, nor shall any Party permit any of its
Subsidiaries to, agree in writing or otherwise to take any action inconsistent
with any of the foregoing.
No Solicitation by Parker & Parsley. From and after the date of the Merger
Agreement, Parker & Parsley will not, and will not authorize or (to the extent
within its control) permit any of its officers, directors, employees, agents,
Affiliates and other representatives or those of any of its subsidiaries
(collectively, "Parker & Parsley Representatives") to, directly or indirectly,
solicit or encourage (including by way of providing information) any prospective
acquiror or the invitation or submission of any inquiries, proposals or offers
or any other efforts or attempts that constitute, or may reasonably be expected
to lead to, any Parker & Parsley Acquisition Proposal (as hereinafter defined)
from any person or engage in any discussions or negotiations with respect
thereto or otherwise cooperate with or assist or participate in, or facilitate
any such proposal; provided, however, that, notwithstanding any other provision
of the Merger Agreement, (i) Parker & Parsley's Board of Directors may take and
disclose to the stockholders of Parker & Parsley a position contemplated by
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Rule 14e-2(a) promulgated under the Exchange Act and (ii) following receipt from
a third party (without any solicitation, initiation or encouragement, directly
or indirectly, by Parker & Parsley or any Parker & Parsley Representatives) of a
bona fide Parker & Parsley Acquisition Proposal, (x) Parker & Parsley may engage
in discussions or negotiations with such third party and may furnish such third
party information concerning it, and its business, properties and assets if such
third party executes a confidentiality agreement in reasonably customary form
and (y) the Board of Directors of Parker & Parsley may withdraw, modify or not
make its recommendation to approve the Parker & Parsley Merger or terminate the
Merger Agreement in accordance with the Merger Agreement, but in each case
referred to in the foregoing clauses (i) and (ii), only to the extent that
Parker & Parsley's Board of Directors shall conclude in good faith based on the
advice of Parker & Parsley's outside counsel that such action is necessary in
order for Parker & Parsley's Board of Directors to act in a manner that is
consistent with its fiduciary obligations under applicable law. Parker & Parsley
will promptly notify Mesa of any such requests for such information or the
receipt of any Parker & Parsley Acquisition Proposal, including the identity of
the person or group engaging in such discussions or negotiations, requesting
such information or making such Parker & Parsley Acquisition Proposal, and the
material terms and conditions of any Parker & Parsley Acquisition Proposal
(provided, however, that Parker & Parsley shall not be required to identify such
person or group or disclose such terms or conditions to Mesa until the beginning
of the one week period referred to paragraph (g) under "-- Termination", if
Parker & Parsley determines that such identification or disclosure prior to such
time would impair such discussions or negotiations). As used in the Merger
Agreement, "Parker & Parsley Acquisition Proposal" means any proposal or offer,
other than a proposal or offer by Mesa or any of its Affiliates, for, or that
could be reasonably expected to lead to, a tender or exchange offer, a merger,
consolidation or other business combination involving Parker & Parsley or any of
its Significant Subsidiaries or any proposal to acquire in any manner a
substantial equity interest in, or any substantial portion of the assets of,
Parker & Parsley or any of its Significant Subsidiaries.
No Solicitation by Mesa. From and after the date of the Merger Agreement,
Mesa will not, and will not authorize or (to the extent within its control)
permit any of its officers, directors, employees, agents, Affiliates and other
representatives or those of any of its subsidiaries (collectively, "Mesa
Representatives") to, directly or indirectly, solicit or encourage (including by
way of providing information) any prospective acquiror or the invitation or
submission of any inquiries, proposals or offers or any other efforts or
attempts that constitute, or may reasonably be expected to lead to, any Mesa
Acquisition Proposal (as hereinafter defined) from any person or engage in any
discussions or negotiations with respect thereto or otherwise cooperate with or
assist or participate in, or facilitate any such proposal; provided, however,
that, notwithstanding any other provision of the Merger Agreement, (i) Mesa's
Board of Directors may take and disclose to the stockholders of Mesa a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act and (ii)
following receipt from a third party (without any solicitation, initiation or
encouragement, directly or indirectly, by Mesa or any Mesa Representatives) of a
bona fide Mesa Acquisition Proposal, (x) Mesa may engage in discussions or
negotiations with such third party and may furnish such third party information
concerning it, and its business, properties and assets if such third party
executes a confidentiality agreement in reasonably customary form and (y) the
Board of Directors of Mesa may withdraw, modify or not make its recommendation
to approve the Reincorporation Merger or terminate the Merger Agreement in
accordance with the Merger Agreement, but in each case referred to in the
foregoing clauses (i) and (ii), only to the extent that Mesa's Board of
Directors shall conclude in good faith based on the advice of Mesa's outside
counsel that such action is necessary in order for Mesa's Board of Directors to
act in a manner that is consistent with its fiduciary obligations under
applicable law. Mesa will promptly notify Parker & Parsley of any such requests
for such information or the receipt of any Mesa Acquisition Proposal, including
the identity of the person or group engaging in such discussions or
negotiations, requesting such information or making such Mesa Acquisition
Proposal, and the material terms and conditions of any Mesa Acquisition Proposal
(provided, however, that Mesa shall not be required to identify such person or
group or disclose such terms or conditions to Parker & Parsley until the
beginning of the one week period referred to in paragraph (i) under
"-- Termination", if Mesa determines that such identification or disclosure
prior to such time would impair such discussions or negotiations). As used in
the Merger Agreement, "Mesa Acquisition Proposal" means any proposal or offer,
other than a proposal or offer by Parker & Parsley or any of its Affiliates,
for, or that could be reasonably expected to lead
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to, a tender or exchange offer, a merger, consolidation or other business
combination involving Mesa or any of its Significant Subsidiaries or any
proposal to acquire in any manner a substantial equity interest in, or any
substantial portion of the assets of, Mesa or any of its Significant
Subsidiaries.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, Mesa, Pioneer and Parker & Parsley have
agreed that (i) they will prepare and file this Joint Proxy Statement/Prospectus
and have it mailed to stockholders of record at the earliest practicable date,
Pioneer will prepare and file with the Commission the Registration Statement,
and each will use its best efforts to have the Registration Statement declared
effective, (ii) they will use their best efforts to have timely delivered to the
other "comfort" letters from their respective independent public accountants,
(iii) they will each afford to the other access to their respective officers,
properties and other information as the other party may reasonably request, (iv)
they will each call meetings of their respective stockholders to be held as
promptly as practicable, (v) they will use all commercially reasonable efforts
to obtain any consent, authorization or approval of any Governmental Entity
required in connection with the Mergers, (vi) Parker & Parsley and Mesa will
each provide a list of persons who may be "affiliates" as defined in Rule 145 of
the Securities Act, and to use its reasonable best efforts to obtain from each
person an undertaking not to transfer shares of Pioneer Common Stock issued to
such person pursuant to the Mergers except pursuant to an effective registration
statement or in compliance with Rule 145, (vii) Mesa and Pioneer will take all
action necessary to permit Pioneer to issue shares of Pioneer Common Stock and
Pioneer Preferred Stock, if any, pursuant to the Mergers and will use
commercially reasonable efforts to have approved for listing on the NYSE,
subject to official notice of issuance, the shares of Pioneer Common Stock and
Pioneer Preferred Stock, if any, to be issued in the Mergers and shares of
Pioneer Common Stock issued or reserved for issuance upon exercise of Parker &
Parsley Stock Options and Mesa Stock Options and issuances under the Parker &
Parsley Stock Plans and Mesa Stock Plans, (viii) Mesa and Parker & Parsley each
agree to certain employee matters, (ix) Pioneer will assume certain outstanding
stock options to purchase Parker & Parsley Common Stock and Mesa Common Stock,
convert such options to options to purchase Pioneer Common Stock and file a
registration statement with respect to such Pioneer Common Stock subject to the
converted options, (x) Pioneer will, subject to certain limits, maintain
directors' and officers' liability insurance for officers and directors of Mesa
and Parker & Parsley and their respective subsidiaries, (xi) they each agree to
cooperate and use commercially reasonable efforts to defend any claim arising
from or in connection with the Mergers, (xii) they will cooperate and consult
with the other regarding press releases and changes that may have a Material
Adverse Effect (as defined in the Merger Agreement), (xiii) they will not take
any action reasonably likely to result in any of the respective representations
and warranties being untrue in any material respect or in any of the conditions
to the Mergers not being satisfied, (xiv) they will not take any action that
would affect the qualification of the Merger as a reorganization described in
Section 368 (a) of the Code, (xv) they will cooperate in the preparation of all
documents relating to conveyance taxes and to each pay such tax payable by it,
(xvi) Pioneer, Mesa and Parker & Parsley will take such action as may be
necessary to ensure that immediately after the P&P Effective Time the Board of
Directors of Pioneer consists of (a) the seven individuals currently serving on
Mesa's Board of Directors and (b) seven of the nine individuals currently
serving on Parker & Parsley's Board of Directors (such seven individuals to be
designated by Parker & Parsley) (see "Pioneer -- Management of Pioneer"), (xvii)
the parties agree to the designation of the Chairman of the Board of Pioneer and
the election of the President and Chief Executive Officer of Pioneer (see
"Pioneer -- Management of Pioneer"), (xviii) the parties agree to certain
Charter amendments and the name and address of Pioneer, (xix) the approval by
Pioneer of certain employee benefit plans and severance agreements with
officers, (xx) Pioneer will assume certain agreements related to the Parker &
Parsley MIPS, (xxi) the parties will take all actions necessary to have Pioneer
or MOC, as applicable, assume by supplemental indenture the indentures governing
the publicly held debt of Mesa, Parker & Parsley and their respective
subsidiaries, (xxii) the parties will cooperate to obtain a new bank credit
facility, (xxiii) the parties agree to the execution of certain voting
agreements with stockholders of Mesa (see "Agreements by Mesa Stockholders"),
(xxiv) Parker & Parsley and its subsidiaries will use their reasonable best
efforts to cause the redemption or exchange into Parker & Parsley Common Stock
of the Parker & Parsley MIPS,
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before the RM Effective Time, and (xxv) Pioneer will assume all obligations
under the Mesa Severance Plan and the Parker & Parsley Severance Agreements at
the P&P Effective Time.
Each of Mesa, Pioneer and Parker & Parsley have agreed to take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on any of them with respect to the Mergers (including, without
limitation, furnishing all information required under the HSR Act and in
connection with approvals of or filings with any other governmental entity) and
to promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their subsidiaries
in connection with the Mergers.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties thereto, by action taken
or authorized by their respective Boards of Directors, at any time before or
after approval by the stockholders of Parker & Parsley and the stockholders of
Mesa, but, after any such approval, no amendment shall be made which by law
requires further approval by such stockholders without first obtaining such
further approval.
At any time prior to the RM Effective Time, the parties to the Merger
Agreement, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto; (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant thereto;
and (iii) waive compliance with any of the agreements or conditions contained in
the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Mergers may be abandoned at
any time prior to the RM Effective Time, whether before or after approval of the
matters presented in connection with the Mergers by the stockholders of Parker &
Parsley and the stockholders of Mesa:
(a) by mutual consent of Mesa and Parker & Parsley;
(b) by either Mesa or Parker & Parsley if (i) any Governmental Entity
shall have issued any injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Mergers and such Injunction or other action shall have become final and
nonappealable; or (ii) any required approval of the stockholders of a party
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders, or
at any adjournment thereof;
(c) by Mesa or Parker & Parsley if the Mergers shall not have been
consummated by December 31, 1997 (the "Initial Termination Date");
provided, however, that the right to terminate the Merger Agreement
pursuant to this provision shall not be available to any party whose breach
of any representation or warranty or failure to fulfill any covenant or
agreement under the Merger Agreement has been the cause of or resulted in
the failure of the Mergers to occur on or before such date;
(d) by Mesa if (i) Parker & Parsley shall have failed to comply in any
material respect with any of the covenants or agreements contained in the
Merger Agreement to be complied with or performed by Parker & Parsley at or
prior to such date of termination (provided such breach has not been cured
within 30 days following receipt by Parker & Parsley of notice of such
breach and is existing at the time of termination of the Merger Agreement);
(ii) any representation or warranty of Parker & Parsley contained in the
Merger Agreement shall not be true in all material respects (provided that
any representation or warranty of Parker & Parsley contained therein that
is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) when made on or at the
time of termination as if made on such date of termination (except to the
extent it relates to a particular date), provided such breach has not been
cured within 30 days following receipt by Parker & Parsley of notice of
such breach and is existing at the time of termination of the Merger
Agreement, or (iii) after the date of the Merger Agreement there has been
any Material Adverse Change with respect to
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Parker & Parsley, except for general economic changes or changes that may
affect the industries of Parker & Parsley or any of its subsidiaries
generally;
(e) by Parker & Parsley if (i) Mesa, Pioneer or MOC shall have failed
to comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement to be complied with or performed by it at
or prior to such date of termination (provided such breach has not been
cured within 30 days following receipt by Mesa of notice of such breach and
is existing at the time of termination of the Merger Agreement); (ii) any
representation or warranty of Mesa, Pioneer or MOC contained in the Merger
Agreement shall not be true in all material respects (provided that any
representation or warranty of Mesa, Pioneer or MOC contained therein that
is qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) when made or on or at
the time of termination as if made on such date of termination (except to
the extent it relates to a particular date), provided such breach has not
been cured within 30 days following receipt by Mesa of notice of such
breach and is existing at the time of termination of the Merger Agreement;
or (iii) after the date of the Merger Agreement there has been any Material
Adverse Change with respect to Mesa, except for general economic changes or
changes that may affect the industries of Mesa or any of its subsidiaries
generally;
(f) by Mesa if (i) the Board of Directors of Parker & Parsley shall
have withdrawn or modified, in any manner which is adverse to Mesa, its
recommendation or approval of the Parker & Parsley Merger or the Merger
Agreement and the transactions contemplated thereby, or shall have resolved
to do so, or (ii) the Board of Directors of Parker & Parsley shall have
recommended to the stockholders of Parker & Parsley any Parker & Parsley
Acquisition Proposal or any transaction described in the definition of
Parker & Parsley Acquisition Proposal, or shall have resolved to do so;
(g) by Parker & Parsley, if Parker & Parsley shall exercise its
termination right described above under "-- Certain Covenants; Conduct of
Business by Parker & Parsley and Mesa--No Solicitation by Parker &
Parsley"; provided that Parker & Parsley may not effect such termination
unless and until (i) Mesa receives at least one week's prior written notice
from Parker & Parsley of its intention to effect such termination; (ii)
during such week, Parker & Parsley shall, and shall cause its respective
financial and legal advisors to, consider any adjustment in the terms and
conditions of the Merger Agreement that Mesa may propose; and (iii) Parker
& Parsley pays the appropriate termination fee to Mesa concurrently with
such termination;
(h) by Parker & Parsley if (i) the Board of Directors of Mesa shall
have withdrawn or modified, in any manner which is adverse to Parker &
Parsley, its recommendation or approval of the Mergers or the Merger
Agreement and the transactions contemplated thereby, or shall have resolved
to do so, or (ii) the Board of Directors of Mesa shall have recommended to
the stockholders of Mesa any Mesa Acquisition Proposal or any transaction
described in the definition of Mesa Acquisition Proposal, or shall have
resolved to do so;
(i) by Mesa, if Mesa shall exercise its termination right described
above under "-- Certain Covenants; Conduct of Business by Parker & Parsley
and Mesa -- No Solicitation by Mesa"; provided that Mesa may not effect
such termination unless and until (i) Parker & Parsley receives at least
one week's prior written notice from Mesa of its intention to effect such
termination; (ii) during such week, Mesa shall, and shall cause its
respective financial and legal advisors to, consider any adjustment in the
terms and conditions of the Merger Agreement that Parker & Parsley may
propose; and (iii) Mesa pays the appropriate termination fee concurrently
with such termination; and
(j) by either Mesa or Parker & Parsley, if the Average Trading Price
(as defined in the Merger Agreement) for the fifteen Trading Day (as
defined in the Merger Agreement) period beginning on July 10, 1997 (the
twentieth Trading Day prior to the date on which the Mesa Special Meeting
and Parker & Parsley Special Meeting with respect to the Mergers are
expected to be held), of the Mesa Common Stock is less than $5.00 per
share, provided that notice of termination is given by the terminating
party to the other parties hereto within two calendar days following the
end of such fifteen Trading Day period.
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(k) by the passage of time in the event that the Board of Directors of
either or both of Mesa or Parker & Parsley shall have withdrawn or
modified, in any manner which is adverse to the other party, its
recommendation or approval of the Reincorporation Merger or the Parker &
Parsley Merger, as applicable, or the Merger Agreement and the transactions
contemplated thereby, or shall have resolved to do so, without further
action by Mesa or Parker & Parsley, at the earlier of (x) 5:00 p.m.,
Dallas, Texas, time on the second calendar day after notice of such
withdrawal or modification is delivered to the other party or publicly
announced by the withdrawing or modifying party, or (y) immediately prior
to the commencement of the first to occur of the Mesa Special Meeting or
the Parker & Parsley Special Meeting, unless, in either case, Mesa and
Parker & Parsley shall otherwise agree in writing prior to such time of
automatic termination.
EXPENSES AND TERMINATION FEE
Each party to the Merger Agreement is required to pay all costs and
expenses incurred by it in connection with the Merger Agreement and all the
transactions contemplated thereby, whether or not the Mergers are consummated,
except that the filing fees with respect to this Joint Proxy
Statement/Prospectus and the Registration Statement and under the HSR Act will
be shared equally by Mesa and Parker & Parsley.
The Merger Agreement provides that:
(1) If (i) the Merger Agreement is terminated pursuant to clause (ii)
of item (b) above (with respect to the Parker & Parsley stockholder vote)
and at the time of such termination or after the date hereof and prior to
the Parker & Parsley stockholders' meeting there shall have been pending a
Parker & Parsley Acquisition Proposal, (ii) Mesa terminates the Merger
Agreement pursuant to item (f) above, (iii) Parker & Parsley terminates the
Merger Agreement pursuant to item (g) above, or (iv) Parker & Parsley, but
not Mesa, withdraws or modifies, in any manner which is adverse to the
other party, its recommendation or approval of the Reincorporation Merger
or the Parker & Parsley Merger, as applicable, or the Merger Agreement and
the transactions contemplated thereby, or shall have resolved to do so, and
the Merger Agreement shall terminate pursuant to item (k) above, then
Parker & Parsley shall, on the day of such termination, pay Mesa a fee of
$45 million.
(2) If within 12 months of any termination other than as described in
item (1) above or item (j) above, Parker & Parsley agrees to or consummates
a Parker & Parsley Acquisition Proposal or a transaction described in the
definition of Parker & Parsley Acquisition Proposal and such Parker &
Parsley Acquisition Proposal or transaction involves a third party that had
discussions with Parker & Parsley after the date of the Merger Agreement
and at or prior to the termination of the Merger Agreement, then at the
closing or other consummation of such Parker & Parsley Acquisition Proposal
or transaction, Parker & Parsley shall pay Mesa a fee equal to $45 million.
(3) If (i) the Merger Agreement is terminated pursuant to clause (ii)
of item (b) above (with respect to the Mesa stockholder vote) and at the
time of such termination or after the date hereof and prior to the Mesa
stockholders' meeting there shall have been pending a Mesa Acquisition
Proposal, (ii) Parker & Parsley terminates the Merger Agreement pursuant to
item (h) above, (iii) Mesa terminates the Merger Agreement pursuant to item
(i) above, or (iv) Mesa, but not Parker & Parsley, withdraws or modifies,
in any manner which is adverse to the other party, its recommendation or
approval of the Reincorporation Merger or the Parker & Parsley Merger, as
applicable, or the Merger Agreement and the transactions contemplated
thereby, or shall have resolved to do so, and the Merger Agreement shall
terminate pursuant to item (k) above, then Mesa shall, on the day of such
termination, pay Parker & Parsley a fee of $45 million.
(4) If within 12 months of any termination other than as described in
item (3) above, Mesa agrees to or consummates a Mesa Acquisition Proposal
or a transaction described in the definition of Mesa Acquisition Proposal
and such Mesa Acquisition Proposal or transaction involves a third party
that had discussions with Mesa after the date of the Merger Agreement and
at or prior to the termination of the Merger Agreement, then at the closing
or other consummation of such Mesa Acquisition Proposal or transaction,
Mesa shall pay Parker & Parsley a fee equal to $45 million.
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AGREEMENTS BY MESA STOCKHOLDERS
Concurrently with the execution of the Merger Agreement, DNR, which as of
the Mesa Record Date is holder of approximately 62,424,436 shares of Mesa Series
B Preferred Stock (or approximately 33.1% of the fully diluted capital shares of
Mesa), executed an agreement (the "DNR Stockholder Agreement") with Mesa in
which DNR agreed, among other things, not to sell, transfer, assign or otherwise
dispose of any of the shares of Mesa's capital stock owned as of April 6, 1997,
to vote all shares of Mesa's capital stock owned by DNR as of the Mesa Record
Date in favor of the Mergers, to elect to receive Pioneer Common Stock and to
vote in favor of any related matters, in accordance with the recommendation of
the Mesa Board. On such date, DNR also executed a letter agreement with Parker &
Parsley by which DNR agreed, subject to certain conditions, not to sell any of
its shares of Mesa Series B Preferred Stock (or Pioneer Common Stock received in
connection with the Mergers) for a period of one year from April 6, 1997. See
"Ownership of Mesa, Parker & Parsley and Pioneer Common Stock."
Boone Pickens, a director of Mesa and of Pioneer, who as of the Mesa Record
Date holds approximately 1,500,000 shares of Mesa Common Stock and 5,037,982
shares of Mesa Series A Preferred Stock (or an aggregate of approximately 4.07%
of the fully diluted capital shares of Mesa), executed an agreement (the
"Pickens Stockholders Agreement" and, together with the DNR Stockholders
Agreement, the "Stockholders Agreements") with Mesa pursuant to which Mr.
Pickens agreed to vote all shares of Mesa capital stock owned by Mr. Pickens as
of the Mesa Record Date in favor of the Mergers, to elect to receive Pioneer
Common Stock and to vote in favor of any related matters, in accordance with the
recommendation of the Mesa Board. See "Pioneer -- Management of
Pioneer -- Directors and Executive Officers" and "Ownership of Mesa, Parker &
Parsley and Pioneer Common Stock."
COMPARISON OF STOCKHOLDERS' RIGHTS
GENERAL
The following is a summary of certain provisions affecting, and the
differences between, the rights of holders of the capital stock of Mesa and
Parker & Parsley, respectively, and those of the holders of Pioneer Common
Stock. Since Mesa is a Texas corporation and Parker & Parsley and Pioneer are
Delaware corporations, the differences between the rights of the Mesa
stockholders and the Parker & Parsley and Pioneer stockholders will arise from
the various differences between the Texas Business Corporation Act ("TBCA") and
the Delaware General Corporation Law ("DGCL") as well as from the differences
between the various provisions of the Mesa Articles of Incorporation ("Mesa
Charter") and Bylaws, the Parker & Parsley Certificate of Incorporation ("Parker
& Parsley Charter") and Bylaws, and the Pioneer Certificate of Incorporation
("Pioneer Charter") and Bylaws, which will be adopted immediately prior to the
Effective Time. The following summary is qualified in its entirety by reference
to the TBCA, the DGCL, the complete text of the Mesa Charter and Bylaws, the
Parker & Parsley Charter and Bylaws, and the Pioneer Charter and Bylaws. The
Pioneer Charter and Bylaws have been filed as exhibits to the Joint Proxy
Statement/Prospectus. See "Available Information."
As a result of the Mergers, holders of Parker & Parsley Common Stock will
become holders of Pioneer Common Stock. The Pioneer Charter is substantially
similar to the Parker & Parsley Charter, and both Parker & Parsley and Pioneer
are Delaware entities. Accordingly, the terms and provisions of the Pioneer
Common Stock are substantially similar to those of Parker & Parsley Common
Stock, except as otherwise described below.
As a result of the Mergers, holders of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock will become holders of Pioneer
Common Stock or Pioneer Preferred Stock, as applicable. The rights of all former
Mesa stockholders will thereafter be governed by the Pioneer Charter, Bylaws and
the DGCL. The rights of the holders of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock are currently governed by the
Mesa Charter, the Mesa Bylaws and the TBCA. The following summary, which does
not purport to be a complete statement of the general differences among
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the rights of the stockholders of Mesa and Pioneer, sets forth certain
differences between the Mesa Charter and the Pioneer Charter, the Mesa Bylaws
and the Pioneer Bylaws and the TBCA and the DGCL.
AUTHORIZED CAPITAL STOCK
Mesa. Mesa's authorized capital stock consists of 1,100,000,000 shares,
divided into 600,000,000 shares of common stock, par value $.01 per share, and
500,000,000 shares of preferred stock, par value $.01 per share. Of the
preferred stock, there are 140,000,000 shares designated as Mesa Series A
Preferred Stock and 140,000,000 shares designated as Mesa Series B Preferred
Stock.
Parker & Parsley. Parker & Parsley's authorized capital stock consists of
200,000,000 shares, divided into 180,000,000 shares of common stock, par value
$.01 per share and 20,000,000 shares of preferred stock, par value $.01 per
share.
Pioneer. Pioneer's authorized capital stock will consist of 600,000,000
shares, divided into 500,000,000 shares of common stock, par value $.01 per
share and 100,000,000 shares of preferred stock, par value $.01 per share.
VOTING
Mesa. Each share of Mesa Common Stock, Mesa Series A Preferred Stock and
Mesa Series B Preferred Stock entitles the holder to one vote on each matter
submitted to stockholders. The holders of the Mesa Series A Preferred Stock and
the Mesa Series B Preferred Stock vote together with the holders of the Mesa
Common Stock as a single class except as otherwise required by the TBCA and with
the following exceptions: the holders of the Mesa Series A Preferred Stock and
the Mesa Series B Preferred Stock each vote as a separate class on any amendment
to the Mesa Charter which would materially affect the terms of such series. In
addition, as long as the Mesa Series B Preferred Stock is outstanding and
subject to certain ownership requirements, the Mesa Series B Preferred Stock has
the right to elect a majority of the directors on the Mesa Board. The Mesa
Series A Preferred Stock has the right to elect two additional directors in the
event that Mesa falls behind by six quarters in the payment of the 8% quarterly
dividend payments.
Parker & Parsley. Each share of Parker & Parsley Common Stock entitles the
holder to one vote on each matter submitted to the stockholders.
Pioneer. Each share of Pioneer Common Stock will entitle the holder to one
vote on each matter submitted to the stockholders. Each share of Pioneer
Preferred Stock, when and if designated and issued, will entitle the holder to
such voting rights as shall be specified in the certificate of designations
establishing such shares. The Pioneer Preferred Stock that may be issued to
holders of the Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
will have substantially the same rights and terms as the existing Mesa Series A
Preferred Stock. See "Description of Pioneer Capital Stock -- Pioneer Preferred
Stock."
SPECIAL MEETINGS OF STOCKHOLDERS
Mesa. The Mesa Bylaws provide that a special meeting of the stockholders
may be called by the Chief Executive Officer, the Board of Directors or the
Secretary at the request of the holders of at least 20% of the shares
outstanding and entitled to vote at such meeting.
Parker & Parsley. The Parker & Parsley Charter provides that a special
meeting of the stockholders may be called exclusively by the Board of Directors.
Pioneer. The Pioneer Charter and Bylaws will provide that a special meeting
of the stockholders may be called exclusively by the Boards of Directors except
to the extent that terms of any series of preferred stock provides the holders
thereof with special rights to call meetings.
DIRECTORS
Mesa. The Mesa Charter provides that the number of directors is to be
established by the Bylaws which currently provide for a Board of Directors
consisting of seven directors. The stockholders have the right to
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cumulate their votes in the election of directors. The Mesa Series B Preferred
Stock have the right to elect a majority (currently four) of the Board of
Directors (the "Series B Directors"), but do not have the right to vote on the
election of the other directors (the "Non-Series B Directors"). The Mesa Series
A Preferred have the right to elect two directors to be added to the Board of
Directors under certain circumstances as described above. See "-- Voting."
Parker & Parsley. The Parker & Parsley Charter provides that the number of
directors constituting the Board of Directors is to be established by the
resolution of the Board of Directors, but can in no event be less than three or
more than twenty-one. The Parker & Parsley Board of Directors currently consists
of nine directors and is staggered into three classes of approximately equal
size, with each class elected for a three-year term at each annual meeting of
stockholders. Stockholders do not have the right to cumulate their votes in the
election of the Board of Directors.
Pioneer. The Pioneer Charter will provide for a Board of Directors
consisting of a number of members to be determined by the resolution of the
Board of Directors, but will in no event be less than three or more than
twenty-one. The Board of Directors will be staggered into three classes of
approximately equal size, with each class to be elected for a three-year term at
each annual meeting of stockholders. See "Pioneer -- Management of Pioneer."
Stockholders will not have the right to cumulate their votes in the election of
the Board of Directors.
REMOVAL OF DIRECTORS
Mesa. The Mesa Bylaws provide that at any special meeting called expressly
for such purpose, any director or the entire Board of Directors may be removed
with or without cause, by the affirmative vote of a majority of the outstanding
shares of stock entitled to vote at an election of directors, except that, if
less than the entire Board of Directors is to be removed, no director may be
removed if the number of votes cast against that director's removal would be
sufficient to elect the director if then cumulatively voted at an election of
the entire Board of Directors. If a particular class or series of stock is
entitled to elect one or more directors, then such class or series of stock
shall have the sole right to cast votes in favor of or against the removal of
any director elected by such class or series of stock.
Parker & Parsley. The Parker & Parsley Charter provides that no director
shall be removed prior to the expiration of such director's term except for
cause and by an affirmative vote of the holders of not less than two-thirds of
the outstanding shares of the class or classes or series of stock then entitled
to be voted at an election of directors of that class or series, voting together
as a single class, cast at the annual meeting of stockholders or at a special
meeting of stockholders called for such purpose.
Pioneer. The Pioneer Charter will provide that no director shall be removed
prior to the expiration of such director's term except for cause and by an
affirmative vote of the holders of not less than two-thirds of the outstanding
shares of the class or classes or series of stock then entitled to be voted at
an election of directors of that class or series of stock, voting together as a
single class, cast at the annual meeting of stockholders or at a special meeting
of stockholders called for such purpose.
VACANCIES ON THE BOARD OF DIRECTORS
Mesa. The Mesa Bylaws provide that, subject to the rights of holders of any
class or series of preferred stock, any vacancy occurring in the Board of
Directors or any directorship to be filled by reason of an increase in the
number of directors may be filled by an election at an annual or special meeting
of the stockholders called for such purpose or by the affirmative vote of a
majority of the remaining directors, though less than a quorum; provided,
however, that any directorship to be filled by the Board of Directors by reason
of an increase in the number of directors may be filled for a term of office
continuing only until the next election of directors by the stockholders. The
right of the Board of Directors to fill any directorships as a result of an
increase in the number of directors is limited to two directors between any two
successive annual meetings of the stockholders. Directors elected to fill a
vacancy serve for the unexpired term of the predecessor director.
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Parker & Parsley. The Parker & Parsley Charter provides that any vacancy in
the Board of Directors may be filled by the majority vote of the remaining
members of the Board of Directors, although less than a quorum, who are
designated to represent the same class or classes of the stockholders that the
vacant position, when filled, is to represent or by the sole remaining director.
Each director elected to fill a vacancy will receive the classification and term
of his predecessor, or if it is a newly created directorship, the classification
that a majority of the Board of Directors designates. The new director will hold
office until the next meeting of stockholders held to elect directors of that
classification.
Pioneer. The Pioneer Bylaws will provide that any vacancy in the Board of
Directors may be filled by the majority vote of the remaining members of the
Board of Directors, although less than a quorum, who are designated to represent
the same class or classes of the stockholders that the vacant position, when
filled, is to represent or by the sole remaining director. Each director elected
to fill a vacancy will receive the classification and term of his predecessor,
or if it is a newly created directorship, the classification that a majority of
the Board of Directors designates. The new director will hold office until the
next meeting of stockholders held to elect directors of that classification.
MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS
Mesa. The TBCA generally requires that a merger, consolidation, sale of all
or substantially all of the assets or dissolution of a corporation be approved
by the holders of at least two-thirds of the outstanding shares of stock
entitled to vote, unless such corporation's articles of incorporation provide
otherwise. The Mesa Charter, pursuant to Section 2.28D of the TBCA, provides
that unless otherwise provided in the Mesa Charter, such actions may be approved
by the affirmative vote of holders of a majority of the outstanding shares of
stock entitled to vote thereon. The Mesa Charter provides that certain business
combinations (including mergers and sales of assets with a value in excess of
$10 million) involving a beneficial owner of at least 20% or more of the
aggregate voting power of Mesa's outstanding capital stock (a "Mesa Related
Person") require the affirmative vote of the holders of at least 80% of the
outstanding voting stock of Mesa, unless certain minimum price or board approval
requirements are met. See "-- Anti-Takeover Provisions."
Parker & Parsley. Under the DGCL, mergers, consolidations or sales of
substantially all of the assets or dissolution of a corporation generally must
be approved by the holders of at least a majority of all outstanding shares of
stock entitled to vote, unless the certificate of incorporation requires
approval by a greater number of shares of stock. The Parker & Parsley Charter
provides that certain business combinations (including mergers and sales of all
or substantially all of the assets of the company) involving a beneficial owner
of at least 10% of the outstanding shares of Parker & Parsley's capital stock (a
"Parker & Parsley Related Person") require the affirmative vote of the holders
of at least 80% of the outstanding voting stock of Parker & Parsley as well as
2/3 of the outstanding shares of capital stock held by stockholders other than
the Parker & Parsley Substantial Stockholder, unless certain minimum price or
board approval requirements are met. See "-- Anti-Takeover Provisions."
Pioneer. Under the DGCL, mergers, consolidations or sales of substantially
all of the assets or dissolution of a corporation generally must be approved by
the holders of at least a majority of all outstanding shares of stock entitled
to vote, unless the certificate of incorporation requires approval by a greater
number of shares of stock. The Pioneer Charter will provide that certain
business combinations (including mergers and sales of all or substantially all
of the assets of the company) involving a beneficial owner of at least 10% of
the outstanding shares of Pioneer's capital stock (a "Pioneer Related Person")
require the affirmative vote of the holders of at least 80% of the outstanding
voting stock of Pioneer as well as two-thirds of the outstanding shares of
capital stock held by stockholders other than the Pioneer Substantial
Stockholder, unless certain minimum price or board approval requirements are
met. See "-- Anti-Takeover Provisions."
AMENDMENTS TO CERTIFICATE OF INCORPORATION
Mesa. Article 4.02 of the TBCA provides that an amendment to a
corporation's articles of incorporation must be approved by the board of
directors and by the affirmative vote of holders of at least two-thirds of the
outstanding shares entitled to vote, unless the corporation's articles of
incorporation provide otherwise. The
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Mesa Charter, pursuant to Section 2.28D of the TBCA, lowers the required
shareholder vote to a majority of the outstanding shares of stock entitled to
vote thereon, voting together as a single class. However, the Mesa Charter
provides that the Mesa Charter cannot be amended in a way that would materially
affect the Mesa Series A Preferred Stock or Mesa Series B Preferred Stock
without the individual vote of such materially affected series (a majority in
the case of the Mesa Series B Preferred Stock and two-thirds in the case of the
Mesa Series A Preferred Stock).
Parker & Parsley. Section 242 of the DGCL provides that an amendment to a
corporation's certificate of incorporation must be approved by the board of
directors and by the affirmative vote of the holders of at least a majority of
the outstanding stock entitled to vote thereon. The Parker & Parsley Charter
provides that amendments to certain provisions regarding (i) election, removal
and replacement of directors and provision for a staggered board, (ii) amendment
of the Bylaws, (iii) appointment or removal of officers and members of
committees of the Board of Directors members, (iv) denial of written consent
rights to stockholders, and (v) matters relating to special meetings of
stockholders must be approved by the affirmative vote of at least two-thirds of
the outstanding shares of capital stock, and amendments to certain provisions
relating to certain business combinations must be approved by the affirmative
vote of at least 80% of the outstanding shares of capital stock and by the
affirmative vote of holders of at least two-thirds of the outstanding shares of
voting stock held by stockholders other than the Parker & Parsley Substantial
Stockholder.
Pioneer. Section 242 of the DGCL provides that an amendment to a
corporation's certificate of incorporation must be approved by the board of
directors and by the affirmative vote of the holders of at least a majority of
the outstanding stock entitled to vote thereon. The Pioneer Charter will provide
that amendments to certain provisions regarding (i) election, removal and
replacement of directors and provision for a staggered board, (ii) amendment of
the Bylaws, (iii) appointment or removal of officers and members of committees
of the Board of Directors members, (iv) denial of written consent rights to
stockholders and (v) matters relating to special meetings of stockholders must
be approved by the affirmative vote of at least two-thirds of the outstanding
shares of capital stock, and amendments to certain provisions relating to
certain business combinations must be approved by the affirmative vote of at
least 80% of the outstanding shares of capital stock and by the affirmative vote
of holders of at least two-thirds of the outstanding shares of voting stock held
by stockholders other than the Pioneer Substantial Stockholder.
AMENDMENTS TO BYLAWS
Mesa. The Mesa Bylaws provide that the Mesa Bylaws may be amended or
repealed by a majority of the Board of Directors, except to the extent that (a)
the stockholders in amending, repealing or adopting a particular bylaw,
expressly provide that the Board of Directors may not amend or repeal such
bylaw, (b) the TBCA or the Mesa Charter reserve the power to take such action in
the stockholders in whole or in part, or (c) Article III Section 1 (the number
of directors constituting the Board of Directors may not be amended without the
unanimous vote of all directors), Section 6 (the bylaw pertaining to the calling
of special meetings may not be amended without the unanimous vote of the Board
of Directors) and Section 8 (certain provisions of the Bylaws pertaining to
committees of the Board of Directors may not be amended without the unanimous
vote of the Board of Directors) otherwise provide. The Mesa Bylaws may be
amended or repealed by the stockholders unless the particular bylaw to be
amended or repealed provides otherwise and any such amendment or repeal must be
effected at a special meeting of the stockholders held for which notice has been
given and such right to amend or repeal is subject to any right granted to any
preferred stock series. As long as any share of Mesa Series B Preferred Stock
remains outstanding, a majority vote of such class is necessary in order to
amend or repeal any portion of the Mesa Bylaws which would limit the ability of
the Board of Directors to amend or repeal any provision of the Mesa Bylaws.
Parker & Parsley. The Parker & Parsley Charter provides that the Board of
Directors may alter, amend or repeal the Parker & Parsley Bylaws. The Parker &
Parsley Bylaws may also be altered, amended or repealed by the holders of not
less than two-thirds of the outstanding shares of stock then entitled to vote
upon an election of directors at any regular meeting of the stockholders or at
any special meeting of the stockholders if notice of such alteration, amendment,
repeal or adoption of new bylaws is contained in the notice of such special
meeting.
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Pioneer. The Pioneer Charter provides that the Board of Directors may
alter, amend or repeal the Pioneer Bylaws. The Pioneer Bylaws may also be
altered, amended or repealed by the holders of not less than two-thirds of the
outstanding shares of stock then entitled to vote upon an election of directors
at any regular meeting of the stockholders or at any special meeting of the
stockholders if notice of such alteration, amendment, repeal or adoption of new
bylaws is contained in the notice of such special meeting.
ANTI-TAKEOVER PROVISIONS
Mesa. The Mesa Charter contains a "fair price" provision that applies to
certain business combination transactions involving any person or group that
beneficially owns 20% or more of the aggregate voting power of all of the
outstanding stock of Mesa (a "Mesa Related Person"). The provision requires the
affirmative vote of holders of at least 80% of the voting stock of Mesa to
approve any merger, consolidation, sale or lease of all or substantially all of
the assets of Mesa, issuance or transfer of Mesa's securities or certain other
transactions involving the Mesa Related Person. This voting requirement is not
applicable to certain transactions, including (i) any transaction in which the
consideration to be received by the holders of each class of stock is the same
in form and amount as that paid in a tender offer in which the Mesa Related
Person acquired at least 50% of the outstanding shares of each such class and
which was consummated not more than one year earlier, (ii) any other transaction
that meets certain other specified pricing criteria or (iii) any other
transaction approved by Mesa's continuing directors (as defined in the Mesa
Charter). This provision could have the effect of delaying or preventing a
change of control of Mesa in a transaction or series of transactions that did
not satisfy the "fair price" criteria.
Parker & Parsley. The Parker & Parsley Charter contains a "fair price"
provision that requires the affirmative vote of the holders of at least 80% of
Parker & Parsley's voting stock and the affirmative vote of at least 66 2/3% of
Parker & Parsley's voting stock not owned, directly or indirectly, by the Parker
& Parsley Related Person to approve any merger, consolidation, sale or lease of
all or substantially all of Parker & Parsley's assets, or certain other
transactions involving a Parker & Parsley Related Person. For purposes of this
fair price provision, a "Parker & Parsley Related Person" is any person
beneficially owning 10% or more of the voting stock of Parker & Parsley who is a
party to the transaction at issue, a director who is also an officer of Parker &
Parsley and is a party to the transaction at issue, an affiliate of either such
person, and certain transferees of those persons. The voting requirement is not
applicable to certain transactions, including those that are approved by Parker
& Parsley's continuing directors (as defined in the Parker & Parsley Charter) or
that meet certain "fair price" criteria contained in the Parker & Parsley
Charter.
DGCL Section 203, in general, prohibits a "business combination" between a
corporation and an "interested stockholder" within three years of the time such
stockholder became an "interested stockholder" unless (i) prior to such time the
board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, exclusive of shares owned by directors who are also
officers and by certain employee stock plans, or (iii) after such time, the
business combination is approved by the board of directors and authorized by the
affirmative vote at a stockholders' meeting of at least 66 2/3% of the
outstanding voting stock which is not owned by the interested stockholder. The
term "business combination" is defined to include, among other transactions
between the interested stockholder and the corporation or any direct or indirect
majority-owned subsidiary thereof, a merger or consolidation, a sale, pledge,
transfer or other disposition (including as part of a dissolution) of assets
having an aggregate market value equal to 10% or more of either the aggregate
market value of all assets of the corporation on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; certain
transactions that would increase the interested stockholder's proportionate
share ownership of the stock of any class or series of the corporation or such
subsidiary; and any receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation or any such subsidiary. In general, and subject to
certain exceptions, an "interested stockholder" is any person who is the owner
of 15% or more of the outstanding voting stock (or, in the case of a corporation
with classes of voting stock with
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disparate voting power, 15% or more of the voting power of the outstanding
voting stock) of the corporation, and the affiliates and associates of such
person. The term "owner" is broadly defined to include any person that
individually or with or through his or its affiliates or associates, among other
things, beneficially owns such stock, or has the right to acquire such
stock(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement or understanding or upon the exercise of
warrants or options or otherwise or has the right to vote such stock pursuant to
any agreement or understanding, or has an agreement or understanding with the
beneficial owner of such stock for the purpose of acquiring, holding, voting or
disposing of such stock. The restrictions of DGCL Section 203 do not apply to
corporations that have elected, in the manner provided therein, not to be
subject to such section or which do not have a class of voting stock that is
listed on a national securities exchange or authorized for quotation on an
interdealer quotation system of a registered national securities association or
held of record by more than 2,000 stockholders.
Pioneer. The Pioneer Charter will contain a "fair price" provision that
applies to certain business combination transactions involving any person or
group that beneficially owns at least 10% of the aggregate voting power of the
outstanding capital stock of Pioneer (a "Pioneer Related Person"). The "fair
price" provision requires the affirmative vote of the holders of (i) at least
80% of the voting stock of Pioneer and (ii) at least 66 2/3% of the voting stock
of Pioneer not beneficially owned by the Pioneer Related Person, to approve
certain transactions between the Pioneer Related Person and Pioneer or its
subsidiaries, including any merger, consolidation or share exchange, any sale,
lease, exchange, pledge or other disposition of assets of Pioneer or its
subsidiaries having a fair market value of at least $10 million, any transfer or
issuance of securities of Pioneer or any of its subsidiaries, any adoption of a
plan or proposal by Pioneer of voluntary liquidation or dissolution of Pioneer,
certain reclassifications of securities or recapitalizations of Pioneer or
certain other transactions, in each case involving the Pioneer Related Person.
This voting requirement will not apply to certain transactions, including (a)
any transaction in which the consideration to be received by the holders of each
class of capital stock of Pioneer is (x) the same in form and amount as that
paid in a tender offer in which the Pioneer Related Person acquired at least 50%
of the outstanding shares of such class and which was consummated not more than
one year earlier or (y) not less in amount than the highest per share price paid
by the Pioneer Related Person for shares of such class or (b) any transaction
approved by Pioneer's continuing directors (as defined in the Pioneer Charter).
As a Delaware corporation, Pioneer will be subject to Section 203 of the
DGCL as described above. The Pioneer Charter does not contain any provision
electing out of the application of DGCL Section 203, and Pioneer has not taken
any of the actions necessary for it to elect out of such provision. As a result,
the provisions of Section 203 will remain applicable to transactions between
Pioneer and any of their respective "interested stockholders."
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DESCRIPTION OF PIONEER CAPITAL STOCK
The authorized capital stock of Pioneer consists of 500,000,000 shares of
common stock, par value $.01 per share, and 100,000,000 shares of preferred
stock, par value $.01 per share, of which 20,000,000 shares have been designated
as Series A Preferred Stock and 3,776,400 shares have been designated and
reserved for issuance as Series B Preferred Stock.
PIONEER COMMON STOCK
All shares of Pioneer Common Stock issued in the Mergers will be fully paid
and nonassessable. The holders of Pioneer Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of common stockholders.
The Pioneer Common Stock does not have cumulative voting rights. Shares of
Pioneer Common Stock have no preemptive rights, conversion rights, redemption
rights or sinking fund provisions. Pioneer Common Stock is not subject to
redemption by Pioneer.
Subject to the rights of the holders of any class of capital stock of
Pioneer having any preference or priority over the Pioneer Common Stock, the
holders of Pioneer Common Stock are entitled to dividends in such amounts as may
be declared by the Pioneer Board from time to time out of funds legally
available for such payments and, in the event of liquidation, to share ratably
in any assets of Pioneer remaining after payment in full of all creditors and
provision for any liquidation preferences on any outstanding preferred stock
ranking prior to the Pioneer Common Stock.
PIONEER PREFERRED STOCK
The Board of Directors, without further stockholder action, is authorized
to issue up to 100,000,000 shares of preferred stock in one or more series and
to fix and determine as to any series all the relative rights and preferences of
shares in the series, including voting rights, dividend rights, liquidation
preferences, terms of redemption, and conversion rights.
Pioneer Series A 8% Cumulative Convertible Preferred Stock
The Pioneer Board has designated 8,807,309 of the 100,000,000 authorized
shares of preferred stock as Series A 8% Cumulative Convertible Preferred Stock.
The Statement of Resolution for the Pioneer Preferred Stock includes the
following principal terms:
Dividends. Subject to the satisfaction of certain conditions described
below, holders of Pioneer Preferred Stock will be entitled to receive, as and
when declared by Pioneer, out of funds legally available therefor, cumulative
dividends at the rate of 8.0% per annum, compounded quarterly. Dividends will be
payable quarterly in arrears on the last business day of each December, March,
June, and September, beginning September 30, 1997. Prior to the fourth
anniversary of the issuance of the Pioneer Preferred Stock, dividends will be
payable in additional shares of Pioneer Preferred Stock, based upon the stated
value (the "Stated Value") of such shares (initially $15.82). On and after June
26, 2000, Pioneer may elect to pay dividends in cash rather than shares of
Pioneer Preferred Stock for any quarter in which any of the following conditions
is satisfied as of the record date for such dividend:
Fixed Charge Coverage Ratio. Pioneer's average Fixed Charge Coverage
Ratio at the end of the four preceding quarters is in excess of 2.5. "Fixed
Charge Coverage Ratio" means the ratio of (i) the sum of (A) Consolidated
EBITDA plus (B) one-third of gross operating rents paid before sublease
income (as defined by Standard & Poors Corporation), if any ("Gross Rents")
to (ii) the sum of (A) interest expense, both expensed and capitalized, of
Pioneer and its consolidated subsidiaries, plus (B) one-third of Gross
Rents plus (C) scheduled principal amortization of indebtedness (including
borrowed money and capitalized leases) of Pioneer and its consolidated
subsidiaries. "Consolidated EBITDA" means the consolidated net income or
loss of Pioneer for the period, excluding gains and losses not arising from
operations (including interest income, gains and losses from investments,
gains and losses from dispositions of oil and gas properties, collections
and settlements of claims and litigation, adjustments of contingency
reserves and other extraordinary gains and losses), plus, to the extent the
following have been deducted in determining such income or loss, interest
expense, income taxes, depreciation, depletion and amortization expense and
impairment expense.
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Gas Price Realization. The Average Gas Price realized by Pioneer on an
Mcf equivalent basis (using a 6:1 conversion ratio) during the four
preceding quarters as reported in Pioneer's financial statements is in
excess of $2.95. "Average Gas Price" means the average price received by
Pioneer from sales of oil and gas production, to be calculated as follows:
(i) the aggregate revenues of Pioneer and its consolidated
subsidiaries during such period from sales of natural gas, natural gas
liquids and oil and condensate produced (other than that used for fuel,
and shrinkage) and sold by Pioneer and its consolidated subsidiaries, as
reported in Pioneer's consolidated financial statements, divided by
(ii) the sum of (A) the total volume, on an Mcf basis, of natural
gas produced (other than that used for fuel, and shrinkage) and sold by
Pioneer and its consolidated subsidiaries during such period (excluding
fuel, shrinkage, etc.) plus (B) the product of 6 times the total number
of barrels of natural gas liquids, oil and condensate produced (other
than that used for fuel, and shrinkage) and sold by Pioneer and its
consolidated subsidiaries during such period, as derived from Pioneer's
consolidated financial statements.
Stock Price Threshold. The average closing price of the Pioneer Common
Stock during any 90 consecutive trading days preceding the tenth day prior
to the record date for any dividend payment date after the fourth
anniversary of the issue date is more than three times the conversion price
then in effect.
If the stock price threshold described above is met, Pioneer will thereafter
have the option to pay dividends either in kind or in cash on any subsequent
dividend payment date, regardless of any subsequent changes in the price of the
Pioneer Common Stock. To the extent dividends are not paid in cash or in kind on
a scheduled dividend payment date, all accrued but unpaid dividends will be
added to the Stated Value of each share of Pioneer Preferred Stock outstanding
and shall remain a part thereof until paid, and dividends will accrue and be
paid thereafter on the basis of the Stated Value, as adjusted.
Voting Rights. Except as otherwise described herein or required by law, the
holders of Pioneer Preferred Stock will vote together with the Pioneer Common
Stock as a single class and not as separate classes or series apart from each
other, including any vote to approve or adopt (i) any plan of merger,
consolidation or share exchange for which Delaware law requires a stockholder
vote; (ii) any disposition of assets for which Delaware law requires a
stockholder vote; and (iii) any dissolution of Pioneer for which Delaware law
requires a stockholder vote.
The authorization, creation or issuance, or any increase in the authorized
or issued amount, of any class or series of stock ranking senior to or in parity
with the Pioneer Preferred Stock or any security convertible into or
exchangeable for any such class or series will require the approval of the
holders of at least a majority of the outstanding Pioneer Preferred Stock,
voting as a separate class.
Any Amendment of the Pioneer Certificate of Incorporation or Pioneer Bylaws
which would materially affect the terms of the Pioneer Preferred Stock will
require the approval of the holders of at least two-thirds of the outstanding
Pioneer Preferred Stock voting as a separate class.
If Pioneer is in arrears in the payment of dividends (whether payable in
cash or in kind) on the shares of Pioneer Preferred Stock for a total of six
quarters, then the size of the Board will automatically be increased by two
additional directors and the holders of Pioneer Preferred Stock, voting as a
separate class, will have the exclusive right to elect such new directors (the
"Series A Directors") immediately and at the next and every subsequent annual
meeting of stockholders called for the election of directors. The right of the
holders of the Pioneer Preferred Stock to elect the Series A Directors will
terminate when all dividends accumulated on the Pioneer Preferred Stock have
been paid in full, subject to revesting at such time as Pioneer is again in
arrears in the payment of dividends.
During any period in which the holders of Pioneer Preferred Stock are
entitled to elect Series A Directors, the holders of Pioneer Preferred Stock
will have certain special rights to call a special meeting of
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Pioneer in lieu of Pioneer's annual meeting for the purpose of electing Series A
Directors. At a meeting held for the purpose of electing a Series A Director, at
least one-third of the outstanding shares of Pioneer Preferred Stock, present in
person or by proxy, will be required to constitute a quorum.
Conversion. Shares of Pioneer Preferred Stock are convertible into shares
of Pioneer Common Stock at any time at the option of the holder, at an initial
conversion ratio of one share of Pioneer Common Stock per share of Pioneer
Preferred Stock. The conversion ratio is subject to customary anti-dilution
adjustment in the event Pioneer (a) subdivides the outstanding shares of Pioneer
Common Stock into a greater number of shares; (b) combines the outstanding
shares of Pioneer Common Stock into a smaller number of shares; (c) declares,
orders, pays or makes any dividend or other distribution to holders of Pioneer
Common Stock payable in Pioneer Common Stock; (d) declares, orders, pays or
makes any dividend or other distribution to all holders of Pioneer Common Stock,
other than a dividend payable in shares of Pioneer Common Stock (including
dividends or distributions payable in cash, evidences of indebtedness, rights,
options or warrants to subscribe for or purchase shares of Pioneer Common Stock
or other securities, or any other securities or other property, but excluding
any rights to purchase stock or other securities if such rights are not
separable from the Pioneer Common Stock except upon occurrence of a contingency
beyond the control of Pioneer); or (e) issues or sells any shares of Pioneer
Common Stock or any rights, options, warrants to subscribe for or purchase
shares of Pioneer Common Stock or shares having the same rights, privileges and
preferences as the Pioneer Common Stock or securities convertible into Pioneer
Common Stock or equivalent common stock, at a price per share of Pioneer Common
Stock or equivalent common stock (or having a conversion price per share, in the
case of a security convertible into shares of Pioneer Common Stock or equivalent
common stock) less than the market price of the Pioneer Common Stock on the date
of such issue or sale, other than (i) the conversion or redemption of shares of
Pioneer Preferred Stock, (ii) the payment of any stock dividend on the Pioneer
Preferred Stock, (iii) the issuance of options to officers, directors and
employees of Pioneer and its subsidiaries to purchase shares of Pioneer Common
Stock, (iv) the issuance and sale of Pioneer Common Stock upon exercise of any
rights, options or warrants described in the foregoing clause (iii) or in clause
(d) above or (v) the issuance and sale of Pioneer Common Stock in an
underwritten public offering at a price to the public of not less than 95% of
the closing price of the Pioneer Common Stock on the date of pricing such
offering.
If, at any time after the original issue date, Pioneer is a party to any
transaction (including a merger, consolidation, statutory share exchange, sale
of all or substantially all of Pioneer's assets or recapitalization of the
Pioneer Common Stock), as a result of which shares of Pioneer Common Stock (or
any other securities of Pioneer then issuable upon conversion of the Pioneer
Preferred Stock) will be converted into the right to receive stock, securities
or other property (including cash) or any combination thereof (a "Fundamental
Change Transaction"), then the shares of Pioneer Preferred Stock remaining
outstanding will thereafter no longer be convertible into Pioneer Common Stock
(or such other securities), but instead each share will be convertible into the
kind and amount of stock and other securities and property receivable upon the
consummation of such Fundamental Change Transaction by a holder of that number
of shares of Pioneer Common Stock (or such other securities) into which one
share of Pioneer Preferred Stock was convertible immediately prior to such
Fundamental Change Transaction (assuming such holder of Pioneer Common Stock or
other securities failed to exercise any right of election as to the kind of
consideration to be received in such Fundamental Change Transaction). Pioneer is
prohibited from being a party to any Fundamental Change Transaction after which
shares of Pioneer Preferred Stock will remain outstanding unless the terms of
such Fundamental Change Transaction are consistent with the foregoing, and it
may not consent or agree to the occurrence of any such Fundamental Change
Transaction until it has entered into an agreement with the successor or
purchasing entity, as the case may be, for the benefit of the holders of the
Pioneer Preferred Stock containing provisions enabling such holders to convert
such shares into the consideration received by holders of Pioneer Common Stock
(or other securities of Pioneer then issuable upon conversion of Pioneer
Preferred Stock), at the conversion ratio then in effect, after such Fundamental
Change Transaction. In the event that, as a result of an adjustment pursuant to
a Fundamental Change Transaction, the Pioneer Preferred Stock become convertible
into any securities other than shares of Pioneer Common Stock, the number of
such other securities issuable upon conversion will be subject to adjustment to
prevent dilution and adjustment in the
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event of a successive Fundamental Change Transaction in a manner and on terms as
nearly equivalent as practicable to those described herein.
Redemption. Subject to any restrictions imposed by the terms of its credit
facility or other indebtedness; Pioneer may, at its option, redeem all or part
of the outstanding shares of Pioneer Preferred Stock (pro rata or by lot among
the outstanding shares) on any dividend payment date after August 1, 2006. All
outstanding shares of Pioneer Preferred Stock are subject to mandatory
redemption on June 30, 2008. The redemption price upon any optional or mandatory
redemption will be equal to the Stated Value per share, plus an amount equal to
the dollar amount of all accrued and unpaid dividends through the redemption
date that have not been added to the Stated Value. The redemption price may be
paid either in cash or in shares of Pioneer Common Stock, at the option of
Pioneer as announced 30 days prior to the redemption date, with the number of
shares of Pioneer Common Stock used to pay the redemption price to be determined
based upon the average trading price during the 20 day period ending five days
before the redemption date.
Liquidation. Each share of Pioneer Preferred Stock will rank prior to each
share of Pioneer Common Stock with respect to the distribution of assets upon a
liquidation, dissolution or winding-up of Pioneer. In the event of any such
liquidation, dissolution or winding-up, each holder of a share of Pioneer
Preferred Stock will be entitled to receive, before any distribution to the
holder of Pioneer Common Stock, a liquidation preference equal to the Stated
Value of such shares, plus all accrued and unpaid dividends thereon.
Ranking. In the event that Pioneer is a party to any merger, consolidation
or share exchange in which the Pioneer Preferred Stock is converted or exchanged
into any other securities, property, cash or other consideration, the
securities, property, cash or other consideration into which the Pioneer
Preferred Stock may be converted or exchanged must be identical in kind and
amount per share, and no shares of Pioneer Preferred Stock may be converted or
exchanged into any securities, property, cash or other consideration unless all
shares of Pioneer Preferred Stock may be converted or exchanged into the same
kind and amount per share of securities, property, cash or other consideration.
The Pioneer Common Stock will rank junior to the Pioneer Preferred Stock with
respect to the payments required or permitted to made to the holders of such
securities pursuant to their respective governing instruments. The Pioneer
Preferred Stock will rank senior to the Pioneer Series B Preferred Shares (as
hereinafter defined) with respect to the distribution of assets upon a
liquidation, dissolution or winding-up of Pioneer.
Authorization by Non-Series A Directors. A majority of Pioneer's directors,
other than Series A Directors, is required to make the determinations required
or permitted (i) as to whether to make payment of the redemption price of
Pioneer Preferred Stock in cash or in kind, (ii) as to whether to exercise
Pioneer's option to redeem outstanding shares of Pioneer Preferred Stock and
(iii) as to whether to make payment of any dividends declared by the Board on
the Pioneer Preferred Stock in cash or in kind (subject to the requirement that
Pioneer have sufficient cash legally available to make any cash dividend
payment).
Certain Covenants of Pioneer. For so long as any shares of Pioneer
Preferred Stock are outstanding: (i) no dividend or other distribution shall be
declared or paid to any securities ranking junior to the Pioneer Preferred
Stock, nor shall any of such securities be redeemed, purchased or otherwise
acquired for consideration; (ii) no dividend or distribution shall be declared
or paid on the Pioneer Preferred Stock or any Pioneer securities ranking on
parity therewith ("Parity Security") unless full cumulative dividends on all of
such securities have been paid and, in the event that a dividend is declared
absent the payment of all such cumulative dividends, then the dividend shall be
declared and paid pro rata between the Pioneer Preferred Stock and in the same
ratio as any unpaid dividends per share on the Pioneer Preferred Stock and the
Parity Securities; and (iii) no shares of Pioneer Preferred Stock or Parity
Securities shall be redeemed, purchased or otherwise acquired for any
consideration by Pioneer unless the full cumulative dividends on all of such
securities shall have been paid on or before the date of such redemption,
purchase or acquisition.
In addition, for so long as any shares of Pioneer Preferred Stock are
outstanding, Pioneer must at all times reserve and keep available for issuance
upon the conversion of such shares such number of its authorized but unissued
shares of Pioneer Common Stock as will be sufficient to permit the conversion of
all outstanding shares of Pioneer Preferred Stock and all other securities and
instruments convertible into shares of Pioneer Common Stock. Pioneer must
endeavor to make the shares of stock that may be issued upon redemption or
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conversion of Pioneer Preferred Stock eligible for trading on any national
securities exchange or automated quotation system upon or through which the
Pioneer Common Stock is then traded. Prior to the delivery of any securities
upon redemption or conversion of Pioneer Preferred Stock, Pioneer must endeavor
to comply with all federal and state securities laws and regulations requiring
the registration of such securities with, or the approval of or consent to the
delivery of such securities by, any governmental authority. Pioneer must pay all
taxes and other governmental charges (other than income or franchise taxes) that
may be imposed with respect to the issue or delivery of shares of Pioneer Common
Stock upon conversion or redemption of shares of Pioneer Preferred Stock, but
will not be required to pay any transfer taxes incurred as a result of the
issuance of shares of Pioneer Common Stock in a name other than that of the
registered holder of the converted or redeemed shares of Pioneer Preferred
Stock.
Designated Pioneer Series B Convertible Preferred Stock
Pioneer has designated and reserved for issuance a series of Preferred
Stock (entitled "Pioneer Series B Convertible Preferred Stock") consisting of
3,776,400 shares to be issued under certain circumstances in exchange for the
Parker & Parsley MIPS issued by P&P Capital, an indirect special purpose finance
subsidiary of Pioneer following the Mergers; however, as of the date of this
Joint Proxy Statement/Prospectus, no shares of such preferred stock have been
issued. Shares of Series B Convertible Preferred Stock are referred to herein as
the "Pioneer Series B Preferred Shares."
The Pioneer Series B Preferred Shares will only be issued in exchange for
the Parker & Parsley MIPS. Upon the occurrence of certain exchange events, the
holders of a majority of the outstanding Parker & Parsley MIPS may, at their
option, cause all (but not less than all) of the outstanding Parker & Parsley
MIPS to be exchanged, on a share-for-share basis, for Pioneer Series B Preferred
Shares. The exchange events are (i) the failure of the holders of the Parker &
Parsley MIPS to receive, for two consecutive monthly dividend periods, the full
amount of dividend payments, (ii) the failure of holders of the Parker & Parsley
MIPS to receive any redemption payment when due, (iii) the failure of P&P
Capital at any time to maintain a net worth of at least $2.5 million, (iv) the
failure of Pioneer to own, directly or indirectly, 100% of the capital stock of
P&P Capital (other than the Parker & Parsley MIPS or any other preferred or
preference stock of P&P Capital), (v) the bankruptcy of P&P Capital or Pioneer,
(vi) the dissolution, liquidation, or winding up of P&P Capital or Pioneer, and
(vii) the determination by P&P Capital or Pioneer, in its sole discretion, that
the withholding or deduction of taxes is required by law and that such
withholding or deduction, if made, would cause a reduction in the amounts to be
received by the holders of Parker & Parsley MIPS and the failure by P&P Capital
or Pioneer, as the case may be, to elect to either pay such additional amounts
as would be necessary so that the net amounts received by holders of Parker &
Parsley MIPS would not be reduced or redomicile P&P Capital to another
jurisdiction wherein the withholding or deduction of such taxes would not be
required by law. The following description of certain terms of the Pioneer
Series B Preferred Shares will be applicable to such shares when issued as
described above.
Dividends on the Pioneer Series B Preferred Shares will be cumulative from
the date of original issuance of such shares and will be payable in United
States dollars at the annual rate of 6 1/4% of the liquidation preference of $50
per share. Dividends will be paid monthly in arrears on the last day of each
calendar month. Any accumulated and unpaid dividends on the Parker & Parsley
MIPS at the time of their exchange for Pioneer Series B Preferred Shares, as
well as certain tax deductions or withholdings that may have been made with
respect to payments on the Parker & Parsley MIPS, will become accumulated and
unpaid dividends on the Pioneer Series B Preferred Shares issued in exchange.
Each Pioneer Series B Preferred Share is convertible at the option of the
holder at any time, unless previously redeemed or converted, into shares of
Pioneer Common Stock at the rate of 1.7778 shares of Pioneer Common Stock for
each Pioneer Series B Preferred Share (equivalent to a conversion price of
$28 1/8 per share of Pioneer Common Stock), subject to adjustment in certain
circumstances.
Pioneer, at its option, may cause the Pioneer Series B Preferred Shares to
be exchanged, in whole or in part, for the number of shares of Pioneer Common
Stock into which the Pioneer Series B Preferred Shares are then convertible, so
long as both (i) the closing price of the Pioneer Common Stock on any 20 trading
days in
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the period of 30 trading days ending on the trading day immediately preceding
Pioneer's exercise of such option and (ii) the closing price of the Pioneer
Common Stock on the trading day immediately preceding Pioneer's exercise of such
option, equal or exceed 125% of the then applicable conversion price.
The Pioneer Series B Preferred Shares will be redeemable, at the option of
Pioneer, in whole or in part, for cash at an initial redemption price of
$52.1875 per share and declining ratably thereafter to $50 per share on and
after April 1, 2004, plus, in each case, accumulated and unpaid dividends to the
date fixed for redemption, but only if the cash used to make such prepayment is
provided to Pioneer through the issuance and sale, within one year of such
redemption, of common stock or certain classes of preferred stock of Pioneer or
any of its subsidiaries. In the case of Pioneer Series B Preferred Shares called
for redemption, the conversion right will terminate five calendar days prior to
the redemption date. The Pioneer Series B Preferred Shares will not be subject
to mandatory redemption.
The holders of the Pioneer Series B Preferred Shares generally will have no
voting rights, but will have the right to elect two additional directors of the
Company whenever dividends on the Pioneer Series B Preferred Shares are in
arrears for 18 months.
After the Pioneer Series B Preferred Shares are issued, Pioneer may not
create or authorize any additional class of shares that ranks senior to the
Pioneer Series B Preferred Shares as to dividends or liquidation preference and
may not amend the provisions of the Pioneer Series B Preferred Shares without
the written consent of holders of at least 66 2/3% of the outstanding Pioneer
Series B Preferred Shares or without a resolution passed by 66 2/3% of the votes
cast at a meeting of the holders of Pioneer Series B Preferred Shares. The
Pioneer Preferred Stock will rank senior to the Pioneer Series B Preferred
Shares with respect to the payment of dividends and the distribution of assets
upon a liquidation, dissolution or winding-up of Pioneer.
In the event of a voluntary or involuntary bankruptcy, liquidation,
dissolution, or winding up of Pioneer, the holders of the Pioneer Series B
Preferred Shares will be entitled to receive out of the net assets of Pioneer,
but before any distribution is made on any class of shares ranking junior to the
Pioneer Series B Preferred Shares, $50 per share in cash plus accumulated and
unpaid dividends (whether or not declared) to the date of payment. After payment
of the full amount of the liquidation distribution to which they are entitled,
the holders of the Pioneer Series B Preferred Shares will not be entitled to any
further participation in any distribution of assets of Pioneer.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
Pioneer's Board of Directors is divided into three classes. The directors
of each class are elected for three-year terms, with the terms of the three
classes staggered so that directors from a single class are elected at each
annual meeting of stockholders. Stockholders may remove a director only for
cause. In general, the Board of Directors, not the stockholders, has the right
to appoint persons to fill vacancies on the Board of Directors.
Pioneer's Certificate of Incorporation contains a "fair price" provision
that requires the affirmative vote of the holders of at least 80% of Pioneer's
voting stock and the affirmative vote of at least 66 2/3% of Pioneer's voting
stock not owned, directly or indirectly, by a Pioneer Related Person
(hereinafter defined) to approve any merger, consolidation, sale or lease of all
or substantially all of Pioneer's assets, or certain other transactions
involving a Pioneer Related Person. For purposes of this fair price provision, a
"Pioneer Related Person" is any person beneficially owning 10% or more of the
voting power of the outstanding capital stock of Pioneer who is a party to the
transaction at issue. The voting requirement is not applicable to certain
transactions, including those that are approved by Pioneer's Continuing
Directors (as defined in the Certificate of Incorporation) or that meet certain
"fair price" criteria contained in the Certificate of Incorporation.
Pioneer's Certificate of Incorporation further provides that stockholders
may act only at annual or special meetings of stockholders and not by written
consent, that special meetings of stockholders may be called only by Pioneer's
Board of Directors, and that only business proposed by the Board of Directors
may be considered at special meetings of stockholders.
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The Certificate of Incorporation also provides that the only business
(including election of directors) that may be considered at an annual meeting of
stockholders, in addition to business proposed (or persons nominated to be
directors) by the directors of Pioneer, is business proposed (or persons
nominated to be directors) by stockholders who comply with the notice and
disclosure requirements set forth in the Certificate of Incorporation. In
general, the Certificate of Incorporation requires that a stockholder give
Pioneer notice of proposed business or nominations no later than 60 days before
the annual meeting of stockholders (meaning the date on which the meeting is
first scheduled and not postponements or adjournments thereof) or (if later) 10
days after the first public notice of the annual meeting is sent to common
stockholders. In general, the notice must also contain information about the
stockholder proposing the business or nomination, his interest in the business,
and (with respect to nominations for director) information about the nominee of
the nature ordinarily required to be disclosed in public proxy solicitations.
The stockholder also must submit a notarized letter from each of his nominees
stating the nominee's acceptance of the nomination and indicating the nominee's
intention to serve as director if elected.
Pioneer's Certificate of Incorporation also restricts the ability of
stockholders to interfere with the powers of the Board of Directors in certain
specified ways, including the constitution and composition of committees and the
election and removal of officers.
Pioneer's Certificate of Incorporation provides that approval by the
holders of at least 66 2/3% of the outstanding Pioneer voting stock is required
to amend the provisions of the Certificate of Incorporation discussed above and
certain other provisions, except that (a) approval by the holders of at least
80% of the outstanding Pioneer voting stock, together with approval by the
holders of at least 66 2/3% of the outstanding voting stock not owned, directly
or indirectly, by the Related Person, is required to amend the fair price
provisions and (b) approval of the holders of at least 80% of the outstanding
voting stock is required to amend the provisions prohibiting stockholders from
acting by written consent.
DELAWARE ANTI-TAKEOVER STATUTE
Pioneer is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
Pioneer's outstanding voting stock) from engaging in a "business combination"
(as defined in Section 203) with Pioneer for three years following the date that
person becomes an interested stockholder unless (a) before that person became an
interested stockholder, Pioneer's Board of Directors approved the transaction in
which the interested stockholder became an interested stockholder or approved
the business combination, (b) upon completion of the transaction that resulted
in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of Pioneer voting stock outstanding at
the time the transaction commenced (excluding stock held by directors who are
also officers of Pioneer and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer), or (c) following
the transaction in which that person became an interested stockholder, the
business combination is approved by Pioneer's Board of Directors and authorized
at a meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding Pioneer voting stock not owned by the interested
stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving Pioneer and
a person who was not an interested stockholder during the previous three years
or who became an interested stockholder with the approval of a majority of
Pioneer's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors who were directors before any person
became an interested stockholder in the previous three years or who were
recommended for election or elected to succeed such directors by a majority of
such directors then in office.
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DESCRIPTION OF MESA 1996 INCENTIVE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Incentive Plan and does not purport to be complete. Such
description is qualified in its entirety by reference to the 1996 Incentive Plan
of MESA Inc. (the "Mesa Incentive Plan"), a copy of which is attached at
Appendix VI to this Joint Proxy Statement/Prospectus.
General
On August 22, 1996, the Mesa Board approved the Mesa Incentive Plan. The
objectives of the Mesa Incentive Plan are to attract and retain key employees of
Mesa and its subsidiaries, to encourage the sense of proprietorship of such
employees and to stimulate the active interest of such persons in the
development and financial success of Mesa and its subsidiaries. These objectives
are to be accomplished by making awards ("Awards") under the Mesa Incentive Plan
and thereby providing participants with a proprietary interest in the growth and
performance of Mesa and its subsidiaries.
Key employees eligible for Awards under the Mesa Incentive Plan (the "Mesa
Employees") are those who hold positions of responsibility and whose performance
can have a significant effect on the success of Mesa and its subsidiaries.
Awards to Mesa Employees under the Mesa Incentive Plan may be made in the
form of grants of stock options ("Options"), stock appreciation rights ("SARs"),
restricted or non-restricted Mesa Common Stock or units denominated in Mesa
Common Stock ("Stock Awards"), cash awards ("Cash Awards"), performance awards
("Performance Awards") or any combination of the foregoing.
The Mesa Incentive Plan provides for future Awards to be made in respect of
a maximum of 9,000,000 shares of Mesa Common Stock. Shares of Mesa Common Stock
which are the subject of Awards that are forfeited or terminated, expire
unexercised, are settled in cash in lieu of Mesa Common Stock or in a manner
such that all or some of the shares covered thereby are not issued or are
exchanged for Awards that do not involve Mesa Common Stock will again
immediately become available for Awards under the Mesa Incentive Plan.
The Mesa Incentive Plan will be administered by the Stock Option Committee
of the Mesa Board, or such other committee as may in the future be appointed by
the Mesa Board (as used for the Mesa Incentive Plan, the "Committee").
The Committee will have the exclusive power to administer the Mesa
Incentive Plan and to take all actions which are specifically contemplated
thereby or are necessary or appropriate in connection with the administration
thereof. The Committee will also have the exclusive power to interpret the Mesa
Incentive Plan and to adopt such rules, regulations and guidelines for carrying
out the purposes of the Mesa Incentive Plan as it may deem necessary or proper
in keeping with the objectives thereof. The Committee may, in its discretion,
provide for the extension of the exercisability of an Award, accelerate the
vesting or exercisability of an Award, eliminate or make less restrictive any
restrictions contained in an Award, waive any restriction or other provision of
the Mesa Incentive Plan or an Award or otherwise amend or modify an Award in any
manner that is either (i) not adverse to the Mesa Employee holding the Award or
(ii) consented to by such Employee.
The Committee may delegate to the Chief Executive Officer and to other
senior officers of Mesa its duties under the Mesa Incentive Plan.
Awards
The Committee will determine the type or types of Awards made under the
Mesa Incentive Plan and will designate the Employees who are to be recipients of
such Awards. Each Award will be embodied in an agreement, which will contain
such terms, conditions and limitations as determined by the Committee and will
be signed by or on behalf of Mesa and the Mesa Employee. Awards may be granted
singly, in combination or in tandem. Awards may also be made in combination or
in tandem with, in replacement of, or as
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alternatives to, grants or rights under the Mesa Incentive Plan or any other
employee plan of Mesa or any of its subsidiaries, including any acquired entity.
All or part of an Award may be subject to conditions established by the
Committee, which may include continuous service with Mesa and its subsidiaries,
achievement of specific business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance.
The types of Awards that may be made under the Mesa Incentive Plan are as
follows:
Options. Options are rights to purchase a specified number of shares of
Mesa Common Stock at a specified price. An option granted pursuant to the Mesa
Incentive Plan may consist of either an incentive stock option ("ISO") that
complies with the requirements of Section 422 of the Code or a nonqualified
stock option ("NQSO") that does not comply with such requirements. Under the
Mesa Incentive Plan, both ISOs and NQSOs must have an exercise price per share
that is not less than 100% of the fair market value of the Mesa Common Stock on
the date of grant. In either case, the exercise price must be paid in full at
the time an Option is exercised in cash or, if the Mesa Employee so elects, by
means of tendering Mesa Common Stock or surrendering another Award or any
combination of cash, Mesa Common Stock or other Awards. The Committee will
determine acceptable methods for tendering Mesa Common Stock or other Awards by
a Mesa Employee to exercise an Option. The Committee may also provide for
procedures to permit the exercise of Options by use of proceeds to be received
from the sale of Mesa Common Stock issuable pursuant to an Option. Subject to
the foregoing, the terms, conditions and limitations applicable to any Options,
including the term of any Options and the date or dates upon which they become
exercisable, will be determined by the Committee.
SARs. SARs are rights to receive a payment, in cash or Mesa Common Stock,
equal to the excess of the fair market value or other specified valuation of a
specified number of shares of Mesa Common Stock on the date the rights are
exercised over a specified strike price. An SAR may be granted under the Mesa
Incentive Plan to the holder of an Option with respect to all or a portion of
the shares of Mesa Common Stock subject to such Option or may be granted
separately. The terms, conditions and limitations applicable to any SARs,
including the term of any SARs and the date or dates upon which they become
exercisable, will be determined by the Committee.
Stock Awards. Stock Awards consist of restricted and non-restricted grants
of Mesa Common Stock or units denominated in Mesa Common Stock. The terms,
conditions and limitations applicable to any Stock Awards will be determined by
the Committee. Without limiting the foregoing, rights to dividends or dividend
equivalents may be extended to and made part of any Stock Award in the
discretion of the Committee.
Cash Awards. Cash Awards consist of grants denominated in cash. The terms,
conditions and limitations applicable to any Cash Awards will be determined by
the Committee.
Performance Awards. Performance Awards consist of grants made to a Mesa
Employee subject to the attainment of one or more performance goals. A
Performance Award will be paid, vested or otherwise deliverable solely upon the
attainment of one or more pre-established, objective performance goals
established by the Committee. A performance goal may be based upon one or more
business criteria that apply to the Mesa Employee, one or more subsidiaries of
Mesa or Mesa as a whole, and may include any of the following: increased
revenue, net income, stock price, market share, earnings per share, return on
equity, return on assets, or decrease in costs. Subject to the foregoing, the
terms, conditions and limitations applicable to any Performance Awards will be
determined by the Committee.
Other Provisions
With the approval of the Committee, payments in respect of Awards may be
deferred, either in the form of installments or a future lump sum payment, by
any Mesa Employee. At the discretion of the Committee, a Mesa Employee may be
offered an election to substitute an Award for another Award or Awards of the
same or different type.
Mesa will have the right to deduct applicable taxes from any Award payment
and withhold, at the time of delivery or vesting of cash or shares of Mesa
Common Stock under this Plan, an appropriate amount of cash or
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number of shares of Mesa Common Stock, or combination thereof, for the payment
of taxes. The Committee may also permit withholding to be satisfied by the
transfer to Mesa of shares of Mesa Common Stock previously owned by the holder
of the Award for which withholding is required.
The Mesa Board may amend, modify, suspend or terminate the Mesa Incentive
Plan for the purpose of addressing any changes in legal requirements or for any
other purpose permitted by law, except that no amendment that would impair the
rights of any Mesa Employee with respect to any Award may be made without the
consent of such Mesa Employee.
In the event of any subdivision or consolidation of outstanding shares of
Mesa Common Stock, declaration of a stock dividend payable in shares of Mesa
Common Stock or other stock split, the Mesa Incentive Plan provides for the
Committee to make appropriate adjustments to (i) the number of shares of Mesa
Common Stock reserved under the Mesa Incentive Plan, (ii) the number of shares
of Mesa Common Stock covered by outstanding Awards in the form of Mesa Common
Stock or units denominated in Mesa Common Stock, (iii) the exercise or other
price in respect of such Awards and (iv) the appropriate fair market value and
other price determinations for Awards in order to reflect such transactions.
Furthermore, in the event of any other recapitalization or capital
reorganization of Mesa, any consolidation or merger of Mesa with another
corporation or entity, the adoption by Mesa of any plan of exchange affecting
the Mesa Common Stock or any distribution to holders of Mesa Common Stock of
securities or property (other than normal cash dividends or stock dividends),
the Mesa Board will make appropriate adjustments to the amounts or other items
referred to in clauses (ii), (iii) and (iv) above to give effect to such
transactions, but only to the extent necessary to maintain the proportionate
interest of the holders of the Awards and to preserve, without exceeding, the
value thereof.
Tax Implications of Awards
Set forth below is a summary of the federal income tax consequences to Mesa
Employees and Mesa as a result of the grant and exercise of Awards under the
Mesa 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. Mesa Employees will not realize taxable income upon the grant of a NQSO
or a SAR. Upon the exercise of a SAR or NQSO, the Mesa Employee will recognize
ordinary income (subject to withholding by Mesa) in an amount equal to the
excess of (i) the amount of cash and the fair market value of the Mesa Common
Stock received, over (ii) the exercise price (if any) paid therefor. The Mesa
Employee will generally have a tax basis in any shares of Mesa 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" below, Mesa (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 the Mesa Employee under the foregoing rules.
Employees will not have taxable income upon the grant of an ISO. Upon the
exercise of an ISO, the Mesa Employee will not have taxable income, although the
excess of the fair market value of the shares of Mesa Common Stock received upon
exercise of the ISO ("ISO Stock") over the exercise price will increase the
alternative minimum taxable income of the Mesa Employee, which may cause such
Mesa Employee to incur alternative minimum tax. The payment of any alternative
minimum tax attributable to the exercise of an ISO would be allowed as a credit
against the Employee's regular tax liability in a later year to the extent the
Mesa Employee's regular tax liability is in excess of the alternative minimum
tax for that year.
Upon the disposition of 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), the Mesa Employee will generally
recognize capital gain (or loss) equal to the excess of the amount received in
the disposition over the exercise price paid by the Mesa Employee for the ISO
Stock. However, if a Mesa Employee disposes of ISO Stock that has not been held
for the requisite holding period (a "disqualifying disposition"), the Mesa
Employee will recognize ordinary 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
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amount realized in the case of an arm's length disqualifying disposition to an
unrelated party) exceeds the exercise price paid by the Mesa Employee for such
ISO Stock. The Mesa 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.
Mesa and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an ISO, unless the Mesa
Employee makes a disqualifying disposition of the ISO Stock. If a Mesa Employee
makes such a disqualifying disposition, Mesa (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 the Mesa Employee under the
rules described in the preceding paragraph.
Under current rulings, if a Mesa Employee transfers previously held shares
of Mesa 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 the Employee would still recognize ordinary compensation income upon
exercise of an NQSO in the manner described above). Moreover, that number of
shares of Mesa Common Stock received upon exercise which equals the number of
shares of previously held Mesa 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 Mesa Common Stock surrendered in satisfaction of the NQSO or ISO
exercise price. Any additional shares of Mesa Common Stock received upon
exercise will have a tax basis that equals the amount of cash (if any) paid by
the Mesa Employee, plus the amount of compensation income recognized by the Mesa
Employee under the rules described above.
Cash Awards; Stock Unit Awards; Stock Awards. A Mesa Employee will
recognize ordinary compensation income upon receipt of cash pursuant to a Cash
Award or Performance Award or, if earlier, at the time such cash is otherwise
made available for the Mesa Employee to draw upon it. A Mesa Employee will not
have taxable income at the time of grant of a Stock Award in the form of units
denominated in Mesa Common Stock ("Stock Unit Award") but rather, will generally
recognize ordinary compensation income at the time he receives Mesa Common Stock
in satisfaction of such Stock Unit Award in an amount equal to the fair market
value of the Mesa Common Stock received. In general, a Mesa Employee will
recognize ordinary compensation income as a result of the receipt of Mesa Common
Stock pursuant to a Stock Award or Performance Award in an amount equal to the
fair market value of the Mesa 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, the Mesa Employee will recognize
ordinary compensation income in an amount equal to the fair market value of the
Mesa Common Stock (a) when the Mesa Common Stock first becomes transferable or
is no longer subject to a substantial risk of forfeiture in cases where the Mesa
Employee does not make an valid election under Section 83(b) of the Code or (b)
when the Mesa Common Stock is received in cases where the Mesa Employee makes a
valid Section 83(b) election.
A Mesa 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 Mesa Common Stock or cash received.
Dividends that are received by a Mesa Employee prior to the time that the Mesa
Common Stock is taxed to the Mesa Employee under the rules described in the
preceding paragraph are taxed as additional compensation, not as dividend
income. The tax basis of a Mesa Employee in the Mesa Common Stock received will
equal the amount recognized by him as compensation income under the rules
described in the preceding paragraph, and the Mesa Employee's holding period in
such shares will commence on the date of receipt of the shares.
Tax Code Limitations on Deductibility. In order for the amounts described
above to be deductible by Mesa (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 Mesa (or a subsidiary)
to
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obtain a deduction for future payments under the Mesa 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 Mesa (or a subsidiary) to obtain a deduction for amounts paid under
the Mesa 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 employees of Mesa to $1 million with respect to any such employee
during any taxable year of Mesa. However, an exception applies to this
limitation in the case of certain performance-based compensation. It is intended
that the approval of the Mesa Incentive Plan by the common stockholders of Mesa
and the description of the Mesa Incentive Plan contained herein will satisfy
certain requirements for the performance-based exception and Mesa will endeavor
to comply with the requirements of the Code and Treasury Regulation Section
1.162-27 with respect to the grant and payment of performance-based awards under
the Mesa Incentive Plan so as to be eligible for the performance-based
exception. However, it may not be possible in all cases to satisfy the
requirements for the exception and Mesa 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.
As of May 31, 1997, 3,570,000 shares are subject to issuance upon the
exercise of outstanding options under the Mesa Incentive Plan, all of which are
subject to the approval of the adoption of the Mesa Incentive Plan by the
stockholders of Mesa at the Mesa Special Meeting.
On June 25, 1997, the last reported sales price of Mesa Common Stock on the
New York Stock Exchange was $5 5/8 per share.
The following table summarizes certain information covering cumulative
options granted, before consideration of forfeitures and exercises, pursuant to
the Mesa Incentive Plan to each executive officer, each person who has received
5% of the options reserved for issuance, all current executive officers as a
group, and all current employees, including all current officers who are not
executive officers, as a group, from inception of the Mesa Incentive Plan
through May 31, 1997:
MESA INCENTIVE PLAN
SUMMARY OF GRANTS AS OF MAY 31, 1997
<TABLE>
<CAPTION>
CUMULATIVE AVERAGE
OPTIONS PER SHARE
NAME GRANTED EXERCISE PRICE
---- ---------- --------------
<S> <C> <C>
I. Jon Brumley, Chief Executive Officer..................... 800,000 $ 3.25
Dennis E. Fagerstone, Executive Vice President and
Chief Operating Officer................................... 500,000 $4.0625
Edwin E. Hance, Senior Vice President -- Operations......... 200,000 $4.0625
M. Garrett Smith, Vice President -- Corporate
Acquisitions.............................................. 350,000 $4.0625
John V. Sobchak, Treasurer.................................. 50,000 $4.0625
Edgar E. St. James, Vice President -- Exploration........... 200,000 $4.0625
Wayne A. Stoerner, Controller............................... 50,000 $4.0625
Henry Galpin, Vice President -- Natural Gas Processing...... 75,000 $4.0625
Gary M. Prescott, Vice President -- Legal................... 50,000 $5.6875
Kenneth H. Sheffield, Jr., Vice President -- Acquisitions
and Development........................................... 100,000 $4.0625
All current executive officers as a group................... 2,375,000 $3.8231
All other current employees as a group...................... 1,195,000 $4.4579
</TABLE>
Approximately 29 employees have outstanding options as of May 31, 1997.
THE MESA BOARD RECOMMENDS THAT STOCKHOLDERS OF MESA VOTE IN FAVOR OF THE
APPROVAL OF THE MESA INCENTIVE PLAN.
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DESCRIPTION OF PIONEER LONG-TERM INCENTIVE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Pioneer Natural Resources Company Long-Term Incentive Plan
(the "Pioneer Long-Term Incentive Plan") does not purport to be complete. The
description is qualified in its entirety by reference to the Pioneer Long-Term
Incentive Plan, a copy of which is attached at Appendix VII to this Joint Proxy
Statement/Prospectus.
GENERAL
Pioneer may grant awards with respect to shares of Pioneer Common Stock
under the Pioneer Long-Term Incentive Plan to officers, directors, employees and
certain consultants and advisors. At the P&P Effective Time, Pioneer is expected
to have 14 directors and approximately 1,100 employees. The awards under the
Pioneer Long-Term Incentive Plan include (i) incentive stock options qualified
as such under U.S. federal income tax laws, (ii) stock options that do not
qualify as incentive stock options, (iii) stock appreciation rights ("SARs"),
(iv) restricted stock awards, and (v) performance units.
The number of shares of Pioneer Common Stock that may be subject to
outstanding awards under the Pioneer Long-Term Incentive Plan at any one time is
equal to ten percent of the total number of outstanding shares of Pioneer Common
Stock (treating as outstanding all shares of Pioneer Common Stock issuable
within 60 days upon conversion or exchange of outstanding, publicly traded
convertible or exchangeable securities of Pioneer) minus the total number of
shares of Pioneer Common Stock subject to outstanding awards under any other
stock-based plan for employees or directors of Pioneer. At the P&P Effective
Time, the number of shares authorized under the Pioneer Long-Term Incentive Plan
will be 4,366,264 (assuming no exercise of currently outstanding options of
Parker & Parsley and Mesa). The number of shares authorized under the Pioneer
Long-Term Incentive Plan and the number of shares subject to an award under the
Pioneer Long-Term Incentive Plan will be adjusted for stock splits, stock
dividends, recapitalizations, mergers, and other changes affecting the capital
stock of Pioneer.
The Board of Directors or any committee designated by it may administer the
Pioneer Long-Term Incentive Plan (as used for the Pioneer Long-Term Incentive
Plan, the "Committee"). Pioneer intends to have its Compensation Committee
administer the plan. The Committee has broad discretion to administer the
Pioneer Long-Term Incentive Plan, interpret its provisions, and adopt policies
for implementing the Pioneer Long-Term Incentive Plan. This discretion includes
the ability to select the recipient of an award, determine the type 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 Pioneer
Long-Term Incentive Plan. Nevertheless, 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.
AWARDS
The Committee determines the exercise price of each option granted under
the Pioneer Long-Term Incentive Plan. The exercise price for an incentive stock
option must not be less than the fair market value of the Pioneer 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 Pioneer 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.
An SAR may be awarded in connection with or separate from a stock option.
An 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 Pioneer 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). An 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
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number of shares for which the SAR is exercised. The surrendered stock option or
portion will then cease to be exercisable. Such an SAR is exercisable or
transferable only to the extent that the related stock option is exercisable or
transferable. An 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 Pioneer 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 Pioneer Long-Term Incentive Plan, except that performance measures for
executive officers must be objective measures chosen from among the following
choices: (a) total stockholder return (Pioneer 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 Pioneer Common Stock
or other securities, (k) the performance of Pioneer 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 Poors' Corporation 500 Composite
Stock Price Index, or (l) the performance of Pioneer 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 Pioneer's best interest to grant
awards not satisfying the requirements of Section 162(m) of the Internal Revenue
Code or any successor law.
Under the Pioneer 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 Pioneer Common Stock on the last
business day of the month in which the annual meeting of the stockholders is
held. Pioneer's initial directors will receive this award on the last day of the
month in which the Mergers occur. 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 Pioneer Common Stock on the business day immediately
preceding the date of the award. When issued, the shares of Pioneer Common Stock
awarded will be 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 Pioneer'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 Pioneer. The Pioneer 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.
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 Pioneer Common
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Stock issuable pursuant to the award or the delivery of previously owned shares
of Pioneer 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
Pioneer Long-Term Incentive Plan will have change-of-control features. The
Committee also has discretion to vary the change of control features as its
deems appropriate. The following describes the change of control features that
Pioneer generally expects may apply to awards, if any such feature applies. An
award agreement under the Pioneer Long-Term Incentive Plan may provide that,
upon a change of control of Pioneer, (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 term whether or not employment is terminated at or following a
change in control. In general, a change in control of Pioneer occurs in any of
four situations: (1) a person other than Pioneer or certain affiliated companies
or benefit plans becomes the beneficial owner of 20% or more of the voting power
of Pioneer's outstanding voting securities (except acquisitions from Pioneer 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
the members of the Board of Directors immediately following the Mergers and
persons whose elections as directors were approved by those directors or their
approved successors; (3) Pioneer merges or consolidates with another corporation
or entity (whether Pioneer or the other entity is the survivor), or Pioneer and
the holders of the voting securities of such other corporation or entity (or the
stockholders of Pioneer and such other corporation or entity) participate in a
securities exchange (other than a merger, consolidation or securities exchange
in which Pioneer's voting securities are converted into or continue to represent
securities having the majority of voting power in the surviving company, in
which no person other than that surviving company owns 20% or more of the
outstanding shares of common stock or voting shares of the surviving corporation
(except for persons with such ownership resulting solely from their ownership in
Pioneer before the transaction), and in which at least a majority of the board
of directors of the surviving corporation were members of the incumbent board of
Pioneer); or (4) Pioneer liquidates or sells all or substantially all of its
assets, except sales to an entity having substantially the same ownership as
Pioneer.
If a restructuring of Pioneer occurs that does not constitute a change in
control of Pioneer, the Committee may (but need not) cause Pioneer 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 Pioneer 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 Pioneer 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 Pioneer or the direct or
indirect transfer of all or substantially all of Pioneer's assets (whether by
sale, merger, consolidation, liquidation, or otherwise) in one transaction or a
series of transactions.
Without stockholder approval, the Board of Directors may not amend the
Pioneer Long-Term Incentive Plan to increase materially the aggregate number of
shares of Pioneer Common Stock that may be issued under the Pioneer Long-Term
Incentive Plan (except for adjustments pursuant to the terms of the Pioneer
Long-Term Incentive Plan). Otherwise, the Board of Directors may at any time and
from time to time alter, amend, suspend or terminate the Pioneer Long-Term
Incentive Plan in whole or in part and in any way,
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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 Pioneer
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 Pioneer Long-Term Incentive
Plan ("Pioneer Employees") and to Pioneer as a result of the grant and exercise
of awards under the Pioneer 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. Pioneer 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 Pioneer Employee will recognize ordinary compensation income (subject to
withholding by Pioneer) in an amount equal to the excess of (i) the amount of
cash and the fair market value of the Pioneer Common Stock received, over (ii)
the exercise price (if any) paid therefor. A Pioneer Employee will generally
have a tax basis in any shares of Pioneer 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," Pioneer (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
Pioneer Employee under the foregoing rules.
Pioneer 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 Pioneer Employee will not have taxable income, although the excess of the
fair market value of the shares of Pioneer Common Stock received upon exercise
of the ISO ("ISO Stock") over the exercise price will increase the alternative
minimum taxable income of the Pioneer Employee, which may cause such Pioneer
Employee to incur alternative minimum tax. The payment of any alternative
minimum tax attributable to the exercise of an ISO would be allowed as a credit
against the Pioneer Employee's regular tax liability in a later year to the
extent the Pioneer Employee's regular tax liability is in excess of the
alternative minimum tax for that year.
Upon the disposition of 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 Pioneer Employee will generally
recognize capital gain (or loss) equal to the excess (or shortfall) of the
amount received in the disposition over the exercise price paid by the Pioneer
Employee for the ISO Stock. However, if a Pioneer Employee disposes of ISO Stock
that has not been held for the requisite holding period (a "disqualifying
disposition"), the Pioneer 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
Pioneer Employee for such ISO Stock. A Pioneer 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.
Pioneer and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an ISO, unless a Pioneer
Employee makes a disqualifying disposition of the ISO Stock. If a Pioneer
Employee makes a disqualifying disposition, Pioneer (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 Pioneer Employee under the
rules described in the preceding paragraph.
Under current rulings, if a Pioneer Employee transfers previously held
shares of Pioneer Common Stock (other than ISO Stock that has not been held for
the requisite holding period) in satisfaction of part or all of
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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 Pioneer Employee would still recognize ordinary
compensation income upon exercise of an NQSO in the manner described above).
Moreover, that number of shares of Pioneer Common Stock received upon exercise
which equals the number of shares of previously held Pioneer 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 Pioneer Common Stock surrendered
in satisfaction of the NQSO or ISO exercise price. Any additional shares of
Pioneer Common Stock received upon exercise will have a tax basis that equals
the amount of cash (if any) paid by the Pioneer Employee, plus the amount of
compensation income recognized by the Pioneer Employee under the rules described
above. If a reload option is issued in connection with a Pioneer Employee's
transfer of previously held Pioneer 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.
Performance Units; Restricted Stock Awards. A Pioneer Employee will
recognize ordinary compensation income upon receipt of cash pursuant to a
performance unit or, if earlier, at the time the cash is otherwise made
available for the Pioneer Employee to draw upon it. A Pioneer Employee will not
have taxable income at the time of grant of a stock award in the form of
performance units denominated in Pioneer Common Stock ("Stock Unit Award"), but
rather, will generally recognize ordinary compensation income at the time he
receives Pioneer Common Stock in satisfaction of the Stock Unit Award in an
amount equal to the fair market value of the Pioneer Common Stock received. In
general, a Pioneer Employee will recognize ordinary compensation income as a
result of the receipt of Pioneer Common Stock pursuant to a restricted stock
award or performance unit in an amount equal to the fair market value of the
Pioneer 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 Pioneer Employee will recognize ordinary compensation income in
an amount equal to the fair market value of the Pioneer Common Stock (a) when
the Pioneer Common Stock first becomes transferable or is no longer subject to a
substantial risk of forfeiture in cases where a Pioneer Employee does not make
an valid election under Section 83(b) of the Code or (b) when the Pioneer Common
Stock is received in cases where a Pioneer Employee makes a valid Section 83(b)
election.
A Pioneer 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 Pioneer Common Stock or cash
received. Dividends that are received by a Pioneer Employee prior to the time
that the Pioneer Common Stock is taxed to the Pioneer Employee under the rules
described in the preceding paragraph are taxed as additional compensation, not
as dividend income. The tax basis of a Pioneer Employee in the Pioneer Common
Stock received will equal the amount recognized by him as compensation income
under the rules described in the preceding paragraph, and the Pioneer Employee's
holding period in those shares will commence on the date of receipt of the
shares.
Subject to the discussion immediately below, Pioneer (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 Pioneer
Employee under the foregoing rules.
Tax Code Limitations on Deductibility. In order for the amounts described
above to be deductible by Pioneer (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 Pioneer (or a
subsidiary) to obtain a deduction for future payments under the Pioneer
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 Pioneer (or a subsidiary) to
obtain a deduction for amounts paid under the Pioneer 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 Pioneer to $1 million with respect to any such officer during any
taxable year of Pioneer. However, an exception applies to this limitation in the
case of certain performance-based compensation. The Pioneer Long-Term Incentive
Plan is intended to satisfy the requirements for the performance-based
exception. Pioneer intends to comply with the requirements of the
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Code with respect to awards under the Pioneer Long-Term Incentive Plan so as to
be eligible for the performance-based exception, but Pioneer 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.
THE MESA BOARD RECOMMENDS THAT STOCKHOLDERS OF MESA VOTE IN FAVOR OF THE
APPROVAL OF THE PIONEER LONG-TERM INCENTIVE PLAN.
THE PARKER & PARSLEY BOARD RECOMMENDS THAT STOCKHOLDERS OF PARKER & PARSLEY
VOTE IN FAVOR OF THE APPROVAL OF THE PIONEER LONG-TERM INCENTIVE PLAN.
DESCRIPTION OF THE PIONEER
EMPLOYEE STOCK PURCHASE PLAN
The description set forth below represents a summary of the principal terms
and conditions of the Pioneer Natural Resources Company Employee Stock Purchase
Plan (the "Pioneer Employee Stock Purchase Plan") and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Pioneer Employee Stock Purchase Plan, a copy of which is attached at Appendix
VIII to this Joint Proxy Statement/Prospectus.
GENERAL
A total of 750,000 shares of Pioneer Common Stock are reserved for issuance
under the Pioneer Employee Stock Purchase Plan. The purpose of the Pioneer
Employee Stock Purchase Plan is to provide employees of Pioneer who participate
in the Pioneer Employee Stock Purchase Plan with an opportunity to purchase
Pioneer Common Stock through payroll deductions. The Pioneer Employee Stock
Purchase Plan, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
See "-- Federal Income Tax Consequences" below.
The Pioneer Employee Stock Purchase Plan will be administered by a
Committee (as used for the Pioneer Employee Stock Purchase Plan, the
"Committee") appointed by the Board of Directors. Pioneer intends to have its
Compensation Committee administer the Pioneer Employee Stock Purchase Plan. All
questions of interpretation of the Pioneer Employee Stock Purchase Plan will be
determined by the Committee, whose decisions will be final and binding upon all
participants.
Any persons (including officers of Pioneer) who have been employed by
Pioneer (or any of its parent or subsidiary corporations within the meaning of
Sections 424(e) and (f) of the Code) for at least six months and are employed
for at least 20 hours per week and more than five months in a calendar year will
be eligible to participate in the Pioneer Employee Stock Purchase Plan, subject
to certain limitations imposed by Section 423(b) of the Code. Eligible employees
may become participants in the Pioneer Employee Stock Purchase Plan by
delivering to Pioneer an agreement authorizing payroll deductions prior to the
applicable offering date.
OFFERING DATES
The Pioneer Employee Stock Purchase Plan will be implemented by one
nine-month offering during each calendar year. The offering periods will
commence on January 1 and end on September 30 of each year. The first offering
period will commence January 1, 1998.
PURCHASE PRICE
The purchase price per share at which shares of Pioneer Common Stock will
be sold under the Pioneer Employee Stock Purchase Plan will be the lower of 85%
of the fair market value of the Pioneer Common Stock on the first day of each
nine-month offering period and 85% of the fair market value of the Pioneer
Common Stock on the last day of each offering period. The fair market value of
the Pioneer Common Stock on a given date will be the closing sales price of the
Pioneer Common Stock on the NYSE on such date.
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The purchase price of the shares of Pioneer Common Stock to be purchased
under the Pioneer Employee Stock Purchase Plan will be accumulated by payroll
deductions during each offering period. The deductions may not exceed 15% of a
participant's eligible compensation, which is defined in the Pioneer Employee
Stock Purchase Plan to include all wages, salary, commissions and bonuses
received (including employee contributions to a 401(k) plan) during the offering
period. An employee may discontinue participation in the Pioneer Employee Stock
Purchase Plan, but may not otherwise increase or decrease the rate of payroll
deductions at any time during the offering period. Payroll deductions will
commence on the first payday on or following the first day of the offering
period and continue at the same rate until terminated as provided in the Pioneer
Employee Stock Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION
The maximum number of shares placed under option to a participant in an
offering period under the Pioneer Employee Stock Purchase Plan will be the
lesser of 1,000 or that number determined by dividing the amount of the
participant's total payroll deductions during the offering period (and any
carryover amounts from the preceding offering period) by the purchase price per
share under the Pioneer Employee Stock Purchase Plan. Unless a participant
withdraws from the Pioneer Employee Stock Purchase Plan, the participant's
option for the purchase of shares will be exercised automatically at the end of
each offering period for the maximum number of whole shares at the applicable
price. As soon as practicable following the end of each offering period, Pioneer
will cause a certificate to be issued in each participant's name representing
the total number of whole shares of Pioneer Common Stock acquired by the
participant through the exercise of the option. Any balance remaining in a
participant's account following the exercise of the participant's option in an
offering period will be carried over to the next offering period.
Notwithstanding the foregoing, no employee of Pioneer will be permitted to
subscribe for shares of Pioneer Common Stock under the Pioneer Employee Stock
Purchase Plan if, immediately after the grant of the option, the employee would
own five percent or more of the voting power or value of all classes of stock of
Pioneer or its subsidiaries (including stock which may be purchased under the
Pioneer Employee Stock Purchase Plan or pursuant to any other options), nor will
any employee be granted an option which would permit the employee to buy
pursuant to the Pioneer Employee Stock Purchase Plan more than $25,000 worth of
stock (determined at the fair market value of the shares at the time the option
is granted) in any calendar year.
OTHER PROVISIONS
A participant may withdraw from the Pioneer Employee Stock Purchase Plan in
whole, but not in part, by signing and delivering to Pioneer a notice of
withdrawal from the Pioneer Employee Stock Purchase Plan. A participant may
elect to withdraw from the Pioneer Employee Stock Purchase Plan at any time
prior to 30 days before the last day of the offering period. Upon a withdrawal,
Pioneer shall refund to the participant the accumulated payroll deductions
credited to the participant's account, and the participant's payroll deductions
and interest in the offering shall terminate.
If any change is made in Pioneer's capitalization, such as a stock split,
stock combination, stock dividend, exchange of shares, or other
recaptialization, merger, or otherwise which results in an increase or decrease
in the number of outstanding shares of Pioneer Common Stock without receipt of
consideration by Pioneer, appropriate adjustments will be made by the Committee
in the shares subject to purchase under the Pioneer Employee Stock Purchase Plan
and in the purchase price per share.
An option granted to a participant under the Pioneer Stock Purchase Plan
may not be pledged, assigned or transferred other than by will or the laws of
descent and distribution, and any participant's attempt to do so may be treated
by Pioneer as an election to withdraw from the Pioneer Stock Purchase Plan.
The Board of Directors may at any time amend or terminate the Pioneer
Employee Stock Purchase Plan, except that such termination shall not affect
options previously granted nor may any amendment make any change in an option
granted prior thereto which adversely affects the rights of any participant
without the written consent of such participant. In addition, no amendment may
be made to the Pioneer Employee Stock
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Purchase Plan without prior approval of the stockholders of Pioneer if such
amendment would materially increase the benefits accruing to participants under
the Pioneer Employee Stock Purchase Plan, increase the number of shares of
Pioneer Common Stock that may be issued under the Pioneer Employee Stock
Purchase Plan (other than as a result of anti-dilution provisions), change the
class of individuals eligible for participation in the Pioneer Employee Stock
Purchase Plan, extend the term of the Pioneer Employee Stock Purchase Plan, or
cause options issued under the Pioneer Employee Stock Purchase Plan to fail to
meet the requirements for employee stock purchase plans as defined in Section
423 of the Code.
FEDERAL INCOME TAX CONSEQUENCES
The Pioneer Employee Stock Purchase Plan, and the right of participants to
make purchases thereunder, is intended to qualify under the provisions of
sections 421 and 423 of the Code. Under these provisions, no income will be
taxable to a participant at the time of grant of the option or purchase of the
shares. Upon disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the participant's
holding period. If the shares have been held by the participant for more than
two years after the date of the option grant, the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price or (b) the excess of the fair market value of the shares at the
date of the option grant over the purchase price will be treated as ordinary
income, and any further gain or loss will be treated as long-term capital gain
or loss. If the shares are disposed of before the expiration of this holding
period, the excess of the fair market value of the shares on the purchase date
over the purchase price will be treated as ordinary income, and any further gain
or loss on such disposition will be long-term or short-term capital gain or
loss, depending on the holding period. Pioneer is not entitled to a deduction
for amounts taxed as ordinary income or capital gain to a participant except to
the extent of ordinary income reported by participants upon disposition of
shares within two years from the date of grant.
The foregoing brief summary of the effect of federal income taxation upon
the participants and Pioneer with respect to the purchase of shares under the
Pioneer Employee Stock Purchase Plan does not purport to be complete, and
reference should be made to the applicable provisions of the Code. In addition,
this summary does not discuss tax consequences of a participant's death or the
provisions of the income tax laws of any municipality, state or foreign country
in which the participant may reside.
THE MESA BOARD RECOMMENDS THAT THE STOCKHOLDERS OF MESA VOTE IN FAVOR OF
THE APPROVAL OF THE PIONEER EMPLOYEE STOCK PURCHASE PLAN.
THE PARKER & PARSLEY BOARD RECOMMENDS THAT THE STOCKHOLDERS OF PARKER &
PARSLEY VOTE IN FAVOR OF THE APPROVAL OF THE PIONEER EMPLOYEE STOCK PURCHASE
PLAN.
LEGAL MATTERS
Baker & Botts, L.L.P., Dallas, Texas, will pass on certain legal matters in
connection with the Mergers, including the validity of the shares of Pioneer
Common Stock or Pioneer Preferred Stock, as the case may be, issued in
connection with the Mergers and certain United States federal income taxation
matters, on behalf of Mesa and Pioneer. Robert L. Stillwell, a partner in the
law firm of Baker & Botts, L.L.P., is a director of Mesa, will be a director of
Pioneer and beneficially owns 25,434 shares of Mesa Common Stock, all of which
represents shares of Mesa Common Stock issuable upon the conversion of Mesa
Series A Preferred Stock. Vinson & Elkins L.L.P., Dallas, Texas, is acting as
counsel for Parker & Parsley in connection with certain legal matters, including
certain United States federal income taxation matters, relating to the Mergers
and the other transactions contemplated by the Merger Agreement. Michael D.
Wortley, a partner in the law firm of Vinson & Elkins L.L.P., is a director of
Parker & Parsley, will become a director of Pioneer and beneficially owns 6,144
shares of Parker & Parsley Common Stock.
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EXPERTS
The Consolidated Financial Statements of Mesa incorporated by reference in
this Joint Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
The Consolidated Financial Statements of Parker & Parsley have been
incorporated by reference in this Joint Proxy Statement/Prospectus in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1995,
consolidated financial statements refers to a change in the method of accounting
for the impairment of long-lived assets and for long-lived assets to be disposed
of.
The estimates of Mesa's proved reserves as of December 31, 1996 set forth
in this Joint Proxy Statement/ Prospectus with respect to its Hugoton and West
Panhandle field properties are based upon a reserve report prepared by
Williamson Petroleum Consultants, Inc., independent petroleum consultants, and
are included herein or incorporated by reference herein upon the authority of
such Firm as experts with respect to such matters covered by such report. The
estimates of Greenhill's proved reserves as of December 31, 1996 set forth in
this Joint Proxy Statement/Prospectus are based upon a reserve report prepared
by Miller and Lents, independent petroleum consultants, and are included herein
or incorporated by reference herein upon the authority of such Firm as experts
with respect to such matters covered by such report.
The estimates of Parker & Parsley's proved reserves as of December 31, 1996
set forth in the Joint Proxy Statement/Prospectus are based upon a reserve
report prepared by Parker & Parsley and audited by Netherland, Sewell &
Associates, Inc., independent petroleum consultants, and are included or
incorporated by reference herein upon the authority of such Firm as experts with
respect to such matters covered by such report.
AVAILABLE INFORMATION
Mesa and Parker & Parsley are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, file reports and other information with the Commission.
Reports, proxy statements and other information filed by Mesa and Parker &
Parsley can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The SEC maintains a Web site that contains reports, proxy and information
statements and other information filed electronically by Mesa and Parker &
Parsley with the Commission, which can be accessed over the Internet at
http://www.sec.gov. In addition, reports, proxy statements and other information
concerning Mesa or Parker & Parsley may be inspected at the offices of the NYSE,
20 Broad Street, New York, New York 10005.
Pioneer has filed with the Commission a registration statement on Form S-4
(together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the Pioneer
Common Stock and Pioneer Preferred Stock. The information contained herein with
respect to Mesa and its subsidiaries has been provided by Mesa, and the
information contained herein with respect to Parker & Parsley has been provided
by Parker & Parsley. This Joint Proxy Statement/Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
thereto, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. The Registration Statement and any amendments
thereto, including exhibits filed as a part thereof, are available for
inspection and copying as set forth above. Statements contained in this Joint
Proxy Statement/Prospectus or in any document incorporated in this Joint Proxy
Statement/Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in each
instance
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reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other incorporated document, each
such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. MESA AND PARKER
& PARSLEY EACH UNDERTAKES TO PROVIDE COPIES OF SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE), WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER TO
WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO, IN THE CASE OF DOCUMENTS RELATING TO MESA OR PIONEER: INVESTOR
RELATIONS, MESA INC., 1400 WILLIAMS SQUARE WEST, 5205 NORTH O'CONNOR BOULEVARD,
IRVING, TEXAS 75039 (TELEPHONE (972) 402-7087) AND, IN THE CASE OF DOCUMENTS
RELATING TO PARKER & PARSLEY: INVESTOR RELATIONS, PARKER & PARSLEY PETROLEUM
COMPANY, 303 W. WALL, SUITE 101, MIDLAND, TEXAS 79701 (TELEPHONE (915)
571-1735). IN ORDER TO ENSURE TIMELY DELIVERY OF THESE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JULY 24, 1997.
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are incorporated herein by reference:
1. Mesa's Annual Report on Forms 10-K and 10-K/A for the year ended
December 31, 1996.
2. Mesa's Quarterly Report on Form 10-Q for the period ended March 31,
1997.
3. Mesa's Current Reports on Form 8-K dated February 7, 1997 and April 6,
1997, and Mesa's Current Report on Form 8-K/A dated February 7, 1997.
4. Parker & Parsley's Annual Report on Forms 10-K and 10-K/A for the year
ended December 31, 1996.
5. Parker & Parsley's Quarterly Report on Form 10-Q for the period ended
March 31, 1997.
6. Parker & Parsley's Current Reports on Form 8-K dated April 6, 1997.
All documents filed by Mesa and Parker & Parsley pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the date of the final adjournment of the
Special Meetings shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing of such documents. All information
appearing in this Joint Proxy Statement/Prospectus or in any document
incorporated herein by reference is not necessarily complete and is qualified in
its entirety by the information and financial statements (including notes
thereto) appearing in the documents incorporated herein by reference and should
be read together with such information and documents.
Any statement contained herein or in a document all or a portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein (or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein) modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this Joint
Proxy Statement/Prospectus except as so modified or superseded.
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STOCKHOLDER PROPOSALS
Neither Mesa nor Parker & Parsley will hold a 1997 annual meeting of
stockholders unless the Mergers are not consummated. If the Mergers are
consummated, stockholders of Pioneer may submit proposals to be included in
Pioneer's proxy materials and considered for stockholder action at the 1998
Pioneer Annual Meeting of Stockholders if they do so in accordance with
applicable regulations of the Commission. Any such proposals must be submitted
to the Secretary of Pioneer no later than December 31, 1997 in order to be
considered for inclusion in Pioneer's 1998 proxy materials.
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GLOSSARY OF SELECTED OIL AND GAS TERMS
The following are abbreviations and definitions of certain terms commonly
used in the oil and gas industry and this Prospectus.
"Bbl" means a barrel of oil and condensate or natural gas liquids.
"Bcf" means billion cubic feet of natural gas.
"Bcfe" means billion cubic feet of natural gas equivalents.
"BOE" means one barrel of oil equivalent.
"Btu" or "British Thermal Unit" means the quantity of heat required to
raise the temperature of one pound of water by one degree Fahrenheit.
"Condensate" means a hydrocarbon mixture that becomes liquid and separates
from natural gas when the gas is produced and is similar to crude oil.
"Development well" means a well drilled within the proved area of an oil or
gas reservoir to the depth of a stratigraphic horizon known to be productive.
"Gross," when used with respect to acres or wells, refers to the total
acres or wells in which Mesa has a working interest.
"Infill Drilling" means drilling of an additional well or additional wells
in order to more adequately drain a reservoir.
"MBbls" means thousands of barrels of oil.
"Mcf" means thousand cubic feet of natural gas.
"Mcfe" means thousand cubic feet of natural gas equivalents.
"MMBbls" means millions of barrels of oil.
"MMBOE" means millions of barrels of oil equivalents.
"MMBtu" means one million British Thermal Units.
"MMcf" means million cubic feet of natural gas.
"MMcfe" means million cubic feet of natural gas equivalents.
"Natural gas equivalents" means a volume, expressed in Mcf's of natural
gas, that includes not only natural gas but also oil or natural gas liquids
converted to an equivalent quantity of natural gas on an energy equivalent
basis. Equivalent gas reserves are based on a conversion factor of 6 Mcf of gas
per barrel of liquids.
"Net," when used with respect to acres or wells, refers to gross acres of
wells multiplied, in each case, by the percentage working interest owned by Mesa
or Parker & Parsley, as the case may be.
"Net production" means production that is owned by Mesa or Parker &
Parsley, as the case may be, less royalties and production due others.
"Oil" means crude oil or condensate.
"Oil equivalents" means a volume, expressed in Bbls of oil, that includes
not only oil but also natural gas and natural gas liquids converted to an
equivalent quantity of oil on an energy equivalent basis. Equivalent oil
reserves are based on the conversion factor of 6 Mcf of gas per barrel of
liquids.
"Operator" means the individual or company responsible for the exploration,
development and production of an oil or gas well or lease.
"Proved developed reserves" means reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the
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application of fluid injection or other improved recovery techniques for
supplementing the natural forces and mechanisms of primary recovery will be
included as "proved developed reserves" only after testing by a pilot project or
after the operation of an installed program has confirmed through production
response that increased recovery will be achieved.
"Proved reserves" means the estimated quantities of crude oil, natural gas
and natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions (i.e., prices and costs as of
the date the estimate is made). Prices include consideration of changes in
existing prices provided only by contractual arrangements, but not on escalation
based upon future conditions.
i. Reservoirs are considered proved if economic productivity is
supported by either actual production or conclusive formation test.
The area of a reservoir considered proved includes (A) that portion
delineated by drilling and defined by gas-oil and/or oil-water
contacts, if any; and (B) the immediately adjoining portions not yet
drilled, but which can be reasonably judged as economically
productive on the basis of available geological and engineering data.
In the absence of information on fluid contacts, the lowest known
structural occurrence of hydrocarbons controls the lower proved limit
of the reservoir.
ii. Reserves that can be produced economically through application of
improved recovery techniques (such as fluid injection) are included
in the "proved" classification when successful testing by a pilot
project, or the operation of an installed program in the reservoir,
provides support for the engineering analysis on which the project or
program was based.
iii. Estimates of proved reserves do not include the following: (A) oil
that may become available from known reservoirs but is classified
separately as "indicated additional reserve"; (B) crude oil, natural
gas and natural gas liquids, the recovery of which is subject to
reasonable doubt because of uncertainty as to geology, reservoir
characteristics or economic factors; (C) crude oil, natural gas and
natural gas liquids that may occur in undrilled prospects; and (D)
crude oil, natural gas and natural gas liquids that may be recovered
from oil shales, coal, gilsonite and other such sources.
"Proved undeveloped reserves" means reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on undrilled
acreage is limited to those drilling units offsetting productive units that are
reasonably certain of production when drilled. Proved reserves for other
undrilled units can be claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing productive formation.
Under no circumstances are estimates for proved undeveloped reserves
attributable to any acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.
"Reserves" means proved reserves.
"Royalty" means an interest in an oil and gas lease that gives the owner of
the interest the right to receive a portion of the production from the leased
acreage (or of the proceeds of the sale thereof), but generally does not require
the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner's royalties, which are
reserved by the owner of the leased acreage at the time the lease is granted, or
overriding royalties, which are usually reserved by the owner of the leasehold
in connection with a transfer to a subsequent owner.
"SEC PV10" means the present value of estimated future revenues to be
generated from the production of proved reserves calculated in accordance with
Commission guidelines, net of estimated production and future development costs,
using prices and costs as of the date of estimation without future escalation,
except as otherwise provided by contract, without giving effect to non-property
related expenses such as general and administrative expenses, debt service,
future income tax expense and depreciation, depletion and amortization, and
discounted using an annual discount rate of 10%.
"Tcfe" means trillion cubic feet of natural gas equivalents.
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"Unitized" means the joint operation of all or some portion of a producing
reservoir. Unitization is important where there is separate ownership of
portions of the rights in a common reservoir in order that it may be made
economically feasible to engage in cycling, pressure maintenance or secondary
recovery operations. In a field that has been unitized, injection and production
wells may be located in accordance with the best engineering practices and
without regard to lease or property lines.
"3-D seismic" means seismic data that are acquired and processed to yield a
three-dimensional picture of the subsurface.
"Working interest" means an interest in an oil and gas lease that gives the
owner of the interest the right to drill for and produce oil and gas on the
leased acreage and requires the owner to pay a share of the costs of drilling
and production operations. The share of production to which a working interest
owner is entitled will always be smaller than the share of costs that the
working interest owner is required to bear, with the balance of the production
accruing to the owners of royalties. For example, the owner of a 100% working
interest in a lease burdened only by a landowner's royalty of 12.5% would be
required to pay 100% of the costs of a well but would be entitled to retain only
87.5% of the production.
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PIONEER NATURAL RESOURCES COMPANY
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PRELIMINARY STATEMENT
UNAUDITED PRO FORMA FINANCIAL STATEMENTS:
100% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER
COMMON STOCK:
Unaudited Pro Forma Combined Balance Sheet as of March
31, 1997.............................................. F-4
Unaudited Pro Forma Combined Statement of Operations
for the three months ended March 31, 1997............. F-5
Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1996.................. F-6
50% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER
COMMON STOCK:
Unaudited Pro Forma Combined Balance Sheet as of March
31, 1997.............................................. F-7
Unaudited Pro Forma Combined Statement of Operations
for the three months ended March 31, 1997............. F-8
Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1996.................. F-9
0% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER
COMMON STOCK:
Unaudited Pro Forma Combined Balance Sheet as of March
31, 1997.............................................. F-10
Unaudited Pro Forma Combined Statement of Operations
for the three months ended March 31, 1997............. F-11
Unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1996.................. F-12
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
PARKER & PARSLEY FOR THE YEAR ENDED DECEMBER 31,
1996................................................... F-13
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS FOR
MESA FOR THE YEAR ENDED DECEMBER 31, 1996.............. F-14
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ F-15
</TABLE>
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<PAGE> 192
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF
PIONEER NATURAL RESOURCES COMPANY
In accordance with the Merger Agreement, (i) holders of Parker & Parsley
Common Stock will receive one share of Pioneer Common Stock for each share held;
(ii) holders of Mesa Common Stock will receive one share of Pioneer Common Stock
for every seven shares held; and (iii) holders of Mesa Series A Preferred Stock
and Mesa Series B Preferred Stock will have the option to receive either (a)
1.25 shares of Pioneer Common Stock for every seven shares held, or (b) one
share of Pioneer Preferred Stock for every seven shares held (subject to certain
conditions).
The Merger Agreement further provides that if the holders of the majority
of the outstanding Mesa Series A Preferred Stock or Mesa Series B Preferred
Stock, each voting as a separate class, vote in favor of the Mergers, then all
holders of the series for which the vote has been obtained will receive Pioneer
Common Stock. The sole holder of the outstanding Mesa Series B Preferred Stock
has committed to vote in favor of the Mergers; however, prior to the actual
stockholder vote, it is not possible to determine if a majority of the holders
of the outstanding Mesa Series A Preferred Stock will vote in favor of the
Mergers. As a result, the aggregate purchase price of Mesa will change depending
on the number of shares of Pioneer Common Stock and Pioneer Preferred Stock that
are actually issued. The unaudited pro forma combined balance sheet of Pioneer
as of March 31, 1997 and the unaudited pro forma combined statements of
operations of Pioneer for the three months ended March 31, 1997 and for the year
ended December 31, 1996 have been prepared to give effect to the Mergers under
each of three different scenarios covering the range of possible outcomes. Each
of the three scenarios assumes that a specified percent (100%, 50%, or 0%) of
the holders of the outstanding Mesa Series A Preferred Stock convert such
preferred stock to Pioneer Common Stock.
To date, Pioneer has no material assets or liabilities, other than its
rights and obligations under the Merger Agreement, and has not generated any
material revenues or expenses.
Under each of the scenarios presented, the unaudited pro forma balance
sheet and statements of operations have been prepared to give effect to certain
transactions as described below.
The unaudited pro forma combined balance sheet of Pioneer as of March
31, 1997 has been prepared to give effect to the Mergers and the
acquisition of Greenhill by Mesa in April 1997 as if such transactions had
occurred on March 31, 1997. In accordance with the provisions of APB No.
16, "Business Combinations", the Mergers have been accounted for as a
purchase of Mesa by Parker & Parsley. The acquisition of Greenhill will
also be accounted for using the purchase method of accounting.
The unaudited pro forma combined statements of operations of Pioneer
for the three months ended March 31, 1997 and for the year ended December
31, 1996 have been prepared to give effect to the Mergers and certain
events described below for Parker & Parsley and Mesa as if the Mergers and
such events had occurred on January 1, 1996.
Pro Forma Parker & Parsley has been prepared to give effect to (i) the
sale of certain wholly-owned Australian subsidiaries in March 1996 and the
sale of Bridge Oil Timor Sea, Inc. in June 1996 (collectively, the
"Australasian Assets Sold") and (ii) the aggregate effect of the sale of
certain nonstrategic domestic oil and gas properties, gas plants, contract
rights and related assets sold during the period from January 2, 1996 to
December 31, 1996 (collectively, the "1996 Assets Sold").
Pro Forma Mesa has been prepared to give effect to the
Recapitalization, which entailed issuing $265 million in new preferred
equity and repaying and refinancing substantially all of Mesa's $1.2
billion of then existing long-term debt, and the acquisition of Greenhill,
including additional borrowings to finance such acquisition.
The unaudited pro forma combined financial statements included herein are
not necessarily indicative of the results that might have occurred had the
transactions taken place at the beginning of the period specified and are not
intended to be a projection of future results. In addition, future results may
vary significantly from the results reflected in the accompanying unaudited pro
forma combined financial statements because of
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<PAGE> 193
normal production declines, changes in product prices, future acquisitions and
divestitures, future development and exploration activities, and other factors.
The following unaudited pro forma combined financial statements should be
read in conjunction with (i) the Consolidated Financial Statements (and the
related notes) of both Parker & Parsley and Mesa included in their respective
Annual Reports on Form 10-K and Form 10-K/A for the year ended December 31, 1996
and their respective Quarterly Reports on Form 10-Q for the three months ended
March 31, 1997 and (ii) the Historical Financial Statements of Greenhill for the
fiscal year ended June 30, 1996 and for the six months ended December 31, 1996
(unaudited) and the related notes thereto which are included in Mesa's Current
Report on Form 8-K/A dated February 7, 1997.
F-3
<PAGE> 194
PIONEER NATURAL RESOURCES COMPANY
(100% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
---------- ---------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 9,425 $ 20,137 $ 9,820 (25,000)(a) $ 6,382
(8,000)(b)
Restricted cash........................ 1,731 -- -- 1,731
Accounts receivable.................... 68,610 30,555 5,722 104,887
Inventories............................ 4,509 2,459 557 7,525
Deferred income taxes.................. 8,700 -- -- 8,700
Other current assets................... 1,732 1,989 489 4,210
---------- ---------- --------- ----------
Total current assets............ 94,707 55,140 16,588 133,435
---------- ---------- --------- ----------
Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of
accounting:
Proved properties.................... 1,473,208 2,051,775 345,708 (15,920)(a) 3,729,868
(124,903)(b)
Unproved properties.................. 8,294 -- -- 44,000(b) 52,294
Natural gas processing facilities...... 62,073 -- -- 62,073
Accumulated depletion, depreciation and
amortization......................... (470,734) (966,463) (187,239) 966,463(a) (470,734)
187,239(b)
---------- ---------- --------- ----------
1,072,841 1,085,312 158,469 3,373,501
---------- ---------- --------- ----------
Other property and equipment, net........ 27,676 11,906 1,877 41,459
Other assets, net........................ 14,846 96,591 2 (35,194)(a) 60,450
(15,795)(b)
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,608,845
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt... $ 6,285 $ 5,305 $ 290 $ 11,880
Undistributed unit purchases........... 1,731 -- -- 1,731
Accounts payable....................... 58,917 35,827 1,836 96,580
Domestic and foreign income taxes...... 2,343 -- -- 2,343
Other current liabilities.............. 14,711 10,779 4,123 29,613
---------- ---------- --------- ----------
Total current liabilities....... 83,987 51,911 6,249 142,147
---------- ---------- --------- ----------
Long-term debt, less current
maturities............................. 309,434 843,386 -- 74,537(a) 1,480,562
253,205(b)
Other noncurrent liabilities............. 10,794 75,937 23 86,754
Deferred income taxes.................... 70,800 -- -- 127,654(a) 198,454
Preferred stock of subsidiary............ 188,820 -- -- 188,820
Stockholders' equity:
Preferred stock........................ -- 1,240 -- (1,240)(a) --
Common stock........................... 370 643 2 (349)(a) 664
(2)(b)
Additional paid-in capital............. 464,290 662,277 205,892 269,189(a) 1,395,756
(205,892)(b)
Treasury stock, at cost................ (34,113) -- -- 34,113(a) --
Unearned compensation.................. (1,378) -- -- (1,378)
Retained earnings (deficit)............ 117,066 (386,445) (35,230) 386,445(a) 117,066
35,230(b)
---------- ---------- --------- ----------
Total stockholders' equity...... 546,235 277,715 170,664 1,512,108
---------- ---------- --------- ----------
Commitments and contingencies
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,608,845
========== ========== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE> 195
PIONEER NATURAL RESOURCES COMPANY
(100% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
-------- ------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $103,779 $90,986 $15,664 $210,429
Natural gas processing................ 6,865 -- -- 6,865
Interest and other.................... 2,153 3,624 179 5,956
Gain (loss) on disposition of assets,
net................................ 775 (22) -- 753
-------- ------- ------- --------
113,572 94,588 15,843 224,003
-------- ------- ------- --------
Cost and expenses:
Oil and gas production................ 28,081 23,978 5,437 57,496
Natural gas processing................ 3,497 -- -- 3,497
Depletion, depreciation and
amortization:
Oil and gas properties............. 26,369 25,200 6,758 18,064(c) 76,391
Other.............................. 2,261 523 -- 2,784
Exploration and abandonments.......... 7,615 5,933 3,469 (179)(d) 16,838
General and administrative............ 6,720 3,801 2,615 179(d) 13,315
Interest.............................. 9,895 22,724 -- (1,094)(e) 36,201
4,676(f)
Other................................. 421 208 -- 629
-------- ------- ------- --------
84,859 82,367 18,279 207,151
-------- ------- ------- --------
Income (loss) from continuing operations
before income taxes................... 28,713 12,221 (2,436) 16,852
Income tax (provision) benefit.......... (10,100) -- 240 3,260(g) (6,600)
-------- ------- ------- --------
Income (loss) from continuing
operations............................ 18,613 12,221 (2,196) 10,252
Dividends on preferred stock............ -- (5,496) -- 5,496(h) --
-------- ------- ------- --------
Income (loss) from continuing operations
attributable to common stock.......... $ 18,613 $ 6,725 $(2,196) $ 10,252
======== ======= ======= ========
Income per common share:
Primary............................... $ .53 $ .10 $ .15
======== ======= ========
Fully diluted......................... $ .49 $ .07 $ .15
======== ======= ========
Weighted average shares outstanding..... 35,359 65,779 (34,318)(i) 66,820
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE> 196
PIONEER NATURAL RESOURCES COMPANY
(100% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARKER & PRO FORMA COMBINED PRO FORMA
PARSLEY MESA ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas................................... $374,560 $371,280 $745,840
Natural gas processing........................ 23,184 -- 23,184
Interest and other............................ 17,328 33,824 51,152
Gain on disposition of assets, net............ -- 11,966 11,966
-------- -------- --------
415,072 417,070 832,142
-------- -------- --------
Cost and expenses:
Oil and gas production........................ 101,545 97,617 199,162
Natural gas processing........................ 11,949 -- 11,949
Depletion, depreciation and amortization:
Oil and gas properties..................... 95,628 130,370 73,972(c) 299,970
Other...................................... 9,001 4,919 13,920
Exploration and abandonments.................. 20,187 12,772 (831)(d) 32,128
General and administrative.................... 26,631 41,016 831(d) 68,478
Interest...................................... 40,720 105,266 (4,923)(e) 141,063
Other......................................... 2,451 2,340 4,791
-------- -------- --------
308,112 394,300 771,461
-------- -------- --------
Income from continuing operations before income
taxes......................................... 106,960 22,770 60,681
Income tax provision............................ (37,400) -- 13,700(g) (23,700)
-------- -------- --------
Income from continuing operations............... 69,560 22,770 36,981
Dividends on preferred stock.................... -- (21,880) 21,880(h) --
-------- -------- --------
Income from continuing operations attributable
to common stock............................... $ 69,560 $ 890 $ 36,981
======== ======== ========
Income per common share:
Primary....................................... $ 1.95 $ .01 $ .55
======== ======== ========
Fully diluted................................. $ 1.81 $ .01 $ .55
======== ======== ========
Weighted average shares outstanding............. 35,734 64,164 (32,794)(i) 67,104
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<PAGE> 197
PIONEER NATURAL RESOURCES COMPANY
(50% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
---------- ---------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 9,425 $ 20,137 $ 9,820 (25,000)(a) $ 6,382
(8,000)(b)
Restricted cash........................ 1,731 -- -- 1,731
Accounts receivable.................... 68,610 30,555 5,722 104,887
Inventories............................ 4,509 2,459 557 7,525
Deferred income taxes.................. 8,700 -- -- 8,700
Other current assets................... 1,732 1,989 489 4,210
---------- ---------- --------- ----------
Total current assets............ 94,707 55,140 16,588 133,435
---------- ---------- --------- ----------
Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of
accounting:
Proved properties.................... 1,473,208 2,051,775 345,708 37,500(a) 3,783,288
(124,903)(b)
Unproved properties.................. 8,294 -- -- 44,000(b) 52,294
Natural gas processing facilities...... 62,073 -- -- 62,073
Accumulated depletion, depreciation and
amortization......................... (470,734) (966,463) (187,239) 966,463(a) (470,734)
187,239(b)
---------- ---------- --------- ----------
1,072,841 1,085,312 158,469 3,426,921
---------- ---------- --------- ----------
Other property and equipment, net........ 27,676 11,906 1,877 41,459
Other assets, net........................ 14,846 96,591 2 (35,194)(a) 60,450
(15,795)(b)
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,662,265
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt... $ 6,285 $ 5,305 $ 290 $ 11,880
Undistributed unit purchases........... 1,731 -- -- 1,731
Accounts payable....................... 58,917 35,827 1,836 96,580
Domestic and foreign income taxes...... 2,343 -- -- 2,343
Other current liabilities.............. 14,711 10,779 4,123 29,613
---------- ---------- --------- ----------
Total current liabilities....... 83,987 51,911 6,249 142,147
---------- ---------- --------- ----------
Long-term debt, less current
maturities............................. 309,434 843,386 -- 74,537(a) 1,480,562
253,205(b)
Other noncurrent liabilities............. 10,794 75,937 23 86,754
Deferred income taxes.................... 70,800 -- -- 146,351(a) 217,151
Preferred stock of subsidiary............ 188,820 -- -- 188,820
Stockholders' equity:
Preferred stock........................ -- 1,240 -- (932)(a) 308
Common stock........................... 370 643 2 (404)(a) 609
(2)(b)
Additional paid-in capital............. 464,290 662,277 205,892 303,659(a) 1,430,226
(205,892)(b)
Treasury stock, at cost................ (34,113) -- -- 34,113(a) --
Unearned compensation.................. (1,378) -- -- (1,378)
Retained earnings (deficit)............ 117,066 (386,445) (35,230) 386,445(a) 117,066
35,230(b)
---------- ---------- --------- ----------
Total stockholders' equity...... 546,235 277,715 170,664 1,546,831
---------- ---------- --------- ----------
Commitments and contingencies
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,662,265
========== ========== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-7
<PAGE> 198
PIONEER NATURAL RESOURCES COMPANY
(50% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
-------- ------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $103,779 $90,986 $15,664 $210,429
Natural gas processing................ 6,865 -- -- 6,865
Interest and other.................... 2,153 3,624 179 5,956
Gain (loss) on disposition of assets,
net................................ 775 (22) -- 753
-------- ------- ------- --------
113,572 94,588 15,843 224,003
-------- ------- ------- --------
Cost and expenses:
Oil and gas production................ 28,081 23,978 5,437 57,496
Natural gas processing................ 3,497 -- -- 3,497
Depletion, depreciation and
amortization:
Oil and gas properties............. 26,369 25,200 6,758 19,022(c) 77,349
Other.............................. 2,261 523 -- 2,784
Exploration and abandonments.......... 7,615 5,933 3,469 (179)(d) 16,838
General and administrative............ 6,720 3,801 2,615 179(d) 13,315
Interest.............................. 9,895 22,724 -- (1,094)(e) 36,201
4,676(f)
Other................................. 421 208 -- 629
-------- ------- ------- --------
84,859 82,367 18,279 208,109
-------- ------- ------- --------
Income (loss) from continuing operations
before income taxes................... 28,713 12,221 (2,436) 15,894
Income tax (provision) benefit.......... (10,100) -- 240 3,660(g) (6,200)
-------- ------- ------- --------
Income (loss) from continuing
operations............................ 18,613 12,221 (2,196) 9,694
Dividends on preferred stock............ -- (5,496) -- 4,131(h) (1,365)
-------- ------- ------- --------
Income (loss) from continuing operations
attributable to common stock.......... $ 18,613 $ 6,725 $(2,196) $ 8,329
======== ======= ======= ========
Income per common share:
Primary............................... $ .53 $ .10 $ .14
======== ======= ========
Fully diluted......................... $ .49 $ .07 $ .14
======== ======= ========
Weighted average shares outstanding..... 35,359 65,779 (39,822)(i) 61,316
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-8
<PAGE> 199
PIONEER NATURAL RESOURCES COMPANY
(50% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARKER & PRO FORMA COMBINED PRO FORMA
PARSLEY MESA ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas...................................... $374,560 $371,280 $745,840
Natural gas processing........................... 23,184 -- 23,184
Interest and other............................... 17,328 33,824 51,152
Gain on disposition of assets, net............... -- 11,966 11,966
-------- -------- --------
415,072 417,070 832,142
-------- -------- --------
Cost and expenses:
Oil and gas production........................... 101,545 97,617 199,162
Natural gas processing........................... 11,949 -- 11,949
Depletion, depreciation and amortization:
Oil and gas properties........................ 95,628 130,370 78,032(c) 304,030
Other......................................... 9,001 4,919 13,920
Exploration and abandonments..................... 20,187 12,772 (831)(d) 32,128
General and administrative....................... 26,631 41,016 831(d) 68,478
Interest......................................... 40,720 105,266 (4,923)(e) 141,063
Other............................................ 2,451 2,340 4,791
-------- -------- --------
308,112 394,300 775,521
-------- -------- --------
Income from continuing operations before income
taxes............................................ 106,960 22,770 56,621
Income tax provision............................... (37,400) -- 15,300(g) (22,100)
-------- -------- --------
Income from continuing operations.................. 69,560 22,770 34,521
Dividends on preferred stock....................... -- (21,880) 16,422(h) (5,458)
-------- -------- --------
Income from continuing operations attributable to
common stock..................................... $ 69,560 $ 890 $ 29,063
======== ======== ========
Income per common share:
Primary.......................................... $ 1.95 $ .01 $ .47
======== ======== ========
Fully diluted.................................... $ 1.81 $ .01 $ .47
======== ======== ========
Weighted average shares outstanding................ 35,734 64,164 (38,298)(i) 61,600
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-9
<PAGE> 200
PIONEER NATURAL RESOURCES COMPANY
(0% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 1997
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
---------- ---------- --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............ $ 9,425 $ 20,137 $ 9,820 (25,000)(a) $ 6,382
(8,000)(b)
Restricted cash...................... 1,731 -- -- 1,731
Accounts receivable.................. 68,610 30,555 5,722 104,887
Inventories.......................... 4,509 2,459 557 7,525
Deferred income taxes................ 8,700 -- -- 8,700
Other current assets................. 1,732 1,989 489 4,210
---------- ---------- --------- ----------
Total current assets.......... 94,707 55,140 16,588 133,435
---------- ---------- --------- ----------
Property, plant and equipment, at cost:
Oil and gas properties, using the
successful efforts method of
accounting:
Proved properties.................. 1,473,208 2,051,775 345,708 90,919(a) 3,836,707
(124,903)(b)
Unproved properties................ 8,294 -- -- 44,000(b) 52,294
Natural gas processing facilities.... 62,073 -- -- 62,073
Accumulated depletion, depreciation
and amortization................... (470,734) (966,463) (187,239) 966,463(a) (470,734)
187,239(b)
---------- ---------- --------- ----------
1,072,841 1,085,312 158,469 3,480,340
---------- ---------- --------- ----------
Other property and equipment, net...... 27,676 11,906 1,877 41,459
Other assets, net...................... 14,846 96,591 2 (35,194)(a) 60,450
(15,795)(b)
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,715,684
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt............................... $ 6,285 $ 5,305 $ 290 $ 11,880
Undistributed unit purchases......... 1,731 -- -- 1,731
Accounts payable..................... 58,917 35,827 1,836 96,580
Domestic and foreign income taxes.... 2,343 -- -- 2,343
Other current liabilities............ 14,711 10,779 4,123 29,613
---------- ---------- --------- ----------
Total current liabilities..... 83,987 51,911 6,249 142,147
---------- ---------- --------- ----------
Long-term debt, less current
maturities........................... 309,434 843,386 -- 74,537(a) 1,480,562
253,205(b)
Other noncurrent liabilities........... 10,794 75,937 23 86,754
Deferred income taxes.................. 70,800 -- -- 165,048(a) 235,848
Preferred stock of subsidiary.......... 188,820 -- -- 188,820
Stockholders' equity:
Preferred stock...................... -- 1,240 -- (623)(a) 617
Common stock......................... 370 643 2 (459)(a) 554
(2)(b)
Additional paid-in capital........... 464,290 662,277 205,892 338,127(a) 1,464,694
(205,892)(b)
Treasury stock, at cost.............. (34,113) -- -- 34,113(a) --
Unearned compensation................ (1,378) -- -- (1,378)
Retained earnings (deficit).......... 117,066 (386,445) (35,230) 386,445(a) 117,066
35,230(b)
---------- ---------- --------- ----------
Total stockholders' equity.... 546,235 277,715 170,664 1,581,553
---------- ---------- --------- ----------
Commitments and contingencies
---------- ---------- --------- ----------
$1,210,070 $1,248,949 $ 176,936 $3,715,684
========== ========== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-10
<PAGE> 201
PIONEER NATURAL RESOURCES COMPANY
(0% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
PARKER & COMBINED PRO FORMA
PARSLEY MESA GREENHILL ADJUSTMENTS COMBINED
-------- ------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $103,779 $90,986 $15,664 $210,429
Natural gas processing................ 6,865 -- -- 6,865
Interest and other.................... 2,153 3,624 179 5,956
Gain (loss) on disposition of assets,
net................................ 775 (22) -- 753
-------- ------- ------- --------
113,572 94,588 15,843 224,003
-------- ------- ------- --------
Cost and expenses:
Oil and gas production................ 28,081 23,978 5,437 57,496
Natural gas processing................ 3,497 -- -- 3,497
Depletion, depreciation and
amortization:
Oil and gas properties............. 26,369 25,200 6,758 19,979(c) 78,306
Other.............................. 2,261 523 -- 2,784
Exploration and abandonments.......... 7,615 5,933 3,469 (179)(d) 16,838
General and administrative............ 6,720 3,801 2,615 179(d) 13,315
Interest.............................. 9,895 22,724 -- (1,094)(e) 36,201
4,676(f)
Other................................. 421 208 -- 629
-------- ------- ------- --------
84,859 82,367 18,279 209,066
-------- ------- ------- --------
Income (loss) from continuing operations
before income taxes................... 28,713 12,221 (2,436) 14,937
Income tax (provision) benefit.......... (10,100) -- 240 4,060(g) (5,800)
-------- ------- ------- --------
Income (loss) from continuing
operations............................ 18,613 12,221 (2,196) 9,137
Dividends on preferred stock............ -- (5,496) -- 2,766(h) (2,730)
-------- ------- ------- --------
Income (loss) from continuing operations
attributable to common stock.......... $ 18,613 $ 6,725 $(2,196) $ 6,407
======== ======= ======= ========
Income per common share:
Primary............................... $ .53 $ .10 $ .11
======== ======= ========
Fully diluted......................... $ .49 $ .07 $ .11
======== ======= ========
Weighted average shares outstanding..... 35,359 65,779 (45,327)(i) 55,811
======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-11
<PAGE> 202
PIONEER NATURAL RESOURCE COMPANY
(0% OF MESA SERIES A PREFERRED STOCK CONVERTS TO PIONEER COMMON STOCK)
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
PARKER & PRO FORMA COMBINED PRO FORMA
PARSLEY MESA ADJUSTMENTS COMBINED
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas.................................. $374,560 $371,280 $745,840
Natural gas processing....................... 23,184 -- 23,184
Interest and other........................... 17,328 33,824 51,152
Gain on disposition of assets, net........... -- 11,966 11,966
-------- -------- --------
415,072 417,070 832,142
-------- -------- --------
Cost and expenses:
Oil and gas production....................... 101,545 97,617 199,162
Natural gas processing....................... 11,949 -- 11,949
Depletion, depreciation and amortization:
Oil and gas properties.................... 95,628 130,370 82,092(c) 308,090
Other..................................... 9,001 4,919 13,920
Exploration and abandonments................. 20,187 12,772 (831)(d) 32,128
General and administrative................... 26,631 41,016 831(d) 68,478
Interest..................................... 40,720 105,266 (4,923)(e) 141,063
Other........................................ 2,451 2,340 4,791
-------- -------- --------
308,112 394,300 779,581
-------- -------- --------
Income from continuing operations before income
taxes........................................ 106,960 22,770 52,561
Income tax provision........................... (37,400) -- 16,900(g) (20,500)
-------- -------- --------
Income from continuing operations.............. 69,560 22,770 32,061
Dividends on preferred stock................... -- (21,880) 10,963(h) (10,917)
-------- -------- --------
Income from continuing operations attributable
to common stock.............................. $ 69,560 $ 890 $ 21,144
======== ======== ========
Income per common share:
Primary...................................... $ 1.95 $ .01 $ .38
======== ======== ========
Fully diluted................................ $ 1.81 $ .01 $ .38
======== ======== ========
Weighted average shares outstanding............ 35,734 64,164 (43,803)(i) 56,095
======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-12
<PAGE> 203
PARKER & PARSLEY PETROLEUM COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AUSTRALASIAN 1996 PRO FORMA
PARKER & ASSETS ASSETS PRO FORMA PARKER &
PARSLEY SOLD SOLD ADJUSTMENTS PARSLEY
-------- ------------ -------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $396,931 $(10,591) $(11,780) $374,560
Natural gas processing................ 23,814 -- (630) 23,184
Interest and other.................... 17,458 (130) -- 17,328
Gain on disposition of assets, net.... 97,140 (83,260) (13,880) --
-------- -------- -------- --------
535,343 (93,981) (26,290) 415,072
-------- -------- -------- --------
Cost and expenses:
Oil and gas production................ 110,334 (3,300) (5,489) 101,545
Natural gas processing................ 12,528 -- (579) 11,949
Depletion, depreciation and
amortization:
Oil and gas properties............. 102,803 (3,917) (3,258) 95,628
Other.............................. 9,331 (300) (30) 9,001
Exploration and abandonments.......... 23,030 (1,435) (1,408) 20,187
General and administrative............ 28,363 (1,732) -- 26,631
Interest.............................. 46,155 (1,100) -- (4,335)(j) 40,720
Other................................. 2,451 -- -- 2,451
-------- -------- -------- --------
334,995 (11,784) (10,764) 308,112
-------- -------- -------- --------
Income from continuing operations before
income taxes.......................... 200,348 (82,197) (15,526) 106,960
Income tax provision.................... (60,100) 16,000 5,400 1,300(g) (37,400)
-------- -------- -------- --------
Income from continuing operations....... $140,248 $(66,197) $(10,126) $ 69,560
======== ======== ======== ========
Income per share:
Primary............................... $ 3.92 $ 1.95
======== ========
Fully diluted......................... $ 3.47 $ 1.81
======== ========
Weighted average shares outstanding..... 35,734 35,734
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-13
<PAGE> 204
MESA INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MESA RECAPITALIZATION GREENHILL ADJUSTMENTS MESA
-------- ---------------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas........................... $300,336 $ -- $70,944 $371,280
Natural gas processing................ -- -- -- --
Interest and other.................... 33,824 -- -- 33,824
Gain on disposition of assets, net.... 11,966 -- -- 11,966
-------- -------- ------- --------
346,126 -- 70,944 417,070
-------- -------- ------- --------
Cost and expenses:
Oil and gas production................ 74,518 -- 23,099 97,617
Natural gas processing................ -- -- -- --
Depletion, depreciation and
amortization:
Oil and gas properties............. 98,382 -- 29,355 2,633(c) 130,370
Other.............................. 4,919 -- -- 4,919
Exploration and abandonments.......... 5,431 -- 7,341 12,772
General and administrative(m)......... 31,473 -- 9,543 41,016
Interest.............................. 121,135 (34,530)(k) (729) 19,390(f) 105,266
Other................................. 1,929 -- 411 2,340
-------- -------- ------- --------
337,787 (34,530) 69,020 394,300
-------- -------- ------- --------
Income from continuing operations before
income taxes.......................... 8,339 34,530 1,924 22,770
Income tax provision.................... -- -- -- --
-------- -------- ------- --------
Income from continuing operations....... 8,339 34,530 1,924 22,770
Dividends on preferred stock............ (9,522) (12,358)(l) -- (21,880)
-------- -------- ------- --------
Income (loss) from continuing operations
attributable to common stock.......... $ (1,183) $ 22,172 $ 1,924 $ 890
======== ======== ======= ========
Income (loss) per common share:
Primary............................... $ (.02) $ .01
======== ========
Fully diluted......................... $ (.02) $ .01
======== ========
Weighted average shares outstanding..... 64,164 64,164
======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements
F-14
<PAGE> 205
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
MARCH 31, 1997 AND DECEMBER 31, 1996
NOTE 1. BASIS OF PRESENTATION
In accordance with the Merger Agreement, (i) holders of Parker & Parsley
Common Stock will receive one share of Pioneer Common Stock for each share held;
(ii) holders of Mesa Common Stock will receive one share of Pioneer Common Stock
for every seven shares held; and (iii) holders of Mesa Series A Preferred Stock
and Mesa Series B Preferred Stock will have the option to receive either (a)
1.25 shares of Pioneer Common Stock for every seven shares held, or (b) one
share of Pioneer Preferred Stock for every seven shares held (subject to certain
conditions).
The Merger Agreement further provides that if the holders of the majority
of the outstanding Mesa Series A Preferred Stock or Mesa Series B Preferred
Stock, each voting as a separate class, vote in favor of the Mergers, then all
holders of the series for which the vote has been obtained will receive Pioneer
Common Stock. The sole holder of the outstanding Mesa Series B Preferred Stock
has committed to vote in favor of the Mergers; however, prior to the actual
stockholder vote, it is not possible to determine if a majority of the holders
of the outstanding Mesa Series A Preferred Stock will vote in favor of the
Mergers. As a result, the aggregate purchase price of Mesa will change depending
on the number of shares of Pioneer Common Stock and Pioneer Preferred Stock that
are actually issued. The unaudited pro forma combined balance sheet of Pioneer
as of March 31, 1997 and the unaudited pro forma combined statements of
operations of Pioneer for the three months ended March 31, 1997 and for the year
ended December 31, 1996 have been prepared to give effect to the Mergers under
each of three different scenarios for the range of possible outcomes. Each of
the three scenarios assumes that a specified percent (100%, 50%, or 0%) of the
holders of the outstanding Mesa Series A Preferred Stock convert such preferred
stock to Pioneer Common Stock.
The unaudited pro forma combined balance sheet of Pioneer as of March 31,
1997 under each of the Mesa Series A Preferred Stock conversion scenarios
presented has been prepared to give effect to the Mergers and the acquisition of
Greenhill by Mesa in April 1997 as if such transactions had occurred on March
31, 1997. In accordance with the provisions of APB No. 16, "Business
Combinations", the Mergers have been accounted for as a purchase of Mesa by
Parker & Parsley. The acquisition of Greenhill will also be accounted for using
the purchase method of accounting.
The unaudited pro forma combined statements of operations of Pioneer for
the three months ended March 31, 1997 and for the year ended December 31, 1996
under each of the Mesa Series A Preferred Stock conversion scenarios presented
have been prepared to give effect to the Mergers and certain events described
below for Parker & Parsley and Mesa as if the Mergers and such events had
occurred on January 1, 1996.
Pro Forma Parker & Parsley has been prepared to give effect to the sale of
the Australasian Assets Sold and the 1996 Assets Sold.
Pro Forma Mesa has been prepared to give effect to the Recapitalization and
the acquisition of Greenhill, including additional borrowings to finance such
acquisition.
The following is a description of the individual columns included in these
unaudited pro forma combined financial statements:
PARKER & PARSLEY -- Represents the consolidated balance sheet of
Parker & Parsley as of March 31, 1997 and the consolidated statements of
operations of Parker & Parsley for the three months ended March 31, 1997
and for the year ended December 31, 1996.
AUSTRALASIAN ASSETS SOLD -- Reflects the results of operations for the
year ended December 31, 1996 from certain wholly-owned subsidiaries prior
to their sale in 1996. On March 28, 1996, the Company completed the sale of
certain wholly-owned subsidiaries to Santos Ltd., and on June 20, 1996, the
Company completed the sale of another wholly-owned subsidiary, Bridge Oil
Timor Sea, Inc., to Phillips Petroleum International Investment Company.
During the year ended December 31, 1996, the Company
F-15
<PAGE> 206
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
received aggregate consideration of $237.5 million for these combined
sales. The assets sold to Santos Ltd. consisted primarily of properties
located in the Cooper Basin in Central Australia, the Surat Basin in
Northeast Australia, the Carnarvon Basin on the Northwest Shelf off the
coast of Western Australia, the Otway Basin off the coast of Southeast
Australia and the Central Sumatra Basin in Indonesia. At December 31, 1995,
the Company's interests in these properties contained 32.1 million BOE of
proved reserves (consisting of 12.4 million Bbls of oil and 118.3 Bcf of
gas), representing $133.8 million of SEC PV 10 value. Prior to their sale
in 1996, these properties produced 249,500 Bbls of oil and 1,927,000 Mcf of
gas. The Company received an average price of $19.55 per Bbl of oil and
$1.95 per Mcf of gas from such production and incurred production costs per
BOE of $4.92 and depletion expense per BOE of $5.84 related to these
properties. The wholly-owned subsidiary sold to Phillips Petroleum
International Investment Company, Bridge Oil Timor Sea, Inc. has a wholly
owned subsidiary, Bridge Oil Timor Sea Pty Ltd., which owns a 22.5%
interest in the ZOCA 91-13 permit in the offshore Bonapart Basin in the
Zone of Cooperation between Australia and Indonesia.
1996 ASSETS SOLD -- Reflects the results of operations for the year
ended December 31, 1996 from certain oil and gas properties, gas plants,
contract rights and related assets prior to their sale in 1996. During the
year ended December 31, 1996, the Company sold certain domestic
nonstrategic oil and gas properties, gas plants and other related assets
for aggregate proceeds of approximately $58.4 million. Prior to their sale
in 1996, these oil and gas properties produced 274,314 Bbls of oil and
3,196,093 Mcf of gas. The Company received an average price of $19.30 per
Bbl of oil and $2.03 per Mcf of gas from such production and incurred
production costs per BOE of $6.80 and depletion expense per BOE of $4.04
related to these properties.
MESA -- Represents the consolidated balance sheet of Mesa as of March
31, 1997 and the consolidated statements of operations of Mesa for the
three months ended March 31, 1997 and for the year ended December 31, 1996.
RECAPITALIZATION -- Represents the effects on Mesa's unaudited pro
forma combined statement of operations from the Recapitalization as if it
had occurred on January 1, 1996. In August of 1996, Mesa completed a
recapitalization of its balance sheet by issuing new equity and repaying
and refinancing substantially all of its then existing long-term debt. The
Recapitalization was undertaken by Mesa in an effort to deleverage and
recapitalize Mesa through the issuance of additional equity and through the
refinancing of substantially all of Mesa's $1.2 billion debt existing prior
to the Recapitalization. The Recapitalization provided Mesa with an
improved financial condition due to (i) a significant reduction in total
debt outstanding, (ii) a reduction in annual cash interest expense of
approximately $75 million, (iii) cost savings programs which reduced
general and administrative and other overhead expenses by approximately $10
million annually, and (iv) the extension of maturities on Mesa's long term
debt, which eliminated Mesa's then existing liquidity concerns. The
Recapitalization included (i) the sale by private placement of shares of a
new class of Mesa Series B Preferred Stock for $133 million to DNR, whose
sole general partner is Rainwater, Inc., a Texas corporation owned by
Richard E. Rainwater, (ii) the sale of $132 million of a new class of Mesa
Series A Preferred Stock to Mesa's then existing stockholders through a
rights offering, (iii) the establishment of a new bank credit facility and
(iv) the issuance of two new series of senior subordinated notes.
GREENHILL -- Represents the unaudited balance sheet of Greenhill as of
March 31, 1997 and the unaudited statements of operations of Greenhill for
the three months ended March 31, 1997 and for the year ended December 31,
1996.
The unaudited pro forma combined statement of operations for the year ended
December 31, 1996 presented herein does not reflect the results of operations
from Mesa's acquisition from MAPCO Inc. of approximately 11 MMBOE in February
1997 for approximately $66 million. The acquisition is not presented
F-16
<PAGE> 207
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
since it is not considered significant under Rule 3-05 of Regulation S-X. The
purchase was funded by additional borrowings under Mesa's credit facility.
NOTE 2. ACQUISITION OF MESA
The aggregate Pioneer Common Stock purchase consideration, including
nonrecurring merger expenses, for each conversion scenario is computed in
accordance with the exchange ratios agreed to in the Merger Agreement as
follows:
<TABLE>
<CAPTION>
100% OF MESA SERIES A PREFERRED STOCK
CONVERTS TO PIONEER COMMON STOCK
-----------------------------------------------------------
MESA MESA SERIES A MESA SERIES B
COMMON PREFERRED PREFERRED
STOCK STOCK STOCK TOTAL
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Shares outstanding............ 64,279,568 61,651,163 62,424,436
Exchange ratio for Mesa
shares...................... 1.00 1.25 1.25
------------ ------------ ------------ ------------
64,279,568 77,063,954 78,030,545 219,374,067
Exchange ratio to Pioneer
Common Stock................ 7.00 7.00 7.00 7.00
------------ ------------ ------------ ------------
Pioneer shares................ 9,182,795 11,009,136 11,147,221 31,339,152
Value of Pioneer Common
Stock(a).................... $ 30.82 $ 30.82 $ 30.82 $ 30.82
------------ ------------ ------------ ------------
Pioneer Common Stock
consideration............... $283,013,742 $339,301,572 $343,557,351 965,872,665
============ ============ ============
Cash consideration for
nonrecurring merger
expenses.................... 25,000,000
------------
Aggregate Pioneer Common Stock
purchase consideration...... $990,872,665
============
</TABLE>
<TABLE>
<CAPTION>
50% OF MESA SERIES A PREFERRED STOCK
CONVERTS TO PIONEER COMMON STOCK
---------------------------------------------------------------
MESA
COMMON MESA SERIES A MESA SERIES B
STOCK PREFERRED STOCK PREFERRED STOCK TOTAL
------------ --------------- --------------- ------------
<S> <C> <C> <C> <C>
Shares outstanding............ 64,279,568 30,825,582 62,424,436
Exchange ratio for Mesa
shares...................... 1.00 1.25 1.25
------------ ------------ ------------ ------------
64,279,568 38,531,977 78,030,545 180,842,090
Exchange ratio to Pioneer
Common Stock................ 7.00 7.00 7.00 7.00
------------ ------------ ------------ ------------
Pioneer shares................ 9,182,795 5,504,568 11,147,221 25,834,584
Value of Pioneer Common
Stock(a).................... $ 30.82 $ 30.82 $ 30.82 $ 30.82
------------ ------------ ------------ ------------
Pioneer Common Stock
consideration............... $283,013,742 $169,650,786 $343,557,351 796,221,879
============ ============ ============
Cash consideration for
nonrecurring merger
expenses.................... 25,000,000
------------
Aggregate Pioneer Common Stock
purchase consideration...... $821,221,879
============
</TABLE>
F-17
<PAGE> 208
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
0% OF MESA SERIES A PREFERRED STOCK CONVERTS
TO PIONEER COMMON STOCK
-------------------------------------------------------------
MESA MESA SERIES A
COMMON PREFERRED MESA SERIES B
STOCK STOCK PREFERRED STOCK TOTAL
------------ ------------- --------------- ------------
<S> <C> <C> <C> <C>
Shares outstanding............. 64,279,568 -- 62,424,436
Exchange ratio for Mesa
shares....................... 1.00 1.25 1.25
------------ ------ ------------ ------------
64,279,568 -- 78,030,545 142,310,113
Exchange ratio to Pioneer
Common Stock................. 7.00 7.00 7.00 7.00
------------ ------ ------------ ------------
Pioneer shares................. 9,182,795 -- 11,147,221 20,330,016
Value of Pioneer Common Stock
(a).......................... $ 30.82 $30.82 $ 30.82 $ 30.82
------------ ------ ------------ ------------
Pioneer Common Stock
consideration................ $283,013,742 $ -- $343,557,351 626,571,093
============ ====== ============
Cash consideration for
nonrecurring merger
expenses..................... 25,000,000
------------
Aggregate Pioneer Common Stock
purchase consideration....... $651,571,093
============
</TABLE>
- ---------------
(a) Pioneer Common Stock is valued at $30.82 per share which represents Parker &
Parsley's seven-day average trading price surrounding the announcement of
the Mergers on April 7, 1997.
The following table represents the preliminary allocation of the total
purchase price of Mesa, including its acquisition of Greenhill, to the acquired
assets and liabilities for each conversion scenario presented herein. The
allocation represents the fair values assigned to each of the significant assets
acquired and liabilities assumed. The fair value of the Pioneer Preferred Stock
was determined by applying the trading price of Mesa's Series A Preferred Stock
on May 30, 1997 to those shares that are not exchanged for Pioneer Common Stock
under each conversion scenario presented. Any future adjustments to the
allocation of the purchase price are not anticipated to be material to the
unaudited pro forma combined financial statements.
<TABLE>
<CAPTION>
CONVERSION OF MESA SERIES A PREFERRED
STOCK TO PIONEER COMMON STOCK
---------------------------------------
100% 50% 0%
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net working capital........................... $ 5,568 $ 5,568 $ 5,568
Property, plant and equipment................. 2,300,660 2,354,080 2,407,499
Other assets.................................. 59,387 59,387 59,387
Long-term debt................................ (1,171,128) (1,171,128) (1,171,128)
Other noncurrent liabilities including
deferred taxes.............................. (203,614) (222,311) (241,008)
Pioneer Series A Preferred Stock.............. -- (204,374) (408,747)
----------- ----------- -----------
$ 990,873 $ 821,222 $ 651,571
=========== =========== ===========
Pioneer Common Stock consideration............ $ 965,873 796,222 $ 626,571
Cash paid for nonrecurring merger expenses.... 25,000 25,000 25,000
----------- ----------- -----------
Aggregate purchase consideration.............. $ 990,873 $ 821,222 $ 651,571
=========== =========== ===========
</TABLE>
F-18
<PAGE> 209
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The following table illustrates the number of Pioneer shares to be issued
in accordance with the exchange ratios agreed to in the Merger Agreement for
each conversion scenario presented herein.
<TABLE>
<CAPTION>
PIONEER SHARES
SHARES OUTSTANDING NEW ------------------------------------
EXISTING SECURITY TYPE AT MAY 30, 1997 PIONEER SECURITY 100% 50% 0%
---------------------- ------------------ ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Parker & Parsley Common Stock..... 35,038,821 Common Stock 35,038,821 35,038,821 35,038,821
Mesa Common Stock................. 64,279,568 Common Stock 9,182,795 9,182,795 9,182,795
Mesa Series A Preferred Stock..... 61,651,163 Common Stock 11,009,136 5,504,568 --
Mesa Series B Preferred Stock..... 62,424,436 Common Stock 11,147,221 11,147,221 11,147,221
---------- ---------- ----------
66,377,973 60,873,405 55,368,837
========== ========== ==========
Preferred Stock -- 4,403,654 8,807,309
========== ========== ==========
</TABLE>
NOTE 3. PRO FORMA ENTRIES
(a) To record the acquisition of Mesa using the purchase method of accounting.
The allocation of the purchase price to the acquired assets and liabilities
is preliminary and, therefore, subject to change. Any future adjustments to
the allocation of the purchase price are not anticipated to be material to
the unaudited pro forma combined financial statements (See Note 2 above).
(b) To record the acquisition by Mesa of 100% of the outstanding common stock of
Greenhill for a total purchase price of $277 million. The purchase was
funded primarily by additional borrowings under Mesa's credit facility
including a performance deposit made in February 1997 of $15.8 million.
Additionally, $8 million of the cash acquired from Greenhill in April 1997
was applied to Mesa's borrowings under its credit facility. The acquisition
of Greenhill will be accounted for using the purchase method of accounting,
and the allocation of the purchase price to the acquired assets and
liabilities, including the allocation between proved and unproved properties
is preliminary and, therefore, subject to change. Any future adjustments to
the allocation of the purchase price are not anticipated to be material to
the unaudited pro forma combined financial statements.
The following table represents the preliminary allocation of the total
purchase price of Greenhill to the acquired assets and liabilities. The
allocation represents the fair values assigned to each of the significant
assets acquired and liabilities assumed.
<TABLE>
<CAPTION>
GREENHILL
--------------
(IN THOUSANDS)
<S> <C>
Net working capital..................... $ 10,339
Property, plant and equipment........... 264,805
Other assets............................ 1,879
Other noncurrent liabilities............ (23)
--------
$277,000
========
Debt reduction resulting from
application of cash acquired.......... 8,000
Borrowings to finance acquisition,
including a performance deposit of
$15,795............................... 269,000
--------
Aggregate purchase consideration........ $277,000
========
</TABLE>
(c) To adjust depreciation, depletion and amortization expense for the
additional basis allocated to the oil and gas properties acquired and
accounted for using the successful efforts method of accounting.
(d) To reclassify certain amounts to conform with the financial statement
presentation of Pioneer.
F-19
<PAGE> 210
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(e) To reduce interest expense for (i) the amortization of the premiums
(utilizing the effective interest rate method) recorded as part of purchase
accounting for Mesa's 10 5/8% Senior Subordinated Notes and 11 5/8% Senior
Subordinated Discount Notes and (ii) the application of Parker & Parsley's
excess cash in 1996 to the reduction of Mesa's outstanding bank indebtedness
at Mesa's 1996 pro forma incremental borrowing rate of 7% (see pro forma
entry (j) below).
(f) To adjust interest expense resulting from the borrowing of the funds
necessary for Mesa's acquisition of Greenhill. Mesa's 1997 and 1996 pro
forma incremental borrowing rate of 7% was utilized to determine the
additional pro forma interest expense.
(g) To adjust income tax expense for each tax jurisdiction.
(h) To adjust the Mesa preferred stock dividends associated with Mesa's Series A
and Series B Preferred Stock. The adjustment reflects the elimination of all
dividends associated with Mesa's Series B Preferred Stock and that portion
of the dividends associated with Mesa's Series A Preferred Stock required by
each scenario presented (see Note 2 above).
(i) To adjust the weighted average shares outstanding for the acquisition of
Mesa and the assumed conversion of 100% of Mesa's Series B Preferred Stock
and the conversion of the indicated portion of Mesa's Series A Preferred
Stock into Pioneer Common Stock. This adjustment also assumes the conversion
of Mesa's outstanding employee stock options into Pioneer employee stock
options for purposes of computing weighted average shares outstanding.
(j) To adjust interest expense resulting from the application of that portion of
the sales proceeds from the Australasian Assets Sold and the 1996 Assets
Sold necessary to retire Parker & Parsley's outstanding bank indebtedness.
The proceeds applied to retire Parker & Parsley's outstanding bank
indebtedness of $225 million resulted in a reduction in interest expense of
$4.3 million. The reduction in interest expense was calculated utilizing
Parker & Parsley's weighted average rate on its bank indebtedness of 6.22%
for the period during 1996 in which Parker & Parsley had outstanding bank
indebtedness.
(k) To reduce interest expense as a result of the Recapitalization. Interest
expense adjustments include the following for the year ended December 31,
1996 (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL PRO FORMA ADJUSTMENT
---------- --------- ----------
<S> <C> <C> <C>
Interest expense on former debt repaid
in the Recapitalization:
Secured Notes......................... $ 26,231 -- $(26,231)
Former Credit Agreement............... 2,472 -- (2,472)
12 3/4% secured discount notes........ 43,979 -- (43,979)
13 1/2% subordinated notes............ 654 -- (654)
Interest expense on former debt repaid
prior to the Recapitalization:
12 3/4% unsecured discount notes...... 2,595 $ 2,595 --
Interest expense on new debt issued in
the Recapitalization:
10 5/8% Senior Subordinated Notes..... 17,613 35,418 17,805
11 5/8% Senior Discount Notes......... 8,893 18,661 9,768
New Credit Facility................... 15,094 26,327 11,233
Other interest expense.................. 3,604 3,604 --
-------- ------- --------
$121,135 $86,605 $(34,530)
======== ======= ========
</TABLE>
F-20
<PAGE> 211
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Other interest expense is primarily the interest portion of the
administrative fee charged by CIG in connection with Mesa's West Panhandle
field operations. The interest rate on the New Credit Facility is
approximately 7.73% on the first $250 million due to an interest rate swap
with the balance at a floating rate that during the period outstanding in
1996 was approximately 7%.
(l) To record the pro forma adjustment for an 8% annual dividend on the Mesa
Series A and Series B Preferred Stock payable quarterly in additional shares
of Mesa Series A and Series B Preferred Stock for at least the first four
years after issuance as if the Mesa Series A and Series B Preferred Stock
had been issued January 1, 1996.
(m) Mesa's general and administrative expenses for the year ended December 31,
1996 includes $9.4 million associated with the elimination of 86 positions
from the total of 385 at December 31, 1995, and a significant downsizing of
Mesa's natural gas vehicle equipment business in conjunction with the
Recapitalization. Given the first quarter 1997 general and administrative
expenses of $3.8 million, Mesa's continuing costs are estimated at
approximately $15 million per year ($3.8 million multiplied by four
quarters). In addition, significant reductions in Greenhill's general and
administrative expenses are expected because few of Greenhill's
administrative personnel were retained. Mesa considers a continuing annual
expense associated with the Greenhill properties of approximately $5 million
to be reasonable. Given the above, Mesa expects total general and
administrative expenses to approximate $20 million per year.
NOTE 4. INCOME TAXES
Pioneer will account for income taxes in accordance with the provisions of
SFAS 109. In accordance with SFAS 109, Pioneer will prepare separate tax
calculations for each tax jurisdiction in which Pioneer will be subject to
income taxes.
NOTE 5. INCOME FROM CONTINUING OPERATIONS PER SHARE
Primary income from continuing operations per share is computed based on
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. The computation of fully diluted
income from continuing operations per share for the three months ended March 31,
1997 and for the year ended December 31, 1996 assumes conversion of Parker &
Parsley's MIPS and conversion of 100%, 50%, or 0% of Mesa's Series A Preferred
Stock (as indicated) which increased the weighted average number of shares of
Pioneer Common Stock outstanding to 73.5 million, 68.0 million, or 62.5 million,
respectively, at March 31, 1997.
NOTE 6. PARKER & PARSLEY STOCK OPTIONS
Upon the consummation of the Parker & Parsley Merger, which constitutes a
"Change of Control" as defined in the Parker & Parsley Long-term Incentive Plan,
each holder of Parker & Parsley options will be granted corresponding stock
appreciation rights, and all outstanding stock appreciation rights and options
will immediately become fully vested and exercisable in full. Consequently,
Pioneer will record compensation expense in accordance with APB No. 25,
"Accounting for Stock Issued to Employees" equal to the value of the stock
appreciation rights of approximately $13.2 million, before income tax effects,
based on a common stock price of $34.00.
NOTE 7. OIL AND GAS RESERVE DATA
The following unaudited pro forma supplemental information regarding the
oil and gas activities of Pioneer is presented pursuant to the disclosure
requirements promulgated by the Commission and Statement of Financial Accounting
Standards No. 69, "Disclosures About Oil and Gas Producing Activities". The pro
F-21
<PAGE> 212
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
forma combined reserve information is presented as if the sale of the
Australasian Assets and 1996 Assets Sold and the acquisition of Mesa and
Greenhill had occurred on January 1, 1996.
Management emphasizes that reserve estimates are inherently imprecise and
subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
Quantities of oil and gas reserves
Set forth below is a pro forma summary of the changes in the net quantities
of oil and natural gas reserves for the year ended December 31, 1996.
<TABLE>
<CAPTION>
OIL, NGL'S AND
CONDENSATE GAS
(BBLS) (MCF)
-------------- ---------
(IN THOUSANDS)
<S> <C> <C>
Balance, January 1, 1996................................... 267,108 1,984,726
Revisions of previous estimates.......................... 31,475 42,246
Purchase of minerals-in-place............................ 300 11,494
New discoveries and extensions........................... 3,952 31,259
Production............................................... (20,550) (160,729)
------- ---------
Balance, December 31, 1996................................. 282,285 1,908,996
======= =========
</TABLE>
Standardized measure of discounted future net cash flows
The pro forma combined standardized measure of discounted future net cash
flows is computed by applying year-end prices of oil and gas (with consideration
of price changes only to the extent provided by contractual arrangements) to the
estimated future production of oil and gas reserves less estimated future
expenditures (based on year-end costs) to be incurred in developing and
producing the proved reserves, discounted using a rate of 10% per year to
reflect the estimated timing of the future cash flows. Future income taxes are
calculated by comparing discounted future cash flows to the tax basis of oil and
gas properties, plus available carryforwards and credits, and applying the
current tax rate to the difference.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Oil and gas producing activities:
Future cash inflows....................................... $14,015,758
Future production costs................................... (3,978,622)
Future development costs.................................. (394,157)
Future income tax expense................................. (2,679,935)
-----------
6,963,044
10% annual discount factor................................ (3,247,780)
-----------
Standardized measure of discounted future net cash
flows.................................................. $ 3,715,264
===========
</TABLE>
F-22
<PAGE> 213
PIONEER NATURAL RESOURCES COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Changes relating to the standardized measure of discounted future net cash
flows
The principal sources of the change in the pro forma combined standardized
measure of discounted future net cash flows for the year ended December 31, 1996
are as follows (in thousands):
<TABLE>
<S> <C>
Oil and gas sales, net of production costs.................. $ (546,678)
Net changes in prices and production costs.................. 1,979,347
Extensions and discoveries.................................. 94,936
Purchases of minerals-in-place.............................. 20,606
Revisions of estimated future development costs............. (83,116)
Revisions of previous quantity estimates.................... 364,334
Accretion of discount....................................... 253,122
Changes in production rates, timing and other............... (132,538)
----------
Change in present value of future net revenues.............. 1,950,013
Net change in present value of future income taxes.......... (566,915)
----------
1,383,098
Balance, beginning of year.................................. 2,332,166
----------
Balance, end of year........................................ $3,715,264
==========
</TABLE>
F-23
<PAGE> 214
APPENDIX I
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMONG
MESA INC.
MESA OPERATING CO.
PIONEER NATURAL RESOURCES COMPANY
AND
PARKER & PARSLEY PETROLEUM COMPANY
DATED AS OF APRIL 6, 1997
<PAGE> 215
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Times of the Mergers...................... 1
1.2 Closing.......................................................... 1
1.3 Effects of the Mergers........................................... 2
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE SM CONSTITUENT
CORPORATIONS AND THE RM CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.1 Effect of Spice Merger on Capital Stock.......................... 2
(a) Capital Stock of MOC........................................ 2
(b) Cancellation of Parker & Parsley Treasury Stock and
Mesa-Owned Parker & Parsley Stock........................... 3
(c) Exchange Ratio for Parker & Parsley Common Stock............ 3
(d) Treatment of Parker & Parsley Stock Options................. 3
2.2 Effect of Reincorporation Merger on Capital Stock................ 3
(a) Capital Stock of Pioneer.................................... 3
(b) Cancellation of Mesa Treasury Stock and Parker &
Parsley-Owned Mesa Stock.................................... 3
(c) Exchange Ratio for Mesa Capital Stock....................... 3
(d) Treatment of Mesa Stock Options............................. 4
2.3 Exchange of Certificates......................................... 4
(a) Exchange Agent.............................................. 4
(b) Exchange Procedures......................................... 4
(c) Distributions with Respect to Unexchanged Shares............ 5
(d) No Further Ownership Rights................................. 5
(e) No Fractional Shares........................................ 6
(f) Termination of Exchange Fund................................ 7
(g) No Liability................................................ 7
(h) Lost, Stolen, or Destroyed Certificates..................... 7
2.4 Exchange Procedures for Mesa Preferred Stock..................... 7
(a) Election.................................................... 7
(b) Procedure for Elections..................................... 7
(c) Revocation of Election; Return of Certificates.............. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Parker & Parsley............... 8
(a) Organization, Standing and Power............................ 8
(b) Capital Structure........................................... 9
(c) Authority; No Violations; Consents and Approvals............ 10
(d) SEC Documents............................................... 11
(e) Information Supplied........................................ 12
(f) Absence of Certain Changes or Events........................ 12
(g) No Undisclosed Material Liabilities......................... 12
(h) No Default.................................................. 13
(i) Compliance with Applicable Laws............................. 13
</TABLE>
i
<PAGE> 216
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(j) Litigation.................................................. 13
(k) Taxes....................................................... 13
(l) Pension and Benefit Plans; ERISA............................ 15
(m) Labor Matters............................................... 20
(n) Intangible Property......................................... 20
(o) Environmental Matters....................................... 21
(p) Insurance................................................... 22
(q) Opinion of Financial Advisor................................ 22
(r) Vote Required............................................... 23
(s) Beneficial Ownership of Mesa Common Stock................... 23
(t) Brokers..................................................... 23
(u) Tax Matters................................................. 23
(v) Amendment to Parker & Parsley Rights Agreement.............. 23
3.2 Representations and Warranties of Mesa, Pioneer and MOC.......... 23
(a) Organization, Standing and Power............................ 23
(b) Capital Structure........................................... 24
(c) Authority; No Violations, Consents and Approvals............ 25
(d) SEC Documents............................................... 26
(e) Information Supplied........................................ 27
(f) Absence of Certain Changes or Events........................ 27
(g) No Undisclosed Material Liabilities......................... 27
(h) No Default.................................................. 27
(i) Compliance with Applicable Laws............................. 28
(j) Litigation.................................................. 28
(k) Taxes....................................................... 28
(l) Pension and Benefit Plans; ERISA............................ 29
(m) Labor Matters............................................... 33
(n) Intangible Property......................................... 34
(o) Environmental Matters....................................... 35
(p) Insurance................................................... 35
(q) Opinion of Financial Advisor................................ 35
(r) Vote........................................................ 36
(s) Beneficial Ownership of Parker & Parsley Common Stock....... 36
(t) Brokers..................................................... 36
(u) Interim Operations of Pioneer and MOC....................... 36
(v) Tax Matters................................................. 36
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by Parker & Parsley and Mesa Pending the 36
Merger...........................................................
(a) Ordinary Course............................................. 36
(b) Dividends; Changes in Stock................................. 37
(c) Issuance of Securities...................................... 37
(d) Governing Documents......................................... 37
(e) No Acquisitions............................................. 37
(f) No Dispositions............................................. 38
(g) No Dissolution, Etc......................................... 38
(h) Accounting.................................................. 38
(i) Affiliate Transactions...................................... 38
(j) Insurance................................................... 38
(k) Tax Matters................................................. 38
</TABLE>
ii
<PAGE> 217
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
(l) Certain Employee Matters.................................... 38
(m) Indebtedness; Leases; Capital Expenditures.................. 39
(n) Agreements.................................................. 39
4.2 No Solicitation by Parker & Parsley.............................. 39
4.3 No Solicitation by Mesa.......................................... 40
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement................. 41
5.2 Letter of Parker & Parsley's Accountants......................... 41
5.3 Letter of Mesa's Accountants..................................... 41
5.4 Access to Information............................................ 41
5.5 Stockholders Meetings............................................ 42
5.6 HSR and Other Approvals.......................................... 42
(a) HSR Act..................................................... 42
(b) Other Regulatory Approvals.................................. 42
5.7 Agreements of Rule 145 Affiliates................................ 42
5.8 Authorization for Shares and Stock Exchange Listing.............. 43
5.9 Employee Matters................................................. 43
5.10 Stock Options.................................................... 44
5.11 Indemnification; Directors' and Officers' Insurance.............. 45
5.12 Agreement to Defend.............................................. 47
5.13 Public Announcements............................................. 47
5.14 Other Actions.................................................... 47
5.15 Advice of Changes; SEC Filings................................... 47
5.16 Reorganization................................................... 47
5.17 Conveyance Taxes................................................. 47
5.18 Board of Directors............................................... 48
5.19 Chairman and CEO................................................. 48
5.20 Charter Amendments; Name and Place of Business................... 48
5.21 Employee and Director Incentive Indemnification and Severance 48
Plans............................................................
5.22 MIPS Assumption Matters.......................................... 48
5.23 Indenture Matters................................................ 48
5.24 New Bank Credit Facility......................................... 49
5.25 DNR Agreement.................................................... 49
5.26 Pickens Agreement................................................ 49
5.27 MIPS Conversion.................................................. 49
5.28 Severance Agreements............................................. 49
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Mergers...... 49
(a) Parker & Parsley Stockholder Approval....................... 49
(b) Mesa Stockholder Approval................................... 49
(c) NYSE Listing................................................ 49
(d) Other Approvals............................................. 49
(e) S-4......................................................... 50
(f) No Injunctions or Restraints................................ 50
</TABLE>
iii
<PAGE> 218
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
6.2 Conditions of Obligations of Mesa, Pioneer and MOC............... 50
(a) Representations and Warranties of Parker & Parsley.......... 50
(b) Performance of Obligations of Parker & Parsley.............. 50
(c) Tax Opinion................................................. 50
(d) Letters from Rule 145 Affiliates............................ 50
6.3 Conditions of Obligations of Parker & Parsley.................... 51
(a) Representations and Warranties of Mesa, Pioneer and MOC..... 51
(b) Performance of Obligations of Mesa.......................... 51
(c) Tax Opinion................................................. 51
(d) Letters from Rule 145 Affiliates............................ 51
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination...................................................... 51
7.2 Effect of Termination............................................ 53
7.3 Amendment........................................................ 54
7.4 Extension; Waiver................................................ 54
ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses.............................................. 55
8.2 Nonsurvival of Representations, Warranties and Agreements........ 55
8.3 Notices.......................................................... 55
8.4 Interpretation................................................... 56
8.5 Counterparts..................................................... 56
8.6 Entire Agreement; No Third Party Beneficiaries................... 56
8.7 Governing Law.................................................... 56
8.8 No Remedy in Certain Circumstances............................... 56
8.9 Assignment....................................................... 56
8.10 Specific Performance............................................. 56
8.11 Schedule Definitions............................................. 57
</TABLE>
iv
<PAGE> 219
EXHIBITS:
<TABLE>
<S> <C>
Exhibit A Post SM Effective Time Board of Directors
DISCLOSURE SCHEDULES:
PARKER & PARSLEY DISCLOSURE SCHEDULE:
Schedule 3.1(a) Parker & Parsley Significant Subsidiaries
Schedule 3.1(b) Parker & Parsley Subsidiary Ownership
Schedule 3.1(c) Parker & Parsley Conflicts
Schedule 3.1(j) Parker & Parsley Litigation
Schedule 3.1(k) Parker & Parsley Tax Information
Schedule 3.1(l) Parker & Parsley Pension and Benefit Plan and Related
Information
Schedule 3.1(m) Parker & Parsley Labor Matters
Schedule 3.1(o) Parker & Parsley Environmental Matters
Schedule 3.1(p) Parker & Parsley Insurance
Schedule 3.1(u) Parker & Parsley Tax Certificate
Schedule 4.1(e) Parker & Parsley Acquisition
MESA DISCLOSURE SCHEDULE:
Schedule 3.2(a) Mesa Significant Subsidiaries
Schedule 3.2(b) Mesa Subsidiary Ownership
Schedule 3.2(c) Mesa Conflicts
Schedule 3.2(j) Mesa Litigation
Schedule 3.2(k) Mesa Tax Information
Schedule 3.2(l) Mesa Pension and Benefit Plan and Related Information
Schedule 3.2(m) Mesa Labor Matters
Schedule 3.2(o) Mesa Environmental Matters
Schedule 3.2(p) Mesa Insurance
Schedule 3.2(v) Mesa Tax Certificate
</TABLE>
v
<PAGE> 220
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------ ------------------
<S> <C>
Affiliate................................................... 4.1(i)
Agreement................................................... Preamble
Antitrust Division.......................................... 5.6(a)
Articles of Merger.......................................... 1.1
Average Trading Price....................................... 7.1(j)
Benefit Liabilities......................................... 3.1(l)(xi)
Certificate of Merger....................................... 1.1
Certificates................................................ 2.3(b)
Closing..................................................... 1.1
Closing Date................................................ 1.2
Code........................................................ Recitals
Confidentiality Agreement................................... 5.4
DGCL........................................................ 1.1
Election Deadline........................................... 2.4(b)
Environmental Laws.......................................... 3.1(o)(A)
ERISA....................................................... 3.1(l)(i)
Excess Securities........................................... 2.3(e)
Exchange Act................................................ 3.1(c)(iii)
Exchange Agent.............................................. 2.3(a)
Exchange Fund............................................... 2.3(a)
Form of Election............................................ 2.4(b)
Fractional Dividends........................................ 2.3(e)
FTC......................................................... 5.6(a)
GAAP........................................................ 3.1(d)
Governmental Entity......................................... 3.1(c)(iii)
Hazardous Materials......................................... 3.1(o)(B)
HSR Act..................................................... 3.1(c)(iii)
Initial Termination Date.................................... 7.1(c)
Injunction.................................................. 6.1(f)
IRS......................................................... 3.1(k)(ii)
Joint Proxy Statement....................................... 3.1(c)(iii)
Knowledge................................................... 3.1(i)
Letter of Transmittal....................................... 2.3(b)
Material Adverse Change..................................... 3.1(a)
Material Adverse Effect..................................... 3.1(a)
Mergers..................................................... Recitals
Mesa........................................................ Preamble
Mesa Acquisition Proposal................................... 4.3(c)
Mesa Common Consideration................................... 2.2
Mesa Common Stock........................................... 2.2(a)
Mesa Conversion Number...................................... 2.2(c)
Mesa Disclosure Schedule.................................... 3.2
Mesa Employee Benefit Plans................................. 3.2(l)(iv)
Mesa ERISA Affiliate........................................ 3.2(l)(i)
Mesa Indemnified Liabilities................................ 5.11(b)
Mesa Indemnified Parties.................................... 5.11(b)
Mesa Intangible Property.................................... 3.2(n)
Mesa Litigation............................................. 3.2(j)
Mesa Merger Consideration................................... 2.2(c)
Mesa Order.................................................. 3.2(j)
</TABLE>
vi
<PAGE> 221
<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------ ------------------
<S> <C>
Mesa Pension Plans.......................................... 3.2(l)(i)
Mesa Permits................................................ 3.2(i)
Mesa Preferred Consideration................................ 2.2(c)
Mesa Preferred Stock........................................ 3.2(b)
Mesa Representatives........................................ 4.3(a)
Mesa SEC Documents.......................................... 3.2(d)
Mesa Series A Preferred Stock............................... 2.2
Mesa Series B Preferred Stock............................... 2.2
Mesa Stock Option........................................... 5.10(a)
Mesa Stock Plans............................................ 3.2(b)
MIPS........................................................ 3.1(b)
MOC......................................................... Preamble
New Common Stock............................................ 2.1(c)
New Series A Preferred Stock................................ 2.2(c)
Non-Election................................................ 2.4(a)
NYSE........................................................ 2.3(e)
Non-Election................................................ 2.4(a)
Non-Election Series A Shares................................ 2.4(a)
Non-Election Series B Shares................................ 2.4(a)
Original Agreement.......................................... Preamble
Parker & Parsley............................................ Preamble
Parker & Parsley Acquisition Proposal....................... 4.2(e)
Parker & Parsley Common Stock............................... 2.1
Parker & Parsley Conversion Number.......................... 2.1(c)
Parker & Parsley Disclosure Schedule........................ 3.1
Parker & Parsley Employee Benefit Plans..................... 3.1(l)(iv)
Parker & Parsley ERISA Affiliate............................ 3.1(l)(i)
Parker & Parsley Indemnified Liabilities.................... 5.11(a)
Parker & Parsley Indemnified Parties........................ 5.11(a)
Parker & Parsley Intangible Property........................ 3.1(n)
Parker & Parsley Litigation................................. 3.1(j)
Parker & Parsley LLC........................................ 3.1(b)
Parker & Parsley Merger..................................... Recitals
Parker & Parsley Order...................................... 3.1(j)
Parker & Parsley Pension Plans.............................. 3.1(l)(i)
Parker & Parsley Permits.................................... 3.1(i)
Parker & Parsley Preferred Stock............................ 3.1(b)
Parker & Parsley Representatives............................ 4.2(a)
Parker & Parsley Rights..................................... 3.1(v)
Parker & Parsley Rights Agreement........................... 3.1(v)
Parker & Parsley SEC Documents.............................. 3.1(d)
Parker & Parsley Series A Preferred Stock................... 3.1(b)
Parker & Parsley Stock Option............................... 5.10(a)
Parker & Parsley Stock Plans................................ 3.1(b)
Party....................................................... 4.1
PBGC........................................................ 3.1(l)(iii)
Pioneer..................................................... Preamble
Proxy Statement............................................. 3.1(c)(iii)
Reincorporation Merger...................................... Recitals
Release..................................................... 3.1(o)(C)
Remedial Action............................................. 3.1(o)(D)
</TABLE>
vii
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<TABLE>
<CAPTION>
DEFINED TERM DEFINED IN SECTION
- ------------ ------------------
<S> <C>
Reportable Event............................................ 3.1(l)(ii)
RM Constituent Corporations................................. 1.3(a)
RM Effective Time........................................... 1.1
RM Surviving Corporation.................................... 1.3(a)
Rule 145 Affiliates......................................... 5.7
S-4......................................................... 3.1(e)
SEC......................................................... 3.1(a)
Securities Act.............................................. 3.1(d)
Series A Approval........................................... 3.2(r)
Series B Approval........................................... 3.2(r)
Significant Subsidiary...................................... 3.1(a)
SM Constituent Corporations................................. 1.3(a)
SM Effective Time........................................... 1.1
SM Surviving Corporation.................................... 1.3(a)
Subsidiary.................................................. 2.1(b)
Tax and Taxes............................................... 3.1(k)
Tax Returns................................................. 3.1(k)
TBCA........................................................ 1.1
Trading Days................................................ 7.1(j)
Voting Debt................................................. 3.1(b)
</TABLE>
viii
<PAGE> 223
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, signed on June 26, 1997 and dated as of
April 6, 1997 (this "Agreement"), among MESA Inc., a Texas corporation ("Mesa"),
MESA Operating Co., a Delaware corporation and a direct wholly owned subsidiary
of Mesa ("MOC"), Pioneer Natural Resources Company, a Delaware corporation and a
direct wholly owned subsidiary of Mesa ("Pioneer"), and Parker & Parsley
Petroleum Company, a Delaware corporation ("Parker & Parsley"), is an amendment
and restatement of the AGREEMENT AND PLAN OF MERGER, dated as of April 6, 1997
(the "Original Agreement"), among Mesa, MOC, Pioneer and Parker & Parsley.
WHEREAS, Mesa and Parker & Parsley have determined to engage in a strategic
business combination;
WHEREAS, in furtherance thereof, the respective Boards of Directors of MOC
and Parker & Parsley have approved this Agreement and the merger of Parker &
Parsley with and into MOC, with MOC being the surviving corporation (the "Parker
& Parsley Merger");
WHEREAS, in furtherance thereof, the respective Boards of Directors of Mesa
and Pioneer have approved this Agreement and the merger of Mesa with and into
Pioneer, with Pioneer being the surviving corporation (the "Reincorporation
Merger" and, together with the Parker & Parsley Merger, the "Mergers");
WHEREAS, the respective Boards of Directors of Mesa, MOC, Pioneer and
Parker & Parsley have determined that it is in the best interests of their
respective stockholders for the Mergers to be effected upon the terms and
subject to the conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that each of the
Mergers shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and this
Agreement is intended to be and is adopted as a plan of reorganization within
the meaning of Treasury Regulation Section 1.368-1(c); and
WHEREAS, Mesa, MOC, Pioneer and Parker & Parsley desire to make certain
representations, warranties, covenants and agreements in connection with the
Mergers and also to prescribe various conditions to the Mergers;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties to this
Agreement agree as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers; Effective Times of the Mergers. Upon the terms and subject
to the conditions of this Agreement, (i) at the RM Effective Time (as
hereinafter defined), Mesa shall be merged with and into Pioneer in accordance
with the Delaware General Corporation Law (the "DGCL") and the Texas Business
Corporation Act (the "TBCA"); and (ii) at the SM Effective Time (as hereinafter
defined) Parker & Parsley shall be merged with and into MOC in accordance with
the DGCL. As soon as practicable at or after the closing of the Mergers (the
"Closing"), a certificate of merger, prepared and executed in accordance with
the relevant provisions of the DGCL, with respect to each of the Mergers (each,
a "Certificate of Merger") shall be filed with the Delaware Secretary of State
and articles of merger, prepared and executed in accordance with the relevant
provisions of the TBCA, with respect to the Reincorporation Merger (the
"Articles of Merger") shall be filed with the Texas Secretary of State. The
Reincorporation Merger shall become effective at such time as is provided in the
Certificate of Merger for the Reincorporation Merger and in the Articles of
Merger, which time shall be at 10:00 a.m., Dallas, Texas, time on the day of the
Closing (the "RM Effective Time"). The Parker & Parsley Merger shall become
effective at such time as is provided in the Certificate of Merger for the
Parker & Parsley Merger, which time shall be at 10:01 a.m., Dallas, Texas, time
on the day of the Closing (the "SM Effective Time").
1.2 Closing. The Closing shall take place at 9:30 a.m., Dallas, Texas, time
on a date to be specified by the parties, which shall be no later than the fifth
business day after satisfaction (or waiver in accordance with this
1
<PAGE> 224
Agreement) of the latest to occur of the conditions set forth in Article VI (the
"Closing Date"), at the offices of Baker & Botts, L.L.P., 2001 Ross Avenue,
Dallas, Texas 75201, unless another date or place is agreed to in writing by the
parties.
1.3 Effects of the Mergers.
(a) At the RM Effective Time: (i) Mesa shall be merged with and into
Pioneer, the separate existence of Mesa shall cease and Pioneer shall continue
as the surviving corporation (Pioneer and Mesa are sometimes referred to herein
as "RM Constituent Corporations" and Pioneer is sometimes referred to herein as
"RM Surviving Corporation"); (ii) the Certificate of Incorporation of Pioneer as
in effect immediately prior to the RM Effective Time shall be the Certificate of
Incorporation of RM Surviving Corporation; and (iii) the Bylaws of Pioneer as in
effect immediately prior to the RM Effective Time shall be the Bylaws of RM
Surviving Corporation. At the SM Effective Time: (i) Parker & Parsley shall be
merged with and into MOC, the separate existence of Parker & Parsley shall cease
and MOC shall continue as the surviving corporation (MOC and Parker & Parsley
are sometimes referred to herein as "SM Constituent Corporations" and MOC is
sometimes referred to herein as "SM Surviving Corporation"); (ii) the
Certificate of Incorporation of MOC as in effect immediately prior to the SM
Effective Time shall be the Certificate of Incorporation of SM Surviving
Corporation; and (iii) the Bylaws of MOC as in effect immediately prior to the
SM Effective Time shall be the Bylaws of SM Surviving Corporation.
(b) The directors and officers designated in accordance with Section 5.19
shall, from and after the SM Effective Time, be the initial directors and
officers of SM Surviving Corporation, and such directors and officers shall
serve until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with SM
Surviving Corporation's Certificate of Incorporation and Bylaws.
(c) From and after the RM Effective Time, the initial directors of RM
Surviving Corporation shall be the individuals identified as Class I, II or III
Directors on Exhibit A hereto and the officers designated in accordance with
Section 5.19 shall, from and after the RM Effective Time, be the initial
officers of RM Surviving Corporation (provided that such directors and officers
who at such time were directors or officers of Parker & Parsley shall not assume
office until the SM Effective Time), and such directors and officers shall serve
until their successors have been duly elected or appointed and qualified or
until their death, resignation or removal in accordance with RM Surviving
Corporation's Certificate of Incorporation and Bylaws.
(d) The Parker & Parsley Merger shall have the effects set forth in this
Section 1.3 and the applicable provisions of the DGCL. The Reincorporation
Merger shall have the effects set forth in this Section 1.3 and the applicable
provisions of the DGCL and the TBCA.
ARTICLE II
EFFECT OF THE MERGERS ON THE CAPITAL STOCK OF THE SM
CONSTITUENT CORPORATIONS AND THE RM CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect of Spice Merger on Capital Stock. At the SM Effective Time, by
virtue of the Spice Merger and without any action on the part of the holder of
any shares of common stock, par value $.01 per share, of Spice (together with
the related common stock purchase rights issued pursuant to the Parker & Parsley
Rights Agreement (as hereinafter defined), as amended as of the SM Effective
Time, the "Parker & Parsley Common Stock"), or capital stock of Merger Sub:
(a) Capital Stock of MOC. Each issued and outstanding share of the
capital stock of MOC shall not be converted or otherwise affected by the
Parker & Parsley Merger and shall remain outstanding after the Parker &
Parsley Merger as one fully paid and nonassessable share of common stock,
par value $0.01 per share, of SM Surviving Corporation.
2
<PAGE> 225
(b) Cancellation of Parker & Parsley Treasury Stock and Mesa-Owned
Parker & Parsley Stock. Each share of Parker & Parsley Common Stock, the
Parker & Parsley Rights (as hereinafter defined) and all other shares of
capital stock of Parker & Parsley that are owned by Parker & Parsley as
treasury stock and any shares of Parker & Parsley Common Stock and all
other shares of capital stock of Parker & Parsley owned by Mesa, MOC,
Pioneer or any other wholly owned Subsidiary (as hereinafter defined) of
Mesa or Parker & Parsley shall be canceled and retired and shall cease to
exist and no stock of RM Surviving Corporation or other consideration shall
be delivered or deliverable in exchange therefor. As used in this
Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which: (i) such party or any other Subsidiary of such party is a general
partner; or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with respect to
such corporation or other organization is, directly or indirectly, owned or
controlled by such party or by any one or more of its Subsidiaries, or by
such party and any one or more of its Subsidiaries.
(c) Exchange Ratio for Parker & Parsley Common Stock. Subject to the
provisions of Section 2.3(e) hereof, each share of Parker & Parsley Common
Stock issued and outstanding immediately prior to the SM Effective Time
(other than shares to be cancelled in accordance with Section 2.1(b)) shall
be converted into a right to receive one (1) share of common stock, par
value $.01 per share ("New Common Stock"), of RM Surviving Corporation (the
"Parker & Parsley Conversion Number"). All such shares of Parker & Parsley
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
New Common Stock and cash in lieu of fractional shares of New Common Stock,
as contemplated by Section 2.3(e), to be delivered or paid in consideration
therefor upon the surrender of such certificate in accordance with Section
2.3, without interest.
(d) Treatment of Parker & Parsley Stock Options. Each outstanding
Parker & Parsley Stock Option (as defined in Section 5.10) shall be assumed
by RM Surviving Corporation as provided in Section 5.10.
2.2 Effect of Reincorporation Merger on Capital Stock. At the RM Effective
Time, by virtue of the Reincorporation Merger and without any action on the part
of the holder of any shares of common stock, par value $.01 per share, of Mesa
("Mesa Common Stock"), Series A 8% Cumulative Convertible Preferred Stock, par
value $.01 per share, of Mesa ("Mesa Series A Preferred Stock"), Series B 8%
Cumulative Preferred Stock, par value $.01 per share, of Mesa ("Mesa Series B
Preferred Stock"), or capital stock of Pioneer:
(a) Capital Stock of Pioneer. Each issued and outstanding share of the
capital stock of Pioneer shall be canceled and retired and shall cease to
exist and no consideration shall be delivered or deliverable in exchange
therefor.
(b) Cancellation of Mesa Treasury Stock and Parker & Parsley-Owned
Mesa Stock. Each share of Mesa Common Stock, Mesa Series A Preferred Stock,
Mesa Series B Preferred Stock and all other shares of capital stock of Mesa
that are owned by Mesa as treasury stock and any shares of Mesa Common
Stock, Mesa Series A Preferred Stock, Mesa Series B Preferred Stock and all
other shares of capital stock of Mesa owned by Parker & Parsley or any
wholly owned Subsidiary of Parker & Parsley or Mesa shall be cancelled and
retired and shall cease to exist and no stock of RM Surviving Corporation
or other consideration shall be delivered or deliverable in exchange
therefor.
(c) Exchange Ratio for Mesa Capital Stock. Subject to the provisions
of Section 2.3(e) hereof, (i) each seven shares of Mesa Common Stock issued
and outstanding immediately prior to the RM Effective Time (other than
shares to be cancelled in accordance with Section 2.2(b)) shall be
converted into a right to receive one (1) share of New Common Stock (the
"Mesa Conversion Number"); and (ii) each seven (7) shares of Mesa Series A
Preferred Stock and each seven (7) shares of Mesa Series B Preferred Stock
issued and outstanding immediately prior to the RM Effective Time (other
than shares to be cancelled in accordance with Section 2.2(b)) shall be
converted into a right to receive either
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(x) one and one-quarter (1.25) shares of New Common Stock (the "Mesa Common
Consideration") or (y) one (1) share of Series A 8% Cumulative Convertible
Preferred Stock, par value $.01 per share ("New Series A Preferred Stock"),
of RM Surviving Corporation (the "Mesa Preferred Consideration"), in each
case as the holder thereof shall have elected or be deemed to have elected,
in accordance with Section 2.4 (collectively, the "Mesa Merger
Consideration"); provided, however, that if (A) the Series A Approval is
obtained (as defined in Section 3.2(r)), each such seven (7) shares of Mesa
Series A Preferred Stock shall be converted into a right to receive only
the Mesa Common Consideration, and (B) the Series B Approval is obtained
(as defined in Section 3.2(r)), each such seven (7) shares of Mesa Series B
Preferred Stock shall be converted into a right to receive only the Mesa
Common Consideration. All such shares of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the New Common Stock, the Mesa Common Consideration or the
Mesa Preferred Consideration, as applicable, and cash in lieu of fractional
shares of New Common Stock or New Series A Preferred Stock, as contemplated
by Section 2.3(f), to be delivered or paid in consideration therefor upon
the surrender of such certificates in accordance with Section 2.3, without
interest. The rights and preferences of the New Series A Preferred Stock
shall be substantially identical to the rights and preferences of the Mesa
Series A Preferred Stock, with such adjustments as are necessary to reflect
the effect of the Mesa Conversion Number.
(d) Treatment of Mesa Stock Options. Each outstanding Mesa Stock
Option (as defined in Section 5.10) shall be assumed by RM Surviving
Corporation as provided in Section 5.10.
2.3 Exchange of Certificates
(a) Exchange Agent. As of the SM Effective Time and RM Effective Time, as
applicable, RM Surviving Corporation shall issue and deposit with Continental
Stock Transfer & Trust Company or such other bank or trust company designated by
Mesa and reasonably acceptable to Parker & Parsley (the "Exchange Agent"), for
the benefit of the holders of shares of Parker & Parsley Common Stock, and for
the benefit of the holders of shares of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock, as applicable, for exchange
in accordance with this Article II, through the Exchange Agent, certificates
representing the shares of New Common Stock and shares of New Series A Preferred
Stock, if any (such shares of New Common Stock and New Series A Preferred Stock,
together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund"), issuable pursuant to Sections
2.1 and 2.2 in exchange for outstanding shares of Parker & Parsley Common Stock,
Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock. The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the New Common Stock and New Series A Preferred Stock contemplated to be issued
pursuant to Sections 2.1 and 2.2 out of the Exchange Fund. The Exchange Fund
shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the SM
Effective Time and RM Effective Time, as applicable, the Exchange Agent shall
mail to each holder of record of a certificate or certificates which,
immediately prior to the SM Effective Time and RM Effective Time, as applicable,
represented outstanding shares of Parker & Parsley Common Stock, Mesa Common
Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred Stock (each, a
"Certificate"), which holder's shares of Parker & Parsley Common Stock, Mesa
Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
were converted into the right to receive shares of New Common Stock or shares of
New Series A Preferred Stock, as the case may be, pursuant to Sections 2.1 or
2.2: (i) a letter of transmittal ("Letter of Transmittal") which shall specify
that delivery shall be effected and risk of loss and title to the Certificates
shall pass only upon delivery of the Certificates to the Exchange Agent, and
shall be in such form and have such other provisions as RM Surviving Corporation
may reasonably specify; and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for certificates representing shares of New
Common Stock or shares of New Series A Preferred Stock, as the case may be. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by RM Surviving
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Corporation, together with the Letter of Transmittal, duly executed, and any
other documents reasonably required by RM Surviving Corporation or the Exchange
Agent, (A) the holder of a Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of New Common
Stock or New Series A Preferred Stock, as the case may be, which such holder has
the right to receive pursuant to the provisions of this Article II, cash in lieu
of fractional shares of New Common Stock or New Series A Preferred Stock, as the
case may be, as contemplated by Section 2.3(e), and any unpaid dividends and
distributions that such holder has the right to receive pursuant to Section
2.3(c); and (B) the Certificate so surrendered shall forthwith be canceled.
Certificates representing fewer than seven (7) shares of Mesa Common Stock, Mesa
Series A Preferred Stock or Mesa Series B Preferred Stock surrendered to the
Exchange Agent shall receive, subject to Section 2.3(e), a proportionate amount
of the applicable consideration to which such shares are entitled pursuant to
Section 2.2(c). In the event of a transfer of ownership of Parker & Parsley
Common Stock which is not registered in the transfer records of Parker &
Parsley, or in the event of a transfer of ownership of Mesa Common Stock, Mesa
Series A Preferred Stock or Mesa Series B Preferred Stock, which is not
registered in the transfer records of Mesa, a certificate representing the
appropriate number of shares of New Common Stock or New Series A Preferred
Stock, as the case may be, may be issued to a transferee if the Certificate
representing such Parker & Parsley Common Stock, Mesa Common Stock, Mesa Series
A Preferred Stock or Mesa Series B Preferred Stock is presented to the Exchange
Agent accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the applicable SM or RM Effective Time to represent
only the right to receive upon such surrender the certificate representing
shares of New Common Stock or New Series A Preferred Stock, as the case may be,
cash in lieu of any fractional shares of New Common Stock or New Series A
Preferred Stock, as the case may be, as contemplated by this Section 2.3 and any
unpaid dividends and distributions that such holder has the right to receive
pursuant to Section 2.3(c). Notwithstanding the foregoing sentence and the fact
that the Exchange Agent may have custody of the shares of New Common Stock and
New Series A Preferred Stock, the former stockholders of record of Mesa and
Parker & Parsley that are entitled to such shares will be deemed as of the RM
Effective Time and the SM Effective Time, as applicable, to be stockholders of
record of Pioneer. The Exchange Agent shall not be entitled to vote or exercise
any rights of ownership with respect to the New Common Stock or New Series A
Preferred Stock, as the case may be, held by it from time to time hereunder,
except that it shall receive and hold all dividends or other distributions paid
or distributed with respect thereto for the account of persons entitled thereto.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to New Common Stock or New Series A Preferred Stock,
as the case may be, declared or made after the applicable SM or RM Effective
Time with a record date after the applicable SM or RM Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the right to
receive shares of New Common Stock or New Series A Preferred Stock, as the case
may be, represented thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.3(e) until the holder of
such Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder thereof, without interest: (i) at the time of such surrender,
the amount of any cash payable in lieu of a fractional share of New Common Stock
or New Series A Preferred Stock, as the case may be, to which such holder is
entitled pursuant to Section 2.3(e) and the amount of dividends or other
distributions with a record date after the applicable SM or RM Effective Time
theretofore paid with respect to such whole shares of New Common Stock or New
Series A Preferred Stock, as the case may be; and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the applicable SM or RM Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares of New Common Stock or New Series A Preferred Stock, as the case may be.
(d) No Further Ownership Rights. All shares of New Common Stock issued upon
the surrender for exchange of shares of Parker & Parsley Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.3(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Parker & Parsley Common Stock subject, however, to
SM Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the SM
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Effective Time that may have been declared or made by Parker & Parsley on such
shares of Parker & Parsley Common Stock in accordance with the terms of this
Agreement or prior to the date hereof and which remain unpaid at the SM
Effective Time, and after the SM Effective Time there shall be no further
registration of transfers on the stock transfer books of SM Surviving
Corporation of the shares of Parker & Parsley Common Stock that were outstanding
immediately prior to the SM Effective Time. If, after the SM Effective Time,
Certificates are presented to SM Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II. All shares of
New Common Stock or New Series A Preferred Stock, as the case may be, issued
upon the surrender for exchange of shares of Mesa Common Stock, Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 2.3(e)) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock subject, however, to RM Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the RM
Effective Time that may have been declared or made by Mesa on such shares of
Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock in accordance with the terms of this Agreement or prior to the date hereof
and which remain unpaid at the RM Effective Time, and after the RM Effective
Time there shall be no further registration of transfers on the stock transfer
books of RM Surviving Corporation of the shares of Mesa Common Stock, Mesa
Series A Preferred Stock or Mesa Series B Preferred Stock that were outstanding
immediately prior to the RM Effective Time. If, after the RM Effective Time,
Certificates are presented to RM Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of New Common Stock or New Series A Preferred Stock, as the case may be,
shall be issued upon the surrender for exchange of Certificates pursuant to this
Article II, and, except as provided in this Section 2.3(e), no dividend or other
distribution, stock split or interest shall relate to any such fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder of RM Surviving Corporation. In lieu
of any fractional security, each holder of shares of Parker & Parsley Common
Stock, Mesa Common Stock, Mesa Series A Preferred Stock or Mesa Series B
Preferred Stock who would otherwise have been entitled to a fraction of a share
of New Common Stock or New Series A Preferred Stock, as the case may be, upon
surrender of Certificates for exchange pursuant to this Article II will be paid
an amount in cash (without interest) equal to such holder's proportionate
interest in the sum of (i) the gross proceeds from the sale or sales by the
Exchange Agent in accordance with the provisions of this Section 2.3(e), on
behalf of all such holders of the aggregate fractional shares of New Common
Stock or New Series A Preferred Stock, as the case may be, issued pursuant to
this Article II and (ii) the aggregate dividends or other distributions that are
payable to such holders with respect to such shares of New Common Stock or New
Series A Preferred Stock, as the case may be, pursuant to Section 2.3(c) (such
dividends and distributions being herein called the "Fractional Dividends"). As
soon as practicable following the SM Effective Time, the Exchange Agent shall
determine the excess of the aggregate of (x) the number of full shares of New
Common Stock delivered to the Exchange Agent by RM Surviving Corporation
pursuant to Section 2.3(a) over the aggregate number of full shares of New
Common Stock to be distributed to holders of Parker & Parsley Common Stock, Mesa
Common Stock, Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
pursuant to Section 2.3(b) and (y) the number of full shares of New Series A
Preferred Stock, if any, delivered to the Exchange Agent by RM Surviving
Corporation pursuant to Section 2.3(a) over the aggregate number of full shares
of New Series A Preferred Stock, if any, to be distributed to holders of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock pursuant to Section
2.3(b) (such excess being herein called the "Excess Securities"), and the
Exchange Agent, as agent for the former holders of Parker & Parsley Common
Stock, Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock, shall sell the Excess Securities at the prevailing prices on
the New York Stock Exchange ("NYSE"). The sale of the Excess Securities by the
Exchange Agent shall be executed on the NYSE through one or more member firms of
the NYSE. RM Surviving Corporation shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of Excess
Securities. Until the gross proceeds of such sale of Excess Securities and the
Fractional Dividends have been distributed to the former stockholders of Parker
& Parsley and Mesa, the
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Exchange Agent will hold such proceeds and dividends in trust for such former
stockholders. As soon as practicable after the determination of the amount of
cash to be paid to former stockholders of Parker & Parsley and Mesa in lieu of
any fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former stockholders.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and any
cash in lieu of fractional shares of New Common Stock or New Series A Preferred
Stock, as the case may be, made available to the Exchange Agent that remain
undistributed to the former stockholders of Parker & Parsley or Mesa on the
first anniversary of the SM Effective Time shall be delivered to RM Surviving
Corporation, upon demand, and any stockholders of Parker & Parsley or Mesa who
have not theretofore received the New Common Stock or New Series A Preferred
Stock, as the case may be, and cash and other dividends or distributions to
which they are entitled under this Article II shall thereafter look only to RM
Surviving Corporation for payment of their claim for New Common Stock or New
Series A Preferred Stock, as the case may be, any cash in lieu of fractional
shares of New Common Stock or New Series A Preferred Stock, as the case may be,
and any dividends or distributions with respect to New Common Stock or New
Series A Preferred Stock, as the case may be.
(g) No Liability. None of Mesa, Parker & Parsley, Pioneer or MOC shall be
liable to any holder of shares of Mesa Common Stock, Mesa Series A Preferred
Stock, Mesa Series B Preferred Stock or Parker & Parsley Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) or cash in lieu of fractional shares of New Common Stock or New Series
A Preferred Stock, as the case may be, delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. Any amounts
remaining unclaimed by holders of any such shares at such date as is immediately
prior to the time at which such amounts would otherwise escheat to or become
property of any governmental entity shall, to the extent permitted by applicable
law, become the property of RM Surviving Corporation, free and clear of any
claims or interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
(h) Lost, Stolen, or Destroyed Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by RM Surviving Corporation, the posting by such person of a bond in
such reasonable amount as RM Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the certificate representing that number of whole shares of New
Common Stock or New Series A Preferred Stock, as the case may be, which such
holder has the right to receive pursuant to the provisions of this Article II,
cash in lieu of fractional shares of New Common Stock or New Series A Preferred
Stock, as the case may be, as contemplated by Section 2.3(e), and any unpaid
dividends and distributions that such holder has the right to receive pursuant
to Section 2.3(c).
2.4 Exchange Procedures for Mesa Preferred Stock.
(a) Election. Subject to Section 2.2(c), each record holder of shares of
Mesa Series A Preferred Stock and Mesa Series B Preferred Stock issued and
outstanding immediately prior to the Election Deadline (as defined in Section
2.4(b)) shall be entitled to elect to receive in respect of each such share (i)
the Mesa Common Consideration or (ii) the Mesa Preferred Consideration or to
indicate that such record holder has no preference as to the receipt of Mesa
Common Consideration or Mesa Preferred Consideration (a "Non-Election"). Shares
of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock in respect of
which a Non-Election is made (collectively, "Non-Election Series A Shares" and
"Non-Election Series B Shares," respectively) shall be deemed to be shares in
respect of which elections for Mesa Preferred Consideration have been made.
(b) Procedure for Elections. Elections pursuant to Section 2.4(a) shall be
made on a form to be mutually agreed upon by Mesa and Parker & Parsley (a "Form
of Election") to be provided by the Exchange Agent for that purpose to holders
of record of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock,
together with appropriate transmittal materials, at the time of mailing to
holders of record of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock of the Joint Proxy Statement (as defined in
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Section 3.1(c)(iii)). Elections shall be made by mailing to the Exchange Agent a
duly completed Form of Election. To be effective, a Form of Election must be (i)
properly completed, signed and submitted to the Exchange Agent at its designated
office by 5:00 p.m., New York City time, on the business day that is the Trading
Day (as defined in Section 7.1(j)) immediately prior to the Closing Date (which
date shall be publicly announced by Mesa as soon as practicable but in no event
less than five Trading Days prior to the Closing Date) (the "Election Deadline")
and (ii), in the case of shares that are not recorded and traded in book entry
form, accompanied by the Certificates as to which the election is being made (or
by an appropriate guarantee of delivery of such Certificates by a commercial
bank or trust company in the United States or a member of a registered national
security exchange or of the National Association of Securities Dealers, Inc.,
provided such Certificates are in fact delivered to the Exchange Agent within
eight Trading Days after the date of execution of such guarantee of delivery).
For shares of Mesa Series B Preferred Stock that are recorded and traded in book
entry form, then Mesa shall establish procedures for the delivery of such
shares, which procedures shall be acceptable to Parker & Parsley. Mesa shall use
its reasonable best efforts to make a Form of Election available to all persons
who become holders of record of Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock between the date of mailing described in the first sentence of
this Section 2.4(b) and the Election Deadline. Mesa or RM Surviving Corporation
shall determine, in its sole and absolute discretion, which authority it may
delegate in whole or in part to the Exchange Agent, whether Forms of Election
have been properly completed, signed and submitted or revoked. The decision of
Mesa or RM Surviving Corporation (or the Exchange Agent, as the case may be) in
such matters shall be conclusive and binding. Neither Mesa or RM Surviving
Corporation nor the Exchange Agent will be under any obligation to notify any
person of any defect in a Form of Election submitted to the Exchange Agent. A
holder of shares of Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock that does not submit an effective Form of Election prior to the Election
Deadline shall be deemed to have made a Non-Election.
(c) Revocation of Election; Return of Certificates. An election may be
revoked, but only by written notice received by the Exchange Agent prior to the
Election Deadline. Any certificate(s) representing shares of Mesa Series A
Preferred Stock or Mesa Series B Preferred Stock which have been submitted to
the Exchange Agent in connection with an election shall be returned without
charge to the holder thereof in the event such election is revoked as aforesaid
and such holder requests in writing the return of such certificate(s). Upon any
such revocation, unless a duly completed Form of Election is thereafter
submitted in accordance with Section 2.4(b), such shares shall be NonElection
Series A Shares or Non-Election Series B Shares, as the case may be. In the
event that this Agreement is terminated pursuant to the provisions hereof and
any shares of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock
have been transmitted to the Exchange Agent pursuant to the provisions hereof,
such shares shall promptly be returned without charge to the person submitting
the same.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Parker & Parsley. Parker & Parsley
represents and warrants to Mesa, Pioneer and MOC as follows (in each case as
qualified by matters reflected on the disclosure schedule dated as of the date
of this Agreement and delivered by Parker & Parsley to Mesa on or prior to the
date of this Agreement (the "Parker & Parsley Disclosure Schedule") and made a
part hereof by reference, each such matter qualifying each representation and
warranty, as applicable, notwithstanding any specific Section or Schedule
reference or lack thereof):
(a) Organization, Standing and Power. Each of Parker & Parsley and its
Significant Subsidiaries (as defined below) is a corporation or partnership
duly organized, validly existing and in good standing under the laws of its
state of incorporation or organization, has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would not have a Material Adverse Effect (as defined below)
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on Parker & Parsley. Parker & Parsley has heretofore delivered to Mesa
complete and correct copies of its Restated Certificate of Incorporation
and Restated Bylaws, each as amended to date. All Significant Subsidiaries
of Parker & Parsley and their respective jurisdictions of incorporation or
organization are identified on Schedule 3.1(a) of the Parker & Parsley
Disclosure Schedule. As used in this Agreement: (i) a "Significant
Subsidiary" means any Subsidiary of Parker & Parsley or Mesa, as the case
may be, that would constitute a Significant Subsidiary of such party within
the meaning of Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "SEC"); and (ii) a "Material Adverse Effect" or "Material
Adverse Change" shall mean, in respect of Parker & Parsley or Mesa, as the
case may be, any effect or change that is or, as far as can be reasonably
determined, may be materially adverse to the business, operations, assets,
condition (financial or otherwise) or results of operations of such party
and its Subsidiaries taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Parker & Parsley consists of 180,000,000 shares of Parker &
Parsley Common Stock and 20,000,000 shares of preferred stock, par value
$.01 per share ("Parker & Parsley Preferred Stock"). At the close of
business on December 31, 1996: (i) 35,066,235 shares of Parker & Parsley
Common Stock were issued and outstanding; (ii) 82,458 and 105,155 shares of
Parker & Parsley Common Stock were reserved for issuance pursuant to Parker
& Parsley's Non-Employee Director Equity Compensation Plan and Parker &
Parsley's Long-Term Incentive Plan (collectively, the "Parker & Parsley
Stock Plans"), respectively; (iii) 6,713,684 shares of Parker & Parsley
Common Stock were reserved for issuance upon conversion of the Parker &
Parsley Series A Preferred Stock (as defined below) or upon exchange of
MIPS (as defined below), in each case in accordance with their respective
terms; (iv) 1,362,629 shares of Parker & Parsley Common Stock were subject
to issuance under outstanding options or awards under the Parker & Parsley
Stock Plans; (v) 1,833,383 shares of Parker & Parsley Common Stock were
held by Parker & Parsley in its treasury; (vi) 3,776,400 shares of Parker &
Parsley Preferred Stock were designated as Series A Convertible Preferred
Stock ("Parker & Parsley Series A Preferred Stock") and reserved for
issuance upon exchange of the 3,776,400 shares of 6 1/4% Cumulative
Guaranteed Monthly Income Convertible Preferred Shares (the "MIPS") issued
by Parker & Parsley Capital LLC, a limited life company organized under the
laws of the Turks and Caicos Islands and a subsidiary of Parker & Parsley
("Parker & Parsley LLC"); (vii) no shares of Parker & Parsley Preferred
Stock were issued and outstanding; and (viii) no Voting Debt (as defined
below) was issued and outstanding. The term "Voting Debt" means bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on
which stockholders of Parker & Parsley or Mesa, as the case may be, may
vote. All outstanding shares of Parker & Parsley Common Stock are validly
issued, fully paid and nonassessable and are not subject to preemptive
rights. Except as set forth on Schedule 3.1(b) of the Parker & Parsley
Disclosure Schedule, all outstanding shares of capital stock of the
Subsidiaries of Parker & Parsley are owned by Parker & Parsley, or a direct
or indirect wholly owned Subsidiary of Parker & Parsley, free and clear of
all liens, charges, encumbrances, claims and options of any nature. Except
as set forth in this Section 3.1(b) or on Schedule 3.1(b) of the Parker &
Parsley Disclosure Schedule, and except for changes since December 31, 1996
resulting from the grant or exercise of stock options granted prior to the
date hereof pursuant to, or from issuances or purchases under, the Parker &
Parsley Stock Plans, or as contemplated by this Agreement, there are
outstanding: (i) no shares of capital stock, Voting Debt or other voting
securities of Parker & Parsley; (ii) no securities of Parker & Parsley or
any Subsidiary of Parker & Parsley (other than the MIPS) convertible into
or exchangeable for shares of capital stock, Voting Debt or other voting
securities of Parker & Parsley or any Subsidiary of Parker & Parsley, and
the MIPS are exchangeable for an aggregate of 3,776,400 shares of Parker &
Parsley Series A Preferred Stock, which Parker & Parsley Series A Preferred
Stock, if and when issued, will be convertible into an aggregate of
6,713,684 shares of Parker & Parsley Common Stock; and (iii) no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which Parker & Parsley or any Subsidiary of Parker & Parsley
is a party or by which it is bound in any case obligating Parker & Parsley
or any Subsidiary of Parker & Parsley to issue, deliver, sell, purchase,
redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Voting Debt
or other voting securities of
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Parker & Parsley or of any Subsidiary of Parker & Parsley, or obligating
Parker & Parsley or any Subsidiary of Parker & Parsley to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
There are not as of the date hereof and there will not be at the SM
Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which Parker & Parsley is a party or by
which it is bound relating to the voting of any shares of the capital stock
of Parker & Parsley that will limit in any way the solicitation of proxies
by or on behalf of Parker & Parsley from, or the casting of votes by, the
stockholders of Parker & Parsley with respect to the Parker & Parsley
Merger. There are no restrictions on Parker & Parsley to vote the stock of
any of its Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Board of Directors of Parker & Parsley has approved the
Parker & Parsley Merger and this Agreement, and declared the Parker &
Parsley Merger and this Agreement to be in the best interests of the
stockholders of Parker & Parsley. The directors of Parker & Parsley have
advised Parker & Parsley and Mesa that they intend to vote or cause to
be voted all of the shares of Parker & Parsley Common Stock beneficially
owned by them and their affiliates in favor of approval of the Parker &
Parsley Merger and this Agreement. Parker & Parsley has all requisite
corporate power and authority to enter into this Agreement and, subject,
with respect to consummation of the Parker & Parsley Merger, to approval
of this Agreement and the Parker & Parsley Merger by the stockholders of
Parker & Parsley in accordance with the DGCL and the Restated
Certificate of Incorporation and Restated Bylaws of Parker & Parsley, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Parker & Parsley, subject, with respect to
consummation of the Parker & Parsley Merger, to approval of this
Agreement and the Parker & Parsley Merger by the stockholders of Parker
& Parsley in accordance with the DGCL and the Restated Certificate of
Incorporation and Restated Bylaws of Parker & Parsley. This Agreement
has been duly executed and delivered by Parker & Parsley and, subject,
with respect to consummation of the Parker & Parsley Merger, to approval
of this Agreement and the Parker & Parsley Merger by the stockholders of
Parker & Parsley in accordance with the DGCL and the Restated
Certificate of Incorporation and Restated Bylaws of Parker & Parsley,
and assuming this Agreement constitutes the valid and binding obligation
of Mesa, Pioneer and MOC, constitutes a valid and binding obligation of
Parker & Parsley enforceable in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium
and other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or
at law).
(ii) Except as set forth on Schedule 3.1(c) of the Parker & Parsley
Disclosure Schedule, the execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to the loss
of a material benefit under, or give rise to a right of purchase under,
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parker & Parsley or
any of its Subsidiaries under, or otherwise result in a material
detriment to Parker & Parsley or any of its Subsidiaries under, any
provision of (i) the Restated Certificate of Incorporation or Restated
Bylaws of Parker & Parsley or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license
applicable to Parker & Parsley or any of its Subsidiaries, (iii) any
joint venture or other ownership arrangement or (iv) assuming the
consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.1(c)(iii) are duly and timely
obtained or made and the approval of the Parker & Parsley Merger and
this Agreement by the stockholders of Parker & Parsley has been
obtained, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parker & Parsley or
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any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests, charges,
encumbrances or detriments that, individually or in the aggregate, would
not have a Material Adverse Effect on Parker & Parsley, materially
impair the ability of Parker & Parsley to perform its obligations
hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to Parker &
Parsley or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by Parker & Parsley or the consummation by
Parker & Parsley of the transactions contemplated hereby, as to which
the failure to obtain or make would have a Material Adverse Effect on
Parker & Parsley, except for: (A) the filing of a premerger notification
report by Parker & Parsley under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration
or termination of the applicable waiting period with respect thereto;
(B) the filing with the SEC of (x) a proxy statement in preliminary and
definitive form relating to the meetings of the stockholders of Parker &
Parsley and of Mesa to be held in connection with the Mergers (the
"Joint Proxy Statement") and (y) such reports under Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
such other compliance with the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger for the Parker & Parsley Merger with the
Delaware Secretary of State; (D) filings with, and approval of, the
NYSE; (E) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, or
environmental laws; (F) such filings and approvals as may be required by
any foreign premerger notification, securities, corporate or other law,
rule or regulation; and (G) any such consent, approval, order,
authorization, registration, declaration, filing, or permit that the
failure to obtain or make would not, individually or in the aggregate,
have a Material Adverse Effect on Parker & Parsley, materially impair
the ability of Parker & Parsley to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby.
(d) SEC Documents. Parker & Parsley has made available to Mesa a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Parker & Parsley with the SEC since
December 31, 1995 and prior to or on the date of this Agreement (the
"Parker & Parsley SEC Documents"), which are all the documents (other than
preliminary material) that Parker & Parsley was required to file with the
SEC between December 31, 1995 and the date of this Agreement. As of their
respective dates, the Parker & Parsley SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such
Parker & Parsley SEC Documents, and none of the Parker & Parsley SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parker & Parsley included
in the Parker & Parsley SEC Documents complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
of the SEC) and fairly present in accordance with applicable requirements
of GAAP (subject, in the case of the unaudited statements, to normal,
recurring adjustments, none of which are material) the consolidated
financial position of Parker & Parsley and its consolidated Subsidiaries as
of their respective dates and the consolidated results of operations and
the consolidated cash flows of Parker & Parsley and its consolidated
Subsidiaries for the periods presented therein. Except as disclosed in the
Parker & Parsley SEC Documents, there are no agreements, arrangements or
understandings between Parker & Parsley and any party who is at the date of
this Agreement or was at any time prior to the date hereof but
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after December 31, 1995 an Affiliate (as defined in Section 4.1(k)) of
Parker & Parsley that are required to be disclosed in the Parker & Parsley
SEC Documents.
(e) Information Supplied. None of the information supplied or to be
supplied by Parker & Parsley for inclusion or incorporation by reference in
the Registration Statement on Form S-4 to be filed with the SEC by Pioneer
in connection with the issuance of shares of New Common Stock and New
Series A Preferred Stock, if any, in the Mergers (the "S-4") will, at the
time the S-4 becomes effective under the Securities Act or at the SM
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and none of the information supplied
or to be supplied by Parker & Parsley and included or incorporated by
reference in the Joint Proxy Statement will, at the date mailed to
stockholders of Parker & Parsley and at the date mailed to stockholders of
Mesa or at the time of the meeting of such stockholders to be held in
connection with the Mergers or at the SM Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the SM Effective Time any event with respect to Parker &
Parsley or any of its Subsidiaries, or with respect to other information
supplied by Parker & Parsley for inclusion in the Joint Proxy Statement or
S-4, shall occur which is required to be described in an amendment of, or a
supplement to, the S-4 or the Joint Proxy Statement, such event shall be so
described, and such amendment or supplement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of Parker
& Parsley. The Joint Proxy Statement, insofar as it relates to Parker &
Parsley or its Subsidiaries or other information supplied by Parker &
Parsley for inclusion therein, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the Parker & Parsley SEC
Documents, or except as contemplated by this Agreement, since December 31,
1996, there has not been: (i) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property)
with respect to any of Parker & Parsley's or Parker & Parsley Capital LLC's
capital stock, other than the declaration and payment of (x) regular cash
dividends with respect to Parker & Parsley's first and third fiscal
quarters not in excess of $.05 per share of Parker & Parsley Common Stock,
with usual record and payment dates, and (y) regular monthly cash dividends
on the MIPS paid in accordance with their terms; (ii) any amendment of any
material term of any outstanding equity security of Parker & Parsley or any
Significant Subsidiary of Parker & Parsley; (iii) any repurchase,
redemption or other acquisition by Parker & Parsley or any Subsidiary of
Parker & Parsley of any outstanding shares of capital stock or other equity
securities of, or other ownership interests in, Parker & Parsley or any
Subsidiary of Parker & Parsley, except as contemplated by the Parker &
Parsley Stock Plans or no more than 100,000 additional shares of Parker &
Parsley Common Stock; (iv) any material change in any method of accounting
or accounting practice or any tax method, practice or election by Parker &
Parsley or any Significant Subsidiary of Parker & Parsley; or (v) any other
transaction, commitment, dispute or other event or condition (financial or
otherwise) of any character (whether or not in the ordinary course of
business) that is reasonably likely to have a Material Adverse Effect on
Parker & Parsley, except for general economic changes and changes that may
affect the industries of Parker & Parsley or any of its Subsidiaries
generally.
(g) No Undisclosed Material Liabilities. Except as disclosed in the
Parker & Parsley SEC Documents, as of the date hereof, there are no
liabilities of Parker & Parsley or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, that are reasonably likely to have a Material Adverse Effect
on Parker & Parsley, other than: (i) liabilities adequately provided for on
the balance sheet of Parker & Parsley dated as of December 31, 1996
(including the notes thereto) contained in Parker & Parsley's Annual Report
on Form 10-K for the year ended December 31, 1996; (ii) liabilities
incurred in the ordinary course of business subsequent to December 31,
1996; and (iii) liabilities under this Agreement.
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(h) No Default. Neither Parker & Parsley nor any of its Subsidiaries
is in default or violation (and no event has occurred which, with notice or
the lapse of time or both, would constitute a default or violation) of any
term, condition or provision of (i) the Restated Certificate of
Incorporation or Restated Bylaws of Parker & Parsley or the comparable
charter or organizational documents of any of its Subsidiaries, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license to which
Parker & Parsley or any of its Subsidiaries is now a party or by which
Parker & Parsley or any of its Subsidiaries or any of their respective
properties or assets is bound or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to Parker & Parsley or any of its
Subsidiaries, except in the case of (ii) and (iii) for defaults or
violations which in the aggregate would not have a Material Adverse Effect
on Parker & Parsley.
(i) Compliance with Applicable Laws. Parker & Parsley and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders,
franchises and approvals of all Governmental Entities necessary for the
lawful conduct of their respective businesses (the "Parker & Parsley
Permits"), except where the failure so to hold would not have a Material
Adverse Effect on Parker & Parsley. Parker & Parsley and its Subsidiaries
are in compliance with the terms of the Parker & Parsley Permits, except
where the failure so to comply would not have a Material Adverse Effect on
Parker & Parsley. Except as disclosed in the Parker & Parsley SEC
Documents, the businesses of Parker & Parsley and its Subsidiaries are not
being conducted in violation of any law, ordinance or regulation of any
Governmental Entity, except for possible violations which would not have a
Material Adverse Effect on Parker & Parsley. As of the date of this
Agreement, no investigation or review by any Governmental Entity with
respect to Parker & Parsley or any of its Subsidiaries is pending and of
which Parker & Parsley has knowledge or, to the knowledge (as hereinafter
defined) of Parker & Parsley as of the date hereof, threatened, other than
those the outcome of which would not have a Material Adverse Effect on
Parker & Parsley. For purposes of this Agreement "knowledge" means the
actual knowledge of the officers, directors or senior managers of Mesa or
Parker & Parsley, as the case may be, after reasonable inquiry.
(j) Litigation. Except as disclosed in the Parker & Parsley SEC
Documents or Schedule 3.1(j) of the Parker & Parsley Disclosure Schedule,
as of the date of this Agreement there is no suit, action or proceeding
pending, or, to the knowledge of Parker & Parsley, threatened against or
affecting Parker & Parsley or any Subsidiary of Parker & Parsley ("Parker &
Parsley Litigation"), and Parker & Parsley and its Subsidiaries have no
knowledge of any facts that are likely to give rise to any Parker & Parsley
Litigation, that (in any case) is reasonably likely to have a Material
Adverse Effect on Parker & Parsley, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parker & Parsley or any Subsidiary of Parker & Parsley
("Parker & Parsley Order") that is reasonably likely to have a Material
Adverse Effect on Parker & Parsley or its ability to consummate the
transactions contemplated by this Agreement. Schedule 3.1(j) of the Parker
& Parsley Disclosure Schedule contains an accurate and complete list of all
suits, actions and proceedings pending or, to the knowledge of Parker &
Parsley, threatened against or affecting Parker & Parsley or any of its
Subsidiaries as of the date hereof.
(k) Taxes. Except as set forth on Schedule 3.1(k) of the Parker &
Parsley Disclosure Schedule:
(i) Each of Parker & Parsley, each of its Subsidiaries and any
affiliated, consolidated, combined, unitary or similar group of which
Parker & Parsley or any of its Subsidiaries is or was a member has (A)
duly filed on a timely basis (taking into account any extensions) all
U.S. federal income Tax Returns (as hereinafter defined), and all other
material Tax Returns, required to be filed or sent by or with respect to
it, (B) duly paid or deposited on a timely basis all Taxes (as
hereinafter defined) that are shown to be due and payable on or with
respect to such Tax Returns, and all material Taxes that are otherwise
due and payable (except for audit adjustments not material in the
aggregate or to the extent that liability therefor is reserved for in
Parker & Parsley's most recent audited financial statements) for which
Parker & Parsley or any of its Subsidiaries may be liable, (C)
established reserves that are adequate for the payment of all material
Taxes not yet due and payable with respect to the results of operations
of Parker & Parsley and its Subsidiaries through
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the date hereof, and (D) complied in all material respects with all
applicable laws, rules and regulations relating to the reporting,
payment and withholding of Taxes that are required to be withheld from
payments to employees, independent contractors, creditors, stockholders
or any other third party and has in all material respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over.
(ii) Schedule 3.1(k) of the Parker & Parsley Disclosure Schedule
sets forth (A) the last taxable period through which the federal income
Tax Returns of Parker & Parsley and any of its Subsidiaries have been
examined by the Internal Revenue Service ("IRS") or for which the
statute of limitations for assessment has otherwise closed and (B) any
affiliated, consolidated, combined, unitary or similar group or Tax
Return in which Parker & Parsley or any of its Subsidiaries is or has
been a member or joins or has joined in the filing. Except to the extent
being contested in good faith, all material deficiencies asserted as a
result of such examinations and any examination by any applicable taxing
authority have been paid, fully settled or adequately provided for in
Parker & Parsley's most recent audited financial statements. Except as
disclosed in or adequately provided for in the Parker & Parsley SEC
Documents or disclosed in Schedule 3.1(k) of the Parker & Parsley
Disclosure Schedule, no audits or other administrative proceedings or
court proceedings are presently pending, or to the knowledge of Parker &
Parsley, threatened, with regard to any Taxes for which Parker & Parsley
or any of its Subsidiaries would be liable, and no material deficiency
for any Taxes has been proposed, asserted or assessed (whether by
examination report or prior to completion of examination by means of
notices of proposed adjustment or other similar requests or notices)
pursuant to such examination against Parker & Parsley or any of its
Subsidiaries by any taxing authority with respect to any period.
(iii) Neither Parker & Parsley nor any of its Subsidiaries has
executed or entered into (or prior to the close of business on the
Closing Date will execute or enter into) with the IRS or any taxing
authority (A) any agreement or other document extending or having the
effect of extending the period for assessment or collection of any
income or franchise Taxes for which Parker & Parsley or any of its
Subsidiaries would be liable or (B) a closing agreement pursuant to
Section 7121 of the Code or any similar provision of state, local,
foreign or other income tax law, which will require any increase in
taxable income or alternative minimum taxable income, or any reduction
in tax credits, for Parker & Parsley or any of its Subsidiaries for any
taxable period ending after the Closing Date.
(iv) Except as set forth in the Parker & Parsley SEC Documents and
in the severance agreements with each officer of Parker & Parsley (true
and complete copies of which have been delivered to Mesa by Parker &
Parsley), neither Parker & Parsley nor any of its Subsidiaries is a
party to an agreement that provides for the payment of any amount that
would constitute a "parachute payment" within the meaning of Section
280G of the Code or that would constitute compensation whose
deductibility is limited under Section 162(m) of the Code.
(v) Except as set forth in the Parker & Parsley SEC Documents,
neither Parker & Parsley nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any tax sharing or allocation
agreement or similar agreement or arrangement.
(vi) There are no requests for rulings or outstanding subpoenas
from any taxing authority for information with respect to Taxes of
Parker & Parsley or any of its Subsidiaries and, to the knowledge of
Parker & Parsley, no material reassessments (for property or ad valorem
Tax purposes) of any assets or any property owned or leased by Parker &
Parsley or any of its Subsidiaries have been proposed in written form.
(vii) Neither Parker & Parsley nor any of its Subsidiaries has
agreed to make any adjustment pursuant to section 481(a) of the Code (or
any predecessor provision) by reason of any change in any accounting
method of Parker & Parsley or any of its Subsidiaries, and neither
Parker & Parsley nor any of its Subsidiaries has any application pending
with any taxing authority requesting permission for any changes in any
accounting method of Parker & Parsley or any of its Subsidiaries. To the
knowledge of Parker & Parsley, neither the IRS nor any other taxing
authority has proposed
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in writing, and neither Parker & Parsley nor any of its Subsidiaries is
otherwise required to make, any such adjustment or change in accounting
method.
(viii) There are no material excess loss accounts or deferred
intercompany transactions between Parker & Parsley and/or any of its
Subsidiaries within the meaning of Treas. Reg. Section 1.1502-13 or
1.1502-19, respectively.
For purposes of this Agreement, "Tax" (and, with correlative meaning,
"Taxes") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid by Parker &
Parsley or any of its Subsidiaries (or Mesa or any of its Subsidiaries, as
applicable), payroll, employment, excise, production, severance, stamp,
occupation, premium, property, environmental or windfall profit tax,
custom, duty or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest and/or any
penalty, addition to tax or additional amount imposed by any taxing
authority, (ii) any liability of Parker & Parsley or any of its
Subsidiaries (or Mesa or any of its Subsidiaries, as applicable) for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated or consolidated group, or arrangement whereby
liability of Parker & Parsley or any of its Subsidiaries (or Mesa or any of
its Subsidiaries, as applicable) for payment of such amounts was determined
or taken into account with reference to the liability of any other person
for any period and (iii) liability of Parker & Parsley or any of its
Subsidiaries (or Mesa or any of its Subsidiaries, as applicable) with
respect to the payment of any amounts of the type described in (i) or (ii)
as a result of any express or implied obligation to indemnify any other
Person.
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with respect
to Parker & Parsley or any of its Subsidiaries (or Mesa or any of its
Subsidiaries, as applicable) in respect of any Taxes, including, without
limitation, (i) any consolidated Federal Income Tax return in which Parker
& Parsley or any of its Subsidiaries (or Mesa or any of its Subsidiaries,
as applicable) is included and (ii) any state, local or foreign Income Tax
returns filed on a consolidated, combined or unitary basis (for purposes of
determining tax liability) in which Parker & Parsley or any of its
Subsidiaries (or Mesa or any of its Subsidiaries, as applicable) is
included.
(l) Pension and Benefit Plans; ERISA. Except as set forth on Schedule
3.1(l) of the Parker & Parsley Disclosure Schedule or in the Parker &
Parsley SEC Documents:
(i) All "employee pension benefit plans," as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by Parker & Parsley or any of its Subsidiaries or
any trade or business (whether or not incorporated) which is under
common control, or which is treated as a single employer, with Parker &
Parsley under Section 414(b), (c), (m) or (o) of the Code ("Parker &
Parsley ERISA Affiliate") or to which Parker & Parsley or any of its
Subsidiaries or any Parker & Parsley ERISA Affiliate contributed or is
obligated to contribute thereunder within six years prior to the SM
Effective Time (the "Parker & Parsley Pension Plans") intended to
qualify under Section 401 of the Code so qualify and the trusts
maintained pursuant thereto have been determined by the IRS to be exempt
from federal income taxation under Section 501 of the Code and, to the
knowledge of Parker & Parsley as of the date hereof, nothing has
occurred with respect to the operation of the Parker & Parsley Pension
Plans that could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(ii) There has been no "reportable event" as that term is defined
in Section 4043 of ERISA and the regulations thereunder with respect to
the Parker & Parsley Pension Plans subject to Title IV of ERISA that
would require the giving of notice or any material event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(iii) As to the Parker & Parsley Pension Plans subject to Title IV
of ERISA, there has been no event or condition which presents the
material risk of termination, no notice of intent to terminate has been
given under Section 4041 of ERISA and no proceeding has been instituted
under
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Section 4042 of ERISA to terminate, such that would result in a material
liability to Parker & Parsley, its Subsidiaries, or Parker & Parsley
ERISA Affiliates; no material liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred; no material accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of
ERISA or Section 412 of the Code has been incurred; and the assets of
each Parker & Parsley Pension Plan equal or exceed the actuarial present
value of the benefit liabilities, within the meaning of Section 4041 of
ERISA, under such Parker & Parsley Pension Plan, based upon reasonable
actuarial assumptions and the asset valuation principles established by
the PBGC.
(iv) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding all the
"employee benefit plans," as defined in Section 3(3) of the ERISA and
all other material employee compensation and benefit arrangements or
payroll practices, including, without limitation, severance pay, sick
leave, vacation pay, salary continuation for disability, consulting or
other compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs maintained by
Parker & Parsley or any of its Subsidiaries or to which Parker & Parsley
or any of its Subsidiaries contributed or is obligated to contribute
thereunder (all such plans, other than the Parker & Parsley Pension
Plans, being hereinafter referred to as the "Parker & Parsley Employee
Benefit Plans") or the Parker & Parsley Pension Plans with the Secretary
of Labor and the Secretary of the Treasury or the furnishing of such
documents to the participants or beneficiaries of the Parker & Parsley
Employee Benefit Plans or Parker & Parsley Pension Plans, which
violation is reasonably likely to have a Material Adverse Effect on
Parker & Parsley.
(v) The Parker & Parsley Employee Benefit Plans and Parker &
Parsley Pension Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including
rules and regulations thereunder) and other applicable Federal and state
law, there is no material liability for breaches of fiduciary duty in
connection with the Parker & Parsley Employee Benefit Plans and Parker &
Parsley Pension Plans, and neither Parker & Parsley nor any of its
Subsidiaries or any "party in interest" or "disqualified person" with
respect to the Parker & Parsley Employee Benefit Plans and Parker &
Parsley Pension Plans has engaged in a material "prohibited transaction"
within the meaning of Section 4975 of the Code or Section 406 of ERISA.
(vi) There are no material actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of Parker &
Parsley, threatened against, or with respect to, the Parker & Parsley
Employee Benefit Plans or Parker & Parsley Pension Plans or their
assets.
(vii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) result in
any payment becoming due to any employee or group of employees of Parker
& Parsley or any of its Subsidiaries; (B) increase any benefits
otherwise payable under any Parker & Parsley Employee Benefit Plan or
Parker & Parsley Pension Plan; or (C) result in the acceleration of the
time of payment or vesting of any such benefits. Except as set forth on
Schedule 3.1(l)(vii) of the Parker & Parsley Disclosure Schedule, there
are no severance agreements or employment agreements between Parker &
Parsley or any of its Subsidiaries and any employee of Parker & Parsley
or such Subsidiary. True and complete copies of all such severance
agreements and employment agreements have been provided to Mesa.
(viii) Neither Parker & Parsley nor any of its Subsidiaries has any
consulting agreement or arrangement with any person involving
compensation in excess of $200,000, except as are terminable upon one
month's notice or less.
(ix) Neither Parker & Parsley nor any of its Subsidiaries nor any
Parker & Parsley ERISA Affiliate contributes to, or has an obligation to
contribute to, and has not within six years prior to the SM Effective
Time contributed to, or had an obligation to contribute to, a
multiemployer plan within the meaning of Section 3(37) of ERISA.
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(x) No stock or other security issued by Parker & Parsley or any of
its Subsidiaries forms or has formed a material part of the assets of
any Parker & Parsley Employee Benefit Plan or Parker & Parsley Pension
Plan.
(xi) Concerning each Parker & Parsley Pension Plan that is or has
been subject to the funding requirements of Title I, Subtitle B, Part 3
of ERISA, the funding method used in connection with such plan is, and
at all times has been, acceptable under ERISA, each of the actuarial
assumptions employed in connection with determining the funding of each
such plan is, and at all times has been, reasonable and satisfies the
requirements of Section 412(c)(3) of the Code and Section 302(c)(3) of
ERISA, and Schedule 3.1(l)(xi) of the Parker & Parsley Disclosure
Schedule sets forth as of December 31, 1996, (A) the actuarially
determined present value of all benefit liabilities within the meaning
of Section 4001(a)(16) of ERISA ("Benefit Liabilities") determined on an
ongoing plan basis, employing in making such determination the same
actuarial assumptions as were used in determining plan fundings for the
most recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (B) the actuarially determined present value of
all Benefit Liabilities under each such Parker & Parsley Pension Plan
employing in such determination the same actuarial assumptions, except
turnover assumptions, as were used in determining plan funding for the
most recently completed plan year unless any such assumption is not
reasonable, in which event such assumption shall be changed to a
reasonable assumption, (C) the fair market value of the assets held to
fund each such Parker & Parsley Pension Plan, (D) the funding method
used in connection with each such Parker & Parsley Pension Plan, (E)
identification of the amount and related plan with respect to which
there is or has been any "accumulated funding deficiency," as defined in
Section 302(a)(2) of ERISA, (F) the estimated amount of, together with
calculations showing how such amounts were determined, any premiums due
to the PBGC for the most recently completed and following five years,
(G) a demonstration showing how any minimum or maximum contributions,
including any contributions required by reason of a liquidity shortfall
within the meaning of Section 412(m)(5) of the Code or Section 302(e)(5)
of ERISA, to any such plans were arrived at for the most recently
completed year, together with an estimate for the following five years
based upon present law and actuarial assumptions and methodologies,
except where such assumptions or methodologies are required by law to be
changed with respect to a particular year, and (H) the date of any
change of any assumptions used to determine current liability of any
such plan, together with a demonstration that such change either (x)
received appropriate approvals under Section 412(c)(5) of the Code and
Section 302(c)(5) of ERISA or (y) that such approval was not necessary
by law; Schedule 3.1(l)(xi) of the Parker & Parsley Disclosure Schedule
sets forth a reasonable good faith estimate of material changes between
December 31, 1996 and the date hereof in the value of benefits or plan
assets described in the preceding clause (A), (B) or (C); Schedule
3.1(l)(xi) of the Parker & Parsley Disclosure Schedule sets forth the
information described in Clauses (A), (B), (C), (D), (F), (G) and (H) as
of December 31, 1996, including a separate statement of liabilities
attributable to unpredictable contingent event benefits within the
meaning of Section 412(l)(7)(B)(ii) of the Code and Section
302(d)(7)(B)(ii) of ERISA; the sum of the amount of unfunded Benefit
Liabilities under all Parker & Parsley Pension Plans (excluding each
such plan with an amount of unfunded Benefit Liabilities of zero or
less) is not more than $5,000,000; all contributions required to be made
by Section 515 of ERISA by the Company or any affiliate to Parker &
Parsley Pension Plans have been timely made; with respect to any such
Parker & Parsley Pension Plan and concerning each Parker & Parsley
Pension Plan which is in whole or in part an "individual account plan"
(as defined in Section 3(34) of ERISA), there is set forth in Schedule
3.1(l)(xi) of the Parker & Parsley Disclosure Schedule (A) the amount of
any Parker & Parsley liability for contributions due or to become due
with respect to each such Parker & Parsley Pension Plan for periods up
to the date hereof, and the date any such amounts were paid and (B) the
amount of any contribution accrued or paid or expected to be accrued or
paid with respect to such Parker & Parsley Pension Plan for the plan
year in which the Closing Date occurs; with respect to any such Parker &
Parsley Pension Plan, no such plan has been terminated or subject to a
"spin-off" or "spin-off
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termination" or partial termination and no assets of any such plan have
been used or employed in a manner so as to subject them to an excise tax
imposed under Section 4980 of the Code; each such Parker & Parsley
Pension Plan permits termination thereof, and distribution of any assets
in excess of those required to pay Benefit Liabilities may be
distributed to or for the benefit of Parker & Parsley or its Affiliates
and Section 4044(d) of ERISA would not prevent such reversion; with
respect to any such Parker & Parsley Pension Plan, any reduction in
benefits was preceded by an adequate and appropriate notice to the
parties described in and as required by Section 204(h) of ERISA; there
are no former employees or participants who are entitled to earn
additional pension benefits by reason of "grow in" or other rights with
respect to service or time periods after such employees have been
terminated from employment with Seller.
(xii) None of Parker & Parsley nor any of its Affiliates has
incurred, by reason of the transaction contemplated by this Agreement,
or will incur, any liability under Section 4062(e) of ERISA. Neither
Parker & Parsley nor any of its Affiliates is a participant in any plan
to which Sections 4063 or 4064 of ERISA apply.
(xiii) Neither Parker & Parsley nor any of its Affiliates has
engaged in any transaction described under Section 4069 of ERISA nor can
any lien be imposed on any of Parker & Parsley, its Affiliates or any of
their respective assets under Section 4068 of ERISA.
(xiv) PBGC and Other Liabilities. Parker & Parsley and its
Affiliates have complied in all material respects with all requirements
for premium payments, including any interest and penalty charges for
late payment, due the PBGC with respect to each Parker & Parsley Pension
Plan and each separate plan year for which any premiums are required.
Except as set forth in Schedule 3.1(l)(xiv) of the Parker & Parsley
Disclosure Schedule, and except for transactions required by this
Agreement, from the period commencing January 1, 1990 through the
Closing Date there has been no "reportable event" (within the meaning of
Section 4043(b) or (c) of ERISA and regulations promulgated by the PBGC
thereunder, Section 4062(e) of ERISA or Section 4063(a) of ERISA) with
respect to any Parker & Parsley Pension Plan subject to Title IV of
ERISA for which notice to the PBGC has not, by rule or regulations, been
waived. There is not any unsatisfied material liability to the PBGC
which has been incurred by Parker & Parsley or any Affiliate on account
of any Parker & Parsley Pension Plan subject to Title IV of ERISA. From
the period commencing January 1, 1990 through the Closing Date, no
filing has been or will be made by Parker & Parsley or any Affiliate
with the PBGC to terminate, nor has any proceeding been commenced by the
PBGC to terminate, any Parker & Parsley Pension Plan subject to Title IV
of ERISA which was maintained, or wholly or partially funded, by Parker
& Parsley or any Affiliate. Concerning both Parker & Parsley and any
Affiliate (A) there has been no cessation of operations at a facility so
as to become subject to the provisions of Section 4062(e) of ERISA, (B)
there has been no withdrawal of a substantial employer from any Parker &
Parsley Pension Plan so as to become subject to the provisions of
Section 4063 of ERISA, (C) there has been no cessation of contributions
on or before the Closing Date to any Parker & Parsley Pension Plan
subject to Section 4064(a) of ERISA to which Parker & Parsley or any
Affiliate has made contributions during the five calendar years prior to
the Closing Date, (D) there has been no complete or partial withdrawal
from a multiemployer plan (as defined in either Section 3(37) or Section
4001(a)(3) of ERISA) so as to incur any material withdrawal liability as
defined in Section 4201 of ERISA (without regard to any subsequent
reduction or waiver of such liability under Section 4207 or 4208 of
ERISA), (E) no employee pension benefit plan which is a multiemployer
plan (as defined in either Section 3(37) or Section 4001(a)(3) of ERISA)
which Parker & Parsley or any Affiliate maintains or contributes to is
in "reorganization" (as defined in Section 4241 of ERISA) or "insolvent"
(as defined in Section 4245 of ERISA), (F) there is not now, nor can
there ever be, any liability under Section 4064 of ERISA to any of Mesa,
RM Surviving Corporation or Parker & Parsley by reason of participation
in any Parker & Parsley Pension Plan by Parker & Parsley or any
Affiliate on or prior to the Closing Date, (G) there has been no
amendment to any Parker & Parsley Pension Plan that would require the
furnishing of security under Section 401(a)(29) of the Code and (H)
there has
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been no event or circumstance and there can be no event or circumstance
which has or may result in any liability being asserted by any Parker &
Parsley Pension Plan, the PBGC or any other person or entity under Title
IV of ERISA against Parker & Parsley or any Parker & Parsley Affiliate
or Mesa or RM Surviving Corporation. Neither Parker & Parsley nor any of
its Affiliates has any liability to any employee benefit plan for
contributions under Section 412(m) of the Code or Section 302(e) of
ERISA, nor has any lien been imposed under Section 412(n) of the Code or
Section 302(f) of ERISA nor is there any liability for excise taxes
imposed under Section 4971 of the Code, and all liabilities arising
under Section 412(c)(11) of the Code with respect to contributions to
any employee benefit plan have been set forth in Schedule 3.1(l)(xiv) of
the Parker & Parsley Disclosure Schedule; any notices to the PBGC under
Section 412(n) of the Code or Section 302(f) of ERISA have heretofore
been delivered to Mesa; and copies of any notices required to be given
to participants under either Section 101(d) or Section 4011 of ERISA
have previously been delivered to Mesa. Except as described in Schedule
3.1(l)(xiv) of the Parker & Parsley Disclosure Schedule, the PBGC has
not communicated with Parker & Parsley, its Affiliates or any of its
agents or representatives concerning the transactions contemplated by
the Agreement, nor any other transactions implemented or contemplated by
Parker & Parsley or any of its Affiliates within the preceding five
calendar years.
(xv) Excess Assets or Benefits. Since January 1, 1990, Parker &
Parsley has not taken any action to vest any overfunded benefits in any
employee benefit plan in any of the participants thereunder. Upon the
termination of any Parker & Parsley Pension Plans, any excess assets
(defined as the excess of plan assets over the amounts required to fund
all liabilities of the plan) will be distributed to or for the benefit
of the sponsor of the plan.
(xvi) Health Care Continuation Coverage. Parker & Parsley and its
Affiliates have materially complied with the requirements of Section
4980B of the Code and Sections 601-608 of ERISA regarding continuation
of health care coverage notices and provision of appropriate health care
coverage under the Parker & Parsley Employee Benefit Plans.
(xvii) No Contribution to Multiemployer Plan. From and after the
Closing Date, neither Parker & Parsley nor Mesa nor RM Surviving
Corporation will be liable for contributions to any Parker & Parsley
Pension Plan that is a multiemployer plan within the meaning of either
Section 3(37) or Section 4001(a)(3) of ERISA except to the extent that
Parker & Parsley or Mesa or RM Surviving Corporation subsequently
affirmatively determines to undertake such contribution obligations.
(xviii) WARN Notices. Any notice under the Workers Adjustment
Retirement Act that has been required with respect to Parker & Parsley
employees or former employees or will be required by the transactions
contemplated by this Agreement has been, or will be, as the case may be,
properly and timely given by Parker & Parsley.
(xix) Certain Pension Deductions. RM Surviving Corporation will be
entitled to deduct on its Tax Returns for periods commencing on or after
the Closing Date any contributions to a Parker & Parsley Pension Plan or
Parker & Parsley Employee Benefit Plan made by Parker & Parsley on or
before the Closing Date.
(xx) Worker's Compensation. Parker & Parsley and its Affiliates
have maintained worker's compensation coverage as required by applicable
state law through purchase of insurance and not by self-insurance or
otherwise except as disclosed to Mesa on Schedule 3.1(l)(xx) of the
Parker & Parsley Disclosure Schedule.
(xxi) Section 162(m) Deduction Limitations. No amount has been paid
by Parker & Parsley or any of its Affiliates, and no amount is expected
to be paid by the Parker & Parsley or any of its Affiliates, which would
be subject to the provisions of 162(m) of the Code such that all or a
part of such payments would not be deductible by the payor.
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(m) Labor Matters. Except as set forth on Schedule 3.1(m) of the
Parker & Parsley Disclosure Schedule or in the Parker & Parsley SEC
Documents:
(i) neither Parker & Parsley nor any of its Subsidiaries is a party
to any collective bargaining agreement or other current labor agreement
with any labor union or organization, and there is no current union
representation question involving employees of Parker & Parsley or any
of its Subsidiaries, nor does Parker & Parsley or any of its
Subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees;
(ii) as of the date hereof, there is no unfair labor practice
charge or grievance arising out of a collective bargaining agreement or
other grievance procedure against Parker & Parsley or any of its
Subsidiaries pending, or, to the knowledge or Parker & Parsley or any of
its Subsidiaries, threatened, that has, or is reasonably likely to have,
a Material Adverse Effect on Parker & Parsley;
(iii) as of the date hereof, there is no complaint, lawsuit or
proceeding in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the foregoing
alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against Parker & Parsley or any of its
Subsidiaries pending, or, to the knowledge of Parker & Parsley or any of
its Subsidiaries, threatened, that has, or is reasonably likely to have,
a Material Adverse Effect on Parker & Parsley;
(iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of Parker & Parsley or any of its
Subsidiaries, threatened, against or involving Parker & Parsley or any
of its Subsidiaries that has, or is reasonably likely to have, a
Material Adverse Effect on Parker & Parsley;
(v) Parker & Parsley and each of its Subsidiaries are in compliance
with all applicable laws respecting employment and employment practices,
terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that does not
have, and is not reasonably likely to have, a Material Adverse Effect on
Parker & Parsley; and
(vi) as of the date hereof, there is no proceeding, claim, suit,
action or governmental investigation pending or, to the knowledge of
Parker & Parsley or any of its Subsidiaries, threatened, in respect to
which any current or former director, officer, employee or agent of
Parker & Parsley or any of its Subsidiaries is or may be entitled to
claim indemnification from Parker & Parsley or any of its Subsidiaries
pursuant to the Restated Certificate of Incorporation or Restated Bylaws
of Parker & Parsley or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, as provided in any
indemnification agreement to which Parker & Parsley or any Subsidiary of
Parker & Parsley is a party or pursuant to applicable law that has, or
is reasonably likely to have, a Material Adverse Effect on Parker &
Parsley.
(n) Intangible Property. Parker & Parsley and its Subsidiaries possess
or have adequate rights to use all material trademarks, trade names,
patents, service marks, brand marks, brand names, computer programs,
databases, industrial designs and copyrights necessary for the operation of
the businesses of each of Parker & Parsley and its Subsidiaries
(collectively, the "Parker & Parsley Intangible Property"), except where
the failure to possess or have adequate rights to use such properties would
not reasonably be expected to have a Material Adverse Effect on Parker &
Parsley. All of the Parker & Parsley Intangible Property is owned or
licensed by Parker & Parsley or its Subsidiaries free and clear of any and
all liens, claims or encumbrances, except those that are not reasonably
likely to have a Material Adverse Effect on Parker & Parsley, and neither
Parker & Parsley nor any such Subsidiary has forfeited or otherwise
relinquished any Parker & Parsley Intangible Property which forfeiture
would result in a Material Adverse Effect on Parker & Parsley. To the
knowledge of Parker & Parsley, the use of the Parker & Parsley Intangible
Property by Parker & Parsley or its Subsidiaries does not, in any material
respect, conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title,
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interest or goodwill, including, without limitation, any intellectual
property right, trademark, trade name, patent, service mark, brand mark,
brand name, computer program, database, industrial design, copyright or any
pending application therefor of any other person and there have been no
claims made and neither Parker & Parsley nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that any of the Parker
& Parsley Intangible Property is invalid or conflicts with the asserted
rights of any other person or has not been used or enforced or has failed
to have been used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of any of the Parker &
Parsley Intangible Property, except for any such conflict, infringement,
violation, interference, claim, invalidity, abandonment, cancellation or
unenforceability that would not reasonably be expected to have a Material
Adverse Effect on Parker & Parsley.
(o) Environmental Matters.
For purposes of this Agreement:
(A) "Environmental Laws" means all federal, state and local laws
(including common laws), rules, regulations, ordinances, orders, decrees
of any Governmental Entity, whether now in existence or hereafter
enacted and in effect at the time of Closing, relating to pollution or
the protection of human health, safety or the environment of any
jurisdiction in which the applicable party hereto owns or operates
assets or conducts business or owned or operated assets or conducted
business (whether or not through a predecessor entity) (including,
without limitation, ambient air, surface water, groundwater, land
surface, subsurface strata, natural resources or wildlife), including,
without limitation, laws and regulations relating to Releases or
threatened Releases of Hazardous Materials or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of solid waste or Hazardous Materials,
and any similar laws, rules, regulations, ordinances, orders and decrees
of any foreign jurisdiction in which the applicable party hereto owns or
operates assets or conducts business;
(B) "Hazardous Materials" means (x) any petroleum or petroleum
products, radioactive materials (including naturally occurring
radioactive materials), asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, polychlorinated biphenyls or
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls, (y) any chemicals, materials or substances
which are now defined as or included in the definition of "solid
wastes," "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous substances," "restricted hazardous
wastes," "toxic substances" or "toxic pollutants," or words of similar
import, under any Environmental Law and (z) any other chemical,
material, substance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a jurisdiction in
which Parker & Parsley or any of its Subsidiaries operates (for purposes
of Section 3.1(o)) or in which Mesa or any of its Subsidiaries operates
(for purposes of Section 3.2(n)).
(C) "Release" means any spill, effluent, emission, leaking,
pumping, pouring, emptying, escaping, dumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or
outdoor environment, or into or out of any property owned, operated or
leased by the applicable party or its Subsidiaries; and
(D) "Remedial Action" means all actions, including, without
limitation, any capital expenditures, required by a Governmental Entity
or required under any Environmental Law, or voluntarily undertaken to
(I) clean up, remove, treat, or in any other way ameliorate or address
any Hazardous Materials or other substance in the indoor or outdoor
environment; (II) prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it does not endanger or
threaten to endanger the public or employee health or welfare of the
indoor or outdoor environment; (III) perform pre-remedial studies and
investigations or post-remedial monitoring and care pertaining or
relating to a Release; or (IV) bring the applicable party into
compliance with any Environmental Law.
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Except as disclosed on Schedule 3.1(o) of the Parker & Parsley
Disclosure Schedule:
(i) The operations of Parker & Parsley and its Subsidiaries have
been conducted, are and, as of the Closing Date, will be, in
compliance with all Environmental Laws, except where the failure to
so comply would not reasonably be expected to have a Material Adverse
Effect on Parker & Parsley;
(ii) Parker & Parsley and its Subsidiaries have obtained and
will maintain all permits, licenses and registrations, or
applications relating thereto, and have made and will make all
filings, reports and notices required under applicable Environmental
Laws for the continued operations of their respective businesses,
except such matters the lack or failure of which would not reasonably
be expected to lead to a Material Adverse Effect on Parker & Parsley;
(iii) Parker & Parsley and its Subsidiaries are not subject to
any outstanding written orders issued by, or contracts with, any
Governmental Entity or other person respecting (A) Environmental
Laws, (B) Remedial Action, (C) any Release or threatened Release of a
Hazardous Material or (D) an assumption of responsibility for
environmental liabilities of another person, except such orders or
contracts the compliance with which would not reasonably be expected
to have a Material Adverse Effect on Parker & Parsley;
(iv) Parker & Parsley and its Subsidiaries have not received any
written communication alleging, with respect to any such party, the
violation of or liability under any Environmental Law, which
violation or liability would reasonably be expected to have a
Material Adverse Effect on Parker & Parsley;
(v) Neither Parker & Parsley nor any of its Subsidiaries has any
contingent liability in connection with the Release of any Hazardous
Material into the indoor or outdoor environment (whether on-site or
off-site) or employee or third party exposure to Hazardous Materials
that would reasonably be expected to lead to a Material Adverse
Effect on Parker & Parsley;
(vi) The operations of Parker & Parsley or its Subsidiaries
involving the generation, transportation, treatment, storage or
disposal of hazardous or solid waste, as defined and regulated under
40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement)
or any applicable state equivalent, are in compliance with applicable
Environmental Laws, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on Parker &
Parsley; and
(vii) To the knowledge of Parker & Parsley, there is not now on
or in any property of Parker & Parsley or its Subsidiaries or any
property for which Parker & Parsley or its Subsidiaries is
potentially liable any of the following: (A) any underground storage
tanks or surface impoundments or (B) any on-site disposal of
Hazardous Material, any of which ((A) or (B) preceding) could
reasonably be expected to have a Material Adverse Effect on Parker &
Parsley.
(p) Insurance. Schedule 3.1(p) of the Parker & Parsley Disclosure
Schedule sets forth an insurance schedule of Parker & Parsley's and each of
its Subsidiaries' directors' and officers' liability insurance, primary and
excess casualty insurance policies, providing coverage for bodily injury
and property damage to third parties, including products liability and
completed operations coverage, and worker's compensation, in effect as of
the date hereof. Parker & Parsley maintains insurance in such amounts and
covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to those of Parker & Parsley and
each of its Subsidiaries (taking into account the cost and availability of
such insurance).
(q) Opinion of Financial Advisor. The Board of Directors of Parker &
Parsley has received the opinion of Goldman, Sachs & Co. addressed to such
Board (a copy of which has been provided to Mesa for information purposes
only) to the effect that, as of the date hereof, the Parker & Parsley
Conversion Number fixing the shares of New Common Stock to be received by
the holders of Parker & Parsley
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<PAGE> 245
Common Stock pursuant to this Agreement is fair from a financial point of
view to such holders. Mesa acknowledges and agrees that it may not, and is
not entitled to, rely on the opinion of Goldman, Sachs & Co. delivered to
the Parker & Parsley Board of Directors.
(r) Vote Required. The affirmative vote of the holders of at least a
majority of the outstanding shares of Parker & Parsley Common Stock is the
only vote of the holders of any class or series of Parker & Parsley capital
stock necessary to approve this Agreement and the transactions contemplated
hereby.
(s) Beneficial Ownership of Mesa Common Stock. As of the date hereof,
neither Parker & Parsley nor its Subsidiaries "beneficially owns" (as
defined in Rule 13d-3 under the Exchange Act) any of the outstanding Mesa
Common Stock, Mesa Series A Preferred Stock or any of Mesa's outstanding
debt securities.
(t) Brokers. Except for the fees and expenses payable to Goldman,
Sachs & Co., which fees are reflected in its engagement letter with Parker
& Parsley (a copy of which has been delivered to Mesa), no broker,
investment banker, or other person is entitled to any broker's, finder's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of Parker & Parsley.
(u) Tax Matters. The representations set forth in the form of
Officer's Certificate of Parker & Parsley included as Schedule 3.1(u) of
the Parker & Parsley Disclosure Schedule are true and correct, assuming for
purposes of this representation and warranty that the Merger had been
consummated on the date and in accordance with the terms hereof.
(v) Amendment to Parker & Parsley Rights Agreement.
(i) The Board of Directors of Parker & Parsley has taken, or will
take, all necessary action to amend the Rights Agreement of Parker &
Parsley dated as of February 19, 1991, as amended by a First Amendment
to Rights Agreement dated as of March 18, 1994 (as so amended, the
"Parker & Parsley Rights Agreement") so that none of the execution and
delivery of this Agreement, the conversion of shares of Parker & Parsley
Common Stock into the right to receive Mesa Common Stock in accordance
with Article II of this Agreement, and the consummation of the Mergers
or any other transaction contemplated hereby will cause (i) the Rights
issued pursuant to the Parker & Parsley Rights Agreement (the "Parker &
Parsley Rights") to become exercisable under the Parker & Parsley Rights
Agreement, (ii) Pioneer, Mesa or any of their respective Subsidiaries to
be deemed an "Acquiring Person" (as defined in the Parker & Parsley
Rights Agreement), (iii) any such event to be deemed a "Triggering
Event" (as defined in the Parker & Parsley Rights Agreement) or (iv) the
"Stock Acquisition Date" (as defined in the Parker & Parsley Rights
Agreement) to occur upon any such event.
(ii) The Board of Directors of Parker & Parsley has taken, or will
take, all necessary action to amend the Parker & Parsley Rights
Agreement so that Section 13 thereof will not apply to the Mergers.
(iii) As of the date of this Agreement, the Parker & Parsley Rights
have not separated from the Parker & Parsley Common Stock and no
distribution of Rights Certificates (as defined in the Parker & Parsley
Rights Agreement) will occur as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
3.2 Representations and Warranties of Mesa, Pioneer and MOC. Mesa, Pioneer
and MOC jointly and severally represent and warrant to Parker & Parsley as
follows (in each case as qualified by matters reflected on the disclosure
schedule dated as of the date of this Agreement and delivered by Mesa to Parker
& Parsley on or prior to the date of this Agreement (the "Mesa Disclosure
Schedule") and made a part hereof by reference, each such matter qualifying each
representation and warranty, as applicable, notwithstanding any specific Section
or Schedule reference or lack thereof):
(a) Organization, Standing and Power. Each of Mesa, Pioneer, MOC and
Mesa's Significant Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the
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laws of its state of incorporation or organization, has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in good standing
to do business in each jurisdiction in which the business it is conducting,
or the operation, ownership or leasing of its properties, makes such
qualification necessary, other than in such jurisdictions where the failure
so to qualify would not have a Material Adverse Effect on Mesa. All
Significant Subsidiaries of Mesa and their respective jurisdictions of
incorporation or organization are identified on Schedule 3.2(a) of the Mesa
Disclosure Schedule. Mesa has heretofore delivered to Parker & Parsley
complete and correct copies of its Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws, each as amended to date.
(b) Capital Structure. As of the date hereof, the authorized capital
stock of Mesa consists of 600,000,000 shares of Mesa Common Stock and
500,000,000 shares of preferred stock, par value $.01 per share, of Mesa
("Mesa Preferred Stock"). At the close of business on December 31, 1996 (i)
64,279,568 shares of Mesa Common Stock were issued and outstanding; (ii)
3,000,000 and 9,000,000 shares of Mesa Common Stock were reserved for
issuance pursuant to Mesa's 1991 Stock Option Plan and 1996 Incentive Plan
(collectively, the "Mesa Stock Plans"), respectively; (iii) 6,079,350
shares of Mesa Common Stock were subject to issuance under outstanding
options under the Mesa Stock Plans; (iv) no shares of Mesa Common Stock
were held by Mesa in its treasury or by its wholly owned Subsidiaries; (v)
of the authorized shares of Mesa Preferred Stock, 140,000,000 were
designated as Mesa Series A Preferred Stock and 140,000,000 were designated
as Mesa Series B Preferred Stock, and 60,443,259 and 61,200,427 shares of
Mesa Series A Preferred Stock and Mesa Series B Preferred Stock,
respectively, were issued and outstanding; (vi) the shares of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock are convertible into
shares of Mesa Common Stock at the option of the holder thereof on a
one-for-one basis and shares of Mesa Series B Preferred Stock are
convertible into shares of Mesa Series A Preferred Stock at the option of
the holder thereof on a one-for-one basis; (vii) of the authorized shares
of Mesa Preferred Stock, 1,000,000 shares were designated Series A Junior
Participating Preferred Stock, no shares of which were issued and
outstanding; and (viii) no Voting Debt was issued and outstanding. All
outstanding shares of Mesa capital stock are validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth on
Schedule 3.2(b) of the Mesa Disclosure Schedule, all outstanding shares of
capital stock of the Subsidiaries of Mesa are owned by Mesa or a direct or
indirect wholly owned Subsidiary of Mesa, free and clear of all liens,
charges, encumbrances, claims and options of any nature. Except as set
forth in this Section 3.2(b) or on Schedule 3.2(b) of the Mesa Disclosure
Schedule, and except for changes since December 31, 1996 resulting from the
grant or exercise of stock options granted prior to the date hereof
pursuant to, or from issuances or purchases under, Mesa Stock Plans, or as
contemplated by this Agreement, there are outstanding: (i) no shares of
capital stock, Voting Debt or other voting securities of Mesa; (ii) no
securities of Mesa (other than the Mesa Series A Preferred Stock and Mesa
Series B Preferred Stock) or any Subsidiary of Mesa convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting
securities of Mesa or any Subsidiary of Mesa; and (iii) no options,
warrants, calls, rights (including preemptive rights), commitments or
agreements to which Mesa or any Subsidiary of Mesa is a party or by which
it is bound in any case obligating Mesa or any Subsidiary of Mesa to issue,
deliver, sell, purchase, redeem or acquire, or cause to be issued,
delivered, sold, purchased, redeemed or acquired, additional shares of
capital stock or any Voting Debt or other voting securities of Mesa or of
any Subsidiary of Mesa or obligating Mesa or any Subsidiary of Mesa to
grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. Except as contemplated by this Agreement, there
are not as of the date hereof and there will not be at the RM Effective
Time any stockholder agreements, voting trusts or other agreements or
understandings to which Mesa is a party or by which it is bound relating to
the voting of any shares of the capital stock of Mesa that will limit in
any way the solicitation of proxies by or on behalf of Mesa from, or the
casting of votes by, the stockholders of Mesa with respect to the
Reincorporation Merger. There are no restrictions on Mesa to vote the stock
of any of its Subsidiaries. As of the date hereof, the authorized capital
stock of MOC consists of 1,000 shares of common stock, par value $.01 per
share, 100 shares of which are validly issued, fully paid and nonassessable
and are owned by Mesa and the balance of which are not issued or
outstanding. As of the date hereof, the authorized capital stock of
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Pioneer consists of 1,000 shares of common stock, par value $.01 per share,
100 shares of which are validly issued, fully paid and nonassessable and
are owned by Mesa and the balance of which are not issued or outstanding.
When issued in accordance with this Agreement upon exercise of the Parker &
Parsley Stock Options (as defined in Section 5.10) and the Mesa Stock
Options (as defined in Section 5.10), in each case to be assumed pursuant
to the Mergers, the shares of New Common Stock and New Series A Preferred
Stock, if any, issued thereunder will be validly issued, fully paid and
nonassessable and not subject to preemptive rights. Mesa will seek
stockholder approval of the 1996 Incentive Plan at its stockholder meeting
referred to in Section 5.5 and pursuant to the Joint Proxy Statement.
(c) Authority; No Violations, Consents and Approvals.
(i) The Boards of Directors of Mesa, Pioneer and MOC have approved
the Mergers and this Agreement, and declared the Mergers and this
Agreement to be in the best interests of the stockholders of Mesa,
Pioneer and MOC, respectively. The directors of Mesa have advised Parker
& Parsley and Mesa that they intend to vote or cause to be voted all of
the shares of Mesa Common Stock beneficially owned by them and their
affiliates in favor of approval of the Reincorporation Merger and this
Agreement. Each of Mesa, Pioneer and MOC has all requisite corporate
power and authority to enter into this Agreement, subject with respect
to consummation of the Mergers, to approval of this Agreement and the
Mesa Merger by the stockholders of Mesa in accordance with the TBCA and
the Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws of Mesa, and to consummate the transactions contemplated
hereby (and subject to the amendment and restatement of the Certificate
of Incorporation of Pioneer as contemplated by Section 5.20 to provide
sufficient authorized capital to effect the Mergers). The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Mesa, Pioneer and MOC, subject, with respect to
the consummation of the Mergers, to approval of this Agreement and the
Reincorporation Merger by the stockholders of Mesa in accordance with
the TBCA and the Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws of Mesa (and subject to the amendment and
restatement of the Certificate of Incorporation of Pioneer as
contemplated by Section 5.20 to provide sufficient authorized capital to
effect the Mergers). This Agreement has been duly executed and delivered
by Mesa, Pioneer and MOC, subject with respect to consummation of the
Mergers, to approval of this Agreement and the Mesa Merger by the
stockholders of Mesa in accordance with the TBCA and the Amended and
Restated Articles of Incorporation and Amended and Restated Bylaws of
Mesa, and, assuming this Agreement constitutes the valid and binding
obligation of Parker & Parsley, constitutes a valid and binding
obligation of each of Mesa, Pioneer and MOC enforceable in accordance
with its terms, subject as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) Except as set forth on Schedule 3.2(c) of the Mesa Disclosure
Schedule, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with
the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of a material
benefit under, or give rise to a right of purchase under, result in the
creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of Mesa or any of its Subsidiaries under, or
otherwise result in a material detriment to Mesa or any of its
Subsidiaries under, any provision of (i) the Amended and Restated
Articles of Incorporation or Amended and Restated Bylaws of Mesa or any
provision of the comparable charter or organizational documents of any
of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Mesa or any of its
Subsidiaries, (iii) any joint venture or other ownership arrangement or
(iv) assuming the consents, approvals,
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authorizations or permits and filings or notifications referred to in
Section 3.2(c)(iii) are duly and timely obtained or made, any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Mesa or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights, liens, security interests,
charges, encumbrances or detriments that, individually or in the
aggregate, would not have a Material Adverse Effect on Mesa, materially
impair the ability of Mesa to perform its obligations hereunder or
thereunder or prevent the consummation of any of the transactions
contemplated hereby or thereby.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any
Governmental Entity is required by or with respect to Mesa or any of its
Subsidiaries in connection with the execution and delivery of this
Agreement by Mesa, Pioneer and MOC or the consummation by Mesa, Pioneer
and MOC of the transactions contemplated hereby, as to which the failure
to obtain or make would have a Material Adverse Effect on Mesa, except
for: (A) the filing of a premerger notification report by Mesa or its
ultimate parent under the HSR Act and the expiration or termination of
the applicable waiting period with respect thereto; (B) the filing with
the SEC of the Joint Proxy Statement, the S-4, such reports under
Section 13(a) of the Exchange Act and such other compliance with the
Securities Act and the Exchange Act and the rules and regulations
thereunder as may be required in connection with this Agreement and the
transactions contemplated hereby, and the obtaining from the SEC of such
orders as may be so required; (C) the filing of a Certificate of Merger
for each of the Parker & Parsley Merger and the Reincorporation Merger
with the Delaware Secretary of State and the filing of the Articles of
Merger for the Reincorporation Merger with the Texas Secretary of State;
(D) filings with, and approval of, the NYSE; (E) such filings and
approvals as may be required by any applicable state securities, "blue
sky" or takeover laws or environmental laws; (F) such filings and
approvals as may be required by any foreign premerger notification,
securities, corporate or other law, rule or regulation; and (G) any such
consent, approval, order, authorization, registration, declaration,
filing, or permit that the failure to obtain or make would not,
individually or in the aggregate, have a Material Adverse Effect on
Mesa, materially impair the ability of Mesa to perform its obligations
hereunder or prevent the consummation of any of the transactions
contemplated hereby.
(d) SEC Documents. Mesa has made available to Parker & Parsley a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Mesa with the SEC since December 31,
1995 and prior to or on the date of this Agreement (the "Mesa SEC
Documents"), which are all the documents (other than preliminary material)
that Mesa was required to file with the SEC between December 31, 1995 and
the date of this Agreement. As of their respective dates, the Mesa SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Mesa SEC Documents,
and none of the Mesa SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of Mesa included in the Mesa SEC Documents complied as to form
in all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of the unaudited statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present in
accordance with applicable requirements of GAAP (subject, in the case of
the unaudited statements, to normal, recurring adjustments, none of which
are material) the consolidated financial position of Mesa and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of Mesa and its
consolidated Subsidiaries for the periods presented therein. Except as
disclosed in the Mesa SEC Documents, there are no agreements, arrangements
or understandings between Mesa and any party who is at the date of this
Agreement or was at any time prior to the date hereof but after December
31, 1995 an Affiliate (as defined in Section 4.1(k)) of Mesa that are
required to be disclosed in the Mesa SEC Documents.
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(e) Information Supplied. None of the information supplied or to be
supplied by Mesa, Pioneer or MOC for inclusion or incorporation by
reference in the S-4 will, at the time the S-4 becomes effective under the
Securities Act or at the RM Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
none of the information supplied or to be supplied by Mesa, Pioneer or MOC
and included or incorporated by reference in the Joint Proxy Statement
will, at the date mailed to stockholders of Parker & Parsley or Mesa, as
the case may be, or at the time of the meeting of such stockholders to be
held in connection with the Mergers or at the RM Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the RM Effective Time any event with
respect to Mesa or any of its Subsidiaries, or with respect to other
information supplied by Mesa, Pioneer or MOC for inclusion in the Joint
Proxy Statement or the S-4, shall occur which is required to be described
in an amendment of, or a supplement to, the S-4 or the Joint Proxy
Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC. The Joint Proxy Statement,
insofar as it relates to Mesa, Pioneer or MOC or other Subsidiaries of Mesa
or other information supplied by Mesa, Pioneer or MOC for inclusion
therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
(f) Absence of Certain Changes or Events. Except as disclosed in, or
reflected in the financial statements included in, the Mesa SEC Documents,
or except as contemplated by this Agreement, since December 31, 1996 there
has not been: (i) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to
any of Mesa's capital stock, other than the declaration and payment of
regular quarterly pay-in-kind dividends at the required annual 8% rate per
share on the Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock, with usual record and payment dates for such dividends; (ii) any
amendment of any material term of any outstanding equity security of Mesa
or any Significant Subsidiary of Mesa; (iii) any repurchase, redemption or
other acquisition by Mesa or any Subsidiary of Mesa of any outstanding
shares of capital stock or other equity securities of, or other ownership
interests in, Mesa or any Subsidiary of Mesa, except as contemplated by the
Mesa Stock Plans; (iv) any material change in any method of accounting or
accounting practice or any tax method, practice or election by Mesa or any
Significant Subsidiary of Mesa; or (v) any other transaction, commitment,
dispute or other event or condition (financial or otherwise) of any
character (whether or not in the ordinary course of business) that is
reasonably likely to have a Material Adverse Effect on Mesa, except for
general economic changes and changes that may affect the industries of Mesa
or any of its Subsidiaries generally.
(g) No Undisclosed Material Liabilities. Except as set forth in the
Mesa SEC Documents, as of the date hereof, there are no liabilities of Mesa
or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, that are
reasonably likely to have a Material Adverse Effect on Mesa, other than:
(i) liabilities adequately provided for on the balance sheet of Mesa dated
as of December 31, 1996 (including the notes thereto) contained in Mesa's
Annual Report on Form 10-K for the year ended December 31, 1996; (ii)
liabilities incurred in the ordinary course of business subsequent to
December 31, 1996; and (iii) liabilities under this Agreement.
(h) No Default. Neither Mesa nor any of its Subsidiaries is in default
or violation (and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any term,
condition or provision of (i) the Amended and Restated Articles of
Incorporation or Amended and Restated Bylaws of Mesa or any provision of
the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license to which Mesa or any of its Subsidiaries is now a
party or by which Mesa or any of its Subsidiaries or any of their
respective properties or assets is bound (except for the requirement under
certain of such instruments to file supplemental indentures as a result of
the transactions contemplated hereby) or (iii) any order, writ, injunction,
decree, statute, rule or
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regulation applicable to Mesa or any of its Subsidiaries, except in the
case of (ii) and (iii) for defaults or violations which in the aggregate
would not have a Material Adverse Effect on Mesa.
(i) Compliance with Applicable Laws. Mesa and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders, franchises and
approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Mesa Permits"), except where the failure
so to hold would not have a Material Adverse Effect on Mesa. Mesa and its
Subsidiaries are in compliance with the terms of the Mesa Permits, except
where the failure so to comply would not have a Material Adverse Effect on
Mesa. Except as disclosed in the Mesa SEC Documents, the businesses of Mesa
and its Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for possible
violations which would not have a Material Adverse Effect on Mesa. As of
the date of this Agreement, no investigation or review by any Governmental
Entity with respect to Mesa or any of its Subsidiaries is pending and of
which Mesa has knowledge or, to the knowledge of Mesa as of the date
hereof, threatened, other than those the outcome of which would not have a
Material Adverse Effect on Mesa.
(j) Litigation. Except as disclosed in the Mesa SEC Documents or
Schedule 3.2(j) of the Mesa Disclosure Schedule, as of the date of this
Agreement there is no suit, action or proceeding pending, or, to the
knowledge of Mesa, threatened against or affecting Mesa or any Subsidiary
of Mesa ("Mesa Litigation"), and Mesa and its Subsidiaries have no
knowledge of any facts that are likely to give rise to any Mesa Litigation,
that (in any case) is reasonably likely to have a Material Adverse Effect
on Mesa, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Mesa or any
Subsidiary of Mesa ("Mesa Order") that is reasonably likely to have a
Material Adverse Effect on Mesa or its ability to consummate the
transactions contemplated by this Agreement. Schedule 3.2(j) of the Mesa
Disclosure Schedule contains an accurate and complete list of all suits,
actions and proceedings pending or, to the knowledge of Mesa, threatened
against or affecting Mesa or any of its Subsidiaries as of the date hereof.
(k) Taxes. Except as set forth on Schedule 3.2(k) of the Mesa
Disclosure Schedule:
(i) Each of Mesa, each of its Subsidiaries and any affiliated,
consolidated, combined, unitary or similar group of which Mesa or any of
its Subsidiaries is or was a member has (A) duly filed on a timely basis
(taking into account any extensions) all U.S. federal income Tax
Returns, and all other material Tax Returns required to be filed or sent
by or with respect to it, (B) duly paid or deposited on a timely basis
all Taxes (as hereinafter defined) that are shown to be due and payable
on or with respect to such Tax Returns, and all material Taxes that are
otherwise due and payable (except for audit adjustments not material in
the aggregate or to the extent that liability therefor is reserved for
in Mesa's most recent audited financial statements) for which Mesa or
any of its Subsidiaries may be liable, (C) established reserves that are
adequate for the payment of all material Taxes not yet due and payable
with respect to the results of operations of Mesa and its Subsidiaries
through the date hereof, and (D) complied in all material respects with
all applicable laws, rules and regulations relating to the reporting,
payment and withholding of Taxes that are required to be withheld from
payments to employees, independent contractors, creditors, shareholders
or any other third party and has in all material respects timely
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over.
(ii) Schedule 3.2(k) of the Mesa Disclosure Schedule sets forth (A)
the last taxable period through which the federal income Tax Returns of
Mesa and any of its Subsidiaries have been examined by the IRS or for
which the statute of limitations for assessment has otherwise closed and
(B) any affiliated, consolidated, combined, unitary or similar group or
Return in which Mesa or any of its Subsidiaries is or has been a member
or joins or has joined in the filing. Except to the extent being
contested in good faith, all material deficiencies asserted as a result
of such examinations and any examination by any applicable taxing
authority have been paid, fully settled or adequately provided for in
Mesa's most recent audited financial statements. Except as disclosed in
or adequately provided for in the Mesa SEC Documents or disclosed in
Schedule 3.2(k) of the Mesa Disclosure
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Schedule, no audits or other administrative proceedings or court
proceedings are presently pending, or to the knowledge of Mesa,
threatened, with regard to any Taxes for which Mesa or any of its
Subsidiaries would be liable, and no material deficiency for any Taxes
has been proposed, asserted or assessed (whether by examination report
or prior to completion of examination by means of notices of proposed
adjustment or other similar requests or notices) pursuant to such
examination against Mesa or any of its Subsidiaries by any taxing
authority with respect to any period.
(iii) Neither Mesa nor any of its Subsidiaries has executed or
entered into (or prior to the close of business on the Closing Date will
execute or enter into) with the IRS or any taxing authority (A) any
agreement or other document extending or having the effect of extending
the period for assessment or collection of any income or franchise Taxes
for which Mesa or any of its Subsidiaries would be liable or (B) a
closing agreement pursuant to Section 7121 of the Code or any similar
provision of state, local, foreign or other income tax law, which will
require any increase in taxable income or alternative minimum taxable
income, or any reduction in tax credits, for Mesa or any of its
Subsidiaries for any taxable period and after the Closing Date.
(iv) Except as set forth in the Mesa SEC Documents, neither Mesa
nor any of its Subsidiaries is a party to an agreement that provides for
the payment of any amount that would constitute a "parachute payment"
within the meaning of Section 280G of the Code or that would constitute
compensation whose deductibility is limited under Section 162(m) of the
Code.
(v) Except as set forth in the Mesa SEC Documents, neither Mesa nor
any of its Subsidiaries is a party to, is bound by or has any obligation
under any tax sharing or allocation agreement or similar agreement or
arrangement.
(vi) There are no requests for rulings or outstanding subpoenas
from any taxing authority for information with respect to Taxes of Mesa
or any of its Subsidiaries and, to the knowledge of Mesa, no material
reassessments (for property or ad valorem Tax purposes) of any assets or
any property owned or leased by Mesa or any of its Subsidiaries have
been proposed in written form.
(vii) Neither Mesa nor any of its Subsidiaries has agreed to make
any adjustment pursuant to section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method
of Mesa or any of its Subsidiaries, and neither Mesa nor any of its
Subsidiaries has any application pending with any taxing authority
requesting permission for any changes in any accounting method of Mesa
or any of its Subsidiaries. To the knowledge of Mesa, neither the IRS
nor any other taxing authority has proposed in writing, and neither Mesa
nor any of its Subsidiaries is otherwise required to make, any such
adjustment or change in accounting method.
(viii) There are no material excess loss accounts or deferred
intercompany transactions between Mesa and/or any of its Subsidiaries
within the meaning of Treas. Reg. Section 1.1502-13 or 1.1502-19,
respectively.
(l) Pension and Benefit Plans; ERISA. Except as set forth on Schedule
3.2(l) of the Mesa Disclosure Schedule or in the Mesa SEC Documents:
(i) All "employee pension plans," as defined in Section 3(2) of the
ERISA, maintained by Mesa or any of its Subsidiaries or any trade or
business (whether or not incorporated) which is under common control, or
which is treated as a single employer, with Mesa under Section 414(b),
(c), (m) or (o) of the Code ("Mesa ERISA Affiliate") or to which Mesa or
any of its Subsidiaries or any Mesa ERISA Affiliate contributed or is
obligated to contribute thereunder within six years prior to the RM
Effective Time (the "Mesa Pension Plans") intended to qualify under
Section 401 of the Code so qualify and the trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the
Code, and, to the knowledge of Mesa as of the date hereof, nothing has
occurred with respect to the operation of the Mesa Pension Plans that
could cause the loss of such qualification or exemption or the
imposition of any material liability, penalty, or tax under ERISA or the
Code.
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(ii) There has been no material "reportable event" as that term is
defined in Section 4043 of ERISA and the regulations thereunder with
respect to the Mesa Pension Plans subject to Title IV of ERISA that
would require the giving of notice or any material event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(iii) As to the Mesa Pension Plans subject to Title IV of ERISA,
there has been no event or condition which presents the material risk of
termination, no notice of intent to terminate has been given under
Section 4041 of ERISA and no proceeding has been instituted under
Section 4042 of ERISA to terminate, such that would result in a material
liability to Mesa, its Subsidiaries, or Mesa ERISA Affiliates; no
material liability to the PBGC has been incurred; no material
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred; and the assets of each Mesa Pension Plan equal or exceed the
actuarial present value of the benefit liabilities, within the meaning
of Section 4041 of ERISA, under such Mesa Pension Plan, based upon
reasonable actuarial assumptions and the asset valuation principles
established by the PBGC.
(iv) There is no violation of ERISA with respect to the filing of
applicable reports, documents, and notices regarding the "employee
benefit plans," as defined in Section 3(3) of ERISA and all other
material employee compensation and benefit arrangements or payroll
practices including, without limitation, severance pay, sick leave,
vacation pay, salary continuation for disability, consulting or other
compensation agreements, retirement, deferred compensation, bonus,
long-term incentive, stock option, stock purchase, hospitalization,
medical insurance, life insurance and scholarship programs maintained by
Mesa or any of its Subsidiaries or to which Mesa or any of its
Subsidiaries contributed or is obligated to contribute thereunder (all
such plans, other than the Mesa Pension Plans, being hereinafter
referred to as the "Mesa Employee Benefit Plans") or the Mesa Pension
Plans with the Secretary of Labor and the Secretary of the Treasury or
the furnishing of such documents to the participants or beneficiaries of
the Mesa Employee Benefit Plans or Mesa Pension Plans, which violation
is reasonably likely to have a Material Adverse Effect on Mesa.
(v) The Mesa Employee Benefit Plans and Mesa Pension Plans have
been maintained, in all material respects, in accordance with their
terms and with all provisions of ERISA (including rules and regulations
thereunder) and other applicable Federal and state law, there is no
material liability for breaches of fiduciary duty in connection with the
Mesa Employee Benefit Plans and Mesa Pension Plans, and neither Mesa nor
any of its Subsidiaries or any "party in interest" or "disqualified
person" with respect to the Mesa Employee Benefit Plans and Mesa Pension
Plans has engaged in a material "prohibited transaction" within the
meaning of Section 4975 of the Code or Section 406 of ERISA.
(vi) There are no material actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of Mesa,
threatened against, or with respect to, the Mesa Employee Benefit Plans
or Mesa Pension Plans or their assets.
(vii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (A) result in
any payment becoming due to any employee or group of employees of Mesa
or any of its Subsidiaries; (B) increase any benefits otherwise payable
under any Mesa Employee Benefit Plan or Mesa Pension Plan; or (C) result
in the acceleration of the time of payment or vesting of any such
benefits. Except as set forth on Schedule 3.2(l)(vii) of the Mesa
Disclosure Schedule, there are no severance agreements or employment
agreements between Mesa or any of its Subsidiaries and any employee of
Mesa or such Subsidiary. True and complete copies of all such severance
agreements and employment agreements have been provided to Parker &
Parsley.
(viii) Except as set forth on Schedule 3.2(l)(viii) of the Mesa
Disclosure Schedule, neither Mesa nor any of its Subsidiaries has any
consulting agreement or arrangement with any person involving
compensation in excess of $200,000, except as are terminable upon one
month's notice or less.
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(ix) Neither Mesa nor any of its Subsidiaries nor any Mesa ERISA
Affiliate contributes to, or has an obligation to contribute to, and has
not within six years prior to the RM Effective Time contributed to, or
had an obligation to contribute to, a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(x) No stock or other security issued by Mesa or any of its
Subsidiaries forms or has formed a material part of the assets of any
Mesa Employee Benefit Plan or Mesa Pension Plan.
(xi) Concerning each Mesa Pension Plan that is or has been subject
to the funding requirements of Title I, Subtitle B, Part 3 of ERISA, the
funding method used in connection with such plan is, and at all times
has been, acceptable under ERISA, each of the actuarial assumptions
employed in connection with determining the funding of each such plan
is, and at all times has been, reasonable and satisfies the requirements
of Section 412(c)(3) of the Code and Section 302(c)(3) of ERISA, and
Schedule 3.2(l)(xi) of the Mesa Disclosure Schedule sets forth as of
December 31, 1996, (A) the actuarially determined present value of all
Benefit Liabilities determined on an ongoing plan basis, employing in
making such determination the same actuarial assumptions as were used in
determining plan fundings for the most recently completed plan year
unless any such assumption is not reasonable, in which event such
assumption shall be changed to a reasonable assumption, (B) the
actuarially determined present value of all Benefit Liabilities under
each such Mesa Pension Plan employing in such determination the same
actuarial assumptions, except turnover assumptions, as were used in
determining plan funding for the most recently completed plan year
unless any such assumption is not reasonable, in which event such
assumption shall be changed to a reasonable assumption, (C) the fair
market value of the assets held to fund each such Mesa Pension Plan, (D)
the funding method used in connection with each such Mesa Pension Plan,
(E) identification of the amount and related plan with respect to which
there is or has been any "accumulated funding deficiency," as defined in
Section 302(a)(2) of ERISA, (F) the estimated amount of, together with
calculations showing how such amounts were determined, any premiums due
to the PBGC for the most recently completed and following five years,
(G) a demonstration showing how any minimum or maximum contributions,
including any contributions required by reason of a liquidity shortfall
within the meaning of Section 412(m)(5) of the Code or Section 302(e)(5)
of ERISA, to any such plans were arrived at for the most recently
completed year, together with an estimate for the following five years
based upon present law and actuarial assumptions and methodologies,
except where such assumptions or methodologies are required by law to be
changed with respect to a particular year, and (H) the date of any
change of any assumptions used to determine current liability of any
such plan, together with a demonstration that such change either (x)
received appropriate approvals under Section 412(c)(5) of the Code and
Section 302(c)(5) of ERISA or (y) that such approval was not necessary
by law; Schedule 3.2(l)(xi) sets forth a reasonable good faith estimate
of material changes between December 31, 1996 and the date hereof in the
value of benefits or plan assets described in the preceding clause (A),
(B) or (C); Schedule 3.2(l)(xi) of the Mesa Disclosure Schedule sets
forth the information described in Clauses (A), (B), (C), (D), (F), (G)
and (H) as of December 31, 1996, including a separate statement of
liabilities attributable to unpredictable contingent event benefits
within the meaning of Section 412(l)(7)(B)(ii) of the Code and Section
302(d)(7)(B)(ii) of ERISA; the sum of the amount of unfunded Benefit
Liabilities under all Mesa Pension Plans (excluding each such plan with
an amount of unfunded Benefit Liabilities of zero or less) is not more
than $5,000,000; all contributions required to be made by Section 515 of
ERISA by the Company or any affiliate to Mesa Pension Plans have been
timely made; with respect to any such Mesa Pension Plan and concerning
each Mesa Pension Plan which is in whole or in part an "individual
account plan" (as defined in Section 3(34) of ERISA), there is set forth
in Schedule 3.2(l)(xi) of the Mesa Disclosure Schedule (A) the amount of
any Mesa liability for contributions due or to become due with respect
to each such Mesa Pension Plan for periods up to the date hereof, and
the date any such amounts were paid and (B) the amount of any
contribution accrued or paid or expected to be accrued or paid with
respect to such Mesa Pension Plan for the plan year in which the Closing
Date occurs; with respect to any such Mesa Pension Plan, no such plan
has been terminated or subject to
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a "spin-off" or "spin-off termination" or partial termination and no
assets of any such plan have been used or employed in a manner so as to
subject them to an excise tax imposed under Section 4980 of the Code;
each such Mesa Pension Plan permits termination thereof, and
distribution of any assets in excess of those required to pay Benefit
Liabilities may be distributed to or for the benefit of Mesa or its
Affiliates and Section 4044(d) of ERISA would not prevent such
reversion; with respect to any such Mesa Pension Plan, any reduction in
benefits was preceded by an adequate and appropriate notice to the
parties described in and as required by Section 204(h) of ERISA; there
are no former employees or participants who are entitled to earn
additional pension benefits by reason of "grow in" or other rights with
respect to service or time periods after such employees have been
terminated from employment with Seller.
(xii) None of Mesa nor any of its Affiliates has incurred, by
reason of the transaction contemplated by this Agreement, or will incur,
any liability under Section 4062(e) of ERISA. Neither Mesa nor any of
its Affiliates is a participant in any plan to which Sections 4063 or
4064 of ERISA apply.
(xiii) Neither Mesa nor any of its Affiliates has engaged in any
transaction described under Section 4069 of ERISA nor can any lien be
imposed on any of Mesa, its Affiliates or any of their respective assets
under Section 4068 of ERISA.
(xiv) PBGC and Other Liabilities. Mesa and its Affiliates have
complied in all material respects with all requirements for premium
payments, including any interest and penalty charges for late payment,
due the PBGC with respect to each Mesa Pension Plan and each separate
plan year for which any premiums are required. Except as set forth in
Schedule 3.2(l)(xiv) of the Mesa Disclosure Schedule, and except for
transactions required by this Agreement, from the period commencing
January 1, 1990 through the Closing Date there has been no "reportable
event" (within the meaning of Section 4043(b) or (c) of ERISA and
regulations promulgated by the PBGC thereunder, Section 4062(e) of ERISA
or Section 4063(a) of ERISA) with respect to any Mesa Pension Plan
subject to Title IV of ERISA for which notice to the PBGC has not, by
rule or regulations, been waived. There is not any unsatisfied material
liability to the PBGC which has been incurred by Mesa or any Affiliate
on account of any Mesa Pension Plan subject to Title IV of ERISA. From
the period commencing January 1, 1990 through the Closing Date, no
filing has been or will be made by Mesa or any Affiliate with the PBGC
to terminate, nor has any proceeding been commenced by the PBGC to
terminate, any Mesa Pension Plan subject to Title IV of ERISA which was
maintained, or wholly or partially funded, by Mesa or any Affiliate.
Concerning both Mesa and any Affiliate (A) there has been no cessation
of operations at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA, (B) there has been no withdrawal of a
substantial employer from any Mesa Pension Plan so as to become subject
to the provisions of Section 4063 of ERISA, (C) there has been no
cessation of contributions on or before the Closing Date to any Mesa
Pension Plan subject to Section 4064(a) of ERISA to which Mesa or any
Affiliate has made contributions during the five calendar years prior to
the Closing Date, (D) there has been no complete or partial withdrawal
from a multiemployer plan (as defined in either Section 3(37) or Section
4001(a)(3) of ERISA) so as to incur withdrawal liability as defined in
Section 4201 of ERISA (without regard to any subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA), (E) no
employee pension benefit plan which is a multiemployer plan (as defined
in either Section 3(37) or Section 4001(a)(3) of ERISA) which Mesa or
any Affiliate maintains or contributes to is in "reorganization" (as
defined in Section 4241 of ERISA) or "insolvent" (as defined in Section
4245 of ERISA), (F) there is not now, nor can there ever be, any
liability under Section 4064 of ERISA to any of Mesa, RM Surviving
Corporation or Parker & Parsley by reason of participation in any Mesa
Pension Plan by Mesa or any Affiliate on or prior to the Closing Date,
(G) there has been no amendment to any Mesa Pension Plan that would
require the furnishing of security under Section 401(a)(29) of the Code
and (H) there has been no event or circumstance and there can be no
event or circumstance which has or may result in any liability being
asserted by any Mesa Pension Plan, the PBGC or any other person or
entity under Title IV of
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ERISA against Mesa or any Mesa Affiliate or Parker & Parsley or RM
Surviving Corporation. Neither Mesa nor any of its Affiliates has any
liability to any employee benefit plan for contributions under Section
412(m) of the Code or Section 302(e) of ERISA, nor has any lien been
imposed under Section 412(n) of the Code or Section 302(f) of ERISA nor
is there any liability for excise taxes imposed under Section 4971 of
the Code, and all liabilities arising under Section 412(c)(11) of the
Code with respect to contributions to any employee benefit plan have
been set forth in Schedule 3.2(l)(xiv) of the Mesa Disclosure Schedule;
any notices to the PBGC under Section 412(n) of the Code or Section
302(f) of ERISA have heretofore been delivered to Mesa; and copies of
any notices required to be given to participants under either Section
101(d) or Section 4011 of ERISA have previously been delivered to Mesa.
Except as described in Schedule 3.2(l)(xiv) of the Mesa Disclosure
Schedule, the PBGC has not communicated with Mesa, its Affiliates or any
of its agents or representatives concerning the transactions
contemplated by the Agreement, nor any other transactions implemented or
contemplated by Mesa or any of its Affiliates within the preceding five
calendar years.
(xv) Excess Assets or Benefits. Since January 1, 1990, Mesa has not
taken any action to vest any overfunded benefits in any employee benefit
plan in any of the participants thereunder. Upon the termination of any
Mesa Pension Plans, any excess assets (defined as the excess of plan
assets over the amounts required to fund all liabilities of the plan)
will be distributed to or for the benefit of the sponsor of the plan.
(xvi) Health Care Continuation Coverage. Mesa and its Affiliates
have materially complied with the requirements of Section 4980B of the
Code and Sections 601-608 of ERISA regarding continuation of health care
coverage notices and provision of appropriate health care coverage under
the Mesa Employee Benefit Plans.
(xvii) No Contribution to Multiemployer Plan. From and after the
Closing Date, neither Parker & Parsley nor Mesa nor RM Surviving
Corporation will be liable for contributions to any Mesa Pension Plan
that is a multiemployer plan within the meaning of either Section 3(37)
or Section 4001(a)(3) of ERISA except to the extent that Parker &
Parsley or Mesa or RM Surviving Corporation subsequently affirmatively
determines to undertake such contribution obligations.
(xviii) WARN Notices. Any notice under the Workers Adjustment
Retirement Act that has been required with respect to Mesa employees or
former employees or will be required by the transactions contemplated by
this Agreement has been, or will be, as the case may be, properly and
timely given by Mesa.
(xix) Certain Pension Deductions. RM Surviving Corporation will be
entitled to deduct on its Tax Returns for periods commencing on or after
the Closing Date any contributions to a Mesa Pension Plan or Mesa
Employee Benefit Plan made by Mesa on or before the Closing Date.
(xx) Worker's Compensation. Mesa and its Affiliates have maintained
worker's compensation coverage as required by applicable state law
through purchase of insurance and not by self-insurance or otherwise
except as disclosed to Parker & Parsley on Schedule 3.2(l)(xx) of the
Mesa Disclosure Schedule.
(xxi) Section 162(m) Deduction Limitations. No amount has been paid
by Mesa or any of its Affiliates, and no amount is expected to be paid
by Mesa or any of its Affiliates, which would be subject to the
provisions of 162(m) of the Code such that all or a part of such
payments would not be deductible by the payor.
(m) Labor Matters. Except as set forth on Schedule 3.2(m) of the Mesa
Disclosure Schedule or in the Mesa SEC Documents:
(i) neither Mesa nor any of its Subsidiaries is a party to any
collective bargaining agreement or other current labor agreement with
any labor union or organization, and there is no current union
representation question involving employees of Mesa or any of its
Subsidiaries, nor does Mesa or any
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of its Subsidiaries know of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or
representative thereof) to organize any such employees;
(ii) as of the date hereof, there is no unfair labor practice
charge or grievance arising out of a collective bargaining agreement or
other grievance procedure against Mesa or any of its Subsidiaries
pending, or, to the knowledge or Mesa or any of its Subsidiaries,
threatened, that has, or is reasonably likely to have, a Material
Adverse Effect on Mesa;
(iii) as of the date hereof, there is no complaint, lawsuit or
proceeding in any forum by or on behalf of any present or former
employee, any applicant for employment or any classes of the foregoing
alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship against Mesa or any of its Subsidiaries
pending, or, to the knowledge of Mesa or any of its Subsidiaries,
threatened, that has, or is reasonably likely to have, a Material
Adverse Effect on Mesa;
(iv) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the knowledge of Mesa or any of its
Subsidiaries, threatened, against or involving Mesa or any of its
Subsidiaries that has, or is reasonably likely to have, a Material
Adverse Effect on Mesa;
(v) Mesa and each of its Subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms
and conditions of employment, wages, hours of work and occupational
safety and health, except for non-compliance that does not have, and is
not reasonably likely to have, a Material Adverse Effect on Mesa; and
(vi) as of the date hereof, there is no proceeding, claim, suit,
action or governmental investigation pending or, to the knowledge of
Mesa or any of its Subsidiaries, threatened, in respect to which any
current or former director, officer, employee or agent of Mesa or any of
its Subsidiaries is or may be entitled to claim indemnification from
Mesa or any of its Subsidiaries pursuant to the Amended and Restated
Articles of Incorporation or Amended and Restated Bylaws of Mesa or any
provision of the comparable charter or organizational documents of any
of its Subsidiaries, as provided in any indemnification agreement to
which Mesa or any Subsidiary of Mesa is a party or pursuant to
applicable law that has, or is reasonably likely to have, a Material
Adverse Effect on Mesa.
(n) Intangible Property. Mesa and its Subsidiaries possess or have
adequate rights to use all material trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the
businesses of each of Mesa and its Subsidiaries (collectively, the "Mesa
Intangible Property"), except where the failure to possess or have adequate
rights to use such properties would not reasonably be expected to have a
Material Adverse Effect on Mesa. All of the Mesa Intangible Property is
owned or licensed by Mesa or its Subsidiaries free and clear of any and all
liens, claims or encumbrances, except those that are not reasonably likely
to have a Material Adverse Effect on Mesa and neither Mesa nor any such
Subsidiary has forfeited or otherwise relinquished any Mesa Intangible
Property which forfeiture would result in a Material Adverse Effect on
Mesa. To the knowledge of Mesa, the use of the Mesa Intangible Property by
Mesa or its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of
any right, title, interest or goodwill, including, without limitation, any
intellectual property right, trademark, trade name, patent, service mark,
brand mark, brand name, computer program, database, industrial design,
copyright or any pending application therefor of any other person and there
have been no claims made and neither Mesa nor any of its Subsidiaries has
received any notice of any claim or otherwise knows that any of the Mesa
Intangible Property is invalid or conflicts with the asserted rights of any
other person or has not been used or enforced or has failed to have been
used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Mesa Intangible Property,
except for any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that would not
reasonably be expected to have a Material Adverse Effect on Mesa.
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(o) Environmental Matters. Except as disclosed on Schedule 3.2(o) of
the Mesa Disclosure Schedule:
(i) The operations of Mesa and its Subsidiaries have been
conducted, are and, as of the Closing Date, will be, in compliance with
all Environmental Laws, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect on Mesa;
(ii) Mesa and its Subsidiaries have obtained and will maintain all
permits, licenses and registrations, or applications relating thereto,
and have made and will make all filings, reports and notices required
under applicable Environmental Laws for the continued operations of
their respective businesses, except such matters the lack or failure of
which would not reasonably be expected to lead to a Material Adverse
Effect on Mesa;
(iii) Mesa and its Subsidiaries are not subject to any outstanding
written orders issued by, or contracts with, any Governmental Entity or
other person respecting (A) Environmental Laws, (B) Remedial Action, (C)
any Release or threatened Release of a Hazardous Material or (D) an
assumption of responsibility for environmental liabilities of another
person, except such orders or contracts the compliance with which would
not reasonably be expected to have a Material Adverse Effect on Mesa;
(iv) Mesa and its Subsidiaries have not received any written
communication alleging, with respect to any such party, the violation of
or liability under any Environmental Law, which violation or liability
would reasonably be expected to have a Material Adverse Effect on Mesa;
(v) Neither Mesa nor any of its Subsidiaries has any contingent
liability in connection with the Release of any Hazardous Material into
the indoor or outdoor environment (whether on-site or off-site) or
employee or third party exposure to Hazardous Materials that would
reasonably be expected to lead to a Material Adverse Effect on Mesa;
(vi) The operations of Mesa or its Subsidiaries involving the
generation, transportation, treatment, storage or disposal of hazardous
or solid waste, as defined and regulated under 40 C.F.R. Parts 260-270
(in effect as of the date of this Agreement) or any applicable state
equivalent, are in compliance with applicable Environmental Laws, except
where the failure to so comply would not reasonably be expected to have
a Material Adverse Effect on Mesa; and
(vii) To the knowledge of Mesa, there is not now on or in any
property of Mesa or its Subsidiaries or any property for which Parker &
Parsley or its Subsidiaries is potentially liable any of the following:
(A) any underground storage tanks or surface impoundments or (B) any
on-site disposal of Hazardous Material, any of which ((A) or (B)
preceding) could reasonably be expected to have a Material Adverse
Effect on Mesa.
(p) Insurance. Schedule 3.2(p) of the Mesa Disclosure Statement sets
forth an insurance schedule of Mesa's and each of its Subsidiaries'
directors' and officers' liability insurance, primary and excess casualty
insurance policies, providing coverage for bodily injury and property
damage to third parties, including products liability and completed
operations coverage, and worker's compensation, in effect as of the date
hereof. Mesa maintains insurance in such amounts and covering such risks as
are in accordance with normal industry practice for companies engaged in
businesses similar to those of Mesa and each of its Subsidiaries (taking
into account the cost and availability of such insurance).
(q) Opinion of Financial Advisor. The Board of Directors of Mesa has
received the opinion dated April 4, 1997 of (i) Merrill Lynch & Co.
addressed to such Board (a copy of which has been provided to Parker &
Parsley for information purposes only) that, as of such date, the Mesa
Conversion Number and the Parker & Parsley Conversion Number are fair from
a financial point of view to the holders of Mesa Common Stock, (ii) Merrill
Lynch & Co. addressed to such Board (a copy of which has been provided to
Parker & Parsley for information purposes only) that, as of such date, the
Mesa Common Consideration is fair from a financial point of view to the
holders of Mesa Common Stock, and (iii) Morgan Stanley & Co Incorporated
addressed to such Board (a copy of which has been provided to
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Parker & Parsley for information purposes only) that, as of such date, the
Mesa Common Consideration and the Mesa Preferred Consideration are fair
from a financial point of view to the holders of Mesa Series A Preferred
Stock. Parker & Parsley acknowledges and agrees that it may not, and is not
entitled to, rely on the opinions of Merrill Lynch & Co. or Morgan Stanley
& Co. Incorporated delivered to the Mesa Board of Directors.
(r) Vote. Subject to Section 5.5, Mesa intends to seek, at the Mesa
stockholders meeting referred to in Section 5.5, the affirmative vote of
the holders of (i) a majority of the outstanding shares of Mesa Common
Stock, voting as a separate class, (ii) a majority of the outstanding
shares of Mesa Series A Preferred Stock and Mesa Series B Preferred Stock,
voting as a single class, (iii) a majority of the outstanding shares of
Mesa Common Stock, Mesa Series A Preferred Stock and Mesa Series B
Preferred Stock, voting as a single class (in each case with shares of Mesa
Series A Preferred Stock and Mesa Series B Preferred Stock having one vote
per share, on an as converted basis), (iv) a majority of the outstanding
shares of Mesa Series A Preferred Stock, voting as a separate class (the
"Series A Approval"), and (v) a majority of the outstanding shares of Mesa
Series B Preferred Stock, voting as a separate class (the "Series B
Approval"). There are no approvals required of the holders of any class or
series of Mesa capital stock necessary to approve this Agreement and the
transactions contemplated hereby other than as set forth in the preceding
sentence. Mesa also intends to seek stockholder approval of its 1996
Incentive Plan at such meeting.
(s) Beneficial Ownership of Parker & Parsley Common Stock. As of the
date hereof, neither Mesa nor its Subsidiaries beneficially owns any of the
outstanding Parker & Parsley Common Stock.
(t) Brokers. Except for the fees and expenses payable to Merrill Lynch
& Co. and Morgan Stanley & Co. Incorporated, which fees are reflected in
their respective engagement letters with Mesa (copies of which have been
delivered to Parker & Parsley), no broker, investment banker or other
person is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Mesa.
(u) Interim Operations of Pioneer and MOC. Pioneer was formed by Mesa
solely for the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business or activities, has incurred no other
obligations or liabilities, has no other assets and has conducted its
operations only as contemplated hereby. All of the outstanding capital
stock of Pioneer and MOC is owned directly by Mesa.
(v) Tax Matters. The representations in the form of Officer's
Certificate of Purchaser included as Schedule 3.2(v) of the Mesa Disclosure
Schedule are true and correct in all material respects, assuming for
purposes of this representation and warranty that the Mergers had been
consummated on the date and in accordance with the terms hereof.
ARTICLE IV
COVENANTS RELATING TO CONDUCT
OF BUSINESS PENDING THE MERGER
4.1 Conduct of Business by Parker & Parsley and Mesa Pending the
Merger. Prior to the SM or RM Effective Time, as applicable, (i) Parker &
Parsley agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, or to the extent that Mesa shall
otherwise consent in writing) and (ii) Mesa agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Parker & Parsley shall otherwise consent in
writing) (for purposes of this Section 4.1 Parker & Parsley and Mesa each being
a "Party"):
(a) Ordinary Course. Each Party and its Subsidiaries shall carry on
its businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and shall use all commercially
reasonable efforts to preserve intact its present business organizations,
keep available the services of its current officers and employees, subject
in the case of Parker & Parsley to Section 5.9, and
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endeavor to preserve its relationships with customers, suppliers and others
having business dealings with it to the end that its goodwill and ongoing
business shall not be impaired in any material respect at the SM or RM
Effective Time, as applicable.
(b) Dividends; Changes in Stock. Except as contemplated by this
Agreement and for transactions solely among a Party and its Subsidiaries, a
Party shall not and it shall not permit any of its Subsidiaries to: (i)
declare or pay any dividends on or make other distributions in respect of
any of its capital stock or partnership interests, except (x) in the case
of Parker & Parsley, for the declaration and payment of regular cash
dividends with respect to Parker & Parsley's first and third fiscal
quarters not in excess of $.05 per share of Parker & Parsley Common Stock
with usual record and payment dates, regular monthly cash dividends on the
MIPS paid by Parker & Parsley LLC in accordance with their terms and
dividends from a Subsidiary of Parker & Parsley to Parker & Parsley or
another Subsidiary of Parker & Parsley and (y) in the case of Mesa, for the
declaration and payment of regular quarterly payment-in-kind dividends with
respect to the Mesa Series A Preferred Stock and Mesa Series B Preferred
Stock in accordance with their terms, upon the conversion of Mesa Series A
Preferred Stock and Mesa Series B Preferred Stock into Mesa Common Stock
and/or Mesa Series A Preferred Stock, as the case may be, in accordance
with their terms, and dividends from a Subsidiary of Mesa to Mesa or
another Subsidiary of Mesa; (ii) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of such
Party's capital stock; or (iii) repurchase, redeem or otherwise acquire, or
permit any of its Subsidiaries to purchase, redeem or otherwise acquire,
any shares of its capital stock, except as required by the terms of its
securities outstanding on the date hereof or as contemplated by any
existing employee benefit plan and except that Parker & Parsley Capital LLC
may redeem the MIPS for cash and/or Parker & Parsley may cause the exchange
of the MIPS for Parker & Parsley Common Stock, in each case in accordance
with the terms of the MIPS.
(c) Issuance of Securities. A Party shall not and it shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose
to issue, deliver or sell, any shares of its capital stock of any class,
any Voting Debt or other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
Voting Debt, other voting securities or convertible securities, other than:
(i) in the case of Parker & Parsley, (x) the issuance of Parker & Parsley
Common Stock and accompanying Parker & Parsley Rights upon the exercise of
stock options granted under the Parker & Parsley Stock Plans that are
outstanding on the date hereof, or in satisfaction of stock grants or stock
based awards made prior to the date hereof pursuant to the Parker & Parsley
Stock Plans, (y) issuances by a wholly owned Subsidiary of Parker & Parsley
of such Subsidiary's capital stock to its parent, and (z) the issuance of
Parker & Parsley Series A Preferred Stock or Parker & Parsley Common Stock
upon the exchange of the MIPS in accordance with their terms and the
issuance of Parker & Parsley Common Stock upon the conversion of the Parker
& Parsley Series A Preferred Stock in accordance with its terms; and (ii)
in the case of Mesa (x) the issuance of Mesa Common Stock upon the exercise
of stock options granted under the Mesa Stock Plans that are outstanding on
the date hereof, or in satisfaction of stock grants or stock based awards
made prior to the date hereof pursuant to Mesa Stock Plans, (y) issuances
by a wholly owned subsidiary of Mesa of such Subsidiary's capital stock to
its parent and (z) issuances upon the conversion of Mesa Series A Preferred
Stock and Mesa Series B Preferred Stock into Mesa Common Stock and/or Mesa
Series A Preferred Stock, as the case may be, in accordance with their
terms.
(d) Governing Documents. Except as contemplated hereby or in
connection herewith, no Party shall amend or propose to amend its
certificate or articles of incorporation or bylaws.
(e) No Acquisitions. A Party shall not, and it shall not permit any of
its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or any of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, other than (i) in the case of Parker & Parsley, the acquisitions
described on Schedule 4.1(e) of the Parker & Parsley Disclosure Schedule or
any such acquisition or acquisitions having a purchase price not exceeding
$50,000,000 in the aggregate; and (ii) in the case of
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Mesa, the acquisition of Greenhill Petroleum Corporation and certain
federal leases in the Gulf of Mexico as described in the Mesa SEC Documents
or any such acquisition or acquisitions having a purchase price not
exceeding $50,000,000 in the aggregate.
(f) No Dispositions. Other than: (i) as may be necessary or required
by law to consummate the transactions contemplated hereby or (ii) sales,
leases, encumbrances or other dispositions in the ordinary course of
business consistent with past practice that are not material, individually
or in the aggregate, to a Party and its Subsidiaries taken as a whole, a
Party shall not, and it shall not permit any of its Subsidiaries to, sell,
lease, encumber or otherwise dispose of, or agree to sell, lease (whether
such lease is an operating or capital lease), encumber or otherwise dispose
of, any of its material assets, except in the case of Mesa, for
encumbrances related to the increase in Mesa's bank credit facility as
described in the Mesa SEC Documents.
(g) No Dissolution, Etc. Except as otherwise permitted or contemplated
by this Agreement, neither Party shall authorize, recommend, propose or
announce an intention to adopt a plan of complete or partial liquidation or
dissolution of such Party or any of its Significant Subsidiaries.
(h) Accounting. Neither Party shall, nor shall either Party permit any
of its Subsidiaries to, make any changes in their accounting methods which
would be required to be disclosed under the rules and regulations of the
SEC, except as required by law, rule, regulation or GAAP.
(i) Affiliate Transactions. Neither Party shall, nor shall either
Party permit any of its Subsidiaries to, enter into any agreement or
arrangement with any of their respective Affiliates (as such term is
defined in Rule 405 under the Securities Act, an "Affiliate"), other than
with wholly owned Subsidiaries of such Party, on terms less favorable to
such Party or such Subsidiary, as the case may be, than could be reasonably
expected to have been obtained with an unaffiliated third party on an
arm's-length basis.
(j) Insurance. Each Party shall, and shall cause its Subsidiaries to,
use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance in such amounts and against such
risks and losses as are customary for companies engaged in their respective
businesses.
(k) Tax Matters. Neither Party shall (i) make or rescind any material
express or deemed election relating to Taxes unless it is reasonably
expected that such action will not materially and adversely affect Parker &
Parsley or Mesa, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or other
investments where Parker & Parsley or Mesa, as appropriate, has the
capacity to make such binding election, (ii) settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, except where such
settlement or compromise will not materially and adversely affect Parker &
Parsley or Mesa, or (iii) change in any material respect any of its methods
of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income Tax Returns that
have been filed for prior taxable years, except as may be required by
applicable law or except for changes that are reasonably expected not to
materially and adversely affect Parker & Parsley or Mesa.
(l) Certain Employee Matters. Except pursuant to Section 5.9, a Party
shall not and it shall not permit any of its Subsidiaries to: (i) grant any
increases in the compensation of any of its directors, officers or
employees, except increases to employees who are not directors or officers
made in the ordinary course of business and in accordance with past
practice; (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required or contemplated by any of
the existing Parker & Parsley Employee Benefit Plans or Parker & Parsley
Pension Plans or Mesa Employee Benefit Plans or Mesa Pension Plans, as
applicable, in each case as in effect on the date hereof to any such
director, officer or employee, whether past or present; (iii) amend or
modify in any material respect or receive any assets from the Parker &
Parsley Pension Plan; (iv) enter into any new, or amend any existing,
material employment or severance or termination agreement with any
director, officer or employee; (v) grant any options or other awards under
the Parker & Parsley Stock Plans or Mesa Stock Plans, as applicable; or
(vi) become obligated under any new Parker & Parsley Employee Benefit Plan
or Parker & Parsley Pension Plan, or any new Mesa Employee Benefit Plan or
Mesa Pension Plan, which
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was not in existence or approved by the Board of Directors of Parker &
Parsley or Mesa, as applicable, prior to the date hereof, or amend any such
plan or arrangement in existence on the date hereof if such amendment would
have the effect of materially enhancing any benefits thereunder.
(m) Indebtedness; Leases; Capital Expenditures. No Party shall, nor
shall any Party permit any of its Subsidiaries to, (i) incur any
indebtedness for borrowed money (except (x) to finance any transactions or
capital or other expenditures permitted by this Agreement (including those
referred to in Section 4.1(e)) and regular borrowings under credit
facilities made in the ordinary course of such Party's cash management
practices, (y) refinancings of existing debt and (z) immaterial borrowings
that, in each such case, permit prepayment of such debt without penalty
(other than LIBOR breakage costs)) or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any debt
securities of such Party or any of its Subsidiaries or guarantee any debt
securities of others, (ii) except in the ordinary course of business, enter
into any material lease (whether such lease is an operating or capital
lease) or create any material mortgages, liens, security interests or other
encumbrances on the property of such Party or any of its Subsidiaries in
connection with any indebtedness thereof, or (iii) make or commit to make
aggregate capital expenditures not described in the Parker & Parsley SEC
Documents or Mesa SEC Documents in excess, in the case of each of Parker &
Parsley and Mesa, of an amount equal to the sum of (A) capital expenditures
budgeted by such Party for the fiscal year ending December 31, 1997 as set
forth in the capital expenditure budgets delivered to the other Party, less
any budgeted capital expenditures expended prior to the date of this
Agreement, plus (B) capital expenditures (not otherwise included in
budgeted capital expenditures) that may be incurred in connection with the
acquisitions by Parker & Parsley and Mesa, as applicable, permitted under
Section 4.1(e).
(n) Agreements. No Party shall, nor shall any Party permit any of its
Subsidiaries to, agree in writing or otherwise to take any action
inconsistent with any of the foregoing.
4.2 No Solicitation by Parker & Parsley.
(a) From and after the date hereof, Parker & Parsley will not, and will not
authorize or (to the extent within its control) permit any of its officers,
directors, employees, agents, Affiliates and other representatives or those of
any of its Subsidiaries (collectively, "Parker & Parsley Representatives") to,
directly or indirectly, solicit or encourage (including by way of providing
information) any prospective acquiror or the invitation or submission of any
inquiries, proposals or offers or any other efforts or attempts that constitute,
or may reasonably be expected to lead to, any Parker & Parsley Acquisition
Proposal (as hereinafter defined) from any person or engage in any discussions
or negotiations with respect thereto or otherwise cooperate with or assist or
participate in, or facilitate any such proposal; provided, however, that,
notwithstanding any other provision of this Agreement, (i) Parker & Parsley's
Board of Directors may take and disclose to the stockholders of Parker & Parsley
a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act and
(ii) following receipt from a third party (without any solicitation, initiation
or encouragement, directly or indirectly, by Parker & Parsley or any Parker &
Parsley Representatives) of a bona fide Parker & Parsley Acquisition Proposal,
(x) Parker & Parsley may engage in discussions or negotiations with such third
party and may furnish such third party information concerning it, and its
business, properties and assets if such third party executes a confidentiality
agreement in reasonably customary form and (y) the Board of Directors of Parker
& Parsley may withdraw, modify or not make its recommendation referred to in
Section 5.5 or terminate this Agreement in accordance with Section 7.1(g), but
in each case referred to in the foregoing clauses (i) and (ii), only to the
extent that Parker & Parsley's Board of Directors shall conclude in good faith
based on the advice of Parker & Parsley's outside counsel that such action is
necessary in order for Parker & Parsley's Board of Directors to act in a manner
that is consistent with its fiduciary obligations under applicable law.
(b) Parker & Parsley shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by Parker & Parsley or any
Parker & Parsley Representatives with respect to any Parker & Parsley
Acquisition Proposal existing on the date hereof.
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(c) Prior to taking any action referred to in Section 4.2(a), if Parker &
Parsley intends to participate in any such discussions or negotiations or
provide any such information to any such third party, Parker & Parsley shall
give reasonable prior notice to Mesa of each such action. Parker & Parsley will
promptly notify Mesa of any such requests for such information or the receipt of
any Parker & Parsley Acquisition Proposal, including the identity of the person
or group engaging in such discussions or negotiations, requesting such
information or making such Parker & Parsley Acquisition Proposal, and the
material terms and conditions of any Parker & Parsley Acquisition Proposal
(provided, however, that Parker & Parsley shall not be required to identify such
person or group or disclose such terms or conditions to Mesa until the beginning
of the one week period referred to in Section 7.1(g), if Parker & Parsley
determines that such identification or disclosure prior to such time would
impair such discussions or negotiations).
(d) Nothing in this Section 4.2 shall permit Parker & Parsley to enter into
any agreement with respect to any Parker & Parsley Acquisition Proposal during
the term of this Agreement (it being agreed that during the term of this
Agreement, Parker & Parsley shall not enter into any agreement with any person
that provides for, or in any way facilitates, any Parker & Parsley Acquisition
Proposal other than a confidentiality agreement in the form referred to above).
(e) As used in this Agreement, "Parker & Parsley Acquisition Proposal"
means any proposal or offer, other than a proposal or offer by Mesa or any of
its Affiliates, for, or that could be reasonably expected to lead to, a tender
or exchange offer, a merger, consolidation or other business combination
involving Parker & Parsley or any of its Significant Subsidiaries or any
proposal to acquire in any manner a substantial equity interest in, or any
substantial portion of the assets of, Parker & Parsley or any of its Significant
Subsidiaries.
4.3 No Solicitation by Mesa.
(a) From and after the date hereof, Mesa will not, and will not authorize
or (to the extent within its control) permit any of its officers, directors,
employees, agents, Affiliates and other representatives or those of any of its
Subsidiaries (collectively, "Mesa Representatives") to, directly or indirectly,
solicit or encourage (including by way of providing information) any prospective
acquiror or the invitation or submission of any inquiries, proposals or offers
or any other efforts or attempts that constitute, or may reasonably be expected
to lead to, any Mesa Acquisition Proposal (as hereinafter defined) from any
person or engage in any discussions or negotiations with respect thereto or
otherwise cooperate with or assist or participate in, or facilitate any such
proposal; provided, however, that, notwithstanding any other provision of this
Agreement, (i) Mesa's Board of Directors may take and disclose to the
stockholders of Mesa a position contemplated by Rule 14e-2(a) promulgated under
the Exchange Act and (ii) following receipt from a third party (without any
solicitation, initiation or encouragement, directly or indirectly, by Mesa or
any Mesa Representatives) of a bona fide Mesa Acquisition Proposal, (x) Mesa may
engage in discussions or negotiations with such third party and may furnish such
third party information concerning it, and its business, properties and assets
if such third party executes a confidentiality agreement in reasonably customary
form and (y) the Board of Directors of Mesa may withdraw, modify or not make its
recommendation referred to in Section 5.5 or terminate this Agreement in
accordance with Section 7.1(i), but in each case referred to in the foregoing
clauses (i) and (ii), only to the extent that Mesa's Board of Directors shall
conclude in good faith based on the advice of Mesa's outside counsel that such
action is necessary in order for Mesa's Board of Directors to act in a manner
that is consistent with its fiduciary obligations under applicable law.
(b) Mesa shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Mesa or any Mesa Representatives with
respect to any Mesa Acquisition Proposal existing on the date hereof.
(c) Prior to taking any action referred to in Section 4.3(a), if Mesa
intends to participate in any such discussions or negotiations or provide any
such information to any such third party, Mesa shall give reasonable prior
notice to Parker & Parsley of each such action. Mesa will promptly notify Parker
& Parsley of any such requests for such information or the receipt of any Mesa
Acquisition Proposal, including the identity of the person or group engaging in
such discussions or negotiations, requesting such information or making such
Mesa Acquisition Proposal, and the material terms and conditions of any Mesa
Acquisition Proposal (provided, however, that Mesa shall not be required to
identify such person or group nor disclose such terms or
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conditions to Parker & Parsley until the beginning of the one week period
referred to Section 7.1(i), if Mesa determines that such identification or
disclosure prior to such time would impair such discussions or negotiations).
(d) Nothing in this Section 4.3 shall permit Mesa to enter into any
agreement with respect to any Mesa Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, Mesa shall
not enter into any agreement with any person that provides for, or in any way
facilitates, any Mesa Acquisition Proposal other than a confidentiality
agreement in the form referred to above).
(e) As used in this Agreement, "Mesa Acquisition Proposal" means any
proposal or offer, other than a proposal or offer by Parker & Parsley or any of
its Affiliates, for, or that could be reasonably expected to lead to, a tender
or exchange offer, a merger, consolidation or other business combination
involving Mesa or any of its Significant Subsidiaries or any proposal to acquire
in any manner a substantial equity interest in, or any substantial portion of
the assets of, Mesa or any of its Significant Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of S-4 and the Joint Proxy Statement. Mesa, Pioneer and
Parker & Parsley shall promptly prepare and file with the SEC the Joint Proxy
Statement and Mesa, Pioneer and Parker & Parsley shall prepare, and Pioneer will
file with the SEC, the S-4 in which the Joint Proxy Statement will be included
as a prospectus. Each of Mesa, Pioneer and Parker & Parsley shall use its
reasonable best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing. Each of Mesa and Parker &
Parsley shall use its reasonable best efforts to cause the Joint Proxy Statement
to be mailed to their respective stockholders at the earliest practicable date.
Each of Mesa and Pioneer shall use its reasonable best efforts to obtain all
necessary state securities laws or "blue sky" permits, approvals and
registrations in connection with the issuance of New Common Stock in the Mergers
and upon the exercise of Parker & Parsley Stock Options (as defined in Section
5.10) and Mesa Stock Options (as defined in Section 5.10) and each of Mesa and
Parker & Parsley shall furnish all information concerning Mesa and Parker &
Parsley and its respective stockholders as may be reasonably requested in
connection with obtaining such permits, approvals and registrations.
5.2 Letter of Parker & Parsley's Accountants. Parker & Parsley shall use
its reasonable best efforts to cause to be delivered to Mesa a letter of KPMG
Peat Marwick LLP, Parker & Parsley's independent public accountants, dated a
date within two business days before the date on which the S-4 shall become
effective and addressed to Mesa, Pioneer and Parker & Parsley, in form and
substance reasonably satisfactory to Mesa and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.3 Letter of Mesa's Accountants. Mesa shall use its reasonable best
efforts to cause to be delivered to Parker & Parsley a letter of Arthur Andersen
LLP, Mesa's independent public accountants, dated a date within two business
days before the date on which the S-4 shall become effective and addressed to
Mesa, Pioneer and Parker & Parsley, in form and substance reasonably
satisfactory to Parker & Parsley and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the S-4.
5.4 Access to Information. Upon reasonable notice, Mesa and Parker &
Parsley, as the case may be, shall (and shall cause each of their respective
Subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of the others, access, during normal business hours during
the period prior to the RM Effective Time, to all its properties, books,
contracts, commitments and records, as well as to its officers and employees
(provided that neither Mesa nor Parker & Parsley shall contact any officer or
employee of the other party without first inquiring of the other party as to
whether the officer and employee to be contacted has been advised of the
pendency of the transactions contemplated by this Agreement) and, during such
period, each of Mesa and Parker & Parsley, as the case may be, shall (and shall
cause each of their
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respective Subsidiaries to) furnish promptly to the others (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each of Mesa and Parker & Parsley agrees that it will not,
and will cause its respective representatives not to, use any information
obtained pursuant to this Section 5.4 for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. The
Confidentiality Agreement dated as of October 1, 1996 between Mesa and Parker &
Parsley (the "Confidentiality Agreement") shall apply with respect to
information furnished thereunder or hereunder and any other activities
contemplated thereby.
5.5 Stockholders Meetings. Each of Parker & Parsley and Mesa shall call a
meeting of its stockholders to be held as promptly as practicable after the date
hereof for the purpose of voting upon (i) in the case of Parker & Parsley, this
Agreement and the Parker & Parsley Merger and (ii) in the case of Mesa, this
Agreement and the Reincorporation Merger. Subject to the fiduciary duties of its
respective Board of Directors, each of Parker & Parsley and Mesa, will, through
its Board of Directors, recommend to its stockholders approval of such matters
and not rescind such recommendation and shall use its reasonable best efforts to
obtain (i) in the case of Parker & Parsley, approval and adoption of this
Agreement and the Parker & Parsley Merger by its stockholders and (ii) in the
case of Mesa, approval and adoption of this Agreement and the Reincorporation
Merger by its stockholders. Each of Parker & Parsley and Mesa shall use all
commercially reasonable efforts to hold such meetings on the same date and as
soon as practicable after the date upon which the S-4 becomes effective.
5.6 HSR and Other Approvals.
(a) HSR Act. Each party hereto shall file or cause to be filed with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") any notification required to be
filed by their respective "ultimate parent" companies under the HSR Act and the
rules and regulations promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all commercially reasonable efforts
to make such filings promptly and to respond on a timely basis to any requests
for additional information made by either of such agencies. Each of the parties
hereto agrees to furnish the others with copies of all correspondence, filings
and communications (and memoranda setting forth the substance thereof) between
it and its Affiliates and their respective representatives, on the one hand, and
the FTC, the Antitrust Division or any other Governmental Entity or members or
their respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby, other than personal financial information
filed therewith. Each party hereto agrees to furnish the others with such
necessary information and reasonable assistance as such other parties and their
respective affiliates may reasonably request in connection with their
preparation of necessary filings, registrations or submissions of information to
any Governmental Entities, including without limitation any filings necessary
under the provisions of the HSR Act. Mesa and Parker & Parsley will each pay 50%
of the applicable filing fee under the HSR Act relating to the Mergers.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and use
its reasonable best efforts to promptly prepare and file all necessary
documentation to effect all necessary applications, notices, petitions, filings
and other documents, and use all commercially reasonable efforts to obtain (and
will cooperate with each other in obtaining) any consent, acquiescence,
authorization, order or approval of, or any exemption or nonopposition by, any
Governmental Entity required to be obtained or made by Mesa or Parker & Parsley
or any of their respective Subsidiaries in connection with the Mergers or the
taking of any action contemplated thereby or by this Agreement.
5.7 Agreements of Rule 145 Affiliates. Prior to the RM Effective Time,
Parker & Parsley shall cause to be prepared and delivered to Mesa, and Mesa
shall cause to be prepared and delivered to Parker & Parsley, a list identifying
all persons who, at the time of the Parker & Parsley or Mesa stockholder
meeting, as applicable, may be deemed to be "affiliates" of Parker & Parsley or
Mesa, as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Rule 145 Affiliates"). Parker & Parsley shall use its
reasonable best efforts to cause each person who is identified as a Rule 145
Affiliate in such Parker & Parsley list to deliver to Mesa and Pioneer, at or
prior to the RM Effective Time, a written agreement, in form and
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substance agreeable to Mesa and Parker & Parsley, that such Rule 145 Affiliate
will not sell, pledge, transfer or otherwise dispose of any shares of New Common
Stock issued to such Rule 145 Affiliate pursuant to the Parker & Parsley Merger,
except pursuant to an effective registration statement or in compliance with
Rule 145 or an exemption from the registration requirements of the Securities
Act. Parker & Parsley and the Rule 145 Affiliates shall be relieved of this
obligation under the foregoing provisions of this Section 5.7 and such written
agreements if, and to the extent, such Rule 145 is amended not to require such
written agreements or any of the covenants contained therein. Mesa shall use its
reasonable best efforts to cause each person who is identified as a Rule 145
Affiliate in such Mesa list to deliver to Mesa and Pioneer, at or prior to the
RM Effective Time, a written agreement, in form and substance agreeable to Mesa
and Parker & Parsley, that such Rule 145 Affiliate will not sell, pledge,
transfer or otherwise dispose of any shares of New Common Stock or New Series A
Preferred Stock issued to such Rule 145 Affiliate pursuant to the
Reincorporation Merger, except pursuant to an effective registration statement
or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act. Mesa and the Rule 145 Affiliates shall be
relieved of this obligation under the foregoing provisions of this Section 5.7
and such written agreements if, and to the extent, such Rule 145 is amended not
to require such written agreements or any of the covenants contained therein.
5.8 Authorization for Shares and Stock Exchange Listing. Prior to the RM
Effective Time, Mesa and Pioneer shall have taken all action necessary to permit
Pioneer to issue the number of shares of New Common Stock and New Series A
Preferred Stock, if any, required to be issued pursuant to Sections 2.1 and 2.2.
Each of Mesa and Pioneer shall use its commercially reasonable efforts to cause
the shares of New Common Stock and New Series A Preferred Stock, if any, to be
issued in the Mergers and the shares of New Common Stock to be reserved for
issuance upon exercise of Parker & Parsley Stock Options and Mesa Stock Options
and issuances under the Parker & Parsley Stock Plans and Mesa Stock Plans to be
approved for listing on the NYSE, subject to official notice of issuance, prior
to the Closing Date.
5.9 Employee Matters. (a) Mesa and Parker & Parsley agree that all
employees of Parker & Parsley immediately prior to the SM Effective Time shall
be employed by SM Surviving Corporation immediately after the SM Effective Time,
it being understood that RM Surviving Corporation and SM Surviving Corporation
shall not have any obligations to continue employing such employees for any
length of time thereafter. Mesa and Parker & Parsley further agree that the
Parker & Parsley Pension Plans in effect at the date of this Agreement shall, to
the extent practicable, remain in effect until otherwise determined after the SM
Effective Time. To the extent such Parker & Parsley Pension Plans are not
continued, (i) Parker & Parsley employees will be covered by the Mesa Pension
Plans applicable to similarly situated employees of Mesa or (ii) RM Surviving
Corporation will maintain for a period of one year after the SM Effective Time
benefit plans that are not less favorable, in the aggregate, to the employees
covered by Parker & Parsley Pension Plans than are the Parker & Parsley Pension
Plans. In the case of Parker & Parsley Pension Plans that are continued and
under which the employees' interests are based upon Parker & Parsley Common
Stock, Mesa and Parker & Parsley agree that such interests shall be based on New
Common Stock in an equitable manner (and in the case of any such interests
existing at the SM Effective Time, on the basis of the Parker & Parsley
Conversion Number); provided, however, that nothing contained herein shall be
construed as requiring RM Surviving Corporation or SM Surviving Corporation to
continue any specific Parker & Parsley Pension Plan.
(b) After the SM Effective Time, RM Surviving Corporation shall provide
those employees of Parker & Parsley and its Subsidiaries covered by the Parker &
Parsley Employee Benefit Plans with the same benefits that accrue to employees
of Mesa and its Subsidiaries; provided, however, that for a period of 90 days
following the SM Effective Time, RM Surviving Corporation shall only be required
to maintain the effectiveness of the Parker & Parsley Employee Benefit Plans. RM
Surviving Corporation further agrees that any present employees of Parker &
Parsley shall be credited for their service with Parker & Parsley and its
predecessor entities, for purposes of eligibility and vesting in the plans
provided by RM Surviving Corporation. Those employees' benefits under RM
Surviving Corporation's medical benefit plan shall not be subject to any
exclusions for any pre-existing conditions, and credit shall be received for any
deductibles or out-of-pocket amounts previously paid. The provisions of this
Section 5.9(b) are intended to be for the benefit of, and shall
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be enforceable by, the parties hereto and the employees of Parker & Parsley and
its Subsidiaries covered by the Parker & Parsley Employee Benefit Plans at the
SM Effective Time and their respective heirs and representatives.
(c) Mesa and Parker & Parsley agree that all employees of Mesa immediately
prior to the RM Effective Time shall be employed by RM Surviving Corporation
immediately after the RM Effective Time, it being understood that RM Surviving
Corporation shall not have any obligations to continue employing such employees
for any length of time thereafter. Mesa and Parker & Parsley further agree that
the Mesa Pension Plans in effect at the date of this Agreement shall, to the
extent practicable, remain in effect until otherwise determined after the RM
Effective Time. To the extent such Mesa Pension Plans are not continued, RM
Surviving Corporation will maintain for a period of one year after the RM
Effective Time benefit plans that are not less favorable, in the aggregate, to
the employees covered by Mesa Pension Plans than are the Mesa Pension Plans. In
the case of Mesa Pension Plans that are continued and under which the employees'
interests are based upon Mesa Common Stock, Mesa and Parker & Parsley agree that
such interests shall be based on New Common Stock in an equitable manner (and in
the case of any such interests existing at the RM Effective Time, on the basis
of the Mesa Conversion Number); provided, however, that nothing contained herein
shall be construed as requiring RM Surviving Corporation to continue any
specific Mesa Pension Plan.
(d) After the RM Effective Time, RM Surviving Corporation shall provide
those employees of Mesa and its Subsidiaries covered by the Mesa Employee
Benefit Plans with the same benefits that accrue to employees of RM Surviving
Corporation and its Subsidiaries; provided, however, that for a period of 90
days following the RM Effective Time, RM Surviving Corporation shall only be
required to maintain the effectiveness of the Mesa Employee Benefit Plans. RM
Surviving Corporation further agrees that any present employees of Mesa shall be
credited for their service with Mesa and its predecessor entities, for purposes
of eligibility and vesting in the plans provided by RM Surviving Corporation.
Those employees' benefits under RM Surviving Corporation's medical benefit plan
shall not be subject to any exclusions for any pre-existing conditions, and
credit shall be received for any deductibles or out-of-pocket amounts previously
paid. The provisions of this Section 5.9(d) are intended to be for the benefit
of, and shall be enforceable by, the parties hereto and the employees of Mesa
and its Subsidiaries covered by the Mesa Employee Benefit Plans at the RM
Effective Time and their respective heirs and representatives.
5.10 Stock Options. (a) At the SM Effective Time, each outstanding option
to purchase Parker & Parsley Common Stock and any stock appreciation rights
related thereto that has been granted pursuant to a Parker & Parsley Stock Plan
("Parker & Parsley Stock Option") and, at the RM Effective Time, each
outstanding option to purchase Mesa Common Stock and any stock appreciation
rights related thereto that has been granted pursuant to a Mesa Stock Plan
("Mesa Stock Option"), whether vested or unvested, shall be assumed by RM
Surviving Corporation. Each such option shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
Parker & Parsley Stock Option or Mesa Stock Option, a number of shares of New
Common Stock equal to the number of shares of Parker & Parsley Common Stock or
Mesa Common Stock, purchasable pursuant to such Parker & Parsley Stock Option or
Mesa Stock Option multiplied by the Parker & Parsley Conversion Number or Mesa
Conversion Number, as applicable, at a price per share equal to the per-share
exercise price for the shares of Parker & Parsley Common Stock purchasable
pursuant to such Parker & Parsley Stock Option divided by the Parker & Parsley
Conversion Number or the per-share exercise price for the shares of Mesa Common
Stock purchasable pursuant to such Mesa Stock Option divided by the Mesa
Conversion Number, as applicable; provided, however, that in the case of any
option to which Section 421 of the Code applies by reason of its qualification
under any of Sections 422-424 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code; and provided further, that, unless otherwise provided in the
applicable Parker & Parsley Stock Plan, Parker & Parsley Stock Option, Mesa
Stock Plan or Mesa Stock Option, the number of shares of New Common Stock that
may be purchased upon exercise of such Parker & Parsley Stock Option or Mesa
Stock Option shall not include any fractional share and, upon exercise of such
Parker & Parsley Stock Option or Mesa Stock Option, a cash payment shall be made
for any fractional share based
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upon the closing price of a share of New Common Stock on the NYSE on the trading
day immediately preceding the date of exercise.
(b) Pioneer shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of New Common Stock for delivery upon
exercise of the Parker & Parsley Stock Options and Mesa Stock Options assumed in
accordance with this Section 5.10. As soon as practicable after the SM Effective
Time, Pioneer shall file with the SEC a registration statement on Form S-8 (or
any successor form) or another appropriate form with respect to the shares of
New Common Stock subject to the Parker & Parsley Stock Options and Mesa Stock
Options and shall use its reasonable best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as Parker & Parsley Stock Options and Mesa Stock Options, as applicable, remain
outstanding.
5.11 Indemnification; Directors' and Officers' Insurance. (a) From and
after the SM Effective Time, RM Surviving Corporation shall indemnify, defend
and hold harmless each person who is now, or has been at any time prior to the
date hereof or who becomes prior to the SM Effective Time, an officer or
director of Parker & Parsley or any of its Subsidiaries or an employee of Parker
& Parsley or any of its Subsidiaries who acts as a fiduciary under any Parker &
Parsley Employee Benefit Plans or Parker & Parsley Pension Plans (the "Parker &
Parsley Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees), liabilities or judgments or amounts that
are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer, or such employee of Parker & Parsley or
any Subsidiary whether pertaining to any matter existing or occurring at or
prior to the SM Effective Time and whether asserted or claimed prior to, or at
or after, the SM Effective Time ("Parker & Parsley Indemnified Liabilities"),
including all Parker & Parsley Indemnified Liabilities based in whole or in part
on, or arising in whole or in part out of, or pertaining to this Agreement or
the transactions contemplated hereby, in each case to the fullest extent
permitted under applicable law (and RM Surviving Corporation will pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the fullest extent permitted by law). Without limiting the
foregoing, in the event any such claim, action, suit, proceeding or
investigation is brought against any Parker & Parsley Indemnified Parties
(whether arising before or after the SM Effective Time), (i) the Parker &
Parsley Indemnified Parties may retain counsel reasonably satisfactory to them
and RM Surviving Corporation, and RM Surviving Corporation shall pay all fees
and expenses of such counsel for the Parker & Parsley Indemnified Parties; and
(ii) RM Surviving Corporation will use all commercially reasonable efforts to
assist in the vigorous defense of any such matter, provided that no party shall
be liable for any settlement effected without its written consent, which consent
shall not be unreasonably withheld. Any Parker & Parsley Indemnified Party
wishing to claim indemnification under this Section 5.11(a), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify RM
Surviving Corporation, but the failure so to notify shall not relieve a party
from any liability that it may have under this Section 5.11(a), except to the
extent such failure materially prejudices such party. The Parker & Parsley
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Parker & Parsley Indemnified Parties. The parties agree that
the rights to indemnification, including provisions relating to advances of
expenses incurred in defense of any action or suit, existing in favor of the
Parker & Parsley Indemnified Parties in the Restated Certificate of
Incorporation and Restated Bylaws of Parker & Parsley with respect to matters
occurring through the SM Effective Time, shall survive the Parker & Parsley
Merger and shall continue in full force and effect for a period of six years
from the SM Effective Time; provided, however, that all rights to
indemnification in respect of any Parker & Parsley Indemnified Liabilities
asserted or made within such period shall continue until the disposition of such
Parker & Parsley Indemnified Liabilities. The foregoing provisions of this
Section 5.11(a) shall not limit or impair the rights of the Parker & Parsley
Indemnified Parties arising under any indemnification or other agreements to
which they are a party, the charter, bylaws or other organizational documents of
Parker & Parsley and its Subsidiaries or applicable laws. RM Surviving
Corporation shall keep in effect provisions in SM Surviving Corporation's
Certificate of Incorporation and Bylaws providing for
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exculpation of director and officer liability and indemnification of directors
and officers to the fullest extent permitted by Delaware law, which provisions
shall not be amended except as required by applicable law or except to make
changes permitted by law that would enlarge the right of indemnification or
exculpation. RM Surviving Corporation hereby guarantees the performance by SM
Surviving Corporation of SM Surviving Corporation's obligations under this
Section 5.11(a).
(b) From and after the RM Effective Time, RM Surviving Corporation shall
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof or who becomes prior to the RM Effective Time, an
officer or director of Mesa or any of its Subsidiaries or an employee of Mesa or
any of its Subsidiaries who acts as a fiduciary under any Mesa Employee Benefit
Plans or Mesa Pension Plans (the "Mesa Indemnified Parties") against all losses,
claims, damages, costs, expenses (including attorneys' fees), liabilities or
judgments or amounts that are paid in settlement with the approval of the
indemnifying party (which approval shall not be unreasonably withheld) of or in
connection with any threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director, officer, or such employee of
Mesa or any Subsidiary whether pertaining to any matter existing or occurring at
or prior to the RM Effective Time and whether asserted or claimed prior to, or
at or after, the RM Effective Time ("Mesa Indemnified Liabilities"), including
all Mesa Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the fullest extent permitted under
applicable law (and RM Surviving Corporation will pay expenses in advance of the
final disposition of any such action or proceeding to each Mesa Indemnified
Party to the fullest extent permitted by law). Without limiting the foregoing,
in the event any such claim, action, suit, proceeding or investigation is
brought against any Mesa Indemnified Parties (whether arising before or after
the RM Effective Time), (i) the Mesa Indemnified Parties may retain counsel
reasonably satisfactory to them and RM Surviving Corporation, and RM Surviving
Corporation shall pay all fees and expenses of such counsel for the Mesa
Indemnified Parties; and (ii) RM Surviving Corporation will use all commercially
reasonable efforts to assist in the vigorous defense of any such matter,
provided that no party shall be liable for any settlement effected without its
written consent, which consent shall not be unreasonably withheld. Any Mesa
Indemnified Party wishing to claim indemnification under this Section 5.11(b),
upon learning of any such claim, action, suit, proceeding or investigation,
shall notify RM Surviving Corporation, but the failure so to notify shall not
relieve a party from any liability that it may have under this Section 5.11(b),
except to the extent such failure materially prejudices such party. The Mesa
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more Mesa Indemnified Parties. The parties agree that the rights
to indemnification, including provisions relating to advances of expenses
incurred in defense of any action or suit, existing in favor of the Mesa
Indemnified Parties in the Amended and Restated Articles of Incorporation and
Amended and Restated Bylaws of Mesa with respect to matters occurring through
the RM Effective Time, shall survive the Reincorporation Merger and shall
continue in full force and effect for a period of six years from the RM
Effective Time; provided, however, that all rights to indemnification in respect
of any Mesa Indemnified Liabilities asserted or made within such period shall
continue until the disposition of such Mesa Indemnified Liabilities. The
foregoing provisions of this Section 5.11(b) shall not limit or impair the
rights of the Mesa Indemnified Parties arising under any indemnification or
other agreements to which they are a party, the charter, bylaws or other
organizational documents of Mesa and its Subsidiaries or applicable laws. RM
Surviving Corporation shall keep in effect provisions in RM Surviving
Corporation's Certificate of Incorporation and Bylaws providing for exculpation
of director and officer liability and indemnification of directors and officers
to the fullest extent permitted by Delaware law, which provisions shall not be
amended except as required by applicable law or except to make changes permitted
by law that would enlarge the right of indemnification or exculpation. RM
Surviving Corporation shall hereby guarantee the performance by SM Surviving
Corporation of SM Surviving Corporation's obligations under this Section
5.11(b).
(c) For a period of six years after the SM Effective Time, RM Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by Parker & Parsley and
its Subsidiaries and Mesa and its Subsidiaries (provided that RM Surviving
Corporation may
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substitute therefor policies of at least the same coverage and amounts
containing terms and conditions that are no less advantageous in any material
respect to the Indemnified Parties) with respect to matters arising before the
SM Effective Time.
(d) In the event that RM Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, in each such case, proper provisions shall be made so that
the successors and assigns of RM Surviving Corporation shall assume the
obligations set forth in this Section 5.11. The provisions of this Section 5.11
are intended to be for the benefit of, and shall be enforceable by, the parties
hereto and each person entitled to indemnification or insurance coverage or
expense advancement pursuant to this Section 5.11, his heirs and
representatives.
5.12 Agreement to Defend. In the event any claim, action, suit,
investigation or other proceeding by any governmental body or other person or
other legal or administrative proceeding is commenced that questions the
validity or legality of the transactions contemplated hereby or seeks damages in
connection therewith, the parties hereto agree to cooperate and use their
commercially reasonable efforts to defend against and respond thereto.
5.13 Public Announcements. The parties hereto will consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement without the consent of
the other parties, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange or
transaction reporting system so long as the other parties are notified promptly
by the disclosing party of such press release or public statement.
5.14 Other Actions. Except as contemplated by this Agreement, neither Mesa
nor Parker & Parsley shall, nor shall Mesa or Parker & Parsley permit any of its
Subsidiaries to, take or agree or commit to take any action that is reasonably
likely to result in any of its respective representations or warranties
hereunder being untrue in any material respect or in any of the conditions to
the Mergers set forth in Article VI not being satisfied. Each of the parties
agrees to use its reasonable best efforts to satisfy the conditions to Closing
set forth in this Agreement.
5.15 Advice of Changes; SEC Filings. Mesa and Parker & Parsley, as the case
may be, shall confer on a regular basis with each other, report on operational
matters and promptly advise each other orally and in writing of any change or
event having, or which, insofar as can reasonably be foreseen, could have, a
Material Adverse Effect on Mesa or Parker & Parsley, as the case may be. Mesa
and Parker & Parsley shall promptly provide each other (or their respective
counsel) copies of all filings made by such party or its Subsidiaries with the
SEC or any other state or federal Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
5.16 Reorganization. It is the intention of Mesa and Parker & Parsley that
each of the Mergers will qualify as a reorganization described in Section 368(a)
of the Code (and any comparable provisions of applicable state or local law).
Neither Mesa nor Parker & Parsley (nor any of their respective Subsidiaries)
will take or omit to take any action (whether before, on or after the Closing
Date) that would cause either of the Mergers not to be so treated. The parties
will characterize each of the Mergers as such a reorganization for purposes of
all Tax Returns and other filings.
5.17 Conveyance Taxes. Mesa and Parker & Parsley will (a) cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the SM Effective Time, (b)
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any applicable
exemptions to any such tax or fee, and (c) each pay any such tax or fee which
becomes payable by it on or before the RM or SM Effective Time, as applicable.
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5.18 Board of Directors. Pioneer, Mesa and Parker & Parsley shall take such
action as may be necessary or advisable (including seeking approval of such
matters as may be necessary or advisable at the Mesa stockholders meeting and
including a solicitation of proxies for such matters in the Joint Proxy
Statement) to ensure that immediately after the SM Effective Time the Board of
Directors of RM Surviving Corporation shall consist of (i) the seven individuals
currently serving on Mesa's Board of Directors and (ii) seven of the nine
individuals currently serving on Parker & Parsley's Board of Directors (such
seven individuals to be designated by Parker & Parsley), all of which
individuals referred to in (i) and (ii) are identified as Class I, II or III
Directors on Exhibit A hereto. Exhibit A hereto also indicates (x) the
assignment of directors to classes whose initial term on the Board of Directors
would expire on the first, second and third annual meetings of stockholders of
RM Surviving Corporation following Closing and (y) which of the directors shall
serve on the audit and compensation committees of the Board of Directors of RM
Surviving Corporation following the SM Effective Time.
5.19 Chairman and CEO; Other Officers. Immediately after the RM Effective
Time, Jon Brumley shall continue to serve as the Chairman of the Board of
Pioneer and Scott Sheffield shall be elected by the Pioneer Board of Directors
as the President and Chief Executive Officer of Pioneer immediately prior to the
SM Effective Time, but to become effective immediately after the SM Effective
Time. Each of the other officers of Pioneer, and each of the directors and
officers of MOC, that will assume office immediately after the SM Effective Time
shall be those persons to be designated by the agreement of Mr. Brumley and Mr.
Sheffield prior to the SM Effective Time, such persons to be elected by the
Board of Directors of Pioneer or MOC, as the case may be, immediately prior to
the SM Effective Time, but to become effective immediately after the SM
Effective Time.
5.20 Charter Amendments; Name and Place of Business. Prior to the RM
Effective Time, Pioneer and Mesa shall take such actions as are necessary to
amend and restate the Certificate of Incorporation of Pioneer into a form that
is, in form and substance, agreeable to Mesa and Parker & Parsley, it being
understood that such amended and restated Certificate of Incorporation shall
include provisions for a classified board of directors, certain other features
contained in the charters of Parker & Parsley and Mesa and the Certificate of
Designation for the New Series A Preferred Stock. In addition, prior to the RM
Effective Time and the name of SM Surviving Corporation shall be changed to a
name that is mutually agreed to by Mesa and Parker & Parsley, which name shall
be included in the amended and restated Certificate of Incorporation of SM
Surviving Corporation. Following the Mergers, the principal place of business of
RM Surviving Corporation and SM Surviving Corporation shall be the same as
Mesa's principal place of business on the date hereof.
5.21 Employee and Director Incentive Indemnification and Severance Plans.
Notwithstanding Section 5.9, prior to the RM Effective Time, but to become
effective immediately after the SM Effective Time, Pioneer shall approve and
adopt (i) a Long-Term Incentive Plan, (ii) a Non-Employee Director Equity
Compensation Plan, (iii) a Section 423 Stock Purchase Plan, (iv) Severance
Agreements for officers of Pioneer and (v) Director and Officer Indemnification
Agreements, in each case in form and substance agreeable to Mesa and Parker &
Parsley and substantially in such forms as have previously been reviewed by the
parties.
5.22 MIPS Assumption Matters. As promptly as practicable following the SM
Effective Time, RM Surviving Corporation shall take all actions as are necessary
or appropriate (i) for RM Surviving Corporation to assume the Guarantee and
Exchange Agreement, the Expense Agreement and the Loan Agreement related to the
MIPS; and (ii) to adopt a certificate of designation substantially in the form
of the certificate of designation relating to the Parker & Parsley Series A
Preferred Stock in order to provide for the exchange of the MIPS into a new
series of preferred stock of RM Surviving Corporation in accordance with the
terms of the MIPS.
5.23 Indenture Matters. Mesa, Parker & Parsley, Pioneer and MOC shall take
all actions that are necessary or appropriate in order for Pioneer or MOC, as
applicable, to assume by supplemental indenture the indentures for the
outstanding publicly held notes or guarantees thereof of Mesa, Parker & Parsley
and their respective Subsidiaries referred to in the Mesa SEC Documents and the
Parker & Parsley SEC Documents, respectively.
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5.24 New Bank Credit Facility. Mesa, Parker & Parsley, Pioneer and MOC
shall use their reasonable best efforts, and shall cooperate, to (i) obtain as
promptly as practicable commitments from financing sources to refinance on an
unsecured basis the existing bank credit facilities of Mesa, Parker & Parsley
and MOC and (ii) have Pioneer and/or MOC enter into a new credit facility
pursuant to such commitments concurrent with the Closing and to refinance such
existing debt.
5.25 DNR Agreement. Concurrently with the execution of the Original
Agreement, Mesa shall have entered into an agreement with DNR-Mesa Holdings,
L.P. in substantially the form previously provided to Parker & Parsley
regarding, among other things, the voting of shares of Mesa capital stock at the
Mesa stockholders meeting relating to the Mergers. Mesa recognizes that Parker &
Parsley is a third party beneficiary of such agreement with DNR and will seek to
enforce such agreement upon request of Parker & Parsley or provide Parker &
Parsley with such documentation and assistance as Parker & Parsley reasonably
deems necessary for Parker & Parsley to enforce such agreement directly. Mesa
shall not amend such agreement, or waive any obligation thereunder, without the
prior written consent of Parker & Parsley.
5.26 Pickens Agreement. Concurrently with the execution of the Original
Agreement, Parker & Parsley and Mesa shall have entered into an agreement with
Boone Pickens in substantially the form previously provided to Parker & Parsley
regarding, among other things, the voting of shares of Mesa capital stock at the
Mesa stockholders meeting relating to the Mergers.
5.27 MIPS Conversion. Parker & Parsley and its Subsidiaries shall use their
reasonable best efforts to cause the redemption of the MIPS for cash (in
connection with a standby underwriting of Parker & Parsley Common Stock, which
issuance of Parker & Parsley Common Stock in connection with such underwriting
shall be deemed not to constitute a breach of any representation, warranty or
covenant of Parker & Parsley herein) or the exchange of the MIPS into Parker &
Parsley Common Stock as soon as practicable in accordance with the terms of the
MIPS and to complete such redemption or exchange prior to the RM Effective Time.
5.28 Severance Agreements. Upon the SM Effective Time, Pioneer shall assume
all obligations of Parker & Parsley under any severance agreements identified in
Schedule 3.1(l)(vii) of the Parker & Parsley Disclosure Schedule and all
obligations of Mesa under any severance agreements or plans identified in
Schedule 3.2(l)(vii) of the Mesa Disclosure Schedule.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Parker & Parsley Stockholder Approval. This Agreement and the
Parker & Parsley Merger shall have been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of
Parker & Parsley Common Stock entitled to vote thereon.
(b) Mesa Stockholder Approval. This Agreement and the Reincorporation
Merger shall have been approved and adopted by the affirmative vote
specified in clauses (i), (ii) and (iii) of Section 3.2(r) as the votes
required to approve such matters.
(c) NYSE Listing. The shares of New Common Stock and New Series A
Preferred Stock, if any, issuable to Parker & Parsley and Mesa stockholders
pursuant to this Agreement in the Mergers shall have been authorized for
listing on the NYSE upon official notice of issuance.
(d) Other Approvals. The waiting period applicable to the consummation
of the Mergers under the HSR Act shall have expired or been terminated and
all filings required to be made prior to the RM or SM Effective Time, as
applicable, with, and all consents, approvals, permits and authorizations
required to be obtained prior to the RM or SM Effective Time, as
applicable, from, any Governmental Entity in connection with the execution
and delivery of this Agreement and the consummation of the transactions
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contemplated hereby shall have been made or obtained (as the case may be),
except for such consents, approvals, permits and authorizations the failure
of which to be obtained would not, in the aggregate, be reasonably likely
to result in a Material Adverse Effect on RM Surviving Corporation
(assuming the Mergers have taken place) or to materially adversely affect
the consummation of the Mergers, and no such consent, approval, permit or
authorization shall impose terms or conditions that would have, or would be
reasonably likely to have, a Material Adverse Effect on RM Surviving
Corporation (assuming the Mergers have taken place). Unless otherwise
agreed to by Mesa and Parker & Parsley (which agreement shall not be
unreasonably withheld), no such consent, approval, permit or authorization
shall then be subject to appeal.
(e) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(f) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction, no order of any Governmental Entity having
jurisdiction over any party hereto, and no other legal restraint or
prohibition shall be in effect (an "Injunction") preventing or making
illegal the consummation of either of the Mergers.
6.2 Conditions of Obligations of Mesa, Pioneer and MOC. The obligations of
Mesa, Pioneer and MOC to effect the Merger are subject to the satisfaction of
the following conditions, any or all of which may be waived in whole or in part
by Mesa:
(a) Representations and Warranties of Parker & Parsley. Each of the
representations and warranties of Parker & Parsley set forth in this
Agreement shall be true and correct in all material respects (provided that
any representation or warranty of Parker & Parsley contained herein that is
qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) as of the date of this
Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and
as of the Closing Date, and Mesa shall have received a certificate signed
on behalf of Parker & Parsley by the Chief Executive Officer and the Chief
Financial Officer of Parker & Parsley to such effect.
(b) Performance of Obligations of Parker & Parsley. Parker & Parsley
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date,
and Mesa shall have received a certificate signed on behalf of Parker &
Parsley by the Chief Executive Officer and the Chief Financial Officer of
Parker & Parsley to such effect.
(c) Tax Opinion. Mesa shall have received an opinion, in form and
substance reasonably satisfactory to Mesa, dated the Closing Date, a copy
of which will be furnished to Parker & Parsley, of Baker & Botts, L.L.P.,
counsel to Mesa, to the effect that, if each of the Mergers is consummated
in accordance with the terms of this Agreement, each of the Mergers will be
treated as a reorganization within the meaning of Section 368(a) of the
Code, no gain or loss will be recognized for federal income tax purposes by
Mesa, Pioneer, MOC or Parker & Parsley as a result of either of the
Mergers, and no gain or loss will be recognized for federal income tax
purposes by a stockholder of Parker & Parsley or Mesa as a result of either
of the Mergers upon the conversion of shares of Parker & Parsley Common
Stock, Mesa Common Stock, Mesa Series A Preferred Stock or Mesa Series B
Preferred Stock into shares of New Common Stock or New Series A Preferred
Stock, as applicable, except with respect to (i) cash, if any, received in
lieu of fractional shares of New Common Stock or New Series A Preferred
Stock or (ii) a stockholder in special circumstances, such as a stockholder
who acquired Parker & Parsley Common Stock or Mesa Common Stock through
exercise of employee stock options or otherwise as compensation for
employment. In rendering such opinion, such counsel may receive and rely
upon representations of fact and covenants contained in the forms of
Certificates included as Schedule 3.1(u) and Schedule 3.2(v) of the Parker
& Parsley and Mesa Disclosure Schedules, respectively.
(d) Letters from Rule 145 Affiliates. Mesa shall have received from
each person named in the Parker & Parsley list referred to in Section 5.7
an executed copy of an agreement as provided in such Section.
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6.3 Conditions of Obligations of Parker & Parsley. The obligation of Parker
& Parsley to effect the Parker & Parsley Merger is subject to the satisfaction
of the following conditions, any or all of which may be waived in whole or in
part by Parker & Parsley:
(a) Representations and Warranties of Mesa, Pioneer and MOC. Each of
the representations and warranties of Mesa, Pioneer and MOC set forth in
this Agreement shall be true and correct in all material respects (provided
that any representation or warranty of Mesa, Pioneer and MOC contained
herein that is qualified by a materiality standard or a Material Adverse
Effect qualification shall not be further qualified hereby) as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, and Parker & Parsley shall have
received a certificate signed on behalf of Mesa by the Chief Executive
Officer and the Chief Financial Officer of Mesa to such effect.
(b) Performance of Obligations of Mesa. Mesa, Pioneer and MOC shall
have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date, and
Parker & Parsley shall have received a certificate signed on behalf of Mesa
by the Chief Executive Officer and the Chief Financial Officer of Mesa to
such effect.
(c) Tax Opinion. Parker & Parsley shall have received an opinion, in
form and substance reasonably satisfactory to Parker & Parsley, dated the
Closing Date, a copy of which will be furnished to Mesa, of Vinson & Elkins
L.L.P., counsel to Parker & Parsley, to the effect that, if each of the
Mergers is consummated in accordance with the terms of this Agreement, each
of the Mergers will be treated as a reorganization within the meaning of
Section 368(a) of the Code, no gain or loss will be recognized for federal
income tax purposes by Mesa, Pioneer, MOC or Parker & Parsley as a result
of either of the Mergers upon the conversion of shares of Parker & Parsley
Common Stock, Mesa Common Stock, Mesa Series A Preferred Stock or Mesa
Series B Preferred Stock into shares of New Common Stock or New Series A
Preferred Stock, as applicable, except with respect to (i) cash, if any,
received in lieu of fractional shares of New Common Stock or New Series A
Preferred Stock or (ii) a stockholder in special circumstances, such as a
stockholder who acquired shares of Parker & Parsley Common Stock or Mesa
Common Stock through the exercise of employee stock options or otherwise as
compensation for employment. In rendering such opinion, such counsel may
receive and rely upon representations of fact and covenants contained in
the forms of Certificates included as Schedule 3.1(u) and Schedule 3.2(v)
of the Parker & Parsley and Mesa Disclosure Schedules, respectively.
(d) Letters from Rule 145 Affiliates. Parker & Parsley shall have
received from each person named in the Mesa list referred to in Section 5.7
an executed copy of an agreement as provided in such Section.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated and the Mergers may be
abandoned at any time prior to the RM Effective Time, whether before or after
approval of the matters presented in connection with the Mergers by the
stockholders of Parker & Parsley and the stockholders of Mesa:
(a) by mutual written consent of Mesa and Parker & Parsley, or by
mutual action of their respective Boards of Directors;
(b) by either Mesa or Parker & Parsley if (i) any Governmental Entity
shall have issued any Injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Mergers and such Injunction or other action shall have become final and
nonappealable; or (ii) any required approval of the stockholders of a party
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote held at a duly held meeting of stockholders, or
at any adjournment thereof;
(c) by Mesa or Parker & Parsley if the Mergers shall not have been
consummated by December 31, 1997 (the "Initial Termination Date");
provided, however, that the right to terminate this Agreement
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under this Section 7.1(c) shall not be available to any party whose breach
of any representation or warranty or failure to fulfill any covenant or
agreement under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date;
(d) by Mesa if (i) Parker & Parsley shall have failed to comply in any
material respect with any of the covenants or agreements contained in this
Agreement to be complied with or performed by Parker & Parsley at or prior
to such date of termination (provided such breach has not been cured within
30 days following receipt by Parker & Parsley of notice of such breach and
is existing at the time of termination of this Agreement); (ii) any
representation or warranty of Parker & Parsley contained in this Agreement
shall not be true in all material respects (providedthat any representation
or warranty of Parker & Parsley contained herein that is qualified by a
materiality standard or a Material Adverse Effect qualification shall not
be further qualified hereby) when made on or at the time of termination as
if made on such date of termination (except to the extent it relates to a
particular date), provided such breach has not been cured within 30 days
following receipt by Parker & Parsley of notice of such breach and is
existing at the time of termination of this Agreement, or (iii) after the
date hereof there has been any Material Adverse Change with respect to
Parker & Parsley, except for general economic changes or changes that may
affect the industries of Parker & Parsley or any of its Subsidiaries
generally;
(e) by Parker & Parsley if (i) Mesa, Pioneer or MOC shall have failed
to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by it at or
prior to such date of termination (provided such breach has not been cured
within 30 days following receipt by Mesa of notice of such breach and is
existing at the time of termination of this Agreement); (ii) any
representation or warranty of Mesa, Pioneer or MOC contained in this
Agreement shall not be true in all material respects (providedthat any
representation or warranty of Mesa, Pioneer or MOC contained herein that is
qualified by a materiality standard or a Material Adverse Effect
qualification shall not be further qualified hereby) when made or on or at
the time of termination as if made on such date of termination (except to
the extent it relates to a particular date), providedsuch breach has not
been cured within 30 days following receipt by Mesa of notice of such
breach and is existing at the time of termination of this Agreement; or
(iii) after the date hereof there has been any Material Adverse Change with
respect to Mesa, except for general economic changes or changes that may
affect the industries of Mesa or any of its Subsidiaries generally;
(f) by Mesa if (i) the Board of Directors of Parker & Parsley shall
have withdrawn or modified, in any manner which is adverse to Mesa, its
recommendation or approval of the Parker & Parsley Merger or this Agreement
and the transactions contemplated hereby, or shall have resolved to do so,
or (ii) the Board of Directors of Parker & Parsley shall have recommended
to the stockholders of Parker & Parsley any Parker & Parsley Acquisition
Proposal or any transaction described in the definition of Parker & Parsley
Acquisition Proposal, or shall have resolved to do so;
(g) by Parker & Parsley, if Parker & Parsley shall exercise the right
specified in clause (ii) of Section 4.2(a); provided that Parker & Parsley
may not effect such termination pursuant to this Section 7.1(g) unless and
until (i) Mesa receives at least one week's prior written notice from
Parker & Parsley of its intention to effect such termination pursuant to
this Section 7.1(g); (ii) during such week, Parker & Parsley shall, and
shall cause its respective financial and legal advisors to, consider any
adjustment in the terms and conditions of this Agreement that Mesa may
propose; and (iii) Parker & Parsley pays the amounts required by Section
7.2(b) concurrently with such termination;
(h) by Parker & Parsley if (i) the Board of Directors of Mesa shall
have withdrawn or modified, in any manner which is adverse to Parker &
Parsley, its recommendation or approval of the Mergers or this Agreement
and the transactions contemplated hereby, or shall have resolved to do so,
or (ii) the Board of Directors of Mesa shall have recommended to the
stockholders of Mesa any Mesa Acquisition Proposal or any transaction
described in the definition of Mesa Acquisition Proposal, or shall have
resolved to do so;
(i) by Mesa, if Mesa shall exercise the right specified in clause (ii)
of Section 4.3(a); provided that Mesa may not effect such termination
pursuant to this Section 7.1(i) unless and until (i) Parker &
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Parsley receives at least one week's prior written notice from Mesa of its
intention to effect such termination pursuant to this Section 7.1(i); (ii)
during such week, Mesa shall, and shall cause its respective financial and
legal advisors to, consider any adjustment in the terms and conditions of
this Agreement that Parker & Parsley may propose; and (iii) Mesa pays the
amounts required by Section 7.2(e) concurrently with such termination;
(j) by either Mesa or Parker & Parsley if the Average Trading Price
for the fifteen (15) Trading Day period beginning on the twentieth (20th)
Trading Day prior to the date on which the meetings of the stockholders of
Mesa and Parker & Parsley with respect to the Mergers are to be held (such
date to be the date specified in the Joint Proxy Statement), is less than
$5.00 per share, provided that notice of termination is given by the
terminating party to the other parties hereto within two calendar days
following the end of such fifteen (15) Trading Day period. For purposes
hereof, the term (i) "Average Trading Price" means the average of the
closing sales prices for Mesa Common Stock during such fifteen (15) Trading
Day period as such closing sales prices are reported in The Wall Street
Journal'sNew York Stock Exchange Composite Transactions Reports; and (ii)
"Trading Days" refers to days on which the NYSE is open for the trading;
and
(k) by the passage of time in the event that the Board of Directors of
either or both of Mesa or Parker & Parsley shall have withdrawn or
modified, in any manner which is adverse to the other party, its
recommendation or approval of the Reincorporation Merger or the Parker &
Parsley Merger, as applicable, or this Agreement and the transactions
contemplated hereby, or shall have resolved to do so, without further
action by Mesa or Parker & Parsley, at the earlier of (x) 5:00 p.m.,
Dallas, Texas, time on the second calendar day after notice of such
withdrawal or modification is delivered to the other party or publicly
announced by the withdrawing or modifying party, or (y) immediately prior
to the commencement of the first stockholders meeting to be held pursuant
to Section 5.5 hereof, unless, in either case, Mesa and Parker & Parsley
shall otherwise agree in writing prior to such time of automatic
termination.
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by any party hereto as
provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto except (i)
with respect to this Section 7.2, the second and third sentences of Section 5.4,
the last sentence of Section 5.6(a) and Section 8.1, and (ii) to the extent that
such termination results from the willful breach (except as provided in Section
8.8) by a party hereto of any of its representations or warranties or of any of
its covenants or agreements contained in this Agreement.
(b) If (i) this Agreement is terminated pursuant to Section 7.1(b)(ii)
(with respect to the Parker & Parsley stockholder vote) and at the time of such
termination or after the date hereof and prior to the Parker & Parsley
stockholders' meeting there shall have been pending a Parker & Parsley
Acquisition Proposal, (ii) Mesa terminates this Agreement pursuant to Section
7.1(f), (iii) Parker & Parsley terminates this Agreement pursuant to Section
7.1(g), or (iv) Parker & Parsley, but not Mesa, withdraws or modifies, in any
manner which is adverse to the other party, its recommendation or approval of
the Reincorporation Merger or the Parker & Parsley Merger, as applicable, or
this Agreement and the transactions contemplated hereby, or shall have resolved
to do so, and this Agreement shall terminate pursuant to Section 7.1(k), then
Parker & Parsley shall, on the day of such termination, pay Mesa a fee of $45
million in cash by wire transfer of immediately available funds to an account
designated by Mesa.
(c) If within 12 months of any termination other than as described in
Section 7.2(b) or 7.1(j), Parker & Parsley agrees to or consummates a Parker &
Parsley Acquisition Proposal or a transaction described in the definition of
Parker & Parsley Acquisition Proposal and such Parker & Parsley Acquisition
Proposal or transaction involves a third party that had discussions with Parker
& Parsley after the date of this Agreement and at or prior to the termination of
this Agreement, then at the closing or other consummation of such Parker &
Parsley Acquisition Proposal or transaction, Parker & Parsley shall pay Mesa a
fee equal to $45 million in cash by wire transfer of immediately available funds
to an account designated by Mesa.
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(d) The parties acknowledge and agree that the actual damages that Mesa
might sustain upon termination of this Agreement under the circumstances
heretofore set forth in Section 7.2(b) or (c) would be difficult, if not
impossible, to ascertain, and that the payment of a $45 million fee to Mesa
under this Section 7.2 would be reasonable compensation in the event of such
termination and shall constitute liquidated damage for purposes of this
Agreement and Mesa's sole remedy for money damages for such termination. Under
no circumstances shall Mesa be entitled to a fee of more than $45 million
pursuant to this Section 7.2.
(e) If (i) this Agreement is terminated pursuant to Section 7.1(b)(ii)
(with respect to the Mesa stockholder vote) and at the time of such termination
or after the date hereof and prior to the Mesa stockholders' meeting there shall
have been pending a Mesa Acquisition Proposal, (ii) Parker & Parsley terminates
this Agreement pursuant to Section 7.1(h), (iii) Mesa terminates this Agreement
pursuant to Section 7.1(i), or (iv) Mesa, but not Parker & Parsley, withdraws or
modifies, in any manner which is adverse to the other party, its recommendation
or approval of the Reincorporation Merger or the Parker & Parsley Merger, as
applicable, or this Agreement and the transactions contemplated hereby, or shall
have resolved to do so, and this Agreement shall terminate pursuant to Section
7.1(k), then Mesa shall, on the day of such termination, pay Parker & Parsley a
fee of $45 million in cash by wire transfer of immediately available funds to an
account designated by Parker & Parsley.
(f) If within 12 months of any termination other than as described in
Section 7.2(e) or 7.1(j), Mesa agrees to or consummates a Mesa Acquisition
Proposal or a transaction described in the definition of Mesa Acquisition
Proposal and such Mesa Acquisition Proposal or transaction involves a third
party that had discussions with Mesa after the date of this Agreement and at or
prior to the termination of this Agreement, then at the closing or other
consummation of such Mesa Acquisition Proposal or transaction, Mesa shall pay
Parker & Parsley a fee equal to $45 million in cash by wire transfer of
immediately available funds to an account designated by Parker & Parsley.
(g) The parties acknowledge and agree that the actual damages that Parker &
Parsley might sustain upon termination of this Agreement under the circumstances
heretofore set forth in Section 7.2(e) or (f) would be difficult, if not
impossible, to ascertain, and that the payment of a $45 million fee to Parker &
Parsley under this Section 7.2 would be reasonable compensation in the event of
such termination and shall constitute liquidated damages for purposes of this
Agreement and Parker & Parsley's sole remedy for money damages for such
termination. Under no circumstances shall Parker & Parsley be entitled to a fee
of more than $45 million pursuant to this Section 7.2.
(h) If this Agreement is terminated by Parker & Parsley or Mesa pursuant to
Section 7.1(j), no fee shall be payable hereunder by or to any party.
7.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Mergers
by the stockholders of Parker & Parsley and the stockholders of Mesa, but, after
any such approval, no amendment shall be made which by law requires further
approval by such stockholders without first obtaining such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the RM Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto;
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto; and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 Payment of Expenses. Each party hereto shall pay its own expenses
incident to preparing for entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby, whether or not the Mergers
shall be consummated, except (i) as otherwise contemplated by the last sentence
of Section 5.6(a) and (ii) that Mesa and Parker & Parsley shall share equally
the expenses incurred by Mesa and Parker & Parsley in connection with the
printing and mailing of the Joint Proxy Statement and all filing fees paid in
connection with the S-4 to the SEC.
8.2 Nonsurvival of Representations, Warranties and Agreements. Subject to
the remaining provisions of this Section 8.2, the representations, warranties
and agreements in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their officers,
directors, representatives or agents whether prior to or after the execution of
this Agreement. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the SM Effective Time and any liability for breach or violation thereof
shall terminate absolutely and be of no further force and effect at and as of
the SM Effective Time, except for the agreements contained in Sections 2.1, 2.2,
2.3, 5.9 through 5.11, 5.18 through 5.26 and Article VIII, and the agreements
delivered pursuant to Section 5.7. The Confidentiality Agreement shall survive
the execution and delivery of this Agreement, and the provisions of the
Confidentiality Agreement shall apply to all information and material delivered
hereunder.
8.3 Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received (i) when so delivered personally, (ii) upon receipt
of an appropriate electronic answerback or confirmation when so delivered by
telegraph or telecopy (to such number specified below or another number or
numbers as such person may subsequently designate by notice given hereunder), or
(iii) five business days after the date of mailing to the following address or
to such other address or addresses as such person may subsequently designate by
notice given hereunder, if so delivered by mail:
(a) if to Mesa, Pioneer or MOC, to:
MESA Inc.
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039
Telecopy: (972) 402-7039
Attention: Chief Executive Officer
with a copy to:
Baker & Botts, L.L.P.
2001 Ross Avenue
Dallas, TX 75201
Telecopy: (214) 953-6503
Attention: Carlos A. Fierro
and (b) if to Parker & Parsley, to:
Parker & Parsley Petroleum Company
303 W. Wall
Suite 101
Midland, Texas 79701
Telecopy: (915) 571-5051
Attention: Chief Executive Officer
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with a copies to:
<TABLE>
<S> <C>
Vinson & Elkins L.L.P. Parker & Parsley Petroleum Company
2001 Ross Avenue 303 W. Wall, Suite 101
Dallas, Texas 75201 Midland, Texas 79701
Telecopy: (214) 220-7716 Telecopy: (915) 571-5050
Attention: Jeffrey A. Chapman Attention: Mark Withrow, General Counsel
</TABLE>
8.4 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, glossary of defined terms and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the word
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." Unless the context
otherwise requires, "or" is disjunctive but not necessarily exclusive, and words
in the singular include the plural and in the plural include the singular.
8.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereto and (b) except as provided
in Sections 5.7, 5.9, 5.10 and 5.11, is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
8.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof, except to the extent the TBCA is
required to govern the Reincorporation Merger.
8.8 No Remedy in Certain Circumstances. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article VII hereof. Except as otherwise contemplated by this
Agreement, to the extent that a party hereto took an action inconsistent
herewith or failed to take action consistent herewith or required hereby
pursuant to an order or judgment of a court or other competent authority, such
party shall not incur any liability or obligation unless such party breached its
obligations under Confidentiality Agreement or did not in good faith seek to
resist or object to the imposition or entering of such order or judgment.
8.9 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that each of Pioneer and MOC may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to any
newly-formed direct wholly owned Subsidiary of Mesa. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.10 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to this Agreement to perform its obligations hereunder
in accordance with their specific terms or to otherwise comply with such
obligations, including its failure to take all actions as are necessary on its
part to the consummation of the Mergers, will cause irreparable injury to the
other parties to this Agreement for which damages, even if available, will not
be an adequate remedy. Accordingly, each of the parties hereto hereby consents
to the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of any party's
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obligations, including an injunction to prevent breaches, and to the granting by
any such court of the remedy of specific performance of the terms and conditions
hereof.
8.11 Schedule Definitions. All capitalized terms in the Parker & Parsley
Disclosure Schedule or Mesa Disclosure Schedule shall have the meanings ascribed
to them herein, unless the context otherwise requires or as otherwise defined.
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IN WITNESS WHEREOF, each party has caused this Agreement to be signed by
its respective officers thereunto duly authorized, all as of the date first
written above.
MESA INC.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
Vice President -- Corporate
Acquisitions
MESA OPERATING CO.
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
Vice President -- Corporate
Acquisitions
PIONEER NATURAL RESOURCES
COMPANY
By: /s/ M. GARRETT SMITH
----------------------------------
M. Garrett Smith
Vice President -- Corporate
Acquisitions
PARKER & PARSLEY PETROLEUM
COMPANY
By: /s/ SCOTT D. SHEFFIELD
----------------------------------
Scott D. Sheffield
President
58
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EXHIBIT A
POST EFFECTIVE TIME BOARD OF DIRECTORS
Class I Directors (term expires at the 1998 annual meeting):
1. Philip B. Smith*
2. John S. Herrington**
3. James L. Houghton**
4. R. Hartwell Gardner**
5. Michael D. Wortley
Class II Directors (term expires at the 1999 annual meeting):
1. Scott D. Sheffield
2. Robert L. Stillwell
3. Jerry P. Jones**
4. Kenneth A. Hersh*
5. To be determined
Class III Directors (term expires at the 2000 annual meeting):
1. T. Boone Pickens
2. I. Jon Brumley
3. Richard E. Rainwater
4. Charles E. Ramsey, Jr.*
5. Arthur L. Smith*
- ---------------
*Compensation Committee
**Audit Committee
A-1
<PAGE> 282
APPENDIX II
[MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD]
April 4, 1997
Board of Directors
Mesa Inc.
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Members of the Board:
Mesa Inc. (the "Company"), Mesa Operating Co., a direct wholly owned
subsidiary of the Company ("Merger Sub"), Mesa Reincorporation Corp., a direct
wholly owned subsidiary of the Company ("Reincorporation Sub" or "RM Surviving
Corporation"), and Parker & Parsley Petroleum Company (the "Subject Company")
propose to enter into an agreement and plan of merger dated as of April 6, 1997
(the "Agreement") pursuant to which (1) the Subject Company will be merged with
and into Merger Sub (the "Parker & Parsley Merger") and (2) the Company will be
merged with and into Reincorporation Sub (the "Reincorporation Merger" and,
together with the Parker & Parsley Merger, the "Mergers"). In the Parker &
Parsley Merger, each outstanding share of the common stock, par value $.01 per
share, of the Subject Company (the "Subject Company Stock") will be converted
into the right to receive one share of the common stock, par value $.01 per
share, of RM Surviving Corporation (the "New Common Stock"). In the
Reincorporation Merger, (1) each seven shares of common stock, par value $.01
per share, of the Company (the "Company Common Stock") will be converted into
the right to receive one share of New Common Stock; and (2) each seven shares of
Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per share, of
the Company (the "Company Series A Preferred Stock") and each seven shares of
Series B 8% Cumulative Convertible Preferred Stock, par value $.01 per share, of
the Company (the "Company Series B Preferred Stock" and, together with the
Company Common Stock and the Company Series A Preferred Stock, the "Company
Stock") will be converted into the right to receive (a) 1.25 shares of New
Common Stock (the "Company Common Consideration") or (b) one share of Series A
8% Cumulative Convertible Preferred Stock, par value $.01 per share (the "New
Series A Preferred Stock"), of RM Surviving Corporation (the "Company Preferred
Consideration"), in each case as the holder thereof shall have elected or be
deemed to have elected; provided, however, that if (x) the Series A Approval (as
defined in the Agreement) is obtained, each such seven shares of the Company
Series A Preferred Stock will be converted into the right to receive only the
Company Common Consideration and (y) the Series B Approval (as defined in the
Agreement) is obtained, each such seven shares of the Company Series B Preferred
Stock will be converted into the right to receive only the Company Common
Consideration. In connection with the Mergers, the Company also proposes to
enter into a shareholders agreement (collectively, the "Shareholders
Agreements") with each of DNR-MXP Holdings, L.P. and Boone Pickens (each, a
"Shareholder") pursuant to which each Shareholder will agree, among other
things, to vote all shares of Company Stock held by such Shareholder in favor of
the Reincorporation Merger and to elect to receive the Company Common
Consideration.
You have asked us whether, in our opinion, the Company Common Consideration
is fair from a financial point of view to the holders of the Company Common
Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Subject Company and the Company that we deemed
to be relevant;
(2) Reviewed certain reserve reports as of December 31, 1996 (the
"Subject Company Reserve Reports") prepared by the Subject Company and the
Subject Company's independent petroleum engineers (the "Subject Company's
Petroleum Engineers");
<PAGE> 283
(3) Reviewed certain reserve reports as of December 31, 1996 (together
with the Subject Company Reserve Reports, the "Reserve Reports") prepared
by the Company and by the Company's independent petroleum engineers
(together with the Subject Company's Petroleum Engineers, the "Petroleum
Engineers");
(4) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Subject Company and the Company, furnished to us by the
Subject Company and the Company, respectively;
(5) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective businesses and
prospects before and after giving effect to the Mergers;
(6) Conducted discussion with representatives of Arthur Andersen &
Co., the independent certified public accountants for the Company;
(7) Reviewed the market prices and valuation multiples for the Subject
Company Common Stock and the Company Common Stock and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(8) Reviewed the results of operations of the Subject Company and the
Company and compared them with those of certain companies that we deemed to
be relevant;
(9) Compared the proposed financial terms of the Mergers with the
financial terms of certain other transactions which we deemed to be
relevant;
(10) Reviewed the potential pro forma impact of the Mergers;
(11) Reviewed drafts dated April 3, 1997 of the Agreement and the
Shareholder Agreements; and
(12) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us or
publicly available or discussed with or reviewed by or for us, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Subject Company or the Company or been furnished with any
such evaluation or appraisal other than the Reserve Reports. In addition, we
have not conducted any physical inspection of the properties or facilities of
the Subject Company or the Company. With respect to the financial forecast
information furnished to or discussed with us by the Subject Company or the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the management of the Subject
Company or the Company as to the expected future financial performance of the
Subject Company or the Company, as the case may be. In addition, we have assumed
that the Reserve Reports have been reasonably prepared and reflect the best
currently available estimates and judgments of the Subject Company and the
Company and their respective Petroleum Engineers as to their respective
reserves, their future hydrocarbon production volume and associated costs. We
have further assumed that the Parker & Parsley Merger will be accounted for as a
purchase under generally accepted accounting principles and that each of the
Mergers will qualify as a tax-free reorganization for U.S. federal income tax
purposes. We have also assumed that the final form of the Agreement and the
Shareholders Agreements will be substantially similar to the last drafts
reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on the date hereof.
We are acting as financial advisor to the Company in connection with the
Mergers and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Mergers. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. We have, in the past, provided financial advisory and
financing services to the Company and/or its affiliates and have received fees
for the rendering of such services. In addition, in the ordinary course of our
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business, we may actively trade the Company Common Stock and other securities of
the Company, as well as the Subject Company Stock and other securities of the
Subject Company, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Mergers, and does not constitute a recommendation
to any stockholder as to how such stockholder should vote on the proposed
Mergers.
We are not expressing any opinion herein as to the prices at which the New
Common Stock or the New Series A Preferred Stock will trade following the
consummation of the Mergers.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Company Common Consideration is fair from a financial
point of view to the holders of the Company Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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APPENDIX III
[MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED LETTERHEAD]
April 4, 1997
Board of Directors
Mesa Inc.
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Members of the Board:
Mesa Inc. (the "Company"), Mesa Operating Co., a direct wholly owned
subsidiary of the Company ("Merger Sub"), Mesa Reincorporation Corp., a direct
wholly owned subsidiary of the Company ("Reincorporation Sub" or "RM Surviving
Corporation"), and Parker & Parsley Petroleum Company (the "Subject Company")
propose to enter into an agreement and plan of merger dated as of April 6, 1997
(the "Agreement") pursuant to which (1) the Subject Company will be merged with
and into Merger Sub (the "Parker & Parsley Merger") and (2) the Company will be
merged with and into Reincorporation Sub (the "Reincorporation Merger" and,
together with the Parker & Parsley Merger, the "Mergers"). In the Parker &
Parsley Merger, each outstanding share of the common stock, par value $.01 per
share, of the Subject Company (the "Subject Company Stock") will be converted
into the right to receive one share (the "Parker & Parsley Conversion Number")
of the common stock, par value $.01 per share, of RM Surviving Corporation (the
"New Common Stock"). In the Reincorporation Merger, (1) each seven shares of
common stock, par value $.01 per share, of the Company (the "Company Common
Stock") will be converted into the right to receive one share (together with the
Parker & Parsley Conversion Number, the "Conversion Numbers") of New Common
Stock; and (2) each seven shares of Series A 8% Cumulative Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Company Series A Preferred
Stock") and each seven shares of Series B 8% Cumulative Convertible Preferred
Stock, par value $.01 per share, of the Company (the "Company Series B Preferred
Stock" and, together with the Company Common Stock and the Company Series A
Preferred Stock, the "Company Stock" ) will be converted into the right to
receive (a) 1.25 shares of New Common Stock (the "Company Common Consideration")
or (b) one share of Series A 8% Cumulative Convertible Preferred Stock, par
value $.01 per share (the "New Series A Preferred Stock"), of RM Surviving
Corporation (the "Company Preferred Consideration"), in each case as the holder
thereof shall have elected or be deemed to have elected; provided, however, that
if (x) the Series A Approval (as defined in the Agreement) is obtained, each
such seven shares of the Company Series A Preferred Stock will be converted into
the right to receive only the Company Common Consideration and (y) the Series B
Approval (as defined in the Agreement) is obtained, each such seven shares of
the Company Series B Preferred Stock will be converted into the right to receive
only the Company Common Consideration. In connection with the Mergers, the
Company also proposes to enter into a shareholders agreement (collectively, the
"Shareholders Agreements") with each of DNR-MXP Holdings, L.P. and Boone Pickens
(each, a "Shareholder") pursuant to which each Shareholder will agree, among
other things, to vote all shares of Company Stock held by such Shareholder in
favor of the Reincorporation Merger and to elect to receive the Company Common
Consideration.
You have asked us whether, in our opinion, the Conversion Numbers are fair
from a financial point of view to the holders of the Company Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Subject Company and the Company that we deemed
to be relevant;
<PAGE> 286
(2) Reviewed certain reserve reports as of December 31, 1996 (the
"Subject Company Reserve Reports") prepared by the Subject Company and the
Subject Company's independent petroleum engineers (the "Subject Company's
Petroleum Engineers");
(3) Reviewed certain reserve reports as of December 31, 1996 (together
with the Subject Company Reserve Reports, the "Reserve Reports") prepared
by the Company and by the Company's independent petroleum engineers
(together with the Subject Company's Petroleum Engineers, the "Petroleum
Engineers");
(4) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Subject Company and the Company, furnished to us by the
Subject Company and the Company, respectively;
(5) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective businesses and
prospects before and after giving effect to the Mergers;
(6) Conducted discussion with representatives of Arthur Andersen &
Co., the independent certified public accountants for the Company;
(7) Reviewed the market prices and valuation multiples for the Subject
Company Common Stock and the Company Common Stock and compared them with
those of certain publicly traded companies that we deemed to be relevant;
(8) Reviewed the results of operations of the Subject Company and the
Company and compared them with those of certain companies that we deemed to
be relevant;
(9) Compared the proposed financial terms of the Mergers with the
financial terms of certain other transactions which we deemed to be
relevant;
(10) Reviewed the potential pro forma impact of the Mergers;
(11) Reviewed drafts dated April 3, 1997 of the Agreement and the
Shareholders Agreements; and
(12) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us or
publicly available or discussed with or reviewed by or for us, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Subject Company or the Company or been furnished with any
such evaluation or appraisal other than the Reserve Reports. In addition, we
have not conducted any physical inspection of the properties or facilities of
the Subject Company or the Company. With respect to the financial forecast
information furnished to or discussed with us by the Subject Company or the
Company, we have assumed that they have been reasonably prepared and reflect the
best currently available estimates and judgment of the management of the Subject
Company or the Company as to the expected future financial performance of the
Subject Company or the Company, as the case may be. In addition, we have assumed
that the Reserve Reports have been reasonably prepared and reflect the best
currently available estimates and judgments of the Subject Company and the
Company and their respective Petroleum Engineers as to their respective
reserves, their future hydrocarbon production volume and associated costs. We
have further assumed that the Parker & Parsley Merger will be accounted for as a
purchase under generally accepted accounting principles and that each of the
Mergers will qualify as a tax-free reorganization for U.S. federal income tax
purposes. We have also assumed that the final form of the Agreement and the
Shareholders Agreements will be substantially similar to the last drafts
reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on the date hereof.
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<PAGE> 287
We are acting as financial advisor to the Company in connection with the
Mergers and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Mergers. In
addition, the Company has agreed to indemnify us for certain liabilities arising
out of our engagement. We have, in the past, provided financial advisory and
financing services to the Company and/or its affiliates and have received fees
for the rendering of such services. In addition, in the ordinary course of our
business, we may actively trade the Company Common Stock and other securities of
the Company, as well as the Subject Company Stock and other securities of the
Subject Company, for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Mergers, and does not constitute a recommendation
to any stockholder as to how such stockholder should vote on the proposed
Mergers.
We are not expressing any opinion herein as to the prices at which the New
Common Stock or the New Series A Preferred Stock will trade following the
consummation of the Mergers.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Conversion Numbers are fair from a financial point of
view to the holders of the Company Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
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APPENDIX IV
[MORGAN STANLEY LETTERHEAD]
April 4, 1997
Board of Directors
MESA, Inc.
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, TX 75039
Members of the Board:
We understand that MXP Inc. ("Buyer"), MXP Operating Co., a direct wholly
owned subsidiary of Buyer ("Merger Sub"), MXP Reincorporation Corp., a direct
wholly owned subsidiary of Buyer ("Reincorporation Sub"), and Spice Company
("Spice" or the "Company") propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated April 3, 1997 (the "Merger
Agreement"), which provides, among other things, for the merger of Spice with
and into Merger Sub (the "Spice Merger") and the merger of Buyer with and into
Reincorporation Sub (the "Reincorporation Merger" and together with the Spice
Merger, the "Mergers"). In connection with (i) the Reincorporation Merger, Buyer
will be reincorporated as a Delaware corporation with Reincorporation Sub as the
surviving corporation, and (ii) the Spice Merger, Merger Sub will be the
surviving corporation and a wholly owned subsidiary of Reincorporation Sub.
Pursuant to the Mergers, (a) each issued and outstanding share of common stock,
par value $.01 per share, of Spice, other than shares held in the treasury of
Spice or by Buyer or any wholly owned subsidiary of Spice or Buyer, will be
converted into the right to receive one (1) share of Common Stock, par value
$.01 per share ("New Common Stock"), of Reincorporation Sub and (b) (i) each
seven (7) shares of issued and outstanding common stock, par value $. 01 per
share, of Buyer, other than shares held in the treasury of Buyer or by Spice or
any wholly owned subsidiary of Spice or Buyer, will be converted into the right
to receive one (1) share of New Common Stock; and (ii) each seven (7) shares of
Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per share, of
Buyer (the "Series A Preferred Stock") and each seven (7) shares of Series B 8%
Cumulative Convertible Preferred Stock, par value $.01 per share, of Buyer (the
"Series B Preferred Stock") issued and outstanding, other than shares held in
the treasury of Buyer or by Spice or any wholly owned subsidiary of Spice or
Buyer, will be converted into the right to receive either (x) one and one
quarter (1.25) shares of New Common Stock (the "Common Exchange Ratio"), or (y)
one (1) share of Series A 8% Cumulative Convertible Preferred Stock, par value
$.01 per share ("New Series A Preferred Stock"), of Reincorporation Sub (the
"Preferred Exchange Ratio"), in each case as the holder thereof shall have
elected or deemed to have elected pursuant to the Merger Agreement; provided
however, that if (A) the holders of a majority of the outstanding shares of
Series A Preferred Stock, voting as a separate class, approve the Merger
Agreement and the transactions contemplated thereby, each seven (7) shares of
Series A Preferred Stock, other than shares held in the treasury of Buyer or by
Spice or any wholly owned subsidiary of Spice or Buyer, will be converted into a
right to receive only that number of shares of Common Stock as provided by the
Common Exchange Ratio and (B) if the holders of a majority of the outstanding
shares of Series B Preferred Stock, voting as a separate class, approve the
Merger Agreement and the transactions contemplated thereby, each seven (7)
shares of Series B Preferred Stock, other than shares held in the treasury of
Buyer or by Spice or any wholly owned subsidiary of Spice or Buyer, will be
converted into a right to receive only that number of shares of Common Stock as
provided by the Common Exchange Ratio. The terms and conditions of the Mergers
are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Common Exchange Ratio and
the Preferred Exchange Ratio pursuant to the Merger Agreement are fair from a
financial point of view to the holders of Series A Preferred Stock.
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For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company and the Buyer;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(v) analyzed certain internal financial statements and other financial
operating data concerning the Buyer prepared by the management of
the Buyer;
(vi) analyzed certain financial projections prepared by the management of
the Buyer;
(vii) discussed the past and current operations and financial condition
and the prospects of the Buyer with senior executives of the Buyer,
and analyzed the pro forma impact of the Mergers on the Buyer's
earnings per share, cash flow per share, consolidated capitalization
and financial ratios;
(viii) reviewed the reported prices and trading activity for the Company
Common Stock, Buyer Common Stock and Series A Preferred Stock;
(ix) compared the financial performance of the Company and the prices and
trading activity of the Company Common Stock with that of certain
other comparable publicly-traded companies and their securities;
(x) compared the financial performance of the Buyer and the prices and
trading activity of the Buyer Common Stock with that of certain
other comparable publicly-traded companies and their securities;
(xi) compared the prices and trading activity of the Buyer Common Stock
with that of the Series A Preferred Stock;
(xii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(xiii) reviewed the Merger Agreement, and certain related documents
(including the agreement of the holder of the Series B Preferred
Stock to vote in favor of the Reincorporation Merger and elect to
receive New Common Stock);
(xiv) reviewed the Statement of Resolution establishing series of shares
designated Series A 8% Cumulative Convertible Preferred Stock and
Series B 8% Cumulative Convertible Preferred Stock of Buyer; and
(xv) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company and the Buyer, respectively. We have not made any independent valuation
or appraisal of the assets or liabilities of the Company or of the Buyer;
however, we have reviewed reserve reports provided by Company management, with
respect to the oil and gas reserves of Company and reserve reports provided by
Buyer management with respect to the oil and gas reserves of Buyer. We have
assumed that the Mergers will qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended and that the
rights and preferences of the New Series A Preferred Stock as evidenced in a
Certificate of Designation or any other instrument governing the rights and
preferences of the New Series A Preferred Stock will be identical in all
material respects to the rights and
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preferences of the Series A Preferred Stock. Our opinion is necessarily based on
economic, market and other conditions as in effect on, and the information made
available to us as of, the date hereof. We have not participated in discussions
and negotiations among representatives of the Company and Buyer and their
financial and legal advisors.
We have acted as financial advisor to the Board of Directors of the Buyer
in connection with rendering the opinion described herein and will receive a fee
for our services.
It is understood that this letter is for the information of the Board of
Directors of Buyer, except that this opinion may be included in its entirety in
any filing made by Buyer or Spice with the Securities and Exchange Commission
with respect to the Mergers and the transactions related thereto. In addition,
we express no opinion or recommendation as to how the holders of the Series A
Preferred Stock, Series B Preferred Stock or the Buyer Common Stock should vote
at the shareholder's meeting held in connection with Mergers.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Common Exchange Ratio and the Preferred Exchange Ratio are fair
from a financial point of view to the holders of Series A Preferred Stock.
Very truly yours,
MORGAN STANLEY & CO.
INCORPORATED
By: /s/ STEPHEN R. MUNGER
----------------------------------
Stephen R. Munger
Managing Director
3
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APPENDIX V
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
- ----------------------------------------
April 6, 1997
Board of Directors
Parker & Parsley Petroleum Company
303 West Wall
Suite 101
Midland, TX 79701
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.01 per share (the "Parker &
Parsley Common Stock"), of Parker & Parsley Petroleum Company (the "Company") of
the exchange ratio of 1.0 share of Common Stock, par value $.01 per share (the
"Reincorporation Sub Common Stock"), of MXP Reincorporation Corp., a wholly
owned subsidiary of MESA Inc. ("Reincorporation Sub"), to be exchanged for each
share of Parker & Parsley Common Stock (the "Conversion Number") pursuant to the
Agreement and Plan of Merger dated as of April 6, 1997 among MESA Inc. ("MESA"),
MESA Operating Co., a wholly owned subsidiary of MESA ("Merger Sub"),
Reincorporation Sub and the Company (the "Agreement"). Pursuant to the
Agreement, MESA will merge with and into Reincorporation Sub (the
"Reincorporation Merger") and (i) each 7 outstanding shares of Common Stock, par
value $.01 per share (the "MESA Common Stock"), of MESA will be converted into
the right to receive 1.0 share of Reincorporation Sub Common Stock and (ii) each
7 outstanding shares of Series A 8% Cumulative Convertible Preferred Stock, par
value $.01 per share (the "MESA Series A Preferred Stock"), of MESA and each 7
outstanding shares of Series B 8% Cumulative Convertible Preferred Stock, par
value $.01 per share (the "MESA Series B Preferred Stock"), of MESA will be
converted, in accordance with the terms of the Agreement, into the right to
receive either (x) 1.25 shares of Reincorporation Sub Common Stock or (y) 1.0
share of Series A 8% Cumulative Convertible Preferred Stock, par value $.01 per
share, of Reincorporation Sub. Immediately following the Reincorporation Merger,
the Company will be merged with and into Merger Sub (the "Parker & Parsley
Merger" and, together with the Reincorporation Merger, the "Merger"), and each
outstanding share of Parker & Parsley Common Stock will be converted into the
right to receive 1.0 share of Reincorporation Sub Common Stock.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as underwriters of public
offerings of Parker & Parsley Common Stock in 1994 and $150,000,000 of 8 7/8%
Senior Notes due 2005 of the Company in April 1995; having acted as managing
underwriters of a private offering of 3,776,400 Parker & Parsley Capital LLC
6 1/4% Convertible Monthly Income Preferred Shares ("Convertible MIPS"),
guaranteed by and convertible into the common stock of the Company, in March
1994; having acted as financial advisor in connection with the purchase by the
Company of certain Prudential-Bache Energy Income LP limited partnership units
in November 1993; and having acted as financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement. We
have also provided certain investment banking services to MESA from time to
time. Furthermore, we may provide investment banking services to Reincorporation
Sub in the future. Goldman Sachs is a full service securities firm and, in the
course of normal trading activities may from time to time effect transactions
and hold positions in the securities of the Company, MESA, Merger Sub and
Reincorporation Sub for its own account or for the accounts of customers. As of
April 6, 1997, Goldman Sachs, for its own account, had a long position of 42,000
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shares of Parker & Parsley Common Stock, a long position of 1,000 Convertible
MIPS, a long position of 770,702 shares of MESA Series A Preferred Stock, a
short position of 715,000 shares of MESA Common Stock, a $2,000,000 short
position in 10 5/8% Senior Subordinated Notes due 2006 of Merger Sub and a
$1,000,000 short position in 11 5/8% Senior Subordinated Discount Notes due 2006
of Merger Sub.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Annual Reports on Form 10-K of the Company for the five years
ended December 31, 1996; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company; the Prospectus Supplement dated August 17,
1995 relating to $150,000,000 of 8 1/4% Senior Notes due 2007 of the Company;
the Prospectus Supplement dated April 5, 1995 relating to $150,000,000 of 8 7/8%
Senior Notes due 2005 of the Company; and the Offering Circular dated March 22,
1994 relating to the Convertible MIPS. We have also reviewed the Annual Reports
on Form 10-K of MESA for the five years ended December 31, 1996; certain interim
reports to stockholders and Quarterly Reports on Form 10-Q of MESA; the
Registration Statement and Prospectus dated June 25, 1996 relating to
$325,000,000 of 10 5/8% Senior Subordinated Notes due 2006 and $264,000,000 of
11 5/8% Senior Subordinated Discount Notes due 2006 of Merger Sub; the
Prospectus dated July 3, 1996 relating to the public rights offering of
58,599,252 shares of MESA Series A Preferred Stock; the MESA Proxy Statement
filed on Schedule 14A dated May 24, 1996; the Statement of Resolution with
respect to the MESA Series A and Series B Preferred Stock; and certain other
communications from the Company and MESA to their respective stockholders. We
have reviewed certain internal financial analyses and forecasts for the Company
and MESA prepared by their respective managements and reviewed by the Company,
including certain internal forecasts for the Company and MESA on a combined
basis, after giving effect to the Merger. We have also held discussions with
members of the senior managements of the Company and MESA regarding the
strategic rationale for, and the benefits of, the Merger and the past and
current business operations, financial condition and future prospects of their
respective companies, on a standalone basis and as combined in the Merger. We
have reviewed certain information provided by the Company and MESA relating to
their respective oil and gas reserves, including year-end reserve reports for
the Company prepared by the Company and audited by independent petroleum
engineers and year-end reserve reports for MESA prepared by independent
petroleum engineers and have discussed the reserve information with the
respective managements of the Company and MESA. We have also held discussions
with members of senior management of the Company regarding their due diligence
examination of such reserve information for MESA. In addition, we have reviewed
the reported price and trading activity for Parker & Parsley Common Stock and
MESA Common Stock, compared certain financial and stock market information for
the Company and MESA with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the oil and gas industry specifically and in
other industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy for purposes
of this opinion. In addition, we have not made an independent evaluation or
appraisal of the assets and liabilities of the Company or MESA or any of their
subsidiaries and, except for the reserve information referred to in the third
paragraph of this opinion, we have not been furnished with any such evaluation
or appraisal. With respect to such reserve information, we are not experts in
the evaluation of oil and gas properties and, with your consent, have relied
solely upon the reserve reports and internal estimates prepared by the
independent petroleum engineers and managements of the Company and MESA. We have
also assumed with your consent that such information and the financial forecasts
provided to us and discussed with us with respect to the Company and MESA after
giving effect to the Merger have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of the
Company and that such forecasts will be realized in the amounts and at the times
contemplated thereby. Our opinion is based upon economic and market conditions
existing on the date hereof. Further, for purposes of our analysis, we have with
your consent assumed that the consummation of the Merger will not result in a
change of control of the Company. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the transaction
contemplated by the Agreement.
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Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the
Conversion Number pursuant to the Agreement is fair to the holders of Parker &
Parsley Common Stock.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ------------------------------------
(GOLDMAN, SACHS & CO.)
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APPENDIX VI
1996 INCENTIVE PLAN
OF
MESA INC.
1. Plan. This 1996 Incentive Plan of MESA Inc. (the "Plan") was adopted
by the Board of Directors of MESA Inc. (the "Company") for the benefit of
selected key executives of the Company by enabling them to acquire shares of
Common Stock, par value $.01 per share, of the Company and to receive other
stock related or incentive compensation.
2. Objectives. This Plan is designed to attract and retain key employees
of the Company and its Subsidiaries (as hereinafter defined), to encourage the
sense of proprietorship of such employees and to stimulate the active interest
of such persons in the development and financial success of the Company and its
Subsidiaries. These objectives are to be accomplished by making Awards (as
hereinafter defined) under this Plan and thereby providing Participants (as
hereinafter defined) with a proprietary interest in the growth and performance
of the Company and its Subsidiaries.
3. Definitions. As used herein, the terms set forth below shall have the
following respective meanings:
"Authorized Officer" means the Chairman of the Board or the Chief
Executive Officer of the Company (or any other senior officer of the
Company to whom either of them shall delegate the authority to execute any
Award Agreement).
"Award" means the grant of any Option, SAR, Stock Award, Cash Award or
Performance Award, whether granted singly, in combination or in tandem, to
a Participant pursuant to such applicable terms, conditions and limitations
as the Committee may establish in order to fulfill the objectives of the
Plan.
"Award Agreement" means a written agreement between the Company and a
Participant setting forth the terms, conditions and limitations applicable
to an Award.
"Board" means the Board of Directors of the Company.
"Cash Award" means an award denominated in cash.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" means the Stock Option Committee of the Board or such
other committee of the Board as is designated by the Board to administer
the Plan.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" means MESA Inc., a Texas corporation.
"Dividend Equivalents" means, with respect to shares of Restricted
Stock that are to be issued at the end of the Restriction Period, an amount
equal to all dividends and other distributions (or the economic equivalent
thereof) that are payable to stockholders of record during the Restriction
Period on a like number of shares of Common Stock.
"Effective Date" has the meaning set forth in paragraph 18 hereof.
"Employee" means an employee of the Company or any of its
Subsidiaries.
"Fair Market Value" of a share of Common Stock means, as of a
particular date, (i) if shares of Common Stock are listed on a national
securities exchange, the mean between the highest and lowest sales price
per share of Common Stock on the consolidated transaction reporting system
for the principal national securities exchange on which shares of Common
Stock are listed on that date, or, if there shall have been no such sale so
reported on that date, on the last preceding date on which such a sale was
so reported, (ii) if shares of Common Stock are not publicly traded, the
most recent value determined by an independent appraiser appointed by the
Company for such purpose.
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"Incentive Option" means an Option that is intended to comply with the
requirements set forth in Section 422 of the Code.
"Nonqualified Stock Option" means an Option that is not an Incentive
Option.
"Option" means a right to purchase a specified number of shares of
Common Stock at a specified price.
"Participant" means an Employee to whom an Award has been made under
this Plan.
"Performance Award" means an award made pursuant to this Plan to a
Participant who is subject to the attainment of one or more Performance
Goals.
"Performance Goal" means a standard established by the Committee to
determine in whole or in part whether a Performance Award shall be earned.
"Restricted Stock" means any Common Stock that is restricted or
subject to forfeiture provisions.
"Restriction Period" means a period of time beginning as of the date
upon which an Award of Restricted Stock is made pursuant to this Plan and
ending as of the date upon which the Common Stock subject to such Award is
no longer restricted or subject to forfeiture provisions.
"SAR" means a right to receive a payment, in cash or Common Stock,
equal to the excess of the Fair Market Value or other specified valuation
of a specified number of shares of Common Stock on the date the right is
exercised over a specified strike price, in each case, as determined by the
Committee.
"Stock Award" means an award in the form of shares of Common Stock or
units denominated in shares of Common Stock.
"Subsidiary" means (i) in the case of a corporation, any corporation
of which the Company directly or indirectly owns shares representing more
than 50% of the combined voting power of the shares of all classes or
series of capital stock of such corporation which have the right to vote
generally on matters submitted to a vote of the stockholders of such
corporation and (ii) in the case of a partnership or other business entity
not organized as a corporation, any such business entity of which the
Company directly or indirectly owns more than 50% of the voting, capital or
profits interests (whether in the form of partnership interests, membership
interests or otherwise).
4. Eligibility. Key Employees eligible for Awards under this Plan are
those who hold positions of responsibility and whose performance, in the
judgment of the Committee, can have a significant effect on the success of the
Company and its Subsidiaries.
5. Common Stock Available for Awards. Subject to the provisions of
paragraph 14 hereof, there shall be available for Awards under this Plan granted
wholly or partly in Common Stock (including rights or options that may be
exercised for or settled in Common Stock) an aggregate of 9,000,000 shares of
Common Stock. The number of shares of Common Stock that are the subject of
Awards under this Plan, that are forfeited or terminated, expire unexercised,
are settled in cash in lieu of Common Stock or in a manner such that all or some
of the shares covered by an Award are not issued to a Participant or are
exchanged for Awards that do not involve Common Stock, shall again immediately
become available for Awards hereunder. The Committee may from time to time adopt
and observe such procedures concerning the counting of shares against the Plan
maximum as it may deem appropriate. The Board and the appropriate officers of
the Company shall from time to time take whatever actions are necessary to file
any required documents with governmental authorities, stock exchanges and
transaction reporting systems to ensure that shares of Common Stock are
available for issuance pursuant to Awards.
6. Administration.
(a) This Plan shall be administered by the Committee.
(b) Subject to the provisions hereof, the Committee shall have full and
exclusive power and authority to administer this Plan and to take all actions
that are specifically contemplated hereby or are necessary or
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appropriate in connection with the administration hereof. The Committee shall
also have full and exclusive power to interpret this Plan and to adopt such
rules, regulations and guidelines for carrying out this Plan as it may deem
necessary or proper, all of which powers shall be exercised in the best
interests of the Company and in keeping with the objectives of this Plan. The
Committee may, in its discretion, provide for the extension of the
exercisability of an Award, accelerate the vesting or exercisability of an
Award, eliminate or make less restrictive any restrictions contained in an
Award, waive any restriction or other provision of this Plan or an Award or
otherwise amend or modify an Award in any manner that is either (i) not adverse
to the Participant to whom such Award was granted or (ii) consented to by such
Participant. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in this Plan or in any Award in the manner and to
the extent the Committee deems necessary or desirable to further the Plan
purposes. Any decision of the Committee in the interpretation and administration
of this Plan shall lie within its sole and absolute discretion and shall be
final, conclusive and binding on all parties concerned.
(c) No member of the Committee or officer of the Company to whom the
Committee has delegated authority in accordance with the provisions of paragraph
7 of this Plan shall be liable for anything done or omitted to be done by him or
her, by any member of the Committee or by any officer of the Company in
connection with the performance of any duties under this Plan, except for his or
her own willful misconduct or as expressly provided by statute.
7. Delegation of Authority. The Committee may delegate to the Chief
Executive Officer and to other senior officers of the Company its duties under
this Plan pursuant to such conditions or limitations as the Committee may
establish.
8. Awards. The Committee shall determine the type or types of Awards to be
made under this Plan and shall designate from time to time the Employees who are
to be the recipients of such Awards. Each Award may be embodied in an Award
Agreement, which shall contain such terms, conditions and limitations as shall
be determined by the Committee in its sole discretion and shall be signed by the
Participant to whom the Award is made and by an Authorized Officer for and on
behalf of the Company. Awards may consist of those listed in this paragraph 8
hereof and may be granted singly, in combination or in tandem. Awards may also
be made in combination or in tandem with, in replacement of, or as alternatives
to, grants or rights under this Plan or any other employee plan of the Company
or any of its Subsidiaries, including the plan of any acquired entity. An Award
may provide for the grant or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events, including the exercise of the
original Award granted to a Participant. All or part of an Award may be subject
to conditions established by the Committee, which may include, but are not
limited to, continuous service with the Company and its Subsidiaries,
achievement of specific business objectives, increases in specified indices,
attainment of specified growth rates and other comparable measurements of
performance. Upon the termination of employment by a Participant, any
unexercised, deferred, unvested or unpaid Awards shall be treated as set forth
in the applicable Award Agreement.
(a) Stock Option. An Award may be in the form of an Option. An Option
awarded pursuant to this Plan may consist of an Incentive Option or a
Nonqualified Option. The price at which shares of Common Stock may be
purchased upon the exercise of an Incentive Option shall be not less than
the Fair Market Value of the Common Stock on the date of grant. The price
at which shares of Common Stock may be purchased upon the exercise of a
Nonqualified Option shall be not less than 100 percent of the Fair Market
Value of the Common Stock on the date of grant. Subject to the foregoing
provisions, the terms, conditions and limitations applicable to any Options
awarded pursuant to this Plan, including the term of any Options and the
date or dates upon which they become exercisable, shall be determined by
the Committee.
(b) Stock Appreciation Right. An Award may be in the form of an SAR.
The terms, conditions and limitations applicable to any SARs awarded
pursuant to this Plan, including the term of any SARs and the date or dates
upon which they become exercisable, shall be determined by the Committee.
(c) Stock Award. An Award may be in the form of a Stock Award. The
terms, conditions and limitations applicable to any Stock Awards granted
pursuant to this Plan shall be determined by the Committee.
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(d) Cash Award. An Award may be in the form of a Cash Award. The
terms, conditions and limitations applicable to any Cash Awards granted
pursuant to this Plan shall be determined by the Committee.
(e) Performance Award. Without limiting the type or number of Awards
that may be made under the other provisions of this Plan, an Award may be
in the form of a Performance Award. A Performance Award shall be paid,
vested or otherwise deliverable solely on account of the attainment of one
or more pre-established, objective Performance Goals established by the
Committee.
9. Payment of Awards.
(a) General. Payment of Awards may be made in the form of cash or Common
Stock, or a combination thereof, and may include such restrictions as the
Committee shall determine, including, in the case of Common Stock, restrictions
on transfer and forfeiture provisions. If payment of an Award is made in the
form of Restricted Stock, the Award Agreement relating to such shares shall
specify whether they are to be issued at the beginning or end of the Restriction
Period. In the event that shares of Restricted Stock are to be issued at the
beginning of the Restriction Period, the certificates evidencing such shares (to
the extent that such shares are so evidenced) shall contain appropriate legends
and restrictions that describe the terms and conditions of the restrictions
applicable thereto. In the event that shares of Restricted Stock are to be
issued at the end of the Restricted Period, the right to receive such shares
shall be evidenced by book entry registration or in such other manner as the
Committee may determine.
(b) Deferral. With the approval of the Committee, payments in respect of
Awards may be deferred, either in the form of installments or a future lump-sum
payment. The Committee may permit selected Participants to elect to defer
payments of some or all types of Awards in accordance with procedures
established by the Committee. Any deferred payment of an Award, whether elected
by the Participant or specified by the Award Agreement or by the Committee, may
be forfeited if and to the extent that the Award Agreement so provides.
(c) Dividends and Interest. Rights to dividends or Dividend Equivalents
may be extended to and made part of any Award consisting of shares of Common
Stock or units denominated in shares of Common Stock, subject to such terms,
conditions and restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of interest on deferred
cash payments and Dividend Equivalents for Awards consisting of shares of Common
Stock or units denominated in shares of Common Stock.
(d) Substitution of Awards. At the discretion of the Committee, a
Participant may be offered an election to substitute an Award for another Award
or Awards of the same or different type.
10. Stock Option Exercise. The price at which shares of Common Stock may
be purchased under an Option shall be paid in full at the time of exercise in
cash or, if elected by the optionee, the optionee may purchase such shares by
means of tendering Common Stock or surrendering another Award, including
Restricted Stock, valued at Fair Market Value on the date of exercise, or any
combination thereof. The Committee shall determine acceptable methods for
Participants to tender Common Stock or other Awards; provided that any Common
Stock that is or was the subject of an Award may be so tendered only if it has
been held by the Participant for six months. The Committee may provide for
procedures to permit the exercise or purchase of such Awards by use of the
proceeds to be received from the sale of Common Stock issuable pursuant to an
Award. Unless otherwise provided in the applicable Award Agreement, in the event
shares of Restricted Stock are tendered as consideration for the exercise of an
Option, a number of the shares issued upon the exercise of the Option, equal to
the number of shares of Restricted Stock used as consideration therefor, shall
be subject to the same restrictions as the Restricted Stock so submitted as well
as any additional restrictions that may be imposed by the Committee.
11. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Award payment and withhold, at the time of delivery or vesting of
cash or shares of Common Stock under this Plan, an appropriate amount of cash or
number of shares of Common Stock or a combination thereof for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy
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all obligations for withholding of such taxes. The Committee may also permit
withholding to be satisfied by the transfer to the Company of shares of Common
Stock owned by the holder of the Award with respect to which withholding is
required. If shares of Common Stock are used to satisfy tax withholding, such
shares shall be valued based on the Fair Market Value when the tax withholding
is required to be made. The Committee may provide for loans, on either a
short-term or demand basis, from the Company to a Participant to permit the
payment of taxes required by law.
12. Amendment, Modification, Suspension or Termination. The Board may
amend, modify, suspend or terminate this Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law, except that no amendment or alteration that would adversely affect the
rights of any Participant under any Award previously granted to such Participant
shall be made without the consent of such Participant.
13. Assignability. The Committee may prescribe and include in applicable
Award Agreements restrictions on transfer. Any attempted assignment of an Award
or any other benefit under this Plan in violation of such restrictions shall be
null and void.
14. Adjustments.
(a) The existence of outstanding Awards shall not affect in any manner the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
capital stock of the Company or its business or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock (whether or not such issue is prior to, on a parity with or junior to the
Common Stock) or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding of any kind, whether or not of a character similar to that of
the acts or proceedings detailed above.
(b) In the event of any subdivision or consolidation of outstanding shares
of Common Stock, declaration of a dividend payable in shares of Common Stock or
other stock split, then (i) the number of shares of Common Stock reserved under
this Plan, (ii) the number of shares of Common Stock covered by outstanding
Awards in the form of Common Stock or units denominated in Common Stock, (iii)
the exercise or other price in respect of such Awards and (iv) the appropriate
Fair Market Value and other price determinations for such Awards shall each be
proportionately adjusted by the Board to reflect such transaction. In the event
of any other recapitalization or capital reorganization of the Company, any
consolidation or merger of the Company with another corporation or entity, the
adoption by the Company of any plan of exchange affecting the Common Stock or
any distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the Board
shall make appropriate adjustments to (i) the number of shares of Common Stock
covered by Awards in the form of Common Stock or units denominated in Common
Stock, (ii) the exercise or other price in respect of such Awards and (iii) the
appropriate Fair Market Value and other price determinations for such Awards to
give effect to such transaction; provided that such adjustments shall only be
such as are necessary to maintain the proportionate interest of the holders of
the Awards and preserve, without exceeding, the value of such Awards. In the
event of a corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, the Board shall be authorized to
issue or assume Awards by means of substitution of new Awards, as appropriate,
for previously issued Awards or to assume previously issued Awards as part of
such adjustment.
15. Restrictions. No Common Stock or other form of payment shall be issued
with respect to any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance with applicable
federal and state securities laws. Certificates evidencing shares of Common
Stock delivered under this Plan (to the extent that such shares are so
evidenced) may be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any securities exchange
or transaction reporting system upon which the Common Stock is then listed or to
which it is admitted for quotation and any applicable federal or state
securities law. The Committee may cause a legend or legends to be placed upon
such certificates (if any) to make appropriate reference to such restrictions.
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16. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock
or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts
may be established with respect to Participants who are entitled to cash, Common
Stock or rights thereto under this Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate any
assets that may at any time be represented by cash, Common Stock or rights
thereto, nor shall this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a trustee of any
cash, Common Stock or rights thereto to be granted under this Plan. Any
liability or obligation of the Company to any Participant with respect to an
Award of cash, Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by this Plan and any
Award Agreement, and no such liability or obligation of the Company shall be
deemed to be secured by any pledge or other encumbrance on any property of the
Company. Neither the Company nor the Board nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by this Plan.
17. Governing Law. This Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by mandatory provisions of
the Code or the securities laws of the United States, shall be governed by and
construed in accordance with the laws of the State of Texas.
18. Effectiveness. This Plan shall be effective as of August 22, 1996 (the
"Effective Date"), the date on which it was approved by the Board of Directors
of the Company.
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APPENDIX VII
PIONEER NATURAL RESOURCES COMPANY
LONG-TERM INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
Pioneer Natural Resources Company, a Delaware corporation (the
"Corporation"), has adopted this Long-Term Incentive Plan (the "Plan") to
provide for the granting of:
(a) Incentive Options to certain Employees;
(b) Nonstatutory Options to certain Employees and other persons;
(c) Performance Units to certain Employees and other persons;
(d) Restricted Stock Awards to certain Employees, Non-employee Directors,
and other persons; and 2
(e) Stock Appreciation Rights to certain Employees and other persons.
The purpose of the Plan is to provide an incentive for Employees,
directors, and certain consultants and advisors of the Corporation or its
Subsidiaries to remain in the service of the Corporation or its Subsidiaries, to
extend to them the opportunity to acquire a proprietary interest in the
Corporation so that they will apply their best efforts for the benefit of the
Corporation, and to aid the Corporation in attracting able persons to enter the
service of the Corporation and its Subsidiaries.
SECTION 1.
DEFINITIONS
1.1 "Annual Retainer" has the meaning given it in Subparagraph 5.2(a).
1.2 "Annual Restricted Stock Award" has the meaning given it in Paragraph
5.2.
1.3 "Award" means the grant of any form of Option, Performance Unit, Reload
Option, Restricted Stock Award, or Stock Appreciation Right under the Plan,
whether granted singly, in combination, or in tandem, to a Holder pursuant to
the terms, conditions, and limitations that the Committee may establish in order
to fulfill the objectives of the Plan.
1.4 "Award Agreement" means the written document or agreement delivered to
Holder evidencing the terms, conditions, and limitations of an Award that the
Corporation granted to that Holder.
1.5 "Board of Directors" means the board of directors of the Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a day
on which banking institutions in the State of Texas are authorized or obligated
by law or executive order to close.
1.7 "Change in Control" means the occurrence of any of the following
events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "PERSON")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (x) the then outstanding shares
of Common Stock of the Corporation (the "OUTSTANDING CORPORATION COMMON
STOCK") or (y) the combined voting power of the then outstanding voting
securities of the Corporation entitled to vote generally in the election of
directors (the "OUTSTANDING CORPORATION VOTING SECURITIES"); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Corporation, (B) any acquisition by the Corporation, (C)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or
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(D) any acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the date of this Plan, constitute the
Board of Directors cease for any reason to constitute at least a majority
of the Incumbent Board;
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Corporation or an acquisition of assets of another corporation (a "BUSINESS
COMBINATION"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Corporation Common
Stock and Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (B) no
Person (excluding any employee benefit plan (or related trust) of the
Corporation or the corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively,
the then outstanding shares of common stock of the corporation resulting
from such Business Combination or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that
such ownership results solely from ownership of the Corporation that
existed prior to the Business Combination and (C) at least a majority of
the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the stockholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee or subcommittee appointed pursuant to
Section 3 by the Board of Directors to administer this Plan.
1.10 "Common Stock" means the authorized common stock, par value $.01 per
share, as described in the Corporation's Certificate of Incorporation.
1.11 "Common Stock Equivalent" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options, convertible
securities, exchangeable securities or indebtedness, or other rights,
exercisable for or convertible or exchangeable into, directly or indirectly,
Common Stock or securities convertible or exchangeable into Common Stock,
whether at the time the number of shares of Common Stock Equivalents are
determined or within sixty days of that date and that are traded or are of the
same class as securities that are traded on a national securities exchange or
quoted on the NASDAQ National Market System, NASDAQ, or National Quotation
Bureau Incorporated. The number of shares of Common Stock Equivalents
outstanding shall equal the number of shares of Common Stock plus the number of
shares of Common Stock issuable upon exercise, conversion or exchange of all
other Common Stock Equivalents.
1.12 "Corporation" means Pioneer Natural Resources Company, a Delaware
corporation.
1.13 "Date of Grant" has the meaning given it in Paragraph 4.3.
1.14 "Disability" has the meaning given it in Paragraph 11.5.
1.15 "Effective Date" means , 1997.
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1.16 "Eligible Individuals" means (a) Employees, (b) Non-employee
Directors, and (c) any other Person that the Committee designates as eligible
for an Award (other than for Incentive Options) because the Person performs bona
fide consulting or advisory services for the Corporation or any of its
Subsidiaries (other than services in connection with the offer or sale of
securities in a capital-raising transaction).
1.17 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934.
1.19 "Exercise Notice" has the meaning given it in Paragraph 6.5.
1.20 "Exercise Price" has the meaning given it in Paragraph 6.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and if
sales prices for shares of Stock of the same class in the over-the-counter
market are reported by the NASDAQ National Market System (or a similar
system then in use) at the date of determining the Fair Market Value, then
the last reported sales price so reported on the last Business Day before
the date in question or, if no such sale takes place on that Business Day,
the average of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
Subparagraph 1.21(b), and if bid and asked prices for shares of Stock of
the same class in the over-the-counter market are reported by NASDAQ (or,
if not so reported, by the National Quotation Bureau Incorporated) at the
date of determining the Fair Market Value, then the average of the high bid
and low asked prices on the last Business Day before the date in question;
or
(d) If shares of Stock of the same class are not listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) and sales
prices or bid and asked prices therefor are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.21(b)
or Subparagraph 1.21(c) at the date of determining the Fair Market Value,
then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Subparagraph 1.21(a) or sales
prices or bid and asked prices therefor are reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Subparagraph 1.21(b)
or, Subparagraph 1.21(c) at the date of determining the Fair Market Value,
but the volume of trading is so low that the Board of Directors determines
in good faith that such prices are not indicative of the fair value of the
Stock, then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes notwithstanding the
provisions of Subparagraphs 1.21(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse and shall be determined on the date in question instead
of the last Business Day before the date in question. For purposes of the
redemption provided for in Subparagraph 10.3(d)(v), Fair Market Value shall have
the meaning and shall be determined as provided above; provided, however, that
the Committee, with respect to any such redemption, shall have the
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right to determine that the Fair Market Value for purposes of the redemption
should be an amount measured by the value of the shares of stock, other
securities, cash or property otherwise being received by holders of shares of
Stock in connection with the Restructure, and upon that determination the
Committee shall have the power and authority to determine Fair Market Value for
purposes of the redemption based upon the value of such shares of stock, other
securities, cash or property. Any such determination by the Committee shall be
conclusive for all purposes.
1.22 "Holder" means an Eligible Individual to whom an Award has been
granted.
1.23 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.24 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Incumbent Board.
1.25 "NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations, Inc.
1.26 "Non-employee Director" means a director of the Corporation who while
a director is not an Employee.
1.27 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Option Agreement to be an option other than an
Incentive Option.
1.28 "Non-Surviving Event" means an event of Restructure as described in
either subparagraph (b) or (c) of Paragraph 1.39.
1.29 "Normal Retirement" means the separation of the Holder from
employment with the Corporation and its Subsidiaries on account of retirement at
any time on or after the date on which the Holder reaches age sixty.
1.30 "Option Agreement" means an Award Agreement for an Incentive Option
or a Nonstatutory Option.
1.31 "Option" means either an Incentive Option or a Nonstatutory Option,
or both.
1.32 "Performance Period" means a period of one or more fiscal years of
the Corporation, beginning with the fiscal year for which Performance Units are
granted and over which performance is measured, for the purpose of determining
the payment value of Performance Units. A Performance Period shall not exceed
ten years.
1.33 "Performance Unit" means a unit representing a contingent right to
receive a specified amount of cash or shares of Stock at the end of a
Performance Period.
1.34 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a limited liability company, a partnership, a trust or other
entity. A Person, together with that Person's affiliates and associates (as
those terms are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
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1.35 "Plan" means the Pioneer Natural Resources Company Long-Term
Incentive Plan, as it may be amended from time to time.
1.36 "Reload Option" has the meaning given it in Paragraph 6.10.
1.37 "Restricted Stock Award" means the grant or purchase, on the terms
and conditions that the Committee determines or on the terms and conditions of
Section 5, of Stock that is nontransferable or subject to substantial risk of
forfeiture until specific conditions are met.
1.38 "Restructure" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any
other Person or of the Corporation, cash, or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other Person
or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or substantially all
of the assets of the Corporation (whether by sale, merger, consolidation,
liquidation or otherwise) to any Person whether effected as a single
transaction or a series of related transactions.
1.39 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act, or any successor rule, as it may be amended from time to time.
1.40 "SAR Exercise Price" has the meaning given it in Paragraph 1.45.
1.41 "Section 162(m)" means Section 162(m) of the Code and the rules and
regulations adopted from time to time thereunder, or any successor law or rule
as it may be amended from time to time.
1.42 "Securities Act" means the Securities Act of 1933.
1.43 "Stock" means Common Stock, or any other securities that are
substituted for the Stock as provided in Section 10.
1.44 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or over a price specified in the related Award Agreement (the "SAR EXERCISE
PRICE") that is not less than eighty-five percent of the Fair Market Value of
the Stock on the Date of Grant of the Stock Appreciation Right.
1.45 "Stockholder Approved Standard" means initially (a) total stockholder
return (Stock price 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 Stock or other securities, (k) the performance of the
Corporation in any of the items mentioned in clauses (a) through (j) in
comparison to the average performance of the companies included in the Standard
& Poors' Corporation 500 Composite Stock Price Index or successor index, or (l)
the performance of the Corporation in any of the items mentioned in clauses (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; and any other performance objective approved by the stockholders of the
Corporation in accordance with section 162(m).
1.46 "Subsidiary" means, with respect to any Person, any corporation,
limited partnership, limited liability company, or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by that Person.
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1.47 "Total Shares" has the meaning given it in Paragraph 10.2.
1.48 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners, or
in the selection of any other similar governing body.
SECTION 2.
SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of Paragraph 2.6
and Section 10 of the Plan, the aggregate number of shares of Stock that the
Corporation may have subject to outstanding Awards at one time under the Plan
shall be an amount equal to (a) ten percent of the total number of shares of
Common Stock Equivalents outstanding from time to time minus (b) 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
Corporation and its Subsidiaries.
2.2 Determination of Available Shares. In computing the total number of
shares of Stock subject to outstanding Awards at one time under the Plan, the
Committee shall count the number of shares of Stock subject to issuance upon
exercise of outstanding Options the number of shares of Stock equal to the
number of outstanding Stock Appreciation Rights, the number of shares of Stock
subject to outstanding Restricted Stock Awards to the extent such shares are
subject to a risk of forfeiture under the restrictions governing such Awards,
and the number of shares of Stock that equal the value of outstanding
Performance Units determined in each case as of the Date of Grant of each Award
(other than Awards designated to be paid only in cash), but shall not (except to
the extent subject to the risk of forfeiture under the restrictions governing
such Awards) count the number of shares of Stock that have been issued upon
prior exercise of Options, the number of shares of Stock that were subject to
previously settled Stock Appreciation Rights, the number of shares of Stock
issued under Restricted Stock Awards for which the risk of forfeiture has
lapsed, and the number of shares of Stock issued upon exercise or settlement of
Performance Units. The number of shares of Stock subject to awards under any
employee stock purchase plan of the Corporation during any offering period of
that plan shall equal the number of shares of Stock that would be issued using
(a) the fair market value of the Stock on the first day of the offering period
and (b) an aggregate purchase price equal to the total projected payroll
deductions during the authorized period based solely on the number of
participants and authorized payroll deduction amounts for those participants on
the first day of the offering period.
2.3 Restoration of Unused and Surrendered Shares. If Stock subject to any
Award is not issued or transferred, or ceases to be issuable or transferable for
any reason, including (but not exclusively) because an Award is forfeited,
terminated, expires unexercised, is settled in cash in lieu of Stock, or is
exchanged for other Awards, the shares of Stock that were subject to that Award
shall no longer be charged against the number of available shares and shall
again be available for issue, transfer, or exercise pursuant to Awards under the
Plan to the extent of such forfeiture, termination, expiration, settlement or
exchange.
2.4 Description of Shares. The shares to be delivered under the Plan shall
be made available from (a) authorized but unissued shares of Stock, (b) Stock
held in the treasury of the Corporation, or (c) previously issued shares of
Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.5 Registration and Listing of Shares. From time to time, the Board of
Directors and appropriate officers of the Corporation shall be and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons to
make shares of Stock available for issuance pursuant to Awards.
2.6 Reduction in Outstanding Shares of Stock. Nothing in this Section 2
shall impair the right of the Corporation to reduce the number of outstanding
shares of Stock pursuant to repurchases, redemptions, or otherwise; provided,
however, that no reduction in the number of outstanding shares of Stock shall
(a) impair the validity of any outstanding Award, whether or not that Award is
fully exercisable or fully vested or
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(b) impair the status of any shares of Stock previously issued pursuant to an
Award or thereafter issued pursuant to a then-outstanding Award as duly
authorized, validly issued, fully paid, and nonassessable shares.
2.7 Individual Limitations on Awards. No Person may be granted, during any
one-year period, (a) Awards (other than Awards designated to be paid only in
cash) with respect to more than 250,000 shares of Stock and (b) Awards
designated to be paid only in cash having a value determined on the Date of
Grant in excess of $2,500,000.
SECTION 3.
ADMINISTRATION OF THE PLAN
3.1 Committee. The Board of Directors shall administer the Plan with
respect to all Eligible Individuals or may delegate all or part of its duties
under this Plan to the Committee or to any officer or committee of officers of
the Corporation, subject in each case to such conditions and limitations as the
Board of Directors may establish and subject to the following sentence. Unless a
majority of the members of the Board of Directors determines otherwise: (a) the
Committee shall be constituted in a manner that satisfies the requirements of
Rule 16b-3, which Committee shall administer the Plan with respect to all
Eligible Individuals who are subject to Section 16 of the Exchange Act in a
manner that satisfies the requirements of Rule 16b-3; and (b) the Committee
shall be constituted in a manner that satisfies the requirements of Section
162(m), which Committee shall administer the Plan with respect to
"performance-based compensation" for all Eligible Individuals who are reasonably
expected to be "covered employees" as those terms are defined in Section 162(m).
The number of persons that shall constitute the Committee shall be determined
from time to time by a majority of all the members of the Board of Directors.
Except for references in Paragraphs 3.1, 3.2, and 3.3 and unless the context
otherwise requires, references herein to the Committee shall also refer to the
Board of Directors as administrator of the Plan for Eligible Individuals or to
the appropriate delegate of the Committee or the Board of Directors.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at
the pleasure of the Board of Directors, which shall have the power, at any time
and from time to time, to remove members from or add members to the Committee.
Removal from the Committee may be with or without cause. Any individual serving
as a member of the Committee shall have the right to resign from membership in
the Committee by at least three days written notice to the Board of Directors.
The Board of Directors, and not the remaining members of the Committee, shall
have the power and authority to fill vacancies on the Committee, however caused.
3.3 Meetings and Actions of Committee. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required, and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
as it may deem advisable for the conduct of its business that are not
inconsistent with the provisions of the Plan, the Certificate of Incorporation,
the by-laws of the Corporation, Rule 16b-3 so long as it is applicable, and
Section 162(m) so long as it is applicable.
3.4 Committee's Powers. Subject to the express provisions of the Plan and
any applicable law with which the Corporation intends the Plan to comply, the
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend, and rescind administrative and interpretive rules and regulations
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relating to the Plan, including without limitation to adopt and observe such
procedures concerning the counting of Awards against the Plan and individual
maximums as it may deem appropriate from time to time; (b) to determine the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted; (c) to determine the amount of cash and the number of shares of Stock,
Stock Appreciation Rights, Restricted Stock Awards, or Performance Units, or any
combination thereof, that shall be the subject of each Award; (d) to determine
the terms and provisions of each Award Agreement (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of shares of Stock issued or transferred pursuant
to any Award is restricted, (iii) the effect of termination of employment on the
Award, and (iv) the effect of approved leaves of absence (consistent with any
applicable regulations of the Internal Revenue Service); (e) to accelerate,
pursuant to Section 10, the time of exercisability of any Option or Stock
Appreciation Right that has been granted or the time of vesting or settlement of
any Restricted Stock Award or Performance Unit; (f) to construe the respective
Award Agreements and the Plan; (g) to make determinations of the Fair Market
Value of the Stock pursuant to the Plan; (h) to delegate its duties under the
Plan to such agents as it may appoint from time to time, subject to the second
sentence of Paragraph 3.1; and (i) to make all other determinations, perform all
other acts, and exercise all other powers and authority necessary or advisable
for administering the Plan, including the delegation of those ministerial acts
and responsibilities as the Committee deems appropriate subject in all respects
to the last two sentences of Paragraph 6.12. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan, in any
Award, or in any Award Agreement in the manner and to the extent it deems
necessary or desirable to carry the Plan into effect, and the Committee shall be
the sole and final judge of that necessity or desirability. The determinations
of the Committee on the matters referred to in this Paragraph 3.4 shall be final
and conclusive. The Committee shall not have the power to appoint members of the
Committee or to terminate, modify, or amend the Plan. Those powers are vested in
the Board of Directors.
3.5 Transferability of Awards. Notwithstanding any limitation on a
Holder's right to transfer an Award, the Committee may (in its sole discretion)
permit a Holder to transfer an Award, or may cause the Corporation to grant an
Award that otherwise would be granted to an Eligible Individual, in any of the
following circumstances: (a) pursuant to a qualified domestic relations order,
(b) to a trust established for the benefit of the Eligible Individual or one or
more of the children, grandchildren, or spouse of the Eligible Individual; (c)
to a limited partnership in which all the interests are held by the Eligible
Individual and that Person's children, grandchildren or spouse; or (d) to
another Person in circumstances that the Committee believes will result in the
Award continuing to provide an incentive for the Eligible Individual to remain
in the service of the Corporation or its Subsidiaries and apply his or her best
efforts for the benefit of the Corporation or its Subsidiaries. If the Committee
determines to allow such transfers or issuances of Awards, any Holder or
Eligible Individual desiring such transfers or issuances shall make application
therefor in the manner and time that the Committee specifies and shall comply
with such other requirements as the Committee may require to assure compliance
with all applicable laws, including securities laws, and to assure fulfillment
of the purposes of this Plan. The Committee shall not authorize any such
transfer or issuance if it may not be made in compliance with all applicable
federal, state and foreign securities laws. The granting of permission for such
an issuance or transfer shall not obligate the Corporation to register the
shares of Stock to be issued under the applicable Award.
SECTION 4.
ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the Plan only
to persons who are Eligible Individuals at the time of the grant thereof or in
connection with the severance or retirement of Eligible Individuals.
4.2 Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
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Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares or cash amounts subject to each of the Awards and shall
authorize and cause the Corporation to grant Awards in accordance with those
determinations.
4.3 Date of Grant. The date on which an Award is granted (the "DATE OF
GRANT") shall be the date specified by the Committee as the effective date or
date of grant of an Award or, if the Committee does not so specify, shall be the
date effective as of which the Committee adopts the resolution approving the
offer of an Award to an individual, including the specification of the number
(or method of determining the number) of shares of Stock and the amount (or
method of determining the amount) of cash to be subject to the Award, even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed or delivered until a
later time. In no event shall a Holder gain any rights in addition to those
specified by the Committee in its grant, regardless of the time that may pass
between the grant of the Award and the actual execution or delivery of the Award
Agreement by the Corporation or the Holder. The Committee may invalidate an
Award at any time before the Award Agreement is signed by the Holder (if
signature is required) or is delivered to the Holder (if signature is not
required), and such Award shall be treated as never having been granted.
4.4 Award Agreements. Each Award granted under the Plan shall be evidenced
by an Award Agreement that incorporates those terms that the Committee shall
deem necessary or desirable. More than one Award may be granted under the Plan
to the same Eligible Individual and be outstanding concurrently. If an Eligible
Individual is granted both one or more Incentive Options and one or more
Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he or she is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership or other non-corporate Subsidiary),
and (b) a person shall not be eligible to receive an Incentive Option if,
immediately before the time the Incentive Option is granted, that person owns
(within the meaning of Sections 422 and 424 of the Code) stock possessing more
than ten percent of the total combined voting power or value of all classes of
stock of the Corporation or a Subsidiary. Nevertheless, this Subparagraph 4.5(b)
shall not apply if, at the time the Incentive Option is granted, the Exercise
Price of the Incentive Option is at least one hundred and ten percent of Fair
Market Value and the Incentive Option is not, by its terms, exercisable after
the expiration of five years from the Date of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be deemed to
give any person a right to be granted an Award except pursuant to Section 5.
SECTION 5.
AWARDS TO NON-EMPLOYEE DIRECTORS
5.1 Ineligibility for Other Awards. Non-employee Directors shall not be
eligible to receive any Awards under the Plan other than the automatic Awards
specified in this Section 5.
5.2 Annual Grant of Restricted Stock. An annual Restricted Stock Award
(the "ANNUAL RESTRICTED STOCK AWARD") shall be made automatically to
Non-employee Directors as follows:
(a) Each Non-employee Director who is a Non-employee Director
immediately following the Effective Time of the Mergers shall automatically
receive hereunder 50% of the amount of the annual retainer fee to be paid
to such Non-employee Director as compensation for his services during the
1997 annual term as a Non-employee Director of the Corporation (the "ANNUAL
RETAINER") in the form of an Annual Restricted Stock Award rather than
cash.
(b) Commencing with the term year beginning with the 1998 annual
meeting of the Corporation's stockholders and each term year thereafter,
each Non-employee Director shall automatically receive
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hereunder 50% of the amount of the Annual Retainer be paid to such
Non-employee Director in the form of an Annual Restricted Stock Award.
(c) Notwithstanding the foregoing, each Non-employee Director may
elect, in his sole discretion, to automatically receive hereunder 100% of
the Annual Retainer in the form of an Annual Restricted Stock Award. Each
Non-employee Director may make such an election by giving notice of the
election to the Corporation on or before the date of the first meeting of
the Board of Directors of the annual term in which the Non-employee
Director desires to receive 100% of his Annual Retainer in the form of an
Annual Restricted Stock Award.
(d) Each Annual Restricted Stock Award shall be granted on the last
Business Day of the month during which the annual meeting of stockholders
of the Corporation is held; provided, however, that each Non-employee
Director receiving an Annual Restricted Stock Award pursuant to
Subparagraph 5.2(a) shall be granted that award on the last Business Day of
the month in which the Effective Time of the Mergers occurs.
(e) The total number of shares of Stock included in each Annual
Restricted Stock Award granted pursuant to Section 5 shall be determined by
dividing 50% or 100% (as appropriate) of the amount of the Annual Retainer
by the Fair Market Value of a share of Stock on the day the Annual
Restricted Stock Award is granted.
5.3 Available Stock. The automatic Awards specified in Paragraphs 5.2(a)
and (b) shall be made in the amounts specified in those Paragraphs only if the
number of shares of Stock available to be issued, transferred or exercised
pursuant to Awards under the Plan (as calculated in Section 2) is sufficient to
make all automatic grants required to be made by Paragraph 5.2 on the Date of
Grant of those automatic Awards. In the event that a lesser number of shares of
Stock are available to be issued, transferred, or exercised pursuant to Awards
under the Plan on the Date of Grant of the automatic Awards described Paragraphs
5.2, but their number is insufficient to permit the grant of the entire number
of shares specified in the automatic Awards, then the number of available shares
shall be apportioned equally among the automatic Awards made on that date, and
the number of shares apportioned to each automatic Award shall be the number of
shares automatically subject to that automatic Award.
5.4 Terms and Conditions of Automatic Award. Award Agreements for
Restricted Stock Awards to Non-employee Directors shall be in the form attached
as Exhibit A and, except as expressly provided in those Award Agreements, the
automatic Awards to Non-employee Directors shall not be subject to the
provisions of Section 10 or 11.
The restrictions with respect to Annual Restricted Stock Awards
granted pursuant to Subparagraph 5.2(a) and (b), shall lapse on all of the
shares subject to the Annual Restricted Stock Award on the earlier of the
next annual meeting of the stockholders of the Corporation or the first
anniversary of the Date of Grant so long as the Non-employee Director
remains a director of the Corporation after the Date of Grant through that
date.
5.5 Retention of Award, Termination. With respect to Annual Restricted
Stock Awards granted pursuant to Subparagraph 5.2(a) and (b), if a Non-employee
Director's services as a member of the Board of Directors are terminated at any
time and for any reason before the earlier of the next annual meeting of the
Corporation's stockholders or the first anniversary of the Date of Grant, a
portion of the shares of Stock granted pursuant to the applicable Award shall
vest. The number of whole shares of Stock that vest shall be determined by
multiplying the number of shares of Stock included in such Award by a fraction,
the denominator of which is the number of regularly scheduled director's
meetings to occur during the time period commencing as of the Date of the Grant
and ending as of the earlier of the next annual meeting or the first anniversary
of the Date of Grant and the numerator of which is the number of regularly
scheduled director's meetings that have occurred to that date.
5.6 Restrictions. Except as otherwise provided in the Plan, shares of
Stock received pursuant to a Restricted Stock Award may not be sold, assigned,
pledged, hypothecated, transferred, or otherwise disposed of until the
restrictions applicable to such Stock have lapsed pursuant to Subparagraph 5.4.
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5.7 Privileges of a Stockholder. A Non-Employee Director shall have all
voting, dividend, liquidation, and other rights with respect to Stock received
by him as a Restricted Stock Award under this Section in accordance with its
terms.
5.8 Retention as Director. Nothing contained in the Plan or in any
Restricted Stock Award granted under the Plan shall interfere with or limit in
any way the right of the stockholders of the Corporation to remove any
Non-employee Director from the Board in accordance with applicable law (and the
Corporation's governing documents) or confer upon any Non-employee Director any
right to continue in the service of the Corporation.
5.9 Enforcement of Restrictions. The Committee shall cause a legend to be
placed on the Stock certificates issued pursuant to each Restricted Stock Award
referring to the restrictions imposed in the Plan and, in addition, may in its
sole discretion require one or more of the following methods of enforcing such
restrictions:
(a) Requiring the Non-employee Director to keep the Stock
certificates, duly endorsed, in the custody of the Corporation while the
restrictions remain in effect; or
(b) Requiring that the Stock certificates, duly endorsed, be held in
the custody of a third party while the restrictions remain in effect.
5.10 Rights to Subscribe. If the Corporation shall at any time grant to
the holders of its Stock rights to subscribe pro rata for additional shares
thereof or for any other securities of the Corporation or of any other
corporation, there shall be reserved with respect to the shares then outstanding
pursuant to any Restricted Stock Award the Stock or other securities that the
Non-employee Director would have been entitled to subscribe for if immediately
prior to such grant the restrictions applicable to such Restricted Stock Award
had lapsed. Upon the lapse of all restrictions applicable to Stock held pursuant
to a Restricted Stock Award, the Non-employee Director shall be provided the
opportunity to subscribe for the additional shares or other securities issuable
with respect to such shares of Stock.
5.11 Tax Withholding. The Corporation shall have the right, subject to
applicable law, to require a Non-employee Director to pay to the Corporation the
amount necessary to satisfy the Corporation's current or future obligation to
withhold federal, state or local income or other taxes that the Non-employee
Director incurs by vesting of a Restricted Stock Award. Tax withholding
obligations in respect of Restricted Stock Awards to Non-employee Directors may
not be satisfied by the Corporation's withholding of Stock subject to the Award
or by the Non-employee Director's transfer of Stock to the Corporation.
SECTION 6.
TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Option Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Paragraph 10.1 and Section 11; provided, however, that the Committee may
authorize an Option Agreement that expressly contains terms and provisions that
differ from the terms and provisions of Section 11. The Committee may also
authorize an Option Agreement that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall apply to an Option Agreement unless the
Option Agreement expressly states that such term or provision applies.
6.1 Number of Shares. Each Option Agreement shall state the total number
of shares of Stock to which it relates.
6.2 Vesting. Each Option Agreement shall state the time, periods or other
conditions on which the right to exercise the Option or a portion thereof shall
vest and the number (or method of determining the number)
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of shares of Stock for which the right to exercise the Option shall vest at each
such time, period or satisfaction of condition.
6.3 Expiration of Options. Nonstatutory Options and Incentive Options may
be exercised during the term determined by the Committee and set forth in the
Option Agreement; provided that no Incentive Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Incentive Option.
6.4 Exercise Price. Each Option Agreement shall state the exercise price
per share of Stock (the "EXERCISE PRICE"). The exercise price per share of Stock
subject to an Incentive Option shall not be less than the greater of (a) the par
value per share of the Stock or (b) 100% of the Fair Market Value per share of
the Stock on the Date of Grant of the Option. The exercise price per share of
Stock subject to a Nonstatutory Option shall not be less than the greater of (a)
the par value per share of the Stock or (b) eighty-five percent of the Fair
Market Value per share of the Stock on the Date of Grant of the Option.
6.5 Method of Exercise. Each Option shall be exercisable only by written,
recorded electronic or other notice of exercise in the manner specified by the
Committee from time to time (the "EXERCISE NOTICE") delivered to the Corporation
or to the Person designated by the Committee during the term of the Option,
which notice shall (a) state the number of shares of Stock with respect to which
the Option is being exercised, (b) be signed or otherwise given by the Holder of
the Option or by the person authorized to exercise the Option in the event of
the Holder's death or disability, (c) be accompanied by the Exercise Price for
all shares of Stock for which the Option is exercised, unless provision for the
payment of the Exercise Price has been made pursuant to Paragraph 6.7 or 6.8 or
in another manner permitted by law and approved in advance by the Committee, and
(d) include such other information, instruments, and documents as may be
required to satisfy any other condition to exercise contained in the Option
Agreement. The Option shall not be deemed to have been exercised unless all of
the requirements of the preceding provisions of this Paragraph 6.5 have been
satisfied.
6.6 Incentive Option Exercises. During the Holder's lifetime, only the
Holder may exercise an Incentive Option. The Holder of an Incentive Option shall
immediately notify the Corporation in writing of any disposition of the Stock
acquired pursuant to the Incentive Option that would disqualify the Incentive
Option from the incentive option tax treatment afforded by Section 422 of the
Code. The notice shall state the number of shares disposed of, the dates of
acquisition and disposition of the shares, and the consideration received upon
that disposition.
6.7 Medium and Time of Payment. The Exercise Price of an Option shall be
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means (such as that specified in Paragraph 6.8) acceptable to the Committee, (b)
on the Committee's prior consent, with shares of Stock owned by the Holder
(including shares received upon exercise of the Option or restricted shares
already held by the Holder) and having a Fair Market Value at least equal to the
aggregate Exercise Price payable in connection with such exercise, or (c) by any
combination of clauses (a) and (b). If the Committee chooses to accept shares of
Stock in payment of all or any portion of the Exercise Price, then (for purposes
of payment of the Exercise Price) those shares of Stock shall be deemed to have
a cash value equal to their aggregate Fair Market Value determined as of the
date of the delivery of the Exercise Notice. If the Committee elects to accept
shares of restricted Stock in payment of all or any portion of the Exercise
Price, then an equal number of shares issued pursuant to the exercise shall be
restricted on the same terms and for the restriction period remaining on the
shares used for payment.
6.8 Payment with Sale Proceeds. In addition, at the request of the Holder
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised (either as a loan to the Holder or
from the proceeds of the sale of Stock issued pursuant to that exercise of the
Option), and the Corporation shall promptly cause the exercised shares to be
delivered to the brokerage firm. Such transactions shall be effected in
accordance with the procedures that the Committee may establish from time to
time.
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6.9 Reload Provisions. Options may contain a provision pursuant to which a
Holder who pays all or a portion of the Exercise Price of an Option or the tax
required to be withheld pursuant to the exercise of an Option by surrendering
shares of Stock shall automatically be granted an Option for the purchase of the
number of shares of Stock equal to the number of shares surrendered (a "RELOAD
OPTION"). The Date of Grant of the Reload Option shall be the date on which the
Holder surrenders the shares of Stock in respect of which the Reload Option is
granted. The Reload Option shall have an Exercise Price equal to the Fair Market
Value of a share of Stock on the Date of Grant of the Reload Option and shall
have a term that is no longer than the original term of the underlying Option.
6.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
otherwise provided in subparagraph 10.2(b), with respect to any Incentive Option
granted under this Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the date the
Incentive Option is granted. For purposes of this Paragraph 6.10 "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section 424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.
6.11 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
6.12 Modification, Extension and Renewal of Options. Subject to the terms
and conditions of and within the limitations of the Plan and any applicable law,
and any consent required by the last two sentences of this Paragraph 6.12, the
Committee may (a) modify, extend or renew outstanding Options granted under the
Plan, (b) accept the surrender of Options outstanding hereunder (to the extent
not previously exercised) and authorize the granting of new Options in
substitution for outstanding Options (to the extent not previously exercised),
and (c) amend the terms of an Incentive Option at any time to include provisions
that have the effect of changing the Incentive Option to a Nonstatutory Option.
Nevertheless, without the consent of the Holder, the Committee may not modify
any outstanding Options so as to specify a higher Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, materially alter or impair any rights of the Holder or
materially increase the obligations of a Holder under any Option theretofore
granted hereunder to that Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Paragraph 6.12.
6.13 Other Agreement Provisions. The Option Agreements authorized under
the Plan shall contain such provisions in addition to those required by the Plan
(including, without limitation, restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Option Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Option Agreement shall cover both an
Incentive Option and a Nonstatutory Option. Each Agreement relating to an
Incentive Option granted hereunder shall contain such limitations and
restrictions upon the exercise of the
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Incentive Option to which it relates as shall be necessary for the Incentive
Option to which such Agreement relates to constitute an incentive stock option,
as defined in Section 422 of the Code.
SECTION 7
STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 7 (to the extent each term and
condition applies to the form of Stock Appreciation Right) and also to the terms
and conditions set forth in Paragraph 10.1 and Section 11; provided, however,
that the Committee may authorize an Award Agreement relating to a Stock
Appreciation Right that expressly contains terms and provisions that differ from
the terms and provisions of Section 11. The Committee may also authorize an
Award Agreement relating to a Stock Appreciation Right that contains any or all
of the terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms
and provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Stock Appreciation Right unless the Award Agreement expressly states that such
term or provision applies.
7.1 Form of Right. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) without relation to
an Option.
7.2 Rights Related to Options. A Stock Appreciation Right granted pursuant
to an Option shall entitle the Holder, upon exercise, to surrender that Option
or any portion thereof, to the extent unexercised, and to receive payment of an
amount computed pursuant to Subparagraph 7.2(b). That Option shall then cease to
be exercisable to the extent surrendered. Stock Appreciation Rights granted in
connection with an Option shall be subject to the terms of the Award Agreement
governing the Option, which shall comply with the following provisions in
addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Paragraph 11.10, a Stock
Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to the
extent that the related Option is transferable. To the extent that an
Option has been exercised, the Stock Appreciation Rights granted in
connection with that Option shall terminate.
(b) Value of Right. Upon the exercise of a Stock Appreciation Right
related to an Option, the Holder shall be entitled to receive payment from
the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the Exercise Price of a
share of Stock specified in the related Option from the Fair Market
Value of a share of Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) The number of shares as to which that Stock Appreciation Right
has been exercised.
7.3 Right Without Option. A Stock Appreciation Right granted without
relationship to an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
(a) Number of Shares. Each Award Agreement shall state the total
number of shares of Stock to which the Stock Appreciation Right relates.
(b) Vesting. Each Award Agreement shall state the time, periods or
other conditions on which the right to exercise the Stock Appreciation
Right or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Stock Appreciation Right shall vest at each
such time, period or satisfaction of condition.
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(c) Expiration of Rights. Each Award Agreement shall state the date at
which the Stock Appreciation Rights shall expire if not previously
exercised.
(d) Value of Right. A Stock Appreciation Right granted without
relationship to an Option shall entitle the Holder, upon exercise of the
Stock Appreciation Right, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the SAR Exercise Price
from the Fair Market Value of a share of Stock on the date of exercise
of that Stock Appreciation Right, by
(ii) The number of rights as to which the Stock Appreciation Right
has been exercised.
7.4 Limitations on Rights. Notwithstanding Subparagraph 7.2(b) and
Subparagraph 7.3(d), the Committee may limit the amount payable upon exercise of
a Stock Appreciation Right. Any such limitation must be determined as of the
Date of Grant and be noted on the instrument evidencing the Stock Appreciation
Right.
7.5 Payment of Rights. Payment of the amount determined under Subparagraph
7.2(b) or Subparagraph 7.3(d) and Paragraph 7.4 may be made solely in whole
shares of Stock valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right or, in the sole discretion of the Committee, solely in cash
or a combination of cash and Stock. If the Committee decides to make full
payment in shares of Stock and the amount payable results in a fractional share,
payment for the fractional share shall be made in cash.
7.6 Other Agreement Provisions. The Award Agreements authorized relating
to Stock Appreciation Rights shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions or the removal
of restrictions upon the exercise of the Stock Appreciation Right and the
retention or transfer of shares thereby acquired) as the Committee may deem
advisable.
SECTION 8.
RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan (other than the
automatic Awards to Non-employee Directors pursuant to Section 5) shall comply
with, and the related Award Agreements shall be deemed to include, and be
subject to the terms and conditions set forth in this Section 8 and also to the
terms and conditions set forth in Paragraph 10.1 and Section 11; provided,
however, that the Committee may authorize an Award Agreement relating to a
Restricted Stock Award that expressly contains terms and provisions that differ
from the terms and provisions of Section 11. The Committee may also authorize an
Award Agreement relating to a Restricted Stock Award that contains any or all of
the terms and provisions of Paragraphs 10.2 and 10.3 or that contains terms and
provisions dealing with similar subject matter differently than do those
Paragraphs; nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any
such differing term or provision) shall apply to an Award Agreement relating to
a Restricted Stock Award unless the Award Agreement expressly states that such
term or provision applies.
8.1 Restrictions. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold, transferred or
otherwise alienated or hypothecated until the restrictions are removed or
expire.
(b) Conditions to Removal of Restrictions. Conditions to removal or
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer,
consultant, or advisor or achievement of performance objectives described
in the Award Agreement.
(c) Legend. Each certificate representing Restricted Stock Awards
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
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(d) Possession. At its sole discretion, the Committee may (i)
authorize issuance of a certificate for shares in the Holder's name only
upon lapse of the applicable restrictions, (ii) require the Corporation,
transfer agent or other custodian to retain physical custody of the
certificates representing Restricted Stock Awards during the restriction
period and may require the Holder of the Award to execute stock powers,
endorsed or in blank, for those certificates and deliver those stock powers
to the Corporation, transfer agent or custodian, or (iii) may require the
Holder to enter into an escrow agreement providing that the certificates
representing Restricted Stock Awards granted or sold pursuant to the Plan
shall remain in the physical custody of an escrow holder until all
restrictions are removed or expire. The Corporation may issue shares
subject to stop-transfer restrictions or may issue such shares subject only
to the restrictive legend described in subparagraph 8.1(c).
(e) Other Conditions. The Committee may impose other conditions on any
shares granted or sold as Restricted Stock Awards pursuant to the Plan as
it may deem advisable, including, without limitation, (i) restrictions
under the Securities Act or Exchange Act, (ii) the requirements of any
securities exchange upon which the shares or shares of the same class are
then listed, and (iii) any state securities law applicable to the shares.
8.2 Expiration of Restrictions. The restrictions imposed in Paragraph 8.1
on Restricted Stock Awards shall lapse as determined by the Committee and set
forth in the applicable Award Agreement, and the Corporation shall promptly
cause to be delivered to the Holder of the Restricted Stock Award a certificate
representing the number of shares for which restrictions have lapsed, free of
any restrictive legend relating to the lapsed restrictions. Each Restricted
Stock Award may have a different restriction period, in the discretion of the
Committee. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award. The
foregoing notwithstanding, no restriction not required by law shall remain in
effect for more than ten years after the date of the Award.
8.3 Changes in Accounting Rules. Notwithstanding any other provision of
the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Restricted Stock Awards shall
occur that, in the sole judgement of the Board of Directors, may have a material
adverse effect on the reported earnings, assets, or liabilities of the
Corporation, the Committee shall have the right and power to modify as necessary
any then outstanding Restricted Stock Awards as to which the applicable
restrictions have not been satisfied.
8.4 Rights as Stockholder. Subject to the provisions of Paragraphs 8.1 and
11.11, the Committee may, in its discretion, determine what rights, if any, the
Holder shall have with respect to the Restricted Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
8.5 Other Agreement Provisions. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 9.
PERFORMANCE UNITS
All Performance Units granted under the Plan shall comply with, and the
related Award Agreements shall be deemed to include and be subject to, the terms
and conditions set forth in this Section 9 (to the extent each term and
condition applies to the form of Performance Unit) and also to the terms and
conditions set forth in Paragraph 10.1 and Section 11; provided, however, that
the Committee may authorize an Award Agreement related to a Performance Unit
that expressly contains terms and provisions that differ from the terms and
provisions of Section 11. The Committee may also authorize an Award Agreement
related to a Performance Unit that contains any or all of the terms and
provisions of Paragraphs 10.2 and 10.3 or that contains terms and provisions
dealing with similar subject matter differently than do those Paragraphs;
nevertheless, no term or provision of Paragraph 10.2 or 10.3 (or any such
differing term or provision) shall
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apply to an Award Agreement related to a Performance Unit unless the Award
Agreement expressly states that such term or provision applies.
9.1 Multiple Grants. The Committee may make grants of Performance Units in
such a manner that more than one Performance Period is in progress
simultaneously. At or before the beginning of each Performance Period, the
Committee will establish the contingent value of each Performance Unit, if any,
for that Performance Period, which may vary depending on the degree to which
performance objectives established by the Committee are met.
9.2 Performance Standards. At or before the beginning of each Performance
Period, the Committee will (a) establish the beginning and ending dates of the
Performance Period, (b) establish for that Performance Period specific
performance objectives as the Committee (in its sole discretion) believes are
relevant to the Corporation's overall business objectives, (c) determine the
minimum and maximum value of a Performance Unit and the value of a Performance
Unit based on the degree to which performance objectives are achieved, exceeded
or not achieved, (d) determine a minimum performance level below which
Performance Units will be assigned a value of zero, and a maximum performance
level above which the value of Performance Units will not increase, and (e)
notify each Holder of a Performance Unit for that Performance Period in writing
of the established performance objectives and minimum, target, and maximum
Performance Unit value for that Performance Period.
9.3 Modification of Standards. If the Committee determines in its sole
discretion that the established performance measures or objectives are no longer
suitable to the Corporation's objectives because of a change in the
Corporation's business, operations, corporate structure, capital structure, or
other conditions the Committee deems to be material, the Committee may modify
the performance measures and objectives as it considers appropriate and
equitable.
9.4 Payment. The basis for payment of Performance Units for a given
Performance Period will be the achievement of those performance objectives
determined by the Committee at the beginning of the Performance Period. If
minimum performance is not achieved or exceeded for a Performance Period, no
payment will be made and all contingent rights will cease. If minimum
performance is achieved or exceeded, the value of a Performance Unit will be
based on the degree to which actual performance exceeded the pre-established
minimum performance standards. The amount of payment will be determined by
multiplying the number of Performance Units granted at the beginning of the
Performance Period by the final Performance Unit value. Payments will be made in
cash or Stock as soon as administratively possible following the close of the
applicable Performance Period.
9.5 Other Agreement Provisions. The Award Agreements, if any, authorized
relating to Performance Units shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions or the removal
of restrictions upon the transfer of shares thereby acquired) as the Committee
may deem advisable.
SECTION 10.
ADJUSTMENT PROVISIONS
The Committee may authorize an Award that contains any or all of the terms
and provisions of this Section 10 or, with respect to Paragraphs 10.2 and 10.3
that contains terms and provisions dealing with similar subject matter
differently than do those Paragraphs; nevertheless, no term or provision of
Paragraph 10.2 or 10.3 (or any such differing term or provision) shall apply to
an Award Agreement unless the Award Agreement expressly states that such term or
provision applies.
10.1 Adjustment of Awards and Authorized Stock. The terms of an Award, the
number of shares of Stock authorized pursuant to Paragraph 2.1 for issuance
under the Plan, and the number shares of Stock that
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constitute the individual limitations in Paragraph 2.7 shall be subject to
adjustment, from time to time, in accordance with the following provisions:
(a) If at any time or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock or otherwise) the
number of shares of Stock then outstanding into a greater number of shares
of Stock, then (i) the maximum number of shares of Stock available for the
Plan and for any individual as provided in Paragraph 2.1 and Paragraph 2.7,
respectively, shall be increased proportionately, and the kind of shares or
other securities available for the Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or securities)
that may be acquired under any Award shall be increased proportionately,
and (iii) the price (including Exercise Price) for each share of Stock (or
other kind of shares or unit of other securities) subject to then
outstanding Awards shall be reduced proportionately, without changing the
aggregate purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time or from time to time the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, (i) the maximum number of shares of Stock
available for the Plan and for any individual as provided in Paragraph 2.1
and Paragraph 2.7, respectively shall be decreased proportionately, and the
kind of shares or other securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of Stock (or other kind
of shares or securities) that may be acquired under any Award shall be
decreased proportionately, and (iii) the price (including Exercise Price)
for each share of Stock (or other kind of shares or unit of other
securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding
Awards and the price for each share of Stock subject to outstanding Awards
are required to be adjusted as provided in this Paragraph 10.1, the
Committee shall promptly prepare a notice setting forth, in reasonable
detail, the event requiring adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the change in price and
the number of shares of Stock, other securities, cash or property
purchasable subject to each Award after giving effect to the adjustments.
The Committee shall promptly give each Holder such a notice.
(d) Adjustments under Paragraph 10(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
10.2 Changes in Control. Upon the occurrence of a Change in Control, (a)
each Holder of an Option shall immediately be granted corresponding cash Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall immediately become fully vested and exercisable in full, including that
portion of any Stock Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a Change in Control is referred to herein
as the "TOTAL SHARES"); (c) the restriction period of any Restricted Stock Award
shall immediately be accelerated and the restrictions shall expire; and (d) 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 occurrence of the Change in Control)
in cash within thirty days following the Change in Control or in Stock effective
as of the Change in Control, for cash and stock-based Performance Units,
respectively. If a Change in Control involves a Restructure or occurs in
connection with a series of related transactions involving a Restructure and if
such Restructure is in the form of a Non-Surviving Event and as a part of such
Restructure shares of stock, other securities, cash or property shall be
issuable or deliverable in exchange for Stock, then the Holder of an Award shall
be entitled to purchase or receive (in lieu of the Total Shares that the Holder
would otherwise be
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entitled to purchase or receive), as appropriate for the form of Award, the
number of shares of stock, other securities, cash or property to which that
number of Total Shares would have been entitled in connection with such
Restructure (and, for Options, at an aggregate exercise price equal to the
Exercise Price that would have been payable if that number of Total Shares had
been purchased on the exercise of the Option immediately before the consummation
of the Restructure). Nothing in this Paragraph 10.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, nor shall the Holder forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control or
because the Holder's employment is terminated for any reason following a Change
in Control.
10.3 Restructure and No Change in Control. In the event a Restructure
should occur at any time while there is any outstanding Award hereunder and that
Restructure does not occur in connection with a Change in Control or in
connection with a series of related transactions involving a Change in Control,
then:
(a) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(b) neither any outstanding Stock Appreciation Rights nor any
outstanding Options shall immediately become fully vested and exercisable
in full merely because of the occurrence of the Restructure;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated and the restrictions expire merely because of
the occurrence of the Restructure;
(d) the target payout opportunity attainable under the Performance
Units will not be deemed to have been fully earned for all Performance
Periods merely because of the occurrence of the Restructure; and
(e) at the option of the Committee, the Corporation may (but shall not
be required to) take any one or more of the following actions:
(i) grant each Holder of an Option corresponding Stock or cash
Stock Appreciation Rights;
(ii) accelerate in whole or in part the time of the vesting and
exercisability of any one or more of the outstanding Stock Appreciation
Rights and Options so as to provide that those Stock Appreciation Rights
and Options shall be exercisable before, upon, or after the consummation
of the Restructure;
(iii) accelerate in whole or in part the expiration of some or all
of the restrictions on any Restricted Stock Award so that the Stock
subject to that Restricted Stock Award shall be owned by the Holder
without restriction or risk of forfeiture;
(iv) treat the outstanding Performance Units as having fully or
partially met their targets and pay, in full or in part, the targeted
payout.
(v) if the Restructure is in the form of a Non-Surviving Event,
cause the surviving entity to assume in whole or in part any one or more
of the outstanding Awards upon such terms and provisions as the
Committee deems desirable; or
(vi) 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, as such payment may be reduced for tax withholding obligations
as contemplated in the section governing the particular form of Award,
in an amount equal to:
(A) for Options and Stock Appreciation Rights granted in
connection with Options, the excess of (1) the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructure, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed over (2) the
Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not granted in connection with
an Option, the excess of (1) the Fair Market Value, determined as of
the date immediately preceding the consumma-
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tion of the Restructure, of the aggregate number of shares of Stock
subject to the Award and as to which the Award is being redeemed over
(2) the Fair Market Value of the number of shares of Stock on the
Date of Grant;
(C) for Restricted Stock Awards, the Fair Market Value,
determined as of the date immediately preceding the consummation of
the Restructure, of the aggregate number of shares of Stock subject
to the Award and as to which the Award is being redeemed; and
(D) for Performance Units, the amount per Performance Unit as
the Committee in its sole discretion may determine (which may be zero
dollars).
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Paragraph 10.3. In the event of any election
or action taken by the Corporation pursuant to this Paragraph 10.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner effect the validity or enforceability of any
action taken by the Corporation and the Committee under this Paragraph 10.3,
including, without limitation, any redemption of an Award as of the consummation
of a Restructure. Any cash payment to be made by the Corporation pursuant to
this Paragraph 10.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any such redemption shall be effective upon the consummation of the
Restructure notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructure
that is in the form of a Non-Surviving Event and as a part of that Restructure
shares of stock, other securities, cash or property shall be issuable or
deliverable in exchange for Stock, then the Holder of the Award shall thereafter
be entitled to purchase or receive (in lieu of the number of shares of Stock
that the Holder would otherwise be entitled to purchase or receive) the number
of shares of stock, other securities, cash or property to which such number of
shares of Stock would have been entitled in connection with the Restructure
(and, for Options, at an aggregate exercise price equal to the Exercise Price
that would have been payable if that number of Total Shares had been purchased
on the exercise of the Option immediately before the consummation of the
Restructure).
10.4 Notice of Change in Control or Restructure. The Corporation shall
attempt to keep all Holders informed with respect to any Change in Control or
Restructure or of any potential Change in Control or Restructure to the same
extent that the Corporation's stockholders are informed by the Corporation of
any such event or potential event.
SECTION 11.
ADDITIONAL PROVISIONS
11.1 Termination of Employment. Subject to the last sentence of Paragraph
10.2, if a Holder is an Eligible Individual because the Holder is an Employee
and if that employment relationship is terminated for any reason other than
Normal Retirement or that Holder's death or Disability, then the following
provisions shall apply to all Awards held by that Holder that were granted
because that Holder was an Employee:
(a) If the termination is by the Holder's employer, then the following
provisions shall apply: (i) if the termination is in breach of the terms
and provisions of any written employment agreement between that Holder and
the Holder's employer, then all Awards held by that Holder shall become
immediately exercisable, all restrictions on those Awards shall immediately
lapse, and the Awards shall survive the termination of employment; or (ii)
if the termination is not in breach of the terms and provisions of any
written employment agreement between that Holder and the Holder's employer
(or if there is no existing written employment agreement between that
Holder and the Holder's employer), then that portion, if any, of any and
all Awards held by that Holder that are not yet exercisable (or for which
restrictions have
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not lapsed) as of the date of the termination shall become null and void as
of the date of the termination; provided, however, that the portion, if
any, of any and all Awards held by that Holder which are exercisable (or
for which restrictions have lapsed) as of the date of such termination
shall survive such termination.
(b) If such termination is by the Holder, then the following
provisions shall apply: (i) if the termination is in breach of the terms
and provisions of any written employment agreement between that Holder and
the Holder's employer or if there is no existing written employment
agreement between that Holder and the Holder's employer, then any and all
Awards held by that Holder, whether or not then exercisable and whether or
not restrictions thereon have lapsed (except in full), shall become null
and void as of the date of the termination; or (ii) if the termination is
in accordance with a right of termination granted to a Holder pursuant to
the terms and provisions of any written employment agreement between that
Holder and his employer, then all Awards held by that Holder shall become
immediately exercisable (and all restrictions thereon shall lapse) and
shall survive the termination of employment.
With respect to any Option or Stock Appreciation Right that survives the
termination of employment pursuant to this Paragraph 11.1, the right to exercise
that Option or Stock Appreciation Right shall terminate in all cases on the
180th day following the last date of employment with the Corporation or its
Subsidiary.
11.2 Other Loss of Eligibility. If a Holder is an Eligible Individual
because the Holder is serving in a capacity other than as an Employee and if
that capacity is terminated for any reason other than the Holder's death, then
that portion, if any, of any and all Awards held by the Holder that were granted
because of that capacity which are not yet exercisable (or for which
restrictions have not lapsed) as of the date of the termination shall become
null and void as of the date of the termination; provided, however, that the
portion, if any, of any and all of the Awards held by the Holder that are
exercisable (or for which restrictions have lapsed) as of the date of the
termination shall survive the termination.
11.3 Death. Upon the death of a Holder, then any and all Awards held by
the Holder that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of the Holder's death shall become null and void as of
the date of death; provided, however, that the portion, if any, of any and all
Awards held by the Holder that are exercisable as of the date of death shall be
exercisable by that Holder's legal representatives, legatees or distributees for
a period of the lesser of (a) the remainder of the term of the Award or (b) 180
days following the date of the Holder's death. Any portion of an Award not
exercised upon the expiration of the periods specified in (a) or (b) shall be
null and void. Except as expressly provided in this Paragraph 11.3, all Awards
held by a Holder shall not be exercisable after the death of that Holder.
11.4 Retirement. If a Holder is an Eligible Individual because the Holder
is an Employee and if that employment relationship is terminated by reason of
the Holder's Normal Retirement, then the portion, if any, of any and all Awards
held by the Holder that are not yet exercisable (or for which restrictions have
not lapsed) as of the date of that retirement shall become null and void as of
the date of retirement; provided, however, that the portion, if any, of any and
all Awards held by the Holder that are exercisable as of the date of that
retirement shall survive the retirement for their original term.
11.5 Disability. If a Holder is an Eligible Individual because the Holder
is an Employee and if that employment relationship is terminated by reason of
the Holder's Disability, then the portion, if any, of any and all Awards held by
the Holder that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of that termination for Disability shall become null and
void as of the date of termination; provided, however, that the portion, if any,
of any and all Awards held by the Holder that are exercisable as of the date of
that termination shall survive the termination for its original term and shall
be exercisable by the Holder, his guardian, or his legal representative.
"Disability" shall have the meaning given it in the employment agreement of the
Holder; provided, however, that if that Holder has no employment agreement,
"Disability" shall mean a physical or mental impairment of sufficient severity
that, in the opinion of the Corporation, either the Holder is unable to continue
performing the duties he performed before such impairment or the Holder's
condition entitles him to disability benefits under any insurance or employee
benefit plan of the Corporation or
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its Subsidiaries and that impairment or condition is cited by the Corporation as
the reason for termination of the Holder's employment.
11.6 Leave of Absence. With respect to an Award, the Committee may, in its
sole discretion, determine that any Holder who is on leave of absence for any
reason will be considered to still be in the employ of the Corporation, provided
that rights to that Award during a leave of absence will be limited to the
extent to which those rights were earned or vested when the leave of absence
began.
11.7 Transferability of Awards. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferrable other than by will or the laws of descent
and distribution, except as permitted in accordance with Paragraph 3.5.
11.8 Forfeiture and Restrictions on Transfer. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and stockholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent holder of the shares of Stock
who is bound by that Award Agreement.
11.9 Delivery of Certificates of Stock. Subject to Paragraph 11.10, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested; (b) a Stock
Appreciation Right has been exercised and upon receipt by the Corporation of any
tax withholding as may be requested; (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested; and (d) performance objectives have been
achieved during a Performance Period relating to a Performance Unit for Stock.
The value of the shares of Stock, cash or notes transferable because of an Award
under the Plan shall not bear any interest owing to the passage of time, except
as may be otherwise provided in an Award Agreement. If a Holder is entitled to
receive certificates representing Stock received for more than one form of Award
under the Plan, separate Stock certificates shall be issued with respect to each
such Award and for Incentive Options and Nonstatutory Stock Options separately.
11.10 Conditions to Delivery of Stock. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award or Performance Unit, the Corporation may, as a condition precedent to the
exercise of such Option or Stock Appreciation Right or vesting of any Restricted
Stock Award or Performance Unit, require from the Holder of the Award (or in the
event of his death, his legal representatives, heirs, legatees, or distributees)
such written representations, if any, concerning the Holder's intentions with
regard to the retention or disposition of the shares of Stock being acquired
pursuant to the Award and such written covenants and agreements, if any, as to
the manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder (or
in the event of the Holder's death, his legal representatives, heirs, legatees,
or distributees) will not involve a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable state or
federal statute or regulation, or any rule of any applicable securities exchange
or securities association, as then in effect.
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11.11 Certain Directors and Officers. With respect to Holders who are
directors or officers of the Corporation or any Subsidiary and who are subject
to Section 16(b) of the Exchange Act, Awards shall contain such other terms and
conditions as may be required by Rule 16b-3 unless the majority of the Board of
Directors or the Holder has determined not to have the Award comply with Rule
16b-3.
11.12 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT
SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
11.13 Legend for Restrictions on Transfer. Each certificate representing
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Paragraph 11.13, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT ENTITLED
"PIONEER NATURAL RESOURCES COMPANY LONG-TERM INCENTIVE PLAN" AS ADOPTED BY
PIONEER NATURAL RESOURCES COMPANY (THE "CORPORATION") ON ,
1997, AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND [HOLDER]
DATED , , AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE
DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A COPY
OF SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
11.14 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 10. Nevertheless,
dividends and dividend equivalent rights may be extended to and made part of any
Award denominated in Stock or units of Stock, subject to such terms, conditions,
and restrictions as the Committee may establish. The Committee may also
establish rules and procedures for the crediting of interest on deferred cash
payments and dividend equivalents for deferred payment denominated in Stock or
units of Stock.
11.15 Furnish Information. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
11.16 Obligation to Exercise. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
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11.17 Adjustments to Awards. Subject to the general limitations set forth
in Sections 6, 7 and 10, the Committee may make any adjustment in the exercise
price of, the number of shares subject to or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding Nonstatutory Option or
Stock Appreciation Right and regranting a Nonstatutory Option or Stock
Appreciation Right. Such adjustment shall be made by amending, substituting or
regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such
amendment, substitution or regrant may result in terms and conditions that
differ from the terms and conditions of the original Nonstatutory Option or
Stock Appreciation Right. The Committee may not, however, impair the rights of
any Holder to previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent. If such action is effected by amendment,
the effective date of such amendment shall be the date of the original grant.
11.18 Remedies. The Corporation shall be entitled to recover from a Holder
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
11.19 Information Confidential. As partial consideration for the granting
of each Award hereunder, the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
In the event any breach of this promise comes to the attention of the Committee,
it shall take into consideration that breach in determining whether to recommend
the grant of any future Award to that Holder, as a factor militating against the
advisability of granting any such future Award to that individual.
11.20 Consideration. No Option or Stock Appreciation Right shall be
exercisable, no restriction on any Restricted Stock Award shall lapse, and no
Performance Unit shall be settled in Stock with respect to a Holder unless and
until the Holder shall have paid cash or property to, or performed services for,
the Corporation or any of its Subsidiaries that the Committee believes is equal
to or greater in value than the par value of the Stock subject to such Award.
11.21 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Award, the amount that the Committee deems necessary to satisfy the
Corporation's or its Subsidiary's current or future obligation to withhold
federal, state or local income or other taxes that the Holder incurs by
exercising an Award. Upon the exercise of an Award requiring tax withholding, a
Holder may (a) direct the Corporation to withhold from the shares of Stock to be
issued to the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value at date of
exercise) to satisfy the Corporation's tax withholding obligations, based on the
shares' Fair Market Value as of the date of exercise; or (c) deliver sufficient
cash to the Corporation to satisfy its tax withholding obligations. Holders who
elect to use such a stock withholding feature must make the election at the time
and in the manner that the Committee prescribes. The Committee may, at its sole
option, deny any Holder's request to satisfy withholding obligations through
Stock instead of cash. In the event the Committee subsequently determines that
the aggregate Fair Market Value (as determined above) of any shares of Stock
withheld as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency.
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SECTION 12.
DURATION AND AMENDMENT OF PLAN
12.1 Duration. No Awards may be granted hereunder after the date that is
ten (10) years from the date the last amendment to this Plan involving an
increase in authorized shares is approved by the stockholders of the
Corporation.
12.2 Amendment. The Board of Directors may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever,
and may amend any provision of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions therefrom, the Code, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the regulations promulgated under the Code or
ERISA, or any other law, rule or regulation that may affect the Plan. The Board
of Directors may also amend, modify, suspend or terminate the Plan for the
purpose of meeting or addressing any changes in other legal requirements
applicable to the Corporation or the Plan or for any other purpose permitted by
law. The Plan may not be amended without the consent of the holders of a
majority of the shares of Stock then outstanding to increase materially the
aggregate number of shares of Stock that may be issued under the Plan (except
for adjustments pursuant to Section 10 of the Plan).
SECTION 13.
GENERAL
13.1 Application of Funds. The proceeds received by the Corporation from
the sale of shares pursuant to Awards shall be used for general corporate
purposes.
13.2 Right of the Corporation and Subsidiaries to Terminate Employment.
Nothing contained in the Plan, or in any Award Agreement, shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary,
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate his or her employment at any time.
13.3 No Liability for Good Faith Determinations. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission, or determination taken or made in good faith with respect to the
Plan or any Award granted under it, and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
13.4 Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
13.5 Exclusion From Pension and Profit-Sharing Compensation. By acceptance
of an Award (whether in Stock or cash), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation or bonus in
determining the amount of any payment under any pension, retirement or other
employee benefit plan of the
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Corporation or any Subsidiary. In addition, each beneficiary of a deceased
Holder shall be deemed to have agreed that the Award will not affect the amount
of any life insurance coverage, if any, provided by the Corporation or a
Subsidiary on the life of the Holder that is payable to the beneficiary under
any life insurance plan covering employees of the Corporation or any Subsidiary.
13.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock or other property to the Holder, or to
his legal representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
13.7 Unfunded Plan. Insofar as it provides for Awards of cash and Stock,
the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Holders who are entitled to cash, Stock, other property or
rights thereto under the Plan, any such accounts shall be used merely as a
bookkeeping convenience. The Corporation shall not be required to segregate any
assets that may at any time be represented by cash, Stock, other property or
rights thereto, nor shall the Plan be construed as providing for such
segregation, nor shall the Corporation nor the Board of Directors nor the
Committee be deemed to be a trustee of any cash, Stock, other property or rights
thereto to be granted under the Plan. Any liability of the Corporation to any
Holder with respect to a grant of cash, Stock, other property or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and any Award Agreement; no such obligation of the
Corporation shall be deemed to be secured by any pledge or other encumbrance on
any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
13.8 No Guarantee of Interests. The Board of Directors, the Committee and
the Corporation do not guarantee the Stock of the Corporation from loss or
depreciation.
13.9 Payment of Expenses. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
13.10 Corporation Records. Records of the Corporation or its Subsidiaries
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
13.11 Information. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished, all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
13.12 Corporation Action. Any action required of the Corporation shall be
by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
13.13 Severability. If any provision of this Plan is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein. If any of the terms or provisions of this Plan
conflict with the requirements of Rule 16b-3 (as those terms or provisions are
applied to Eligible Individuals who are subject to Section 16(b) of the Exchange
Act) or Section 422 of the Code (with respect to Incentive Options), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 or Section 422 of the Code
unless the Committee has determined that the Plan should not comply with such
requirements. With respect to Incentive Options, if this Plan does not contain
any provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with
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the same force and effect as if that provision had been set out at length
herein; provided, further, that, to the extent any Option that is intended to
qualify as an Incentive Option cannot so qualify, that Option (to that extent)
shall be deemed a Nonstatutory Option for all purposes of the Plan.
13.14 Notices. Whenever any notice is required or permitted hereunder
other than any Exercise Notice or notice to exercise a Stock Appreciation Right,
such notice must be in writing and personally delivered or sent by mail. Any
such notice required or permitted to be delivered hereunder shall be deemed to
be delivered on the date on which it is personally delivered, or, whether
actually received or not, on the third Business Day after it is deposited in the
United States mail, certified or registered, postage prepaid, addressed to the
person who is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith. The Corporation or
a Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any Exercise Notice or notice to exercise a Stock Appreciation Right shall be
valid only when it is in fact received by the Corporation or the Person it
designates in accordance with procedures that the Committee may adopt from time
to time.
13.15 Waiver of Notice. Any person entitled to notice hereunder may waive
such notice.
13.16 Successors. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors, and assigns, and upon the Committee, and its successors.
13.17 Headings. The titles and headings of Sections and Paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
13.18 Governing Law. All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the State of
Delaware except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law shall
govern. The obligation of the Corporation to sell and deliver Stock hereunder is
subject to applicable laws and to the approval of any governmental authority
required in connection with the authorization, issuance, sale, or delivery of
such Stock.
13.19 Word Usage. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, Pioneer Natural Resources Company, acting by and
through its officer hereunto duly authorized, has executed this Pioneer Natural
Resources Company Long-Term Incentive Plan this day of , 1997.
PIONEER NATURAL RESOURCES
COMPANY
By:
----------------------------------
Scott D. Sheffield
President and Chief Executive
Officer
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EXHIBIT A TO THE
PIONEER NATURAL RESOURCES COMPANY
LONG-TERM INCENTIVE PLAN
FORM OF
PIONEER NATURAL RESOURCES COMPANY
RESTRICTED STOCK AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
, 19
Dear
1. Restricted Stock Award. Pioneer Natural Resources Company, a Delaware
corporation (the "CORPORATION"), hereby grants to you an aggregate of
shares of Common Stock, par value $.01 per share, of the
Corporation (the "RESTRICTED SHARES") pursuant to Section 5 of the Pioneer
Natural Resources Company Long-Term Incentive Plan, a copy of which is attached
hereto and made a part hereof for all purposes (the "PLAN"). This award is
subject to your acceptance of and agreement to all of the terms, conditions and
restrictions described in the Plan that are applicable to Awards under Section 5
and to your acceptance of and agreement to the further terms, conditions and
restrictions described in this Restricted Stock Award Agreement (the
"AGREEMENT"). To the extent that any provision of this Agreement conflicts with
the expressly applicable terms of the Plan, it is hereby acknowledged and agreed
that those terms of the Plan shall control and, if necessary, the applicable
provisions of this Agreement shall be hereby deemed amended so as to carry out
the purpose and intent of the Plan. Terms that have their initial letters
capitalized but that are not otherwise defined in this Agreement shall have the
meanings given them in the Plan in effect as of the date of this Agreement.
2. Escrow of Restricted Shares. The Corporation shall issue in your name a
certificate or certificates for the Restricted Shares and retain that
certificate or those certificates during the restriction period. You shall
execute stock powers in blank for those certificates and deliver those stock
powers to the Corporation. You hereby agree that the Corporation shall hold the
Restricted Shares and the related stock powers pursuant to the terms of this
Agreement until such time as the Restricted Shares are either delivered to you
or canceled pursuant to Section 4 of this Agreement.
3. Ownership of Restricted Shares. You are entitled to all the rights of
absolute ownership of the Restricted Shares, including the right to vote those
shares and to receive dividends thereon if, as, and when declared by the Board
of Directors of the Corporation, subject, however, to the terms, conditions and
restrictions described in the Plan and in this Agreement.
4. Restrictions. Until the restrictions set forth in this Section 4 shall
lapse pursuant to Section 5, the Restricted Shares that are still subject to
such restrictions:
(a) shall not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, and
(b) shall be returned to the Corporation, and all of your rights to
those Restricted Shares shall terminate without any payment of
consideration by the Corporation, if your continuous service as a director
of the Corporation shall terminate for any reason, except as provided in
Section 5(a) or (b). If your interest in any Restricted Shares shall
terminate pursuant to this Section 4(b), those Restricted Shares shall be
cancelled; provided, however, that the portion, if any, of any and all of
the Restricted Shares held by you for which restrictions have lapsed as of
the date of the termination shall survive the termination.
5. Lapse of Restrictions. Except as set forth in the following
paragraphs of this Section 5, the restrictions set forth in Section 4 shall
lapse with respect to the Restricted Shares in cumulative increments of the
total shares of Stock subject to the Award, with restrictions relating to
one-third of the shares lapsing on , 199 , another one-third
lapsing on , 199 , and the last one-third lapsing on
, 199 , so long as you have remained a director of the
Corporation
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continuously after the Date of Grant through each applicable lapse date.
The Date of Grant of this Restricted Stock Award is the date first set
forth above.
(a) Any provision of Section 4 to the contrary notwithstanding, if, having
been in the continuous service as a director of the Corporation since the Date
of Grant of this Restricted Stock Award, you shall while in that status die or
terminate that status by reason of Disability (hereafter defined), then the
restrictions set forth in Section 4 shall lapse on the date of that event.
(b) Notwithstanding any provision of Section 5 or any other provision
hereunder to the contrary, all of the restrictions set forth in Section 4 shall
lapse with respect to all Restricted Shares upon and simultaneously with any
Change in Control of the Corporation.
(c) As used in this Section 5, Disability means a physical or mental
impairment of sufficient severity such that, in the opinion of a physician
selected by the Corporation, you are unable to continue to serve as a director
of the Corporation and that in fact results in the cessation of your service.
6. Code Section 83(b) Election. You agree as an express condition to the
grant of this Restricted Stock Award that you will make an election under
Section 83(b) of the Internal Revenue Service Code of 1986, as amended, to
include an amount in income in respect of the Restricted Shares.
7. Cash Payment. Upon your making the Section 83(b) election described in
Section 6, the Corporation shall pay you in cash, on or before the date such tax
payments are due and payable to the taxing authority, an amount that is
sufficient to pay all federal, state, and local income taxes imposed with
respect to the Restricted Shares and to this cash payment, which amount shall be
conclusively determined by the Corporation's independent certified public
accountants based on the estimated federal, state, and local income taxes that
you will incur by reason of the Restricted Shares and this cash payment to be
made under this Section 7. You agree to provide the Corporation and its
independent accountants all information that they may request to calculate such
payments.
8. Agreement Respecting Taxes. You agree that:
(a) You will pay to the Corporation, or make arrangements satisfactory to
the Corporation regarding payment of, any federal, state or local taxes of any
kind required by law to be withheld by the Corporation with respect to the
Restricted Shares; provided, however, that you shall not be entitled or
permitted to satisfy this obligation by the Corporation's withholding of Stock
that is subject to this Agreement or by your transfer of other shares of Stock
to the Corporation; and
(b) the Corporation shall, to the extent permitted by law, have the right
to deduct from any payments of any kind otherwise due to you, including, but not
limited to, those to be made pursuant to Section 7 hereof, any federal, state or
local taxes of any kind required by law to be withheld with respect to those
Restricted Shares.
9. Adjustment of Shares. The number of shares of Restricted Stock subject
to this Agreement shall be adjusted as provided in Paragraph 10.1 of the Plan.
10. Agreement Respecting Securities Act of 1933. You hereby represent and
agree that you will not sell Restricted Shares except pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or pursuant
to an exemption from registration under the Securities Act.
11. Restrictive Legend. You hereby acknowledge that the certificate or
certificates for the Restricted Shares bear a legend noted conspicuously thereon
referring to the terms, conditions and restrictions described in the Plan and in
this Agreement. Any attempt to dispose of any Restricted Shares in contravention
of the terms, conditions and restrictions described in the Plan or in this
Agreement shall be ineffective.
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If you accept this Restricted Stock Award and agree to the foregoing terms
and conditions, please so confirm by signing and returning the duplicate copy of
this Agreement enclosed for that purpose.
Very truly yours,
PIONEER NATURAL RESOURCES COMPANY
By:
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
- ------------------------------
[Date]
ATTEST:
- ------------------------------
The foregoing Award is accepted by me in
(city), (state), as of the day of
19 , and I hereby agree to the terms, conditions and
restrictions set forth above and in the Plan.
- ------------------------------------------------------
Witness
- ------------------------------------------------------
[Date]
30
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APPENDIX VIII
PIONEER NATURAL RESOURCES COMPANY
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Pioneer Natural Resources Company Employee
Stock Purchase Plan (the "Plan") is to provide eligible employees with an
incentive to advance the interests of Pioneer Natural Resources Company (the
"Company") by affording an opportunity to purchase stock of the Company at a
favorable price.
2. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee (the "Committee") of, and appointed by, the Board of Directors of the
Company (the "Board"). Subject to the provisions of the Plan, the Committee
shall interpret and construe the Plan and all options granted under the Plan,
shall make such rules as it deems necessary for the proper administration of the
Plan, shall make all other determinations necessary or advisable for the
administration of the Plan, including the determination of eligibility to
participate in the Plan and the amount of a participant's option under the Plan,
and shall correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option granted under the Plan in the manner
and to the extent that the Committee deems desirable to carry the Plan or any
option into effect. The Committee shall, in its sole discretion exercised in
good faith, make such decisions or determinations and take such actions as it
deems appropriate, and all such decisions, determinations and actions taken or
made by the Committee pursuant to this and the other paragraphs of the Plan
shall be conclusive on all parties. The Committee shall not be liable for any
decision, determination or action taken in good faith in connection with the
administration of the Plan.
3. PARTICIPATING COMPANIES. Each present and future parent or subsidiary
corporation of the Company (within the meaning of Sections 424(e) and (f) of the
Internal Revenue Code of 1986, as amended (the "Code")) that is eligible by law
to participate in the Plan shall be a "Participating Company" during the period
that such corporation is such a parent or subsidiary corporation; provided,
however, that the Committee may at any time and from time to time, in its sole
discretion, terminate a Participating Company's Plan participation. Any
Participating Company may, by appropriate action of its Board of Directors,
terminate its participation in the Plan. Transfer of employment among the
Company and Participating Companies (and among any other parent or subsidiary
corporation of the Company) shall not be considered a termination of employment
hereunder.
4. ELIGIBILITY. All employees of the Company and the Participating
Companies who have been employed by the Company or any Participating Company
(including any predecessor company) for at least six (6) months (including any
authorized leave of absence meeting the requirements of Treasury Regulation ss.
1.421-7(h)(2)) as of the applicable date of grant (defined below) and who are
customarily employed at least 20 hours per week and at least 5 months per year
shall be eligible to participate in the Plan; provided, however, that no option
shall be granted to an employee if such employee, immediately after the option
is granted, owns stock possessing five percent or more of the total combined
voting power or value of all classes of stock of the Company or of its parent or
subsidiary corporation (within the meaning of Sections 423(b)(3) and 424(d) of
the Code) ("Eligible Employee").
5. STOCK SUBJECT TO THE PLAN. Subject to the provisions of paragraph 12
(relating to adjustment upon changes in stock), the aggregate number of shares
which may be sold pursuant to options granted under the Plan shall not exceed
750,000 shares of the authorized $.01 par value common stock of the Company
("Stock"), which shares may be unissued shares or reacquired shares or shares
bought on the market for purposes of the Plan. Should any option granted under
the Plan expire or terminate prior to its exercise in full, the shares
theretofore subject to such option may again be subject to an option granted
under the Plan. Any shares which are not subject to outstanding options upon the
termination of the Plan shall cease to be subject to the Plan.
6. GRANT OF OPTIONS. (a) General Statement; "Date Of Grant"; "Option
Period"; "Date Of Exercise". Upon the effective date of the Plan and continuing
while the Plan remains in force, the Company shall
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offer options under the Plan to all Eligible Employees to purchase shares of
Stock. Except as otherwise determined by the Committee, these options shall be
granted on January 1, 1998, and, thereafter, on the first day of January of each
subsequent year (each of which dates is herein referred to as a "date of
grant"). The term of each option granted shall be for a period of nine (9)
months beginning on the date of grant and ending on September 30 (each such nine
(9)-month period is herein referred to as an "option period"). The last day of
each option period is herein referred to as a "date of exercise." The number of
shares subject to each option shall be the quotient of the sum of the payroll
deductions withheld on behalf of each participant in accordance with
subparagraph 6(b), the payments made by such participant pursuant to
subparagraph 6(f) during the option period and any amount carried forward from
the preceding option period pursuant to subparagraph 7(a), divided by the
"option price" (defined in subparagraph 7(b)) of the Stock, excluding all
fractions; provided, however, that the maximum number of shares that may be
subject to any option may not exceed one thousand (1000) (subject to adjustment
as provided in paragraph 12).
(b) Election To Participate; Participate Deduction Authorization. Except as
provided in subparagraph 6(f), an Eligible Employee may participate in the Plan
only by means of payroll deduction. Except as provided in subparagraph 6(g),
each Eligible Employee who elects to participate in the Plan (each such
participating Eligible Employee being a "participant") shall deliver to the
Company, within the time period prescribed by the Committee, a written payroll
deduction authorization on a form prepared by the Committee whereby he gives
notice of his election to participate in the Plan as of the next following date
of grant, and whereby he designates an integral percentage or specific amount of
his "eligible compensation" (as defined in subparagraph 6(d)) to be deducted
from his compensation for each pay period and credited to a book entry account
established in his name. The designated percentage or specific amount may not
result in a deduction during any payroll period of an amount less than $20.00.
The designated percentage or specific amount may not exceed either of the
following: (i) 15% of the amount of eligible compensation from which the
deduction is made; or (ii) an amount which will result in noncompliance with the
$25,000 limitation stated in subparagraph 6(e).
(c) Changes In Payroll Authorization. Except as provided in subparagraph
8(a), the payroll deduction authorization referred to in subparagraph 6(b) may
not be changed during the option period.
(d) "Eligible Compensation" Defined. The term "eligible compensation" means
the gross (before taxes are withheld) total of all wages, salaries, commissions,
and bonuses received during the option period, except that such term shall
include elective contributions made on an employee's behalf by the Company or a
Participating Company that are not includable in income under Section 125 or
Section 402(e)(3) of the Code. Notwithstanding the foregoing, "eligible
compensation" shall not include (i) employer contributions to or payments from
any deferred compensation program, whether such program is qualified under
Section 401(a) of the Code (other than amounts considered as employer
contributions under Section 402(e)(3) of the Code) or nonqualified, (ii) amounts
realized from the receipt or exercise of a stock option that is not an incentive
stock option within the meaning of Section 422 of the Code, (iii) amounts
realized at the time property described in Section 83 of the Code is freely
transferable or no longer subject to a substantial risk of forfeiture, (iv)
amounts realized as a result of an election described in Section 83(b) of the
Code, and (v) any amount realized as a result of a disqualifying disposition
within the meaning of Section 421(a) of the Code.
(e) $25,000 Limitation. No Eligible Employee shall be granted an option
under the Plan to the extent such grant would permit him to purchase Stock under
the Plan and under all other employee stock purchase plans of the Company and
its parent and subsidiary corporations (as such terms are defined in Section
424(e) and (f) of the Code) to accrue at a rate which exceeds $25,000 of Fair
Market Value of Stock (determined at the time the option is granted) for each
calendar year in which any such option granted to such employee is outstanding
at any time (within the meaning of Section 423(b)(8) of the Code).
(f) Leaves of Absence. During a paid leave of absence approved by the
Company and meeting the requirements of Treasury Regulation ss. 1.421-7(h)(2), a
participant's elected payroll deductions shall continue. If a participant takes
an unpaid leave of absence that is approved by the Company or a Participating
Company and meets the requirements of Treasury Regulation ss. 1.421-7(h)(2),
then such participant may continue participation in the Plan by cash payments to
the Company on his normal pay days equal to the
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reduction in his payroll deductions caused by his leave. If a participant on
such leave fails to make such payments, or if a participant takes a leave of
absence that is not described in the preceding provisions of this subparagraph
6(f), then the Committee shall determine whether the participant shall be
considered to have withdrawn from the Plan pursuant to the provisions of
paragraph 8 hereof or whether the participant's payroll deductions shall remain
subject to the Plan and used to exercise options on the next following date of
exercise.
(g) Continuing Election. A participant (i) who has elected to participate
in the Plan pursuant to subparagraph 6(b) as of a date of grant and (ii) who
takes no action to change or revoke such election as of the next following date
of grant and/or as of any subsequent date of grant prior to any such respective
date of grant, shall be deemed to have made the same election, including the
same attendant payroll deduction authorization, for such next following and/or
subsequent date(s) of grant as was in effect for the date of grant for which he
made such election to participate. A participant who wants to discontinue
participation in the Plan for a subsequent option period shall deliver to the
Company a notice of withdrawal pursuant to paragraph 8, at least thirty (30)
days prior to the beginning of the option period.
7. EXERCISE OF OPTIONS. (a) General Statement. Each Eligible Employee who
is a participant in the Plan, automatically and without any act on his part,
shall be deemed to have exercised his option on each date of exercise to the
extent that the cash balance then in his account under the Plan is sufficient to
purchase at the "option price" (as defined in subparagraph 7(b)) whole shares of
Stock. Any balance remaining in his account after payment of the purchase price
of those whole shares shall be carried forward and used toward the purchase of
whole shares in the next following option period.
(b) "Option Price" Defined. The option price per share of Stock to be paid
by each Eligible Employee on each exercise of his option shall be an amount
equal to the lesser of 85% of the Fair Market Value of the Stock on the date of
exercise or on the date of grant. For all purposes under the Plan, the "Fair
Market Value" of a share of Stock means, for a particular day:
(i) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on that
business day or, if no such sale takes place on that business day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to unlisted trading privileges on
that securities exchange or, if no such closing prices are available for
that day, the last reported sale price, regular way, on the composite tape
of that exchange on the last business day before the date in question; or
(ii) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in subparagraph (i) and if sales
prices for shares of Stock of the same class in the over-the-counter market
are reported by the National Association of Securities Dealers, Inc.
Automated Quotations, Inc. ("NASDAQ") National Market System (or a similar
system then in use) at the date of determining the Fair Market Value, then
the last reported sales price so reported on that business day or, if no
such sale takes place on that business day, the average of the high bid and
low asked prices so reported or, if no such prices are available for that
day, the last reported sale price so reported on the last business day
before the date in question; or
(iii) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in subparagraph (i) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
subparagraph (ii), and if bid and asked prices for shares of Stock of the
same class in the over-the-counter market are reported by NASDAQ (or, if
not so reported, by the National Quotation Bureau Incorporated) at the date
of determining the Fair Market Value, then the average of the high bid and
low asked prices on that business day or, if no such prices are available
for that day, the average of the high bid and low asked prices on the last
business day before the date in question; or
(iv) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in subparagraph (i) and sales
prices or bid and asked prices therefor are not reported by
3
<PAGE> 333
NASDAQ (or the National Quotation Bureau Incorporated) as provided in
subparagraph (ii) or subparagraph (iii) at the date of determining the Fair
Market Value, then the value determined in good faith by the Committee,
which determination shall be conclusive for all purposes; or
(v) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in subparagraph (i) or sales prices
or bid and asked prices therefor are reported by NASDAQ (or the National
Quotation Bureau Incorporated) as provided in subparagraph (ii) or
subparagraph (iii) at the date of determining the Fair Market Value, but
the volume of trading is so low that the Board of Directors determines in
good faith that such prices are not indicative of the fair value of the
Stock, then the value determined in good faith by the Committee, which
determination shall be conclusive for all purposes notwithstanding the
provisions of subparagraphs (i), (ii) or (iii).
(c) Delivery of Share Certificates. As soon as practicable after each date
of exercise, the Company shall arrange for the delivery to each participant, as
appropriate, of a certificate representing the number of whole shares of Stock
purchased upon exercise of the option. In the event the Company is required to
obtain from any commission or agency authority to issue any shares of Stock
hereunder, the Company shall seek to obtain such authority. Inability of the
Company to obtain from any such commission or agency authority which counsel for
the Company deems necessary for the lawful issuance of any shares of Stock shall
relieve the Company from liability to any participant in the Plan except to
return to the participant the amount of the balance in the participant's
account. The Company may cause the Stock certificates issued in connection with
the exercise of options under the Plan to bear such legend or legends, and the
Company may take such other actions, as it deems appropriate in order to reflect
the provisions of this subparagraph 7(c) and to assure compliance with
applicable securities laws. Neither the Company nor the Committee shall have any
liability with respect to a delay in the delivery of Stock or a certificate
pursuant to this subparagraph 7(c).
8. WITHDRAWAL FROM THE PLAN. (a) General Statement. Any participant may
withdraw in whole from the Plan at any time at least thirty (30) days before the
exercise date relating to a particular option period. Partial withdrawals shall
not be permitted. A participant who wishes to withdraw from the Plan must timely
deliver to the Company a notice of withdrawal on a form prepared by the
Committee. The Company, promptly following the time when the notice of
withdrawal is delivered, shall refund to the participant the amount of the cash
balance in his account under the Plan; and thereupon, automatically and without
any further act on his part, his payroll deduction authorization and his
interest in unexercised options under the Plan shall terminate.
(b) Eligibility Following Withdrawal. A participant who withdraws from the
Plan shall not be eligible to participate in the Plan during the then current
option period (if any), but shall be eligible to participate again in the Plan
in a subsequent option period (provided that he is otherwise an Eligible
Employee at such time).
9. TERMINATION OF EMPLOYMENT. If the employment of a participant terminates
for any reason whatsoever, his participation in the Plan automatically and
without any act on his part shall terminate as of the date of the termination of
his employment. The Company shall refund to him the amount of the cash balance
in his account under the Plan, and thereupon his interest in unexercised options
under the Plan shall terminate.
10. RESTRICTION UPON ASSIGNMENT OF OPTION. An option granted under the Plan
shall not be pledged, assigned or transferred otherwise than by will or the laws
of descent and distribution. Each option shall be exercisable, only by the
participant to whom granted during such participant's lifetime. The Company
shall not recognize and shall be under no duty to recognize any assignment or
purported assignment by a participant of his option or of any rights under his
option, and any such attempt may be treated by the Company as an election to
withdraw from the Plan the notice for which has been delivered to the Company.
11. NO RIGHTS OF STOCKHOLDER UNTIL CERTIFICATE ISSUES. With respect to
shares of Stock subject to an option, an participant shall not be deemed to be a
stockholder, and he shall not have any of the rights or privileges of a
stockholder. A participant shall have the rights and privileges of a stockholder
upon, but not until, a certificate for shares has been issued on his behalf
following exercise of his option.
12. (a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number or kind of outstanding shares of Stock subject to options
hereunder effected without receipt of consideration
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therefor by the Company, by reason of a stock dividend, stock split,
combination, exchange of shares or other recapitalization, merger, or otherwise,
in which the Company is the surviving corporation, an appropriate and
proportionate adjustment shall be made in the number or kind of shares as to
which options may be granted hereunder. A corresponding adjustment changing the
number or kind of shares allocated to unexercised options or portions thereof,
which shall have been granted prior to any such change, shall likewise be made.
Any such adjustment, however, in the outstanding options shall be made without
change in the total price applicable to the unexercised portion of the option
but with a corresponding adjustment, if appropriate, in the price for each share
of Stock covered by the option. In the event of a dispute concerning such
adjustment, the decision of the Committee shall be conclusive. The number of
shares subject to any option granted hereunder shall be automatically reduced by
any fraction included therein which results from any adjustment made pursuant to
this Section 12(a).
(b) CHANGE OF CONTROL. Further, in the event of a Change of Control (as
defined below) of the Company, then the Committee shall, at its option, (i)
substitute for the shares of the Company subject to the unexercised portions of
such outstanding options an appropriate number of shares of each class of stock
or other securities of the reorganized or merged or consolidated corporation
which were distributed to the stockholders of the Company with respect to the
same class of shares of the Company (or, as appropriate, in the case of an
acquisition of the Company by another corporation, substitute the shares of the
acquiring corporation for the shares of the Company), or (ii) cancel all such
options as of the effective date of any such transaction by giving notice to
each holder thereof or his personal representative of its intention to do so and
by permitting the holders thereof to exercise all such outstanding options,
without regard to any other provisions of the Plan, during the 30-day period
immediately preceding such effective date, or (iii) allow the options granted
under the Plan to remain outstanding without any modifications or amendments.
(c) CHANGE OF CONTROL DEFINED. As used in Section 12(b), "Change of
Control" means the occurrence of any of the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (x) the then outstanding shares
of Common Stock of the Company (the "Outstanding Company Common Stock") or
(y) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control; (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (D) any acquisition
by any corporation pursuant to a transaction which complies with clauses
(A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the date of this Plan, constitute the
Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Company; provided, however, that any individual becoming a director of the
Company after the date of this Plan whose election or appointment by the
Board of Directors, or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Incumbent
Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or an acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior
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to such Business Combination beneficially own, directly or indirectly, more
than 50% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of the Company or the corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership resulting solely from
ownership of the Company that existed prior to the Business Combination and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
13. USE OF FUNDS; NO INTEREST PAID. All funds received or held by the
Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction, and may be used for any corporate
purpose. No interest shall be paid to any participant or credited to his account
under the Plan.
14. TERM OF THE PLAN. The Plan shall be effective as of January 1, 1998,
provided the Plan is approved by the stockholders of the Company within 12
months of the date of adoption by the Board. Notwithstanding any provision in
the Plan, no option granted under the Plan shall be exercisable prior to such
stockholder approval, and, if the stockholders of the Company do not approve the
Plan within 12 months after its adoption by the Board, then the Plan shall
automatically terminate. If not sooner terminated under the provisions of
paragraph 15, the Plan shall terminate upon and no further options shall be
granted after December 31, 2007.
15. AMENDMENT OR TERMINATION THE PLAN. The Board in its discretion may
terminate the Plan at any time with respect to any shares for which options have
not theretofore been granted. The Board shall have the right to alter or amend
the Plan or any part thereof from time to time; provided, that no change in any
option theretofore granted may be made which would impair the rights of the
participant without the consent of such participant; and provided, further, that
the Board may not make any alteration or amendment which would materially
increase the benefits accruing to participants under the Plan, increase the
aggregate number of shares which may be issued pursuant to the provisions of the
Plan (other than as a result of the anti-dilution provisions of the Plan),
change the class of individuals eligible to receive options under the Plan,
extend the term of the Plan, cause options issued under the Plan to fail to meet
the requirements for employee stock purchase plans as defined in Section 423 of
the Code, or otherwise modify the requirements as to eligibility for
participation in the Plan without the approval of the stockholders of the
Company.
16. SECURITIES LAWS. The Company shall not be obligated to issue any Stock
pursuant to any option granted under the Plan at any time when the shares
covered by such option have not been registered under the Securities Act of
1933, as amended, and such other state and federal laws, rules or regulations as
the Company or the Committee deems applicable and, in the opinion of legal
counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. Further, all Stock acquired pursuant to the Plan shall be
subject to the Company's policy or policies, if any, concerning compliance with
securities laws and regulations, as the same may be amended from time to time.
17. NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall
be construed to prevent the Company or any subsidiary from taking any corporate
action which is deemed by the Company or such subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
6
<PAGE> 336
the Plan or any award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company or any subsidiary as a result of
any such action.
EXECUTED this day of , 1997.
Pioneer Natural Resources Company
By:
Name:
Title:
7
<PAGE> 337
PIONEER NATURAL RESOURCES COMPANY
<TABLE>
<S> <C>
(Parker & Parsley LOGO)
(MESA LOGO) PARKER & PARSLEY PETROLEUM COMPANY
</TABLE>
JOINT PROXY STATEMENT
AND PROSPECTUS
JUNE , 1997
The Information Agents Are:
<TABLE>
<S> <C>
FOR MESA: FOR PARKER & PARSLEY:
Morrow & Co., Inc. D. F. King & Co., Inc.
909 Third Avenue 77 Water Street
New York, New York 10022 New York, New York 10005
Telephone: (800) (800) 769-5414
566-9058
</TABLE>
<PAGE> 338
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL, inter alia, authorizes a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) because the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with the suit or proceeding if the person acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe his conduct was unlawful. Similar indemnity
is authorized against expenses (including attorneys fees) actually and
reasonably incurred in defense or settlement of any pending, completed or
threatened action or suit by or in the right of the corporation if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and provided further that
(unless a court of competent jurisdiction otherwise provides) the person shall
not have been adjudged liable to the corporation. The indemnification may be
made only as authorized in each specific case upon a determination by the
stockholders or disinterested directors that indemnification is proper because
the indemnitee has met the applicable standard of conduct.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any capacity,
or arising out of his status as such, whether or not the corporation would
otherwise have the power to indemnify him. Pioneer will maintain policies
insuring the officers and directors of Pioneer and its subsidiaries against
certain liabilities for actions taken in their capacities, including liabilities
under the Securities Act.
Article Thirteen of Pioneer's Charter provides as follows:
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (1) for any breach of
the directors duty of loyalty to the Corporation or its stockholders, (2)
for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (3) under Section 174 of the
General Corporation Law of the State of Delaware, as the same exists or as
such provision may hereafter be amended, supplemented or replaced, or (4)
for any transaction from which the director derived an improper personal
benefit. Any repeal or amendment of this Article Thirteenth by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of
the Corporation arising from an act or omission occurring prior to the time
of such repeal or amendment. In addition to the circumstances in which a
director of the Corporation is not personally liable as set forth in the
foregoing provisions of this Article Thirteenth, a director shall not be
liable to the Corporation or its stockholders to such further extent as
permitted by any law hereafter enacted, including without limitation any
subsequent amendment to the General Corporation Law of the State of
Delaware. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation required
by law or by this Certificate of Incorporation, the affirmative vote of the
holders of not less than two-thirds of the shares of the Corporation then
entitled to be voted in an election of directors, voting together as a
single class, shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article Thirteenth.
II-1
<PAGE> 339
Article Twelve of Pioneer's Charter provides as follows:
The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (1) is or was a director or officer of
the Corporation or (2) while a director or officer of the Corporation, is
or was serving at the request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent, or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other
enterprise, to the fullest extent permitted under the General Corporation
Law of the State of Delaware, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position
of director or officer of the Corporation or elects to continue to serve as
a director or officer of the Corporation while this Article Twelfth is in
effect. Any repeal or amendment of this Article Twelfth shall be
prospective only and shall not limit the rights of any such director or
officer or the obligations of the Corporation with respect to any claim
arising from or related to the services of such director or officer in any
of the foregoing capacities prior to any such repeal or amendment to this
Article Twelfth. Such right shall include the right to be paid by the
Corporation expenses (including attorneys' fees) incurred in defending any
such proceeding in advance of its final disposition to the maximum extent
permitted under the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended. If a claim for indemnification
or advancement of expenses hereunder is not paid in full by the Corporation
within sixty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and, if successful
in whole or in part, the claimant shall also be entitled to be paid the
expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification or advancement of costs of defense are not
permitted under the General Corporation Law of the State of Delaware, but
the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors or any
committee thereof or disinterested directors, independent legal counsel, or
stockholders) to have made a determination that indemnification of, or
advancement of expenses to, the claimant is permissible in the
circumstances nor an actual determination by the Corporation (including its
board of directors or any committee thereof or disinterested directors,
independent legal counsel or stockholders) that such indemnification or
advancement of expenses is not permissible shall be a defense to the action
or create a presumption that such indemnification or advancement of
expenses is not permissible. In the event of the death of any person having
a right of indemnification under the foregoing provisions, such right shall
inure to the benefit of his or her heirs, executors, administrators, and
personal representatives. The rights conferred above shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, by-law, resolution of stockholders or directors, agreement, or
otherwise.
The Corporation may additionally indemnify any employee or agent of
the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an
action, suit, or proceeding, and any inquiry or investigation that could
lead to such an action, suit, or proceeding.
INDEMNIFICATION AGREEMENTS
Pioneer will enter into indemnification agreements with each of its
directors and officers. These agreements will require Pioneer to indemnify its
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. Each indemnification agreement will also provide
that, upon a potential change in control of Pioneer and if the indemnified
director or officer so requests, Pioneer 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 Pioneer has indemnified the director
or officer.
II-2
<PAGE> 340
Furthermore, under the terms of the Indemnification Agreements, Pioneer
will agree to pay all reasonable expenses incurred by or on behalf of an
Indemnitee in connection with any Proceeding, whether brought by or in the right
of Pioneer or otherwise, in advance of any determination with respect to
entitlement to indemnification and within 15 days after the receipt by Pioneer
of a written request from such Indemnitee for such payment. In the
Indemnification Agreements, each Indemnitee will agree that he or she will
reimburse and repay Pioneer for any expenses so advanced to the extent that it
shall ultimately be determined that he or she is not entitled to be indemnified
by Pioneer against such expenses.
The Indemnification Agreements will also include provisions that specify
the procedures and presumptions which are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the nature
of the procedures specified in the Indemnification Agreements varies depending
on whether there has occurred a "Change in Control" or a "Potential Change in
Control" (each as defined in the Indemnification Agreements) of Pioneer.
The Company intends to maintain in effect director's and officers'
liability insurance policies providing customary coverage for its directors and
officers against losses resulting from wrongful acts committed by them in their
capacities as directors and officers of the Company.
The above discussion of Pioneer's Charter and Bylaws and of Section 145 of
the DGCL is not intended to be exhaustive and is respectively qualified in its
entirety by the Pioneer Charter and Bylaws and such statute.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
as of April 6, 1997, by and among Mesa, MOC, MXP
Reincorporation Corp. and Parker & Parsley (included in
the Joint Proxy Statement/Prospectus as Appendix I).
3.1 -- Amended and Restated Certificate of Incorporation of
Pioneer Natural Resources Company.
3.2 -- Amended and Restated Bylaws of Pioneer Natural Resources
Company as adopted June 24, 1997.
4.1 -- Specimen Stock Certificate for the Common Stock of
Pioneer Natural Resources Company.
4.2 -- Certificate of Designations of Series A 8% Cumulative
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.3 -- Specimen Stock Certificate for the Series A 8% Cumulative
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.4 -- Form of Certificate of Designations of Series B
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.5 -- Specimen Stock Certificate for the Series B Convertible
Preferred Stock of Pioneer Natural Resources Company.
+4.6 -- Indenture dated July 2, 1996, among MOC, as Issuer, Mesa,
as a Guarantor, and Harris Trust and Savings Bank as
Trustee relating to the 11 5/8% Senior Subordinated
Discount Notes Due 2006 (incorporated by reference to
Exhibit 4.17 of Mesa's Form 10-Q dated August 13, 1996).
+4.7 -- Indenture dated July 2, 1996, among MOC, as Issuer, Mesa,
as a Guarantor, and Harris Trust and Savings Bank as
Trustee relating to 10 5/8% Senior Subordinated Notes Due
2006 (incorporated by reference to Exhibit 4.18 Mesa's
Form 10-Q dated August 13, 1996).
</TABLE>
II-3
<PAGE> 341
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+4.8 -- Indentures relating to $50,000,000 principal amount of
8 1/2% Convertible Subordinated Debentures due 2005 of
Dorchester Master Limited Partnership ($3,762,000 million
principal amount of which were outstanding and held by
nonaffiliates at December 31, 1996) and $100,000,000
principal amount of 9 1/2% Senior Notes due 2000 of
Bridge Oil (U.S.A.) Inc. ($2,063,000 principal amount of
which were outstanding at December 31, 1996) have been
omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. Parker & Parsley hereby agrees to furnish a copy of
such indenture to the Securities and Exchange Commission
upon request. (incorporated by reference to Parker &
Parsley's Form 10-K dated December 31, 1996).
+4.9 -- Indenture (the "Indenture") relating to $150,000,000
principal amount of 8 7/8% Senior Notes Due 2005 of the
Company and to $150,000,000 principal amount of 8 1/4%
Senior Notes Due 2007 of Parker & Parsley (incorporated
by reference to Exhibit 4.1 to Parker & Parsley's Current
Report of Form 8-K dated April 12, 1995, Commission File
No. 1-10695).
+4.10 -- Form of 8 7/8% Senior Notes Due 2005 dated as of April
12, 1995, in the aggregate principal amount of
$150,000,000, together with Officers' Certificate dated
April 12, 1995, establishing the terms of the 8 7/8%
Senior Notes Due 2005 of Parker & Parsley pursuant to the
Indenture (incorporated by reference to Exhibit 4.2 to
Parker & Parsley's Quarterly Report on Form 10-Q for the
period ended June 30, 1995, Commission File No. 1-10695).
+4.11 -- Form of 8 1/4% Senior Notes Due 2007 dated as of August
22, 1995, in the aggregate principal amount of
$150,000,000, together with Officers' Certificate dated
August 22, 1995, establishing the terms of the 8 1/4%
Senior Notes Due 2007 of Parker & Parsley pursuant to the
Indenture (incorporated by reference to Exhibit 1.2 to
Parker & Parsley's Current Report on Form 8-K dated
August 17, 1995, Commission File No. 1-10695).
5.1 -- Opinion of Baker & Botts, L.L.P. regarding legality of
securities being requested.
8.1 -- Tax Opinion of Baker & Botts, L.L.P. regarding certain
Federal income tax matters.
8.2 -- Tax Opinion of Vinson & Elkins, L.L.P. regarding certain
Federal income tax matters.
+9.1 -- Shareholder Agreement, dated as of April 6, 1997, between
Mesa, Boone Pickens and Parker & Parsley. (incorporated
by reference to Exhibit 2.4 of Mesa's Form 8-K filed
April 8, 1997).
+9.2 -- Shareholders Agreement, dated as of April 6, 1997,
between DNR and Mesa (incorporated by reference to
Exhibit 2.2 of Mesa's Form 8-K filed April 8, 1997).
+10.1 -- Contract dated January 3, 1928, between Colorado
Interstate Gas Company and Amarillo Oil Company (the "B"
Contract) (incorporated by reference to Exhibit 10.1 to
Pioneer Corporation's Form 10-K dated December 31, 1985).
+10.2 -- Amendments to the "B" Contract (incorporated by reference
to Exhibit 10.2 to Pioneer Corporation's Form 10-K dated
December 31, 1985.
+10.3 -- Gathering Charge Agreement dated January 20, 1984, as
amended, with respect to the "B" Contract (incorporated
by reference to Exhibit 10.3 to Pioneer Corporation's
Form 10-K dated December 31, 1985).
+10.4 -- Agreement of Compromise and Settlement dated May 29,
1987, between the Partnership and Colorado Interstate Gas
Company (Confidential Treatment Requested) (incorporated
by reference to Exhibit 10(s) to Mesa Limited
Partnership's Form 10-K dated December 31, 1987).
</TABLE>
II-4
<PAGE> 342
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.5 -- Agreement of Sale between Pioneer Corporation and Cabot
Corporation dated August 29, 1984 (incorporated by
reference to Exhibit 10.5 to Pioneer Corporation's Form
10-K dated December 31, 1985).
+10.6 -- Settlement Agreement dated March 15, 1989, by and among
MESA Operating Limited Partnership and MESA Limited
Partnership, et al, Energas Company and the City of
Amarillo (incorporated by reference to Exhibit 10(k) to
Mesa Limited Partnership's form 10-K dated December 31,
1990).
+10.7 -- Gas Purchase Agreement dated December 1, 1989, between
Williams Natural Gas Company and Mesa Operating Limited
Partnership acting on behalf of itself and as agent for
Mesa Midcontinent Limited Partnership (incorporated by
reference to Exhibit 10.1 to Registration Statement of
Mesa Limited Partnership on Form S-3, Registration No.
33-32978).
+10.8 -- "B" Contract Production Allocation Agreement dated July
29, 1991 and effective as of January 1, 1991, between
Colorado Interstate Gas Company and Mesa Operating
Limited Partnership (incorporated by reference to Exhibit
10(r) to Mesa's Form 10-K dated December 31, 1991).
+10.9 -- Amendment to "B" Contract Production Allocation Agreement
effective as of January 1, 1993, between Colorado
Interstate Gas Company and Mesa Operating Limited
Partnership (incorporated by reference to Exhibit 10.24
to Mesa's Registration Statement on Form S-1,
Registration No. 033-51909).
+10.10 -- Amended Supplemental Stipulation and Agreement between
Colorado Interstate Gas Company and Mesa Operating
Limited Partnership dated June 19, 1991 (incorporated by
reference to Exhibit 10(w) to Mesa Limited Partnership's
Registration Statement on Form S-4, Registration No.
33-42102).
+10.11 -- Amended Peak Day Gas Purchase Agreement dated effective
June 19, 1991, between Colorado Interstate Gas Company
and Mesa Operating Limited Partnership (incorporated by
reference to Exhibit 10(t) to Mesa's Form 10-K dated
December 31, 1991).
+10.12 -- Omnibus Amendment to Collateral Instruments to
Supplemental Stipulation and Agreement dated June 19,
1991, between Colorado Interstate Gas Company and Mesa
Operating Limited Partnership (incorporated by reference
to Exhibit 10(u) to Mesa's Form 10-K dated December 31,
1991).
+10.13 -- Amarillo Supply Agreement between Mesa Operating Limited
Partnership, Seller, and Energas Company, a division of
Atmos Energy Corporation, Buyer, dated effective January
2, 1993 (incorporated by reference to Exhibit 10.14 to
Mesa's Form 10-K dated December 31, 1995).
+10.14 -- Gas Gathering Agreement-Interruptible between Colorado
Interstate Gas Company, Transporter, and Mesa Operating
Limited Partnership, Shipper, dated effective October 1,
1993, as amended by agreements dated January 1, 1994,
January 5, 1994, and June 1, 1994 (incorporated by
reference to Exhibit 10.15 to Mesa's Form 10-K dated
December 31, 1995).
+10.15 -- Gas Supply Agreement dated May 11, 1994, between Mesa
Operating Co., as successor to Mesa Operating Limited
Partnership, acting on behalf of itself and as agent for
Hugoton Capital Limited Partnership, and Williams Gas
Marketing Company, and Gas Supply Guarantee dated May 11,
1994 (incorporated by reference to Exhibit 10.16 to
Mesa's Form 10-K dated December 31, 1995).
+10.16 -- Gas Transportation Agreement dated June 14, 1994, between
Western Resources, Inc. and Mesa Operating Co., acting on
behalf of itself and as agent for Hugoton Capital Limited
Partnership (incorporated by reference to Exhibit 10.24
to Mesa's Form 10-K dated December 31, 1994).
</TABLE>
II-5
<PAGE> 343
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.17 -- Incentive Bonus Plan of Mesa Operating Limited
Partnership, as amended, dated effective January 1, 1986
(incorporated by reference to Exhibit 10(s) to Mesa
Limited Partnership's Form 10-K dated December 31, 1990).
+10.18 -- Performance Bonus Plan of Mesa Operating Limited
Partnership dated effective January 1, 1990 (incorporated
by reference to Exhibit 10(t) to Mesa Limited
Partnership's Form 10-K dated December 31, 1990).
+10.19 -- 1991 Stock Option Plan of MESA (incorporated by reference
to Exhibit 10(v) to Mesa's Form 10-K dated December 31,
1991).
+10.20 -- Interruptible Gas Transportation and Sales Agreement
dated January 1, 1991, between Mesa Operating Limited
Partnership and Energas Company and Amendment dated
January 1, 1995 (incorporated by reference to Exhibit
10.22 to Mesa's Form 10-K dated December 31, 1995).
+10.21 -- "B" Contract Operating Agreement dated January 1, 1988,
between Mesa Operating Limited Partnership and Colorado
Interstate Gas Company (incorporated by reference to
Exhibit 10.23 to Mesa's Form 10-K dated December 31,
1995).
+10.22 -- "B" Contract Agreement of Compromise and Settlement dated
May 29, 1987, between Mesa Operating Limited Partnership
and Colorado Interstate Gas Company, and Amendment to
Gathering Agreement dated July 15, 1990 (incorporated by
reference to Exhibit 10.24 to Mesa's Form 10-K dated
December 31, 1995).
+10.23 -- Gas Purchase Agreement dated January 1, 1996, between
Mesa Operating Co., as Seller, and KN Marketing L.P., as
Buyer, and Amendment dated August 1, 1995 (incorporated
by reference to Exhibit 10.25 to Mesa's Form 10-K dated
December 31, 1995).
+10.24 -- Change in Control Retention/Severance Plan of Mesa
adopted August 22, 1995, and Amendment dated October 20,
1995 (incorporated by reference to Exhibit 10.26 to
Mesa's Form 10-K dated December 31, 1995).
+10.25 -- Employment Agreement dated as of August 21, 1996, between
Mesa and Ira Jon Brumley. (incorporated by reference to
Exhibit 10.26 of Mesa's Form 10-K dated December 31,
1996).
+10.26 -- Stock Purchase Agreement, dated April 26, 1996, between
Mesa and DNR (incorporated by reference to Exhibit No. 10
to Mesa's Form 8-K filed on April 29, 1996).
+10.27 -- 1991 Stock Option Plan of Mesa (incorporated by reference
to Mesa's Form 10-K dated December 31, 1991).
+10.28 -- 1996 Incentive Plan of Mesa (included in the Joint Proxy
Statement/Prospectus as Appendix VI).
+10.29 -- Mesa Management Severance Plan, dated April 4, 1997,
including a Schedule of Participants on Schedule A for
the purpose of defining the payment of certain benefits
upon the termination of the officer's employment under
certain circumstances.
+10.30 -- Form of Indemnification Agreement of Mesa.
+10.31 -- Parker & Parsley Petroleum Company Long-term Incentive
Plan dated February 19, 1991 (incorporated by reference
to Exhibit 4.1 to Parker & Parsley's Registration
Statement on Form S-8, Registration No. 33-38971).
</TABLE>
II-6
<PAGE> 344
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.32 -- First Amendment to the Parker & Parsley Petroleum Company
Long-term Incentive Plan dated August 23, 1991
(incorporated by reference to Exhibit 10.2 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
+10.33 -- Amended and Restated Indemnification Agreement, dated as
of February 15, 1995, between the Company and Scott D.
Sheffield, together with a schedule identifying
substantially identical agreements between Parker &
Parsley and each of Parker & Parsley's other directors
and Named Executive Officers and setting forth the
material details in which those agreements differ from
the Amended and Restated Indemnification Agreement filed
(incorporated by reference to Exhibit 10.4 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-10695).
+10.34 -- Agreement of Partnership of P&P Employees 89-B Conv.,
L.P. (formerly P&P Employees 89-B GP), dated October 31,
1989, among Parker & Parsley, Ltd. and the Investor
Partners (as defined therein, which includes individuals
who are directors and executive officers of Parker &
Parsley), together with a schedule identifying
substantially identical documents and setting forth the
material details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.50 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.35 -- Amendment to Agreement of Partnership of P&P Employees
89-B GP, dated May 31, 1990, among Parker & Parsley Ltd.
and the Investor Partners (as defined therein, which
includes individuals who are directors and executives
officers of Parker & Parsley), together with a schedule
identifying substantially identical documents and setting
forth the material details in which those documents
differ from the foregoing document (incorporated by
reference to Exhibit 10.51 to Parker & Parsley's
Registration Statement on Form S-4 dated December 31,
1990, Registration No. 33-38436).
+10.36 -- Schedule identifying additional documents substantially
identical to the Amendment to Agreement of Partnership of
P&P Employees 89-B GP included as Exhibit 10.5 and
setting forth the material details in which those
documents differ from that document (incorporated by
reference to Exhibit 10.52 to Parker & Parsley's
Registration Statement on Form S-1 dated February 28,
1992, Registration No. 33-46082).
+10.37 -- Agreement of Partnership of P&P Employees 90 Spraberry
Private Development GP, dated October 16, 1990, among
Parker & Parsley, Ltd., James D. Moring, and the General
Partners (as defined therein, which includes individuals
who are directors and executive officers of Parker &
Parsley), and form of Amendment to Agreement of
Partnership of P&P Employees 90 Spraberry Private
Development GP, together with a schedule identifying
substantially identical documents and setting forth the
material details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.52 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.38 -- Amendment to Agreement of Partnership of Parker & Parsley
90-A GP, dated February 19, 1991, among Parker & Parsley
Development Company and the Investor Partners (as defined
therein, which includes individuals who are directors and
executive officers of Parker & Parsley), together with a
schedule identifying substantially identical documents
and setting forth the material details in which those
documents differ from the foregoing document
(incorporated by reference to Exhibit 10.58 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
</TABLE>
II-7
<PAGE> 345
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.39 -- Agreement of Partnership of P&P Employees 91-A, GP, dated
September 30, 1991, among Parker & Parsley Development
Company, James D. Moring, and the General Partners (as
defined therein, which includes individuals who are
directors and executive officers of Parker & Parsley),
together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.61 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
+10.40 -- Development Drilling Program Agreement of Parker &
Parsley 91-A Development Drilling Program, dated
September 30, 1991, among Parker & Parsley Development
Company, the P&P Employee Participants (as defined
therein, which includes individuals who are directors and
executive officers of Parker & Parsley), P&P Employees
91-A, GP, and Parker & Parsley 91-A, L.P., together with
a schedule identifying substantially identical documents
and setting forth the material details in which those
documents differ from the foregoing document
(incorporated by reference to Exhibit 10.63 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
+10.41 -- Development Drilling Program Agreement dated August 1,
1989, among Parker & Parsley Ltd., Parker & Parsley
Development Partners L.P., certain key employees of
Parker & Parsley, Ltd. (which includes individuals who
are directors and executive officers of Parker &
Parsley), and related persons, P&P Employees 89-A GP, and
Parker & Parsley 89-A GP, and Parker & Parsley 89-A,
L.P., together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.56 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.42 -- Amendment to Development Drilling Program Agreement,
dated February 19, 1991, amending the Development
Drilling Program Agreement included in Exhibit 10.11,
together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.66 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
+10.43 -- Amendment to Agreement of Partnership of P&P Employees 90
Spraberry Private Development GP, dated April 22, 1991,
among the Partners (as defined therein, which includes
individuals who are directors and executive officers of
Parker & Parsley) (incorporated by reference to Exhibit
10.67 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
+10.44 -- Agreement of Limited Partnership of Parker & Parsley 1992
Direct Investment Program, Ltd., dated as of July 24,
1992, amount Parker & Parsley Development company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.57 to Parker &
Parsley's Annual report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-10695).
</TABLE>
II-8
<PAGE> 346
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.45 -- Agreement of Limited Partnership of Parker & Parsley 1993
Direct Investment Program, Ltd., dated as of January 1,
1993, among Parker & Parsley Development Company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.49 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-10695).
+10.46 -- Agreement of Limited Partnership of Parker & Parsley 1994
Direct Investment Program, Ltd., dated as of January 1,
1994, among Parker & Parsley Development Company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.20 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-10695).
+10.47 -- Forms of Stock Acquisition Loan Agreements entered into
as of June 15, 1995, between the Company and the officers
identified on Schedule I thereto, providing for Parker &
Parsley's loans to such officers of the amounts
respectively identified on Schedule I thereto, for the
purpose of acquiring Parker & Parsley's Common Stock, par
value $0.01 per share (incorporated by reference to
Exhibit 10.1 to Parker & Parsley's Quarterly Report on
Form 10-Q for the period ended June 30, 1995, Commission
File No. 1-10695).
+10.48 -- Severance Agreement dated as of January 1, 1996 between
Parker & Parsley and Scott D. Sheffield, together with a
schedule identifying substantially identical agreements
between Parker & Parsley and each of the other Named
Executive Officers identified on Schedule I for the
purpose of defining the payment of certain benefits upon
the termination of the officer's employment under certain
circumstances (incorporated by reference to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File No. 1-10695).
+10.49 -- Omnibus Amendment to Nonstatutory Stock Option
Agreements, included as part of the Long-term Incentive
Plan, dated as of November 16, 1995, between Parker &
Parsley and Named Executive Officers identified on
Schedule 1 setting forth additional details relating to
the Long-term Incentive Plan (incorporated by reference
to Parker & Parsley's Annual Report on Form 10-K for the
year ended December 31, 1995, Commission File No.
1-10695).
10.50 -- Form of Pioneer Severance Agreement.
10.51 -- Form of Indemnification Agreement of Pioneer Natural
Resources Company.
+10.52 -- Pioneer Natural Resources Company 1997 Long-Term
Incentive Plan. (included in the Proxy
Statement/Prospectus as Appendix VII).
+10.53 -- Pioneer Natural Resources Company 1998 Employee Stock
Purchase Plan (included in the Joint Proxy
Statement/Prospectus as Appendix VIII).
21.1 -- Subsidiaries of Pioneer Natural Resources Company.
+23.1 -- Consent of Arthur Andersen LLP.
+23.2 -- Consent of KPMG Peat Marwick LLP.
+23.3 -- Consent of Coopers & Lybrand L.L.P.
+23.4 -- Consent of Baker & Botts, L.L.P. (included in Exhibit
5.1).
+23.5 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
8.2).
+23.6 -- Consent of Merrill Lynch & Co.
+23.7 -- Consent of Morgan Stanley & Co. Incorporated (included in
the Joint Proxy Statement/Prospectus as Appendix IV).
+23.8 -- Consent of Goldman, Sachs & Co.
</TABLE>
II-9
<PAGE> 347
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+23.9 -- Consent of Netherland, Sewell & Associates, Inc.
+23.10 -- Consent of Miller and Lents, Ltd.
+23.11 -- Consent of Williamson Petroleum Consultants, Inc.
+24 -- Power of Attorney (included herein on page II-12).
99.1 -- Form of Proxies for Special Meeting of MESA Inc.
99.2 -- Form of Proxy for Special Meeting of Parker & Parsley
Petroleum Company.
+99.3 -- Opinions dated April 4, 1997 of Merrill Lynch & Co.
(included as Appendices II and III to the Proxy
Statement).
+99.4 -- Opinion dated April 4, 1997 of Morgan Stanley & Co.,
Incorporated (included as Appendix IV to the Proxy
Statement).
+99.5 -- Opinion dated April 6, 1997 of Goldman, Sachs & Co.
(included as Appendix V to the Proxy Statement).
+99.6 -- Consent of R. Hartwell Gardner as a Person About to
Become a Director.
+99.7 -- Consent of John W. Herrington as a Person About to Become
a Director.
+99.8 -- Consent of Kenneth A. Hersh as a Person About to Become a
Director.
+99.9 -- Consent of James L. Houghton as a Person About to Become
a Director.
+99.10 -- Consent of Jerry P. Jones as a Person About to Become a
Director.
+99.11 -- Consent of Boone Pickens as a Person About to Become a
Director.
+99.12 -- Consent of Richard E. Rainwater as a Person About to
Become a Director.
+99.13 -- Consent of Charles E. Ramsey, Jr. as a Person About to
Become a Director.
+99.14 -- Consent of Scott D. Sheffield as a Person About to Become
a Director.
+99.15 -- Consent of Arthur L. Smith as a Person About to Become a
Director.
+99.16 -- Consent of Philip B. Smith as a Person About to Become a
Director.
+99.17 -- Consent of Robert L. Shillwell as a Person About to
Become a Director.
+99.18 -- Consent of Michael D. Wortley as a Person About to Become
a Director.
99.19 -- Form of Election and Letter of Transmittal for Shares of
the Series A 8% Cumulative Convertible Preferred Stock of
MESA Inc.
99.20 -- Form of Notice of Guaranteed Delivery With Respect to
Shares of Series A 8% Cumulative Convertible Preferred
Stock of MESA Inc.
99.21 -- Form of Letter from MESA Inc. to Securities Dealers,
Commercial Banks, Trust Companies and Other Nominees
Regarding the Consideration Election.
99.22 -- Form of Letter from Nominee Holders to Clients Regarding
the Consideration Election.
</TABLE>
- ---------------
+ Previously Filed
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(a) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) if the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(b) (1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act, and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration
II-10
<PAGE> 348
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof;
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue;
(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request; and
(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being involved therein, that was not
the subject of and included in the Registration Statement when it became
effective.
II-11
<PAGE> 349
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Dallas, State of Texas, on
the 26th day of June, 1997.
PIONEER NATURAL RESOURCES COMPANY
By: /s/ M. GARRETT SMITH
-------------------------------------
M. Garrett Smith
Vice President and Secretary
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ I. JON BRUMLEY* President, Chief June 26, 1997
- ----------------------------------------------------- Executive Officer and
I. Jon Brumley Director (Principal
Executive Officer)
/s/ M. GARRETT SMITH Vice President, Secretary June 26, 1997
- ----------------------------------------------------- and Director (Principal
M. Garrett Smith Financial Officer)
/s/ WAYNE STOERNER* Controller (Principal June 26, 1997
- ----------------------------------------------------- Accounting Officer)
Wayne Stoerner
*By: /s/ M. GARRETT SMITH
- -----------------------------------------------------
M. Garrett Smith
Attorney-in-fact
</TABLE>
II-12
<PAGE> 350
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated
as of April 6, 1997, by and among Mesa, MOC, MXP
Reincorporation Corp. and Parker & Parsley (included in
the Joint Proxy Statement/Prospectus as Appendix I).
3.1 -- Amended and Restated Certificate of Incorporation of
Pioneer Natural Resources Company.
3.2 -- Amended and Restated Bylaws of Pioneer Natural Resources
Company as adopted June 24, 1997.
4.1 -- Specimen Stock Certificate for the Common Stock of
Pioneer Natural Resources Company.
4.2 -- Certificate of Designations of Series A 8% Cumulative
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.3 -- Specimen Stock Certificate for the Series A 8% Cumulative
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.4 -- Form of Certificate of Designations of Series B
Convertible Preferred Stock of Pioneer Natural Resources
Company.
4.5 -- Specimen Stock Certificate for the Series B Convertible
Preferred Stock of Pioneer Natural Resources Company.
+4.6 -- Indenture dated July 2, 1996, among MOC, as Issuer, Mesa,
as a Guarantor, and Harris Trust and Savings Bank as
Trustee relating to the 11 5/8% Senior Subordinated
Discount Notes Due 2006 (incorporated by reference to
Exhibit 4.17 of Mesa's Form 10-Q dated August 13, 1996).
+4.7 -- Indenture dated July 2, 1996, among MOC, as Issuer, Mesa,
as a Guarantor, and Harris Trust and Savings Bank as
Trustee relating to 10 5/8% Senior Subordinated Notes Due
2006 (incorporated by reference to Exhibit 4.18 Mesa's
Form 10-Q dated August 13, 1996).
+4.8 -- Indentures relating to $50,000,000 principal amount of
8 1/2% Convertible Subordinated Debentures due 2005 of
Dorchester Master Limited Partnership ($3,762,000 million
principal amount of which were outstanding and held by
nonaffiliates at December 31, 1996) and $100,000,000
principal amount of 9 1/2% Senior Notes due 2000 of
Bridge Oil (U.S.A.) Inc. ($2,063,000 principal amount of
which were outstanding at December 31, 1996) have been
omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. Parker & Parsley hereby agrees to furnish a copy of
such indenture to the Securities and Exchange Commission
upon request. (incorporated by reference to Parker &
Parsley's Form 10-K dated December 31, 1996).
+4.9 -- Indenture (the "Indenture") relating to $150,000,000
principal amount of 8 7/8% Senior Notes Due 2005 of the
Company and to $150,000,000 principal amount of 8 1/4%
Senior Notes Due 2007 of Parker & Parsley (incorporated
by reference to Exhibit 4.1 to Parker & Parsley's Current
Report of Form 8-K dated April 12, 1995, Commission File
No. 1-10695).
+4.10 -- Form of 8 7/8% Senior Notes Due 2005 dated as of April
12, 1995, in the aggregate principal amount of
$150,000,000, together with Officers' Certificate dated
April 12, 1995, establishing the terms of the 8 7/8%
Senior Notes Due 2005 of Parker & Parsley pursuant to the
Indenture (incorporated by reference to Exhibit 4.2 to
Parker & Parsley's Quarterly Report on Form 10-Q for the
period ended June 30, 1995, Commission File No. 1-10695).
</TABLE>
<PAGE> 351
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+4.11 -- Form of 8 1/4% Senior Notes Due 2007 dated as of August
22, 1995, in the aggregate principal amount of
$150,000,000, together with Officers' Certificate dated
August 22, 1995, establishing the terms of the 8 1/4%
Senior Notes Due 2007 of Parker & Parsley pursuant to the
Indenture (incorporated by reference to Exhibit 1.2 to
Parker & Parsley's Current Report on Form 8-K dated
August 17, 1995, Commission File No. 1-10695).
5.1 -- Opinion of Baker & Botts, L.L.P. regarding legality of
securities being requested.
8.1 -- Tax Opinion of Baker & Botts, L.L.P. regarding certain
Federal income tax matters.
8.2 -- Tax Opinion of Vinson & Elkins, L.L.P. regarding certain
Federal income tax matters.
+9.1 -- Shareholder Agreement, dated as of April 6, 1997, between
Mesa, Boone Pickens and Parker & Parsley. (incorporated
by reference to Exhibit 2.4 of Mesa's Form 8-K filed
April 8, 1997).
+9.2 -- Shareholders Agreement, dated as of April 6, 1997,
between DNR and Mesa (incorporated by reference to
Exhibit 2.2 of Mesa's Form 8-K filed April 8, 1997).
+10.1 -- Contract dated January 3, 1928, between Colorado
Interstate Gas Company and Amarillo Oil Company (the "B"
Contract) (incorporated by reference to Exhibit 10.1 to
Pioneer Corporation's Form 10-K dated December 31, 1985).
+10.2 -- Amendments to the "B" Contract (incorporated by reference
to Exhibit 10.2 to Pioneer Corporation's Form 10-K dated
December 31, 1985.
+10.3 -- Gathering Charge Agreement dated January 20, 1984, as
amended, with respect to the "B" Contract (incorporated
by reference to Exhibit 10.3 to Pioneer Corporation's
Form 10-K dated December 31, 1985).
+10.4 -- Agreement of Compromise and Settlement dated May 29,
1987, between the Partnership and Colorado Interstate Gas
Company (Confidential Treatment Requested) (incorporated
by reference to Exhibit 10(s) to Mesa Limited
Partnership's Form 10-K dated December 31, 1987).
+10.5 -- Agreement of Sale between Pioneer Corporation and Cabot
Corporation dated August 29, 1984 (incorporated by
reference to Exhibit 10.5 to Pioneer Corporation's Form
10-K dated December 31, 1985).
+10.6 -- Settlement Agreement dated March 15, 1989, by and among
MESA Operating Limited Partnership and MESA Limited
Partnership, et al, Energas Company and the City of
Amarillo (incorporated by reference to Exhibit 10(k) to
Mesa Limited Partnership's form 10-K dated December 31,
1990).
+10.7 -- Gas Purchase Agreement dated December 1, 1989, between
Williams Natural Gas Company and Mesa Operating Limited
Partnership acting on behalf of itself and as agent for
Mesa Midcontinent Limited Partnership (incorporated by
reference to Exhibit 10.1 to Registration Statement of
Mesa Limited Partnership on Form S-3, Registration No.
33-32978).
+10.8 -- "B" Contract Production Allocation Agreement dated July
29, 1991 and effective as of January 1, 1991, between
Colorado Interstate Gas Company and Mesa Operating
Limited Partnership (incorporated by reference to Exhibit
10(r) to Mesa's Form 10-K dated December 31, 1991).
+10.9 -- Amendment to "B" Contract Production Allocation Agreement
effective as of January 1, 1993, between Colorado
Interstate Gas Company and Mesa Operating Limited
Partnership (incorporated by reference to Exhibit 10.24
to Mesa's Registration Statement on Form S-1,
Registration No. 033-51909).
</TABLE>
<PAGE> 352
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.10 -- Amended Supplemental Stipulation and Agreement between
Colorado Interstate Gas Company and Mesa Operating
Limited Partnership dated June 19, 1991 (incorporated by
reference to Exhibit 10(w) to Mesa Limited Partnership's
Registration Statement on Form S-4, Registration No.
33-42102).
+10.11 -- Amended Peak Day Gas Purchase Agreement dated effective
June 19, 1991, between Colorado Interstate Gas Company
and Mesa Operating Limited Partnership (incorporated by
reference to Exhibit 10(t) to Mesa's Form 10-K dated
December 31, 1991).
+10.12 -- Omnibus Amendment to Collateral Instruments to
Supplemental Stipulation and Agreement dated June 19,
1991, between Colorado Interstate Gas Company and Mesa
Operating Limited Partnership (incorporated by reference
to Exhibit 10(u) to Mesa's Form 10-K dated December 31,
1991).
+10.13 -- Amarillo Supply Agreement between Mesa Operating Limited
Partnership, Seller, and Energas Company, a division of
Atmos Energy Corporation, Buyer, dated effective January
2, 1993 (incorporated by reference to Exhibit 10.14 to
Mesa's Form 10-K dated December 31, 1995).
+10.14 -- Gas Gathering Agreement-Interruptible between Colorado
Interstate Gas Company, Transporter, and Mesa Operating
Limited Partnership, Shipper, dated effective October 1,
1993, as amended by agreements dated January 1, 1994,
January 5, 1994, and June 1, 1994 (incorporated by
reference to Exhibit 10.15 to Mesa's Form 10-K dated
December 31, 1995).
+10.15 -- Gas Supply Agreement dated May 11, 1994, between Mesa
Operating Co., as successor to Mesa Operating Limited
Partnership, acting on behalf of itself and as agent for
Hugoton Capital Limited Partnership, and Williams Gas
Marketing Company, and Gas Supply Guarantee dated May 11,
1994 (incorporated by reference to Exhibit 10.16 to
Mesa's Form 10-K dated December 31, 1995).
+10.16 -- Gas Transportation Agreement dated June 14, 1994, between
Western Resources, Inc. and Mesa Operating Co., acting on
behalf of itself and as agent for Hugoton Capital Limited
Partnership (incorporated by reference to Exhibit 10.24
to Mesa's Form 10-K dated December 31, 1994).
+10.17 -- Incentive Bonus Plan of Mesa Operating Limited
Partnership, as amended, dated effective January 1, 1986
(incorporated by reference to Exhibit 10(s) to Mesa
Limited Partnership's Form 10-K dated December 31, 1990).
+10.18 -- Performance Bonus Plan of Mesa Operating Limited
Partnership dated effective January 1, 1990 (incorporated
by reference to Exhibit 10(t) to Mesa Limited
Partnership's Form 10-K dated December 31, 1990).
+10.19 -- 1991 Stock Option Plan of MESA (incorporated by reference
to Exhibit 10(v) to Mesa's Form 10-K dated December 31,
1991).
+10.20 -- Interruptible Gas Transportation and Sales Agreement
dated January 1, 1991, between Mesa Operating Limited
Partnership and Energas Company and Amendment dated
January 1, 1995 (incorporated by reference to Exhibit
10.22 to Mesa's Form 10-K dated December 31, 1995).
+10.21 -- "B" Contract Operating Agreement dated January 1, 1988,
between Mesa Operating Limited Partnership and Colorado
Interstate Gas Company (incorporated by reference to
Exhibit 10.23 to Mesa's Form 10-K dated December 31,
1995).
</TABLE>
<PAGE> 353
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.22 -- "B" Contract Agreement of Compromise and Settlement dated
May 29, 1987, between Mesa Operating Limited Partnership
and Colorado Interstate Gas Company, and Amendment to
Gathering Agreement dated July 15, 1990 (incorporated by
reference to Exhibit 10.24 to Mesa's Form 10-K dated
December 31, 1995).
+10.23 -- Gas Purchase Agreement dated January 1, 1996, between
Mesa Operating Co., as Seller, and KN Marketing L.P., as
Buyer, and Amendment dated August 1, 1995 (incorporated
by reference to Exhibit 10.25 to Mesa's Form 10-K dated
December 31, 1995).
+10.24 -- Change in Control Retention/Severance Plan of Mesa
adopted August 22, 1995, and Amendment dated October 20,
1995 (incorporated by reference to Exhibit 10.26 to
Mesa's Form 10-K dated December 31, 1995).
+10.25 -- Employment Agreement dated as of August 21, 1996, between
Mesa and Ira Jon Brumley. (incorporated by reference to
Exhibit 10.26 of Mesa's Form 10-K dated December 31,
1996).
+10.26 -- Stock Purchase Agreement, dated April 26, 1996, between
Mesa and DNR (incorporated by reference to Exhibit No. 10
to Mesa's Form 8-K filed on April 29, 1996).
+10.27 -- 1991 Stock Option Plan of Mesa (incorporated by reference
to Mesa's Form 10-K dated December 31, 1991).
+10.28 -- 1996 Incentive Plan of Mesa (included in the Joint Proxy
Statement/Prospectus as Appendix VI).
+10.29 -- Mesa Management Severance Plan, dated April 4, 1997,
including a Schedule of Participants on Schedule A for
the purpose of defining the payment of certain benefits
upon the termination of the officer's employment under
certain circumstances.
+10.30 -- Form of Indemnification Agreement of Mesa.
+10.31 -- Parker & Parsley Petroleum Company Long-term Incentive
Plan dated February 19, 1991 (incorporated by reference
to Exhibit 4.1 to Parker & Parsley's Registration
Statement on Form S-8, Registration No. 33-38971).
+10.32 -- First Amendment to the Parker & Parsley Petroleum Company
Long-term Incentive Plan dated August 23, 1991
(incorporated by reference to Exhibit 10.2 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
+10.33 -- Amended and Restated Indemnification Agreement, dated as
of February 15, 1995, between the Company and Scott D.
Sheffield, together with a schedule identifying
substantially identical agreements between Parker &
Parsley and each of Parker & Parsley's other directors
and Named Executive Officers and setting forth the
material details in which those agreements differ from
the Amended and Restated Indemnification Agreement filed
(incorporated by reference to Exhibit 10.4 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-10695).
</TABLE>
<PAGE> 354
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.34 -- Agreement of Partnership of P&P Employees 89-B Conv.,
L.P. (formerly P&P Employees 89-B GP), dated October 31,
1989, among Parker & Parsley, Ltd. and the Investor
Partners (as defined therein, which includes individuals
who are directors and executive officers of Parker &
Parsley), together with a schedule identifying
substantially identical documents and setting forth the
material details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.50 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.35 -- Amendment to Agreement of Partnership of P&P Employees
89-B GP, dated May 31, 1990, among Parker & Parsley Ltd.
and the Investor Partners (as defined therein, which
includes individuals who are directors and executives
officers of Parker & Parsley), together with a schedule
identifying substantially identical documents and setting
forth the material details in which those documents
differ from the foregoing document (incorporated by
reference to Exhibit 10.51 to Parker & Parsley's
Registration Statement on Form S-4 dated December 31,
1990, Registration No. 33-38436).
+10.36 -- Schedule identifying additional documents substantially
identical to the Amendment to Agreement of Partnership of
P&P Employees 89-B GP included as Exhibit 10.5 and
setting forth the material details in which those
documents differ from that document (incorporated by
reference to Exhibit 10.52 to Parker & Parsley's
Registration Statement on Form S-1 dated February 28,
1992, Registration No. 33-46082).
+10.37 -- Agreement of Partnership of P&P Employees 90 Spraberry
Private Development GP, dated October 16, 1990, among
Parker & Parsley, Ltd., James D. Moring, and the General
Partners (as defined therein, which includes individuals
who are directors and executive officers of Parker &
Parsley), and form of Amendment to Agreement of
Partnership of P&P Employees 90 Spraberry Private
Development GP, together with a schedule identifying
substantially identical documents and setting forth the
material details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.52 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.38 -- Amendment to Agreement of Partnership of Parker & Parsley
90-A GP, dated February 19, 1991, among Parker & Parsley
Development Company and the Investor Partners (as defined
therein, which includes individuals who are directors and
executive officers of Parker & Parsley), together with a
schedule identifying substantially identical documents
and setting forth the material details in which those
documents differ from the foregoing document
(incorporated by reference to Exhibit 10.58 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
+10.39 -- Agreement of Partnership of P&P Employees 91-A, GP, dated
September 30, 1991, among Parker & Parsley Development
Company, James D. Moring, and the General Partners (as
defined therein, which includes individuals who are
directors and executive officers of Parker & Parsley),
together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.61 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
</TABLE>
<PAGE> 355
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.40 -- Development Drilling Program Agreement of Parker &
Parsley 91-A Development Drilling Program, dated
September 30, 1991, among Parker & Parsley Development
Company, the P&P Employee Participants (as defined
therein, which includes individuals who are directors and
executive officers of Parker & Parsley), P&P Employees
91-A, GP, and Parker & Parsley 91-A, L.P., together with
a schedule identifying substantially identical documents
and setting forth the material details in which those
documents differ from the foregoing document
(incorporated by reference to Exhibit 10.63 to Parker &
Parsley's Registration Statement on Form S-1 dated
February 28, 1992, Registration No. 33-46082).
+10.41 -- Development Drilling Program Agreement dated August 1,
1989, among Parker & Parsley Ltd., Parker & Parsley
Development Partners L.P., certain key employees of
Parker & Parsley, Ltd. (which includes individuals who
are directors and executive officers of Parker &
Parsley), and related persons, P&P Employees 89-A GP, and
Parker & Parsley 89-A GP, and Parker & Parsley 89-A,
L.P., together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.56 to Parker & Parsley's Registration Statement on
Form S-4 dated December 31, 1990, Registration No.
33-38436).
+10.42 -- Amendment to Development Drilling Program Agreement,
dated February 19, 1991, amending the Development
Drilling Program Agreement included in Exhibit 10.11,
together with a schedule identifying substantially
identical documents and setting forth the material
details in which those documents differ from the
foregoing document (incorporated by reference to Exhibit
10.66 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
+10.43 -- Amendment to Agreement of Partnership of P&P Employees 90
Spraberry Private Development GP, dated April 22, 1991,
among the Partners (as defined therein, which includes
individuals who are directors and executive officers of
Parker & Parsley) (incorporated by reference to Exhibit
10.67 to Parker & Parsley's Registration Statement on
Form S-1 dated February 28, 1992, Registration No.
33-46082).
+10.44 -- Agreement of Limited Partnership of Parker & Parsley 1992
Direct Investment Program, Ltd., dated as of July 24,
1992, amount Parker & Parsley Development company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.57 to Parker &
Parsley's Annual report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-10695).
+10.45 -- Agreement of Limited Partnership of Parker & Parsley 1993
Direct Investment Program, Ltd., dated as of January 1,
1993, among Parker & Parsley Development Company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.49 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-10695).
</TABLE>
<PAGE> 356
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
+10.46 -- Agreement of Limited Partnership of Parker & Parsley 1994
Direct Investment Program, Ltd., dated as of January 1,
1994, among Parker & Parsley Development Company, as
managing general partner, and certain key employees of
Parker & Parsley (including individuals who are directors
and executive officers of Parker & Parsley), as
non-managing general partners and limited partners
(incorporated by reference to Exhibit 10.20 to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-10695).
+10.47 -- Forms of Stock Acquisition Loan Agreements entered into
as of June 15, 1995, between the Company and the officers
identified on Schedule I thereto, providing for Parker &
Parsley's loans to such officers of the amounts
respectively identified on Schedule I thereto, for the
purpose of acquiring Parker & Parsley's Common Stock, par
value $0.01 per share (incorporated by reference to
Exhibit 10.1 to Parker & Parsley's Quarterly Report on
Form 10-Q for the period ended June 30, 1995, Commission
File No. 1-10695).
+10.48 -- Severance Agreement dated as of January 1, 1996 between
Parker & Parsley and Scott D. Sheffield, together with a
schedule identifying substantially identical agreements
between Parker & Parsley and each of the other Named
Executive Officers identified on Schedule I for the
purpose of defining the payment of certain benefits upon
the termination of the officer's employment under certain
circumstances (incorporated by reference to Parker &
Parsley's Annual Report on Form 10-K for the year ended
December 31, 1995, Commission File No. 1-10695).
+10.49 -- Omnibus Amendment to Nonstatutory Stock Option
Agreements, included as part of the Long-term Incentive
Plan, dated as of November 16, 1995, between Parker &
Parsley and Named Executive Officers identified on
Schedule 1 setting forth additional details relating to
the Long-term Incentive Plan (incorporated by reference
to Parker & Parsley's Annual Report on Form 10-K for the
year ended December 31, 1995, Commission File No.
1-10695).
10.50 -- Form of Pioneer Severance Agreement.
10.51 -- Form of Indemnification Agreement of Pioneer Natural
Resources Company.
+10.52 -- Pioneer Natural Resources Company 1997 Long-Term
Incentive Plan. (included in the Proxy
Statement/Prospectus as Appendix VII).
+10.53 -- Pioneer Natural Resources Company 1998 Employee Stock
Purchase Plan (included in the Joint Proxy
Statement/Prospectus as Appendix VIII).
21.1 -- Subsidiaries of Pioneer Natural Resources Company.
+23.1 -- Consent of Arthur Andersen LLP.
+23.2 -- Consent of KPMG Peat Marwick LLP.
+23.3 -- Consent of Coopers & Lybrand L.L.P.
+23.4 -- Consent of Baker & Botts, L.L.P. (included in Exhibit
5.1).
+23.5 -- Consent of Vinson & Elkins L.L.P. (included in Exhibit
8.2).
+23.6 -- Consent of Merrill Lynch & Co.
+23.7 -- Consent of Morgan Stanley & Co. Incorporated (included in
the Joint Proxy Statement/Prospectus as Appendix IV).
+23.8 -- Consent of Goldman, Sachs & Co.
+23.9 -- Consent of Netherland, Sewell & Associates, Inc.
+23.10 -- Consent of Miller and Lents, Ltd.
+23.11 -- Consent of Williamson Petroleum Consultants, Inc.
+24 -- Power of Attorney (included herein on page II-12).
99.1 -- Forms of Proxies for Special Meeting of MESA Inc.
</TABLE>
<PAGE> 357
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
99.2 -- Form of Proxy for Special Meeting of Parker & Parsley
Petroleum Company.
+99.3 -- Opinions dated April 4, 1997 of Merrill Lynch & Co.
(included as Appendices II and III to the Proxy
Statement).
+99.4 -- Opinion dated April 4, 1997 of Morgan Stanley & Co.,
Incorporated (included as Appendix IV to the Proxy
Statement).
+99.5 -- Opinion dated April 6, 1997 of Goldman, Sachs & Co.
(included as Appendix V to the Proxy Statement).
+99.6 -- Consent of R. Hartwell Gardner as a Person About to
Become a Director.
+99.7 -- Consent of John W. Herrington as a Person About to Become
a Director.
+99.8 -- Consent of Kenneth A. Hersh as a Person About to Become a
Director.
+99.9 -- Consent of James L. Houghton as a Person About to Become
a Director.
+99.10 -- Consent of Jerry P. Jones as a Person About to Become a
Director.
+99.11 -- Consent of Boone Pickens as a Person About to Become a
Director.
+99.12 -- Consent of Richard E. Rainwater as a Person About to
Become a Director.
+99.13 -- Consent of Charles E. Ramsey, Jr. as a Person About to
Become a Director.
+99.14 -- Consent of Scott D. Sheffield as a Person About to Become
a Director.
+99.15 -- Consent of Arthur L. Smith as a Person About to Become a
Director.
+99.16 -- Consent of Philip B. Smith as a Person About to Become a
Director.
+99.17 -- Consent of Robert L. Shillwell as a Person About to
Become a Director.
+99.18 -- Consent of Michael D. Wortley as a Person About to Become
a Director.
99.19 -- Form of Election and Letter of Transmittal for Shares of
the Series A 8% Cumulative Convertible Preferred Stock of
MESA Inc.
99.20 -- Form of Notice of Guaranteed Delivery With Respect to
Shares of Series A 8% Cumulative Convertible Preferred
Stock of MESA Inc.
99.21 -- Form of Letter from MESA Inc. to Securities Dealers,
Commercial Banks, Trust Companies and Other Nominees
Regarding the Consideration Election.
99.22 -- Form of Letter from Nominee Holders to Clients Regarding
the Consideration Election.
</TABLE>
- ---------------
+ Previously Filed
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
PIONEER NATURAL RESOURCES COMPANY
Pioneer Natural Resources Company, a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The present name of the Corporation is Pioneer
Natural Resources Company and the name under which the Corporation was
originally incorporated is MXP Reincorporation Corp.
2. The date of filing of the original Certificate of
Incorporation of the Corporation (the "Original Certificate") with the
Secretary of State of the State of Delaware is April 2, 1997.
3. This Amended and Restated Certificate of
Incorporation of the Corporation (the "Amended and Restated Certificate") was
duly adopted in accordance with the provisions of Sections 242 and 245 of the
General Corporation Law of the State of Delaware.
4. This Amended and Restated Certificate restates and
integrates and amends the Original Certificate to read in its entirety as
follows:
FIRST: The name of the corporation (the "Corporation") is Pioneer
Natural Resources Company.
SECOND: The registered office of the Corporation in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at that address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to
engage in any and all lawful acts and activities for which corporations may be
organized under the General Corporation Law of the State of Delaware (the
"DGCL") and the Corporation shall have the power to perform all lawful acts and
activities.
FOURTH: The Corporation will have perpetual existence.
FIFTH: The total number of shares of stock that the Corporation shall
have authority to issue is 600,000,000 shares of capital stock classified as
(i) 500,000,000 shares of common stock, par value $.01 per share ("Common
Stock") and (ii) 100,000,000 shares of preferred stock, par value $.01 per
share ("Preferred Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
<PAGE> 2
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more series, the shares of each series to have any
designations and powers, preferences, rights, qualifications,
limitations and restrictions thereof, as are stated and expressed in
this Article Fifth and in the resolution or resolutions providing for
the issue of such series adopted by the board of directors of the
Corporation as hereafter prescribed (a "Preferred Stock Designation").
(b) Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance
of the Preferred Stock from time to time in one or more series, and
with respect to each series of the Preferred Stock, to fix and state
by the resolution or resolutions from time to time adopted providing
for the issuance thereof the following:
(i) whether or not the series is to have voting
rights, full, special or limited, or is to be without voting
rights, and whether or not such series is to be entitled to
vote as a separate class either alone or together with the
holders of one or more other classes or series of stock;
(ii) the number of shares to constitute the series
and the designations thereof;
(iii) the preferences and relative, participating,
optional, or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
with respect to any series;
(iv) whether or not the shares of any series shall
be redeemable at the option of the Corporation or the holders
thereof or upon the happening of any specified event, and, if
redeemable, the redemption price or prices (which may be
payable in the form of cash, notes, securities or other
property), and the time or times at which and the terms and
conditions upon which such shares shall be redeemable and the
manner of redemption;
(v) whether or not the shares of a series shall
be subject to the operation of retirement or sinking funds to
be applied to the purchase or redemption of such shares for
retirement, and, if such retirement or sinking fund or funds
are to be established, the periodic amount thereof, and the
terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are
payable in cash, stock of the Corporation or other property,
the conditions upon which and the times when such dividends
are payable, the preference to or the relation to the payment
of dividends
2
<PAGE> 3
payable on any other class or classes or series of stock,
whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which
such dividends shall accumulate;
(vii) the preferences, if any, and the amounts
thereof which the holders of any series thereof shall be
entitled to receive upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the
Corporation;
(viii) whether or not the shares of any series, at
the option of the Corporation or the holder thereof or upon
the happening of any specified event, shall be convertible
into or exchangeable for the shares of any other class or
classes or of any other series of the same or any other class
or classes of stock, securities or other property of the
Corporation and the conversion price or prices or ratio or
ratios or the rate or rates at which such conversion or
exchange may be made, with such adjustments, if any, as shall
be stated and expressed or provided for in such resolution or
resolutions; and
(ix) any other special rights and protective
provisions with respect to any series as the board of
directors of the Corporation may deem advisable.
(c) The shares of each series of the Preferred Stock may
vary from the shares of any other series thereof in any or all of the
foregoing respects and in any other manner. The board of directors of
the Corporation may increase the number of shares of the Preferred
Stock designated for any existing series by a resolution adding to
such series authorized and unissued shares of the Preferred Stock not
designated for any other series. Unless otherwise provided in the
Preferred Stock Designation, the board of directors of the Corporation
may decrease the number of shares of the Preferred Stock designated
for any existing series by a resolution subtracting from such series
authorized and unissued shares of the Preferred Stock designated for
such existing series, and the shares so subtracted shall become
authorized, unissued and undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) The holders of shares of the Common Stock shall be
entitled to vote upon all matters submitted to a vote of the common
stockholders of the Corporation and shall be entitled to one vote for
each share of the Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any class or series
thereof, and subject to the right of participation, if any, of the
holders of the Preferred Stock in any dividends, the holders of shares
of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock or otherwise) as may be declared thereon by
the board of directors at any time and from time to time out of any
funds of the Corporation legally available therefor.
3
<PAGE> 4
(c) In the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, after
distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of the Preferred Stock or any
class or series thereof, and subject to the right of participation, if
any, of the holders of the Preferred Stock in any dividends, the
holders of shares of the Common Stock shall be entitled to receive all
of the remaining assets of the Corporation available for distribution
to its stockholders, ratably in proportion to the number of shares of
the Common Stock held by them. A liquidation, dissolution or
winding-up of the Corporation, as such terms are used in this
Paragraph (c), shall not be deemed to be occasioned by or to include
any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange
or conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its
Preferred Stock and Common Stock from time to time for such
consideration (not less than the par value thereof) as may be fixed by
the board of directors of the Corporation, which is expressly
authorized to fix the same in its absolute discretion subject to the
foregoing conditions. Shares so issued for which the consideration
shall have been paid or delivered to the Corporation shall be deemed
fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be liable
for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of
the Corporation's capital stock of any class or series or other
securities of the Corporation, and such rights and options shall be
evidenced by instrument(s) approved by the board of directors of the
Corporation. The board of directors of the Corporation shall be
empowered to set the exercise price, duration, times for exercise and
other terms of such rights or options; provided, however, that the
consideration to be received for any share of capital stock subject
thereto shall not be less than the par value thereof.
(c) No stockholder of the Corporation shall by reason of
his or her holding shares of any class of capital stock of the
Corporation have any preemptive or preferential right to acquire or
subscribe for any additional, unissued or treasury shares (whether now
or hereafter acquired) of any class of capital stock of the
Corporation now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or carrying any
right, option or warrant to subscribe for or acquire shares of any
class of capital stock of the Corporation now or hereafter to be
authorized, whether or not the issuance of any such shares or such
notes, debentures, bonds or other securities would adversely affect
the dividends or voting or other rights of that stockholder.
4
<PAGE> 5
(d) Cumulative voting of shares of any capital stock
having voting rights is prohibited.
SIXTH: The number, classification, and terms of the board of
directors of the Corporation and the procedures to elect directors, to remove
directors, and to fill vacancies in the board of directors shall be as follows:
1. The number of directors that shall constitute the
whole board of directors shall from time to time be fixed exclusively
by the board of directors by a resolution adopted by a majority of the
members of the board of directors serving at the time of that vote.
In no event shall the number of directors that constitute the whole
board of directors be fewer than three or more than twenty-one. No
decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Directors of the
Corporation need not be elected by written ballot unless the bylaws of
the Corporation otherwise provide.
2. The board of directors of the Corporation shall be
divided into three classes designated Class I, Class II and Class III,
respectively, and all as nearly equal in number as possible. The
initial term of office of directors of Class I shall expire at the
first annual meeting of stockholders of the Corporation in 1998, of
Class II shall expire at the second annual meeting of stockholders of
the Corporation, and of Class III shall expire at the third annual
meeting of stockholders of the Corporation, and in all cases as to
each director until his successor is elected and qualified or until
his earlier death, resignation or removal. At each annual meeting of
stockholders beginning with the annual meeting of stockholders in
1998, each director elected to succeed a director whose term is then
expiring shall hold his office until the third annual meeting of
stockholders after his election and until his successor is elected and
qualified or until his earlier death, resignation or removal. If the
number of directors that constitutes the whole board of directors is
changed as permitted by this Article Sixth, the majority of the
members of the board of directors serving at the time of the vote to
make such change shall also fix and determine the number of directors
comprising each class; provided, however, that any increase or
decrease in the number of directors shall be apportioned among the
classes as equally as possible.
3. Vacancies in the board of directors resulting from
death, resignation, retirement, disqualification, removal from office
or other cause and newly-created directorships resulting from any
increase in the authorized number of directors shall be filled by a
majority vote of the remaining directors then in office, though less
than a quorum, or by the sole remaining director, and each director so
chosen shall receive the classification of the vacant directorship to
which he or she has been appointed or, if it is a newly created
directorship, shall receive the classification that at least a
majority of the board of directors designates and shall hold office
until the first meeting of stockholders held after his election for
the purpose of electing directors of that classification and until his
or her successor is elected and qualified or until his or her earlier
death, resignation or removal from office.
5
<PAGE> 6
4. No director of any class of directors of the
Corporation shall be removed before the expiration of that director's
term of office except for cause and by an affirmative vote of the
holders of not less than two-thirds in voting power of the outstanding
shares entitled to vote thereon cast at the annual meeting of
stockholders or at any special meeting of stockholders called for this
purpose by a majority of the members of the board of directors serving
at the time of that vote.
5. Notwithstanding the foregoing, the election, removal
and the filling of vacancies with respect to directors elected
separately by any series of Preferred Stock shall be governed by the
terms of the Preferred Stock Designation establishing such series.
6. Notwithstanding any other provisions of this
Certificate of Incorporation or any provision of law that might
otherwise permit a lesser or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of
the capital stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of
not less than two-thirds in voting power of the shares of the
Corporation then entitled to be voted in an election of directors,
voting together as a single class, shall be required to amend or
repeal or to adopt any provision inconsistent with, this Article
Sixth.
SEVENTH: All of the power of the Corporation, insofar as it
may be lawfully vested by this Certificate of Incorporation in the board of
directors, is hereby conferred upon the board of directors of the Corporation.
In furtherance of and not in limitation of that power or the powers conferred
by law, (1) a majority of whole board of directors shall have the power to
adopt, amend, and repeal the bylaws of the Corporation; (2) the board of
directors may designate and appoint from among its members one or more
committees, and may designate one or more of its members as alternate members,
who may, subject to any limitations imposed by the board of directors, replace
absent or disqualified members at any meeting of such committee; (3) the
stockholders of the Corporation shall have no power to appoint or remove
directors as members of committees of the board of directors, nor to abrogate
the power of the board of directors to establish any such committees or the
power of any such committee to exercise the powers and authority of the board
of directors; (4) the stockholders of the Corporation shall have no power to
elect or remove officers of the Corporation nor to abrogate the power of the
board of directors to elect and remove officers of the Corporation; and (5)
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law that might otherwise permit a lesser or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by this
Certificate of Incorporation, the bylaws of the Corporation shall not be
adopted, altered, amended or repealed by the stockholders of the Corporation
except in accordance with the provisions of the bylaws and by the vote of the
holders of not less than a majority in voting power of the outstanding shares
of stock then entitled to vote upon the election of directors, voting together
as a single class or such higher vote as is set forth in the bylaws. The
bylaws of the Corporation shall not contain any provision inconsistent with
this Certificate of Incorporation. Notwithstanding any other provisions of
this Certificate of Incorporation or any provision of law that might otherwise
permit a lesser or no vote, but in addition to any affirmative vote of the
holders of
6
<PAGE> 7
any particular class or series of the capital stock of the Corporation required
by law or by this Certificate of Incorporation, the affirmative vote of the
holders of not less than two-thirds in voting power of the shares of the
Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to amend or repeal or to adopt
any provision inconsistent with, this Article Seventh.
EIGHTH: No action required to be taken or that may be taken at any
meeting of common stock holders of the Corporation may be taken without a
meeting, and the power of common stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied. Notwithstanding
any other provisions of this Certificate of Incorporation or any provision of
law that might otherwise permit a lesser or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the
capital stock of the Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of not less than eighty
percent in voting power of the shares of the Corporation then entitled to be
voted in an election of directors, voting together as a single class, shall be
required to amend or repeal or to adopt any provision inconsistent with, this
Article Eighth.
NINTH: Special meetings of the common stockholders of the
Corporation, and any proposals to be considered at such meetings, may be called
and proposed exclusively by the board of directors, pursuant to a resolution
approved by a majority of the members of the board of directors serving at the
time of that vote, and no stockholder of the Corporation shall require the
board of directors to call a special meeting of common stockholders or to
propose business at a special meeting of common stockholders. No business
proposed by a stockholder to be considered at an annual meeting of the common
stockholders (including the nomination of any person to be elected as a
director of the Corporation) shall be considered by the common stockholders at
that meeting unless, no later than sixty days before the annual meeting of
common stockholders or (if later) ten days after the first public notice of
that meeting is sent to common stockholders, the Corporation receives from the
stockholder proposing that business a written notice that sets forth (1) the
nature of the proposed business with reasonable particularity, including the
exact text of any proposal to be presented for adoption, and the reasons for
conducting that business at the annual meeting; (2) with respect to each such
stockholder, that stockholder's name and address (as they appear on the records
of the Corporation), business address and telephone number, residence address
and telephone number, and the number of shares of each class and series of
stock of the Corporation beneficially owned by that stockholder; (3) any
interest of the stockholder in the proposed business; (4) the name or names of
each person nominated by the stockholder to be elected or reelected as a
director, if any; and (5) with respect to each nominee, that nominee's name,
business address and telephone number, and residence address and telephone
number, the number of shares, if any, of each class and series of stock of the
Corporation owned beneficially by that nominee, and all information relating to
that nominee that is required to be disclosed in solicitations of proxies for
elections of directors or is otherwise required, pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (or
any provision of law subsequently replacing Regulation 14A), together with a
notarized letter signed by the nominee stating his or her acceptance of the
nomination by that stockholder, stating his or her intention to serve as
director if elected, and consenting to being
7
<PAGE> 8
named as a nominee for director in any proxy statement relating to such
election. The person presiding at the annual meeting shall determine whether
business (including the nomination of any person as a director) has been
properly brought before the meeting and, if the facts so warrant, shall not
permit any business (or voting with respect to any particular nominee) to be
transacted that has not been properly brought before the meeting.
Notwithstanding any other provisions of this Certificate of Incorporation or
any provision of law that might otherwise permit a lesser or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the capital stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of not less
than two-thirds in voting power of the shares of the Corporation then entitled
to be voted in an election of directors, voting together as a single class,
shall be required to amend or repeal or to adopt any provision inconsistent
with, this Article Ninth.
TENTH: No contract or transaction between the Corporation and one or
more of its directors, officers or stockholders or between the Corporation and
any other person (as used herein "person" means a corporation, partnership,
association, firm, trust, joint venture, political subdivision or
instrumentality) or other organization in which one or more of its directors,
officers or stockholders are directors, officers or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her or their votes are counted for such purpose, if: (1) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the board of directors, a committee
thereof, or the stockholders. Interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
ELEVENTH:
1. In addition to any affirmative vote that may be
required by law, the Certificate of Incorporation or the bylaws of the
Corporation, and except as otherwise prohibited by law or expressly
provided by Section 253 of the DGCL or expressly provided in paragraph
2 of this Article Eleventh:
(a) any merger, consolidation or share exchange
of the Corporation or any subsidiary of the Corporation with
(i) any Related Person or (ii) any other Person (whether or
not itself a Related Person) which is, or after such merger,
consolidation or share exchange would be, an Affiliate of a
Related Person; or
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<PAGE> 9
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition by the Corporation or any
subsidiary of the Corporation to any Related Person or any
Affiliate of any Related Person or by any Related Person or
any Affiliate of any Related Person to the Corporation or any
subsidiary of the Corporation, of any assets or properties
having an aggregate Fair Market Value of $10,000,000 or more;
or
(c) any issuance or transfer by the Corporation
or any subsidiary of the Corporation of any securities of the
Corporation or any subsidiary of the Corporation to any
Related Person or any Affiliate of any Related Person (except
(i) pursuant to the exercise, exchange or conversion of
securities exercisable for, exchangeable for or convertible
into stock of the Corporation or any subsidiary of the
Corporation which securities were acquired by the Related
Person prior to becoming a Related Person, or (ii) pursuant to
a dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of the Corporation
or subsidiary of the Corporation which security is
distributed, pro rata to all holders of a class or series of
stock of the Corporation subsequent to the time the Related
Person became such, and provided in the case of this clause
(ii) that there is not any increase of more than 1% in the
Related Person's proportionate share of the stock of any class
or series of the Corporation or of the Voting Stock of the
Corporation); or
(d) any adoption of any plan or proposal by the
Corporation for the liquidation or dissolution of the
Corporation voluntarily caused or proposed by or on behalf of
a Related Person or any Affiliate of any Related Person; or
(e) any reclassification of securities (including
any reverse stock split) or recapitalization of the
Corporation or any merger, consolidation or share exchange of
the Corporation with any of its subsidiaries or any other
transaction (whether or not with or into or otherwise
involving a Related Person) which has the effect, either
directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding stock of any class or
series or the securities convertible into stock of any class
or series of the Corporation or any subsidiary of the
Corporation which is Beneficially Owned by any Related Person
or any Affiliate of any Related Person or otherwise increasing
the voting power of the outstanding stock of the Corporation
or any subsidiary of the Corporation possessed by any such
Related Person or Affiliate; or
(f) any series or combination of transactions
having, directly or indirectly, the same effect as any of the
foregoing; or
(g) any agreement, contract or other arrangement
providing, directly or indirectly, for any of the foregoing,
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shall require the affirmative vote of the holders of (x) not less than
80% in voting power of the then outstanding Voting Stock held by
stockholders voting together as a single class and (y) not less than
66 2/3% in voting power of the then outstanding Voting Stock not
Beneficially Owned, directly or indirectly, by any Related Person with
respect to such Business Combination, voting together as a single
class. Subject to the applicability of paragraph 2, such affirmative
vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law,
elsewhere in the Certificate of Incorporation, in the bylaws of the
Corporation or in any agreement with any national securities exchange
or otherwise.
2. The provisions of paragraph 1 shall not be applicable
to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by applicable
law, any other provision of the Certificate of Incorporation other
than this Article Eleventh, the bylaws of the Corporation and any
agreement with a national securities exchange or otherwise, if all of
the conditions specified in either of the following subparagraphs (a)
and (b) are met:
(a) the cash, property, securities or other
consideration to be received per share by holders of each and
every outstanding class or series of shares of the Corporation
in the Business Combination is, with respect to each such
class or series, either (i) the same in form and amount per
share as that paid by the Related Person in a tender offer in
which such Related Person acquired at least 50% of the
outstanding stock of such class or series and which was
consummated not more than one year prior to the date of such
Business Combination or (ii) not less in amount (as to cash)
or Fair Market Value (as to consideration other than cash) as
of the date of the determination of the Highest Per Share
Price (as to property, securities or other consideration) than
the Highest Per Share Price applicable to such class or series
of shares; provided; however that in the event of any Business
Combination in which the Corporation survives, any shares
retained by the holders thereof shall constitute consideration
other than cash for purposes of this subparagraph (a); or
(b) at least a majority of the Continuing
Directors shall have expressly approved such Business
Combination either in advance of or subsequent to such Related
Person's having become a Related Person.
In the case of any Business Combination with a Related Person
to which subparagraph (b) above does not apply, at least a majority of
the Continuing Directors, promptly following the request of a Related
Person, shall determine the Highest Per Share Price for each class or
series of stock of the Corporation. Such determination shall be
announced not less than five days prior to the meeting at which
holders of shares vote on the Business Combination. Such
determination shall be final, unless the Related Person becomes the
Beneficial Owner of additional shares after the date of the earlier
determination, in which case the Continuing
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Directors shall make a new determination as to the Highest Per Share
Price for each class or series of shares prior to the consummation of
the Business Combination.
A Related Person shall be deemed to have acquired a share at
the time that such Related Person became the Beneficial Owner thereof.
With respect to shares owned by Affiliates, Associates and other
Persons whose ownership is attributable to a Related Person, if the
price paid by such Related Person for such shares is not determinable
by a majority of the Continuing Directors, the price so paid shall be
deemed to be the higher of (i) the price paid upon the acquisition
thereof by the Affiliate, Associate or other Person or (ii) the Share
Price of the shares in question at the time when the Related Person
became the Beneficial Owner thereof.
3. For purposes of this Article Eleventh:
(a) The term "Affiliate," used to indicate a
relationship to a specified Person, shall mean a Person that
directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with,
such specified Person.
(b) The term "Associate," used to indicate a
relationship with a specified Person, shall mean (i) any
corporation, partnership or other organization (other than the
Corporation or any wholly owned subsidiary of the Corporation)
of which such specified Person is an officer or partner or is,
directly or indirectly, the Beneficial Owner of 10% or more of
any class of equity securities; (ii) any trust or other estate
in which such specified Person has a beneficial interest of
10% or more or as to which such specified Person serves as
trustee or in a similar fiduciary capacity; (iii) any Person
who is a director or officer of such specified Person or any
of its parents or subsidiaries (other than the Corporation or
any wholly owned subsidiary of the Corporation); and (iv) any
relative or spouse of such specified Person or of any of its
Associates or any relative of any such spouse, who has the
same home as such specified Person or such Associate.
(c) A Person shall be a "Beneficial Owner" of any
shares of any class or series of capital stock of the
Corporation (i) which such Person or any of its Affiliates or
Associates beneficially owns, directly or indirectly; or (ii)
which such Person or any of its Affiliates or Associates has,
directly or indirectly, (A) the right or obligation to acquire
(whether such right or obligation is exercisable immediately
or only after the passage of time or the occurrence of any
event), pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the beneficial owner of any stock tendered pursuant to
a tender or exchange offer made by such Person or any of such
Person's Affiliates or Associates until such tendered stock is
accepted for purchase or
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exchange, or (B) the right to vote or dispose of, including
pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person
shall not be deemed the beneficial owner of any stock because
of such Person's right to vote such stock if the agreement,
arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy
or consent solicitation made to ten or more Persons pursuant
to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act; or (iii)
which is beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with
which such Person or any of its Affiliates or Associates has
any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting or
disposing of such stock; or (iv) of which such Person would be
the Beneficial Owner pursuant to the terms of Rule 13d-3 of
the General Rules and Regulations under Exchange Act, as in
effect on June 26, 1997.
(d) The term "Business Combination" shall mean
any transaction which is referred to in any one or more of
clauses (a) through (g) of paragraph 1 of this Article
Eleventh.
(e) The term "Continuing Director" shall mean,
with respect to a Business Combination with a Related Person,
any director of the Corporation (i) who is unaffiliated with
the Related Person and (ii) who (A) became a director prior to
the time that the Related Person became a Related Person or
(B) was recommended or nominated to succeed a Continuing
Director by a majority of all then Continuing Directors,
acting separately or as a part of any action taken by the
board of directors or any committee thereof. Without limiting
the generality of the foregoing, a director shall be deemed to
be affiliated with a Related Person if such director (i) is or
at any previous time has been an officer, director, employee
or general partner of such Related Person; (ii) is or at any
previous time has been an Affiliate or Associate of such
Related Person; (iii) is or at any previous time has been a
relative or spouse of such Related Person or of any such
officer, director, general partner, Affiliate or Associate;
(iv) performs services for, or is a member, employee, greater
than 5% stockholder or other equity owner of any organization
(other than the Corporation and its subsidiaries) which
performs services, for such Related Person or any Affiliate of
such Related Person or is a relative or spouse of any such
Person; or (v) was nominated for election as a director by
such Related Person.
(f) The term "Fair Market Value" shall mean, in
the case of securities, the average of the closing sale prices
during the 30-day period immediately preceding the date in
question of such security on the principal United States
securities exchange registered under the Exchange Act on which
such security is listed (or the composite tape therefor) or,
if such securities are not listed on any such exchange, the
average of the closing bid quotations with respect to such
security during the 30-day period
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preceding the date in question on the Nasdaq National Market
or any similar system then in use or, if no such quotations
are available, the fair market value on the date in question
of such security as determined in good faith by a majority of
the Continuing Directors; and in the case of property other
than cash or securities, the fair market value of such
property on the date in question as determined in good faith
by a majority of the Continuing Directors.
(g) The term "Highest Per Share Price" shall mean
(i) as to any class or series of stock of which the Related
Person Beneficially Owns 10% or more of the outstanding
shares, the highest price that can be determined to have been
paid or agreed to be paid for any share or shares of that
class or series by such Related Person in a transaction that
either (A) resulted in such Related Person Beneficially Owning
10% or more thereof or (B) was effected at a time when such
Related Person Beneficially Owned more than 10% thereof, (ii)
as to any class or series of stock of which the Related Person
Beneficially Owns shares, but not more than 10% of the
outstanding shares, the highest price that can be determined
to have been paid or agreed to be paid at any time by such
Related Person for any share or shares of that class or series
that are then Beneficially Owned by such Related Person or
(iii) as to any other class or series of stock, the amount
determined by a majority of the Continuing Directors, on
whatever basis they believe is appropriate, to be the per
share price equivalent of the highest price that can be
determined to have been paid or agreed to be paid at any time
by the Related Person for any other class or series of stock.
In determining the Highest Per Share Price, all purchases by
the Related Person shall be taken into account regardless of
whether the shares were purchased before or after the Related
Person became a Related Person and the Highest Per Share Price
will be appropriately adjusted to take into account (W)
distributions paid or payable in stock, (X) subdivisions of
outstanding stock, (Y) combinations of shares of stock into a
smaller number of shares and (Z) similar events.
(h) The term "Person" shall mean any individual,
corporation, limited liability company, association,
partnership, joint venture, trust, estate or other entity or
organization.
(i) The term "Related Person" shall mean any
Person (other than the Corporation or any subsidiary of the
Corporation and other than any profit-sharing, employee
ownership or other employee benefit plan of the Corporation or
any subsidiary of the Corporation or any trustee of or
fiduciary with respect to any such plan when acting in such
capacity) who or which (i) is the Beneficial Owner of more
than 10% of the aggregate voting power of all outstanding
stock of the Corporation; or (ii) is an Affiliate of the
Corporation and at any time within the two-year period
immediately prior to the date in question was the Beneficial
Owner of more than 10% of the aggregate voting power of all
outstanding stock of the Corporation; or (iii) is an assignee
of or has otherwise succeeded to any shares of stock of the
Corporation
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which were at any time within the two-year period immediately
prior to the date in question Beneficially Owned by any
Related Person, if such assignment or succession shall have
occurred in the course of a privately negotiated transaction
rather than an open market transaction. For the purposes of
determining whether a Person is a Related Person, the number
of shares of any class or series deemed to outstanding shall
include shares of such class or series of which the Person is
deemed the Beneficial Owner, but shall not include any other
shares which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, exchange rights, warrants or options, otherwise.
(j) The term "Voting Stock" shall mean all
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors,
considered for the purpose of this Article Eleventh as one
class. If the Corporation has shares of Voting Stock entitled
to more or less than one vote for any such share, each
reference in this Article Eleventh to a proportion or
percentage in voting power of Voting Stock shall be calculated
by reference to the portion or percentage of votes entitled to
be cast by the holders of such shares.
4. Nothing contained in this Article ELEVENTH shall be
construed to relieve any Related Person from any fiduciary obligation
imposed by law.
5. Notwithstanding any other provision of the
Certificate of Incorporation (and notwithstanding that a lesser
percentage may be specified by law), the affirmative vote of the
holders of not less than 80% in voting power of the then outstanding
Voting Stock held by stockholders, voting together as a single class,
shall be required to amend or repeal or adopt any provisions
inconsistent with, this Article Eleventh.
TWELFTH: The Corporation shall indemnify any person who was,
is, or is threatened to be made a party to a proceeding (as hereinafter
defined) by reason of the fact that he or she (1) is or was a director or
officer of the Corporation or (2) while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation, limited liability
company, association, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise, entity or organization, to the
fullest extent permitted under the DGCL, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article Twelfth is in effect.
Any repeal or amendment of this Article Twelfth shall be prospective only and
shall not limit the rights of any such director or officer or the obligations
of the Corporation with respect to any claim arising from or related to the
services of such director or officer in any of the foregoing capacities prior
to any such repeal or amendment to this Article Twelfth. Such right shall
include the right to be paid by the Corporation expenses (including attorneys'
fees) incurred in defending any such proceeding in advance of its final
disposition to the
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maximum extent permitted under the DGCL, as the same exists or may hereafter be
amended. If a claim for indemnification or advancement of expenses hereunder
is not paid in full by the Corporation within sixty days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim,
and, if successful in whole or in part, the claimant shall also be entitled to
be paid the expenses of prosecuting such claim. It shall be a defense to any
such action that such indemnification is not permitted under the DGCL, but the
burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its board of directors or any committee
thereof, independent legal counsel or stockholders) to have made its
determination prior to the commencement of such action that indemnification of
the claimant is permissible in the circumstances nor an actual determination by
the Corporation (including its board of directors or any committee thereof,
independent legal counsel or stockholders) that such indemnification is not
permissible shall be a defense to the action or create a presumption that such
indemnification is not permissible. In the event of the death of any person
having a right of indemnification under the foregoing provisions, such right
shall inure to the benefit of his or her heirs, executors, administrators, and
personal representatives. The rights conferred above shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, bylaw, resolution of stockholders or directors, agreement or
otherwise.
The Corporation may additionally indemnify any employee or
agent of the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action,
suit or proceeding, and any inquiry or investigation that could lead to such an
action, suit or proceeding.
THIRTEENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (1) for any breach of the
directors duty of loyalty to the Corporation or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (3) under Section 174 of the DGCL, as the same exists
or as such provision may hereafter be amended, supplemented or replaced, or (4)
for any transaction from which the director derived an improper personal
benefit. Any repeal or amendment of this Article Thirteenth by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of
the Corporation is not personally liable as set forth in the foregoing
provisions of this Article Thirteenth, a director shall not be liable to the
Corporation or its stockholders to such further extent as permitted by any law
hereafter enacted, including without limitation any subsequent amendment to the
DGCL. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or
no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the capital stock of the Corporation
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required by law or by this Certificate of Incorporation, the affirmative vote
of the holders of not less than two-thirds in voting power of the shares of the
Corporation then entitled to be voted in an election of directors, voting
together as a single class, shall be required to amend or repeal or to adopt
any provision inconsistent with, this Article Thirteenth.
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
PIONEER NATURAL RESOURCES COMPANY
A Delaware Corporation
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE ONE: OFFICES
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meeting . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . 2
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Required Vote; Withdrawal of Quorum . . . . . . . . . . . . 3
2.8 Method of Voting; Proxies . . . . . . . . . . . . . . . . . 3
2.9 Record Date . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Conduct of Meeting . . . . . . . . . . . . . . . . . . . . 4
2.11 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE THREE: DIRECTORS
3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Number; Election; Classification; Term; Qualification . . . 5
3.3 Change in Number . . . . . . . . . . . . . . . . . . . . . 5
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Meetings of Directors . . . . . . . . . . . . . . . . . . . 6
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . 6
3.8 Election of Officers . . . . . . . . . . . . . . . . . . . 6
3.9 Regular Meetings . . . . . . . . . . . . . . . . . . . . . 6
3.10 Special Meetings . . . . . . . . . . . . . . . . . . . . . 7
3.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . 7
3.13 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Presumption of Assent . . . . . . . . . . . . . . . . . . . 7
3.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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<TABLE>
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ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . 8
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . 8
4.5 Alternate Members of Committees . . . . . . . . . . . . . . 8
4.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . 8
4.7 Special Meetings . . . . . . . . . . . . . . . . . . . . 8
4.8 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . 9
4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Responsibility . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE FIVE: NOTICE
5.1 Method . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office . . . . . . . . . . . . . . 10
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . 10
6.7 President . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.8 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . 11
6.9 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.10 Assistant Treasurers . . . . . . . . . . . . . . . . . . . 11
6.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.12 Assistant Secretaries . . . . . . . . . . . . . . . . . . . 12
6.13 Other Officers . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares . . . . . . . . . . . . . . . . . . 12
7.2 Replacement of Lost or Destroyed Certificates . . . . . . . 12
7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . 13
7.4 Registered Stockholders . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 4
<TABLE>
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7.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . 13
8.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.6 Resignations . . . . . . . . . . . . . . . . . . . . . . . . 14
8.7 Securities of Other Corporations . . . . . . . . . . . . . 14
8.8 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . 14
8.9 Action Without a Meeting . . . . . . . . . . . . . . . . . 14
8.10 Invalid Provisions . . . . . . . . . . . . . . . . . . . . 15
8.11 Mortgages, etc. . . . . . . . . . . . . . . . . . . . . . . 15
8.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.13 References . . . . . . . . . . . . . . . . . . . . . . . . 15
8.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
PIONEER NATURAL RESOURCES COMPANY
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation Law
of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Pioneer Natural Resources Company, a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. Except as otherwise required by law, special
meetings of the common stockholders of the Corporation, and any proposals to be
considered at such meetings, may be called and proposed exclusively by the
board of directors, pursuant to a resolution approved by a majority of the
members of the board of directors at the time in office, and no stockholder of
the Corporation shall require the board of directors to call a special meeting
of common stockholders
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or to propose business at a special meeting of common stockholders. A special
meeting shall be held on such date and at such time as shall be designated by
the resolution calling the meeting and stated in the notice of the meeting or
in a duly executed waiver of notice of such meeting. Only such business shall
be transacted at a special meeting as may be stated or indicated in the notice
of such meeting or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be held
at any place within or without the State of Delaware designated by the board of
directors. A special meeting of stockholders may be held at any place within
or without the State of Delaware designated in the notice of the meeting or a
duly executed waiver of notice of such meeting. Meetings of stockholders shall
be held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and
time of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten nor more than 60 days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board if
such office has been filled (otherwise, the President), the Secretary, or the
officer or person(s) calling the meeting, to each stockholder of record
entitled to vote at such meeting. If such notice is to be sent by mail, it
shall be directed to such stockholder at his address as it appears on the
records of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
2.5 Voting List. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares registered in the name of each stockholder.
For a period of ten days prior to such meeting, such list shall be kept on file
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of meeting or a duly executed waiver of notice of
such meeting or, if not so specified, at the place where the meeting is to be
held and shall be open to examination by any stockholder during ordinary
business hours. Such list shall be produced at such meeting and kept at the
meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these bylaws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders,
the
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stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other
than announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide
any question brought before such meeting, unless the question is one on which,
by express provision of statute, the certificate of incorporation of the
Corporation, or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation before or at
the time of the meeting. No proxy shall be valid after three years from the
date of its execution, unless otherwise provided in the proxy. If no date is
stated in a proxy, such proxy shall be presumed to have been executed on the
date of the meeting at which it is to be voted. Each proxy shall be revocable
unless expressly provided therein to be irrevocable and coupled with an
interest sufficient in law to support an irrevocable power or unless otherwise
made irrevocable by law.
2.9 Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, for any such determination
of stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which
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notice is given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
2.10 Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence or inability to act of any such officer, such
officer's duties shall be performed by the officer given the authority to act
for such absent or non- acting officer under these bylaws or by some person
appointed by the meeting.
2.11 Inspectors. The board of directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail
to appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies and shall receive votes or ballots, hear and determine all
challenges and questions arising in connection with the right to vote, count
and tabulate all votes or ballots, determine the results, and do such acts as
are proper to conduct the election or vote with fairness to all stockholders.
On request of the chairman of the meeting, the inspectors shall make a report
in writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
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ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall
be managed by the board of directors. Subject to the restrictions imposed by
law, the certificate of incorporation of the Corporation, or these bylaws, the
board of directors may exercise all the powers of the Corporation.
3.2 Number; Election; Classification; Term; Qualification. The
number of directors that shall constitute the entire board of directors shall
be not less than three and not more than twenty-one. The first board of
directors shall consist of the number of directors named in the certificate of
incorporation of the Corporation or, if no directors are so named, shall
consist of the number of directors elected by the incorporator(s) at an
organizational meeting or by unanimous written consent in lieu thereof.
Thereafter, within the limits above specified, the number of directors that
shall constitute the whole board of directors shall from time to time be fixed
exclusively by the board of directors by a resolution adopted by a majority of
the whole board of directors serving at the time of that vote. Except as
otherwise required by law or required or permitted by the certificate of
incorporation of the Corporation or these bylaws, the directors shall be
elected at an annual meeting of stockholders at which a quorum is present.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors. Effective at the time specified in the certificate of incorporation
of the Corporation, the board of directors of the Corporation shall be divided
into three classes designated Class I, Class II, and Class III, respectively,
all as nearly equal in number as possible, with each director then in office
receiving the classification that at least a majority of the board of directors
designates. The initial term of office of the directors of Class I shall
expire at the annual meeting of stockholders of the Corporation in 1998, of
Class II shall expire at the annual meeting of stockholders of the Corporation
in 1999, and of Class III shall expire at the annual meeting of stockholders of
the Corporation in 2000, and in all cases as to each director until his
successor is elected and qualified or until his earlier death, resignation or
removal. At each annual meeting of stockholders beginning with the annual
meeting of stockholders in 1998, each director elected to succeed a director
whose term is then expiring shall hold his office until the third annual
meeting of stockholders after his election and until his successor is elected
and qualified or until his earlier death, resignation or removal. None of the
directors need be a stockholder of the Corporation or a resident of the State
of Delaware. Each director must have attained the age of majority. Upon
reaching the age of 72 years, persons will become ineligible to serve as
directors of the Corporation. Accordingly, the term of office of any person
reaching that age while serving as a director of the Corporation shall
immediately terminate and the vacancy shall be filled as provided in Section
3.5. In addition, any person who has reached the age of 72 years (or would
reach that age during the first year of the term of the class of directors for
which such person is nominated) is ineligible for election as a director of the
Corporation.
3.3 Change in Number. If the number of directors that constitutes
the whole board of directors is changed in accordance with the certificate of
incorporation and these bylaws, the majority of the whole board of directors
that adopts the change shall also fix and determine the number of directors
comprising each class; provided, however, that any increase or decrease in the
number of directors shall be apportioned among the classes as equally as
possible. No decrease in the number of directors constituting the entire board
of directors shall have the effect of shortening the term of any incumbent
director.
3.4 Removal. No director of any class of directors of the
Corporation shall be removed before the expiration date of that director's term
of office except for cause and by an affirmative vote
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of the holders of not less than two-thirds of the outstanding shares of the
class or classes or series of stock then entitled to be voted at an election of
directors of that class or series, voting together as a single class, cast at
the annual meeting of stockholders or at any special meeting of stockholders
called by a majority of the whole board of directors for this purpose.
3.5 Vacancies. Vacancies in the board of directors resulting from
death, resignation, retirement, disqualification, removal from office, or other
cause and newly-created directorships resulting from any increase in the
authorized number of directors may be filled by no less than a majority of the
remaining directors then in office, though less than a quorum, who are
designated to represent the same class or classes of stockholders that the
vacant position, when filled, is to represent or by the sole remaining director
(but not by the common stockholders except as required by law), and each
director so chosen shall receive the classification of the vacant directorship
to which he has been appointed or, if it is a newly-created directorship, shall
receive the classification that at least a majority of the board of directors
designates and shall hold office until the first meeting of stockholders held
after his election for the purpose of electing directors of that classification
and until his successor is elected and qualified or until his death,
resignation, or removal from office. If there are no directors in office, an
election of directors may be held in the manner provided by statute. Except as
otherwise provided in these bylaws, when one or more directors shall resign
from the board of directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, who are
designated to represent the same class or classes or series of stockholders
that the position being vacated represents shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in these bylaws with respect to the filling of other
vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.7 First Meeting. Each newly elected board of directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting shall be
necessary.
3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors
shall be held at such times and places as shall be designated from time to time
by resolution of the board of directors. Notice of such regular meetings shall
not be required.
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3.10 Special Meetings. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
any director.
3.11 Notice. The Secretary shall give notice of each special meeting
to each director at least 24 hours before the meeting. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of
directors, a majority of the directors fixed in the manner provided in these
bylaws shall constitute a quorum for the transaction of business. If at any
meeting of the board of directors there be less than a quorum present, a
majority of those present or any director solely present may adjourn the
meeting from time to time without further notice. Unless the act of a greater
number is required by law, the certificate of incorporation of the Corporation,
or these bylaws, the act of a majority of the directors present at a meeting at
which a quorum is in attendance shall be the act of the board of directors. At
any time that the certificate of incorporation of the Corporation provides that
directors elected by the holders of a class or series of stock shall have more
or less than one vote per director on any matter, every reference in these
bylaws to a majority or other proportion of directors shall refer to a majority
or other proportion of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall
be transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing
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contained herein shall be construed to preclude any director from serving the
Corporation in any other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted
by a majority of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of one
or more directors appointed by resolution adopted by a majority of the entire
board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each committee member shall serve as such until the
earliest of (i) the expiration of his term as director, (ii) his resignation as
a committee member or as a director, or (iii) his removal as a committee member
or as a director.
4.3 Authority. Each committee, to the extent expressly provided in
the resolution establishing such committee, shall have and may exercise all of
the authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the power
at any time to fill vacancies in, to change the membership of, and to discharge
any committee.
4.5 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any
such alternate member may replace any absent or disqualified member at any
meeting of the committee. If no alternate committee members have been so
appointed to a committee or each such alternate committee member is absent or
disqualified, the member or members of such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least two days before such special meeting. Neither the business to
be transacted at, nor the purpose of, any special meeting of any committee need
be specified in the notice or waiver of notice of any special meeting.
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4.8 Quorum; Majority Vote. At meetings of any committee, a majority
of the number of members designated by the board of directors shall constitute
a quorum for the transaction of business. If a quorum is not present at a
meeting of any committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present. The act of a majority of the members
present at any meeting at which a quorum is in attendance shall be the act of a
committee, unless the act of a greater number is required by law, the
certificate of incorporation of the Corporation, or these bylaws.
4.9 Minutes. Each committee shall cause minutes of its proceedings
to be prepared and shall report the same to the board of directors upon the
request of the board of directors. The minutes of the proceedings of each
committee shall be delivered to the Secretary of the Corporation for placement
in the minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the board
of directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such
director by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of
the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice
required or permitted to be given by telegram, telex, or telefax shall be
deemed to be delivered and given at the time transmitted with all charges
prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express
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purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), and a
Treasurer. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided. Any two
or more offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the board
of directors may be removed by the board of directors whenever in its judgment
the best interest of the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the
Corporation (by death, resignation, removal, or otherwise) may be filled by the
board of directors.
6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these bylaws or
as may be determined by resolution of the board of directors not inconsistent
with these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the board of directors; provided, however,
that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such
power is delegated) to the Chairman of the Board or the President or to any
committee of the board of directors.
6.6 Chairman of the Board. The Chairman of the Board, if elected by
the board of directors, shall have such powers and duties as may be prescribed
by the board of directors, which may include being the chief executive officer
of the Corporation. If designated as the chief executive officer, the Chairman
of the Board shall have general executive charge, management, and control of
the properties and operations of the Corporation in the ordinary course of its
business, with all such powers with respect to such properties and operations
as may be reasonably incident to such responsibilities. Such officer shall
preside at all meetings of the stockholders and of the board of directors.
Such officer may agree upon and execute all division and transfer orders,
bonds, contracts, and other obligations in the name of the Corporation, and he
may sign all certificates for shares of stock of the Corporation.
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6.7 President. If a Chairman of the Board has not been elected or if
the Chairman of the Board has been elected but has not been designated by the
board of directors to be the chief executive officer of the Corporation, the
President shall be the chief executive officer of the Corporation and, subject
to the board of directors, he shall have general executive charge, management,
and control of the properties and operations of the Corporation in the ordinary
course of its business, with all such powers with respect to such properties
and operations as may be reasonably incident to such responsibilities. If the
Chairman of the Board has been elected and has been designated as the chief
executive officer of the Corporation, the President shall be the chief
operating and administrative officer of the Corporation and, subject to the
board of directors, shall have charge of the actual day-to-day operations and
management of the Corporation and its property with all such powers with
respect to such properties and operations as may be reasonably incident to such
responsibilities. If the board of directors has not elected a Chairman of the
Board or in the absence or inability to act of the Chairman of the Board, the
President shall exercise all of the powers and discharge all of the duties of
the Chairman of the Board. As between the Corporation and third parties, any
action taken by the President in the performance of the duties of the Chairman
of the Board shall be conclusive evidence that there is no Chairman of the
Board or that the Chairman of the Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as
may be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise the powers of the
Treasurer during that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman
11
<PAGE> 16
of the Board or the President, in the name of the Corporation, all contracts of
the Corporation and affix the seal of the Corporation thereto. He may sign
with the Chairman of the Board or the President all certificates for shares of
stock of the Corporation, and he shall have charge of the certificate books,
transfer books, and stock papers as the board of directors may direct, all of
which shall at all reasonable times be open to inspection by any director upon
application at the office of the Corporation during business hours. He shall
in general perform all duties incident to the office of the Secretary, subject
to the control of the board of directors, the Chairman of the Board, and the
President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
6.13 Other Officers. Each other officer elected by the board of
directors and designated to be an officer of the Corporation shall have the
title that the board of directors may prescribe and the duties that the board
of directors, the Chairman of the Board, or the President may prescribe.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or
the President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all
signatures on the certificate may be a facsimile and may be sealed with the
seal of the Corporation or a facsimile thereof. If any officer, transfer
agent, or registrar who has signed, or whose facsimile signature has been
placed upon, a certificate has ceased to be such officer, transfer agent, or
registrar before such certificate is issued, such certificate may be issued by
the Corporation with the same effect as if he were such officer, transfer
agent, or registrar at the date of issue. The certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting
12
<PAGE> 17
from a claim, that may be made against the Corporation with respect to the
certificate or certificates alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and
authority to provide that certificates representing shares of stock bear such
legends as the board of directors deems appropriate to assure that the
Corporation does not become liable for violations of federal or state
securities laws or other applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to
provide for contingencies, to equalize dividends, or to repair or maintain any
property of the Corporation, or for such other purpose as the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in the manner in which it was
created.
8.3 Books and Records. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer
13
<PAGE> 18
agent or registrar, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of the shares held by
each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed
by the board of directors; provided, that if such fiscal year is not fixed by
the board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may
resign by giving written notice to the board of directors, the Chairman of the
Board, the President, or the Secretary. Such resignation shall take effect at
the time specified therein or, if no time is specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board, the
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy,
or consent with respect to any such securities.
8.8 Telephone Meetings. Members of the board of directors, and
members of a committee of the board of directors, may participate in and hold a
meeting of such board of directors or committee by means of a conference
telephone or similar communications equipment by means of which persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
8.9 Action Without a Meeting. Unless otherwise restricted by the
certificate of incorporation of the Corporation or by these bylaws, any action
required or permitted to be taken at a meeting of the board of directors, or of
any committee of the board of directors, may be taken without a meeting if a
consent or consents in writing, setting forth the action so taken, shall be
signed by all the directors or all the committee members, as the case may be,
entitled to vote with respect to the subject matter thereof, and such consent
shall have the same force and effect as a vote of such directors or committee
members, as the case may be, and may be stated as such in any certificate or
document filed with the Secretary of State of the State of Delaware or in any
certificate delivered to any person. Such consent or consents shall be filed
with the minutes of proceedings of the board or committee, as the case may be.
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<PAGE> 19
8.10 Invalid Provisions. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary.
8.12 Headings. The headings used in these bylaws have been inserted
for administrative convenience only and do not constitute matter to be
construed in interpretation.
8.13 References. Whenever herein the singular number is used, the
same shall include the plural when appropriate, and words referring to persons
of one sex shall include references to persons of the other sex when
appropriate.
8.14 Amendments. These bylaws may be altered, amended, or repealed or
new bylaws may be adopted by the board of directors at any regular meeting of
the board of directors or at any special meeting of the board of directors if
notice of such alteration, amendment, repeal, or adoption of new bylaws be
contained in the notice of such special meeting. These bylaws may also be
altered, amended, or repealed or new bylaws may be adopted upon the vote of the
holders of not less than two-thirds of the outstanding shares of stock then
entitled to vote upon the election of directors at any regular meeting of the
stockholders or at any special meeting of the stockholders if notice of such
alteration, amendment, repeal, or adoption of new bylaws be contained in the
notice of such special meeting.
The undersigned, the Secretary of the Corporation, hereby certifies that
the foregoing bylaws were adopted by unanimous consent of the directors of the
Corporation as of June 24, 1997.
PIONEER NATURAL RESOURCES COMPANY
By: /s/ M. GARRETT SMITH
--------------------------------
M. Garrett Smith
Vice President
__________________________________________________
15
<PAGE> 1
EXHIBIT 4.1
Incorporated Under the Laws of COMMON
The State of Delaware PAR VALUE $.01
NUMBER SHARES
<TABLE>
<S> <C>
This Certificate is transferable in CUSIP 000000 00 0
New York, New York and Jersey City, New Jersey See reverse for certain definitions and legends
</TABLE>
PIONEER NATURAL RESOURCES COMPANY
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
SEAL Pioneer Natural Resources Company (hereinafter called the
Corporation), transferable on the books of the Corporation holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid unless
countersigned by Transfer Agent and registered by the Registrar.
Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
/s/ S. SHEFHELD
- -------------------------------------
PRESIDENT AND CHIEF EXECUTIVE OFFICER DATED
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
/s/ M. WITHROW BY
- --------------------------------------
EXECUTIVE VICE PRESIDENT AND SECRETARY Authorized Signature
<PAGE> 2
PIONEER NATURAL RESOURCES COMPANY
The Corporation is authorized to issue shares of more than one class
and to issue shares in more than one series of at least one class. The
Corporation will furnish without charge to each stockholder who so requests a
statement of the powers, designations, preferences and relative, participating,
optional or other special right of each class of stock or series thereof of the
Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________Custodian _____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _______________
in common ([____])
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________________ hereby sell, assign
and transfer unto
Please insert Social Security or other
Identifying Number of Assignee
-----------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address of Assignee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of
- --------------------------------------------------------------------
capital stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint _____________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
----------------------------
X
---------------------------------
NOTICE: (Signature)
THE SIGNATURES TO THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR X
WITHOUT ALTERNATION OR ENLARGEMENT ---------------------------------
OR ANY CHANGE WHATEVER. (Signature)
The signature(s) would be
guaranteed by an "eligible
guarantor institution" as defined
in _____ under The Securities
Exchange Act of 1934 as amended.
SIGNATURE(S) GUARANTEED BY:
AMERICAN BANKNOTE COMPANY Production Coordinator
- Belinda Beck - [__________]
89 Blair Mill Road Proof of June 10, 1997
Horsham, PA 79044 PIONEER
[_________] [_____________]
Sales Person M. Garrett Opr. [___] REV. 1
[________________] [__________________]
<PAGE> 1
EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
PIONEER NATURAL RESOURCES COMPANY
Pursuant to the provisions of Section 151(g) of the General Corporation
Law of the State of Delaware (the "DGCL"), and pursuant to Article Fifth of its
Amended and Restated Certificate of Incorporation, the undersigned, Pioneer
Natural Resources Corporation, a company organized and existing under the DGCL
(the "Corporation"), in accordance with the provisions of Section 103 thereof,
DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Amended and Restated Certificate of
Incorporation of the Corporation, the Board of Directors on August 7, 1997,
adopted the following resolution creating a series of Preferred Stock, par
value $.01, designated as "Series A 8% Cumulative Convertible Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation ("Board of Directors") in accordance with
provisions of its Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation"), a series of Preferred Stock, par
value $.01 per share, of the Corporation is hereby created, and that
the designation and number of shares thereof and the preferences,
limitations and relative rights thereof are as follows:
Section 1. Designation, Number of Shares and Stated Value of
Series A 8% Cumulative Convertible Preferred Stock. There is hereby authorized
and established a series of Preferred Stock that shall be designated as "Series
A 8% Cumulative Convertible Preferred Stock" (hereinafter referred to as
"Series A Preferred"), and the number of shares constituting such series shall
be 20,000,000. Such number of shares may be increased, but not decreased below
the number of shares thereof issued and outstanding at the time of decrease
plus the maximum number of shares thereof issuable pursuant to Section 3 hereof
prior to June 30, 2008, by resolution adopted by the majority of the full Board
of Directors. The "Stated Value" per share of the Series A Preferred shall be
equal to $15.82.
Section 2. Definitions. In addition to the definitions set
forth elsewhere herein, the following terms shall have the meanings indicated:
"Average Gas Equivalent Price" shall mean for any Rolling 4 Quarter
Period, the average price received by the Corporation during such period from
sales of oil and gas production, expressed on a natural gas equivalent basis per
thousand cubic feet ("Mcf") using a factor of 6 Mcf of natural gas per 1 barrel
of liquids, to be calculated as follows:
<PAGE> 2
(a) the aggregate revenues of the Corporation and its
consolidated subsidiaries during such Rolling 4 Quarter Period from
sales of natural gas, natural gas liquids and oil and condensate
produced (other than that used for fuel and shrinkage) and sold by the
Corporation and its consolidated subsidiaries, as reported in the
Corporation's consolidated financial statements, divided by,
(b) the sum of (i) the total volume, on an Mcf basis, of
natural gas produced (other than that used for fuel and shrinkage) and
sold by the Corporation and its consolidated subsidiaries during such
Rolling 4 Quarter Period, plus (ii) the product of 6 times the total
number of barrels of natural gas liquids, oil and condensate, produced
(other than that used for fuel and shrinkage) and sold by the
Corporation and its consolidated subsidiaries during such Rolling 4
Quarter Period, as derived from the Corporation's consolidated
financial statements.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in Dallas, Texas are authorized or obligated
by law or executive order to close.
"Closing Price" with respect to a particular security on any Trading
Day shall mean the last reported sales price, regular way, for such security on
such Trading Day, or, in case no sale takes place on such day, the average of
the closing bid and ask prices, regular way on such Trading Day, in either case
as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which such security is listed or admitted to trading or, if such
security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such date
such security is not quoted by any such organization, the average of the
closing bid and ask prices on such Trading Day as furnished by a professional
market maker making a market in such security selected by the Board of
Directors of the corporation. If on any such date no market maker is making a
market in such security, the fair value of such shares on such date as
determined in good faith by the Board of Directors shall be used.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Corporation.
"Consolidated EBITDA" for any period, shall mean the consolidated net
income or loss of the Corporation for such period determined in accordance with
GAAP, but excluding gains and losses not arising from operations (including,
without limitation, interest income, gains and losses from investments, gains
and losses from dispositions of oil and gas properties or other assets,
collections and settlements of claims and litigation, adjustments of
contingency reserves and other extraordinary and/or non-recurring gains and
losses), plus, to the extent the following have been deducted in determining
such net income or loss, interest expense, income taxes, depreciation,
depletion and amortization expense and impairment expense.
2
<PAGE> 3
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Series A Preferred is convertible, as such conversion
price may be adjusted pursuant to Section 9 hereof. The initial Conversion
Price will be $15.82.
"full Board of Directors" when used in reference to the Corporation's
Board of Directors, means the total number of members of the Board of Directors
as fixed by, or in the manner provided in, the Certificate of Incorporation and
Bylaws (without regard to any then existing vacancies).
"Fixed Charge Coverage Ratio" shall mean as of the end of any Rolling
4 Quarter Period, the ratio of (a) the sum of (i) the Consolidated EBITDA for
such Rolling 4 Quarter Period, plus (ii) one-third of gross operating rents paid
before sublease income as defined by Standard & Poor's Corporation ("Gross
Rents"), if any, for such period to (b) the sum for such Rolling 4 Quarter
Period of (i) interest expense, both expensed and capitalized, of the
Corporation and its consolidated subsidiaries for such period, plus (ii)
one-third of Gross Rents for such period, plus (iii) scheduled principal
amortization of indebtedness (including borrowed money and capitalized leases)
of the Corporation and its consolidated subsidiaries.
"GAAP" shall mean generally accepted accounting principles in the
United States of America from time to time.
"Junior Securities" means the Common Stock or any other series of
stock issued by the Corporation ranking junior as to the Series A Preferred in
payment of dividends or distributions or upon liquidation, dissolution, or
winding-up of the Corporation.
"Market Price" per share of Common Stock as of any date shall mean the
average of the daily Closing Prices for a period of twenty Trading Days ending
on such date.
"Non-Series A Directors" shall mean the members of the Board of
Directors in whose election the holders of Common Stock are entitled to vote
(whether or not holders of shares of any other class or series are also
entitled to vote thereon).
"Original Issue Date" shall mean with respect to the Series A
Preferred the date on which shares of such series are first issued.
"Parity Security" means any class or series of stock issued by the
Corporation ranking on a parity with the Series A Preferred in payment of
dividends or distributions or upon liquidation, dissolution or winding-up of the
Corporation.
"Payable-in-Kind" or "Paid-in-Kind" when used in reference to any
dividend payable on the shares of Series A Preferred, means payment of the
dividend by issuance of that number of additional shares of Series A Preferred
that has an aggregate Stated Value equal to the dollar amount of such dividend
then payable, rounded to the nearest whole share (i.e., if less than .5 rounded
down, and if .5 or more rounded up). Shares of Series A Preferred issued as
dividends Payable-in-Kind shall be
3
<PAGE> 4
duly authorized, validly issued and nonassessable and, upon issuance, shall
have rights (including without limitation, dividend, voting, conversion and
redemption rights) identical to the outstanding shares of Series A Preferred in
respect of which they are issued.
"Person" means any individual, corporation, association, partnership,
joint venture, limited liability company, trust, estate, or other entity or
organization.
"Rolling 4 Quarter Period" means the most recently ended period of
four consecutive fiscal quarters of the Corporation prior to the date of
determination.
"Senior Securities" means any class or series of stock issued by the
Corporation ranking senior to the Series A Preferred in payment of dividends or
distributions or upon liquidation, dissolution or winding-up of the Corporation.
"Trading Day" with respect to any security means (a) if such security
is listed or admitted for trading on any national securities exchange, a day on
which such national securities exchange is open for trailing, or (b) if such
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
"Transfer Agent" means Continental Stock Transfer & Trust Company,
or such other agent or agents of the Corporation as may be designated by the
Board of Directors as the transfer agent or conversion agent for the Series A
Preferred.
"Underlying Common Stock" means at any time, with respect to any share
of Series A Preferred, the aggregate number of shares of Common Stock into
which such share is then convertible at such time pursuant to Section 9 hereof.
Section 3. Dividends and Distributions.
(a) The holders of outstanding shares of Series A Preferred shall
be entitled to receive, as and when declared by the Corporation, out of funds of
the Corporation legally available for the payment of dividends, preferential
quarterly dividends at the times and at the rates provided for in this Section
3. Dividends on shares of the Series A Preferred shall be cumulative and shall
accrue from and including the date of issuance of such shares to and including
the date on which such shares shall have been converted into Common Stock or
redeemed pursuant to Section 6 hereof. Such dividends shall accrue whether or
not there shall be (at the time such dividend becomes payable or at any other
time) profits, surplus or other funds of the Corporation legally available for
the payment of dividends.
(b) Dividends shall accrue on each outstanding share of Series A
Preferred at the rate of eight percent (8%) per annum of the Stated Value (the
"Dividend Rate") of such share. Dividends shall be payable quarterly, in
arrears, as of the last Business Day of each December, March, June and
September, commencing on September 30, 1997 (each, a "Dividend Payment Date").
4
<PAGE> 5
(c) During the period beginning on the Original Issue Date of the
Series A Preferred and ending on June 30, 2000 (the "Exclusive PIK Period"),
dividends on outstanding shares of Series A Preferred shall be Payable-in-Kind.
After the Exclusive PIK Period, dividends on the shares of Series A Preferred
shall be Payable-in-Kind or, at the Corporation's option, if the "Stock Price
Threshold" (as defined in subsection (d) below) or the "Coverage Ratio or Gas
Price Threshold" (as defined in subsection (e) below) is satisfied as of the
record date for such dividend, payable in cash.
(d) For purposes hereof, the "Stock Price Threshold" shall be
satisfied as of a record date for a Dividend Payment Date after the Exclusive
PIK Period if the average of the daily Closing Price, for the Common Stock
during a period of ninety (90) consecutive Trading Days preceding the tenth day
prior to such record date, was more than three times the Conversion Price then
in effect. Once the Stock Price Threshold has been satisfied, it shall be
deemed to remain satisfied on each subsequent Quarterly Dividend Payment Date
regardless of any subsequent changes in the price of the Common Stock.
(e) For purposes hereof, the "Coverage Ratio or Gas Price
Threshold" shall be satisfied as of a record date for a Dividend Payment Date
if either (i) the Fixed Charge Coverage Ratio as of the end of the then most
recently ended Rolling 4 Quarter Period is in excess of 2.5; or (ii) the
Average Gas Equivalent Price realized by the Corporation during the then most
recently ended Rolling 4 Quarter Period is in excess of $2.95. As a condition
to the payment of cash dividends on any Dividend Payment Date, the Coverage
Ratio or Gas Price Threshold must be satisfied as of the record date for such
quarterly Dividend Payment Date (unless the Stock Price Threshold has been
satisfied, in which case satisfaction of the Coverage Ratio or Gas Price
Threshold shall not be required).
(f) The amount of dividends payable on each Dividend Payment Date
shall be determined by applying the Dividend Rate from but excluding the
immediately preceding Dividend Payment Date (or from but excluding the date of
issuance of shares of Series A Preferred, with respect to the first dividend
period) to and including the Dividend Payment Date.
(g) Notwithstanding the foregoing or anything else herein to the
contrary, however, (i) dividends payable on any Redemption Date (as defined in
Section 6 below), shall be payable in cash or in Common Stock in accordance with
Section 6 hereof, and (ii) dividends payable on any final distribution date
relating to a dissolution, liquidation or winding up of the Corporation, shall
be payable in cash only. If the payment date does not occur on a regular
Dividend Payment Date, dividends shall be calculated on the basis of the actual
number of days elapsed from but excluding the immediately preceding Dividend
Payment Date to and including the Redemption Date or such final distribution
date. Dividends payable on the shares of Series A Preferred for any period of
less than a full quarterly dividend period shall be computed on the basis of a
360-day year comprised of twelve 30-day months.
(h) To the extent dividends are not paid in cash or Paid-in-Kind
on a Dividend Payment date, all dividends which shall have accrued on each
share of Series A Preferred outstanding as of such Dividend Payment Date shall
be added to the Stated Value of such share of Series A Preferred
5
<PAGE> 6
and shall remain a part thereof until paid, and dividends shall accrue at the
Dividend Rate and be paid on such share of Series A Preferred on the basis of
the Stated Value, as so adjusted.
(i) Dividends payable on each Dividend Payment Date shall be paid to
record holders of the shares of Series A Preferred as they appear on the books
of the Corporation at the close of business on the tenth Business Day
immediately preceding the respective Dividend Payment Date or on such other
record date as may be fixed by the Board of Directors of the Corporation in
advance of a Dividend Payment Date, provided that no such record date shall be
less than ten nor more than sixty calendar days preceding such Dividend Payment
Date.
(j) So long as any shares of Series A Preferred are outstanding:
(i) No dividend or other distribution shall be declared
or paid, or set apart for payment on or in respect of, any Junior
Securities (other than dividends or distributions payable in shares of
Junior Securities or in rights to purchase Junior Securities), nor
shall any Junior Securities be redeemed, purchased or otherwise
acquired for any consideration (or any money be paid to a sinking fund
or otherwise set apart for the purchase or redemption of any such
Junior Securities).
(ii) No dividend or other distribution, except as
described in the next succeeding sentence, shall be declared or paid,
or set apart for payment on or in respect of, Series A Preferred or
any Parity Securities for any period unless full cumulative dividends
on all outstanding shares of Series A Preferred and any Parity
Securities have been or contemporaneously are declared and paid for
all dividend periods terminating on or prior to the date set for
payment of such dividend. When dividends are not paid in full, as
aforesaid, on the shares of Series A Preferred and any Parity
Securities, all dividends declared upon the Series A Preferred and
such Parity Securities shall be declared and paid pro rata so that the
amounts of dividends per share declared and paid on the shares of
Series A Preferred and such Parity Securities shall in all cases bear
to each other the same ratio that unpaid dividends per share on the
Series A Preferred and on such Parity Securities bear to each other.
(iii) No shares of Series A Preferred or any Parity
Securities shall be redeemed, purchased or otherwise acquired for any
consideration (or any money be paid to a sinking fund or otherwise set
apart for the purchase or redemption of any such Parity Security) by
the Corporation unless the full cumulative dividends on all outstanding
shares of Series A Preferred shall have been or contemporaneously are
declared and paid for all dividend periods terminating on or prior to
the date on which such redemption, purchase or other payment is to
occur.
Section 4. Certain Covenants and Restrictions. So long as any
shares of Series A Preferred are outstanding:
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(a) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the shares of Series A Preferred as provided
in Section 6 and Section 9, respectively, such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the conversion
of all outstanding shares of Series A Preferred and all other securities and
instruments convertible into shares of Common Stock, and shall take all
reasonable action within its power required to increase the authorized number of
shares of Common Stock necessary to permit the conversion of all outstanding
shares of Series A Preferred and all such other securities and instruments
convertible into shares of Common Stock.
(b) The Corporation covenants and agrees that all shares of Common
Stock that may be issued as payment of the Redemption Price or upon exercise of
the conversion rights of shares of Series A Preferred will, upon issuance, be
fully-paid and nonassessable.
(c) The Corporation will endeavor to make the shares of stock that
may be issued as payment of the Redemption Price or upon exercise of the
conversion rights of shares of Series A Preferred eligible for trading upon any
national securities exchange, or any automated quotation system of a registered
securities association, upon or through which the Common Stock shall then be
traded prior to such delivery.
(d) Prior to the delivery of any securities which the Corporation
shall be obligated to deliver upon redemption or conversion of the Series A
Preferred, the Corporation will endeavor to comply with all federal and state
securities laws and regulations thereunder requiring the registration of such
securities with, or any approval of or consent to the delivery of such
securities by, any governmental authority.
(e) The Corporation shall pay all taxes and other governmental
charges (other than any income or franchise taxes) that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion or
redemption of Series A Preferred as provided herein. The Corporation shall not
be required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for shares of Common Stock
in any name other than that of the registered holder of the shares of the Series
A Preferred surrendered in connection with the conversion or redemption thereof,
and in such case the Corporation shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid, or it has been
established to the Corporation's satisfaction that no tax or other charge is
due.
Section 5. Liquidation Preference.
(a) In the event of any liquidation, dissolution, or winding-up of
the Corporation (in connection with the bankruptcy or insolvency of the
Corporation or otherwise), whether voluntary or involuntary, before any payment
or distribution of the assets of the Corporation (whether capital or surplus)
shall be made to or set apart for the holders of shares of any Junior
Securities, the holders of the shares of Series A Preferred shall be entitled to
receive an amount per share equal to the Stated Value per share held by them,
plus an amount in cash equal to the full cumulative dividends accrued
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<PAGE> 8
and unpaid thereon, to the date of such payment, whether or not declared, to the
extent such amount has not already been added to the Stated Value pursuant to
Section 3(h) hereof. No payment on account of any such liquidation, dissolution
or winding-up of the Corporation shall be paid to the holders of the shares of
Series A Preferred or the holders of any Parity Securities unless there shall be
paid at the same time to the holders of the shares of Series A Preferred and the
holders of any Parity Securities proportionate amounts determined ratably in
proportion to the full amounts to which the holders of all outstanding shares of
Series A Preferred and the holders of all such outstanding Parity Securities are
respectively entitled with respect to such distribution. For purposes of this
Section 5, neither a consolidation or merger of the Corporation with one or more
partnerships, companies or other entities nor a sale, lease, exchange or
transfer of all or any substantial part of the Corporation's assets for cash,
securities or other property shall be deemed to be a liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary.
(b) After payment of the full amount of the liquidation preference
to which the holders of shares of Series A Preferred are entitled, such holders
will not be entitled to any further participation in any distribution of assets
of the Corporation.
(c) Written notice of any liquidation, dissolution or winding-up
of the Corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage prepaid, not less than 15 days
prior to any payment date stated therein, to the holders of record of the
shares of Series A Preferred at their respective addresses as the same shall
appear in the records of the Corporation.
Section 6. Redemption. The outstanding shares of Series A
Preferred are subject to redemption in accordance with the following
provisions:
(a) Subject to the terms hereof, the Corporation may at its option
elect to redeem outstanding shares of Series A Preferred, in whole or in part
(pro-rata or by lot among the outstanding shares), on any Dividend Payment Date
after August 1, 2006.
(b) On June 30, 2008, the Corporation shall redeem all of the
shares of Series A Preferred outstanding on such date.
(c) The redemption price per share for Series A Preferred redeemed
on any optional or mandatory redemption date (the "Redemption Price") shall be
equal to the Stated Value per share of the shares to be redeemed plus an amount
equal to the aggregate dollar amount of all accrued and unpaid dividends through
the redemption date that have not been added to the Stated Value of such shares
pursuant to Section 3(h) hereof. The Redemption Price shall be paid in cash
from any source of funds legally available therefore unless the Corporation
shall publicly announce at least 30 days prior to the redemption date that it
has elected to make payment of the Redemption Price in Common Stock, in which
case the Redemption Price shall be payable in Common Stock. If the Corporation
elects to pay the Redemption Price in shares of Common Stock, the number (or
fraction) of shares to be
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<PAGE> 9
issued in payment of the Redemption Price shall be calculated based on the
Market Price per share of Common Stock as of the fifth Trading Day before the
redemption date.
(d) Not less than thirty nor more than sixty days prior the
redemption date, a notice specifying the time and place of such redemption shall
be given by first class mail, postage prepaid, to the holders of record of the
shares of Series A Preferred to be redeemed at their respective addresses as
the same shall appear on the books of the Corporation (but no failure to mail
such notice or any defect therein shall affect the validity of the proceedings
for redemption except as to the holder to whom the Corporation has failed to
mail such notice or except as to the holder whose note was defective), calling
upon each such holder of record to surrender to the Corporation on the
redemption date at the place designated in such notice such holder's certificate
or certificates representing the then outstanding shares of Series A Preferred
held by such holder. On or after the Redemption Date, each holder of shares of
Series A Preferred called for redemption shall surrender his certificate or
certificates for such shares to the Corporation at the place designated in the
redemption notice and shall thereupon be entitled to receive payment of the
Redemption Price in the manner set forth in Section 6(a) above. If the
redemption is delayed for any reason, dividends shall continue to accrue on the
shares of Series A Preferred outstanding, and shall be added to and become a
part of the Redemption Price of such shares, until the Redemption Price, as so
adjusted, for such shares is paid in full.
(e) If a holder of shares of Series A Preferred called for
redemption shall have elected, in accordance with the provisions of Sections
9(a) and (b), to convert such shares into Common Stock, such shares of Series A
Preferred which are to be converted into Common Stock shall no longer be
subject to redemption, and conversion of same shall occur in accordance with
the terms of Section 9.
Section 7. Shares to be Retired. All shares of Series A
Preferred repurchased, redeemed, converted or otherwise acquired by the
Corporation shall be retired and canceled and shall be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, and may thereafter be reissued.
Section 8. Voting Rights.
(a) Except as otherwise provided in this Section 8 or required by
law or any provision of the Certificate of Incorporation of the Corporation, the
holders of the shares of Series A Preferred shall vote together with the shares
of Common Stock as a single class at any annual or special meeting of
stockholders of the Corporation upon the following basis: each holder of shares
of Series A Preferred shall be entitled to such number of votes for the shares
of Series A Preferred held by such holder on the record date fixed for such
meeting as shall be equal to the whole number of shares of Underlying Common
Stock for such shares of Series A Preferred immediately after the close of
business on the record date fixed for such meeting.
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<PAGE> 10
(b) With respect to any matter for which the affirmative vote of
the holders of separate classes or series of the Corporation's capital stock is
required by the DGCL, the holders of Series A Preferred shall vote as a
separate class with respect to such matter.
(c) For so long as any shares of Series A Preferred remain
outstanding, the Corporation shall not: (i) without the affirmative vote or
consent of the holders of a majority of the shares of Series A Preferred voting
as a separate class: authorize, create or issue, or increase the authorized or
issued amount of, any class or series of stock of Senior Securities or Parity
Securities, or any security convertible into or exchangeable for Senior
Securities or Parity Securities or reclassify or modify any Junior Securities
so as to become Parity Securities or Senior Securities; or (ii) without the
affirmative vote or consent of the holders of two-thirds of the shares of
Series A Preferred voting as a separate class, adopt any amendment to the
Certificate of Incorporation or the bylaws that would materially affect the
terms of the Series A Preferred.
(d) The following special voting provisions shall be applicable to
the Series A Preferred Stock:
(i) if the corporation shall be in arrears in the payment
of dividends (whether Payable-in-Kind or in cash) on the shares of
Series A Preferred for a total of six quarterly Divided Payment
Dates, then the number of members of the Board of Directors shall
automatically be increased by two additional directors and the holders
of the Series A Preferred, voting as a separate class, shall have the
exclusive right to elect two directors ("Series A Directors") at the
next annual meeting of stockholders (or at a special meeting as
provided in Section 8(e) hereof) and every subsequent annual meeting
of stockholders called for the election of directors at which the term
of office of the Series A Directors expire;
(ii) the right of the holders of Series A Preferred to
elect the Series A Directors as aforesaid shall continue until such
time as dividends accumulated on the Series A Preferred shall have
been paid in full, whether Payable-in-Kind or in cash, at which time
the office of the Series A Directors shall be eliminated and the
special right of the holders of Series A Preferred so to vote
separately as a class for the election of the Series A Directors shall
terminate, subject to revesting at such time as the Corporation shall
be in arrears in the payment of dividends on the outstanding shares of
Series A Preferred as set forth in clause (i) above;
(iii) upon any termination of the right of holders of
Series A Preferred to vote as a separate class for directors as herein
provided, the term of office of each Series A Director shall
automatically expire and the size of the Board of Directors shall
automatically be reduced accordingly;
(iv) unless otherwise terminated as set forth above, the
term of office of each Series A Director shall terminate upon the
election of a successor Series A Director at any meeting of the
stockholders held for the purpose of electing directors; and
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(v) in any case in which the holders of Series A Preferred
shall be entitled to vote pursuant to this Section 8(d), each holder of
Series A Preferred shall be entitled to one vote for each share of
Series A Preferred held.
(e) During any period in which the holders of Series A Preferred
shall be entitled to elect directors pursuant to subsection (d) of this Section
8, the following shall be applicable:
(i) if the annual meeting of stockholders of the
corporation is not, for any reason, held within the time fixed in the
Bylaws of the corporation, or if a vacancy shall exist in the office
of a Series A Director, a proper officer of the corporation, upon the
written request of the holders of record of at least ten percent (10%)
of the shares of the Series A Preferred then outstanding, as
applicable, addressed to the Secretary of the Corporation, shall call
a special meeting in lieu of the annual meeting of stockholders for
the purpose of electing Series A Directors, or in the event of a
vacancy, a special meeting of the holders of Series A Preferred for
the purpose of electing Series A Directors, and any such meeting shall
be held at the earliest practicable date at such time and place as
shall be determined by the Corporation;
(ii) if such meeting shall not be called by the proper
officer of the Corporation within twenty (20) days after personal
service of said written request upon the Secretary of the Corporation,
or within (20) days after mailing the same within the United States by
certified mail, addressed to the Secretary of the Corporation at its
principal executive offices, then the holders of record of at least
ten percent (10%) of the outstanding shares of the Series A Preferred
may designate in writing one of their number to call such meeting at
the expense of the Corporation, and such meeting may be called by the
person so designated upon the notice required for the annual meetings
of stockholders of the Corporation and shall be held at the principal
executive offices of the Corporation. Any holder of Series A
Preferred so designated shall have access to the lists of Series A
Preferred stockholders to be called pursuant to the provisions hereof;
and
(iii) at any meeting held for the purpose of electing a
director at which the holders of Series A Preferred shall have the
right, voting as a separate class, to elect the Series A Director
pursuant to this Section 8, the presence in person or by proxy of the
holders of at least one-third (1/3) of the outstanding Series A
Preferred shall be required to constitute a quorum of such Series A
Preferred.
Section 9. Conversion Rights. Holders of shares of Series A
Preferred shall have the right to convert all or a portion of such shares into
shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section 9, each share of Series A Preferred shall be convertible at the option
of the holder thereof into fully paid, nonassessable shares of Common Stock.
The number (or fraction) of shares of Common Stock deliverable upon conversion
of one share of Series A Preferred shall be determined by dividing the
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<PAGE> 12
Stated Value of such share of Series A Preferred by the Conversion Price then
in effect. For purpose of such determination, the Stated Value of each share
of Series A Preferred shall be increased by the amount of accrued and unpaid
dividends for all quarterly dividend payment periods ending on or prior to the
date such shares are surrendered to the Corporation for conversion and for the
partial dividend period beginning on the date immediately following the most
recent Dividend Payment Date through and including the date on which such
shares are surrendered for conversion. Notwithstanding the foregoing, holders
of shares of Series A Preferred surrendered for conversion shall have the
right to require the Corporation to make payment in cash of all such accrued and
unpaid dividends, in lieu of such adjustment to the Stated Value to the extent
funds are legally available therefor.
(b) The conversion of any share of Series A Preferred may be
effected by the holder thereof by the surrender of the certificate for such
share to the Corporation at the principal office of the Transfer Agent or to
such other agent or agents of the Corporation as may be designated by the Board
of Directors. If any shares of Series A Preferred are called for redemption
pursuant to Section 6 hereof, such right of conversion shall cease and terminate
as to the shares called for redemption at the close of business on the Business
Day immediately preceding the redemption date, unless the Corporation shall
default in the payment of the Redemption Price, in which event such conversion
right shall remain in effect until full payment of the Redemption Price has been
made.
(c) As promptly as practicable after the surrender of shares of
Series A Preferred for conversion, the Corporation shall issue and deliver or
cause to be issued and delivered to the holder of such shares certificates
representing the number (or fraction) of fully paid and non-assessable shares
of Common Stock into which such shares of Series A Preferred have been
converted in accordance with the provisions of this Section 9. Subject to the
following provisions of this Section 9, such conversion shall be deemed to have
been made as of the close of business on the date on which the shares of Series
A Preferred shall have been surrendered for conversion in the manner herein
provided, so that the rights of the holder of the shares of Series A Preferred
so surrendered shall cease at such time, and the person or persons entitled to
receive the shares of Common Stock upon conversion thereof shall be treated for
all purposes as having become the record holder or holders of such shares of
Common Stock at such time; provided, however, that any such surrender on any
date when the stock transfer books of the Corporation are closed shall be
deemed to have been made, and shall be effective to terminate the rights of the
holder or holders of the shares of Series A Preferred so surrendered for
conversion and to constitute the person or persons entitled to receive such
shares of Common Stock as the record holder or holders thereof for all
purposes, at the opening of business on the next succeeding day on which such
transfer books are open and such conversion shall be at the Conversion Price in
effect at such time.
(d) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value of the shares of Common
Stock deliverable upon conversion of the shares of Series A Preferred, the
Corporation will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and non-assessable shares of Common Stock at such adjusted
Conversion Price.
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(e) The Conversion Price shall be subject to adjustment from time
to time as follows:
(i) In case at any time the Corporation shall (A)
subdivide the outstanding shares of Common Stock into a greater number
of shares, or (B) combine the outstanding shares of Common Stock into
a smaller number of shares, the Conversion Price in effect immediately
prior thereto shall be adjusted proportionately so that the adjusted
Conversion Price shall bear the same relation to the Conversion Price
in effect immediately prior to such event as the total number of
shares of Common Stock outstanding immediately prior to such event
shall bear to the total number of shares of Common Stock outstanding
immediately after such event. Such adjustment shall become effective
immediately after the effective date of a subdivision or combination.
(ii) In case at any time the Corporation shall declare,
order, pay or make any dividend or other distribution to holders of the
Common Stock payable in Common Stock, then in each such case, subject
to Section 9(e)(v) hereof, the Conversion Price in effect immediately
prior to the close of business on the record date fixed for
determination of holders of any class of securities entitled to receive
such dividend or distribution shall be reduced to a price (calculated
to the nearest .001 of cent) determined by multiplying such Conversion
Price by a fraction:
(A) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such
dividend or distribution; and
(B) the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such
dividend or distribution.
Shares of Common Stock owned by or held for the account of the
Corporation shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made on the date such dividend
is paid or such distribution is made and shall become effective
retroactive to the record date for the determination of
stockholders entitled to receive such dividend or distribution.
(iii) In case at any time the Corporation shall declare,
order, pay or make any dividend or other distribution to all holders of
the Common Stock, other than a dividend payable in shares of Common
Stock (including, without limitation, dividends or distributions
payable in cash, evidences of indebtedness, rights, options or warrants
to subscribe or purchase any Common Stock (or other securities, or any
other securities or other property, but excluding any rights to
purchase any stock or other securities if such rights are not separable
from the Common Stock except upon the occurrence of a contingency
beyond the control of the Corporation), then, and in each such case,
subject to Section 9(e)(v) hereof, the Conversion Price in effect
immediately prior to the close of business on the record date fixed for
the determination of holders of Common Stock entitled to received
such dividend or
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distribution shall be reduced to a price (calculated to the nearest
.001 of cent) determined by multiplying such Conversion Price by a
fraction:
(A) the numerator of which shall be the Market
Price per share of Common Stock in effect as of such record
date or, if the Common Stock trades on an ex-dividend basis,
on the Trading Day immediately prior to the date of
commencement of ex-dividend trading, less the value of such
dividend or distribution (as determined in good faith by the
Board of Directors of the Corporation) applicable to one share
of Common Stock, and
(B) the denominator of which shall be such Market
Price per share of Common Stock as of such record date or, if
the Capital Stock trades on an ex-dividend basis, on the
Trading Day immediately prior to the date of commencement of
ex-dividend trading.
Such adjustment shall be made on the date such dividend is paid or
such distribution is made and shall become effective retroactive to
the record date for the determination of stockholders entitled to
receive such dividend or distribution.
(iv) In case at any time the Corporation issues or sells
any shares of Common Stock or any rights, options or
warrants to subscribe for or purchase shares of Common Stock or shares
having the same rights, privileges and preferences as the Common Stock
("equivalent common stock") or securities convertible into Common
Stock or equivalent common stock, at a price per share of Common Stock
or equivalent common stock (or having a conversion price per share, if
a security is convertible into shares of Common Stock or equivalent
common stock) less than the Market Price of the Common Stock as of the
date of such issue or sale, then upon such issue or sale the
Conversion Price shall be reduced to such Conversion Price determined
by multiplying the Conversion Price in effect immediately prior to
such issue or sale by a fraction, (x) the numerator of which shall be
the sum of the number of shares of Common Stock outstanding
immediately prior to such issue or sale plus the number of shares of
Common Stock which the aggregate offering price of the total number of
shares of Common Stock and/or equivalent common stock so to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Market Price and
(y) the denominator of which shall be the sum of the number of shares
of Common Stock outstanding immediately prior to such issue or sale
plus the number of additional shares of Common Stock and/or equivalent
common stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially
convertible). In case such subscription price may be paid in a
consideration part of or all of which shall be in a form other than
cash, the value of such consideration shall be determined in good
faith by the Board of Directors of the Corporation. Shares of Common
Stock owned by or held for the account of the Corporation shall not be
deemed outstanding for the purpose of any such computation. Such
issue or sale adjustment shall be made successively upon the issuance
or sale of shares of Common Stock or equivalent common stock or any
rights, options or
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warrants to subscribe for or purchase Common Stock or equivalent common
stock or securities convertible into common stock or equivalent common
stock. Notwithstanding the foregoing, no adjustment of the Conversion
Price pursuant to this Section 9(e)(iv) shall be made upon (A) the
conversion or redemption of shares of Series A Preferred; (B) the
payment of any stock dividend on the Series A Preferred; (C) the
issuance of options to officers, directors and employees of the
Corporation and its subsidiaries, to purchase shares of Common Stock,
including any such options as are issued and outstanding as of the
Original Issue of the Series A Preferred; (D) the issuance and sale of
Common Stock upon exercise of any rights, options or warrants
referenced in the immediately preceding clause (C) or in Section
9(e)(iii); or (E) the issuance and sale of Common Stock in an
underwritten public offering at a price to the public of not less than
95% of the Closing Price of the Common Stock on the date of the pricing
of such offering.
(v) If the amount of any adjustment of the Conversion
Price required pursuant to this Section 9 would be less than 1% of the
Conversion Price in effect at the time such adjustment is otherwise so
required to be made, such amount shall be carried forward and an
adjustment with respect thereto made at the time of and together with
any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least
1% of such Conversion Price. All calculations under this Section 9
shall be made to the nearest .001 of a cent.
(vi) Except as herein otherwise expressly provided, for
all purposes of this Section 9(e) the term "Common Stock" shall mean
the Common Stock and any shares of stock or other class of capital
stock of the Corporation which is not preferred as to dividends or
assets over any other class of capital stock of the Corporation and
which is not subject to redemption, or which is issued to the holders
of shares of Common Stock upon any reclassification thereof
(f) In case at any time after the Original Issuance Date, the
Corporation shall be a party to any transaction (including without limitation, a
merger, consolidation, statutory share exchange, sale of all or substantially
all of the Corporation's assets or recapitalization of the Common Stock) in each
case as a result of which shares of Common Stock (or any other securities of the
Corporation then issuable upon conversion of the Series A Preferred ) shall be
converted to the right to receive stock, securities or other property (including
cash or any combination thereof) (each of the foregoing transactions being
referred to as a "Fundamental Change Transaction"), then the shares of Series A
Preferred remaining outstanding will thereafter no longer be subject to
conversion into Common Stock (or such other securities) pursuant to this Section
9, but instead each share shall be convertible into the kind and amount of stock
and other securities and property receivable (including cash) upon the
consummation of such Fundamental Change Transaction by a holder of that number
of shares or fraction thereof of Common Stock (or such other securities) into
which one share of Series A Preferred was convertible immediately prior to such
Fundamental Change Transaction assuming such holder of Common Stock failed to
exercise any right of election as to the kind of consideration to be received in
such Fundamental Change Transaction. The Corporation shall not be a party to
any Fundamental Change Transaction after which shares of the Series A Preferred
shall remain
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outstanding unless the terms of such Fundamental Change Transaction are
consistent with the provisions of this Section 9(f), and it shall not consent or
agree to the occurrence of any such Fundamental Change Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the shares of
Series A Preferred which will contain provisions enabling the holders of shares
of the Series A Preferred which remain outstanding after such Fundamental
Change Transaction to convert such shares into the consideration received by
holders of Common Stock (or any other securities of the Corporation then
issuable upon conversion of the Series A Preferred ) at the Conversion Price
immediately after such Fundamental Change Transaction. In the event that at any
time, as a result of an adjustment made pursuant to this Section 9, the Series A
Preferred shall become subject to conversion into any securities other than
shares of Common Stock, thereafter the number of such other securities so
issuable upon conversion of the shares of Series A Preferred shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the shares of Series A Preferred
contained in this Section 9. The provisions of this Section 9(f) shall
similarly apply to successive Fundamental Change Transactions.
(g) Upon the occurrence of any event requiring an adjustment of
the Conversion Price, then and in any such case the Corporation shall promptly
deliver to the holders of shares of Series A Preferred a notice stating the
Conversion Price resulting from such adjustment, the method of calculation
thereof, and setting forth a brief statement of the facts requiring such
adjustment and upon which such adjustment is based.
(h) In case at any time:
(i) the Corporation shall declare or pay to all holders of
Common Stock any dividend (whether payable in Common Stock, cash,
securities or other property);
(ii) there shall be any capital reorganization, or
reclassification of the Common Stock of the Corporation or
consolidation or merger of the Corporation with, or sale of all or
substantially all of its assets to, another Corporation or other
entity;
(iii) there shall be a voluntary or involuntary
dissolution, liquidation, or winding-up of the Corporation; or
(iv) there shall be any other Fundamental Change
Transaction;
then, in any one or more of such cases, the Corporation shall give to
the holder of shares of Series A Preferred (A) at least 15 days prior
to any event referred to in clause (i) above and at least 30 days prior
to any event referred to in clause (ii), (iii) or (iv) above, written
notice of the date on which the books of the Corporation shall close or
records shall be taken for such dividend or distribution or for
determining rights to vote in respect of any such organization,
reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Fundamental Change Transaction and (B) in
the case of any such reorganization,
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reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Fundamental Change Transaction known to
the Corporation, at least 30 days prior written notice of the date (or
if not then known, a reasonable approximation thereof by the
Corporation) when the same shall take place. Such notice in accordance
with the foregoing clause (A) shall also specify, in the case of any
such dividend or distribution, the date on which such holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (B) shall also specify the date on which such holders
of Common Stock shall be entitled to exchange their Common Stock
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up, or Fundamental Change Transaction, as the case
may be.
(v) All shares of Common Stock issuable upon the
conversion set forth in this Section 9 shall be validly issued,
fully-paid and non-assessable.
Section 10. Ranking. Without limiting the definition of Junior
Securities, the shares of Common Stock of the Corporation and the shares of
Series B Convertible Preferred Stock of the Corporation established on the date
hereof shall rank junior to the Series A Preferred with respect to the payments
required or permitted to be made to the holders of the Common Stock and Series B
Convertible Preferred Stock pursuant to the Certificate of Incorporation and
payments required to be made to the holders of the Series A Preferred pursuant
hereto.
Section 11. Record Holders. The Corporation and the Transfer
Agent may deem and treat the record holder of any shares of Series A Preferred
as the true and lawful owner thereof for all purposes, and neither the
Corporation nor Transfer Agent shall be affected by any notice to the contrary.
Section 12. Notice. Except as may otherwise be provided by law
or provided for herein, all notices referred to herein shall be in writing, and
all notices hereunder shall be deemed to have been given upon receipt, in the
case of a notice of conversion given to the Corporation as contemplated in
Section 9(h) hereof, or, in all other cases, upon the earlier of receipt of such
notice or three Business Days after the mailing of such notices sent by
first-class mail (unless certified or registered mail shall be specifically
required) with postage prepaid, addressed: If to the Corporation, to its
principal executive offices (Attention: Corporate Secretary) or to any agent of
the Corporation designated as permitted hereby; or if to a holder of the Series
A Preferred, to such holder at the address of such holder of the Series A
Preferred as listed in the stock record books of the Corporation (which shall
include the records of the Transfer Agent), or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.
Section 13. Authorization by Non-Series A Directors. A majority
of the Non-Series A Directors shall make any determination required or
permitted to be made by the Board of Directors on behalf of the Corporation (i)
pursuant to Section 6(c) hereof, as to whether to make payment of the
Redemption Price of the Series A Preferred in cash or in kind, (ii) pursuant
to Section 6(a) hereof, as to whether to exercise the Corporation's option to
redeem outstanding shares of Series A Preferred, or (iii) pursuant to Section
3(c) hereof, as to whether to make payment of any dividends declared by the
Board of Directors on the Series A Preferred in cash or in kind; provided
that, the Non-Series
17
<PAGE> 18
A Directors shall not be entitled to make any determination to pay cash
dividends unless the Corporation shall have sufficient cash legally available to
make such payment in full.
Section 14. Successors and Transferees. The provisions
applicable to shares of Series A Preferred shall bind and inure to the benefit
of and be enforceable by the Corporation, the respective successors to the
Corporation, and by any record holder of shares of Series A Preferred.
IN WITNESS WHEREOF, the undersigned has executed this Certificate and
does affirm the foregoing as true this 24th day of June, 1997.
PIONEER NATURAL RESOURCES COMPANY
By: /s/ M. GARRETT SMITH
---------------------------------
M. Garrett Smith
Vice President
18
<PAGE> 1
EXHIBIT 4.3
Incorporated Under the Laws of SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED
of Delaware PAR VALUE $.01
NUMBER SHARES
This Certificate is transferable in CUSIP 000000 00 0
New York, New York and Jersey City,
New Jersey See reverse for certain definitions
and legends
PIONEER NATURAL RESOURCES COMPANY
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES A 8% CUMULATIVE
CONVERTIBLE PREFERRED STOCK OF
Pioneer Natural Resources Company (hereinafter called the
Corporation), transferable on the books of the Corporation holder
SEAL hereof in person or by duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate is not valid
unless countersigned by Transfer Agent and registered by the
Registrar.
Witness, the seal of the Corporation and the signatures of its
duly authorized officers.
/s/ S. SHEFFIELD
- -------------------------
S. SHEFFIELD
PRESIDENT AND DATED
CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
/s/ M. WITHROW TRANSFER AGENT
- ------------------------- AND REGISTRAR
M. WITHROW BY
EXECUTIVE VICE PRESIDENT Authorized Signature
AND SECRETARY
<PAGE> 2
PIONEER NATURAL RESOURCES COMPANY
The Corporation is authorized to issue shares of more than one class
and to issue shares in more than one series of at least one class. The
Corporation will furnish without charge to each stockholder who so requests a
statement of the powers, designations, preferences and relative, participating,
optional or other special right of each class of stock or series thereof of the
Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian _____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _______________
in common ([____])
Additional abbreviations may also be used though not in the above list.
</TABLE>
For value received, ____________________________ hereby sell, assign
and transfer unto
Please insert Social Security or other
Identifying Number of Assignee
_____________________________
________________________________________________________________________________
Please print or typewrite name and address of Assignee.
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
____________________________________________________________________ shares of
capital stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint _________________________________________________
Attorney to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated ____________________________
<TABLE>
<S> <C>
X
---------------------------------------------------------------------
NOTICE: (Signature)
THE SIGNATURES TO THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR X
---------------------------------------------------------------------
WITHOUT ALTERNATION OR ENLARGEMENT (Signature)
OR ANY CHANGE WHATEVER.
The signature(s) would be guaranteed by an "eligible guarantor
institution" as defined in _____ under The Securities Exchange Act of
1934 as amended.
SIGNATURE(S) GUARANTEED BY:
AMERICAN BANKNOTE COMPANY Production Coordinator - Belinda Beck - [__________]
89 Blair Mill Road Proof of June 10, 1997
Horsham, PA 79044 PIONEER
[_________] [_____________]
Sales Person M. Garrett Opr. [___] REV. 1
[________________] [__________________]
</TABLE>
<PAGE> 1
EXHIBIT 4.4
FORM OF CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
PIONEER NATURAL RESOURCES COMPANY
Pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware (the "DGCL") and pursuant to Article
Fifth of its Amended and Restated Certificate of Incorporation, the
undersigned, Pioneer Natural Resources Company, a company organized and
existing under the DGCL (the "Corporation"), in accordance with the provisions
of Section 103 thereof, DOES HEREBY CERTIFY
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Amended and Restated Certificate of
Incorporation of the Corporation, the Board of Directors on June 24, 1997,
adopted the following resolution creating a series of Preferred Stock, par
value $.01 per share, designated as "Series B Convertible Preferred Stock":
RESOLVED, that pursuant to the authority vested in this Board
of Directors of the Corporation (the "Board of Directors") in
accordance with the provisions of its Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation"), a series of
Preferred Stock, par value $.01 per, of the Corporation is hereby
created and authorized, and the designation, amount and stated value
of such series and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereon,
are as set forth in the form of Certificate of Designations attached
as Exhibit A to these resolutions (the "Certificate of Designations")
which, for all purposes, shall be deemed to be a part hereof.
1. Designation. The shares of this series of Preferred Stock
shall be designated as Series A Convertible Preferred Stock ("Convertible
Preferred Shares") and the number of shares constituting such series shall be
3,776,400:
2. Definitions: For purposes of this Certificate of Designation,
the following terms shall have the meanings indicated below:
"Affiliate" shall mean, with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
"Board of Directors" means the Board of Directors of the Corporation.
<PAGE> 2
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in The City of New York are authorized or
obligated by law or executive order to close.
"Certificated Shares" shall mean the Convertible Preferred Shares
which have been issued in certificated form.
"Closing Price" of any common stock on any day shall mean the last
reported sale price regular way on the New York Stock Exchange, or if the
common stock is not admitted to trading on such exchange, on the principal
national securities exchange or quotation system on which the common stock is
listed or admitted to trading or quoted, or, if not listed or admitted to
trading or quoted on any national securities exchange or quotation system, the
average of the closing bid and asked prices of the common stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similar generally accepted reporting
service, or, if not so available in such manner, as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose or, if not so available in such manner, as otherwise
determined in good faith by the Board of Directors.
"Common Shares" shall mean the shares of common stock of the
Corporation, par value $.01 per share.
"Conversion Price" shall mean the conversion price per Common Share
for which the Convertible Preferred Shares are convertible at the option of the
holders thereof in accordance with Section 7 hereof, as such Conversion Price
may be adjusted pursuant to Section 7 hereof. The initial Conversion Price
will be $28 1/8 (equivalent to the rate of 1.7778 Common Shares for each
Convertible Preferred Share).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Global Certificate" shall mean the global Convertible Preferred Share
certificate or certificates representing Convertible Preferred Shares which is
deposited with and held by The Depository Trust Company, New York, New York,
and registered in the name of Cede & Co. as its nominee.
"Issue Date" shall mean the first day on which all of the Convertible
Preferred Shares are issued.
"Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"P&P Capital Preferred Stock" shall mean the 6 1/4% Cumulative
Guaranteed Monthly Income Convertible Preferred Shares, liquidation preference
of $50 per share, of Parker & Parsley Capital LLC, a limited life company
organized under the laws of the Turks and Caicos Islands.
"Redemption Price" shall mean the price per Convertible Preferred
Share payable by the Corporation in the event of a redemption pursuant to
Section 5.
<PAGE> 3
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Trading Day" shall mean, so long as the Common Shares are listed or
admitted to trading on the New York Stock Exchange, a day on which the New York
Stock Exchange is open for the transaction of business, or, if the Common
Shares are not listed or admitted to trading on the New York Stock Exchange, a
day on which the securities exchange on which the Common Shares are listed is
open for the transaction of business, or, if the Common Shares are not so
listed or admitted for trading on any securities exchange, a Business Day.
"Transfer Agent" means Continental Stock Transfer & Trust, or such
other agent or agents of the Corporation as may be designated by the Board of
Directors as the transfer agent for the Convertible Preferred Shares.
3. Ranking. The Convertible Preferred Shares shall, with respect
to dividend rights and distribution of assets on liquidation, rank (a) junior
to, or on parity with, as the case may be, any other stock of the Corporation,
the terms of which shall specifically provide that such stock shall rank senior
to, or on parity with, as the case may be, the Convertible Preferred Shares
with respect to dividend rights or distribution of assets on liquidation, and
(b) senior to any other stock of the Corporation, including the Common Shares
and to all of the Corporation's hereafter issued capital stock ranking junior
to the Convertible Preferred Shares with respect to dividend rights and
distribution of assets on liquidation.
4. Dividends. (a) The holders of the Convertible Preferred
Shares shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds held by the Corporation and legally available therefor,
cumulative cash dividends at the rate of 6 1/4% of the liquidation preference
of $50 per share per annum, and no more, calculated on the basis of a 360 day
year consisting of 12 months of 30 days each, and for any period shorter than a
full monthly dividend period, dividends will be computed on the basis of the
actual number of days elapsed in such period, and payable monthly in arrears on
the last day of each calendar month of each year, commencing on the last day of
the month during which the Issue Date occurs. Dividends will accumulate and be
cumulative whether or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends. Dividends on the Convertible Preferred Shares shall be
cumulative from the Issue Date. In the event that any date on which dividends
are payable on the Convertible Preferred Shares is not a Business Day, then
payment of the dividend payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date. No interest shall be payable in respect of any dividend payment
on the Convertible Preferred Shares which may be in arrears.
(b) Dividends declared on the Convertible Preferred Shares will be
payable to the record holders thereof as they appear on the records for the
Convertible Preferred Shares on the relevant record dates, which will be one
Business Day prior to the relevant payment dates.
(c) If dividends have not been paid in full on the Convertible
Preferred Shares, the Corporation shall not:
-3-
<PAGE> 4
(i) pay, or declare and set aside for payment, any
dividends on any other preferred or preference stock of the
Corporation ranking pari passu with the Convertible Preferred Shares
as regards participation in profits of the Corporation ("Corporation
Dividend Parity Shares"), unless the amount of any dividends declared
on any Corporation Dividend Parity Shares is paid on the Corporation
Dividend Parity Shares and the Convertible Preferred Shares on a pro
rata basis on the date such dividends are paid on such Corporation
Dividend Parity Shares, so that
(x) (A) the aggregate amount of dividends
paid on the Convertible Preferred Shares bear to (B) the
aggregate amount of dividends paid on such Corporation
Dividend Parity Shares the same ratio as
(y) (A) the aggregate of all accumulated and
unpaid dividends in respect of the Convertible Preferred
Shares bears to (B) the aggregate of all accumulated and
unpaid dividends in respect of such Corporation Dividend
Parity Shares;
(ii) pay, or declare and set aside for payment, any
dividends on any shares of the Corporation ranking junior to the
Convertible Preferred Shares as to dividends ("Corporation Dividend
Junior Shares"); or
(iii) redeem, purchase or otherwise acquire any Corporation
Dividend Parity Shares or Corporation Dividend Junior Shares;
until, in each case, such time as all accumulated and unpaid dividends on the
Convertible Preferred Shares shall have been paid in full for all dividend
periods terminating on or prior to, in the case of clauses (i) and (ii) above,
such payment, and in the case of clause (iii) above, the date of such
redemption, purchase or acquisition.
(d) If dividends have been paid in full on the Convertible
Preferred Shares for all prior whole dividend periods, then holders of
Convertible Preferred Shares shall not be entitled to receive or share in any
dividends paid, declare or set aside for payment on any other security of the
Corporation.
(e) (i) Accumulated and unpaid dividends (whether or not
declared), if any, on the P&P Capital Preferred Stock at the time that such P&P
Capital Preferred Stock was exchanged for Convertible Preferred Shares in
accordance with the terms of such P&P Capital Preferred Stock and (ii) the
amount of Tax Deductions, if any, with respect to such P&P Capital Preferred
Stock made prior to the first Exchange Election Meeting (if, and only if, at
such meeting an Exchange Election was made), shall automatically become
accumulated and unpaid dividends (in the same amounts) on such Convertible
Preferred Shares. For purposes of this subsection (e), the terms "Tax
Deductions", "Exchange Election Meeting" and "Exchange Election" shall have the
meanings ascribed thereto in the resolutions adopted by the Corporation, as
Manager of Parker & Parsley Capital LLC, authorizing the issuance of, and
establishing the rights, preferences, privileges, limitations and restrictions
relating to, the P&P Capital Preferred Stock, as set forth in that certain
-4-
<PAGE> 5
document, dated March 29, 1994, entitled "Terms of the 6 1/4% Cumulative
Guaranteed Monthly Income Convertible Preferred Shares of Parker & Parsley
Capital LLC."
5. Optional Redemption. (a) Convertible Preferred Shares may not
be redeemed by the Corporation prior to April 1, 1997, on or after which time
the Corporation, at its option but subject to the provisions of subsection (b)
below, may redeem the Convertible Preferred Shares, in whole or in part, at any
time or from time to time, during the twelve-month periods beginning on April 1
in each of the following years at the following redemption prices, plus
accumulated and unpaid dividends, if any, to the date fixed for redemption,
whether or not declared.
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
1997 $52.1875
1998 $51.8750
1999 $51.5625
2000 $51.2500
2001 $50.9375
2002 $50.6250
2003 $50.3125
2004 and thereafter
</TABLE>
(b) Any redemption pursuant to subsection (a) above may be made
only if the funds (the "Redemption Funds") used for redemption are derived by
the Corporation, directly or indirectly, from the issuance and sale by the
Corporation or any of its subsidiaries, within one year of the date fixed for
redemption, of either (i) common stock or (ii) convertible or non-convertible
preferred or preference stock having a dividend rate not exceeding 6 1/4% and a
term ending, if at all, on or after March 29, 2024.
6. Redemption Procedure. (a) Notice of any redemption (a "Notice
of Redemption") of the Convertible Preferred Shares under Section 5 will be
given by the Corporation by mail to reach record holder of Convertible
Preferred Shares to be redeemed not fewer than 30 nor more than 60 days prior
to the date fixed for redemption thereof. For purposes of the calculation of
the date of redemption and the dates on which notices are given pursuant to
this Section 6(a), a Notice of Redemption shall be deemed to be given on the
day such notice is first mailed by first class mail, postage prepaid, to
holders of record of the Convertible Preferred Shares. Each Notice of
Redemption shall be addressed to the holder of record at the address of the
holder appearing in the stock records of the Corporation. No defect in the
Notice of Redemption or in the mailing thereof or publication of its contents
shall affect the validity of the redemption proceedings.
-5-
<PAGE> 6
(b) In the event that fewer than all the outstanding Convertible
Preferred Shares are to be redeemed, the Convertible Preferred Shares to be
redeemed will be selected as follows: the total number of Convertible
Preferred Shares to be redeemed shall first be allocated, on a pro rata basis,
to the shares represented by the Global Certificate and to the Certificated
Shares. The shares so allocated to the shares represented by the Global
Certificate for redemption shall be selected by The Depository Trust Company in
accordance with its then-current practices and procedures. The shares so
allocated to the Certificated Shares for redemption shall be selected by the
Corporation by lot.
The Corporation will not redeem fewer than all the outstanding
Convertible Preferred Shares unless all accumulated and unpaid dividends have
been paid on all Convertible Preferred Shares for all monthly dividend periods
terminating on or prior to the date of redemption.
(c) If the Corporation gives a Notice of Redemption in respect of
Convertible Preferred Shares represented by the Global Certificate, then by
12:00 noon, New York time, on the redemption date, the Corporation will
irrevocably deposit with The Depository Trust Company funds sufficient to pay
the applicable Redemption Price, and will give The Depository Trust Company
irrevocable instructions and authority to pay the Redemption Price to the
holders thereof. If a Notice of Redemption shall have been given and funds
deposited as required, then immediately prior to the close of business on the
date of such deposit, all rights of holders of such Convertible Preferred Stock
so called for redemption will cease, except the right of the holders of such
shares to receive the Redemption Price, but without additional interest.
If the Corporation gives a Notice of Redemption in respect of
Certificated Shares, then on or after the redemption date, each holder of
Convertible Preferred Shares so called for redemption shall surrender the
certificate or certificates evidencing such shares to the Corporation at the
place designated in the Notice of Redemption and shall thereupon be entitled to
receive payment of the Redemption Price. If less than all of the Convertible
Preferred Shares evidenced by any such surrendered certificate are redeemed, a
new certificate shall be issued evidencing the unredeemed shares. If, on or
before the redemption date, the Corporation will have irrevocably deposited
with a bank or trust company funds sufficient to pay the applicable Redemption
Price, and will have given such bank or trust company irrevocable instructions
and authority to pay the Redemption Price to the holders of Convertible
Preferred Shares to be redeemed, then, notwithstanding that the certificates
evidencing any Convertible Preferred Shares so called for redemption shall not
have been surrendered, immediately prior to the close of business on the date
of such deposit all rights of holders of such Convertible Preferred Shares so
called for redemption will cease, except the right of the holders of such
shares to receive the Redemption Price, but without interest. If funds legally
available for such purpose are not sufficient for redemption of the Convertible
Preferred Shares which were to be redeemed, then such funds which are deposited
shall be applied to redeem such Convertible Preferred Shares as the Corporation
may designate by lot, and the certificates evidencing shares not redeemed shall
be deemed not to be surrendered, such shares shall remain outstanding, the
right of the holder to receive payment of the Redemption Price for such shares
shall terminate and the right of holders of Convertible Preferred Shares
thereafter shall continue to be those of a holder of Convertible Preferred
Shares.
In the event that payment of the Redemption Price in respect of
Convertible Preferred Shares is improperly withheld or refused and not paid by
the Corporation, dividends on such shares will
-6-
<PAGE> 7
continue to accumulate, at the then applicable rate, from the redemption date
to the date that the Redemption Price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the Redemption Price.
In the event that any date on which any payment in respect of the
redemption of the Convertible Preferred Shares is not a Business Day, then
payment of the Redemption Price payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day.
No fractional Convertible Preferred Shares shall be issued upon
redemption of less than all Convertible Preferred Shares. If more than one
certificate evidencing Convertible Preferred Shares shall be held at one time
by the same holder, the number of full shares issuable upon redemption of less
than all of such shares shall be computed on the basis of the aggregate number
of Convertible Preferred Shares so held. Instead of any fractional Convertible
Preferred Share that would otherwise be issuable to a holder upon redemption of
less than all Convertible Preferred Shares, the Corporation shall pay a cash
adjustment in respect of such fractional share in an amount equal to the same
fraction of the Redemption Price per Convertible Preferred Share.
(d) All Convertible Preferred Shares purchased or redeemed by the
Corporation shall be retired and shall be restored to the status of authorized
but unissued Preferred Stock, without designation as to series.
7. Optional Conversion. (a) Subject to and upon compliance with
the provisions of this Section 7, a holder of Convertible Preferred Shares
shall have the right, at his or its option, at any time to convert such shares
into the number of fully paid and nonassessable Common Shares (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing $50.00
by the Conversion Price; provided, however, that the right to convert shares
called for redemption pursuant to Section 5 hereof shall terminate at the close
of business on the fifth calendar day preceding the date fixed for such
redemption (but in no event until after March 31, 1997), unless the Corporation
shall default in making payment of the amount payable upon such redemption.
(b) In order to exercise the conversion right provided in
subsection (a) above, the holder of each Convertible Preferred Share to be
converted shall notify each of the Corporation and the Transfer Agent in
writing (a "Conversion Notice") that the holder elects to convert his or its
Convertible Preferred Shares or a specified portion thereof, and, if the shares
to be converted are Certificated Shares, such holder shall contemporaneously
surrender the certificate or certificates evidencing such shares at the office
of the Transfer Agent, duly endorsed to the Corporation or in blank. If the
shares to be converted are represented by the Global Certificate, the holder
thereof shall also deliver the Conversion Notice to The Depository Trust
Company. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such Convertible Preferred Shares are registered, the
Conversion Notice shall be accompanied by instruments of transfer, in form
satisfactory to the Transfer Agent, duly executed by the holder or such
holder's authorized attorney and an amount sufficient to pay any transfer or
similar tax (or evidence reasonably satisfactory to the Transfer Agent
demonstrating that such taxes have been paid).
-7-
<PAGE> 8
Holders of Convertible Preferred Shares at the close of business on a
dividend payment record ate shall be entitled to receive the dividend payable
on such shares on the corresponding dividend payment date notwithstanding the
conversion thereof following such dividend payment record ate and on or prior
to such dividend payment date. Except as provided elsewhere herein, the
Corporation shall not make payment of allowance for accumulated and unpaid
dividends, whether nor not in arrears, on converted shares or for dividends on
Common Shares issued upon such conversion.
As promptly as practicable after in (i) the case of shares to be
converted which are represented by the Global Certificate, the Conversion
Notice is received by the Corporation, or (ii) the case of Certificated Shares
to be converted, the surrender of certificates evidencing such shares, and, in
each case, the compliance by the converting holder with any other conditions
set forth in this subsection (b), the Corporation shall issue and shall deliver
to such holder, or otherwise in accordance with his or its written order, a
certificate or certificates for the number of full Common Shares issuable upon
the conversion of such shares in accordance with the provisions of this Section
7, and any fractional interest in respect of a Common Share arising upon such
conversion shall be settled as provided in subsection (c) of this Section 7.
Each conversion of shares represented by the Global Certificate shall
be deemed to have been effected immediately prior to the close of business on
the date on which the Conversion Notice is received by the Corporation. Each
conversion of Certificated Shares shall be deemed to have been effected
immediately prior to the close of business on the date on which such shares are
surrendered for conversion. The person or persons in whose name or names any
certificate or certificates for the Common Shares issuable upon any conversion
of Convertible Preferred Shares shall be deemed to have become the holder of
record of the shares represented thereby at the time and on the date determined
in accordance with the first two sentences of this paragraph, and such
conversion shall be at the Conversion Price in effect at such time on such
date. All Common Shares delivered upon conversion of the Convertible
Preferred Shares will upon delivery be duly and validly issued and fully paid
and nonassessable.
(c) No fractional Common Shares shall be issued upon conversion of
Convertible Preferred Shares. If more than one certificate evidencing
Convertible Preferred Shares shall be surrendered for conversion at the time by
the same holder, the number of full shares issuable upon conversion thereof
shall be computed on the basis of the aggregate number of Convertible Preferred
Shares so surrendered. Instead of any fractional Common Share that would
otherwise be issuable to a holder upon conversion of any Convertible Preferred
Shares, the Corporation shall pay a cash adjustment in respect of such
fractional share in an amount equal to the same fraction of the Closing Price
per share of the Common Shares at the close of business on the day of
conversion.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall pay or make a dividend
or other distribution on Common Shares exclusively in Common Shares or
shall pay or make a dividend or other distribution on any other class
or series of capital stock of the Corporation which dividend or
distribution includes Common Shares, the Conversion Price in effect at
the opening of business on the date following the date fixed for the
determination of stockholders entitled
-8-
<PAGE> 9
to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of Common Shares outstanding at the close of
business on the date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the
day following the date fixed for such determination. For the purposes
of this subparagraph (i), the number of Common Shares at any time
outstanding shall not include shares held in the treasury of the
Corporation. The Corporation shall not pay any dividend or make any
distribution on Common Shares held in the treasury of the Corporation.
(ii) In case the Corporation shall pay or make a dividend
or other distribution on Common Shares consisting exclusively of, or
shall otherwise issue to all holders of Common Shares, rights or
warrants entitling the holders thereof to subscribe for or purchase
Common Shares at a price per share less than the current market price
per share (determined as provided in subparagraph (vii) of this
Section 7(d) of the Common Shares on the date fixed for the
determination of stockholders entitled to receive such rights or
warrants, the Conversion Price in effect at the opening of business on
the day following the date fixed for such determination shall be
reduced by multiplying such Conversion Price by a fraction of which
the numerator shall be the number of Common Shares outstanding at the
close of business on the date fixed for such determination plus the
number of Common Shares which the aggregate of the offering price of
the total number of Common Shares so offered for subscription or
purchase would purchase at such current market price and the
denominator shall be the number of Common Shares outstanding at the
close of business on the date fixed for such determination plus the
number of Common Shares so offered for subscription or purchase, such
reduction to become effective immediately after the opening of business
on the day following the date fixed for such determination for the
purposes of this subparagraph (ii), the number of Common Shares at any
time outstanding shall not include shares held in the treasury of the
Corporation. The Corporation shall not issue any rights or warrants in
respect of Common Shares held in the treasury of the Corporation. In
case any rights or warrants referred to in this subparagraph (ii) in
respect of which an adjustment shall have been made shall expire
unexercised within 45 days after the same shall have been distributed
or issued by the Corporation, the Conversion Price shall be readjusted
at the time of such expiration to the Conversion Price that would have
been in effect if no adjustment had been made on account of the
distribution or issuance of such expired rights or warrants.
(iii) In case outstanding Common Shares shall be subdivided
into a greater number of Common Shares, the Conversion Price in effect
at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced,
and conversely, in case outstanding Common Shares shall each be
combined into a smaller number of Common Shares, the Conversion Price
in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately
increased; such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
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<PAGE> 10
(iv) Subject to the last sentence of this subparagraph
(iv), in case the Corporation shall, by dividend or otherwise,
distribute to all holders of Common Shares evidences of its
indebtedness, shares of any class or series of capital stock, cash or
assets (including securities, but excluding any rights or warrants
referred to in subparagraph (ii) of this Section 7(d), any dividend or
distribution paid exclusively in cash and any dividend or distribution
referred to in subparagraph (i) of this Section 7(d), the Conversion
Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (vii) by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (iv) of this Section 7(d)) of the Common
Shares on the date fixed for the payment of such distribution (the
"Reference Date") less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors), on
the Reference Date, of the portion of the evidences of indebtedness,
shares of capital stock, cash or assets to distributed applicable to
one Common Share and the denominator shall be such current market price
per share of the Common shares, such reduction to become effective
immediately prior to the opening of business on the day following the
Reference Date. If after the Rights Distribution Date (the "Rights
Distribution Date"), as defined in the Rights Agreement, dated as of
February 19, 1991, between the Corporation and First City Transfer
Corporation, as in effect on the date hereof (the "Rights Agreement"),
converting holders of the Convertible Preferred Shares are not entitled
to receive the Rights (as defined in the Rights Agreement) which would
otherwise be attributable (but for the date of conversion) to the
Common Shares received upon such conversion, then adjustment of the
Conversion Price shall be made under the preceding sentence as if the
Rights were then being distributed to holders of the Common Shares. If
such an adjustment is made and the Rights are later redeemed,
invalidated or terminated, than a corresponding reversing adjustment
shall be made to the Conversion Price, on an equitable basis, to take
account of such event. However, the Corporation may elect to amend the
provisions presently applicable to the Rights so that each Common Share
issuable upon conversion of the Convertible Preferred Shares, whether
or not issued after the Rights Distribution Date, will be accompanied
by the Rights which would otherwise be attributable (but for the date
of conversion) to such Common Shares, in which event the preceding two
sentences will not apply. The foregoing provisions shall also be
applicable to any other similar rights plan of the Corporation. If the
Board of Directors determines the fair market value of any distribution
for purposes of this subparagraph (iv) by reference to the actual or
when issued trading market for any securities comprising such
distribution, it must in doing so consider the prices in such market
over the same period used in computing the current market price per
share of Common Shares pursuant to subparagraph (vii) of this Section
7(d). For purposes of this subparagraph (iv), any dividend or
distribution that includes Common Shares or rights or warrants to
subscribe for or purchase Common Shares shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness, cash,
assets or shares of capital stock other than such Common Shares or such
rights or warrants (making any Conversion Price reduction required by
this subparagraph (iv)) immediately followed by (2) a dividend or
distribution of such Common Shares or such rights or warrants (making
any further Conversion Price reduction required by subparagraph (i) or
(ii) of this Section 7(d),
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<PAGE> 11
except (A) the Reference Date of such dividend or distribution as
defined in this subparagraph (iv) shall be substituted as "the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution," "the date fixed for the determination
of Stockholders entitled to receive such rights or warrants" and "the
date fixed for the determination" within the meaning of subparagraphs
(i) and (ii) of this Section 7(d) and (B) any Common Shares included
in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination"
within the meaning of subparagraph (i) of this Section 7(d).
(v) In case the Corporation shall pay or make a dividend
or other distribution on Common Shares exclusively in cash (excluding,
in the case of any quarterly or semi-annual, as applicable, cash
dividend on the Common Shares, the portion thereof that does not
exceed the per share amount of the next preceding quarterly or
semi-annual, as applicable, cash dividend on the Common Shares (as
adjusted to appropriately reflect any o the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of this Section
7(d)), or all of such quarterly or semi-annual, as applicable, cash
dividends if the amount thereof per share of Common Shares, multiplied
by four with respect to quarterly dividends and multiplied by two with
respect to semi-annual dividends, does not exceed 15% of the current
market price per share (determined as provided in subparagraph (vii)
of this Section 7(d)) of the Common Shares on the Trading Day next
preceding the date of declaration of such dividend), the Conversion
Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which the
numerator shall be the current market price per share (determined as
provided in subparagraph (vii) of this Section 7(d)) of the Common
Shares on the date fixed for the payment of such distribution less the
amount of cash so distributed and not excluded as provided above
applicable to one Common Share and the denominator shall be such
current market price per share of the Common Shares, such reduction to
become effective immediately prior to the opening of business on the
day following the date fixed for the payment of such distribution.
(vi) In the case a tender or exchange offer made by the
Corporation or any subsidiary of the Corporation for all or any
portion of the Common Shares shall expire and such tender or exchange
offer shall involve the payment by the Corporation or such subsidiary
of consideration per share of Common Shares having a fair market value
(as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) at the last time (the "Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange offer (as
it shall have been amended) that exceeds (by at least 10%, with any
smaller excess being disregarded for this purpose) the current market
price per share (determined as provided in subparagraph (vii) of this
Section 7(d)) of the Common Shares on the Trading Day next succeeding
the Expiration Time, the Conversion Price shall be reduced so that the
same shall equal the price determined by multiplying the Conversion
Price in effect immediately prior to the effectiveness of the
Conversion Price reduction contemplated by this subparagraph (vi) by a
fraction of which the numerator shall be the number of Common Shares
outstanding (including any tendered or exchanged shares) at the
Expiration Time multiplied by the current market price per share
(determined as provided in subparagraph (vii) of this Section 7(d)) of
the Common Shares on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the
shares deemed so accepted, up to any such maximum, being referred to
as the "Purchased Shares") and (y) the product of the number of Common
Shares outstanding (less any Purchased Shares) at the Expiration Time
and the current market price per share (determined as provided in
subparagraph (vii) of this Section
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<PAGE> 12
7(d)) of the Common Shares on the Trading Day next succeeding the
Expiration Time, such reduction to become effective immediately prior
to the opening of business on the day following the Expiration Time.
Notwithstanding anything contained in this Section 7(d)(vi) to the
contrary, no adjustment shall be made to the Conversion Price in the
case of a tender offer that complies with Rule 13e-4(h)(v) under the
Exchange Act, or any successor rule thereto.
(vii) For the purpose of any computation under
subparagraphs (ii), (iv) and (v) of this Section 7(d), the current
market price per share of Common Shares on any date in question shall
be deemed to be the average of the daily Closing Prices for the five
consecutive Trading Days prior to and including the date in question;
provided, however, that (1) if the "ex" date (as hereinafter defined)
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above
("Other Event") occurs after the fifth Trading Day prior to the day in
question and prior to the "ex" date for the issuance or distribution
requiring such computation (the "Current Event"), the Closing Price
for each Trading Day prior to the "ex" date for such Other Event shall
be adjusted by multiplying such Closing Price by the same fraction by
which the Conversion Price is so required to be adjusted as a result
of such Other Event, (2) if the "ex" date for any Other Event occurs
after the "ex" date for the Current Event and on or prior to the date
in question, the Closing Price for each Trading Day on and after the
"ex" date for such Other Event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such
Other Event, (3) if the "ex" date of any Other Event occurs on the
"ex" date for the Current Event, one of those events shall be deemed
for purposes of clauses (1) and (2) of this proviso to have an "ex"
date occurring prior to the "ex" date for the other event, and (4) if
the "ex" date for the Current Event is on or prior to the date in
question, after taking into account any adjustment required pursuant
to clause (2) of this proviso, the Closing Price for each Trading Day
on or after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value on the date in question
(as determined in good faith by the Board of Directors in a manner
consistent with any determination of such value for purposes of
subparagraph (iv) or (v) of this Section 7(d), whose determination
shall be conclusive and described in a resolution of the Board of
Directors) of the portion of the right, warrants, evidences of
indebtedness, shares of capital stock or assets being distributed
applicable to one Common Share. For the purpose of any computation
under subparagraph (vi) of this Section 7(d), the current market price
per share of Common Shares on any date in question shall be deemed to
be the average of the daily Closing Prices for such date in question
and the next two succeeding Trading Days; provided, however, that if
the "ex" date for any event (other than the tender or exchange offer
requiring such computation) that requires an adjustment to the
Conversion
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<PAGE> 13
Price pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi)
above occurs after the Expiration Time for the tender or exchange
offer requiring such computation and or prior to the second Trading
Day following the date in question, the Closing Price for each Trading
Day on and after the "ex" date for such other event shall be adjusted
by multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Price is so required to be adjusted as a result
of such other event. For purposes of this paragraph, the term "ex"
date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Shares trades regular way on
the relevant exchange or in the relevant market from which the Closing
Price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or
combination of Common Shares, means the first date on which the Common
Shares trade regular way on such exchange or in such market after the
time at which such subdivision or combination becomes effective, and
(3) when used with respect to any tender or exchange offer means the
first date on which the Common Shares trade regular way on such
exchange or in such market after the Expiration Time of such offer.
(viii) The Corporation may make such reductions in the
Conversion Price, in addition to those required by subparagraphs (i),
(ii), (iii), (iv), (v) and (vi) of this Section 7(d), as it considers
to be advisable to avoid or diminish an income tax to holders of
Common Shares or rights to purchase Common Shares resulting from any
dividend or distribution of stock (or rights to acquire stock) or from
any event treated as such for income tax purposes. The Corporation
from time to time may reduce the Conversion Price by any amount for
any period of time if the period is at least twenty days, the
reduction is irrevocable curing the period, and the Board of Directors
shall have made a determination that such reduction would be in the
best interest of the Corporation, which determination shall be
conclusive. Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Corporation shall mail to holders of record of
the Convertible Preferred Shares a notice of the reduction at least
fifteen days prior to the date the reduced Conversion Price takes
effect, and such notice shall state the reduced Conversion Price and
the period it will be in effect.
(ix) No adjustment in the Conversion Price shall be
required unless such adjustment would required an increase or decrease
of at least 1% in the Conversion Price; provided, however, that any
adjustments which by reason of this subparagraph (ix) are not required
to be made shall be carried forward and take into account in any
subsequent adjustment.
(x) Whenever the Conversion Price is adjusted as herein
provided:
(A) the Corporation shall compute
the adjusted Conversion Price and shall prepare a
certificate signed by the President or any Vice
President of the Corporation setting forth the
adjusted Conversion Price and showing in reasonable
detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with
the transfer agent for the Convertible Preferred
Shares; and
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<PAGE> 14
(B) a notice stating the Conversion
Price has been adjusted and setting forth the
adjusted Conversion Price shall forthwith be
required, and as soon as practicable after it is
required such notice shall be mailed by the
Corporation to all record holders of Convertible
Preferred Shares at their last addresses as they
shall appear upon the stock transfer books of the
Corporation.
(e) In the event that the Corporation shall be a party to any
transaction (including without limitation any recapitalization or
reclassification of the Common Shares (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination of the Common Shares), any consolidation
of the Corporation with, or merger of the Corporation into, any other person,
any merger of another person into the Corporation (other than a merger which
does not result in a reclassification, conversion, exchange or cancellation of
outstanding Common Shares), any sale or transfer of all or substantially all of
the assets of the Corporation or any compulsory share exchange) pursuant to
which the Common Shares are converted into the right to receive other
securities, cash or other property, then lawful provisions shall be made as
part of the terms of such transaction whereby the holder of each Convertible
Preferred Share then outstanding shall have the right thereafter to convert
such share only into (i) in the case of any such transaction other than a
Common Shares Fundamental Change (as defined in Section 7(i)) and subject to
funds being legally available for such purpose under applicable law at the time
of such conversion, the kind and amount of securities, cash and other property
receivable upon such transaction by a holder of the number of Common Shares
into which such Convertible Preferred Shares could have been converted
immediately prior to such transaction, after giving effect, in the case of any
Non-Stock Fundamental Change (as defined in Section 7(i)), to any adjustment in
the Conversion Price required by the provisions of Section 7(h), and (ii) in
the case of a Common Shares Fundamental Change, common stock of the kind
received by holders of Common Shares as a result of such Common Shares
Fundamental Change in an amount determined pursuant to the provisions of
Section 7(h). The Corporation or the person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. Such certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events subsequent
to the effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 7. The above provisions shall
similarly apply to successive transactions of the foregoing type.
(f) The Corporation shall at all times reserve and keep available,
free from preemptive rights out of its authorized and unissued stock, solely
for the purpose of effecting the conversion of the Convertible Preferred
Shares, such number of Common Shares as shall from time to time be sufficient
to effect the conversion of all Convertible Preferred Shares from time to time
outstanding. The Corporation shall from time to time, in accordance with the
laws of the State of Delaware, increase the authorized number of Common Shares
if at any time the number of authorized and unissued Common Shares shall not be
sufficient to permit the conversion of all the then-outstanding Convertible
Preferred Shares.
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<PAGE> 15
If the Common Shares are quoted on any U.S. national securities
exchange, the Corporation will, if permitted by the rules of such exchange,
list and keep listed on such exchange, upon official notice of issuance, all
Common Shares issuable upon conversion of the Convertible Preferred Shares.
(g) In case:
(i) the Corporation shall (1) declare any dividend (or
any other distribution) on Common Shares, other than (A) a dividend
payable in Common Shares or (b) a dividend payable in cash out of its
retained earnings other than any special or nonrecurring or other
extraordinary dividend or (2) declare or authorize a redemption or
repurchase of in excess of 10% of the then-outstanding Common Shares;
or
(ii) the Corporation shall authorize the granting to all
holders of Common Shares of rights or warrants to subscribe for or
purchase any shares of stock of any class or series or of any other
rights or warrants; or
(iii) of any reclassification of Common Shares (other than
a subdivision or combination of the outstanding Common Shares, or a
change in par value, or from par value to no par value, or from no par
value to par value), or of any consolidation or merger to which the
Corporation is a party and for which approval of any shareholders of
the Corporation shall be required, or of the sale or transfer of all
or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Common Shares are converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent, and shall
cause to be mailed to the holders of record of the Convertible Preferred
Shares, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least fifteen days prior to the applicable record
or effective date hereinafter specified, a notice stating (x) the date on which
a record (if any) is to be taken for the purpose of such dividend,
distribution, redemption, repurchase, rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Shares of record to be
entitled to such dividend, distribution, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Shares of record shall be entitled to exchange their Common
Shares for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, shares exchange,
dissolution, liquidation or winding up (but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
corporate action required to be specified in such notice).
(h) Notwithstanding any other provision in this Section 7 to the
contrary, if any Fundamental Change (as defined in Section 7(i)) occurs, then
the Conversion Price in effect will be adjusted immediately after such
Fundamental Change as described below. In addition, in the event of a Common
Shares Fundamental Change, each Convertible Preferred Share shall be
convertible
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<PAGE> 16
solely into common stock of the kind and amount received by holders of Common
Shares as the result of such Common Shares Fundamental Change as more
specifically provided in the following clauses (h)(i) and (h)(ii).
For purposes of calculating any adjustment to be made pursuant to this
Section 7(h) in the event of a Fundamental Change, immediately after such
Fundamental Change:
(i) in the case of a Non-Stock Fundamental
Change, the Conversion Price of the Convertible Preferred
Shares shall thereupon become the lower of (A) the Conversion
Price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Section 7, and (B) the
result obtained by multiplying the greater of the Applicable
Price (as defined in Section 7(i)) or the then applicable
Reference Market Price (as defined in Section 7(ii)) by a
fraction of which the numerator shall be $50.00 and the
denominator shall be (x) the then-current Redemption Price per
share of Convertible Preferred Shares or (y) for any Non-
Stock Fundamental Change that occurs before the Convertible
Preferred Shares become redeemable by the Corporation pursuant
to Section 5, the applicable price per share set forth for the
date of such Non- Stock Fundamental Change in the following
table:
<TABLE>
<CAPTION>
Date of Non-Stock Fundamental Change Price
------------------------------------ -----
<S> <C>
After date of original issuance of $53.125
Convertible Preferred Shares and before
April 1, 1995
On and after April 1, 1995, and before 52.8125
April 1, 1996
On and after April 1, 1996, and before April 52.500
1, 1997
</TABLE>
plus, in any case referred to in this clause (y), an amount equal to
all per share dividends on the Convertible Preferred Shares
accumulated and unpaid thereon, whether or not declared, to but
excluding the date of such Non-Stock Fundamental Change; and
(ii) in the case of a Common Shares Fundamental Change,
the Conversion Price of the Convertible Preferred Shares in effect
immediately prior to such Common Shares Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to this
Section 7, shall thereupon be adjusted by multiplying such Conversion
Price by a fraction of which the numerator shall be the purchaser
Stock Price (as defined in Section 7(i)) and the denominator shall be
the Applicable Price; provided, however, that in the event of a Common
Shares Fundamental Change in which (A) 100% by value of the
consideration received by a holder of Common Shares is common stock of
the successor, acquiror or other third party (and cash, if any, is
paid with respect to any fractional interests in such common stock
resulting from such Common Shares Fundamental change) and (B) all of
the Common Shares shall have been exchanged for, converted into or
acquired for common stock (and
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<PAGE> 17
cash with respect to fractional interests) of the successor, acquiror
or other third party, the Conversion Price in effect immediately prior
to such Common Shares Fundamental Change shall thereupon be adjusted
by multiplying such Conversion Price by a fraction of which the
numerator shall be one (1) and the denominator shall be the number of
shares of common stock of the successor, acquiror, or other third
party received by a stockholder for one Common Share as a result of
such Common Shares Fundamental Change.
(i) The following definitions shall apply to terms used
in this Section 7:
(i) "APPLICABLE PRICE" shall mean (i) in the event of a
Non-Stock Fundamental Change in which the holders of the Common Shares
receive only cash, the amount of cash received by a stockholder for
one Common Share and (ii) in the event of any other Non-Stock
Fundamental Change or any Common Shares Fundamental Change, the
average of the daily Closing Prices of the Common Shares for the ten
consecutive Trading Days prior to and including the record date for
the determination of the holders of Common Shares entitled to receive
securities, cash or other property in connection with such Non-Stock
Fundamental Change or Common Shares Fundamental Change, or, if there
is no such record date, the date upon which the holders of the Common
Shares shall have the right to receive such securities, cash or other
property, in each case, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 7(d).
(ii) "COMMON SHARES FUNDAMENTAL CHANGE" shall mean any
Fundamental Change in which more than 50% by value (as determined in
good faith by the Board of Directors) of the consideration received by
holders of Common Shares consists of common stock that for each of the
ten consecutive Trading Days referred to with respect to such
Fundamental Change in Section 7(h)(i) above has been admitted for
listing or admitted for listing subject to notice of issuance on a
national securities exchange or quoted on the NASDAQ National Market
System; provided, however, that a Fundamental Change shall not be a
Common Shares Fundamental Change unless either (i) the Corporation
continues to exist after the occurrence of such Fundamental Change and
the outstanding Convertible Preferred Shares continue to exist as
outstanding Convertible Preferred Shares, or (ii) not later than the
occurrence of such Fundamental Change, the outstanding Convertible
Preferred Shares are converted into or exchanged for shares of
convertible preferred stock of a corporation succeeding to the
business of the Corporation, which convertible preferred stock has
powers, preferences and relative, participating, optional or other
rights, and qualifications, limitations and restrictions,
substantially similar to those of the Convertible Preferred Shares.
(iii) "FUNDAMENTAL CHANGE" shall mean the occurrence of any
transaction or event in connection with a plan pursuant to which all
or substantially all of the Common Shares shall be exchanged for,
converted into, acquired for or constitute solely the right to receive
securities, cash or other property (whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided, however,
in the case of a plan involving more than one such transaction or
event, for purposes of adjustment of the Conversion Price, such
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<PAGE> 18
Fundamental Change shall be deemed to have occurred when substantially
all of the Common Shares shall be exchanged for, converted into, or
acquired for or constitute solely the right to receive cash,
securities, property or other assets, but the adjustment shall be
based upon the highest weighted average of consideration per share
which a holder of Common Shares could have received in such
transactions or events as a result of which more than 50% of the
Common Shares shall have been exchanged for, converted into, or
acquired for or constitute solely the right to receive cash,
securities, property or other assets.
(iv) "NON-STOCK FUNDAMENTAL CHANGE" shall mean any
Fundamental Change other than a Common Shares Fundamental Change.
(v) "PURCHASER STOCK PRICE" shall mean, with respect to
any Common Shares Fundamental Change, the average of the daily Closing
Prices of the common stock received in such Common Shares Fundamental
Change for the ten consecutive Trading Days prior to and including the
record date for the determination of the holders of Common Shares
entitled to receive such common stock, or, if there is no such record
date, the date upon which the holders of the Common Shares shall have
the right to receive such common stock, in each case, as adjusted in
good faith by the Board of Directors to appropriately reflect any of
the events referred to in subparagraphs (i), (ii), (iii), (iv), (v)
and (vi) of Section 7(d); provided, however, if no such Closing Prices
of the common stock for such Trading Days exist, then the Purchaser
Stock Price shall be set at a price determined in good faith by the
Board of Directors.
(vi) "REFERENCE MARKET PRICE" shall initially mean $15.00
(which is an amount equal to 66 2/3% of the reported last sale price
for the Common Shares on the New York Stock Exchange on March 22,
1994), and in the event of any adjustment to the Conversion Price
other than as a result of a Non-Stock Fundamental Change, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price after giving effect to
any such adjustment shall always be the same as the ratio of $15.00 to
the initial Conversion Price.
(j) Notwithstanding the foregoing provisions, the issuance of any
Common Shares pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Corporation
and the investment of additional optional amounts in Common Shares under any
such plan, and the issuance of any Common Shares or options or rights to
purchase such shares pursuant to any present or future employee benefit plan or
program of the Corporation or pursuant to any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the Issue
Date, shall not be deemed to constitute an issuance of Common Shares or
exercisable, exchangeable or convertible securities by the Corporation to which
any of the adjustment provisions described above applies. There shall also be
no adjustment of the Conversion Price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the Corporation
except as specifically described in this Section 7. If any action would
require adjustment of the Conversion Price pursuant to more than one of the
provisions described above, only one adjustment shall be made and such
adjustment shall be the amount of adjustment which has the highest absolute
value to holders of Convertible Preferred Shares.
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<PAGE> 19
(k) In case the Corporation shall, by dividend, or otherwise,
declare or make a distribution on Common Shares referred to in Section 7(d)(iv)
or 7(d)(v) (including, without limitation, dividends or distributions referred
to in the last sentence of Section 7(d)(iv)), the holder of each Convertible
Preferred Share, upon the conversion thereof subsequent to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution and prior to the effectiveness of the Conversion
Price adjustment in respect of such distribution, shall also be entitled to
receive for each Common Share into which such Convertible Preferred Share is
converted, the portion of the Common Shares, rights, warrants, evidences of
indebtedness, shares of capital stock, cash and assets so distributed applicable
to one Common Share; provided, however, that, at the election of the Corporation
with respect to all holders so converting, the Corporation may, in lieu of
distributing to such holder any portion of such distribution not consisting of
cash or securities of the Corporation, pay such holder an amount in cash equal
to the fair market value thereof (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a resolution
of the Board of Directors). If any conversion of a Convertible Preferred Share
described in the immediately preceding sentence occurs prior to the payment date
for a distribution to holders of Common Shares which the holders of the
Convertible Preferred Share so converted is entitled to receive in accordance
with the immediately preceding sentence, the Corporation may elect (such
election to be evidenced by a resolution of the Board of Directors) to
distribute to such holder a due bill for the Common Shares, rights, warrants,
evidences of indebtedness, shares of capital stock, cash or assets to which such
holder is so entitled, provided that such due bill (i) meets any applicable
requirements of the principal national securities exchange or other market on
which the Common Shares are then traded and (ii) requires payment or delivery of
such Common Shares, rights, warrants, evidences of indebtedness, shares of
capital stock, cash or assets no later than the date of payment or delivery
thereof to holders of Common Shares receiving such distribution.
8. Conversion at Option of the Corporation. (a) Subject to and
upon compliance with the provisions of this Section 8, the Corporation shall
have the right, at its option, at any tie on or after April 1, 1997, to require
any holder of Convertible Preferred Shares to convert (a "Mandatory
Conversion") such holder's shares for the number of fully paid and
nonassessable Common Shares (calculated as to each conversion to the nearest
1/100th of a share) obtained by dividing $50.00 by the Conversion Price;
provided, however, that before any Mandatory Conversion may be effected, both
(i) the Closing Price per share of the Common Shares on any 20 of the 30
consecutive Trading Days immediately preceding the day on which the Notice of
Conversion (hereinafter defined) with respect to such Mandatory Conversion is
given by the Corporation and (ii) the Closing Price per share of Common Shares
on the Trading Day immediately preceding the day on which such Notice of
Conversion is given by the Corporation, shall have equaled exceeded 125% of the
then applicable Conversion Price. In order to effect a Mandatory Conversion,
(A) the corporation shall issue a press release announcing such Mandatory
Conversion prior to the opening of business on the second Trading Day after the
day on which the conditions described in clauses (i) and (ii) above have been
satisfied and (B) a notice of conversion (a "Notice of Conversion") of the
Convertible Preferred Shares shall be given by the Corporation by mail to each
record holder of Convertible Preferred Shares to be converted. For purposes of
the calculation of the date of conversion and the dates on which notices are
given pursuant to this Section 8(a), a Notice of Conversion shall be deemed to
be given on the day such notice if first mailed by first class mail, postage
prepaid, to holders of record as of the close of business on the day
immediately preceding the day on which such Notice of Conversion is given of
the Convertible Preferred Shares to be converted. Each Notice of Conversion
-19-
<PAGE> 20
shall be addressed to the holder of record at the address of the holder
appearing in the stock records of the Corporation. No defect in the Notice of
Conversion or in the mailing thereof or publication of its contents shall
affect the validity of the Mandatory Conversion proceedings. The Corporation
may only exercise its option under this Section 8 if, at the time a Notice of
Conversion is given, there are not accumulated and unpaid dividends on the
Convertible Preferred Shares (exclusive of any period in the month during which
such Notice of Conversion is given).
(b) As promptly as practicable after a Notice of Conversion is
given by the Corporation, the Corporation shall issue and shall deliver to The
Depository Trust Company and/or to each holder of Certificated Shares, as the
case may be, to be converted, against the surrender of the certificate or
certificates evidencing such shares, a certificate or certificates for the
number of full Common Shares issuable upon the Mandatory Conversion of such
shares in accordance with the provisions of this Section 8, and any fractional
interest in respect of a Common Share arising upon such conversion shall be
settled as provided in subsection (c) of this Section 8.
Each Mandatory Conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the Notice of
Conversion is given by the Corporation, and the person or persons in whose name
or names any certificate or certificates for the Common Shares issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby at such time on such date and such conversion
shall be at the Conversion Price in effect at such time on such date. At such
time on such date, all rights of the holders of the Convertible Preferred
Shares to be converted as such holders shall cease, and such holders shall
thereupon and thereafter be deemed to be and be for all purposes the holders of
the Common Shares issued upon conversion thereof. All Common Shares delivered
upon a Mandatory Conversion will upon delivery be duly and validly issued and
fully paid and nonassessable.
(c) No fractional shares or scrip representing fractions of the
Common Shares shall be issued upon a Mandatory Conversion. Instead of any
fractional interest in any Common Share which would otherwise be deliverable
upon a Mandatory Conversion, the Corporation shall pay to the holder of such
share an amount in cash (computed to the nearest cent) based upon the Closing
Price of the Common Shares on the Trading Day immediately preceding the date
the Notice of Conversion is given.
9. Liquidation Distribution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of the Convertible Preferred Shares at the time outstanding will be
entitled to receive out of the assets of the Corporation available for
distribution to shareholders, before any distribution of assets is made to
holders of Common Shares or any other class of shares of the Corporation
ranking junior to the Convertible Preferred Shares as regards participation in
assets of the Corporation ("Corporation Liquidation Junior Shares"), but
together with the holders of every other series of preferred or preference
stock of the Corporation outstanding, if any, ranking pari passu with the
Convertible Preferred Shares as regards participation in the assets of the
Corporation ("Corporation Liquidation Parity Shares"), an amount equal, in the
case of the holders of the Convertible Preferred Shares, to the aggregate of the
liquidation preference of $50 per Convertible Preferred Share and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution"). If, upon any such liquidation, the
Liquidation Distributions can be paid only in part because the Corporation has
insufficient assets available to pay in full the aggregate Liquidation
Distributions and the aggregate maximum
-20-
<PAGE> 21
Liquidation Distributions on the Corporation Liquidation Parity Shares, then
the amounts payable by the Corporation on the Convertible Preferred Shares and
on such Corporation Liquidation Parity Shares shall be paid on a pro rata
basis, so that
(i) the aggregate amount paid as Liquidation
Distributions on the Convertible Preferred Shares bears to (y) the
aggregate amount paid as liquidation distributions on the Corporation
Liquidation Parity Shares the same ratio as
(ii) (x) the aggregate Liquidation Distributions bears to
(y) the aggregate maximum liquidation distributions on the
Corporation Liquidation Parity Shares.
If, upon any such liquidation, the holders of Convertible Preferred
Shares are paid in full the aggregate Liquidation Distributions to which they
are entitled hereunder, then such holders shall not be entitled to receive or
share in any other assets of the Corporation thereafter available for
distribution to any other shareholders of the Corporation.
10. Voting Rights. (a) The holders of Convertible Preferred
Shares will not have any voting rights except as set forth below or as
otherwise from time to time required by law. In connection with any right to
vote, each holder of a Convertible Preferred Share will have one vote for each
share held. Any Convertible Preferred Shares held by the Corporation or any
entity controlled by the Corporation shall not have voting rights hereunder and
shall not be counted in determining the presence of a quorum and shall be
deemed not to be outstanding.
(b) Whenever dividends on the Convertible Preferred Shares shall
be in arrears in an amount equal to at least 18 monthly dividends (whether or
not consecutive), (i) the number of members of the Board of Directors shall be
increased by two, effective as of the time of election of such directors as
hereinafter provided, and (ii) the holders of Convertible Preferred Shares
(voting separately as a class with all the affected classes or series of
Preferred Stock (if any) upon which like voting rights have been conferred and
are exercisable) will have the exclusive right to vote for and elect such two
additional directors of the Corporation at any meeting of stockholders of the
Corporation at which directors are to be elected held during the period such
dividends remain in arrears. The right of the holders of Convertible Preferred
Shares to vote for such two additional directors shall terminate when all
accumulated and unpaid dividends on the Convertible Preferred Shares have been
declared and paid or set apart for payment. The term of office of all
directors so elected shall terminate immediately upon the termination of the
right of the holders of Convertible Preferred Shares to vote for such two
additional directors, and the number of directors of the Board of Directors
shall immediately thereafter be reduced by two.
The foregoing right of the holders of Convertible Preferred Shares
with respect to the election of two directors may be exercised at any annual
meeting of stockholders or at any special meeting of stockholders held for such
purpose. If the right to elect directors shall have accrued to the holders of
Convertible Preferred Shares more than ninety days preceding the date
established for the next annual meeting of stockholders, the President of the
Corporation shall, within twenty days after the delivery to the Corporation at
its principal office of a written request for a special meeting signed by the
holders of at least 10% of all outstanding Convertible Preferred Shares, call a
special meeting of the holders of Convertible Preferred Shares to be held within
sixty days after the delivery of such request for the purpose of electing such
additional directors.
-21-
<PAGE> 22
(c) (i)The holders of Convertible Preferred Shares and any
Preferred Stock referred to above voting as a class shall have the right to
remove without cause at any time and replace any directors such holders shall
have elected pursuant to this Section 10.
(d) So long as the Convertible Preferred Shares are outstanding,
the Corporation shall not, without the affirmative vote or consent of the
holders of at least 66-2/3% (unless a higher percentage shall then be required
by applicable law) of all outstanding Convertible Preferred Shares voting
separately as a class, (i) take any action that will effect any variation or
abrogation of the rights, preferences, qualifications, limitations or
restrictions of the Convertible Preferred Shares (by way of amendment to the
Certificate of Incorporation of the Corporation, by resolution or otherwise) or
(ii) create, authorize or issue, or reclassify any authorized stock of the
Corporation into, or increase the authorized amount of, any class or series of
the Corporation's capital stock ranking prior to the Convertible Preferred
Shares as to dividends or as to distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or any security convertible into shares of such a class or series. A class
vote on the part of the Convertible Preferred Shares shall, without limitation,
specifically not be deemed to be required (except as otherwise required by law
or resolution of the Board of Directors) in connection with (A) the
authorization, issuance or increase in the authorized amount of any Common
Shares, Corporation Dividend Junior Shares or Corporation Liquidation Junior
Shares or any class or series of the Corporation's capital stock that is
Corporation Dividend Parity Shares and/or Corporation Liquidation Parity
Shares; (B) the authorization, issuance or increase in the amount of any bonds,
mortgages, debentures or other obligations of the Corporation (other than those
that may be covered by clause (ii) of the preceding sentence); or (C) the
merger or consolidation of the Corporation with or into any other Person.
11. No Obligation to Register Securities. The Corporation shall
not be obligated to register the resale of the Securities (hereinafter defined)
or conduct a registered exchange offer for the Securities. For purposes of
this Section 11, "SECURITIES" shall mean the Convertible Preferred Shares and
the Common Shares issuable upon conversion of the Convertible Preferred Shares.
12. Merger; Sales of Assets; Etc. Notwithstanding anything to the
contrary herein contained, any merger of the Corporation with or into another
entity (whether or not the Corporation is the survivor of such merger), or the
sale, transfer or lease by the Corporation of all or substantially all of its
assets to another entity, shall not be, and shall not be deemed to be or cause,
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation (unless the stockholders of the Corporation adopt a plan of
liquidation in connection therewith).
13. Transfer Restrictions. (a) The certificates evidencing
Convertible Preferred Shares shall, unless otherwise agreed by the Corporation
and the holders of any such certificates, bear a legend substantially to the
following effect (with such changes therein as the Corporation may specify in
light of the nature of the holder of the certificate and requirements of
applicable securities laws):
This Security has not been and will not be registered under the United
States Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered, sold, pledged or otherwise transferred except (a)
to a person who the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule
-22-
<PAGE> 23
144A under the Securities Act purchasing for its own account or for
the account of a qualified institutional buyer in a transaction
meeting the requirements of Rule 144A or to Parker & Parsley Capital
LLC or Pioneer Natural Resources Company, (b) in an offshore
transaction complying with Rule 904 of Regulation S under the
Securities Act or (c) pursuant to an exemption from registration
provided by Rule 144 under the Securities Act (if available), in each
case in accordance with any applicable securities laws of any state of
the United States.
This Security may be amended or supplemented from time to time to
modify the restrictions on and procedures for resales and other
transfers of this Security to reflect any change in applicable law or
regulation (or the interpretation thereof) or in practices relating to
the resale or transfer of restricted securities generally. The holder
of this Security shall be deemed, by the acceptance of this Security,
to have agreed to any such amendment or supplement.
Certificates representing the Common Shares issued upon conversion of the
Convertible Preferred Shares shall bear a comparable legend. The Convertible
Preferred Shares, and the Common Shares issued upon conversion thereof, shall
be subject to the restrictions on transfer set forth in the legends referred to
above for such period as the Corporation determines to be required or
appropriate under applicable securities laws.
(b) At any time when the Corporation is not subject to Section 13
or 15(d) of the Exchange Act, upon the request of a holder of Convertible
Preferred Shares or Common Shares issued upon conversion of Convertible
Preferred Shares, the Corporation will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such holder or to a
prospective purchaser of such shares designated by such holder, as the case may
be, in order to permit compliance by such holder with Rule 144A under the
Securities Act in connection with the resale of such shares by such holder
unless the provision of such information is no longer required by law to effect
resales of such Convertible Preferred Shares or such Common Shares under Rule
144A under the Securities Act; provided, however, that the Corporation shall
not be required to furnish such information in connection with any request made
on or after the date which is three years from the later of (i) the date such
shares were acquired from the Corporation or (ii) the date such shares were
last acquired from an "affiliate" of the Corporation within the meaning of Rule
144 under the Securities Act; and provided further, however, that the
Corporation shall not be required to furnish such information at any time to a
prospective purchaser located outside the United States who is not a "U.S.
person" within the meaning of Regulation S under the Securities Act if such
Convertible Preferred Shares may then be sold to such prospective purchaser in
accordance with Rule 904 under the Securities Act (or any successor provision
thereto). "Rule 144A Information" shall be such information as is specified
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto).
14. Preemptive Rights. The Convertible Shares are not entitled to
any preemptive or subscription rights in respect of any securities of the
Corporation.
15. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof
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<PAGE> 24
is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating or otherwise adversely affecting the remaining provisions
hereof. If a court of competent jurisdiction should determine that a provision
hereof would be valid or enforceable if a period of time were extended or
shortened or a particular percentage were increased or decreased, then such
court may make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
16. Miscellaneous. The Corporation shall pay any and all stock
transfer and documentary stamp taxes that may be payable in respect of any
issuance or delivery of Convertible Preferred Share or Common Shares or other
securities issued on account of Convertible Preferred Shares pursuant hereto or
certificates or instruments evidencing such shares or securities. The
Corporation shall not, however, be required to pay any such tax which may be
payable in respect of any transfer involved in the issuance or delivery of
Convertible Preferred Shares or Common Shares or other securities in a name
other than that in which the Convertible Preferred Shares with respect to which
such shares or other securities are issued or delivered were registered, or in
respect of any payment to any Person with respect to any such shares or
securities other than a payment to the registered holder thereof, and shall not
be required to make any such issuance, delivery or payment unless and until the
Person otherwise entitled to such issuance, delivery or payment has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid or is not payable.
IN WITNESS WHEREOF, this Certificate of Designations, Series A
Convertible Preferred Stock has been executed as of June 25,1997, on behalf
of Pioneer Natural Resources Company by the Executive Vice President of the
Corporation and attested by the Secretary of the Corporation, who do hereby
affirm, under penalties of perjury, that the foregoing Certificate is the act
and deed of the Corporation and that the facts stated therein are true.
PIONEER NATURAL RESOURCES COMPANY
By:
----------------------------
ATTEST:
- --------------------
Secretary
-24-
<PAGE> 1
EXHIBIT 4.5
Incorporated Under the Laws of SERIES B CONVERTIBLE PREFERRED
The State of Delaware PAR VALUE $.01
NUMBER SHARES
<TABLE>
<S> <C>
This Certificate is transferable in CUSIP 000000 00 0
New York, New York and Jersey City, New Jersey See reverse for certain definitions and legends
</TABLE>
PIONEER NATURAL RESOURCES COMPANY
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE SERIES B CONVERTIBLE
PREFERRED STOCK OF
SEAL Pioneer Natural Resources Company (hereinafter called the Corporation),
transferable on the books of the Corporation holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by
Transfer Agent and registered by the Registrar.
Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
/s/ S. SHEFHELD
PRESIDENT AND CHIEF EXECUTIVE OFFICER DATED
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER &
TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
/s/ M. WITHROW BY
EXECUTIVE VICE PRESIDENT AND SECRETARY Authorized Signature
<PAGE> 2
PIONEER NATURAL RESOURCES COMPANY
The Corporation is authorized to issue shares of more than one class
and to issue shares in more than one series of at least one class. The
Corporation will furnish without charge to each stockholder who so requests a
statement of the powers, designations, preferences and relative, participating,
optional or other special right of each class of stock or series thereof of the
Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
the transfer agent.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________Custodian _____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act _______________
in common ([____])
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ____________________________ hereby sell, assign
and transfer unto
Please insert Social Security or other
Identifying Number of Assignee
-----------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address of Assignee.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
shares of
- --------------------------------------------------------------------
capital stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint _____________________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated
----------------------------
X
---------------------------------
NOTICE: (Signature)
THE SIGNATURES TO THE ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR X
WITHOUT ALTERNATION OR ENLARGEMENT ---------------------------------
OR ANY CHANGE WHATEVER. (Signature)
The signature(s) would be
guaranteed by an "eligible
guarantor institution" as defined
in _____ under The Securities
Exchange Act of 1934 as amended.
SIGNATURE(S) GUARANTEED BY:
AMERICAN BANKNOTE COMPANY Production Coordinator
- Belinda Beck - [__________]
89 Blair Mill Road Proof of June 10, 1997
Horsham, PA 79044 PIONEER
[_________] [_____________]
Sales Person M. Garrett Opr. [___] REV. 1
[________________] [__________________]
<PAGE> 1
EXHIBIT 5.1
BAKER & BOTTS, L.L.P.
2001 ROSS AVENUE
DALLAS, TEXAS 75201
00C602.0306 June 26, 1997
Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Boulevard
Irving, Texas 75039
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4
(Registration No. 333-26951) (the "Registration Statement"), filed by Pioneer
Natural Resources Company, a Delaware corporation ("Pioneer"), with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Securities Act"), relating to the registration of (i) 74,942,697 shares
of common stock, par value $.01 per share ("Pioneer Common Stock"), of Pioneer
and (ii) 8,807,309 shares of Series A 8% Cumulative Convertible Preferred
Stock, par value $.01 per share ("Pioneer Preferred Stock"), of Pioneer
issuable in connection with the merger of MESA Inc., a Texas corporation
("Mesa"), with and into Pioneer and the merger of Parker & Parsley Petroleum
Company, a Delaware corporation ("Parker & Parsley"), with and into Mesa
Operating Co., a Delaware corporation ("MOC"), all as more fully described in
the Amended and Restated Agreement and Plan of Merger, dated as of April 6,
1997 (the "Merger Agreement"), among Mesa, Pioneer, MOC and Parker & Parsley.
The Registration Statement also relates to the registration of 8,807,309 shares
of Pioneer Common Stock issuable upon conversion of the Pioneer Preferred
Stock.
You have asked us to pass upon for you certain legal matters
with respect to the Pioneer Common Stock and Pioneer Preferred Stock to be
issued in connection with the transactions referred to above. In our capacity
as counsel to Pioneer and Mesa in connection with such transactions, we have
examined the Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws of Pioneer, each as amended to date, the Certificate of
Designation for the Pioneer Preferred Stock, the Merger Agreement, and
originals, or copies certified or otherwise identified, of corporate records of
Pioneer, including minute books of Pioneer as furnished to us by Pioneer,
certificates of public officials and of representatives of Pioneer, statutes
and other instruments or documents, as a basis for the opinions hereinafter
expressed. In giving such opinions,
<PAGE> 2
Pioneer Natural Resources Company Page 2 June 26, 1997
we have relied upon certificates of officers of Pioneer with respect to the
accuracy of the material factual matters contained in such certificates. In
making our examination, we have assumed that all signatures on documents
examined by us are genuine, that all documents submitted to us as originals are
authentic and that all documents submitted to us as certified or photostatic
copies conform with the original copies of such documents.
On the basis of the foregoing, and subject to the assumptions,
limitations and qualifications set forth herein, we are of the opinion that:
1. Pioneer is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware.
2. The shares of Pioneer Common Stock and Pioneer
Preferred Stock to be issued upon consummation of the Mergers have been duly
authorized and, upon issuance in accordance with the terms of the Merger
Agreement, will be validly issued, fully paid and nonassessable.
3. The shares of Pioneer Common Stock to be issued upon
conversion of the Pioneer Preferred Stock have been duly authorized and, upon
issuance in accordance with the terms of the Pioneer Preferred Stock, will be
validly issued, fully paid and nonassessable.
The opinions set forth above are limited in all respects to
matters of Texas law and the General Corporation Law of the State of Delaware
as in effect on the date hereof. At your request, this opinion is being
furnished to you for filing as Exhibit 5 to the Registration Statement.
Additionally, we hereby consent to the reference to our Firm under the caption
"Legal Matters" in the Joint Proxy Statement/Prospectus forming a part of the
Registration Statement. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
Baker & Botts, L.L.P.
<PAGE> 1
EXHIBIT 8.1
[BAKER & BOTTS, L.L.P. LETTERHEAD]
June 26, 1997
MESA Inc.
1400 Williams Square West
5205 North O' Connor Blvd.
Irving, Texas 75039
Gentlemen:
We have acted as counsel to MESA Inc. ("Mesa") in connection
with (a) the planned merger (the "Reincorporation Merger") of Mesa with and
into Pioneer Natural Resources Company ("Pioneer") and (b) the planned merger
(the "Parker & Parsley Merger") of Parker & Parsley Petroleum Company ("Parker
& Parsley") with and into MOC Operating Co., a wholly owned subsidiary of Mesa
("MOC"), pursuant to an Amended and Restated Agreement and Plan of Merger dated
as of April 6, 1997 (the "Merger Agreement"). Defined terms used in the Merger
Agreement have the same meanings when used herein, unless otherwise defined
herein.
In rendering this opinion, we have examined and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy at all relevant times of the statements and representations, and the
performance or satisfaction as appropriate, of the covenants, contained in (i)
the Merger Agreement (including all disclosure schedules thereto), (ii) the
Joint Proxy Statement/Prospectus (which was included in Registration No. 33-
26951, as amended, filed jointly by Parker & Parsley and Mesa with the
Securities and Exchange Commission (the "Registration Statement")), (iii)
certain of the Mesa SEC Documents and Parker & Parsley SEC Documents (each as
defined in the Merger Agreement), and (iv) the officers' certificates dated as
of the date hereof which were provided to us by each of Mesa and Parker &
Parsley. In addition, we assume that the Reincorporation Merger and the Parker
& Parsley Merger (collectively the "Mergers") will be consummated in accordance
with the Merger Agreement and as described in the Joint Proxy
Statement/Prospectus. Any inaccuracy in any of the aforementioned statements
and representations, or breach or failure of any of the aforementioned
covenants, could adversely affect our opinion.
On the basis of the foregoing and subject to the limitations
set forth below, it is our opinion that, under presently applicable federal
income tax law, the Parker & Parsley Merger and
<PAGE> 2
MESA Inc. Page 2 June 26, 1997
the Reincorporation Merger will each be treated as a reorganization within the
meaning of section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). As a result, the following U.S. federal income tax consequences will
occur:
(a) No gain or loss will be recognized by Parker &
Parsley as a result of the merger of Parker & Parsley with and into
MOC.
(b) No gain or loss will be recognized by holders of
Parker & Parsley Common Stock solely by reason of their receipt, in
the Parker & Parsley Merger, of Pioneer Common Stock in exchange
therefor.
(c) The tax basis of the shares of Pioneer Common Stock
received by a Parker & Parsley stockholder in the Parker & Parsley
Merger (including any fractional share not actually received) will be
the same as the tax basis of the Parker & Parsley Common Stock
surrendered in exchange therefor.
(d) The holding period of the shares of Pioneer Common
Stock received by a Parker & Parsley stockholder in the Parker &
Parsley Merger will include the holding period of the shares of Parker
& Parsley Common Stock surrendered in exchange therefor, provided that
such shares of Parker & Parsley Common Stock are held as capital
assets at the Effective Time.
(e) A cash payment in lieu of a fractional share will be
treated as if a fractional share of Pioneer Common Stock had been
received in the Parker & Parsley Merger and then redeemed by Pioneer.
Such redemption should qualify as a distribution in full payment in
exchange for the fractional share rather than as a distribution of a
dividend. Accordingly, a Parker & Parsley stockholder receiving cash
in lieu of a fractional share will recognize gain or loss upon such
payment in an amount equal to the difference, if any, between such
stockholder's basis in the fractional share (as described in paragraph
(c) above) and the amount of cash received. Such gain or loss will be
a capital gain or loss if the Parker & Parsley Common Stock is held as
a capital asset at the Effective Time.
(f) A cash payment received as a result of an exercise of
dissenters' rights of appraisal will give rise to the recognition of
taxable gain or loss, as the case may be, equal to the difference
between the amount of cash received and the basis of the Parker &
Parsley Common Stock for which the cash is deemed to be payment. Such
gain or loss will be capital gain or loss if the Parker & Parsley
Common Stock is held as a capital asset at the Effective Time.
<PAGE> 3
MESA Inc. Page 3 June 26, 1997
(g) No gain or loss will be recognized by Mesa as a
result of the merger of Mesa with and into Pioneer.
(h) No gain or loss will be recognized by holders of Mesa
Common Stock solely by reason of their receipt, in the Reincorporation
Merger, of Pioneer Common Stock in exchange therefor.
(i) The tax basis of the shares of Pioneer Common Stock
received by a holder of Mesa Common Stock in the Reincorporation
Merger (including any fractional share not actually received) will be
the same as the tax basis of the Mesa Common Stock surrendered in
exchange therefor.
(j) The holding period of the shares of Pioneer Common
Stock received by a holder of Mesa Common Stock in the Reincorporation
Merger will include the holding period of the shares of Mesa Common
Stock surrendered in exchange therefor, provided that such shares of
Mesa Common Stock are held as capital assets at the Effective Time.
(k) No gain or loss will be recognized by holders of Mesa
Series A Preferred Stock solely by reason of their receipt, in the
Reincorporation Merger, of Pioneer Common Stock or Pioneer Preferred
Stock in exchange therefor, except to the extent that Pioneer Common
Stock or Pioneer Preferred Stock is received in exchange for accrued
and unpaid dividends (if any) on the Mesa Series A Preferred Stock.
(l) The tax basis of the shares of Pioneer Common Stock
or Pioneer Preferred Stock received by a holder of Mesa Series A
Preferred Stock in the Reincorporation Merger (including any
fractional share not actually received) will be the same as the tax
basis of the Mesa Series A Preferred Stock surrendered in exchange
therefor.
(m) The holding period of the shares of Pioneer Common
Stock or Pioneer Preferred Stock received by a holder of Mesa Series A
Preferred Stock in the Reincorporation Merger will include the holding
period of the shares of Mesa Series A Preferred Stock surrendered in
exchange therefor, provided that such shares of Mesa Series A
Preferred Stock are held as capital assets at the Effective Time.
(n) No gain or loss will be recognized by holders of Mesa
Series B Preferred Stock solely by reason of their receipt, in the
Reincorporation Merger, of Pioneer Common Stock or Pioneer Preferred
Stock in exchange therefor, except to the extent that Pioneer Common
Stock or Pioneer Preferred Stock is received in exchange for accrued
and unpaid dividends (if any) on the Mesa Series B Preferred Stock.
<PAGE> 4
MESA Inc. Page 4 June 26, 1997
(o) The tax basis of the shares of Pioneer Common Stock
or Pioneer Preferred Stock received by a holder of Mesa Series B
Preferred Stock in the Reincorporation Merger (including any
fractional share not actually received) will be the same as the tax
basis of the Mesa Series B Preferred Stock surrendered in exchange
therefor.
(p) The holding period of the shares of Pioneer Common
Stock or Pioneer Preferred Stock received by a holder of Mesa Series B
Preferred Stock in the Reincorporation Merger will include the holding
period of the shares of Mesa Series B Preferred Stock surrendered in
exchange therefor, provided that such shares of Mesa Series B
Preferred Stock are held as capital assets at the Effective Time.
(q) A cash payment in lieu of a fractional share will be
treated as if a fractional share of Pioneer Common Stock or Pioneer
Preferred Stock, as the case may be, had been received in the
Reincorporation Merger and then redeemed by Pioneer. Such redemption
should qualify as a distribution in full payment in exchange for the
fractional share rather than as a distribution of a dividend.
Accordingly, a Mesa stockholder receiving cash in lieu of a fractional
share will recognize gain or loss upon such payment in an amount equal
to the difference, if any, between such stockholder's basis in the
fractional share (as described in paragraph (i), (l), or (o), as the
case may be, above) and the amount of cash received. Such gain or
loss will be a capital gain or loss if the stock surrendered is held
as a capital asset at the Effective Time.
Our opinion is based on our interpretation of the Code,
applicable Treasury regulations, judicial authority, and administrative rulings
and practice, all as in effect as of the date hereof. There can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy or applicability of the
conclusions set forth herein. We do not undertake to advise you as to any such
future changes or interpretations unless we are specifically retained to do so.
Our opinion will not be binding upon the Internal Revenue Service (the "IRS")
or the courts, and neither will be precluded from adopting a contrary position.
If the IRS successfully challenged the status of the Parker &
Parsley Merger as a reorganization within the meaning of section 368(a) of the
Code, a Parker & Parsley stockholder would recognize gain or loss in an amount
equal to the difference between the stockholder's tax basis in his or her
shares of Parker & Parsley Common Stock and the fair market value, as of the
Effective Time, of Pioneer Common Stock received in exchange therefor. In such
event, the stockholder's tax basis in Pioneer Common Stock so received would be
equal to its fair market value as of the Effective Time, and the holding period
for such stock would begin on the day after the Effective Time.
<PAGE> 5
MESA Inc. Page 5 June 26, 1997
Similarly, if the IRS successfully challenged the status of
the Reincorporation Merger as a reorganization within the meaning of section
368(a) of the Code, a Mesa stockholder would recognize gain or loss in an
amount equal to the difference between the stockholder's tax basis in his or
her shares of Mesa Common Stock, Mesa Series A Preferred Stock, or Mesa Series
B Preferred Stock, as the case may be, and the fair market value, as of the
Effective Time, of Pioneer Common Stock or Pioneer Preferred Stock received in
exchange therefor. In such event, the stockholder's tax basis in Pioneer
Common Stock or Pioneer Preferred Stock so received would be equal to its fair
market value as of the Effective Time, and the holding period for such stock
would begin on the day after the Effective Time.
No opinion is expressed as to any matter not specifically
addressed above, including, without limitation, the tax consequences of the
Mergers under any foreign, state, or local tax law. Moreover, tax consequences
which are different from or in addition to those described herein may apply to
Parker & Parsley stockholders or Mesa stockholders who are subject to special
treatment under the U.S. federal income tax laws, such as persons who acquired
their shares in compensatory transactions in exchange for services rendered,
and persons who have a contingent right to receive additional Parker & Parsley
or Mesa stock as a result of contingency or earn-out provisions in prior
acquisitions by Parker & Parsley or Mesa. Such persons are advised to consult
their own tax advisors with specific reference to their particular
circumstances.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement. This opinion is being delivered to you solely
for that purpose.
Very truly yours,
/s/ Baker & Botts, L.L.P.
<PAGE> 1
EXHIBIT 8.2
[VINSON & ELKINS L.L.P. LETTERHEAD]
June 26, 1997
Parker & Parsley Petroleum Company
303 W. Wall
Suite 101
Midland, Texas 79701
Gentlemen:
We have acted as counsel to Parker & Parsley Petroleum Company ("Parker &
Parsley") in connection with (a) the planned merger (the "Reincorporation
Merger") of MESA, Inc. ("Mesa") with and into Pioneer Natural Resources Company
("Pioneer"), and (b) the planned merger (the "Parker & Parsley Merger") of
Parker & Parsley with and into MOC Operating Co., a wholly owned subsidiary of
Mesa ("MOC"), pursuant to an Amended and Restated Agreement and Plan of Merger
dated as of April 6, 1997 (the "Merger Agreement"). Defined terms used in the
Merger Agreement have the same meanings when used herein, unless otherwise
defined herein.
In rendering this opinion, we have examined and are relying upon
(without any independent investigation or review thereof) the truth and
accuracy at all relevant times of the statements, and representations, and the
performance or satisfaction as appropriate, of the covenants, contained in (i)
the Merger Agreement (including all disclosure schedules thereto), (ii) the
Joint Proxy Statement/Prospectus (which was included in Registration No.
333-26951, as amended, filed jointly by Parker & Parsley and Mesa with the
Securities and Exchange Commission (the "Registration Statement")), (iii)
certain of the MXP SEC Documents and Spice SEC Documents (each as defined in
the Merger Agreement), and (iv) the officers' certificates dated June 26,
1997 which were provided to us by each of Mesa and Parker & Parsley. In
addition, we assume that the Reincorporation Merger and the Parker & Parsley
Merger (collectively the "Mergers") will be consummated in accordance with the
Merger Agreement and as described in the Joint Proxy Statement/Prospectus. Any
inaccuracy in any of the aforementioned statements and representations, or
breach or failure of any of the aforementioned covenants, could adversely
affect our opinion.
On the basis of the foregoing and subject to the limitations set forth
below, it is our opinion that, under presently applicable federal income tax
law, the Parker & Parsley Merger and the Reincorporation Merger will each be
treated as a reorganization within the meaning of section 368(a)
<PAGE> 2
of the Internal Revenue Code of 1986, as amended (the "Code"). As a result,
the following U.S. federal income tax consequences will occur:
(a) No gain or loss will be recognized by Parker & Parsley as
a result of the merger of Parker & Parsley with and into MOC.
(b) No gain or loss will be recognized by holders of Parker &
Parsley Common Stock solely by reason of their receipt, in the Parker &
Parsley Merger, of Pioneer Common Stock in exchange therefor.
(c) The tax basis of the shares of Pioneer Common Stock
received by a Parker & Parsley stockholder in the Parker & Parsley
Merger (including any fractional share not actually received) will be
the same as the tax basis of the Parker & Parsley Common Stock
surrendered in exchange therefor.
(d) The holding period of the shares of Pioneer Common Stock
received by a Parker & Parsley stockholder in the Parker & Parsley
Merger will include the holding period of the shares of Parker & Parsley
Common Stock surrendered in exchange therefor, provided that such shares
of Parker & Parsley Common Stock are held as capital assets at the
Effective Time.
(e) A cash payment in lieu of a fractional share will be
treated as if a fractional share of Pioneer Common Stock had been
received in the Parker & Parsley Merger and then redeemed by Pioneer.
Such redemption should qualify as a distribution in full payment in
exchange for the fractional share rather than as a distribution of a
dividend. Accordingly, a Parker & Parsley stockholder receiving cash in
lieu of a fractional share will recognize gain or loss upon such payment
in an amount equal to the difference, if any, between such stockholder's
basis in the fractional share (as described in paragraph (c) above) and
the amount of cash received. Such gain or loss will be a capital gain
or loss if the Parker & Parsley Common Stock is held as a capital asset
at the Effective Time.
(f) A cash payment received as a result of an exercise of
dissenters' rights of appraisal will give rise to the recognition of
taxable gain or loss, as the case may be, equal to the difference
between the amount of cash received and the basis of the Parker &
Parsley Common Stock for which the cash is deemed to be payment. Such
gain or loss will be capital gain or loss if the Parker & Parsley Common
Stock is held as a capital asset at the Effective Time.
(g) No gain or loss will be recognized by Mesa as a result of
the merger of Mesa with and into Pioneer.
-2-
<PAGE> 3
(h) No gain or loss will be recognized by holders of Mesa
Common Stock solely by reason of their receipt, in the Reincorporation
Merger, of Pioneer Common Stock in exchange therefor.
(i) The tax basis of the shares of Pioneer Common Stock
received by a holder of Mesa Common Stock in the Reincorporation Merger
(including any fractional share not actually received) will be the same
as the tax basis of the Mesa Common Stock surrendered in exchange
therefor.
(j) The holding period of the shares of Pioneer Common Stock
received by a holder of Mesa Common Stock in the Reincorporation Merger
will include the holding period of the shares of Mesa Common Stock
surrendered in exchange therefor, provided that such shares of Mesa
Common Stock are held as capital assets at the Effective Time.
(k) No gain or loss will be recognized by holders of Mesa
Series A Preferred Stock solely by reason of their receipt, in the
Reincorporation Merger, of Pioneer Common Stock or Pioneer Preferred
Stock in exchange therefor, except to the extent that Pioneer Common
Stock or Pioneer Preferred Stock is received in exchange for accrued and
unpaid dividends (if any) on the Mesa Series A Preferred Stock.
(l) The tax basis of the shares of Pioneer Common Stock or
Pioneer Preferred Stock received by a holder of Mesa Series A Preferred
Stock in the Reincorporation Merger (including any fractional share not
actually received) will be the same as the tax basis of the Mesa Series
A Preferred Stock surrendered in exchange therefor.
(m) The holding period of the shares of Pioneer Common Stock
or Pioneer Preferred Stock received by a holder of Mesa Series A
Preferred Stock in the Reincorporation Merger will include the holding
period of the shares of Mesa Series A Preferred Stock surrendered in
exchange therefor, provided that such shares of Mesa Series A Preferred
Stock are held as capital assets at the Effective Time.
(n) No gain or loss will be recognized by holders of Mesa
Series B Preferred Stock solely by reason of their receipt in the
Reincorporation Merger of Pioneer Common Stock or Pioneer Preferred
Stock in exchange therefor, except to the extent that Pioneer Common
Stock or Pioneer Preferred Stock is received in exchange for accrued and
unpaid dividends (if any) on the Mesa Series B Preferred Stock.
(o) The tax basis of the shares of Pioneer Common Stock or
Pioneer Preferred Stock received by a holder of Mesa Series B Preferred
Stock in the Reincorporation Merger (including any fractional share not
actually received) will be the same as the tax basis of the Mesa Series
B Preferred Stock surrendered in exchange therefor.
-3-
<PAGE> 4
(p) The holding period of the shares of Pioneer Common Stock
or Pioneer Preferred Stock received by a holder of Mesa Series B
Preferred Stock in the Reincorporation Merger will include the holding
period of the shares of Mesa Series B Preferred Stock surrendered in
exchange therefor, provided that such shares of Mesa Series B Preferred
Stock are held as capital assets at the Effective Time.
(q) A cash payment in lieu of a fractional share will be
treated as if a fractional share of Pioneer Common Stock or Pioneer
Preferred Stock, as the case may be, had been received in the
Reincorporation Merger and then redeemed by Pioneer. Such redemption
should qualify as a distribution in full payment in exchange for the
fractional share rather than as a distribution of a dividend.
Accordingly, a Mesa stockholder receiving cash in lieu of a fractional
share will recognize gain or loss upon such payment in an amount equal
to the difference, if any, between such stockholder's basis in the
fractional share (as described in paragraph (i), (l), or (o), as the
case may be, above) and the amount of cash received. Such gain or loss
will be a capital gain or loss if the stock surrendered is held as a
capital asset at the Effective Time.
Our opinion is based on our interpretation of the Code, applicable
Treasury regulations, judicial authority, and administrative rulings and
practice, all as in effect as of the date hereof. There can be no assurance
that future legislative, judicial or administrative changes or interpretations
will not adversely affect the accuracy or applicability of the conclusions set
forth herein. We do not undertake to advise you as to any such future changes
or interpretations unless we are specifically retained to do so. Our opinion
will not be binding upon the Internal Revenue Service (the "IRS") or the
courts, and neither will be precluded from adopting a contrary position.
If the IRS successfully challenged the status of the Parker & Parsley
Merger as a reorganization within the meaning of Section 368(a) of the Code, a
Parker & Parsley stockholder would recognize gain or loss in an amount equal to
the difference between the stockholder's tax basis in his or her shares of
Parker & Parsley Common Stock and the fair market value, as of the Effective
Time, of Pioneer Common Stock received in exchange therefor. In such event,
the stockholder's tax basis in Pioneer Common Stock so received would be equal
to its fair market value as of the Effective Time, and the holding period for
such stock would begin on the day after the Effective Time.
Similarly, if the IRS successfully challenged the status of the
Reincorporation Merger as a reorganization within the meaning of Section 368(a)
of the Code, a Mesa stockholder would recognize gain or loss in an amount equal
to the difference between the stockholder's tax basis in his or her shares of
Mesa Common Stock, Mesa Series A Preferred Stock, or Mesa Series B Preferred
Stock, as the case may be, and the fair market value, as of the Effective Time,
of Pioneer Common Stock or Pioneer Preferred Stock received in exchange
therefor. In such event, the stockholder's tax basis in Pioneer Common Stock
or Pioneer Preferred Stock so received would be
-4-
<PAGE> 5
equal to its fair market value as of the Effective Time, and the holding period
for such stock would begin on the day after the Effective Time.
No opinion is expressed as to any matter not specifically addressed
above, including, without limitation, the tax consequences of the Mergers under
any foreign, state, or local tax law. Moreover, tax consequences which are
different from or in addition to those described herein may apply to Parker &
Parsley stockholders or Mesa stockholders who are subject to special treatment
under the U.S. federal income tax laws, such as persons who acquired their
shares in compensatory transactions in exchange for services rendered, and
persons who have a contingent right to receive additional Parker & Parsley or
Mesa stock as a result of contingency or earn-out provisions in prior
acquisitions by Parker & Parsley or Mesa. Such persons are advised to consult
their own tax advisors with specific reference to their particular
circumstances.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. This opinion is being delivered to you solely for that
purpose.
Very truly yours,
/s/ Vinson & Elkins L.L.P.
-5-
<PAGE> 1
EXHIBIT 10.50
PIONEER NATURAL RESOURCES COMPANY
SEVERANCE AGREEMENT
This Severance Agreement (this "AGREEMENT") is entered into, effective
_____________, 1997, between Pioneer Natural Resources Company, a Delaware
corporation ("PARENT"), and ______________ (the "OFFICER"). As used in this
Agreement, the term "COMPANY" shall be deemed to include Parent and its direct
or indirect wholly-owned subsidiaries.
RECITALS
A. Officer is currently serving as an officer of Parent. Parent
and Officer desire to enter into an agreement governing certain matters
relating to Officer's employment with the Company, including compensation
arrangements and restrictions on Officer's use of Company information.
B. Parent acknowledges that Officer is a significant employee of
the Company, possessing skills and knowledge instrumental to the successful
conduct of the Company's business. Parent is willing to enter into a severance
arrangement with Officer in order to better ensure itself of the continued
management services of Officer for itself and its subsidiaries and, in part, to
induce Officer to continue to provide those services and subject himself to
certain restrictions regarding the use of Company information.
C. Officer is willing to subject himself to the restrictions
mentioned above in part to induce Parent to enter into a compensation
arrangement that provides for, among other things, the payment of certain
benefits upon the termination of Officer's employment under certain
circumstances.
Now, therefore, for and in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties to this
Agreement hereby agree as follows:
1. POSITION AND DUTIES. Officer shall serve Parent as __________,
and, in so doing, shall report to Parent's Board of Directors (the "BOARD"),
Parent's Chief Executive Officer (the "CHIEF EXECUTIVE OFFICER") or such
officers of Parent as is prescribed by Parent's bylaws, by resolutions of the
Board or by direction of the Chief Executive Officer. Officer shall have
supervision and control over, and responsibility for, such management and
operational functions of the Company currently assigned to such position, and
shall have such other or different powers and duties (including holding officer
positions with one or more subsidiaries of Parent), as may from time to time be
prescribed by the Board or the Chief Executive Officer, so long as such
functions, powers and duties are reasonable and customary for a Vice President
serving an enterprise comparable to Parent.
2. DEVOTION OF EFFORTS. So long as Officer is serving the
Company in the capacities described in Section 1, he shall devote his full time,
skill and attention and his best efforts during normal business hours to the
business and affairs of the Company to the extent necessary to discharge
faithfully and efficiently his duties and responsibilities described in Section
1, except for usual, ordinary and customary periods of vacation and absence due
to illness or other disability or such periods of leave as are approved in
writing by the Board or the Chief Executive Officer. The provisions of this
Section shall not be construed to prevent Officer from making investments in
other businesses or enterprises, so long as such investments do not violate the
Company's conflict of interest policies or require the provision of services by
Officer to such businesses or enterprises to an extent that would interfere in
any material respect with the performance of Officer's duties and
responsibilities to the Company.
3. COMPENSATION.
(a) BASE SALARY. As compensation for Officer's services,
the Company shall pay Officer an annualized base salary of a specified amount
per annum (the "BASE SALARY"). The Base Salary shall be
<PAGE> 2
payable in substantially equal semi-monthly installments. The Compensation
Committee of the Board (the "COMPENSATION COMMITTEE") may review the Base
Salary periodically and may grant such increases, or effect such reductions, in
the Base Salary as the Compensation Committee considers appropriate in
accordance with such compensation guidelines and policies as it may establish
from time to time. The Base Salary applicable from time to time for any period
of Officer's employment with the Company, commencing on the effective date of
this Agreement, shall be identified on Schedule A attached hereto, which shall
be amended periodically to reflect any increases or reductions effected by the
Compensation Committee.
(b) BONUSES. Officer shall be entitled to receive (in
addition to the Base Salary) such annual or other periodic bonus as the
Compensation Committee may award in accordance with such compensation guidelines
and policies as it may establish from time to time.
(c) OTHER BENEFITS. Officer shall be entitled to
participate in, or receive benefits under, any employee benefit plan or other
arrangement made available now or in the future by the Company to the officers
of Parent (a "BENEFIT PLAN"), subject to the terms, conditions and overall
administration of such Benefit Plan. Officer's participation in, or receipt of
benefits under, any Benefit Plan shall be in addition to (and not in lieu of)
the Base Salary.
(d) VACATIONS AND HOLIDAYS. Officer shall be entitled to
the number of paid vacation days in each calendar year determined by Parent from
time to time for its officers and shall be entitled to all paid holidays given
by the Company to its employees in general.
4. RELOCATION. Officer shall be required to perform his duties
and responsibilities hereunder at Parent's offices located in _____________,
Texas. If the Company requires Officer to perform his duties and
responsibilities at any location that is more than 50 miles from the nearest
border of ______________, Texas (a "NEW LOCATION") and, within 30 days after
receiving notice thereof, Officer accepts such relocation rather than
terminating his employment with the Company pursuant to Section 5(a), the
Company shall pay to Officer, or shall reimburse Officer for (upon submission of
reasonably detailed evidence thereof), such sums as are provided for under the
Relocation Policy for Exempt Employees as established by Parent.
5. TERMINATION OF EMPLOYMENT.
(a) RIGHT TO TERMINATE. Officer's employment with the
Company (including his officer position with Parent) shall be terminated upon
the death, Disability (as defined in subsection (f)(3) of this Section) or
Normal Retirement (as defined in subsection (f)(5) of this Section) of Officer.
In addition, Officer's employment with the Company (including his officer
position with Parent) may be terminated at any time and for any reason as a
result of a dismissal or other action by the Company or as a result of a
voluntary action by Officer. Any such termination of employment is referred to
herein as a "TERMINATION OF EMPLOYMENT."
(b) NOTICE OF TERMINATION.
(1) Any Termination of Employment that is the
result of Officer's Disability shall be communicated by the Company to
Officer in a written notice thereof. Such notice shall state that, in
the opinion of the Board, Officer is suffering from a Disability and
such Disability is the reason for the Termination of Employment.
(2) Any Termination of Employment that is the
result of Officer's Normal Retirement shall be communicated by Officer
to Parent by a written notice thereof. Such notice shall state that
Officer is retiring and shall specify the date of such Termination of
Employment, which shall be not less than 30 days following the date
such notice is received by Parent.
(3) Any Termination of Employment that is the
result of a dismissal or other action by the Company (but is not the
result of Officer's Disability) shall be communicated by the Company to
Officer by a written notice thereof. Such notice shall state whether
or not (in the Company's opinion) the Termination of Employment
constitutes a Termination for Cause (as defined
-2-
<PAGE> 3
in subsection (f)(6) of this Section) and, if so, shall set forth in
reasonable detail facts and circumstances constituting a basis for such
Termination for Cause.
(4) Any Termination of Employment that is the
result of a voluntary action by Officer (but is not the result of
Officer's Normal Retirement) shall be communicated by Officer to Parent
by written notice thereof. Such notice shall state whether or not (in
Officer's opinion) the Termination of Employment constitutes a
Termination for Good Reason (as defined in subsection (f)(7) of this
Section) and, if so, shall set forth in reasonable detail the facts and
circumstances claimed as the basis for such Termination for Good
Reason. Such notice shall also specify the date of such Termination of
Employment, which (if the Termination of Employment does not constitute
a Termination for Good Reason) shall be not less than 30 days following
the date such notice is received by Parent.
(c) DATE OF TERMINATION OF EMPLOYMENT. For purposes of
this Agreement, the date of a Termination of Employment shall be (1) if the
Termination of Employment is the result of Officer's death, the date of such
death, (2) if the Termination of Employment is the result of Officer's
Disability, the date on which the notice described in subsection (b)(1) of this
Section is received by Officer, (3) if the Termination of Employment is the
result of Officer's Normal Retirement, the date specified in the notice
described in subsection (b)(2) of this Section, (4) if the Termination of
Employment is the result of a dismissal or other action by the Company (but is
not the result of Officer's Disability), the date on which the notice described
in subsection (b)(3) of this Section is received by the Officer, and (5) if the
Termination of Employment is the result of a voluntary action by Officer (but is
not the result of Officer's Normal Retirement), the date specified in the notice
described in subsection (b)(4) of this Section.
(d) PAYMENTS DUE UPON TERMINATION OF EMPLOYMENT. The
provisions of subsections (d)(1) and (d)(3) of this Section shall apply to any
Termination of Employment, whether occurring prior to, at the time of or at any
time following a Change in Control (as defined in subsection (f)(2) of this
Section); and the provisions of subsection (d)(2) of this Section shall apply
only to any Termination of Employment prior to a Change in Control.
(1) DEATH, DISABILITY OR NORMAL RETIREMENT. If
the Termination of Employment is the result of Officer's death,
Disability or Normal Retirement, the Company shall pay the following
amounts to Officer (or his estate or personal representative):
(A) The Base Salary (at the rate in
effect on the date of such Termination of Employment, as
identified on Schedule A) through and including the date of
such Termination of Employment, to the extent not already paid,
which amount shall be paid in cash on the first normal
semi-monthly Base Salary payment date immediately succeeding
the date of such Termination of Employment;
(B) Any amounts arising from Officer's
participation in, or benefits under, any Benefit Plan through
and including the date of such Termination of Employment, which
amounts shall be payable in accordance with the terms and
conditions of such Benefit Plan; and
(C) An amount equal to one full year's
Base Salary (at the rate in effect on the date of such
Termination of Employment, as identified on Schedule A), which
amount shall be paid in cash within 30 days following the date
of such Termination of Employment.
(2) TERMINATION FOR GOOD REASON OR NOT FOR CAUSE.
If the Termination of Employment (i) is the result of a dismissal or
other action by the Company (but is not the result of Officer's
Disability) and does not constitute a Termination for Cause or (ii) is
the result of a voluntary action by Officer (but is not the result of
Officer's Normal Retirement) and constitutes a Termination for Good
Reason, the Company shall pay the following amounts, and provide the
following benefits to Officer:
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<PAGE> 4
(A) The Base Salary (at the rate in
effect on the date of such Termination of Employment, as
identified on Schedule A) through and including the date of
such Termination of Employment, which amount shall be paid in
cash on the date of such Termination of Employment;
(B) Any amount arising from Officer's
participation in, or benefits under, any Benefit Plan through
and including the date of such Termination of Employment, which
amounts shall be payable in accordance with the terms and
conditions of such Benefit Plan;
(C) An amount equal to one full year's
Base Salary (at the rate in effect on the date of such
Termination of Employment, as identified on Schedule A), which
amount shall be paid in cash on the date of such Termination of
Employment;
(D) For a period of one year following
the date of such Termination of Employment, a continuation of
all health insurance coverage applicable at the time of such
Termination of Employment to Officer and his immediate family
under any Benefit Plan; and
(E) With respect to a Termination of
Employment described in Section 5(d)(2)(i), an amount equal to
one-twelfth (1/12) of the Officer's Base Salary, which amount
shall be paid in cash on the date of such Termination of
Employment.
(3) TERMINATION FOR CAUSE OR NOT FOR GOOD REASON.
If the Termination of Employment (i) is the result of a dismissal or
other action by the Company (but is not the result of Officer's
Disability) and constitutes a Termination for Cause or (ii) is the
result of a voluntary action by Officer (but is not the result of
Officer's Normal Retirement) and does not constitute a Termination for
Good Reason, the Company shall pay the following amounts to Officer:
(A) Base Salary (at the rate in effect
on the date of such Termination of Employment, as identified
on Schedule A) through and including the date of such
Termination of Employment, which amount shall be paid in cash
on the first normal semi-monthly Base Salary payment date
immediately succeeding the date of such Termination of
Employment; and
(B) Any amounts arising from Officer's
participation in, or benefits under, any Benefit Plan through
and including the date of such Termination of Employment, which
amounts shall be payable in accordance with the terms and
conditions of such Benefit Plan.
(4) PAYMENT CONTINGENT ON RELEASE. If Officer's
Termination of Employment is prior to a Change in Control (and only in
that event), and Officer is otherwise entitled to the payment provided
in subsection (d)(2) of this Section, then such payment shall be
subject to, and contingent upon, Officer's execution of a General
Release Agreement in favor of the Company in substantially the form and
substance as the one attached hereto as Schedule B.
(e) ADDITIONAL PROVISIONS APPLICABLE UPON TERMINATION OF
EMPLOYMENT CONCURRENT WITH OR FOLLOWING CHANGE IN CONTROL. The following
provisions shall apply to any Termination of Employment occurring at the time
of, or at any time within one year following, a Change in Control.
(1) TERMINATION FOR GOOD REASON OR NOT FOR CAUSE.
If the Termination of Employment (i) is the result of a dismissal or
other action by the Company (but is not the result of Officer's
Disability) and does not constitute a Termination for Cause, or (ii) is
the result of a voluntary action by Officer (but is not the result of
Officer's Normal Retirement) and constitutes a Termination for Good
Reason, the Company shall pay the following amounts, and provide the
following benefits, to Officer:
(A) The Base Salary (at the rate in effect
on the date of such Termination of Employment, as identified
on Schedule A) through and including the date of
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<PAGE> 5
such Termination of Employment, which amount shall be paid in
cash on the date of such Termination of Employment;
(B) A lump sum in cash equal to 2.99
times the sum of (i) Officer's Base Salary (at the rate in
effect on the date of such Termination of Employment, as
identified on Schedule A), plus (ii) the greater of the then
current year's targeted bonus or actual bonus award (if
applicable) for Officer, which amount shall be paid in cash on
the date of such Termination of Employment;
(C) Any amount arising from Officer's
participation in, or benefits under, any Benefit Plan through
and including the date of such Termination of Employment, which
amounts shall be payable in accordance with the terms and
conditions of such Benefit Plan;
(D) For a period of one year following
the date of such Termination of Employment, a continuation of
all health insurance coverage applicable at the time of such
Termination of Employment to Officer and his immediate family
under any Benefit Plan; and
(E) With respect to a Termination of
Employment described in Section 5(e)(1)(i), an amount equal to
one-twelfth (1/12) of the Officer's Base Salary, which amount
shall be paid in cash on the date of such Termination of
Employment.
(2) VOLUNTARY TERMINATION NOT FOR GOOD REASON. If
the Termination of Employment is the result of a voluntary action by
Officer, does not constitute a Termination for Good Reason and either
(A) occurs at least six months, but not more than one year, following a
Change in Control or (B) occurs at the time of, or at any time within
one year following, a Change in Control and following the Company's
requiring the Officer to perform his duties and responsibilities
hereunder at a New Location, which relocation is not accepted by
Officer within 30 days after receiving notice thereof, then the Company
shall pay to Officer all amounts that would be payable pursuant to
subsection (d)(2) of this Section had such Termination of Employment
occurred prior to the Change in Control and constituted a Termination
for Good Reason.
(3) EXCISE TAX AND GROSS-UP PAYMENT.
(A) If any portion of such compensation
constitutes a parachute payment (a "Payment") and is subject to
the Excise Tax (hereinafter defined), then Company shall, in
addition to providing such compensation, pay the Gross-Up
Payment (hereinafter defined) to Officer in the manner
described below. For purposes of this Agreement, (i) "Excise
Tax" shall mean the tax imposed pursuant to section 4999 of the
Code and any interest or penalties incurred by the Officer with
respect to such Excise Tax, and (ii) "Gross-Up Payment" shall
mean, with respect to any compensation provided to the Officer
by Company (including without limitation the payments provided
for under this Agreement and any payments to the Officer under
any employee benefit plan, including without limitation the
Company's Long-term Incentive Plan, or other arrangement) that
is subject to the Excise Tax, an amount that, after reduction
of the amount of such Gross-Up Payment for all federal, state,
and local tax (including any interest or penalties imposed with
respect to such taxes) to which the Gross-Up Payment is subject
(including the Excise Tax to which the Gross-Up Payment is
subject), is equal to the amount of the Excise Tax to which
such compensation is subject. For purposes of determining the
amount of any Gross-Up Payment, Officer shall be deemed to pay
federal income taxes at the highest marginal rate of taxation
and state and local taxes, if applicable, at the highest
marginal rate of taxation in the state and locality of
residence of the Officer on the Date of Termination, net of the
maximum reduction in federal income taxes that could be
obtained from deduction of such state and local taxes, if
any.
(B) Subject to the provisions of
subsection 5(e)(3)(C), all determinations required to be made
under this subsection 5(e)(3), including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up
Payment and the assumptions to be
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<PAGE> 6
utilized in arriving at such determination, shall be made by
the accounting firm which performed the audit of the Company
for the year preceding the year in which the Change in Control
occurred (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Officer
within 15 business days of the receipt of notice from the
Officer that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the Officer
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this subsection 5(e)(3), shall be paid
by the Company to the Officer within five days of the receipt
of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Officer, it
shall furnish the Officer with a written opinion that failure
to report the Excise Tax on the Officer's applicable federal
income or excise tax return would not result in the imposition
of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company
and the Officer.
(C) The Officer shall notify the
Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company
of the Gross- Up Payment. Such notification shall be given no
later than ten business days after the Officer is informed in
writing of such claim. The Officer shall not pay such claim
prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the
Officer in writing prior to the expiration of such period that
it desires to contest such claim, (i) the Officer shall accept
legal representation with respect to such claim by an attorney
reasonably selected by the Company, (ii) cooperate with the
Company in good faith in order to effectively contest such
claim, and (iii) permit the Company to participate in any
proceedings relating to such claim; provided, however, the
Company shall bear and pay directly all costs and expenses
(including legal and accounting fees and additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Officer harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. The Company
shall control all proceedings taken in connection with such
contest to the extent relating to issues impacting whether a
Gross-Up Payment is payable hereunder. The Officer shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority in connection with such contest.
(D) If any such claim referred to in
subsection 5(e)(3)(C) is made by the Internal Revenue Service
and the Company does not request the Officer to contest the
claim within the 30-day period following notice of the claim,
the Company shall pay to the Officer the amount of any Gross-Up
Payment owed to the Officer, but not previously paid pursuant
to subsection 5(e)(3)(B), immediately upon the expiration of
such 30-day period. If any such claim is made by the Internal
Revenue Service and the Company requests the Officer to contest
such claim, the Company shall pay to the Officer the amount of
any Gross-Up Payment owed to the Officer, but not previously
paid under the provisions of subsection 5(e)(3)(B), within five
days of a Final Determination of the liability of the Officer
for such Excise Tax. For purposes of this Agreement, a "Final
Determination" shall be deemed to occur with respect to a claim
when (i) there is a decision, judgment, decree or other order
by any court of competent jurisdiction, which decision,
judgment, decree or other order has become final, i.e., all
allowable appeals have been exhausted by either party to the
action, (ii) there is a closing agreement made under Section
7121 of the Code, or (iii) the time for instituting a claim for
refund has expired, or if a claim was filed, the time for
instituting suit with respect thereto has expired.
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<PAGE> 7
(4) LETTER OF CREDIT. Following a Change in
Control, Parent (within 10 days following receipt of Officer's written
request therefor), at its sole cost and expense, shall post an
irrevocable letter of credit with a banking institution reasonably
acceptable to Officer in an amount equal to the maximum amount of the
aggregate cash payments that would be made to Officer pursuant to the
provisions of paragraph (1) of this subsection if the provisions of
paragraph (1) of this subsection were to become applicable. Such
letter of credit shall contain provisions making the funds available
thereunder to Officer by Officer's drafts drawn at sight at any time
and from time to time. Such provisions shall permit Officer to present
drafts (including drafts for partial draws) drawn at sight by
presentation by Officer to the applicable banking institution of a
written statement to the effect that the Company is in default on a
payment to be made to Officer pursuant to the terms of this Agreement
(setting forth the amount of such payment in default) and that Officer
is not in default under, and has not breached the terms of, this
Agreement. Parent shall continue to keep such letter of credit in place
until the expiration of at least 60 days following the date of a
Termination of Employment occurring after the Change in Control.
(5) RETIREMENT BENEFITS FUNDED. Upon a Change in
Control, any accrued but unfunded retirement benefit obligations to
Officer under any then existing retirement plan shall be fully funded
to a Rabbi Trust for the benefit of such Officer, which amount shall be
paid in cash on the date of such Change in Control.
(f) CERTAIN DEFINITIONS. As used in the Section and
elsewhere in this Agreement, the following terms shall have the respective
meanings indicated:
(1) "ACROSS-THE-BOARD SALARY REDUCTION" shall
mean a reduction in the Base Salary that is a part of, and is at a rate
consistent with, a reduction in the base salaries paid to substantially
all officers of Parent.
(2) "CHANGE IN CONTROL" shall mean the occurrence
of any of the following events:
(A) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")) (a "PERSON") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (x) the then outstanding
shares of common stock of Parent (the "OUTSTANDING PARENT
COMMON STOCK") or (y) the combined voting power of the then
outstanding voting securities of Parent entitled to vote
generally in the election of directors (the "OUTSTANDING PARENT
VOTING SECURITIES"); provided, however, that for purposes of
this subsection (A), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from Parent, (ii) any acquisition by Parent, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Parent or any corporation controlled
by Parent or (iv) any acquisition by any corporation pursuant
to a transaction which complies with clauses (i), (ii) and
(iii) of paragraph (C) below; or
(B) Individuals who, as of the date of
this Agreement, constitute the Board (the "INCUMBENT BOARD")
cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a
director subsequent to the date of this Agreement whose
election, or nomination for election by Parent's shareholders,
was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than
the Board; or
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<PAGE> 8
(C) Consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of Parent or an acquisition of
substantially all of the assets of another corporation (a
"BUSINESS COMBINATION"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Parent Common Stock and
Outstanding Parent Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction
owns Parent or all or substantially all of Parent's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (ii) no Person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of Parent or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(D) Approval by the shareholders of
Parent of a complete liquidation or dissolution of Parent; or
(E) Consummation of a Business
Combination not otherwise constituting a Change of Control but,
pursuant to which the Person serving as Chief Executive Officer
at the time of the execution of the initial agreement is
removed from, or replaced in, such capacity with respect to the
corporation resulting from such Business Combination.
(3) "DISABILITY" shall mean Officer's physical
or mental impairment or incapacity of sufficient severity that, in the
opinion of the Board, either (A) Officer is unable to continue to
perform his duties and responsibilities hereunder or (B) Officer's
condition entitles him to disability benefits under any Benefit Plan
providing for the payment thereof.
(4) "EXCESSIVE SALARY REDUCTION" shall mean (A)
a reduction in the Base Salary that is not an Across-the-Board Salary
Reduction (as defined in paragraph (1) of this subsection) and that,
when combined with the net effect of all prior increases and reductions
in the Base Salary (other than prior reductions that were
Across-the-Board Salary Reductions), results in the Base Salary being
less than 80% of the highest Base Salary to which Officer has ever been
subject pursuant to this Agreement (as identified on Schedule A) or (B)
a reduction in the Base Salary (whether or nor an Across-the- Board
Salary Reduction) that, when combined with the net effect of all prior
increases and reductions in the Base Salary (whether or not
Across-the-Board Salary Reductions), results in the Base Salary being
less than 65% of the highest Base Salary to which Officer has ever been
subject pursuant to this Agreement (as identified on Schedule A).
(5) "NORMAL RETIREMENT" shall have the meaning
given to such term in Section 1.27 of the Long-term Incentive Plan.
(6) "TERMINATION FOR CAUSE" shall mean a
Termination of Employment as a result of a dismissal or other action by
the Company following (A) Officer's continued failure to substantially
perform his duties and responsibilities as described in Section 1
(other than any such
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<PAGE> 9
failure resulting from Officer's physical or mental impairment or
incapacity) after written demand for substantial performance is
delivered by the Board or the Chief Executive Officer specifically
identifying the manner in which the Board or the Chief Executive
Officer, as the case may be, believes Officer has not substantially
performed such duties and responsibilities, (B) Officer's engaging in
misconduct that is materially injurious to the Company, monetarily or
otherwise, or (C) a material violation by Officer of the provisions of
Section 6. For purposes of clause (B) of this paragraph, an act, or
failure to act, on Officer's part shall be considered "misconduct" if
done, or omitted, by Officer not in good faith and without reasonable
belief that such act, or failure to act, was in the best interest of
the Company.
(7) "TERMINATION FOR GOOD REASON" shall mean a
Termination of Employment as a result of voluntary action by Officer
within 30 days after receiving notice of (A) the demotion of the
Officer to an officer position junior to the officer position specified
in Section 1 or to a non-officers position, (B) an Excessive Salary
Reduction (as defined in paragraph (4) of this subsection), or (C) the
failure by Parent to obtain the assumption agreement described in
Section 7(f) on or prior to a succession described in Section 7(f).
6. NONPUBLIC INFORMATION.
(a) Officer hereby acknowledges that, in connection with
his employment with the Company, he has received, and will continue to receive,
various information regarding the Company and its business, operations and
affairs. All such information, to the extent not publicly available other than
as a result of a disclosure by Officer in violation of this Agreement, is
referred to herein as the "NONPUBLIC INFORMATION."
(b) Officer hereby agrees that, from and after the date
hereof and continuing until three (3) years following a Termination of
Employment, he will keep all Nonpublic Information confidential and will not,
without the prior written consent of the Board or the Chief Executive Officer,
disclose any Nonpublic Information in any manner whatsoever or use any Nonpublic
Information other than in connection with the performance of his services to the
Company hereunder; provided, however, that the provisions of this subsection
shall not prevent Officer from (1) disclosing any Nonpublic Information to any
other employee of the Company or to any representative or agent of the Company
(such as an independent accountant, engineer, attorney or financial advisor)
when such disclosure is reasonably necessary or appropriate (in Officer's
judgment) in connection with the performance by Officer of his duties and
responsibilities hereunder or (2) disclosing any Nonpublic Information as
required by applicable law, rule, regulation or legal process (but only after
compliance with the provisions of subsection (c) of this Section).
(c) If Officer is requested pursuant to, or required by,
applicable law, rule, regulation or legal process to disclose any Nonpublic
Information, Officer will notify Parent promptly so that the Company may seek a
protective order or other appropriate remedy or, in the Company's sole
discretion, waive compliance with the terms of this Section, and Officer will
fully cooperate in any attempt by the Company to obtain any such protective
order or other remedy. If no such protective order or other remedy is obtained,
or the Company waives compliance with the terms of this Section, Officer will
furnish or disclose only that portion of the Nonpublic Information as is legally
required and will exercise all reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the Nonpublic Information that is
so disclosed.
7. MISCELLANEOUS PROVISIONS.
(a) MITIGATION. Officer shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, and the amount of any payment provided for in
this Agreement shall not be reduced by any compensation earned by Officer as the
result of employment by another employer after the date of any Termination of
Employment or otherwise.
(b) INTEREST. Until paid, all past due amounts required
to be paid by the Company to Officer under any provision of this Agreement shall
bear interest at the highest non-usurious rate permitted by applicable federal,
state or local law.
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<PAGE> 10
(c) EQUITABLE RELIEF AVAILABLE. Officer acknowledges that
remedies at law may be inadequate to protect the Company against any actual or
threatened breach of the provisions of Section 6 by Officer. Accordingly,
without prejudice to any other rights or remedies otherwise available to the
Company, Officer agrees that the Company shall have the right to equitable and
injunctive relief to prevent any breach of the provisions of Section 6, as well
as to such damages or other relief as may be available to the Company by reason
of any such breach as does occur.
(d) BREACH NOT A DEFENSE. The representations and
covenants on the part of Officer contained in Section 6 shall be construed as
ancillary to and independent of any other provision of this Agreement, and the
existence of any claim or cause of action of Officer against the Company or any
officer, director, stockholder or representative of the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of the covenants on the part of Officer contained in
Section 6.
(e) NOTICES. Any notice or other communication called
for by the terms of this Agreement shall be in writing and either delivered
personally or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(1) If to Parent or the Company, _______________,
_______________________, Texas ________ Attention: General Counsel.
(2) If to Officer, the address of Officer set
forth below Officer's signature on the signature page of this
Agreement, and marked "Confidential."
(f) ASSUMPTION BY SUCCESSOR OF PARENT. Parent shall
require any successor (whether direct or indirect) to all or substantially all
of the business or assets of Parent (whether by purchase of securities, merger,
consolidation, sale of assets or otherwise), by a written agreement in form and
substance satisfactory to Officer, to expressly assume and agree to perform the
obligations to be performed by Parent or the Company under this Agreement in the
same manner and to the same extent that Parent or the Company would be required
to perform if no such succession had taken place.
(g) ASSIGNMENT.
(1) Except pursuant to an assumption by a
successor described in subsection (f) of this Section, the rights and
obligations of the Company pursuant to this Agreement may not be
assigned, in whole or in part, by the Company to any other person or
entity without the express written consent of Officer.
(2) The rights and obligations of Officer
pursuant to this Agreement may not be assigned, in whole or in part, by
Officer to any other person or entity without the express written
consent of the Board.
(h) SUCCESSORS. This Agreement shall be binding on, and
shall inure to the benefit of, the Company, Officer and their respective
successors, permitted assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees and legatees, as applicable.
(i) AMENDMENT AND WAIVERS. Except as hereinafter provided,
no provision of this Agreement may be amended or otherwise modified, and no
right of any party to this Agreement may be waived, unless such amendment,
modification or waiver is agreed to in a written instrument signed by Officer
and Parent (and any dated and signed Schedule A, as described in subsection (o)
of this Section, shall constitute such an instrument). Beginning on the fifth
anniversary of the date hereof, unless a Change of Control shall have occurred
or be pending or contemplated, Parent may amend, modify, or waive any provision
of, or terminate, this Agreement upon sixty (60) days notice without the consent
of Officer; PROVIDED that any such amendment, modification, waiver or
termination shall be made to all severance agreements of
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<PAGE> 11
Parent covering all officers of Parent similarly situated to Officer. No waiver
by either party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by the other party hereto shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
(j) COMPLETE AGREEMENT. The provisions of this Agreement
constitute the complete understanding and agreement among the parties with
respect to the subject matter hereof, and no agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
(k) GOVERNING LAW. THIS AGREEMENT IS BEING MADE AND
EXECUTED IN, AND IS INTENDED TO BE PERFORMED IN, THE STATE OF TEXAS AND SHALL BE
GOVERNED, CONSTRUED, INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF TEXAS.
(l) ATTORNEY FEES. All legal fees and other costs
incurred by Officer in connection with the resolution of any dispute or
controversy under or in connection with this Agreement shall be reimbursed by
the Company to Officer, if such dispute or controversy is resolved in favor of
Officer. The Company shall be responsible for, and shall pay, all legal fees
and other costs incurred by the Company in connection with the resolution of any
dispute or controversy under or in connection with this Agreement, regardless of
whether such dispute or controversy is resolved in favor of the Company or
Officer.
(m) COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same agreement.
(n) CONSTRUCTION. The captions of the Sections,
subsections and paragraphs of this Agreement have been inserted as a matter of
convenience of reference only and shall not affect the meaning or construction
of any of the terms or provisions of this Agreement. Unless otherwise specified,
references in this Agreement to a "Section," "subsection," "paragraph,"
"subparagraph" or "Schedule" shall be considered to be references to the
appropriate Section, subsection, paragraph, subparagraph or Schedule,
respectively, of this Agreement. Unless the context otherwise requires, all
words used in this Agreement in any gender shall include the masculine, feminine
and neuter gender, all singular words shall include the plural and all plural
words shall include the singular. As used in this Agreement, the term
"including" shall mean "including, but not limited to."
(o) SCHEDULE A. Schedule A may be replaced at any time
and from time to time to reflect a change in the Base Salary; provided, however,
that no Schedule A attached hereto shall be effective unless it contains a date
and bears a signature of approval on behalf of Officer and a signature of
approval on behalf of Parent; and provided further, however, that if at any time
two or more dated and signed copies of Schedule A conflict with each other, the
later dated of such copies shall control.
(p) VALIDITY AND SEVERABILITY. If any term or provision
of this Agreement is held to be illegal, invalid or unenforceable under the
present or future laws effective during the term of this Agreement, (1) such
term or provision shall be fully severable, (2) this Agreement shall be
construed and enforced as if such term or provision had never comprised a part
of this Agreement and (3) the remaining terms and provisions of this Agreement
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable term or provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable term
or provision, there shall be added automatically as a part of this Agreement, a
term or provision as similar to such illegal, invalid or unenforceable term or
provision as may be possible and be legal, valid and enforceable.
(q) EXECUTION BY PARENT. The execution of this Agreement
by Parent shall constitute an acceptance of, and an agreement to be bound by,
the terms and provisions of this Agreement by Parent and each of its direct and
indirect wholly-owned subsidiaries, and Parent hereby agrees to cause each of
its direct and indirect wholly-owned subsidiaries, now and in the future, to
fully comply with all obligations applicable to the Company pursuant to the
terms of this Agreement.
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<PAGE> 12
In witness whereof, the parties have executed this Agreement effective
as of the date first written above.
PIONEER NATURAL RESOURCES COMPANY
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
OFFICER:
------------------------------------------
Printed Name:
-----------------------------
Address:
------------------------------------------
------------------------------------------
[Signature Page - Severance Agreement - Page of 1 of 1]
<PAGE> 13
SCHEDULE A
ATTACHED TO SEVERANCE AGREEMENT BETWEEN
____________________________________ AND
____________________________________
BASE SALARY:
EFFECTIVE DATE AMOUNT
____________ $______
Dated and Approved as of _______________:
PIONEER NATURAL RESOURCES OFFICER:
COMPANY
By:
----------------------------------
Name: Printed Name:
-------------------------------- ------------------------
Title:
-------------------------------
A-1
<PAGE> 14
SCHEDULE B
GENERAL RELEASE AGREEMENT
NOTICE: VARIOUS STATE AND FEDERAL LAWS AND REGULATIONS PROHIBIT EMPLOYMENT
DISCRIMINATION BASED ON AGE, RACE, COLOR, RELIGION, SEX, NATIONAL ORIGIN,
DISABILITY, CITIZENSHIP, AND MEMBERSHIP OR APPLICATION FOR MEMBERSHIP IN A
UNIFORMED SERVICE. THESE LAWS ARE ENFORCED THROUGH THE EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION, U.S. DEPARTMENT OF LABOR, TEXAS COMMISSION ON HUMAN
RIGHTS, AND OTHER FEDERAL AND STATE AGENCIES. YOU ARE ADVISED TO DISCUSS THIS
RELEASE WITH YOUR ATTORNEY. IN ANY EVENT, YOU SHOULD THOROUGHLY REVIEW AND
UNDERSTAND THE EFFECT OF THIS DOCUMENT BEFORE SIGNING IT. THEREFORE, PLEASE
TAKE THIS GENERAL RELEASE AGREEMENT HOME AND CAREFULLY CONSIDER IT FOR AT LEAST
FIVE DAYS BEFORE SIGNING IT. IN ACCORDANCE WITH THE REQUIREMENTS OF THE OLDER
WORKERS BENEFIT PROTECTION ACT, YOU ARE ALLOWED AT LEAST 45 DAYS FROM THE DATE
OF YOUR RECEIPT OF THIS DOCUMENT AND THE ACCOMPANYING EXPLANATORY LETTER TO
CONSIDER THE OFFER MADE TO YOU AND TO RETURN AN EXECUTED COPY OF THIS FORM TO
THE VICE PRESIDENT ADMINISTRATION. ADDITIONALLY, AFTER YOU HAVE EXECUTED THIS
FORM, YOU HAVE SEVEN DAYS TO RECONSIDER AND REVOKE YOUR AGREEMENT.
GENERAL RELEASE: IN CONSIDERATION OF MY ACCEPTANCE OF THE PAYMENTS AND
BENEFITS OFFERED TO ME UNDER SECTION 5(D)(2)(C) OF THE SEVERANCE AGREEMENT, I
HEREBY RELEASE AND DISCHARGE PIONEER NATURAL RESOURCES COMPANY AND ITS
SUBSIDIARIES AND AFFILIATES (THE "COMPANY"), AND THE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, SUCCESSORS, AND ASSIGNS OF SUCH ENTITIES (COLLECTIVELY THE
"RELEASED PARTIES") FROM ANY AND ALL CLAIMS, LIABILITIES, DEMANDS, AND CAUSES
OF ACTION, KNOWN OR UNKNOWN, FIXED OR CONTINGENT, WHICH I HAVE OR CLAIM AGAINST
THEM AS A RESULT OF THE TERMINATION OF MY EMPLOYMENT, INCLUDING BUT NOT LIMITED
TO CLAIMS ARISING UNDER FEDERAL, STATE, OR LOCAL LAWS PROHIBITING EMPLOYMENT
DISCRIMINATION, INCLUDING THE AGE DISCRIMINATION IN EMPLOYMENT ACT, OR CLAIMS
GROWING OUT OF ANY LEGAL RESTRICTIONS, CONTRACTUAL OR OTHERWISE, ON THE
COMPANY'S RIGHT TO TERMINATE THE EMPLOYMENT OF ITS EMPLOYEES, AND I DO HEREBY
AGREE NOT TO FILE A LAWSUIT TO ASSERT SUCH CLAIMS. I FURTHER ACKNOWLEDGE AND
AGREE THAT BY ACCEPTING THE SEVERANCE AGREEMENT BENEFITS, I HAVE GIVEN UP MY
RIGHT TO FILE ANY COMPLAINT, LAWSUIT, OR OTHER LEGAL ACTION AGAINST ANY OF THE
RELEASED PARTIES GROWING OUT OF, CONNECTED WITH, OR RELATING IN ANY WAY TO MY
EMPLOYMENT OR THE TERMINATION OF MY EMPLOYMENT WITH THE COMPANY. FURTHER IN
CONSIDERATION OF THE PAYMENTS AND BENEFITS OFFERED TO ME UNDER THE SEVERANCE
AGREEMENT, I ACKNOWLEDGE AND AGREE THAT THE RELEASED PARTIES MAY RECOVER FROM
ME ANY LOSS, INCLUDING ATTORNEY'S FEES AND COSTS OF DEFENDING AGAINST ANY CLAIM
BROUGHT BY ME, THAT THEY MAY SUFFER ARISING OUT OF MY BREACH OF THIS GENERAL
RELEASE AGREEMENT.
I understand that this General Release Agreement is final and binding,
and I agree not to challenge its enforceability. If I do challenge the
enforceability of this General Release Agreement, I agree initially to tender
to the Company all money received pursuant to the Severance Agreement, and
invite the Company to retain such money and agree with me to cancel this
General Release Agreement. In the event the Company accepts this offer, the
Company shall retain such money and this General Release Agreement will be
void. In the event the Company does not accept such offer, the Company shall
so notify me, and shall place such money in an interest-bearing escrow account
pending the resolution of any dispute as to whether this General Release
Agreement shall be set aside and/or otherwise be rendered unenforceable.
I acknowledge and agree that the Company has no legal obligation to
provide the payment under Section 5(d)(2)(c) of the Severance Agreement offered
to me, and my acceptance of the obligations and attendant additional payment as
described therein constitutes my agreement to all terms and conditions set
forth in this General Release Agreement, and are in consideration of the
promises and undertakings of the Company pursuant to the Severance Agreement.
I further acknowledge and agree that for unemployment compensation purposes,
the payments I receive under the Severance Agreement shall be considered
additional wages in lieu of notice; and that, accordingly, I may be ineligible
to receive unemployment compensation benefits for an equivalent period of time.
This General Release Agreement does not have any effect on any claim I
may have against the Released Parties unrelated to the termination of my
employment or with respect to any rights or claims that may arise after the
date this General Release Agreement is executed.
I have carefully read and fully understand all of the provisions of
this General Release. I further acknowledge that entering into this General
Release Agreement is knowing and voluntary on my part, that I have had a
reasonable time to deliberate regarding its terms, and that I have had the
right to consult with an attorney if I so desired.
I acknowledge that I initially executed a General Release Agreement,
containing the same terms and conditions as this General Release Agreement,
more than seven days prior to the date appearing below and placed the General
Release Agreement in the mail addressed to the Company. I further acknowledge
that I have had at least seven days since the date of execution of the
originally executed General Release Agreement in which to reconsider and revoke
my agreement to the terms and conditions set forth in this General Release
Agreement.
Date signed:
---------------------- --------------------------------------
Signature of Officer
Date signed:
---------------------- --------------------------------------
Signature of Officer
B-1
<PAGE> 1
EXHIBIT 10.51
PIONEER NATURAL RESOURCES COMPANY
INDEMNIFICATION AGREEMENT
This Agreement ("Agreement") is made and entered into as of
the ____ day of _________, 199__ (the "Effective Date"), by and between
Pioneer Natural Resources Company, a Delaware corporation (the "Corporation"),
and ___________________ ("Indemnitee").
RECITALS
A. Highly competent and experienced persons are becoming
more reluctant to serve corporations as directors, executive officers or in
other capacities unless they are provided with adequate protection through
insurance and adequate indemnification against inordinate risks of claims and
actions against them arising out of their service to and activities on behalf
of the corporation.
B. The Board of Directors of the Corporation (the
"Board") has determined that the inability to attract and retain such persons
would be detrimental to the best interests of the Corporation and its
stockholders and that the Corporation should act to assure such persons that
there will be increased certainty of such protection in the future.
C. The Board has also determined that it is reasonable,
prudent and necessary for the Corporation, in addition to purchasing and
maintaining directors' and officers' liability insurance (or otherwise
providing for adequate arrangements of self-insurance), contractually to
obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Corporation
free from undue concern that they will not be so indemnified.
D. Indemnitee is willing to serve, continue to serve and
to take on additional service for or on behalf of the Corporation on the
condition that he be so indemnified.
E. Article Twelfth of the Amended and Restated
Certificate of Incorporation and Article VI of the Bylaws of the Corporation
provide for indemnification, advancement of expenses, arrangements of insurance
and self-insurance and specifically authorize[s] the Corporation to enter into
indemnification agreements that contractually provide to indemnitees the
benefits of the provisions of such Article V and that include related
provisions and which agreements facilitate indemnitees' receipt of such
benefits and such other indemnification protections as may be deemed
appropriate by the Board.
In consideration of the foregoing and the mutual covenants
herein contained, and other good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the parties hereby agree as
follows:
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<PAGE> 2
ARTICLE I
CERTAIN DEFINITIONS
As used herein, the following words and terms shall have the
following respective meanings (whether singular or plural):
"Acquiring Person" means any person other than (i) the Corporation,
(ii) any of the Corporation's Subsidiaries, (iii) any employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of stock of the Corporation, or (iv)
any trustee or other fiduciary holding securities under an employee benefit
plan of the Corporation or of a Subsidiary of the Corporation or of a
corporation owned directly or indirectly by the stockholders of the Corporation
in substantially the same proportions as their ownership of stock of the
Corporation.
"Change in Control" means the occurrence of any of the following
events:
(A) An Acquiring Person becomes beneficial owner (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (x) the then outstanding shares of the Corporation's
common stock (the "Outstanding Common Stock") or (y) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Voting Securities"); provided, however, that for
purposes of this subsection (A), the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly from the
Corporation, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
paragraph (C) below; or
(B) Individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date of this
Agreement whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or
(C) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Corporation or an acquisition of all
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<PAGE> 3
or substantially all of the assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting securities immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns
the Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination, of the Outstanding Common Stock
and Outstanding Voting securities, as the case may be, (ii) no person
(excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Corporation or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(D) Approval by the stockholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
"Claim" means an actual or threatened claim or request for
relief which is or may be made by reason of anything done or not done by
Indemnitee in, or by reason of any event or occurrence related to, Indemnitee's
Corporate Status.
"Corporate Status" means the status of a person who is,
becomes or was a director, officer, employee, agent or fiduciary of the
Corporation or is becomes or was serving at the request of the Corporation as a
director, officer, partner, venturer, proprietor, trustee, employee, agent,
fiduciary or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan
or other enterprise. For purposes of this Agreement, the Corporation agrees
that Indemnitee's service on behalf of or with respect to any Subsidiary of the
Company shall be deemed to be at the request of the Company.
"DGCL" means the Texas Business Corporation Act and any
successor statute thereto, as either of them may from time to time be amended.
"Disinterested Director" with respect to any request by
Indemnitee for indemnification hereunder, means a director of the Corporation
who at the time of the vote is not
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<PAGE> 4
a named defendant or respondent in the Proceeding, in respect of which
indemnification is sought by Indemnitee.
"Expenses" means all attorneys' fees, retainers, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees and all other disbursements, costs or expenses of the types customarily
incurred in connection with prosecuting, defending (including affirmative
defenses and counterclaims), preparing to prosecute or defend, investigating or
being or preparing to be a witness in, or participating in or preparing to
participate in (including on appeal), a Proceeding.
"Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither
contemporaneously is, nor in the five years theretofore has been, retained to
represent: (a) the Corporation or Indemnitee in any matter material to either
such party (other than as Independent Counsel under this Agreement or similar
agreements, (b) any other party to the Proceeding giving rise to a claim for
indemnification hereunder or (c) the beneficial owner, directly or indirectly,
of securities of the Corporation representing 40% or more of the combined
voting power of the Corporation's then outstanding voting securities (other
than, in each such case, with respect to matters concerning the rights of
Indemnitee under this Agreement, or of other indemnitees under similar
indemnification agreements). Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Corporation or Indemnitee in an action to
determine Indemnitee's rights under this Agreement.
"person" shall have the meaning ascribed to such term in
Sections 13(d) and 14(d) of the Exchange Act.
"Potential Change in Control" shall be deemed to have occurred
if (i) the Corporation enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any person
(including the Corporation) publicly announces an intention to take or consider
taking actions that, if consummated, would constitute a Change in Control;
(iii) any Acquiring Person who is or becomes the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of the
Corporation representing 10% or more of the combined voting power of the then
outstanding Voting Securities of the Corporation increases his beneficial
ownership of such securities by 5% or more over the percentage so owned by the
person on the date hereof; or (iv) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change of Control has
occurred.
"Proceeding" means any threatened, pending or completed
action, suit, arbitration, investigation, alternate dispute resolution
mechanism, administrative hearing or any other proceeding (including, without
limitation, any securities laws action, suit, arbitration, alternative dispute
resolution mechanism, hearing or procedure) whether civil, criminal,
administrative, arbitrative or investigative and whether or not based upon
events occurring, or actions taken, before the date hereof, and any appeal in
or related to any such action, suit, arbitration,
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<PAGE> 5
investigation, hearing or proceeding and any inquiry or investigation
(including discovery), whether conducted by the Corporation or any other party,
that Indemnitee in good faith believes could lead to any appeal in or related
to, any such action, suit, arbitration, alternative dispute resolution
mechanism, hearing or other proceeding.
"Subsidiary" means, with respect to any person, any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by that person.
"Voting Securities" means any securities that vote generally
in the election of directors, in the admission of general partners, or in the
selection of any other similar governing body.
ARTICLE II
SERVICES BY INDEMNITEE
Indemnitee is serving as _________________________ of the
Corporation. Indemnitee may from time to time also agree to serve, as the
Corporation may request from time to time, as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, fiduciary or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise.
Indemnitee and the Corporation each acknowledge that they have entered into
this Agreement as a means of inducing Indemnitee to serve, or continue to
serve, the Corporation in such capacities. Indemnitee may at any time and for
any reason resign from such position or positions (subject to any other
contractual obligation or any obligation imposed by operation of law). The
Corporation shall have no obligation under this Agreement to continue
Indemnitee in any such position or positions.
ARTICLE III
INDEMNIFICATION
Section 3.1 General. Subject to the provisions set forth
in Article V, the Corporation shall indemnify, and advance Expenses to,
Indemnitee to the fullest extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The other provisions set forth in this Agreement are
provided in addition to and as a means of furtherance and implementation of,
and not in limitation of, the obligations expressed in this Article III. No
requirement, condition to or limitation of any right to indemnification III, or
to advancement of Expenses under this Article III, shall in any way limit the
rights of Indemnitee under Section 7.3.
Section 3.2 Additional Indemnity of the Corporation.
Indemnitee shall be entitled to indemnification pursuant to this Section 3.2
if, by reason of anything done or not done by
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<PAGE> 6
Indemnitee in, or by reason of any event or occurrence related to, Indemnitee's
Corporate Status, Indemnitee is, was or becomes, or is threatened to be made, a
party to, or witness or other participant in any Proceeding. Pursuant to this
Section 3.2, Indemnitee shall be indemnified against any and all Expenses,
judgments, penalties (including excise or similar taxes), fines and amounts
paid in settlement (including all interest, assessments and other charges paid
or payable in connection with or in respect of any such Expenses, judgments,
penalties, fines and amounts paid in settlement) actually and reasonably
incurred by him or on his behalf in connection with such Proceeding or any
Claim, issue or matter therein. Notwithstanding the foregoing, the obligations
of the Corporation under this Section 3.2 shall be subject to the condition
that no determination (which, in any case in which Independent Counsel is
involved, shall be in a form of a written opinion) shall have been made
pursuant to Article V that Indemnitee would not be permitted to be indemnified
under applicable law. Nothing in this Section 3.2 shall limit the benefits of
Section 3.1 or any other Section hereunder.
Section 3.3 Advancement of Expenses. The Corporation
shall pay all reasonable Expenses incurred by or on behalf of Indemnitee (or,
if applicable, reimburse Indemnitee for any and all Expenses reasonable
incurred by Indemnitee and previously paid by Indemnitee) in connection with
any Claim or Proceeding, whether brought by the Corporation or otherwise, in
advance of any determination respecting entitlement to indemnification pursuant
to Article V hereof within 10 days after the receipt by the Corporation of (a)
a written request from Indemnitee requesting such payment or payments from time
to time, whether prior to or after final disposition of such Proceeding, and
(b) a written affirmation from Indemnitee of his good faith belief that he has
met the standard of conduct necessary for indemnitee to be permitted to be
indemnified under applicable law. Such statement or statements shall
reasonably evidence the Expenses incurred by Indemnitee. Any such payment by
the Corporation is referred to in this Agreement as an "Expense Advance". In
connection with any request for an Expense Advance, if requested by the
Corporation, Indemnitee or Indemnitee's counsel shall also submit an affidavit
stating that the Expenses incurred were reasonable. Any dispute as to the
reasonableness of any Expense shall not delay an Expense Advance by the
Corporation, and the Corporation agrees that any such dispute shall be resolved
only upon the disposition or conclusion of the underlying Claim against the
Indemnitee. Indemnitee hereby undertakes and agrees (which agreement shall be
an unsecured obligation of Indemnitee) that he will reimburse and repay the
Corporation without interest for any Expenses Advance to the extent that it
shall ultimately be determined (in a final adjudication by a court from which
there is no further right of appeal or in a final adjudication of an
arbitration pursuant to Section 6.1 if Indemnitee
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<PAGE> 7
elects to seek such arbitration) that Indemnitee is not entitled to be
indemnified by the Corporation against such Expenses.
Section 3.4 Indemnification for Additional Expenses. The
Corporation shall indemnity Indemnitee against any and all costs and expenses
(including attorneys' and expert witnesses' fees) and, if requested by
Indemnitee, shall (within two business days of that request) advance those
costs and expenses to Indemnitee, that are incurred by Indemnitee in connection
with any claim asserted against or action brought by Indemnitee for (i)
indemnification or an Expense Advance by the Corporation under this Agreement
or any other agreement or provision of the Corporation's Certificate of
Incorporation or Bylaws now or hereafter in effect relating to any Claim or
Proceeding, or (ii) recovery under any directors' and officers' liability
insurance policies maintained by the Corporation, regardless of whether
Indemnitee ultimately is determined to be entitled to that indemnification,
advance expense payment, or insurance recovery, as the case may be.
Section 3.5 Partial Indemnity. If Indemnitee is entitled
under any provision of this Agreement to indemnification by the Corporation for
some or a portion of the Expenses, judgments, fines, penalties, and amounts
paid in settlement of a Claim or Proceeding but not, however, for all of the
total amount thereof, the Corporation shall nevertheless indemnify Indemnitee
for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all Claims or Proceedings, or in defense of any issue or matter therein,
including dismissal without prejudice, Indemnitee shall be indemnified against
all Expenses incurred in connection therewith.
ARTICLE IV
PROCEDURE FOR DETERMINATION OF ENTITLEMENT
TO INDEMNIFICATION
Section 4.1 Request by Indemnitee. To obtain
indemnification under this Agreement, Indemnitee shall submit to the
Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary or an Assistant Secretary of the
Corporation shall, promptly upon receipt of such a request for indemnification,
advise the Board in writing that Indemnitee has requested indemnification.
Section 4.2 Determination of Request. Upon written
request by Indemnitee for indemnification pursuant to the first sentence of
Section 5.1 hereof, a determination, if required by applicable law, with
respect to whether Indemnitee is permitted under applicable law to be
indemnified shall be made in accordance with the terms of Section 5.5(b), in
the specific case as follows:
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<PAGE> 8
(a) If a Potential Change in Control or a Change in
Control shall have occurred, by Independent Counsel (selected in
accordance with Section 5.3) in a written opinion to the Board and
Indemnitee, unless Indemnitee shall request that such determination be
made by the Board, or a committee of the Board, in which case by the
person or persons or in the manner provided for in clause (i) or (ii)
of paragraph (b) below; or
(b) If a Potential Change in Control or a Change in
Control shall not have occurred, (i) by the Board by a majority vote
of a quorum of the Board consisting of Disinterested Directors, or
(ii) if there are no Disinterested Directors, or if a quorum of the
Board consisting of Disinterested Directors is not obtainable, by a
majority vote of a committee of the Board designated to act in the
matter by a majority vote of the entire Board, consisting solely of
two or more Disinterested Directors, or (iii) by Independent Counsel
selected by the Board or a committee of the Board by a vote as set
forth in clauses (i) or (ii) of this paragraph (b), or if such quorum
is not obtainable or such a committee cannot be established, by a
majority vote of all directors, or (iv) if Indemnitee and the
Corporation agree, by the stockholders of the Corporation in a vote
that excludes the shares held by directors who are not Disinterested
Directors.
(c) As provided in Section 5.5(b).
If it is so determined that Indemnitee is permitted to be indemnified under
applicable law, payment to Indemnitee shall be made within 10 days after such
determination. Nothing contained in this Agreement shall require that any
determination be made under this Section 5.2 prior to the disposition or
conclusion of a Claim or Proceeding against the Indemnitee; provided, however,
that Expense Advances shall continue to be made by the Corporation pursuant to,
and to the extent required by, the provisions of Article III. Indemnitee shall
cooperate with the person or persons making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person
upon reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person or persons making such
determination shall be borne by the Corporation (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the
Corporation shall indemnify and hold harmless Indemnitee therefrom.
Section 4.3 Independent Counsel. If a Potential Change
in Control or a Change in Control shall not have occurred and the determination
of entitlement to indemnification is to be made by Independent Counsel, the
Independent Counsel shall be selected by (a) a majority vote of the
Disinterested Directors, even though less than a quorum of the Board or (b) if
there are no Disinterested Directors, by a majority vote of the Board, and the
Corporation shall give written notice to Indemnitee, within 10 days after
receipt by the Corporation of Indemnitee's request for indemnification,
specifying the identity and address of the Independent Counsel so selected. If
a Potential Change in Control or a Change in Control shall have occurred and
the determination of entitlement to indemnification is to be made by
Independent Counsel, the Independent Counsel
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<PAGE> 9
shall be selected by Indemnitee, and Indemnitee shall give written notice to
the Corporation, within 10 days after submission of Indemnitee's request for
indemnification, specifying the identity and address of the Independent Counsel
so selected (unless Indemnitee shall request that such selection be made by the
Disinterested Directors or a committee of the Board, in which event the
Corporation shall give written notice to Indemnitee within 10 days after
receipt of Indemnitee's request for the Board or a committee of the
Disinterested Directors to make such selection, specifying the identity and
address of the Independent Counsel so selected). In either event, (i) such
notice to Indemnitee or the Corporation, as the case may be, shall be
accompanied by a written affirmation of the Independent Counsel so selected
that it satisfies the requirements of the definition of "Independent Counsel"
in Article I and that it agrees to serve in such capacity and (ii) Indemnitee
or the Corporation, as the case may be, may, within seven days after such
written notice of selection shall have been given, deliver to the Corporation
or to Indemnitee, as the case may be, a written objection to such selection.
Any objection to selection of Independent Counsel pursuant to this Section 5.3
may be asserted only on the ground that the Independent Counsel so selected
does not meet the requirements of the definition of "Independent Counsel" in
Article I, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is timely made, the
Independent Counsel so selected may not serve as Independent Counsel unless and
until a court of competent jurisdiction (the "Court") has determined that such
objection is without merit. In the event of a timely written objection to a
choice of Independent Counsel, the party originally selecting the Independent
Counsel shall have seven days to make an alternate selection of Independent
Counsel and to give written notice of such selection to the other party, after
which time such other party shall have five days to make a written objection to
such alternate selection. If, within 30 days after submission of Indemnitee's
request for indemnification pursuant to Section 5.1, no Independent Counsel
shall have been selected and not objected to, either the Corporation or
Indemnitee may petition the Court for resolution of any objection that shall
have been made by the Corporation or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 5.2.
The Corporation shall pay any and all reasonable fees and expenses incurred by
such Independent Counsel in connection with acting pursuant to Section 5.2, and
the Corporation shall pay all reasonable fees and expenses incident to the
procedures of this Section 5.3, regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due commencement of
any judicial proceeding or arbitration pursuant to Section 6.1, Independent
Counsel shall be discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional conduct then
prevailing).
Section 4.4 Establishment of a Trust. In the event of a
Potential Change in Control or a Change in Control, the Corporation shall, upon
written request by the Indemnitee, create a trust for the benefit of the
Indemnitee (the "Trust") and from time to time upon written request of the
Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for, and defending any Claim, and
any and all judgments, fines, penalties, and
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<PAGE> 10
settlement amounts of any and all Claims from time to time actually paid or
claimed, reasonably anticipated, or proposed to be paid. The amount to be
deposited in the Trust pursuant to the foregoing funding obligation shall be
determined by the Independent Counsel (or other person(s) making the
determination of whether Indemnitee is permitted to be indemnified by
applicable law). The terms of the Trust shall provide that, upon a Change in
Control, (i) the Trust shall not be revoked or the principal thereof invaded,
without the written consent of the Indemnitee; (ii) the trustee of the Trust
shall advance, within ten business days of a request by Indemnitee, any and all
reasonable Expenses to Indemnitee, any required determination concerning the
reasonableness of the Expenses to be made by the Independent Counsel (and
Indemnitee hereby agrees to reimburse the Trust under the circumstances in
which Indemnitee would be required to reimburse the Corporation for Expenses
Advances under Section ____ of this Agreement); (iii) the Trust shall continue
to be funded by the Corporation in accordance with the funding obligation set
forth above; (iv) the trustee of the Trust shall promptly pay to Indemnitee all
amounts for which Indemnitee shall be entitled to indemnification pursuant to
this Agreement; and (v) all unexpended funds in the Trust shall revert to the
Corporation upon a final determination by the Independent Counsel or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee of the Trust shall
be chosen by Indemnitee, and shall be an institution that is not affiliated
with the Indemnitee. Nothing in this Section 5.4 shall relieve the Company of
any of its obligations under this Agreement.
Section 4.5 Presumptions and Effect of Certain
Proceedings.
(a) The Indemnitee shall be presumed to be entitled to
indemnification under this Agreement upon submission of a request for
indemnification under Section 5.1, and the Corporation shall have the burden of
proof in overcoming that presumption in reaching a determination contrary to
that presumption. Such presumption shall be used by Independent Counsel (or
other person or persons determining entitlement to indemnification) as a basis
for a determination of entitlement to indemnification unless the Corporation
provides information sufficient to overcome such presumption by clear and
convincing evidence or the investigation, review and analysis of Independent
Counsel (or such other person or persons) convinces him by clear and convincing
evidence that the presumption should not apply.
(b) If the person or persons empowered or selected under
Article V of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after
receipt by the Corporation of the request by Indemnitee therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
knowing misstatement by Indemnitee of a material fact, or knowing omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided, however,
that such 60-day period may be extended for a reasonable time, not to exceed an
additional 30 days, if the person making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating to
such
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<PAGE> 11
determination; and provided, further, that the 60-day limitation set forth in
this Section 5.5(b) shall not apply and such period shall be extended as
necessary (i) if within 30 days after receipt by the Corporation of the request
for indemnification under Section 5.1 Indemnitee and the Corporation have
agreed, and the Board has resolved to submit such determination to the
stockholders of the Corporation pursuant to Section 5.2(b) for their
consideration at an annual meeting of stockholders to be held within 90 days
after such agreement and such determination is made thereat, or a special
meeting of stockholders is called within 30 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 5.2(a) of this Agreement, in
which case the applicable period shall be as set forth in Section 6.1(c).
(c) The termination of any Proceeding or of any Claim,
issue or matter by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its equivalent,
shall not (except as otherwise expressly provided in this Agreement) by itself
adversely affect the rights of Indemnitee to indemnification or create a
presumption that Indemnitee meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law. Indemnitee shall be deemed to have been found
liable in respect of any Claim, issue or matter only after he shall have been
so adjudged by the Court after exhaustion of all appeals therefrom.
ARTICLE V
CERTAIN REMEDIES OF INDEMNITEE
Section 5.1 Indemnitee Entitled to Adjudication in an
Appropriate Court. If (a) a determination is made pursuant to Article V that
Indemnitee is not entitled to indemnification under this Agreement; (b) there
has been any failure by the Corporation to make timely payment or advancement
of any amounts due hereunder; or (c) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 5.2
and such determination shall not have been made and delivered in a written
opinion within 90 days after the latest of (i) such Independent Counsel's being
appointed, (ii) the overruling by the Court of objections to such counsel's
selection or (iii) expiration of all periods for the Corporation or Indemnitee
to object to such counsel's selection, Indemnitee shall be entitled to commence
an action seeking an adjudication in the Court of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the commercial arbitration rules of the American Arbitration
Association. Indemnitee shall commence such action seeking an adjudication or
an award in arbitration within 180 days following the date on which Indemnitee
first has the right to commence such action pursuant to this Section 6.1, or
such right shall expire. The Corporation agrees not to oppose Indemnitee's
right to seek any such adjudication or award in arbitration.
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<PAGE> 12
Section 5.2 Adverse Determination Not to Affect any
Judicial Proceeding. If a determination shall have been made pursuant to
Article V that Indemnitee is not entitled to indemnification under this
Agreement, any judicial proceeding or arbitration commenced pursuant to this
Article VI shall be conducted in all respects as a de novo trial or arbitration
on the merits, and Indemnitee shall not be prejudiced by reason of such initial
adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Article VI, Indemnitee shall be presumed to be entitled to
indemnification or advancement of Expenses, as the case may be, under this
Agreement and the Corporation shall have the burden of proof in overcoming such
presumption and to show by clear and convincing evidence that Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
Section 5.3 Corporation Bound by Determination Favorable
to Indemnitee in any Judicial Proceeding or Arbitration. If a determination
shall have been made or deemed to have been made pursuant to Article V that
Indemnitee is entitled to indemnification, the Corporation shall be irrevocably
bound by such determination in any judicial proceeding or arbitration commenced
pursuant to this Article VI, and shall be precluded from asserting that such
determination has not been made or that the procedure by which such
determination was made is not valid, binding and enforceable, in each such case
absent (a) a knowing misstatement by Indemnitee of a material fact, or a
knowing omission of a material fact necessary to make a statement by Indemnitee
not materially misleading, in connection with the request for indemnification
or (b) a prohibition of such indemnification under applicable law.
Section 5.4 Corporation Bound by the Agreement. The
Corporation shall be precluded from asserting in any judicial proceeding or
arbitration commenced pursuant to this Article VI that the procedures and
presumptions of this Agreement are not valid, binding and enforceable and shall
stipulate in any such court or before any such arbitrator that the Corporation
is bound by all the provisions of this Agreement.
Section 5.5 Indemnitee Entitled to Expenses of Judicial
Proceeding. If Indemnitee seeks a judicial adjudication of or an award in
arbitration to enforce his rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from the Corporation,
and the Corporation shall indemnify Indemnitee against, any and all expenses
(of the types described in the definition of Expenses in Article I) actually
and reasonably incurred by him in such judicial adjudication or arbitration but
only if Indemnitee prevails therein. If it shall be determined in such
judicial adjudication or arbitration that Indemnitee is entitled to receive
part but not all of the indemnification or advancement of expenses or other
benefit sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be equitably allocated between the
Corporation and Indemnitee. Notwithstanding the foregoing, if a Change in
Control shall have occurred, Indemnitee shall be entitled to indemnification
under this Section 6.5 regardless of whether Indemnitee ultimately prevails in
such judicial adjudication or arbitration.
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<PAGE> 13
ARTICLE VI
MISCELLANEOUS
Section 6.1 Contribution Payment. To the extent the
indemnification provided for under any provision of this Agreement is
determined (in the manner hereinabove provided) not to be permitted under
applicable law, then in the event Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Proceeding by reason of (or arising in part
out of) Indemnitee's Corporate Status, the Corporation, in lieu of indemnifying
Indemnitee, shall contribute to the amount of any and all Expenses, judgments,
fines, or penalties assessed against or incurred or paid by Indemnitee on
account of such Proceeding and any and all amounts paid in settlement of that
Proceeding (including all interest, assessments, and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties, or amounts paid in settlement) for which such indemnification is not
permitted ("Contribution Amounts"), in such proportion as is appropriate to
reflect the relative fault with respect to the subject matter of the Proceeding
giving rise to the Contribution Amounts of Indemnitee, on the one hand, and of
the Corporation and any and all other parties (including officers and directors
of the Corporation other than Indemnitee) who may be at fault with respect to
such matter (collectively, including the Corporation, the "Third Parties") on
the other hand.
Section 6.2 Relative Fault. The relative fault of the
Third Parties and the Indemnitee shall be determined (i) by reference to the
relative fault of Indemnitee as determined by the court or other governmental
agency assessing the Contribution Amounts or (ii) to the extent such court or
other governmental agency does not apportion relative fault, by the Independent
Counsel (or such other party which makes a determination under Section ____
after giving effect to, among other things, the relative intent, knowledge,
access to information, and opportunity to prevent or correct the subject matter
of the Proceedings and other relevant equitable considerations of each party.
The Corporation and Indemnitee agree that it would not be just and equitable if
contribution pursuant to this Section __ were determined by pro rata allocation
or by any other method of allocation which does take account of the equitable
considerations referred to in this Section____.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Non-Exclusivity. The rights of Indemnitee to
receive indemnification and advancement of Expenses under this Agreement shall
be in addition to, and shall not be deemed exclusive of, any other rights
Indemnitee shall under the DGCL or other applicable law, the Certificate of
Incorporation or Bylaws of the Corporation, any other agreement, vote of
stockholders or a resolution of directors, or otherwise. No amendment or
alteration of the Articles of Incorporation or Bylaws of the Corporation or any
provision thereof shall adversely affect Indemnitee's rights hereunder and such
rights shall be in addition to any rights Indemnitee may have under the
Corporation's Articles of Incorporation, Bylaws and the DGCL or other
applicable law. To
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<PAGE> 14
the extent that there is a change in the DGCL or other applicable law (whether
by statute or judicial decision) that allows greater indemnification by
agreement than would be afforded currently under the Corporation's Certificate
of Incorporation or Bylaws and this Agreement, it is the intent of the parties
hereto that the Indemnitee shall enjoy by virtue of this Agreement the greater
benefit so afforded by such change.
Section 7.2 Insurance and Subrogation.
(a) To the extent that the Corporation maintains an
insurance policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the Corporation or for
individuals serving at the request of the Corporation as directors, officers,
partners, venturers, proprietors, trustees, employees, agents, fiduciaries or
similar functionaries of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise, Indemnitee shall be covered by such policy or policies in
accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee, agent or fiduciary under
such policy or policies.
(b) In the event of any payment by the Corporation under
this Agreement, the Corporation shall be subrogated to the extent of such
payment to all of the rights of recovery of Indemnitee, who shall execute all
papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Corporation to bring
suit to enforce such rights.
(c) The Corporation shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received such payment
under the Corporation's Certificate of Incorporation or Bylaws or any insurance
policy, contract, agreement or otherwise.
Section 7.3 Self Insurance of the Corporation; Other
Arrangements. The parties hereto recognize that the Corporation may, but is
not required to, procure or maintain insurance or other similar arrangements,
at its expense, to protect itself and any person, including the Indemnitee, who
is or was a director, officer, employee, agent or fiduciary of the Corporation
or who is or was serving at the request of the Corporation as a director,
officer, partner, venturer, proprietor, trustee, employee, agent, fiduciary or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan or other
enterprise against any expense, liability or loss asserted against or incurred
by such person, in such a capacity or arising out of his status as such a
person, whether or not the Corporation would have the power to indemnify such
person against such expense or liability or loss.
In considering the cost and availability of such insurance,
the Corporation (through the exercise of the business judgment of its directors
and officers) may, from time to time, purchase insurance which provides for
certain (i) deductibles, (ii) limits on payments required to be made by the
insurer or (iii) coverage which may not be as comprehensive as that previously
included in
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<PAGE> 15
insurance purchased by the Corporation or its predecessors. The purchase of
insurance with deductibles, limits on payments and coverage exclusions, even if
in the best interest of the Corporation, may not be in the best interest of the
Indemnitee. As to the Corporation, purchasing insurance with deductibles,
limits on payments and coverage exclusions is similar to the Corporation's
practice of self-insurance in other areas. In order to protect Indemnitee who
would otherwise be more fully or entirely covered under such policies, the
Corporation shall, to the maximum extent permitted by applicable law, indemnify
and hold Indemnitee harmless to the extent (i) of such deductibles, (ii) of
amounts exceeding payments required to be made by an insurer or (iii) that
prior policies of officer's and director's liability insurance held by the
Corporation or its predecessors would have provided for payment to Indemnitee,
if by reason of his Corporate Status he is or is threatened to be made a party
to any Proceeding. The obligation of the Corporation in the preceding sentence
shall be without regard to whether the Corporation would otherwise be required
to indemnify such officer or director under the other provisions of this
Agreement, or under any law, agreement, vote of stockholders or directors or
other arrangement. Without limiting the generality of any provision of this
Agreement, the procedures in Article V hereof shall, to the extent applicable,
be used for determining entitlement to indemnification under this Section 7.3.
Section 7.4 Certain Settlement Provisions. The
Corporation shall have no obligation to indemnify Indemnitee under this
Agreement for amounts paid in settlement of a Proceeding or Claim without the
Corporation's prior written consent. The Corporation shall not settle any
Proceeding or Claim in any manner that would impose any fine or other
obligation on Indemnitee without Indemnitee's prior written consent. Neither
the Corporation nor Indemnitee shall unreasonably withhold their consent to any
proposed settlement.
Section 7.5 Exculpation of Directors. If Indemnitee is
or was a director of the Corporation, he shall not in that capacity be liable
to the Corporation or its stockholders for monetary damages for an act or
omission in Indemnitee's capacity as a director, except that Indemnitee's
liability shall not be eliminated or limited for: (a) a breach of Indemnitee's
duty of loyalty to the Corporation or its stockholders; (b) an act or omission
not in good faith or that involves intentional misconduct or a knowing
violation of the law; (c) a transaction from which Indemnitee received an
improper benefit, whether or not the benefit resulted from an action taken
within the scope of Indemnitee's office; or (d) an act or omission for which
the liability of Indemnitee is expressly provided for by statute.
Section 7.6 Duration of Agreement. This Agreement shall
continue for so long as Indemnitee serves as a director, officer, employee,
agent or fiduciary of the Corporation or, at the request of the Corporation, as
a director, officer, partner, venturer, proprietor, trustee, employee, agent,
fiduciary or similar functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan
or other enterprise, and thereafter shall survive until and terminate upon the
later to occur of: (a) the expiration of 20 years after the latest date that
Indemnitee shall have ceased to serve in any such capacity; (b) the final
termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of Expenses hereunder and of
any proceeding commenced by Indemnitee pursuant to
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<PAGE> 16
Article VI relating thereto; or (c) the expiration of all statutes of
limitation applicable to possible Claims arising out of Indemnitee's Corporate
Status.
Section 7.7 Notice by Each Party. Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document or
communication relating to any Proceeding or Claim for which Indemnitee may be
entitled to indemnification or advancement of Expenses hereunder; provided,
however, that any failure of Indemnitee to so notify the Corporation shall not
adversely affect Indemnitee's rights under this Agreement except to the extent
the Corporation shall have been materially prejudiced as a direct result of
such failure. The Corporation shall promptly notify Indemnitee in writing as
to the pendency of any Proceeding or Claim that may involve a claim against the
Indemnitee for which Indemnitee may be entitled to indemnification or
advancement of Expenses hereunder.
Section 7.8 Amendment. This Agreement may not be
modified or amended except by a written instrument executed by or on behalf of
each of the parties hereto.
Section 7.9 Waivers. The observance of any term of this
Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party entitled to enforce such
term only by a writing signed by the party against which such waiver is to be
asserted. Unless otherwise expressly provided herein, no delay on the part of
any party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party
hereto of any right, power or privilege hereunder operate as a waiver of any
other right, power or privilege hereunder nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
Section 7.10 Entire Agreement. This Agreement and the
documents expressly referred to herein constitute the entire agreement between
the parties hereto with respect to the matters covered hereby, and any other
prior or contemporaneous oral or written understandings or agreements with
respect to the matters covered hereby are expressly superseded by this
Agreement.
Section 7.11 Severability. If any provision of this
Agreement (including any provision within a single section, paragraph or
sentence) or the application of such provision to any person or circumstance,
shall be judicially declared to be invalid, unenforceable or void, such
decision will not have the effect of invalidating or voiding the remainder of
this Agreement or affect the application of such provision to other persons or
circumstances, it being the intent and agreement of the parties that this
Agreement shall be deemed amended by modifying such provision to the extent
necessary to render it valid, legal and enforceable while preserving its
intent, or if such modification is not possible, by substituting therefor
another provision that is valid, legal and unenforceable and that achieves the
same objective. Any such finding of invalidity or unenforceability shall not
prevent the enforcement of such provision in any other jurisdiction to the
maximum extent permitted by applicable law.
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<PAGE> 17
Section 7.12 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon (a) transmitter's
confirmation of a receipt of a facsimile transmission, (b) confirmed delivery
of a standard overnight courier or when delivered by hand or (c) the expiration
of five business days after the date mailed by certified or registered mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice):
If to the Corporation, to it at:
Pioneer Natural Resources Company
1400 Williams Square West
5205 North O'Connor Blvd.
Irving, Texas 75039-3746
Attn: Chief Financial Officer
If to Indemnitee, to him at:
------------------------------------------
Pioneer Natural Resources Company
------------------------------------------
------------------------------------------
------------------------------------------
or to such other address or to such other individuals as any party shall have
last designated by notice to the other parties. All notices and other
communications given to any party in accordance with the provisions of this
Agreement shall be deemed to have been given when delivered or sent to the
intended recipient thereof in accordance with the provisions of this Section
7.12.
Section 7.13 Governing Law. This Agreement shall be
construed in accordance with and governed by the laws of the State of Delaware
without regard to the principles of conflict of laws.
Section 7.14 Certain Construction Rules.
(a) The article and section headings contained in
this Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. As used in
this Agreement, unless otherwise provided to the contrary, (1) all
references to days shall be deemed references to calendar days and (2)
any reference to a "Section" or "Article" shall be deemed to refer to
a section or article of this Agreement. The words "hereof," "herein"
and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Whenever the words "include," "includes"
or "including"
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<PAGE> 18
are used in this Agreement, they shall be deemed to be followed by the
words "without limitation." Unless otherwise specifically provided
for herein, the term "or" shall not be deemed to be exclusive.
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.
(b) For purposes of this Agreement, references to
"other enterprises" shall include employee benefit plans; references
to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; references to "serving at the
request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, nominee, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries.
Section 7.15 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument,
notwithstanding that both parties are not signatories to the original or same
counterpart.
Section 7.16 Certain Persons Not Entitled to
Indemnification. Notwithstanding any other provision of this Agreement,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
hereunder with respect to any Proceeding or any Claim, issue or matter therein,
brought or made by such person against the Corporation, except as specifically
provided in Article V or Article VI hereof.
Section 7.17 Indemnification for Negligence, Gross
Negligence, etc. Without limiting the generality of any other provision
hereunder, it is the express intent of this Agreement that Indemnitee be
indemnified and Expenses be advanced regardless of Indemnitee's acts of
negligence, gross negligence, intentional or willful misconduct to the extent
that indemnification and advancement of Expenses is allowed pursuant to the
terms of this Agreement and under applicable law.
Section 7.18 Mutual Acknowledgment. Both the Corporation
and Indemnitee acknowledge that in certain instances, applicable law or public
policy may prohibit the Corporation from indemnifying the directors, officers,
employees, agents or fiduciaries of the Corporation under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Corporation has
undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Corporation's right under
public policy to indemnify Indemnitee.
Section 7.19 Enforcement. The Corporation agrees that its
execution of this Agreement shall constitute a stipulation by which it shall be
irrevocably bound in any court or arbitration in which a proceeding by
Indemnitee for enforcement of his rights hereunder shall have been commenced,
continued or appealed, that its obligations set forth in this Agreement are
unique
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<PAGE> 19
and special, and that failure of the Corporation to comply with the provisions
of this Agreement will cause irreparable and irremediable injury to Indemnitee,
for which a remedy at law will be inadequate. As a result, in addition to any
other right or remedy he may have at law or in equity with respect to breach of
this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief
directing specific performance by the Corporation of its obligations under this
Agreement.
Section 7.20 Successors and Assigns. All of the terms and
provisions of this Agreement shall be binding upon, shall inure to the benefit
of and shall be enforceable by the parties hereto and their respective
successors, assigns, heirs, executors, administrators, legal representatives.
Section 7.21 Period of Limitations. No legal action shall
be brought and no cause of action shall be asserted by or on behalf of the
Corporation or any affiliate of the Corporation against Indemnitee or
Indemnitee's spouse, heirs, executors, or personal or legal representatives
after the expiration of three years from the date of accrual of that cause of
action, and any claim or cause of action of the Corporation or its affiliate
shall be extinguished and deemed released unless asserted by the timely filing
of a legal action within that three-year period; provided, however, that, if
any shorter period of limitations is otherwise applicable to any such cause of
action, the shorter period shall govern.
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<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered to be effective as of the date first above written.
PIONEER NATURAL RESOURCES COMPANY
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
INDEMNITEE:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF PIONEER NATURAL RESOURCES COMPANY
None
<PAGE> 1
EXHIBIT 99.1
[MESA LOGO]
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of MESA Inc. on August 7, 1997. At this meeting, stockholders
will be asked to approve certain matters relating to the proposed merger with
Parker & Parsley Petroleum Company announced April 6, 1997.
The meeting will begin at 2:00 p.m. at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas. For your convenience, we
are including a map on the reverse side of this letter that will be useful in
planning your activities should you decide to attend the meeting.
After reviewing the enclosed material, please take a moment to sign,
date and mark your vote on the proxy card below and return it in the enclosed
postage-paid envelope. While management is recommending a vote "FOR" each of
the issues outlined below and would appreciate your support, we urge your
careful review of the enclosed material so that you can make your own
determination on how to vote. We believe all stockholders should have a voice
in the Company's direction, so we ask that you return the proxy card whether or
not you plan to attend the special meeting.
If you have any questions or require additional information with
respect to the proposed merger, please contact MESA's information agent, Morrow
& Co. Inc. at 1-800-566-9058.
I look forward to seeing you on August 7th.
Jon Brumley
Chairman of the Board and
Chief Executive Officer
FOLD AND TEAR HERE FOLD AND TEAR HERE FOLD AND TEAR HERE
- --------------------------------------------------------------------------------
PROXY PROXY
MESA INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF STOCKHOLDERS TO BE
HELD AUGUST 7, 1997
The undersigned stockholder hereby appoints M. Garrett Smith and G. Michael
Prescott, jointly and severally, as proxies, with full power of substitution,
to vote, as specified below, all shares of Common Stock, par value $0.01 per
share ("Common Stock"), of MESA Inc. (the "Company") that the undersigned is
entitled to vote at the Special Meeting of Stockholders of the Company to be
held at the Wyndham Anatole Hotel, Wedgwood Room, 2201 Stemmons Freeway,
Dallas, Texas, at 2:00 p.m. on August 7, 1997, or any adjournment or
postponement thereof (the "Special Meeting"), and directs said proxies to vote
as instructed on the matters set forth below AND OTHERWISE AT THEIR DISCRETION.
Receipt of a copy of the Notice of said Special Meeting and the accompanying
Joint Proxy Statement/Prospectus is hereby acknowledged. This proxy revokes
all prior proxies given by the undersigned with respect to the Common Stock.
Please sign EXACTLY as name(s) appears
hereon, and in signing as Attorney,
Administrator, Guardian, Trustee or
Corporate Officer, please add your
title as such.
Signature_____________________________
Title_________________________________
Date_______________________________1997
USE THIS CARD ONLY TO VOTE SHARES OF MESA INC. COMMON STOCK
<PAGE> 2
MEETING LOCATION [REVERSE SIDE]
DALLAS, TEXAS
[Map]
The Special Meeting will be held in the Wedgwood Room of the
Wyndham Anatole Hotel, 2201 Stemmons Freeway, Dallas, Texas.
Parking is conveniently located at the entrances in front of
the hotel.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3
AND PROPOSAL 4 SET FORTH BELOW.
Proposal 1. Approve and adopt the Agreement and Plan of Merger among the
Company, Mesa Operating Co., Pioneer Natural Resources Company and
Parker & Parsley Petroleum Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 2. Approve the adoption of the Mesa 1996 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. Approve the adoption of the Pioneer Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. Approve the adoption of the Pioneer Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL ONE IS NOT CONDITIONED ON THE APPROVAL OF ANY OF THE OTHER PROPOSALS.
PROPOSAL TWO IS NOT CONDITIONED ON THE APPROVAL OF ANY OF THE OTHER PROPOSALS.
NEITHER PROPOSAL THREE NOR PROPOSAL FOUR WILL BE IMPLEMENTED UNLESS PROPOSAL
ONE IS APPROVED. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. WHERE NO VOTE IS SPECIFIED FOR A PROPOSAL, THIS PROXY
WILL BE VOTED "FOR" SUCH PROPOSAL. THE INDIVIDUALS NAMED HEREIN ARE
AUTHORIZED TO VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT PROPERLY COME
BEFORE THE SPECIAL MEETING.
USE THIS CARD ONLY TO VOTE SHARES OF MESA INC. COMMON STOCK
<PAGE> 3
<PAGE> 4
[MESA LOGO]
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of MESA Inc. on August 7, 1997. At this meeting, stockholders
will be asked to approve certain matters relating to the proposed merger with
Parker & Parsley Petroleum Company announced April 6, 1997.
The meeting will begin at 2:00 p.m. at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas. For your convenience, we
are including a map on the reverse side of this letter that will be useful in
planning your activities should you decide to attend the meeting.
After reviewing the enclosed material, please take a moment to sign,
date and mark your vote on the proxy card below and return it in the enclosed
postage-paid envelope. While management is recommending a vote "FOR" each of
the issues outlined below and would appreciate your support, we urge your
careful review of the enclosed material so that you can make your own
determination on how to vote. We believe all stockholders should have a voice
in the Company's direction, so we ask that you return the proxy card whether or
not you plan to attend the special meeting.
If you have any questions or require additional information with
respect to the proposed merger, please contact MESA's information agent, Morrow
& Co. Inc. at 1-800-566-9058.
I look forward to seeing you on August 7th.
Jon Brumley
Chairman of the Board and
Chief Executive Officer
FOLD AND TEAR HERE FOLD AND TEAR HERE FOLD AND TEAR HERE
- --------------------------------------------------------------------------------
PROXY PROXY
MESA INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD AUGUST 7, 1997
The undersigned stockholder hereby appoints M. Garrett Smith and G. Michael
Prescott, jointly and severally, as proxies, with full power of substitution, to
vote, as specified below, all shares of Series A 8% Cumulative Convertible
Preferred Stock, par value $0.01 per share ("Series A Preferred Stock"), of MESA
Inc. (the "Company") that the undersigned is entitled to vote at the Special
Meeting of Stockholders of the Company to be held at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas, at 2:00 p.m. on August 7,
1997, or any adjournment or postponement thereof (the "Special Meeting"), and
directs said proxies to vote as instructed on the matters set forth below AND
OTHERWISE AT THEIR DISCRETION. Receipt of a copy of the Notice of said Special
Meeting and the accompanying Joint Proxy Statement/Prospectus is hereby
acknowledged. This proxy revokes all prior proxies given by the undersigned
with respect to the Series A Preferred Stock.
Please sign EXACTLY as name(s) appears
hereon, and in signing as Attorney,
Administrator, Guardian, Trustee or Corporate
Officer, please add your title as such.
Signature
------------------------------------
Title
----------------------------------------
Date 1997
-----------------------------
USE THIS CARD ONLY TO VOTE SHARES OF MESA INC. SERIES A PREFERRED STOCK
<PAGE> 5
MEETING LOCATION [REVERSE SIDE]
DALLAS, TEXAS
[Map]
The Special Meeting will be held in the Wedgwood Room of the Wyndham
Anatole Hotel, 2201 Stemmons Freeway, Dallas, Texas. Parking is
conveniently located at the entrances in front of the hotel.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3
AND PROPOSAL 4 SET FORTH BELOW.
Proposal 1. Approve and adopt the Agreement and Plan of Merger among the
Company, Mesa Operating Co., Pioneer Natural Resources Company and
Parker & Parsley Petroleum Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 2. Approve the adoption of the Mesa 1996 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 3. Approve the adoption of the Pioneer Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal 4. Approve the adoption of the Pioneer Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL ONE IS NOT CONDITIONED ON THE APPROVAL OF ANY OF THE OTHER PROPOSALS.
PROPOSAL TWO IS NOT CONDITIONED ON THE APPROVAL OF ANY OF THE OTHER PROPOSALS.
NEITHER PROPOSAL THREE NOR PROPOSAL FOUR WILL BE IMPLEMENTED UNLESS PROPOSAL
ONE IS APPROVED. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. WHERE NO VOTE IS SPECIFIED FOR A PROPOSAL, THIS PROXY
WILL BE VOTED "FOR" SUCH PROPOSAL. THE INDIVIDUALS NAMED HEREIN ARE AUTHORIZED
TO VOTE IN THEIR DISCRETION ON ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE
SPECIAL MEETING.
USE THIS CARD ONLY TO VOTE SHARES OF MESA INC. SERIES A PREFERRED STOCK
<PAGE> 6
[MESA LOGO]
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of MESA Inc. on August 7, 1997. At this meeting, stockholders
will be asked to approve certain matters relating to the proposed merger with
Parker & Parsley Petroleum Company announced April 6, 1997.
The meeting will begin at 2:00 p.m. at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas. For your convenience, we
are including a map on the reverse side of this letter that will be useful in
planning your activities should you decide to attend the meeting.
After reviewing the enclosed material, please take a moment to sign,
date and mark your vote on the proxy card below and return it in the enclosed
postage-paid envelope. While management is recommending a vote "FOR" each of
the issues outlined below and would appreciate your support, we urge your
careful review of the enclosed material so that you can make your own
determination on how to vote. We believe all stockholders should have a voice
in the Company's direction, so we ask that you return the proxy card whether or
not you plan to attend the special meeting.
If you have any questions or require additional information with
respect to the proposed merger, please contact MESA's information agent, Morrow
& Co. Inc. at 1-800-566-9058.
I look forward to seeing you on August 7th.
Jon Brumley
Chairman of the Board and
Chief Executive Officer
FOLD AND TEAR HERE FOLD AND TEAR HERE FOLD AND TEAR HERE
- --------------------------------------------------------------------------------
PROXY PROXY
MESA INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD AUGUST 7, 1997
The undersigned stockholder hereby appoints M. Garrett Smith and G. Michael
Prescott, jointly and severally, as proxies, with full power of substitution, to
vote, as specified below, all shares of Series B 8% Cumulative Convertible
Preferred Stock, par value $0.01 per share ("Series B Preferred Stock"), of MESA
Inc. (the "Company") that the undersigned is entitled to vote at the Special
Meeting of Stockholders of the Company to be held at the Wyndham Anatole Hotel,
Wedgwood Room, 2201 Stemmons Freeway, Dallas, Texas, at 2:00 p.m. on August 7,
1997, or any adjournment or postponement thereof (the "Special Meeting"), and
directs said proxies to vote as instructed on the matters set forth below AND
OTHERWISE AT THEIR DISCRETION. Receipt of a copy of the Notice of said Special
Meeting and the accompanying Joint Proxy Statement/Prospectus is hereby
acknowledged. This proxy revokes all prior proxies given by the undersigned
with respect to the Series B Preferred Stock.
Please sign EXACTLY as name(s) appears
hereon, and in signing as Attorney,
Administrator, Guardian, Trustee or Corporate
Officer, please add your title as such.
Signature
------------------------------------
Title
----------------------------------------
Date 1997
-----------------------------
USE THIS CARD ONLY TO VOTE SHARES OF MESA INC. SERIES B PREFERRED STOCK
<PAGE> 1
EXHIBIT 99.2
[PARKER & PARSLEY LOGO]
Dear Stockholder:
You are cordially invited to attend the Special Meeting of
Stockholders of Parker & Parsley Petroleum Company on August 7, 1997. At this
meeting, stockholders will be asked to approve certain matters relating to the
proposed merger with MESA Inc. announced April 6, 1997.
The meeting will begin at 2:00 p.m. at the Wyndham Anatole Hotel,
Peacock Room, 2001 Stemmons Freeway, Dallas, Texas. For your convenience, we
are including a map on the reverse side of this letter that will be useful
in planning your activities should you decide to attend the meeting.
After reviewing the enclosed material, please take a moment to sign,
date and mark your vote on the proxy card below and return it in the enclosed
postage-paid envelope. While management is recommending a vote "FOR" each of
the issues outlined below and would appreciate your support, we urge your
careful review of the enclosed material so that you can make your own
determination on how to vote. We believe all stockholders should have a voice
in the Company's direction, so we ask that you return the proxy card whether or
not you plan to attend the special meeting.
If you have any questions or require additional information with
respect to the proposed merger, please contact Parker & Parsley's information
agent, D.F. King & Co., Inc. at 1-800-769-5414.
I look forward to seeing you on August 7th.
Scott D. Sheffield
Chairman of the Board and
Chief Executive Officer
FOLD AND TEAR HERE FOLD AND TEAR HERE FOLD AND TEAR HERE
- -------------------------------------------------------------------------------
PROXY PROXY
PARKER & PARSLEY PETROLEUM COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 1997
The undersigned stockholder hereby appoints Scott D. Sheffield, Mark L. Withrow
and Lon C. Kile, jointly and severally, as proxies, with full power of
substitution, to vote, as specified below, all shares of Common Stock, par
value $0.01 per share ("Common Stock") of Parker & Parsley Petroleum Company
(the "Company") that the undersigned is entitled to vote at the Special Meeting
of Stockholders of the Company to be held at the Wyndham Anatole Hotel, Peacock
Room, 2001 Stemmons Freeway, Dallas, Texas, at 2:00 p.m. on August 7, 1997, or
any adjournment or postponement thereof (the "Special Meeting"), and directs
said proxies to vote as instructed on the matters set forth below AND OTHERWISE
AT THEIR DISCRETION. Receipt of a copy of the Notice of said Special Meeting
and the accompanying Joint Proxy Statement/Prospectus is hereby acknowledged.
This proxy revokes all prior proxies given by the undersigned with respect to
the Common Stock.
Please sign EXACTLY as name(s) appears
hereon, and in signing as Attorney,
Administrator, Guardian, Trustee or
Corporate Officer, please add your title
as such.
Signature
-----------------------------
Title
---------------------------------
Date 1997
-----------------------
USE THIS CARD ONLY TO VOTE SHARES OF
PARKER & PARSLEY PETROLEUM COMPANY COMMON STOCK
<PAGE> 2
MEETING LOCATION [REVERSE SIDE]
DALLAS, TEXAS
[Map]
The Special Meeting will be held in the Peacock Room of the Wyndham
Anatole Hotel, 2201 Stemmons Freeway, Dallas, Texas. Parking is
conveniently located at the entrances in front of the hotel.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2 AND
PROPOSAL 3 SET FORTH BELOW.
Proposal 1. Approve and adopt the Agreement and Plan of Merger among the
Company, MESA Inc., Mesa Operating Co. and Pioneer Natural
Resources Company.
|_| FOR |_| AGAINST |_| ABSTAIN
Proposal 2. Approve the adoption of the Pioneer Long-Term Incentive Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
Proposal 3. Approve the adoption of the Pioneer Employee Stock Purchase Plan.
|_| FOR |_| AGAINST |_| ABSTAIN
PROPOSAL ONE IS NOT CONDITIONED ON THE APPROVAL OF ANY OF THE OTHER PROPOSALS.
NEITHER PROPOSAL TWO NOR PROPOSAL THREE WILL BE IMPLEMENTED UNLESS PROPOSAL ONE
IS APPROVED. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. WHERE NO VOTE IS SPECIFIED FOR A PROPOSAL, THIS PROXY WILL BE
VOTED "FOR" SUCH PROPOSAL. THE INDIVIDUALS NAMED HEREIN ARE AUTHORIZED TO VOTE
IN THEIR DISCRETION ON ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE SPECIAL
MEETING.
USE THIS CARD ONLY TO VOTE SHARES OF PARKER & PARSLEY PETROLEUM COMPANY COMMON
STOCK
<PAGE> 1
EXHIBIT 99.19
FORM OF ELECTION AND
LETTER OF TRANSMITTAL
FOR SHARES OF
MESA INC.
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
This Form of Election and Letter of Transmittal (this "Form of
Election") is to be used by record holders of Series A 8% Cumulative
Convertible Preferred Stock, par value $0.01 per share ("Mesa Series A
Preferred Stock"), of MESA Inc. ("Mesa") to make Consideration Elections (as
defined below) with respect to the type of Merger Consideration (as defined
below) to be received upon conversion of such holder's shares of Mesa Series A
Preferred Stock in the Mergers (as defined below), all as contemplated by the
Agreement and Plan of Merger, dated as of April 6, 1997, as amended (as
amended, the "Merger Agreement"), by and among Mesa, its subsidiaries Pioneer
Natural Resources Company ("Pioneer") and Mesa Operating Co. ("MOC"), and
Parker & Parsley Petroleum Company ("Parker & Parsley").
Pursuant to the Merger Agreement, among other things, (i) Mesa will
merge (the "Reincorporation Merger") with and into Pioneer, with Pioneer being
the surviving corporation. The Reincorporation Merger will have the effect of
changing Mesa's state of incorporation from Texas to Delaware. Immediately
after the Reincorporation Merger, Parker & Parsley will merge (together with
the Reincorporation Merger, the "Mergers") with and into MOC, with MOC being
the surviving corporation. As a result, Parker & Parsley will become a wholly
owned subsidiary of Pioneer. Except as otherwise indicated, capitalized terms
used but not defined herein have the meanings given to them in the Joint Proxy
Statement/Prospectus dated June , 1997 of Mesa, Pioneer, MOC and Parker &
Parsley relating to the Mergers (the "Joint Proxy Statement/Prospectus").
Pursuant to the terms of the Reincorporation Merger, each seven shares
of Mesa Series A Preferred Stock will be converted, at the option of the
holder, into either (i) 1.25 shares of Common Stock of Pioneer ("Pioneer Common
Stock") or one share of Series A 8% Cumulative Convertible Preferred Stock of
Pioneer ("Pioneer Preferred Stock"), PROVIDED, HOWEVER, THAT IF A MAJORITY OF
THE OUTSTANDING SHARES OF MESA SERIES A PREFERRED STOCK VOTE IN FAVOR OF THE
MERGER AGREEMENT, THEN ALL OF THE SHARES OF MESA SERIES A PREFERRED STOCK SHALL
BE CONVERTED INTO PIONEER COMMON STOCK, REGARDLESS OF WHETHER SOME OF SUCH
HOLDERS ELECTED TO RECEIVE THE PIONEER PREFERRED STOCK. If a holder of Mesa
Series A Preferred Stock expresses no preference as between Pioneer Preferred
Stock or Pioneer Common Stock (a "Non-Election"), such shares shall be deemed
to be shares in respect of which elections for Pioneer Preferred Stock have
been made.
THE EXCHANGE AGENT IS CONTINENTAL STOCK TRANSFER & TRUST COMPANY.
BY REGULAR U.S. MAIL, BY HAND OR BY OVERNIGHT COURIER :
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York, 10004
Attn: Reorganization Department
CONFIRM BY TELEPHONE
1-212-509-4000 (Ext. 535)
-1-
<PAGE> 2
TO BE EFFECTIVE, THIS FORM OF ELECTION, TOGETHER WITH CERTIFICATES FOR SHARES
OF MESA SERIES A PREFERRED STOCK AND ANY OTHER DOCUMENTS REQUIRED HEREBY, MUST
BE RECEIVED BY THE EXCHANGE AGENT AT ITS ADDRESS SET FORTH ABOVE, AND NOT
WITHDRAWN, PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE TRADING DAY
IMMEDIATELY PRECEDING THE CLOSING DATE OF THE MERGERS (THE "ELECTION
DEADLINE"). ANY HOLDER OF SHARES OF MESA SERIES A PREFERRED STOCK THAT DOES
NOT SUBMIT AN EFFECTIVE ELECTION FORM PRIOR TO THE ELECTION DEADLINE SHALL BE
DEEMED TO HAVE MADE A NON-ELECTION.
SHARES OF MESA SERIES A PREFERRED STOCK HELD BY A RECORD HOLDER OF
MESA SERIES A PREFERRED STOCK (A "STOCKHOLDER") WHO DOES NOT TIMELY SUBMIT A
PROPERLY COMPLETED FORM OF ELECTION WILL BE DEEMED TO BE SHARES IN RESPECT OF
WHICH NO ELECTION HAS BEEN MADE. ANY STOCKHOLDER MAY AT ANY TIME PRIOR TO THE
ELECTION DEADLINE CHANGE A PREVIOUSLY MADE ELECTION BY WRITTEN NOTICE TO THE
EXCHANGE AGENT ACCOMPANIED BY A PROPERLY COMPLETED, LATER-DATED FORM OF
ELECTION.
DO NOT SEND THIS FORM OF ELECTION TO PARKER & PARSLEY OR MESA.
DELIVERY OF THIS FORM OF ELECTION AND CERTIFICATES REPRESENTING SHARES
OF MESA SERIES A PREFERRED STOCK OTHER THAN TO THE EXCHANGE AGENT AT THE
ADDRESS SHOWN ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS
FORM OF ELECTION WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED.
Ladies and Gentlemen:
In accordance with the Merger Agreement, the undersigned, as the
registered holder(s) of the certificates for shares of Mesa Series A Preferred
Stock listed below or the assignee(s) of such registered holder(s), hereby
makes the Consideration Election(s) indicated below for the number of shares of
Mesa Series A Preferred Stock specified below. Such Consideration Election(s)
is subject to the terms and conditions set forth in (i) the Joint Proxy
Statement/ Prospectus, (ii) the Merger Agreement, a copy of which is attached
to the Joint Proxy Statement/Prospectus as Appendix I, and (iii) the
Instructions hereto set forth below.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE JOINT PROXY
STATEMENT/PROSPECTUS, AND THE PROSPECTUS SUPPLEMENT ACCOMPANYING THIS FORM OF
ELECTION.
The undersigned understands that delivery of the Merger Consideration
corresponding to the Consideration Election(s) made hereunder will be made as
promptly as practicable after the Effective Time, provided that surrender of
certificates for Mesa Series A Preferred Stock is made in acceptable form. The
undersigned acknowledges that surrender is not made in acceptable form until
the Exchange Agent has received this Form of Election, or a copy hereof, duly
completed and signed, together, in the circumstances in which evidences of
authority are required hereby, with all accompanying evidences of authority in
satisfactory form to the Exchange Agent. Upon request, the undersigned will
execute and deliver any additional document that Pioneer (or Mesa and Pioneer
prior to the Effective Time (as defined below)) or the Exchange Agent
reasonably deems necessary or appropriate in connection with the surrender of
certificates for Mesa Series A Preferred Stock or in connection with the
exchange contemplated hereby. The undersigned also understands that delivery
of certificates for surrendered Mesa Series A Preferred Stock shall be made
only to the Exchange Agent, and risk of loss and title to certificates for Mesa
Series A Preferred Stock shall pass only upon proper delivery of such
certificates to the Exchange Agent.
The undersigned represents that the undersigned has full authority to
surrender the certificates for Mesa Series A Preferred Stock surrendered hereby
without restriction, and that, upon payment by Pioneer of the Merger
Consideration for the shares represented by such certificates in accordance
with the Consideration Election(s) indicated below, Pioneer will acquire good,
marketable and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim.
Subject to consummation of the Mergers, the undersigned hereby appoints
Continental Stock Transfer and Trust Company as the undersigned's
attorney-in-fact, with full power of substitution, for the purpose of causing
the shares of Mesa Series A Preferred Stock represented by the accompanying
certificates to be converted into the Merger Consideration corresponding to the
Consideration Election(s) made below and the instructions contained in this
Form of Election. All authority conferred by this Form of Election and the
surrender of the enclosed certificates for Mesa Series
-2-
<PAGE> 3
A Preferred Stock are irrevocable, will bind the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and will
survive, and not be affected by, the death or incapacity of the undersigned.
If certificates for shares of Mesa Series A Preferred Stock are not delivered
herewith, there is furnished a properly completed and executed Notice of
Guaranteed Delivery.
The undersigned understands that the purpose of the election procedure
is to permit Stockholders to express their preferences for either Pioneer
Common Stock or Pioneer Preferred Stock, PROVIDED, HOWEVER, THAT IF A MAJORITY
OF THE OUTSTANDING SHARES OF MESA SERIES A PREFERRED STOCK VOTE IN FAVOR OF THE
MERGER AGREEMENT, THEN ALL OF THE SHARES OF MESA SERIES A PREFERRED STOCK SHALL
BE CONVERTED INTO PIONEER COMMON STOCK, REGARDLESS OF WHETHER SOME OF SUCH
HOLDERS ELECTED TO RECEIVE THE PIONEER PREFERRED STOCK. Subject to the
foregoing provision, and the limitations described below and in the Merger
Agreement, the Exchange Agent will seek to take into account the Consideration
Election(s) made by Stockholders when it issues the Merger Consideration after
the Effective Time. THE UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THAT IN THE
EVENT THAT THE HOLDERS OF A MAJORITY OF THE MESA SERIES A PREFERRED STOCK VOTE
IN FAVOR OF THE MERGER AGREEMENT, THE UNDERSIGNED WILL RECEIVE PIONEER COMMON
STOCK, REGARDLESS OF WHETHER SUCH HOLDER ELECTED TO RECEIVE PIONEER PREFERRED
STOCK OR PIONEER COMMON STOCK.
No fractional shares of Pioneer Common Stock or Pioneer Preferred
Stock will be issued to any Stockholder upon the consummation of the Mergers.
The undersigned understands that in lieu of any fractional share, for each
fractional share of Pioneer Common Stock or Pioneer Preferred Stock that would
otherwise be issued, Pioneer will pay by check to each former stockholder of
Mesa Series A Preferred Stock an amount equal to a pro rata portion of the net
proceeds of the sale by the Exchange Agent of shares of Mesa Series A Preferred
Stock representing the aggregate of all such fractional shares and the
aggregate dividends or other distributions that are payable with respect to
such shares of Mesa Series A Preferred Stock, if any.
Unless otherwise directed by written instructions attached hereto,
please issue one stock certificate for the shares of Pioneer Common Stock or
Pioneer Preferred Stock, as elected, and/or one check for the fractional shares
of the Merger Consideration to which the undersigned is entitled, as the case
may be. Unless otherwise specified under "Special Payment Instructions" or
"Special Mailing Instructions" below, the undersigned requests that the
undersigned's certificate and/or check, as the case may be, be issued in the
name and mailed to the address of the undersigned as set forth below.
-3-
<PAGE> 4
Please complete the following boxes to indicate the Consideration
Election(s) made with respect to the Mesa Series A Preferred Stock to which
this Form of Election relates.
PLEASE READ THE INSTRUCTIONS SET FORTH AT THE END OF THIS FORM OF ELECTION
CAREFULLY BEFORE COMPLETING THIS FORM OF ELECTION.
DESCRIPTION OF MESA SERIES A PREFERRED STOCK SURRENDERED
<TABLE>
<CAPTION>
CERTIFICATE(S) BEING SURRENDERED
(ATTACH SEPARATE SCHEDULE IF NECESSARY)
NAME(S) OF REGISTERED HOLDER(S) NUMBER OF SHARES
AS SHOWN ON THE CERTIFICATE(S) AND ADDRESS(ES) OF CERTIFICATE REPRESENTED BY NUMBER OF SHARES
SUCH REGISTERED HOLDERS NUMBERS CERTIFICATES SURRENDERED*
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
TOTAL SHARES:
</TABLE>
* Unless otherwise indicated, the registered holder(s) will be deemed to have
surrendered all of the shares represented by such certificates.
CONSIDERATION ELECTION
Check one or more of the boxes below to make the indicated Consideration
Election and specify the number of shares to which such Consideration Election
applies:
<TABLE>
<S> <C> <C>
Pioneer Common Stock [ ] Number of Shares
----------------------
Pioneer Preferred Stock [ ] Number of Shares
----------------------
No Preference [ ] Number of Shares
----------------------
</TABLE>
IF NO BOX IS CHECKED OR IF THE NO PREFERENCE BOX IS CHECKED, THE SHARES OF
MESA SERIES A PREFERRED STOCK OF THE REGISTERED HOLDER(S) TO WHICH THIS FORM
OF ELECTION RELATES WILL BE DEEMED TO HAVE ELECTED TO RECEIVE PIONEER
PREFERRED STOCK.
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<PAGE> 5
NOTE: ALL STOCKHOLDERS MUST SIGN HERE AND
ON THE ACCOMPANYING SUBSTITUTE FORM W-9
Dated _____________, 1997
________________________________________________________________________________
(Signature(s) of Registered holder(s) or Authorized Signatory)
________________________________________________________________________________
(Signature(s) of Registered holder(s) or Authorized Signatory)
Telephone Number_______________________________________________________________
(Include Area Code)
Must be signed above by registered holder(s) exactly as name(s) appear(s) on
the certificate(s) to which this Form of Election relates as indicated above
or by person(s) authorized to become registered holder(s). See Instruction 3.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following information
and see instruction 3(e).
Name(s)________________________________________________________________________
PLEASE PRINT
Capacity (full title) _________________________________________________________
<TABLE>
<CAPTION>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL MAILING INSTRUCTIONS
(See Instructions 3, 4 and 7) (See Instruction 4)
<S> <C>
To be completed ONLY if the certificate(s) To be completed ONLY if the certificate(s)
representing Pioneer Preferred Stock or Pioneer representing Pioneer Preferred Stock or Pioneer
Common Stock and checks for cash issued in lieu Common Stock and checks for cash issued in lieu
of fractional shares of Pioneer Preferred Stock of fractional shares of Pioneer Preferred Stock
or Pioneer Common Stock are to be issued in the or Pioneer Common Stock are to be mailed to an
name(s) of someone OTHER THAN the name(s) which address other than indicated above.
appear on the certificate(s). YOUR SIGNATURE(S)
MUST BE GUARANTEED ON THE FORM BELOW.
ISSUE TO: MAIL TO:
PLEASE PRINT PLEASE PRINT
(ATTACH SEPARATE SCHEDULE IF NECESSARY)
Name: Name:
------------------------------------------ ---------------------------------------------
Address: Address:
---------------------------------------- ------------------------------------------
------------------------------------------------ --------------------------------------------------
------------------------------------------------ --------------------------------------------------
(Include Zip Code) (Include Zip Code)
Tax Identification or Social Security Number(s) Attention:
of Person(s) Named in this Box: ----------------------------------------
[ ] PLEASE CHECK BOX IF THIS IS A
------------------------------------------------ PERMANENT ADDRESS CHANGE.
(Also complete the Substitute Form W-9)
</TABLE>
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<PAGE> 6
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3(G))
Authorized Signature(s) _______________________________________________________
Title__________________________________________________________________________
Name of Firm __________________________________________________________________
Dated ___________________________________________________________________, 1997
PLEASE RETURN THIS FORM OF ELECTION AND YOUR CERTIFICATE(S)
REPRESENTING SHARES OF MESA SERIES A PREFERRED STOCK COVERED HEREBY TO
THE EXCHANGE AGENT IN THE ENCLOSED ENVELOPE.
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<PAGE> 7
*IMPORTANT TAX INFORMATION*
Please be advised that, regardless of whether you have previously
furnished a taxpayer identification number (Social Security number for
individual, or employer identification number for corporation(s)) (a "TIN") or
the certification on Form W-9 with respect to dividend payments, you must again
furnish this number, certified to be correct under penalties of perjury, to
assure that backup withholding of 31% on reportable payments will not be
implemented. Certification should be made to the Exchange Agent on the
Substitute Form W-9 below. If the certificates representing shares of Mesa
Series A Preferred Stock covered by this Form of Election are registered in
more than one name or are not registered in the name of the actual holder,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to
report.
PAYOR'S NAME: CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
<TABLE>
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT Social Security Number or
FORM W-9 AND CERTIFY BY SIGNING AND DATING BELOW, OR IF A TIN HAS Employer Identification Number
Please fill in your NOT BEEN ISSUED TO YOU, PLEASE CHECK THE BOX IN PART 3
Name and Address: BELOW.
-------------------
-------------------
-------------------
CHECK APPROPRIATE BOX [ ] Individual / Sole Proprietor [ ] Corporation [ ] Partnership [ ] Other_____
DEPARTMENT OF TREASURY PART 2 -- For payees exempt from backup withholding, see the enclosed Guidelines
PAYER'S REQUEST FOR TAXPAYER for Certification of Taxpayer Identification Number on Substitute Form W-9
IDENTIFICATION NUMBER (TIN)
</TABLE>
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (i) I am exempt from
backup withholding, or (ii) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends or (iii) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because of
under reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
The IRS does not require your consent to any provision of this document other
than the certifications required to avoid backup withholding.
PART 3
SIGNATURE _________________ DATE _________, 1997 Awaiting TIN [ ]
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<PAGE> 8
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office and will provide such
taxpayer identification number to you within 60 days or (b) I intend to mail or
deliver an application in the near future and will provide the taxpayer
identification number to you within 60 days. I understand that,
notwithstanding that I have checked the box in Part 3 (and have completed this
Certificate of Awaiting Taxpayer Identification Number), all reportable
payments made to me prior to the time I provide the Exchange Agent with a
properly certified taxpayer identification number may be subject to a 31%
backup withholding tax.
SIGNATURE _______________________________ DATE ________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY REPORTABLE PAYMENTS MADE TO YOU.
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<PAGE> 9
INSTRUCTIONS
1. GENERAL. This Form of Election is to be used by registered
holders of Mesa Series A Preferred Stock to make an election to receive either
Pioneer Common Stock or Pioneer Preferred Stock as Merger Consideration, or to
indicate that they have no preference as to the form of Merger Consideration to
be received (individually, a "Consideration Election" and, collectively, the
"Consideration Elections") with respect to their shares of Mesa Series A
Preferred Stock in the Mergers under the Merger Agreements and to submit their
shares of Mesa Series A Preferred Stock in exchange for Merger Consideration.
When making elections, Stockholders should read carefully these Instructions
and the information set forth in the Joint Proxy Statement/Prospectus. A
properly completed and duly executed copy of this Form of Election, together
with certificates for Mesa Series A Preferred Stock, and any other documents
required by this Form of Election must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the trading
day immediately preceding the Closing Date (the "Election Deadline"). The
shares of Mesa Series A Preferred Stock held by a registered holder of Mesa
Series A Preferred Stock who does not submit a Form of Election with respect to
those shares that is received by the Exchange Agent prior to the Election
Deadline, or who indicates no preference as to the form of Merger Consideration
to be received, will be deemed by Pioneer, in its sole and absolute discretion,
to be shares in respect of which Pioneer Preferred Stock has been elected as
the Merger Consideration. The method of delivery of this Form of Election,
certificates for Mesa Series A Preferred Stock and all other required documents
to the Exchange Agent is at the option and risk of the electing holder and,
except as otherwise provided below, the delivery will be deemed made only when
actually received by the Exchange Agent. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure delivery to the Exchange
Agent before the Election Deadline. All Consideration Elections will be void
and of no effect if the Mergers are not consummated and, in that event,
certificates submitted in connection therewith will be returned to the persons
submitting them.
2. ELECTION AND SURRENDER BY HOLDER. Only a registered holder of
Mesa Series A Preferred Stock may make a Consideration Election and surrender
certificates for the Merger Consideration corresponding to such Consideration
Election. Any beneficial owner of Mesa Series A Preferred Stock who is not the
registered holder and who wishes to make a Consideration Election and surrender
certificates should arrange with the registered holder to execute and deliver
this Form of Election reflecting such Consideration Election or must, prior to
completing and executing this Form of Election and delivering the certificates,
either make appropriate arrangements to register ownership of the certificates
in such beneficial owner's name or obtain a properly completed stock power from
the registered holder.
3. SIGNATURES ON THIS FORM OF ELECTION; STOCK POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
(a) If this Form of Election is signed by the registered holder of
the certificates for Mesa Series A Preferred Stock described above, the
signature must correspond exactly with the name as written on the face of the
certificates without alteration, enlargement or any change whatsoever.
(b) If any certificates for Mesa Series A Preferred Stock are
owned of record by two or more joint owners, all such owners must sign this
Form of Election. If any certificates for Mesa Series A Preferred Stock are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Form of Election as
there are different registrations of certificates.
(c) When this Form of Election is signed by the registered holder
or holders of certificates listed herein and surrendered hereby, and the Merger
Consideration therefor is to be delivered to the registered holder, no
endorsements on certificates or separate stock powers are required. In any
other case, such holder or holders must either properly endorse the
certificates surrendered or transmit properly completed separate stock powers
with this Form of Election, with the signatures on the endorsement or stock
powers guaranteed by an Eligible Institution (as defined below).
(d) If this Form of Election is signed by a person other than the
registered holder or holders of any shares of Mesa Series A Preferred Stock
represented by certificates listed herein, such certificates must be endorsed
or accompanied by appropriate stock powers, in each case signed as the name or
names of the registered holder or holders appears on the certificates, and the
signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
(e) If this Form of Election or any certificate for Mesa Series A
Preferred Stock or stock powers is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or
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<PAGE> 10
representative capacity, such persons should so indicate when signing, and,
unless waived by Pioneer, evidence satisfactory to Pioneer their authority so
to act must be submitted with this Form of Election.
(f) Endorsements on certificates for Mesa Series A Preferred Stock
or signatures on stock powers required by this Instruction 3 must be guaranteed
by an Eligible Institution.
(g) Except as otherwise provided in this Instruction 3(g), all
signatures on this Form of Election must be guaranteed by a bank, brokerage
firm, savings and loan association or credit union, in any case with membership
in an approved and recognized Medallion Signature Guarantor Program (an
"Eligible Institution"). Signatures on this Form of Election need not be
guaranteed if this Form of Election is signed by the registered holder(s) of
the Mesa Series A Preferred Stock surrendered herewith and such holder(s) have
not completed the box set forth herein entitled "Special Payment Instructions"
or the box entitled "Special Mailing Instructions."
4. SPECIAL PAYMENT AND MAILING INSTRUCTIONS. Electing holders of
Mesa Series A Preferred Stock should indicate, in the applicable box or boxes,
the name and address to which certificates for Pioneer Common Stock or Pioneer
Preferred Stock are to be issued, if different from the name and address of the
person signing this Form of Election. In the case of issuance in a different
name, the taxpayer identification or social security number of the person named
must also be set forth.
5. GUARANTEED DELIVERY PROCEDURES. If any certificates
representing shares of Mesa Series A Preferred Stock with respect to which this
Form of Election relates are not delivered herewith, there must be furnished a
guarantee of delivery of such shares on the Notice of Guaranteed Delivery form
provided with this Form of Election from a trust company organized in the
United States, a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. A Form of
Election accompanied by such a Notice of Guaranteed Delivery shall be subject
to the condition that the certificates covered by such guarantee are in fact
delivered to the Exchange Agent no later than 5:00 p.m., New York City time, on
the fourth business day after the Election Deadline. Shares of Mesa Series A
Preferred Stock represented by any such certificates that are not so delivered
will be deemed by Pioneer to be shares for which no election has been made.
6. REVOCATION OF ELECTION. Any Consideration Election may be
revoked until the Election Deadline. To revoke a Consideration Election, a
written notice of revocation must be received by the Exchange Agent at its
address set forth on the cover of this Form of Election prior to the Election
Deadline. Any such notice or revocation must (i) specify the name of the
registered holder having made the Consideration Election to be revoked, (ii)
identify the certificate(s) for Mesa Series A Preferred Stock with respect to
which the Consideration Election is to be revoked and (iii) be signed by the
record holder in the same manner as the original signature on the Form of
Election by which such Consideration Election was made. A new Consideration
Election may be made by submitting a new Form of Election.
7. TRANSFER TAXES. If certificates for Pioneer Common Stock or
Pioneer Preferred Stock are to be delivered to or are to be registered or
issued in the name of, any person other than the registered holder of the Mesa
Series A Preferred Stock surrendered hereby, or if a transfer tax is imposed
for any reason other than solely as a result of the surrender of certificates
for Mesa Series A Preferred Stock for the Merger Consideration, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other persons) will be payable by the surrendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Form of Election, the amount of such transfer taxes will be billed
directly to such surrendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Mesa Series A Preferred Stock listed
in this Form of Election.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder
whose certificates for Mesa Series A Preferred Stock have been mutilated, lost,
stolen or destroyed should contact the Exchange Agent at the address indicated
above for further instructions as soon as possible. In the event of a
mutilated, lost, stolen or destroyed certificate, certain procedures will be
required to be completed before this Form of Election can be processed.
Because these procedures may take a substantial amount of time to complete,
notice of any mutilated, lost, stolen or destroyed certificate should be
provided to the Exchange Agent as soon as possible.
9. TAX IDENTIFICATION NUMBER. Federal income tax law generally
requires that a holder who receives a reportable payment made with respect to
the Pioneer Common Stock or Pioneer Preferred Stock must provide Pioneer (as
payor)
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<PAGE> 11
with such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 above, which, in the case of a surrendering holder who is an
individual, is his or her social security number. If the shares of Mesa Series
A Preferred Stock relating to this Form of Election are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer's Identification Number on Substitute
Form W-9 (the "W-9 Guidelines") for additional instructions. If Pioneer
(through the Exchange Agent) is not provided with the current TIN, or if any
other information is not correctly provided, such surrendering holder may be
subject to up to a $500 penalty imposed by the Internal Revenue Service (plus
additional penalties if a holder willfully makes a false certification). In
addition, the Pioneer Common Stock or Pioneer Preferred Stock may be subject to
backup withholding in an amount equal to 31% of all such reportable payments.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained provided that the required
information is furnished to the Internal Revenue Service.
Exempt holders (including, among others, corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. (In order to satisfy Pioneer that a foreign individual qualifies
as an exempt recipient, that holder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent.) See the enclosed W-9
Guidelines for additional instructions.
To prevent backup withholding from applying to any reportable payment
with respect to the Pioneer Common Stock or the Pioneer Preferred Stock, each
holder must provide its correct TIN by completing the Substitute Form W-9 set
forth above, certifying that the TIN provided is correct and that (i) the
holder is exempt from backup withholding, (ii) the holder has not been notified
by the Internal Revenue Service that such holder is subject to backup
withholding as a result of a failure to report all interest or dividends or
(iii) the Internal Revenue Service has notified the holder that such holder is
no longer subject to backup withholding. The box in Part 3 of the Substitute
Form W-9 above may be checked if the holder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is checked, the holder must also complete the Certificate of Awaiting
Taxpayer Identification Number contained in the Substitute Form W-9 in order to
avoid backup withholding. Notwithstanding that the box in Part 3 is checked
(and the Certificate of Awaiting Taxpayer Identification Number is completed),
Pioneer may withhold 31% of the Pioneer Common Stock or the Pioneer Preferred
Stock prior to the time it is provided with a properly certified TIN. Backup
withholding, if applicable, will continue until such holder furnishes its TIN
to Pioneer (through the Exchange Agent).
10. ELECTION PROCEDURE. Subject to the limitation described in
Instruction 15 below, each record holder of shares of Mesa Series A Preferred
Stock (other than Dissenting Shares) outstanding immediately prior to the
effective time of the Mergers (the "Effective Time") is entitled to submit an
election specifying the Merger Consideration preferred in respect of each such
share either Pioneer Common Stock or Pioneer Preferred Stock. Alternatively, a
record holder may indicate that the record holder has no preference as between
Pioneer Common Stock and Pioneer Preferred Stock for such shares.
All elections are to be made on this Form of Election. It is
anticipated that the Closing Date will be on August _____, 1997, the day after
the Special Meetings. If the anticipated Closing Date changes, Mesa will issue
a public announcement of the new anticipated Closing Date as soon as
practicable, but in no event less than five trading days prior to the Closing
Date.
Election Forms must be received by the Exchange Agent at its office
set forth herein no later than 5:00 p.m., New York City time, on the trading
day immediately preceding the Closing Date. To make a proper election, a
holder of shares of Mesa Series A Preferred Stock must have delivered to the
Exchange Agent at the address specified above prior to the Election Deadline
the following:
(a) a Form of Election properly completed in accordance
with these Instructions and signed by the record holder of the
shares of Mesa Series A Preferred Stock as to which such election is
being made; and
(b) either (i) the certificates for such shares, (ii) an
appropriate guarantee of delivery of certificates for such shares.
STOCKHOLDERS WHO PERFECT AN ELECTION OF PIONEER PREFERRED STOCK WILL
NOT RECEIVE THE ELECTED PIONEER PREFERRED STOCK IN THE EVENT THAT A MAJORITY OF
THE HOLDERS OF THE OUTSTANDING MESA SERIES A PREFERRED STOCK VOTE IN FAVOR OF
THE MERGER AGREEMENT. IN SUCH EVENT, EACH SHARE OF MESA SERIES A PREFERRED
STOCK SHALL BE CONVERTED INTO A RIGHT TO ONLY
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<PAGE> 12
RECEIVE THE PIONEER COMMON STOCK, REGARDLESS OF WHETHER SOME OF SUCH HOLDERS
ELECTED TO RECEIVE THE PIONEER PREFERRED STOCK.
11. MERGER CONSIDERATION. Except for shares owned directly or
indirectly by Mesa or Parker & Parsley (which will be canceled at the Effective
Time), each 7 shares of Mesa Series A Preferred Stock outstanding immediately
prior to the Effective Time will be converted at the Effective Time into the
right to receive from Pioneer the Merger Consideration. The Merger
Consideration will consist of (i) 1.25 shares of Pioneer Common Stock or (ii)
one share of Pioneer Preferred Stock), in each case for seven shares of Mesa
Series A Preferred Stock.
12. FIXED MERGER CONSIDERATION. The Stockholders should consider
that the Merger Consideration will not be adjusted in the event of an increase
or decrease in the market price of Mesa Series A Preferred Stock. Holders of
Mesa Series A Preferred Stock will receive either 1.25 shares of Pioneer Common
Stock or one share of Pioneer Series A Preferred Stock for each seven shares of
Mesa Series A Preferred Stock held.
However, each of Mesa and Parker & Parsley have the option to
terminate the Merger Agreement if the Average Trading Price for the fifteen
(15) Trading Day period beginning on the twentieth (20th) Trading Day prior to
the date on which the meetings of the stockholders of Mesa and Parker & Parsley
with respect to the Mergers are to be held (such date to be the date specified
in the Joint Proxy Statement/Prospectus), is less than $5.00 per share,
provided that notice of termination is given by the terminating party to the
other parties to the Merger Agreement within two calendar days following the
end of such fifteen (15) Trading Day period. If this is the case, Mesa and
Parker & Parsley will each independently determine whether to terminate the
Merger Agreement, waive the option and proceed to the consummation of the
Mergers or seek to renegotiate the terms upon which the Mergers will be
consummated. The Stockholders are urged to obtain current stock market
quotations for Mesa Series A Preferred Stock, and to consider the possible
impact of the fluctuating market value of Pioneer stock on the value of total
Merger Consideration received in the Mergers. For purposes hereof, the term
(i) "Average Trading Price" means the average of the closing sales prices for
Mesa Common Stock during such fifteen (15) Trading Day period as such closing
sales prices are reported in The Wall Street Journal's New York Stock Exchange
Composite Transactions Reports; and (ii) "Trading Days" refers to days on which
the NYSE is open for the trading.
15. VOTE OF A MAJORITY BINDING. If a majority of the outstanding
shares of Mesa Series A Preferred Stock vote in favor of the Merger Agreement,
then each seven shares of Mesa Series A Preferred Stock shall be converted into
a right to only receive the Pioneer Common Stock, regardless of whether some of
such holders elected to receive the Pioneer Preferred Stock.
16. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
relating to the procedure for making a Consideration Election or surrendering
certificates, as well as requests for assistance or for additional copies of
the Joint Proxy Statement/Prospectus or this Form of Election, may be directed
to the Information Agent, Morrow & Co., Inc., 909 Third Avenue, New York, New
York 10022, or by telephone at 1-800-566-9061.
17. MISCELLANEOUS. Pioneer (or Mesa prior to the Effective Time)
reserves the absolute right, which it may assign in whole or in part to the
Exchange Agent, to determine whether Forms of Election have been properly
completed, signed and submitted or revoked and to disregard immaterial defects
in Forms of Election. The decision of Pioneer (or Mesa prior to the Effective
Time) or the Exchange Agent in such matters shall be conclusive and binding.
NONE OF MESA, PIONEER, MOC, PARKER & PARSLEY OR THE EXCHANGE AGENT
WILL BE UNDER ANY OBLIGATION WHATSOEVER TO NOTIFY ANY PERSON OF ANY DEFECT IN A
FORM OF ELECTION SUBMITTED TO THE EXCHANGE AGENT OR ANY OTHER IRREGULARITY IN
CONNECTION WITH THE SUBMISSION OF A FORM OF ELECTION AND ACCOMPANYING
DOCUMENTS, NOR WILL ANY OF THEM INCUR ANY LIABILITY FOR FAILURE TO GIVE SUCH
NOTIFICATION. THE SHARES OF MESA SERIES A PREFERRED STOCK OF A HOLDER COVERED
BY THE SUBMISSION OF A FORM OF ELECTION THAT IS DETERMINED BY PIONEER (OR MESA
PRIOR TO THE EFFECTIVE TIME) OR THE EXCHANGE AGENT TO BE INVALID AND THAT IS
NOT CORRECTED BY THE ELECTION DEADLINE WILL BE DEEMED BY PIONEER, IN ITS SOLE
AND ABSOLUTE DISCRETION, TO BE SHARES IN RESPECT OF WHICH PIONEER COMMON STOCK
ELECTIONS HAVE BEEN MADE. ANY DISPUTE CONCERNING THE VALIDITY OR EFFECTIVENESS
OF A FORM OF ELECTION (INCLUDING ANY DISPUTES INVOLVING THE INTERPRETATION OF
THESE INSTRUCTIONS) WILL BE DETERMINED BY PIONEER (OR MESA PRIOR TO THE
EFFECTIVE TIME), WHOSE DETERMINATION WILL BE CONCLUSIVE AND BINDING.
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<PAGE> 13
PLEASE RETURN THIS FORM OF ELECTION AND YOUR CERTIFICATE(S)
REPRESENTING SHARES OF MESA SERIES A PREFERRED STOCK COVERED HEREBY TO THE
EXCHANGE AGENT IN THE ENCLOSED ENVELOPE.
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<PAGE> 1
EXHIBIT 99.20
FORM OF NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO SHARES OF
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
MESA INC.
PURSUANT TO THE JOINT PROXY STATEMENT/PROSPECTUS DATED JUNE , 1997
This form must be used by holders of shares of Series A 8% Cumulative
Convertible Preferred Stock (the "Mesa Series A Preferred Stock") of MESA Inc.,
a Texas corporation (the "Company"), who wish to make Consideration Elections
with respect to the Merger Consideration to be received upon conversion of such
holders' shares of Mesa Series A Preferred pursuant to the guaranteed delivery
procedures described in "The Mergers -- Election Procedures for Mesa Preferred
Stock" of the Company's Joint Proxy Statement/Prospectus, dated June ___, 1997
(the "Joint Proxy Statement/Prospectus") and in the Instructions to the related
Form of Election and Letter of Transmittal. Any holder who wishes to make an
election pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to 5:00 p.m.,
New York City time, on August ___, 1997. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Joint Proxy
Statement/Prospectus or the Form of Election and Letter of Transmittal.
THE CHANGE OF ELECTION AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK TIME, ON AUGUST ___ 1997 UNLESS EXTENDED (THE "ELECTION
DEADLINE").
Continental Stock Transfer & Trust Company
(the "Exchange Agent")
<TABLE>
<CAPTION>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
<S> <C> <C>
Continental Stock Transfer & Trust Continental Stock Transfer & Trust Continental Stock Transfer & Trust
Company Company Company
2 Broadway 2 Broadway, 19th Floor 2 Broadway
New York, New York, 10004 New York, New York, 10004 New York, New York, 10004
Attn: Reorganization Department Attn: Reorganization Department Attn: Reorganization Department
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby elects, upon the terms and subject to the
conditions set forth in the Joint Proxy Statement/Prospectus and the related
Form of Election and Letter of Transmittal, receipt of which is hereby
acknowledged, to receive the following Merger Consideration pursuant to the
guaranteed delivery procedures set forth in the Prospectus and in the
Instructions to the Form of Election and Letter of Transmittal.
The undersigned hereby tenders the Mesa Series A Preferred Stock
listed below:
CERTIFICATE NUMBER(S) (IF KNOWN) NUMBER OF SHARES
REPRESENTED
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
- ------------------------------------ -------------------------------------
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signature of Registered Holder(s)
or Authorized Signatory:
Date: , 1997
- ------------------------------------ ----------------------------
Address:
- ------------------------------------ ----------------------------------
Names(s) of Registered Holder(s):
- ------------------------------------ ----------------------------------
Area Code and Telephone No.
- ------------------------------------ --------------
- ------------------------------------
This Notice of Guaranteed Delivery must be signed by the holder(s) exactly
as their name(s) appear on certificates for the Mesa Series A Preferred Stock
or on a security position listing as the owner of Mesa Series A Preferred
Stock, or by person(s) authorized to become holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by
2
<PAGE> 3
a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
- -------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Form of Election and
Letter of Transmittal (or facsimile thereof), together with the shares of Mesa
Series A Preferred Stock tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such shares of Mesa Series A
Preferred Stock into the Exchange Agent's account at the Depository Trust
Company (the "DTC") described in the prospectus under the caption "The Mergers
- -- Election Procedures for Mesa Preferred Stock" and in the Form of Election
and Letter of Transmittal) and any other required documents, all by 5:00 p.m.,
New York time, on the fifth New York Stock Exchange trading day following the
Election Deadline.
Name of Firm
---------------------------- ----------------------------
(Authorized Signature)
Address:
--------------------------------
Name
-------------------------------- ----------------------------
(Include Zip Code) (Please Print)
Area Code and Tel. No. Title
------------------- ----------------------------
Dated , 1997
-------------------
3
<PAGE> 4
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF
SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
the Instructions to the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Mesa Series A
Preferred referred to herein, the signature must correspond with the name(s)
written on the face of the certificate representing the shares of Mesa Series A
Preferred without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of the Mesa Series A Preferred, the signature must correspond with the
name shown on the security position listing as the owner of the Mesa Series A
Preferred.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Mesa Series A Preferred listed or a participant
of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the certificate representing the shares of Mesa Series A
Preferred or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the Joint
Proxy Statement/Prospectus. Holders may also contact their broker, dealer,
commercial bank, trust company, or other nominee for assistance concerning the
Consideration Election.
5
<PAGE> 1
EXHIBIT 99.21
CONSIDERATION ELECTION WITH RESPECT TO THE
SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF MESA INC. PURSUANT TO THE MERGER WITH PARKER & PARSLEY PETROLEUM COMPANY
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
This letter is being distributed to securities dealers,
commercial banks, trust companies and other nominees in connection with the
consideration elections of the holders of the shares of Series A 8% Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Mesa Series A
Preferred Stock"), of Mesa, pursuant to the terms of a certain Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement") among MESA Inc.
(the "Company"), Mesa Operating Co., Pioneer Natural Resources Company
("Pioneer") and Parker & Parsley Petroleum Company ("Parker & Parsley"). At
the Effective Time (as defined in the Joint Proxy Statement/Prospectus of the
Company) each seven shares of Mesa Series A Preferred Stock outstanding will be
converted into either (i) 1.25 shares of common stock of Pioneer ("Pioneer
Common Stock") or (ii) one share of Series A 8% Cumulative Convertible
Preferred Stock of Pioneer ("Pioneer Preferred Stock"), PROVIDED, HOWEVER, that
if a majority of the outstanding shares of Mesa Series A Preferred Stock are
voted in favor of the Merger Agreement, then all of the shares of Mesa Series A
Preferred Stock will be converted into Pioneer Common Stock, regardless of
whether some of the holders of the shares of Mesa Series A Preferred Stock
elected to receive Pioneer Preferred Stock. The Merger Agreement, the
transactions contemplated thereby and the election procedures are described in
the enclosed Joint Proxy Statement/Prospectus.
Each beneficial owner of shares of Mesa Series A Preferred
Stock registered in your name or the name of your nominee is entitled to make a
Consideration Election as described above.
We are asking you to contact your clients for whom you hold
shares of Mesa Series A Preferred Stock registered in your name or in the name
of your nominee to obtain instructions with respect to the Consideration
Elections of such shares.
Enclosed are copies of the following documents:
1. The Joint Proxy Statement/Prospectus;
2. Form of Election and Letter of Transmittal for the
Mesa Series A Preferred Stock;
2. Form of Notice of Guaranteed Delivery for the Mesa
Series A Preferred Stock;
3. Return envelope addressed to The Continental Stock
Transfer and Trust Company; as Exchange
Agent;
3. Nominee Holder Certification; and
4. Letter to the beneficial owners of the Mesa Series A
Preferred Stock.
Your prompt action is requested. The deadline for
consideration elections will occur at 5:00 p.m., New York City time on August
_, 1997 (the trading day immediately preceding the Closing Date of the Mergers,
(the "Election Deadline").
To make a Consideration Election, a properly completed and
executed Form of Election and Letter of Transmittal must be delivered to the
Exchange Agent as indicated in the Joint Proxy Statement/Prospectus prior to
the Election Deadline, unless the guaranteed delivery procedures described in
the Joint Proxy Statement/Prospectus are followed.
<PAGE> 2
Additional copies of the enclosed materials may be obtained
from Morrow & Co., Inc., the Information Agent. The Information Agent's
toll-free telephone number is (800) 566-9061.
Very truly yours,
MESA INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON
AS AN AGENT OF MESA INC., THE EXCHANGE AGENT OR ANY OTHER PERSON MAKING OR
DEEMED TO BE MAKING OFFERS OF THE PIONEER PREFERRED STOCK OR PIONEER COMMON
STOCK ISSUABLE UPON A VALID CONSIDERATION ELECTION, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO
THE CONSIDERATION ELECTIONS EXCEPT FOR STATEMENTS MADE IN THE JOINT PROXY
STATEMENT/PROSPECTUS.
2
<PAGE> 1
EXHIBIT 99.22
EXCHANGE OF
SHARES OF SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
MESA INC.
FOR SHARES OF EITHER COMMON STOCK
OR SERIES A 8% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF PIONEER NATURAL RESOURCES COMPANY
June ___, 1997
To Our Clients:
We are enclosing for your consideration a Joint Proxy
Statement/Prospectus dated June ___, 1997 describing the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") among MESA Inc., Mesa
Operating Co., Pioneer Natural Resources Company ("Pioneer") and Parker &
Parsley Petroleum Company, pursuant to which the holders of record on June 27,
1997 of the Series A 8% Cumulative Convertible Preferred Stock (the "Mesa
Series A Preferred") will have the right to elect the consideration such
holders will receive upon the closing of the mergers contemplated by Merger
Your attention is directed to the following:
o Holders of the Mesa Series A Preferred will be entitled to make
an election of the type of consideration they will receive upon
the closing date of the mergers. Each seven shares of Mesa
Series A Preferred will be converted to either (i) 1.25 shares
of Common Stock, par value $.01 per share, of Pioneer ("Pioneer
Common Stock") or (ii) one share of Series A 8% Cumulative
Convertible Preferred Stock of Pioneer ("Pioneer Preferred
Stock"), PROVIDED, HOWEVER, THAT IF THE HOLDERS OF A MAJORITY OF
THE SHARES OF MESA SERIES A PREFERRED VOTE IN FAVOR OF THE
MERGER AGREEMENT, THEN ALL OF THE HOLDERS OF THE MESA SERIES A
PREFERRED WILL RECEIVE PIONEER COMMON STOCK.
o The Pioneer Common Stock and the Pioneer Preferred Stock (if
issued) will be admitted for trading on the New York Stock
Exchange, the stock exchange on which Mesa's Series A Preferred
is traded.
o The expiration of the period for election of consideration is
5:00 p.m. New York City time, on August ___, 1997. Any shares for
which elections are not received, or for which incomplete or
improper election forms are received shall be deemed to be
non-elections and the holders of such shares will receive
Pioneer Preferred Stock as consideration unless the holders of a
majority of the Mesa Series A Preferred Stock vote in favor of
the Merger Agreement.
Since we are the holder of record of the shares of Mesa Series A
Preferred Stock held in your Account, we have received your consideration
election materials. We will make a consideration election only in accordance
with your instructions. If you do not give us your instructions, a
consideration election will not be made with respect to your shares and you
will receive Pioneer Preferred Stock as consideration unless the holders of a
majority of the Mesa Series A Preferred Stock vote in favor of the Merger
Agreement.
Please forward your instructions to us immediately by completing the
form on the reverse side. Your rights to make an election will expire at 5:00
p.m. New York City time, August , 1997.
<PAGE> 2
LETTER OF INSTRUCTIONS
To My Bank or Broker:
The undersigned acknowledges receipt of the Joint Proxy
Statement/Prospectus relating to the Merger Agreement. This letter instructs
you to either elect to receive Pioneer Common Stock or Pioneer Preferred Stock
or to indicate "no preference," as indicated below, with respect to the shares
of Mesa Series A Preferred you hold for the account of the undersigned upon the
terms and conditions set forth in the Joint Proxy Statement/Prospectus.
CONSIDERATION ELECTION
Consideration Elected Mesa Series A Preferred Stock
--------------------- -----------------------------
Pioneer Common Stock Number of Shares
----------- ----------
Pioneer Preferred Stock Number of Shares
----------- ----------
No Preference* Number of Shares
----------- ----------
DATED:
------------------------------- ---------------------------------
---------------------------------
Signature(s)
---------------------------------
Account Number
---------------------------------
Please type or print name
*If no box is checked or if the "no preference" box is checked, then the shares
of Mesa Series A Preferred to which this election relates will be deemed to be
shares in respect of which no election has been made and therefore, the
beneficial owner of such shares will receive Pioneer Preferred Stock unless the
holders of a majority of the Mesa Series A Preferred Stock elect to receive
Pioneer vote in favor of the Merger Agreement, in which case such holder will
receive Pioneer Common Stock.
