<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MITCHELL ENERGY & DEVELOPMENT CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE> 2
MITCHELL ENERGY & DEVELOPMENT CORP.
[MITCHELL LOGO]
2001 TIMBERLOCH PLACE -- P.O. BOX 4000
THE WOODLANDS, TEXAS 77387-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 1998
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of MITCHELL
ENERGY & DEVELOPMENT CORP. (the "Company") will be held at the MND Learning
Center, 2002 Timberloch Place, The Woodlands, Texas 77380, on Wednesday, June
24, 1998, at 10:00 A.M. Central Daylight Time, for the following purposes:
1. To elect a Board of twelve (12) directors;
2. To consider and act upon a proposal to appoint Arthur Andersen LLP
as the Company's independent public accountants for the fiscal year ending
January 31, 1999; and
3. To transact such other business as may properly come before the
meeting.
Holders of both Class A Common Stock and Class B Common Stock are entitled
to notice of the Annual Meeting; however, only holders of Class A Common Stock
of record at the close of business on May 6, 1998, are entitled to vote at the
Annual Meeting or any adjournment or adjournments thereof.
Information concerning the matters to be acted upon at the Annual Meeting
is set forth in the accompanying Proxy Statement.
CLASS A COMMON STOCKHOLDERS: PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED
IN THE UNITED STATES, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING.
THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO THE VOTING OF SUCH PROXY.
A copy of the Annual Report to Stockholders for the fiscal year ended
January 31, 1998, has preceded this Notice and Proxy Statement.
By Order of the Board of Directors,
/s/ THOMAS P. BATTLE
---------------------
Thomas P. Battle
Secretary
May 20, 1998
<PAGE> 3
MITCHELL ENERGY & DEVELOPMENT CORP.
2001 TIMBERLOCH PLACE -- P. O. BOX 4000
THE WOODLANDS, TEXAS 77387-4000
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
Proxies are being solicited by the Board of Directors of the Company for
use at the Annual Meeting of Stockholders to be held on June 24, 1998, and at
any adjournment or adjournments thereof. In addition to mailing proxy materials,
such solicitations may be in person or by telephone by directors, officers or
employees of the Company, who will receive no additional compensation therefor.
Upon request, the Company will reimburse banks, nominees, and agents of the
stockholders for reasonable costs incurred by them in sending proxy materials to
beneficial owners of the Company's Class A Common Stock and its Class B Common
Stock (collectively, "Common Stock"). The entire cost of soliciting proxies in
the accompanying form will be borne by the Company.
This Proxy Statement and the proxy cards are first being mailed to
stockholders on or about May 20, 1998.
A PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE VOTING OF SUCH PROXY BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY WRITTEN NOTICE OF
REVOCATION TO THE SECRETARY OF THE COMPANY, OR BY VOTING IN PERSON AT THE
MEETING.
VOTING OF PROXIES
It is the policy of this Company to provide stockholders complete privacy
in voting. Proxy cards are returned in envelopes to our independent tabulating
agent, who receives, inspects, and tabulates the proxies. Voted proxies are not
seen by nor reported to the Company, except in aggregate number and in limited
circumstances.
The proxy card accompanying the Proxy Statement mailed to each stockholder
of record of the Company's Class A Common Stock at the close of business on May
6, 1998, is designed to permit such stockholder to vote in the election of
directors and on the proposals described in this statement. It provides space
for a stockholder to withhold voting for any or all nominees for the Board of
Directors, or to abstain from voting for any proposal if so desired.
The proxy card specifies Bernard F. Clark, Vice Chairman of the Company,
and Thomas P. Battle, General Counsel and Secretary of the Company, to vote all
shares represented by proxies returned to the Company. A stockholder wishing to
name as his proxy someone other than those designated on such proxy card may do
so by crossing out the names of the two designated proxies and inserting the
name of the person he wishes to act as his proxy. In that case, it will be
necessary for the stockholder to sign the proxy and deliver it to the person
named and for the person so named to be present and vote at the meeting. Proxy
cards so changed should not be mailed to the Company.
When a stockholder's proxy card specifies a choice with respect to a matter
being voted upon, the shares will be voted accordingly. If no such
specifications are made, the shares will be voted for the election of all
nominees as directors, in favor of the appointment of Arthur Andersen LLP as the
Company's independent public accountants, and in accordance with the discretion
of the person voting it with respect to any other business properly before the
meeting. The election of directors and the ratification of the appointment of
Arthur Andersen LLP as independent public accountants will require the
affirmative vote of a majority of the shares of Class A Common Stock voting in
person or by proxy at the Annual Meeting, assuming a quorum is present. The
Bylaws of the Company require, for a quorum, the presence at the Annual Meeting
in person or by proxy of the holders of a majority of the shares of capital
stock of the Company entitled to vote. Thus,
<PAGE> 4
abstentions and broker non-votes will not be included in vote totals and will
have no effect on the outcome of any vote, although they will be counted in the
determination of a quorum.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of record of shares of Class A Common Stock of the Company at
the close of business on May 6, 1998 are entitled to vote at the Annual Meeting
or any adjournment or adjournments thereof, each share having one vote on each
matter to be presented at the Annual Meeting. There were 22,321,142 shares of
the Company's Class A Common Stock outstanding on the record date.
To the knowledge of the Company, the only person owning beneficially more
than five percent of the Company's outstanding Class A Common Stock, its only
class of outstanding voting securities, as of March 13, 1998 is as set forth in
the following table:
<TABLE>
<CAPTION>
TOTAL AMOUNT
OF CLASS A
COMMON STOCK
BENEFICIALLY PERCENT
NAME AND ADDRESS OWNED OF CLASS
- ---------------- ------------ --------
<S> <C> <C>
George P. Mitchell.......................................... 14,506,604* 65.0%
2001 Timberloch Place
The Woodlands, Texas
</TABLE>
- ---------------
* See notes (a) and (b) to the table under "Security Ownership of Management."
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of each class of the
Company's Common Stock owned beneficially by each of its directors and nominees
for director, by its executive officers named in the Summary Compensation Table
and by all directors and executive officers as a group as of March 13, 1998:
<TABLE>
<CAPTION>
TOTAL AMOUNT TOTAL AMOUNT
OF CLASS A OF CLASS B
COMMON STOCK COMMON STOCK
BENEFICIALLY PERCENTAGE BENEFICIALLY PERCENT
NAME OWNED(a) OF CLASS A OWNED(a) OF CLASS B
- ---- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Robert Baldwin..................... 500 * -- *
Thomas P. Battle................... 8,640 * 25,333 *
Bernard F. Clark................... 28,571(c) * 40,271(c) *
William D. Eberle.................. 599 * 1,599 *
Shaker A. Khayatt.................. 266(d) * 266(d) *
Ben F. Love........................ 2,500 * 2,500 *
Walter A. Lubanko.................. 4,000 * 6,000 *
George P. Mitchell................. 14,506,604(b) 65.0% 13,747,590(b) 51.4%
J. Todd Mitchell................... 16,739 * 16,739 *
M. Kent Mitchell................... 24,348 * 24,348 *
Constantine S. Nicandros........... 3,506 * -- *
Philip S. Smith.................... -- * 37,333 *
W. D. Stevens...................... 63,250 * 132,083 *
Allen J. Tarbutton, Jr. ........... 13,500 * 46,332 *
Raymond L. Watson.................. 2,500 * 2,500 *
J. McDonald Williams............... -- * 2,500 *
All directors and executive
officers as a group (16
persons)......................... 14,675,523(b-e) 65.7% 14,085,394(b-e) 52.6%
</TABLE>
- ---------------
* Less than 1%.
2
<PAGE> 5
- ---------------
(a) Unless otherwise indicated, beneficial owners have sole rather than shared
voting and investment power respecting their shares, other than shared
rights created under joint tenancy or marital property laws as between the
Company's directors and officers and their respective spouses, if any.
(b) Includes shares held by George P. Mitchell's wife (511,253 Class A and
511,253 Class B), as to which Mr. Mitchell disclaims beneficial ownership.
(c) Includes shares held by Mr. Clark's wife (11,172 Class A and 15,872 Class
B), as to which Mr. Clark disclaims beneficial ownership.
(d) Includes shares held by Mr. Khayatt's wife (266 Class A and 266 Class B),
as to which Mr. Khayatt disclaims beneficial ownership.
(e) Includes shares which certain officers have a right to acquire within 60
days following March 13, 1998 by exercising stock options. The following
shares underlying such unexercised options were added to the holdings of
each of the following executive officers: Mr. Battle -- 5,000 Class A and
25,333 Class B; Mr. Mitchell -- 106,667 Class B; Mr. Stevens -- 57,508
Class A and 123,995 Class B; Mr. Smith -- 37,333 Class B; Mr.
Tarbutton -- 13,500 Class A and 44,832 Class B. No director or nominee for
director (other than Mr. Stevens and Mr. Mitchell) has the right to acquire
any shares within such 60 day period.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Twelve directors are to be elected and qualified, for a term commencing on
the date of this Annual Meeting and continuing until the next Annual Meeting of
Stockholders or until their successors have been duly elected and qualified.
Each nominee listed below currently serves as a member of the Company's Board of
Directors and was elected at the Annual Meeting held on June 25, 1997. In the
event that any nominee for director should become unavailable to serve, it is
intended that votes will be cast, pursuant to the proxy card, for such
substitute nominee as may be nominated by the Board of Directors. The Company
has no present knowledge that any of the nominees will be unable to serve.
The nominees for directors are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
Robert W. Baldwin......... 77 Consultant (Energy/Management); President of 1983
Gulf Refining and Marketing Company, a division
of Gulf Oil Corp. (1975-1981)
Bernard F. Clark.......... 76 Vice Chairman of the Board of the Company 1962
William D. Eberle......... 74 Chairman of the Board of Manchester Associates, 1976
venture capital consulting (since 1977); Of
Counsel on trade issues to Kaye, Scholar,
Fierman, Hays and Handler, attorneys-at-law
(since 1993)
Shaker A. Khayatt......... 62 President and Chief Executive Officer of 1972
Khayatt and Company, Inc., investment banking
(since 1979)
Ben F. Love............... 73 Advisory Director of Chase Bank of Texas, 1990
National Association (successor to Texas
Commerce Bank N.A.), since 1995; Chairman and
Chief Executive Officer of Texas Commerce
Bancshares, Inc. (1972-1989)
Walter A. Lubanko......... 72 Chairman and President of W. A. Lubanko & Co., 1972
Inc., investment banking (since 1977)
George P. Mitchell........ 78 Chairman of the Board and Chief Executive 1947
Officer of the Company
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND DIRECTOR
NAME AGE BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- ---- --- ------------------------------------------ --------
<S> <C> <C> <C>
J. Todd Mitchell.......... 39 President of The Discovery Bay Company, a 1993
seismic data analysis software company (since
1992); President of and geologist for Dolomite
Resources, Inc., a mineral exploration and
investments company (since 1987)
M. Kent Mitchell.......... 45 President and Chief Executive Officer of Bald 1988
Head Island Management, Inc., real estate
development and sales (since 1983)
Constantine S. 64 Chairman of CSN and Company, an investment and 1996
Nicandros............... consulting firm (since 1996); Chairman,
President and Chief Executive Officer of Conoco
Inc. (1987-1996); Vice Chairman of E.I. du Pont
de Nemours and Company (1991-1996)
W. D. Stevens............. 63 President and Chief Operating Officer of the 1992
Company (since 1994); President of Exxon
Company, U.S.A. (1988-1992)
Raymond L. Watson......... 71 Chairman of the Executive Committee of the 1983
Board of Directors of The Walt Disney Company,
entertainment company (since 1984); Vice
Chairman of The Irvine Co., real estate
development (since 1986)
</TABLE>
There are no family relationships by blood, marriage or adoption between
any nominee for director or any of the executive officers of the Company, except
that J. Todd Mitchell and M. Kent Mitchell are sons of George P. Mitchell.
The nominees for directors hold the following directorships in other public
corporations: William D. Eberle -- America Service Group, Ampco-Pittsburgh
Corp., Barry's Jewelers, Inc., FAC Realty Trust, Showscan Entertainment, Inc.,
and Sirrom Capital Corporation; Ben F. Love -- El Paso Energy Company;
Constantine S. Nicandros -- Cooper Industries, Inc.; and Raymond L.
Watson -- The Walt Disney Company and Irvine Apartment Communities (IAC).
George P. Mitchell could be deemed to be a control person with respect to
the Company by virtue of his ownership of Common Stock of the Company.
During the Company's fiscal year ended January 31, 1998 (hereinafter
"fiscal 1998"), Puro-Tech International, a company of which Shaker A. Khayatt is
Chairman of the Board of Directors, and Barry's Jewelers, Inc., a company of
which William D. Eberle is Chairman of the Board of Directors, each filed a
petition under federal bankruptcy laws.
The Company's Board of Directors has an Audit Committee which consisted
during all of fiscal 1998 of Ben F. Love, Walter A. Lubanko, Constantine S.
Nicandros and J. McDonald Williams. (Mr. Williams has elected not to stand for
re-election at this year's Annual Meeting.) During fiscal 1998, the Audit
Committee met two times. The functions performed by the Audit Committee include
reviewing the nature of the services rendered by the Company's independent
public accountants, relating to both auditing and nonauditing services. The
Committee also reviews, with representatives of the independent public
accountants, the scope of the independent public accountants' audit of the
Company's financial statements, results of those audits, and any significant
weaknesses in internal accounting controls identified by the independent public
accountants in the course of their audit. The Committee each year recommends to
the Board of Directors the appointment of a firm of independent public
accountants for the coming year, and reviews the various other presentations and
reports to the Board of Directors relating to accounting matters and financial
statements.
4
<PAGE> 7
The Company's Board of Directors has a Compensation Committee which
consisted during all of fiscal 1998 of Robert W. Baldwin, William D. Eberle,
Shaker A. Khayatt, M. Kent Mitchell and Raymond L. Watson. During fiscal 1998,
the Compensation Committee met five times. As stated in its Report on Executive
Compensation beginning at page 10 of this Proxy Statement, the Compensation
Committee establishes policies with respect to compensation for executives,
determines pay levels for senior executives including all named executive
officers, reviews compensation levels for all other members of Company senior
management, and sets and monitors overall compensation and benefits programs and
policies for the Company's entire work force.
The Company's Board of Directors has an Executive Committee which consists
of Ben F. Love, William D. Eberle, M. Kent Mitchell, J. Todd Mitchell and W. D.
Stevens. The Executive Committee met one time during fiscal 1998. The function
of the Executive Committee is to (i) select and nominate successor(s) to George
P. Mitchell in the event he were disabled or otherwise unable to function as
Chairman of the Board and Chief Executive Officer of the Company, (ii) nominate
individuals to serve as directors of the Company, and (iii) perform such other
functions as are delegated to it by the Board. The Committee will consider
stockholder recommendations for director sent to the Executive Committee, c/o
Thomas P. Battle, Secretary, Mitchell Energy & Development Corp., P.O. Box 4000,
The Woodlands, Texas 77387-4000.
The Company's Board of Directors met seven times during fiscal 1998 and
held two special telephonic meetings. Each director attended more than 75
percent of the aggregate number of meetings of directors and committees on which
he served.
Currently, each director who is not an employee of the Company receives
$47,500 a year for serving as a director and for serving as a member of one or
more committees. Each director who is an employee of the Company receives $100
for each directors' meeting which he attends. All directors are reimbursed for
any travel, lodging and other expenses incurred in connection with attending any
meetings of directors or a committee. Additionally, the Company offers to pay
the premium on a $100,000 term life insurance policy for any of its non-employee
directors who choose to maintain such coverage. Currently the Company provides
such insurance for four of its non-employee directors at an annual premium of
$192 per policy.
5
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for services rendered in all capacities during the
fiscal years ended January 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL SECURITIES
COMPENSATION(A) UNDERLYING NUMBER OF ALL OTHER
-------------------------- STOCK OPTION BONUS UNITS LTIP COMPEN-
FISCAL SALARY BONUS AWARDS(B) GRANTED(C) PAYOUTS SATION
NAME/PRINCIPAL POSITION YEAR ($) ($) (#) (#) ($) ($)
----------------------- ------ ------- ------- ------------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell 1998 841,667 320,000 168,000 52,000 -- 238,920(d)
Chairman and CEO 1997 744,167 320,000 60,000 -- -- 231,845(e)
1996 680,004 200,000 60,000 -- -- 237,365(f)
W. D. Stevens 1998 541,679 320,000 126,000 39,000 -- 33,101(g)
President and Chief Operating Officer 1997 445,845 320,000 45,000 -- -- 27,251(h)
1996 400,008 200,000 32,000 -- -- 24,600(j)
Philip S. Smith 1998 357,089 150,000 58,800 24,300 -- 21,425(k)
Senior Vice President 1997 347,556 150,000 21,000 -- -- 20,853(k)
1996 347,556 89,400 21,000 -- -- 20,853(k)
Allen J. Tarbutton, Jr. 1998 300,491 127,500 48,300 16,300 -- 18,029(k)
Senior Vice President 1997 286,008 127,500 19,000 -- -- 17,160(k)
1996 286,008 83,400 16,500 -- -- 17,160(k)
Thomas P. Battle 1998 257,500 68,500 27,300 13,100 -- 15,450(k)
Senior Vice President 1997 252,000 68,500 12,000 -- -- 15,120(k)
1996 252,000 39,000 12,000 -- -- 15,120(k)
</TABLE>
- ---------------
(a) In accordance with Securities and Exchange Commission ("SEC") regulations,
no amounts have been reported for perquisites and other personal benefits
since the aggregate value of such items provided to each named officer was
less than the lesser of 10% of his annual compensation or $50,000.
(b) These options were granted under the Company's 1995 Stock Option Plan at an
exercise price equal to the fair market value of the Company's Class B
stock on the date of grant. Such options are exercisable within ten years
from the date of grant and vest over a three-year period. Also, over
one-half of the 1998 grants would normally have been made early in fiscal
1999.
(c) These bonus units, which are the economic equivalent of stock appreciation
rights (SARs), were granted under the Company's 1997 Bonus Unit Plan at a
floor price equal to the fair market of the Company's Class B stock on the
date of grant. Such units are redeemable within ten years from the date of
grant and vest over a three-year period.
(d) For Mr. Mitchell, this consists of amounts contributed toward his personal
life insurance program ($210,000), rentals paid to him for business-related
use of properties that he owns ($28,320) (see "Certain Transactions") and
directors' meeting attendance fees ($600).
(e) For Mr. Mitchell, this consists of amounts contributed toward his personal
life insurance program ($210,000), rentals paid to him for business-related
use of properties that he owns ($21,345) (see "Certain Transactions") and
directors' meeting attendance fees ($500).
(f) For Mr. Mitchell, this consists of amounts contributed toward his personal
life insurance program ($210,000), rentals paid to him for business-related
use of properties that he owns ($26,765) (see "Certain Transactions") and
directors' meeting attendance fees ($600).
(g) For Mr. Stevens, this consists of Thrift and Savings Plan contributions
($32,501) and directors' meeting attendance fees ($600).
(h) For Mr. Stevens, this consists of Thrift and Savings Plan contributions
($26,751) and directors' meeting attendance fees ($500).
(i) Not used.
(j) For Mr. Stevens, this consists of Thrift and Savings Plan contributions
($24,000) and directors' meeting attendance fees ($600).
(k) For indicated amounts, this consists exclusively of Thrift and Savings Plan
contributions.
6
<PAGE> 9
STOCK OPTIONS
The following table shows the stock options granted to the named executive
officers during fiscal 1998 and the potential realizable value of those grants
(on a pre-tax basis) determined in accordance with SEC rules. The information in
this table shows how much the named executive officers may eventually realize in
future dollars under two hypothetical situations: if the stock gains 5% or 10%
in value per year compounded over the ten-year life of the options. These are
assumed rates of appreciation and are not intended to forecast future
appreciation of the Company's Class B Common Stock. Also included in this table
is the increase in value to all common shareholders using the same assumed rates
of appreciation.
STOCK OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(c) GRANT
OPTIONS EMPLOYEES IN PER EXPIRATION ----------------------------- DATE
NAME GRANTED(a) FISCAL YEAR(b) SHARE DATE 5% 10% VALUE(d)
- ---- ---------- -------------- -------- ---------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell........... 80,000 8.43% $21.75 2/21/07 $ 1,094,280 $ 2,773,112 $604,000
88,000(e) 9.27 26.125 12/17/07 1,445,831 3,664,012 805,200
W. D. Stevens................ 60,000 6.32 21.75 2/21/07 820,710 2,079,834 453,000
66,000(e) 6.95 26.125 12/17/07 1,084,373 2,748,009 603,900
Philip S. Smith.............. 28,000 2.95 21.75 2/21/07 382,998 970,589 211,400
30,800(e) 3.24 26.125 12/17/07 506,041 1,282,404 281,820
Allen J. Tarbutton, Jr....... 23,000 2.42 21.75 2/21/07 314,606 797,270 173,650
25,300(e) 2.66 26.125 12/17/07 415,676 1,053,403 231,495
Thomas P. Battle............. 13,000 1.37 21.75 2/21/07 177,821 450,631 98,150
14,300(e) 1.51 26.125 12/17/07 234,948 595,402 130,845
Increase in value to all common stockholders(f)................................... 763,293,000 1,934,330,000
</TABLE>
- ---------------
(a) The securities underlying the options are shares of Class B common stock.
(b) Based on the total number of options granted to employees under the 1995
Stock Option Plan.
(c) Calculated over a ten-year period, which is equal to the maximum term of
the options.
(d) Calculated using the Black-Scholes option pricing model, based on the
Company's current dividend policy, volatility based on stock price data
over the five years preceding the option grants and a risk-free interest
rate, which equaled, at the time of the grants, the yield on U. S. Treasury
Strips with a time to maturity that approximates the seven-year estimated
average life of the options. This resulted in Black-Scholes option values
of $7.55 and $9.15 per share, respectively, for the February 21, 1997 and
December 17, 1997 grants. The Company does not believe that the values
estimated by this model, or any other model, necessarily will be indicative
of the values to be realized by an executive.
(e) This award normally would have been made early in fiscal 1999. (See
discussion of long-term incentives on page 12 for additional information.)
(f) Calculated using the $23.9375 simple average of the per share closing
prices of the Class B Common Stock on February 21, 1997 and December 17,
1997 (the dates of all the fiscal 1998 option grants) and the total
weighted average number of common shares outstanding during fiscal 1998.
BONUS UNITS
The Company's bonus units are the economic equivalent of SARs. The
following table shows the bonus units granted to the named executive officers
during fiscal 1998 and the potential realizable value of those grants (on a
pre-tax basis) determined in accordance with SEC rules. The information in this
table shows how much the named executive officers may eventually realize in
future dollars under two hypothetical situations: if the stock gains 5% or 10%
in value per year compounded over the ten-year life of the units. These are
assumed rates of appreciation and are not intended to forecast future
appreciation of the Company's Class B
7
<PAGE> 10
Common Stock. Also included in this table is the increase in value to all common
shareholders using the same assumed rates of appreciation.
BONUS UNIT GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
--------------------------- ASSUMED RATES OF
PERCENT OF STOCK PRICE
TOTAL BONUS UNITS FLOOR APPRECIATION FOR BONUS
NUMBER OF GRANTED TO PRICE UNITS TERM(c) GRANT
BONUS UNITS EMPLOYEES IN PER EXPIRATION ---------------------- DATE
NAME GRANTED(a) FISCAL YEAR(b) SHARE DATE 5% 10% VALUE(d)
- ---- ----------- ----------------- ------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell............. 52,000 22.81 $26.125 12/17/07 $854,355 $2,165,098 $475,800
W. D. Stevens.................. 39,000 17.11 26.125 12/17/07 640,766 1,623,824 356,850
Philip S. Smith................ 24,300 10.66 26.125 12/17/07 399,247 1,011,167 222,345
Allen J. Tarbutton, Jr......... 16,300 7.15 26.125 12/17/07 267,807 678,675 149,145
Thomas P. Battle............... 13,100 5.75 26.125 12/17/07 215,232 545,438 119,865
</TABLE>
- ---------------
(a) The bonus unit values are based on prices for the Company's Class B common
stock.
(b) Based on the total number of bonus units granted to employees under the
1997 Bonus Unit Plan.
(c) Calculated over a ten-year period, which is equal to the maximum term of
the bonus units.
(d) Calculated using the Black-Scholes pricing model. (See note (d) on page 7
for additional information.)
Shown below is information with respect to stock options and bonus units
exercised during fiscal 1998 by the named executive officers and their holdings
of unexercised grants at January 31, 1998.
STOCK OPTION/BONUS UNIT EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION/BONUS UNIT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES/UNITS VALUE OF UNEXERCISED,
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED GRANTS OPTIONS/BONUS UNITS
ACQUIRED/BONUS AT JANUARY 31, 1998(#) AT JANUARY 31, 1998($)
UNITS SURRENDERED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS
George P. Mitchell.......... -- -- 60,000 280,000 550,000 1,085,000
W. D. Stevens............... 9,830 86,930 146,503 205,667 1,033,639 773,128
Philip S. Smith............. -- -- 21,000 79,800 193,375 363,825
Allen J. Tarbutton, Jr...... -- -- 44,333 67,467 370,267 315,745
Thomas P. Battle............ -- -- 22,000 39,300 206,125 189,263
BONUS UNITS
George P. Mitchell.......... -- -- -- 52,000 -- 45,500
W. D. Stevens............... -- -- -- 39,000 -- 34,125
Phillip S. Smith............ 38,000 308,813 -- 24,300 -- 21,263
Allen J. Tarbutton, Jr...... 40,000 419,063 -- 16,300 -- 14,263
Thomas P. Battle............ 1,500 12,563 -- 13,100 -- 11,463
</TABLE>
RETIREMENT PLAN
Eligibility for participation in the Company's qualified Retirement Plan is
extended to all employees (except those employees paid solely on a commission
basis) including executive officers, on an equal basis, on each February 1 and
August 1 immediately following the completion of one year of participation
service.
8
<PAGE> 11
Pension benefits are determined by final average annual compensation where
annual compensation is the sum of amounts shown in the columns labeled "Salary"
and "Bonus" in the Summary Compensation Table.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL
COMPENSATION FOR
36 CONSECUTIVE ANNUAL RETIREMENT INCOME AT AGE 65 EXPRESSED AS A STRAIGHT LIFE ANNUITY
MONTHS IN LAST --------------------------------------------------------------------------
120 MONTHS YEARS OF SERVICE
PRECEDING --------------------------------------------------------------------------
RETIREMENT 10 15 20 25 30 35 40
- ---------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$250,000.................................... $ 53,760 $ 80,641 $107,521 $107,521 $119,521 $139,442 $154,109
300,000.................................... 64,961 97,441 129,922 129,922 144,322 168,376 185,976
400,000.................................... 87,372 131,042 174,723 174,723 193,924 226,244 249,712
450,000.................................... 98,562 147,843 197,124 197,124 218,724 255,178 281,579
500,000.................................... 109,762 164,643 219,524 219,524 243,525 284,113 313,447
600,000.................................... 132,163 198,244 264,326 264,326 293,127 341,981 377,182
700,000.................................... 154,564 231,845 309,127 309,127 342,728 399,850 440,918
800,000.................................... 176,964 265,446 353,929 353,929 392,330 457,718 504,653
900,000.................................... 199,496 299,245 398,993 398,993 442,194 515,893 568,695
</TABLE>
Eligible employees will receive a retirement benefit equal to the greater
of the amounts computed under the following two benefit Formulas A and B upon
retirement. The monthly benefit payable under Formula A is equal to 1.65% times
average monthly compensation (defined as the average of the compensation
received in the 36 highest-paid consecutive calendar months in the last 10 years
of employment) plus 0.45% times average monthly compensation in excess of 150%
of covered compensation (defined as the average of Social Security Wage Bases
over the 35 years prior to the Social Security Retirement Age), such sum then
being multiplied by the lesser of years of credited service or twenty years. The
monthly benefit payable under Formula B is equal to 1.1% times average monthly
compensation plus 0.45% times average monthly compensation in excess of 100% of
covered compensation, such sum then being multiplied by years of credited
service (up to 35 years of service). Under both formulas, accrued benefits are
100% vested after five years of credited service.
The Employee Retirement Income Security Act of 1974 ("ERISA"), as amended
by the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") and the Tax
Reform Act of 1986, currently limits (i) the maximum benefits payable or
accruing under the Company's Retirement Plan and Thrift and Savings Plans on a
combined annual basis, (ii) the total benefit payable under the Retirement Plan
annually (currently $125,000), and (iii) the amount of compensation which can be
included for benefit calculation purposes (currently $160,000). The Company has
adopted supplemental arrangements on a non-qualified basis to provide that all
employees be credited with the full benefit accruing to such individuals under
the Retirement Plan notwithstanding such combined annual limitation, and to
maintain for certain employees who may be affected by the annual benefit limit
(for fiscal 1998, each of the named executive officers) total benefits upon
retirement at approximately the levels shown in the table set forth above.
Based on certain assumptions (which includes Board of Directors' approval),
illustrated above are the approximate annual benefits to which employees would
become entitled upon retirement at age 65 under the Retirement Plan and the
supplemental, non-qualified plans. The benefits set forth in the table reflect
the greater of the Plan's two formulas, are computed on a straight life annuity
basis, and would not be further reduced by Social Security income. For the
individuals named in the Summary Compensation Table of this Proxy Statement, the
credited years of service under the Retirement Plan, as of January 31, 1998, are
as follows: George P. Mitchell, 51 years; Thomas P. Battle, 15 years; Philip S.
Smith, 18 years; W. D. Stevens, 4 years; and Allen J. Tarbutton, Jr., 24 years.
Prior federal law required that any active employee start receiving his/her
pension no later than the April 1 following the calendar year in which the age
70 1/2 is reached. Any such employee who continued to work after age 70 1/2 was
required to commence benefit payments and continued to receive credit for any
additional service rendered after age 70 1/2. George P. Mitchell turned 70 1/2
at the time this law was required, so
9
<PAGE> 12
for fiscal 1998, George P. Mitchell received pension payments from the
Retirement Plan totaling $163,221 and payments from the supplemental
non-qualified retirement plan of $421,233.
SUPPLEMENTARY LIFE INSURANCE AND OTHER AGREEMENTS
The Company has agreements with Philip S. Smith and Allen J. Tarbutton,
Jr., whereby the Company will pay to such officer or his estate an amount, up to
a maximum of $250,000, upon the death of such officer or his retirement at or
after age 65, provided he is still employed with the Company at his death or at
age 65, whichever occurs first. The Company has purchased a life insurance
policy on Mr. Smith's life to insure against such risk. There was no cost to the
Company for this policy for fiscal 1998 as a result of the prior conversion of
such policy to universal life coverage.
SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
The Company also has an agreement with George P. Mitchell, whereby the
Company will pay to Mr. Mitchell's surviving spouse, if any, a supplemental
surviving spouse benefit in the event that Mr. Mitchell dies while still
employed by the Company, or following termination of employment resulting from
total and permanent disability. Such supplemental surviving spouse benefit shall
be in an annual amount equal to the greater of (i) Mr. Mitchell's annual base
salary from the Company in effect at the time of his death or as of the date he
becomes totally and permanently disabled, or (ii) $625,000, and shall be payable
until the earlier to occur of (i) 36 monthly installments or (ii) the death of
such surviving spouse.
SEVERANCE COMPENSATION
The Company has severance compensation agreements with Philip S. Smith and
Allen J. Tarbutton, Jr. The terms of the severance agreements are invoked only
in the event of a change of control (i.e., George P. Mitchell no longer holds
majority voting control of the Company). Generally, if the executive is no
longer employed in a substantially equivalent position and being paid a salary
at least equivalent to the salary being paid immediately prior to the change of
control ("Loss of Position"), the executive will receive an amount monthly
($11,250 for Mr. Smith; $9,600 for Mr. Tarbutton) for 60 months following the
Loss of Position. No payments for Loss of Position due to a change of control
shall be owed or paid to an executive after he reaches the age of 66, or if he
voluntarily severs employment with the Company for any reason other than Loss of
Position or if the Company discharges such executive for cause.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 (the "Exchange Act") that might incorporate future filings, including
this Proxy Statement, in whole or in part, this Compensation Committee Report on
Executive Compensation and the Cumulative Shareholder Return Graph on page 14
shall not be incorporated by reference into any such filings.
ROLE OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for administering compensation programs for the Company's
executives. Responsibilities of the Committee include:
- Establishing policies with respect to compensation for executives;
- Determining pay levels for senior executives including all named
executive officers;
- Reviewing compensation levels for all other members of Company senior
management; and
- Setting and monitoring overall compensation and benefits programs and
policies for the Company's entire workforce.
10
<PAGE> 13
The Committee is comprised of five non-employee directors.
COMPENSATION PHILOSOPHY
The Company's overall compensation philosophy is to provide executives with
compensation opportunities which reflect:
- Overall Company performance relative to historical performance, Company
goals and objectives, and industry and national economic conditions;
- Individual efforts and contributions which have added value to the
success of the Company;
- Competitive market pay levels and practices; and
- Internal equity issues.
While the Committee considers pay levels and program practices of other
companies of similar size and operating characteristics, pay levels for the
Company's executives are necessarily a function of individual and Company
performance, including expected future financial and operating conditions.
The companies included in the industry groups in the Cumulative Shareholder
Return Graph on page 14 are not exclusively the same companies with which the
Company compares compensation practices and levels. By nature of the Company's
diversified business operations, it must consider such practices in the
Exploration and Production, as well as Gas Gathering, Processing and Pipeline
industries, in evaluating competitive salaries for individual executives. In
choosing the companies with which to compare compensation levels and practices,
the Company considers those companies with whom it competes for executive talent
in each line of business.
Over the past few years, the Company has shifted its compensation
philosophy to target executive total compensation levels closer to the 50th
percentile of the competitive market. This change in philosophy has resulted in
an emphasis away from fixed base salaries (which were shown to be near the 75th
percentile of the market a few years ago) and toward variable "at risk"
compensation. In addition, more emphasis has also been placed on the longer term
component of variable compensation for executives (i.e., equity-based
compensation).
In determining overall compensation, the Committee does not assign
quantitative weight to different factors or follow mathematical formulae.
Rather, the Committee exercises its discretion and makes a judgment after
considering the factors it deems relevant. A discussion of each of the key
elements of the Company's executive compensation program and the factors
considered in setting each element follows. In determining any one element, the
Committee necessarily considers the effect the element has on the total
compensation package.
Effective for tax years beginning on or after January 1, 1994, Section
162(m) of the Internal Revenue Code (the "Code") limits the deductibility of
certain compensation paid to the CEO and to each of the four highest paid
executive officers who are employed at year end to $1 million per year. However,
the policy of this Committee is to establish and maintain a compensation program
which maximizes the creation of long-term shareholder value. In this regard, the
Committee is obligated to the Board and to the shareholders of the Company to
recognize and reward performance which increases the value of the Company.
Accordingly, the Committee will continue to exercise discretion in those
instances where a purely mechanical approach necessary under tax law
considerations would compromise the interests of shareholders.
BASE SALARIES
Base salaries for executive officer positions are determined, in part, by
competitive pay practices. Each year, the Company obtains information through
participation in industry specific executive compensation surveys conducted by
independent consultants. The Committee analyzes the survey information and makes
adjustments to reflect the Committee's assessment of individual performance,
experience and scope of responsibility. In fiscal 1998, an analysis of
competitive data found in such surveys indicated that, while the
11
<PAGE> 14
mix between cash and stock-based compensation still differs from competitive
norms, base salaries and targeted bonus levels are much more in line with those
found among comparable companies. After two years of minimal executive base
salary movement, the Committee approved salary increases in fiscal 1998 for
nearly all executives, including all of the named executives.
ANNUAL INCENTIVE BONUSES
Executives are eligible to receive annual cash bonuses based on the overall
performance of the Company, as well as individual contributions and performance.
Bonuses are designed to reward performance, and as such, are not guaranteed.
Awards are determined based on the Committee's discretionary assessment of
performance. Some of the factors the Committee considers in its assessment
include:
- Revenues;
- Divisional operating earnings;
- Net earnings;
- Reserve replacement; and
- Expense reduction.
Bonuses are not based on specific achievement of predetermined criteria;
rather the Committee considers all of the above factors, as well as the current
and expected operating climate, when deciding on specific awards. This
discretion allows the Committee to utilize its judgment in granting awards
which, it believes, truly reflect individual effort expended and the results
produced by those efforts. For fiscal 1998, each of the above factors were
heavily considered. However, many external market conditions, including
significant industry employment (and turnover) activities, led to the awarding
of actual bonuses for fiscal 1998 performance which were fairly consistent with
those awarded in fiscal 1997.
In addition to granting bonuses to executives, fiscal 1998 bonus awards
were extended to a larger number of employees below the executive level than had
previously been done. These awards were not broad-based but, rather,
discretionary and based on individual contributions.
LONG-TERM INCENTIVES
Long-term incentives are provided pursuant to the Company's Stock Option
and Bonus Unit Plans. Both types of plans provide a direct link between
shareholder return (through stock price appreciation) and long-term incentive
compensation for executives. Based on information provided by industry surveys
and independent consulting firms regarding long-term incentive compensation
practices, the Committee has decided that annual long-term incentives should be
awarded to executives, including the CEO, based upon multiples of their salaries
similar to those used by comparable companies. Awards are granted on an annual
basis and at the sole discretion of the Committee. The criteria for determining
individual awards include individual performance, scope of responsibility and
organizational level.
Stock Options
Stock options awarded to named executive officers during fiscal 1998 are
set forth on page 7 of this Proxy Statement in the table entitled "Stock Option
Grants in Fiscal 1998". For the third consecutive year, stock option awards were
granted under the Company's 1995 Stock Option Plan to senior executives in an
effort to bring the Company in line with competitive practices and to promote
mutual commitment to the achievement of longer term performance goals. The stock
option grants expiring on December 17, 2007 normally would have been granted in
early fiscal 1999. However, due to competitive market pressures, the Committee
decided to accelerate these grants by two months to December 1997.
12
<PAGE> 15
Bonus Units
Bonus units awarded to named executive officers during fiscal 1998 are
shown on page 8 of this Proxy Statement in the table entitled "Bonus Unit Grants
in Fiscal 1998". These bonus units were granted under the Company's 1997 Bonus
Unit Plan, the terms of which are essentially identical to the 1995 Stock Option
Plan, except that bonus units can only be redeemed for cash (similar to an SAR).
In addition, the 1997 Bonus Unit Plan provides that any bonus units granted
under the Plan automatically reduce the number of shares available for grant
under the 1995 Stock Option Plan. These bonus units were granted in addition to
stock options in order to further strengthen the longer term incentive component
of compensation for senior executives and to provide a more comparable mix of
total compensation relative to the market.
CEO COMPENSATION
The Committee is also responsible for establishing pay levels for the CEO.
The compensation of the CEO reflects the same elements, and the Committee
considers the same factors described for the other executives in determining the
CEO's total compensation (i.e., base salary plus bonuses plus long-term
incentives). A recent evaluation of Mr. Mitchell's total compensation against
competitive data revealed that it approximated the 50th percentile of the total
cash compensation of the CEOs of comparable companies. Mr. Mitchell's bonus
award for fiscal 1998 was determined in much the same manner as the other named
executives. Mr. Mitchell received a 13.3% increase in base salary during fiscal
1998. In addition, Mr. Mitchell was granted stock options for the third
consecutive year, in addition to bonus units, in a continuing effort to bring
his long-term compensation more in line with CEOs of comparable companies.
As the founder and majority owner of the Company, Mr. Mitchell has a
significant portion of his wealth invested in the Company's stock. His
significant stock ownership provides a strong incentive for Company management
to maximize shareholder value.
The Company contributes $210,000 per year toward Mr. Mitchell's personal
life insurance program. Mr. Mitchell is currently receiving distributions from
the Company's pension plan (as required by IRS regulations and based on previous
contributions made on his behalf). No additional contributions are being made on
Mr. Mitchell's behalf to the Company's Thrift and Savings Plan.
Mr. Robert W. Baldwin
Mr. William D. Eberle
Mr. Shaker A. Khayatt
Mr. M. Kent Mitchell
Mr. Raymond L. Watson
13
<PAGE> 16
CUMULATIVE SHAREHOLDER RETURN GRAPH
The following graph sets forth cumulative total shareholder return for the
Company's voting Common Stock, the Standard & Poor's 500 Stock Index ("S&P 500
Index") and the Dow Jones Oil -- Secondary Index for the years indicated as
prescribed by SEC rules. The information contained in this graph is not
necessarily indicative of future Company performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG MITCHELL ENERGY & DEVELOPMENT CORP., THE S&P 500 INDEX
AND THE DOW JONES OIL -- SECONDARY INDEX
<TABLE>
<CAPTION>
DOW JONES
MEASUREMENT PERIOD OIL --
(FISCAL YEAR COVERED) S&P 500 SECONDARY MEDC
<S> <C> <C> <C>
1/93 100 100 100
1/94 113 112 129
1/95 113 100 102
1/96 153 118 118
1/97 194 147 154
1/98 246 147 205
</TABLE>
- ---------------
* Total return for each of the last five fiscal years ending January 31. Assumes
$100 was invested on January 31, 1993 in the Company's voting Common Stock or
in the indicated index and that dividends were reinvested as received.
CERTAIN TRANSACTIONS
When the Company became a publicly owned corporation in 1972, it adopted a
policy that it would not permit its officers and directors to compete with the
Company in any manner and that it would not, on terms less favorable to the
Company than could have been arranged with an unaffiliated third party, enter
into any of the following transactions: (i) make loans to officers, directors or
stockholders and (ii) sell to or purchase from its officers or directors any
properties or interests therein. Management of the Company believes that all of
the transactions summarized below are in keeping with this established policy.
Prior to the time the Company became a publicly held corporation, George P.
Mitchell acquired interests in several oil and gas properties in which the
Company also owns interests and for which the Company is operator. The Company
distributes to Mr. Mitchell his share of the revenues and charges him for his
share of the costs and expenses associated with these oil and gas operations.
G. Scott Mitchell, an adult son of George P. Mitchell, through LifeForms,
Inc. ("LifeForms"), a company of which he is Secretary/Treasurer and in which he
and his brother M. Kent Mitchell have a 44% ownership interest and a 5%
ownership interest, respectively, during the first six months of fiscal 1998
purchased 82 developed lots for residential development in The Woodlands from a
subsidiary of the Company,
14
<PAGE> 17
at a total purchase price of $2,776,303. The price contracted for and paid and
the terms of payment for each lot were comparable to those paid to the
subsidiary by unrelated parties for similar lots in the same areas. Also during
the first six months of fiscal 1998, LifeForms paid $100,906 toward The
Woodlands' participative builders' advertising program. Such advertising and
financing arrangements with LifeForms were similar to arrangements with other
builders in The Woodlands. On July 31, 1997, the Company sold The Woodlands
Corporation, its real estate subsidiary.
Both GPM, Inc., a corporation wholly-owned by Mr. Mitchell, and Mrs.
Mitchell lease space from a subsidiary of the Company. The total rent charged
during fiscal 1998 was $77,250. In addition, the Company provides, at cost,
various administrative services to GPM, Inc., including temporary personnel,
telephone, property tax, insurance and legal services, and copier equipment,
which during fiscal 1998 aggregated $73,442.
GPM, Inc. is also included in the Company's high deductible Workers'
Compensation program. During fiscal 1998, GPM, Inc. reimbursed the Company for
claims and/or losses under such Workers' Compensation program in the amount of
$78,495.
During fiscal 1998, the Company incurred business promotion charges in the
amount of $87,233 at hotels owned by a company of Mr. Mitchell's in connection
with the Galveston Mardi Gras celebration.
The Company paid Mr. Mitchell rental reimbursements in the amount of
$28,320 during fiscal 1998 for lodging expenses when he is out-of-town on
Company-related business and for Company-related use of properties which he
owns.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
M. Kent Mitchell, a director of the Company and a member of the
Compensation Committee, has a 5% ownership interest in LifeForms. See "Certain
Transactions" for a discussion of certain business transactions during fiscal
1998 between such company and the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Exchange Act ("Section 16") requires that reports of
beneficial ownership of Common Stock and changes in such ownership be filed with
the Securities and Exchange Commission by the Company's directors and executive
officers. The Company is required to conduct a review and to identify in its
proxy statement each director or officer who failed to file any required reports
under Section 16 on a timely basis. To the Company's knowledge, all Section 16
reporting requirements applicable to its other directors and executive officers
were complied with for fiscal 1998.
PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company proposes the appointment of Arthur
Andersen LLP, independent public accountants, to audit the accounts of the
Company for the fiscal year ending January 31, 1999. If the stockholders do not
appoint Arthur Andersen LLP, the selection of independent public accountants
will be made by the Board of Directors, and Arthur Andersen LLP may at that time
be considered for such appointment.
Arthur Andersen LLP has served as the Company's independent public
accountants continuously since 1973. Representatives of Arthur Andersen LLP will
be present at the Annual Meeting of Stockholders and shall be accorded the
opportunity to make a statement if they so desire, and will also be available to
respond to appropriate questions from stockholders.
15
<PAGE> 18
STOCKHOLDER PROPOSALS
To permit the Company and its stockholders to deal with stockholder
proposals in an informed and orderly manner, the Bylaws establish an advance
notice procedure with regard to the nomination (other than by or at the
direction of the Board of Directors) of candidates for election to the Board of
Directors and with regard to certain matters to be brought before an Annual
Meeting of Stockholders. In general, written notice must be received by the
Secretary of the Company not less than 20 days nor more than 60 days prior to
the meeting and must contain certain specified information concerning the person
to be nominated or the matters to be brought before the meeting as well as the
stockholder submitting the proposal. A copy of the applicable Bylaw provisions
may be obtained, without charge, upon written request to the Secretary of the
Company at the address set forth on page 1 of this Proxy Statement.
In order to be included in the proxy materials for the 1999 Annual Meeting,
stockholder proposals must be received by the Company on or before January 20,
1999.
OTHER MATTERS
The Board of Directors does not intend to bring any matter before the
Annual Meeting other than those mentioned above. However, if any other matters
should be properly presented to the meeting for action by the stockholders or
should otherwise come before the meeting, it is intended that the holders of the
proxies with discretionary authority to vote on such other matters will vote
thereon in their discretion.
By Order of the Board of Directors,
/s/ THOMAS P. BATTLE
--------------------
Thomas P. Battle
Secretary
16
<PAGE> 19
MITCHELL ENERGY & DEVELOPMENT CORP.
[MITCHELL LOGO]
<PAGE> 20
PROXY
MITCHELL ENERGY & DEVELOPMENT CORP.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 24, 1998
The undersigned hereby appoints Bernard F. Clark and Thomas P. Battle, or
either of them, as Proxies, with power of substitution, and authorizes them, or
either of them, to represent the undersigned at the Annual Meeting of
Stockholders of Mitchell Energy & Development Corp. to be held on June 24,
1998, or any adjournment thereof, and to vote as follows the number of shares
which the undersigned would be entitled to vote if personally present.
This Proxy will be voted in accordance with your instructions or, if no
instructions are indicated, will be voted for the election of all nominees as
directors, in favor of the appointment of Arthur Andersen LLP as the Company's
independent public accountants, and in accordance with the discretion of the
person voting it with respect to any other business properly before the
meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE MARK YOUR VOTES
[X] AS INDICATED
IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL NO. 1
AND "FOR" PROPOSAL NO. 2.
1. Election of Directors
FOR all nominees WITHHOLD AUTHORITY
listed (except as to vote for all
indicated to the contrary) nominees listed
[ ] [ ]
Nominees: Robert W. Baldwin, Bernard F. Clark, William D. Eberle, Shaker A.
Khayatt, Ben F. Love, Walter A. Lubanko, George P. Mitchell, J. Todd Mitchell,
M. Kent Mitchell, Constantine S. Nicandros, W. D. Stevens and Raymond L.
Watson.
To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.
- --------------------------------------------------------------------------------
2. The appointment of Arthur Andersen LLP as the Company's Independent public
accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting.
I PLAN TO ATTEND MEETING. [ ]
Signature(s) Date
----------------------------------------- -------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
