<PAGE> 1
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 28, 2000
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
28, 2000, at 10:00 A.M. Central Daylight Time, for the following purposes:
1. To elect a Board of nine (9) directors;
2. To consider and act upon a proposal to amend Article Four of the
Company's Restated Articles of Incorporation, as amended, (i) combining the
Company's two classes of common stock into a single class of voting common
stock by reclassifying each issued share of the Company's Class B Common
Stock, $0.10 par value, into one share of Class A Common Stock, $0.10 par
value, (ii) increasing the number of authorized shares of Class A Common
Stock from 100,000,000 to 200,000,000, and (iii) establishing the
preferences, limitations and relative rights of the Class A Common Stock;
3. 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, 2001; and
4. 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 9, 2000, are entitled to vote on the
election of directors and on all of the proposals described in this statement at
the Annual Meeting or any adjournment or adjournments thereof. Holders of Class
B Common Stock of record at the close of business on May 9, 2000, are entitled
to vote on the proposed charter amendment at the Annual Meeting or any
adjournment of adjournments thereof.
Information concerning the matters to be acted upon at the Annual Meeting
is set forth in the accompanying Proxy Statement.
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, 2000, has preceded this Notice and Proxy Statement.
By Order of the Board of Directors,
/s/Thomas P. Battle
Secretary
May 25, 2000
<PAGE> 2
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 28, 2000, 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 company has engaged ChaseMellon
Shareholder Services, L.L.C. to assist in the solicitation of proxies for the
Annual Meeting for a fee of $7,500.00, plus reasonable expenses. 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 25, 2000.
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
9, 2000, is designed to permit such stockholder to vote in the election of
directors and on the other 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 accompanying the Proxy Statement mailed to each stockholder of record
of the Company's Class B Common Stock at the close of business on May 9, 2000,
is designed to permit such stockholder to vote on the proposed charter amendment
or to abstain from voting for such 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 both the proposed charter amendment referred
to in the Notice of Annual Meeting and 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
<PAGE> 3
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 proposed charter amendment will
require the affirmative vote of two-thirds of the outstanding shares of both the
Class A and Class B Common Stock entitled to vote on the matter. 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. Abstentions and broker non-votes will not be included
in vote totals and will have no effect on the outcome of any vote, except in the
case of the proposed charter amendment, where they will have the same legal
effect as a vote against the amendment. However, abstentions and broker
non-votes 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 9, 2000 are entitled to vote on the election of
directors and on all of the proposals described in this statement 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 22,305,433
shares of the Company's Class A Common Stock outstanding on the record date.
Holders of record of Class B Common Stock of the Company at the close of
business of May 9, 2000 are entitled to vote on the proposed charter amendment,
each share having one vote, at the Annual Meeting or any adjournment or
adjournments thereof. There were 26,797,851 shares of the Company's Class B
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 15, 2000 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.......................................... 14,283,422* 64.0%
2001 Timberloch Place
The Woodlands, Texas
</TABLE>
- ---------------
* See notes (a) and (b) to the table under "Security Ownership of Management."
2
<PAGE> 4
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 15, 2000:
<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............... 3,658 * 46,563(e) *
Bernard F. Clark............... 28,571(c) * 30,771(c) *
William D. Eberle.............. 599 * 599 *
Shaker A. Khayatt.............. 266(d) * 266(d) *
Ben F. Love.................... 2,500 * 2,500 *
George P. Mitchell............. 14,283,422(b) 64.0% 13,669,255(b)(e) 51.0%
J. Todd Mitchell............... 16,739 * 16,739 *
M. Kent Mitchell............... 24,348 * 24,348 *
Philip S. Smith................ -- * 90,533(e) *
W. D. Stevens.................. 63,250(e) * 241,750(e) *
Allen J. Tarbutton, Jr. ....... 25,874(e) * 102,373(e) *
All directors and executive
officers as a group (12
persons)..................... 14,449,727(b-e) 64.7% 14,225,697(b-e) 53.1%
</TABLE>
- ---------------
* Less than 1%.
(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 10,872 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 15, 2000 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 -- 46,533 Class B; Mr.
Mitchell -- 295,332 Class B; Mr. Stevens -- 57,508 Class A and 233,662
Class B; Mr. Smith -- 90,533 Class B; Mr. Tarbutton -- 13,500 Class A and
88,866 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.
3
<PAGE> 5
PROPOSAL 1 -- ELECTION OF DIRECTORS
Nine 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 30, 1999. 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..................... 79 Consultant (Energy/Management); President 1983
of Gulf Refining and Marketing Company, a
division of Gulf Oil Corp. (1975-1981)
Bernard F. Clark...................... 78 Vice Chairman of the Board of the Company 1962
William D. Eberle..................... 76 Chairman of the Board of Manchester 1976
Associates, 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..................... 64 President and Chief Executive Officer of 1972
Khayatt and Company, Inc., investment
banking (since 1979)
Ben F. Love........................... 75 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) Co.,
Inc., investment banking (since 1977)
George P. Mitchell.................... 80 Chairman of the Board and Chief Executive 1947
Officer of the Company
J. Todd Mitchell...................... 41 President of GPM, Inc., private 1993
investments (since 1998); President of The
Discovery Bay, a 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...................... 47 President and Chief Executive Officer of 1988
Bald Head Island Management, Inc., real
estate development and sales (since 1983)
W. D. Stevens......................... 65 President and Chief Operating Officer of 1992
the Company (since 1994); President of
Exxon Company, U.S.A. (1988-1992)
</TABLE>
4
<PAGE> 6
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., Konover Property Trust (formerly FAC Realty Trust), and Showscan
Entertainment, Inc.; and Ben F. Love -- El Paso Energy Company.
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.
The Company's Board of Directors has an Audit Committee which included
during all of the fiscal year ended January 31, 2000 (hereinafter "fiscal 2000")
Ben F. Love and Shaker A. Khayatt and for a portion of fiscal 2000, Robert W.
Baldwin, Constantine S. Nicandros and Walter A. Lubanko (Messrs. Lubanko and
Nicandros passed away during fiscal 2000). During fiscal 2000, the Audit
Committee met three 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.
The Company's Board of Directors has a Compensation Committee which
included during all of fiscal 2000 Robert W. Baldwin, William D. Eberle and M.
Kent Mitchell and for a portion of fiscal 2000 Shaker A. Khayatt. During fiscal
2000, the Compensation Committee met five times. As stated in its Report on
Executive Compensation beginning at page 11 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 2000. 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 six times during fiscal 2000 and held
three 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 two of its non-employee directors at an annual premium of
$192 per policy.
5
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for services rendered in all capacities during the
fiscal years ended January 31, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL SECURITIES
COMPENSATION(A) UNDERLYING NUMBER OF ALL OTHER
-------------------------- STOCK OPTION BONUS UNITS LTIP COMPEN-
FISCAL SALARY BONUS AWARDS(B) GRANTED(C) PAYOUTS SATION
NAME/PRINCIPAL POSITION YEAR ($) ($) (#) (#) ($) ($)
- ----------------------- ------ ------- ------- ------------ ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell 2000 925,000 350,000 110,000 -- -- 210,400(d)
Chairman and CEO 1999 895,833 -- -- -- -- 210,600(e)
1998 841,667 320,000 168,000 52,000 -- 238,920(f)
W. D. Stevens 2000 605,007 320,000 -- 90,000 -- 36,700(g)
President and Chief Operating Officer 1999 577,512 -- -- -- -- 35,251(h)
1998 541,679 320,000 126,000 39,000 -- 33,101(i)
Philip S. Smith 2000 376,708 160,000 -- 38,000 -- 22,603(k)
Senior Vice President 1999 368,080 -- -- -- -- 22,085(k)
1998 357,089 150,000 58,800 24,300 -- 21,425(k)
Allen J. Tarbutton, Jr. 2000 321,500 135,000 -- 36,000 -- 19,290(k)
Senior Vice President 1999 312,984 -- -- -- -- 18,779(k)
1998 300,491 127,500 48,300 16,300 -- 18,029(k)
Thomas P. Battle 2000 270,375 165,000 -- 20,700 -- 16,223(k)
Senior Vice President 1999 265,333 -- -- -- -- 15,920(k)
1998 257,500 68,500 27,300 13,100 -- 15,450(k)
</TABLE>
- ---------------
(a) Beginning in fiscal 1999, each of the named officers was eligible to
participate in the Company's 1998 Mutual Fund Option Plan by exchanging
self-designated percentages of his salary and/or bonus and other cash
compensation for options to purchase mutual fund shares at a later date.
Reported compensation amounts for fiscal years 1999 and 2000 include all
compensation earned by the applicable officer, whether paid in cash or
mutual fund options. Additionally, 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. Normally, over one-half of
the 1998 grants would 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) and directors' meeting attendance fees
($400).
(e) For Mr. Mitchell, this consists of amounts contributed toward his personal
life insurance program ($210,000) and directors' meeting attendance fees
($600).
(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 ($28,320) and directors' meeting attendance
fees ($600).
(g) For Mr. Stevens, this consists of thrift and savings matching contributions
($36,300) and directors' meeting attendance fees ($400).
(h) For Mr. Stevens, this consists of thrift and savings matching contributions
($34,651) and directors' meeting attendance fees ($600).
(i) For Mr. Stevens, this consists of thrift and savings matching contributions
($32,501) and directors' meeting attendance fees ($600).
(j) Not used.
(k) For the indicated amounts, this consists exclusively of thrift and savings
matching contributions.
6
<PAGE> 8
STOCK OPTIONS
The following table shows the stock options granted to the named executive
officers during fiscal 2000 and the potential realizable value of those grants
(on a pre-tax basis) determined in accordance with SEC rules. The information in
this table shows how much the named executive officers may eventually realize in
future dollars under two hypothetical situations: if the stock gains 5% or 10%
in value per year compounded over the ten-year life of the options. These are
assumed rates of appreciation and are not intended to forecast future
appreciation of the Company's Class B Common Stock. Also included in this table
is the increase in value to all common shareholders using the same assumed rates
of appreciation.
STOCK OPTION GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(c) GRANT
OPTIONS EMPLOYEES IN PRICE ------------------------- DATE
GRANTED(a) FISCAL YEAR(b) PER SHARE EXPIRATION 5% 10% VALUE(d)
NAME (#) (%) ($) DATE ($) ($) ($)
- ---- ---------- -------------- --------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell......... 110,000 27.13 12.3125 3/05/09 851,763 2,158,530 348,700
W. D. Stevens.............. -- -- -- -- -- -- --
Philip S. Smith............ -- -- -- -- -- -- --
Allen J. Tarbutton, Jr. ... -- -- -- -- -- -- --
Thomas P. Battle........... -- -- -- -- -- -- --
Increase in value to all
common stockholders(e)... 380,335,409 963,842,514
</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 option 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 a Black-Scholes
option value of $3.17 per share for the March 5, 1999 grants. The Company
does not believe that values estimated by this model, or any other model,
necessarily will be indicative of the values to be realized by an executive.
(e) Calculated using the $12.3125 closing price of the Class B Common Stock on
March 5, 1999 (the date of all the fiscal 2000 option grants) and the total
weighted average number of common shares outstanding during fiscal 2000.
7
<PAGE> 9
BONUS UNITS
The Company's bonus units are the economic equivalent of SARs. The
following table shows the bonus units granted to the named executive officers
during fiscal 2000 and the potential realizable value of those grants (on a
pre-tax basis) determined in accordance with SEC rules. The information in this
table shows how much the named executive officers may eventually realize in
future dollars under two hypothetical situations: if the stock gains 5% or 10%
in value per year compounded over the ten-year life of the units. These are
assumed rates of appreciation and are not intended to forecast future
appreciation of the Company's Class B Common Stock.
BONUS UNIT GRANTS IN FISCAL 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF RATES OF STOCK PRICE
NUMBER OF TOTAL BONUS APPRECIATION FOR
BONUS UNITS GRANTED FLOOR BONUS UNITS TERM(c) GRANT
UNITS TO EMPLOYEES PRICE --------------------- DATE
GRANTED(a) IN FISCAL YEAR(b) PER SHARE EXPIRATION 5% 10% VALUE(d)
NAME (#) (%) ($) DATE ($) ($) ($)
- ---- ---------- ----------------- --------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
George P. Mitchell..... -- -- -- -- -- -- --
W. D. Stevens.......... 90,000 36.06 12.3125 3/05/09 696,897 1,766,070 285,300
Philip S. Smith........ 38,000 15.22 12.3125 3/05/09 294,245 745,674 120,460
Allen J. Tarbutton,
Jr................... 36,000 14.42 12.3125 3/05/09 278,759 706,428 114,120
Thomas P. Battle....... 20,700 8.29 12.3125 3/05/09 160,286 406,196 65,619
</TABLE>
- ---------------
(a) The bonus unit values are based on prices for the Company's Class B Common
Stock.
(b) Based on the total number of bonus units granted to employees under the
1997 Bonus Unit Plan.
(c) Calculated over a ten-year period, which is equal to the maximum term of
the bonus units.
(d) Calculated using the Black-Scholes pricing model -- (see note (d) to the
preceding table for additional information).
8
<PAGE> 10
Shown below is information with respect to stock options and bonus units
exercised during fiscal 2000 by the named executive officers and their holdings
of unexercised grants at January 31, 2000.
STOCK OPTION/BONUS UNIT EXERCISES IN FISCAL 2000
AND YEAR-END OPTION/BONUS UNIT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES/
UNITS UNDERLYING VALUE OF UNEXERCISED,
SHARES UNEXERCISED GRANTS IN-THE-MONEY GRANTS
ACQUIRED/BONUS AT JANUARY 31, 2000(#) AT JANUARY 31, 2000($)
UNITS SURRENDERED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS
George P. Mitchell.......... -- -- 231,999 166,001 595,000 1,140,625
W. D. Stevens............... -- -- 271,170 42,000 609,193 15,000
Philip S. Smith............. -- -- 81,199 19,601 208,250 7,000
Allen J. Tarbutton, Jr. .... -- -- 94,699 16,101 269,563 5,750
Thomas P. Battle............ 10,000 7,500 42,199 9,101 117,500 3,250
BONUS UNITS
George P. Mitchell.......... -- -- 34,666 17,334 -- --
W. D. Stevens............... -- -- 26,000 103,000 -- 916,875
Philip S. Smith............. -- -- 16,200 46,100 -- 387,125
Allen J. Tarbutton, Jr. .... -- -- 10,866 41,434 -- 366,750
Thomas P. Battle............ -- -- 8,733 25,067 -- 210,881
</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. 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.................................... $ 53,474 $ 80,212 $106,949 $106,949 $118,949 $138,774 $153,441
300,000.................................... 64,675 97,012 129,350 129,350 143,750 167,708 185,309
400,000.................................... 87,076 130,613 174,151 174,151 193,352 225,577 249,044
450,000.................................... 98,276 147,414 196,552 196,552 218,152 254,511 280,912
500,000.................................... 109,476 164,214 218,952 218,952 242,953 283,445 312,780
600,000.................................... 131,877 197,815 263,754 263,754 292,555 341,314 376,515
700,000.................................... 154,278 231,416 308,555 308,555 342,156 399,182 440,250
800,000.................................... 176,678 265,017 353,357 353,357 391,758 457,051 503,986
900,000.................................... 199,079 298,619 398,158 398,158 441,359 514,919 567,721
</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
9
<PAGE> 11
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 total benefit payable under the
Retirement Plan annually (currently $135,000), and (ii) the amount of
compensation which can be included for benefit calculation purposes (currently
$170,000). The Company has adopted supplemental arrangements on a non-qualified
basis to maintain for certain employees who may be affected by the annual
benefit limit or the compensation limit (for fiscal 2000, 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, 2000, are
as follows: George P. Mitchell, 53 years; Thomas P. Battle, 17 years; Philip S.
Smith, 20 years; W. D. Stevens, 6 years; and Allen J. Tarbutton, Jr., 26 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 in force, so for fiscal 2000, George P. Mitchell
received pension payments from the Retirement Plan totaling $163,221 and
payments from the supplemental non-qualified retirement plans of $624,823.
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 2000 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 maintains a Severance Benefit Plan for its employees upon their
involuntary termination as well as specific agreements with selected executives
("Change-in-Control Agreements"). Any severance amount under the Severance
Benefit Plan applies to essentially all employees and is determined by the
individual's length of service with the Company. Individual Change-in-Control
Agreements have been established with each of the executives named in the
Summary Compensation Table; and with respect to
10
<PAGE> 12
Messrs. Smith and Tarbutton, they are in lieu of other payments under previously
disclosed but now terminated severance compensation agreements. The
Change-in-Control Agreements provide for severance benefits in the event the
executive's employment is terminated in a qualifying termination (as defined in
the Change-in-Control Agreements) resulting from a change-in-control of the
Company. Upon such a termination, the executive may receive severance pay equal
to between one and one-half to three times the sum of the executive's base
salary plus the average annual bonus paid to the executive during the past three
years. Upon termination of employment, the executive will also receive a pro
rata annual incentive bonus for the year of termination and continued
participation in welfare benefits for twenty-four months following the
executive's termination; and the executive's nonqualified retirement plans and
retiree medical plan benefits will be calculated assuming the executive's
employment had continued for three full years following his date of termination.
In the event that the severance benefits under the Change-in-Control Agreements
exceed the excise tax limit set forth in Section 280G of the Internal Revenue
Code, Messrs. Mitchell, Stevens, Smith and Tarbutton will receive an additional
cash gross-up payment so that the net amount retained by the participant, after
the imposition of the tax, is equal to the amount of severance benefits due him
under the Change-in-Control Agreement. All other Change-in-Control Agreements
limit the severance benefits to an amount which avoids the excise tax, provided
that the limitation shall be applied if, and only if, such limitation results in
a greater net cash benefit to the executive than would have been received had
the benefits not been capped and an excise tax been levied.
MUTUAL FUND OPTION PLAN
The Company has a Mutual Fund Option Plan ("MFOP") which permits officers
and key employees of the Company and its affiliates, selected by the regular
Compensation Committee of the Board of Directors of the Company, to replace a
portion of their salary, bonus, and certain other cash compensation with options
to purchase shares of mutual funds ("MFOP Options"). Each MFOP participant may
elect to replace a minimum of 10% of his salary and/or 10% of other approved
lump sum cash payments up to a maximum of 100% of such amounts, after applicable
taxes and deductions for benefit payments with MFOP Options. The plan expires in
ten years from its inception date of July 1, 1998, or earlier at the discretion
of the Board.
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.
The Committee is comprised of three non-employee directors.
11
<PAGE> 13
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.
In addition to reviewing competitive levels of compensation, the Company is
committed to ensuring that each executive has the right "mix" of fixed vs.
variable and short term vs. long-term compensation. That mix should be
consistent with both competitive industry trends as well as the Company's short
and long-term operating goals.
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.
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 2000, an analysis of
competitive data found in such surveys indicated that total cash compensation
levels (i.e., base salaries and cash incentive bonuses) are generally in line
with the 50th percentile of those found among comparable companies, which is
consistent with the Company's compensation philosophy. Due to weak energy prices
and industry performance in early 1999, executive salary increases were delayed
until later in the year. By June 1999, steady price and earnings increases
prompted the Compensation
12
<PAGE> 14
Committee to approve a 5% budget for granting merit-based salary increases to
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.
In fiscal 2000, the Committee awarded incentive bonuses to executives and
key employees based on overall Company performance indicators. As done in prior
years, a sizeable portion of these bonus awards was granted to employees below
the executive level. These awards were, however, not broad-based but, rather,
discretionary and based on individual contribution.
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 and other key employees, based upon
competitive industry trends in grant size and frequency. Awards, which are
generally granted on an annual basis, are at the sole discretion of the
Committee. The criteria for determining individual awards include individual
performance, scope of responsibility and organizational level.
In fiscal 2000, the Committee granted awards under both the 1995 Stock
Option Plan and the 1997 Bonus Unit Plan to executives and key employees. In
addition to being consistent with the Company's desired competitive position for
total compensation opportunity, these awards provide an alignment of interests
between employees and the Company's shareholders.
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 received a
6.7% increase in base salary during fiscal 2000. As with the other named
executives, Mr. Mitchell was awarded an incentive bonus based on the Company's
stronger performance indicators for fiscal 2000.
13
<PAGE> 15
Mr. Mitchell also received a stock option grant in fiscal 2000 in an
ongoing effort to maintain a level of longer term compensation opportunity that
is comparable to CEOs of other large independent oil and gas 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 continues to provide 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. M. Kent Mitchell
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
[GRAPH]
<TABLE>
<CAPTION>
S&P 500 DJ OIL SECONDARY MEDC
------- ---------------- ----
<S> <C> <C> <C>
1/95 100.00 100.00 100.00
1/96 135.00 118.00 116.00
1/97 171.00 147.00 151.00
1/98 217.00 146.00 176.00
1/99 288.00 102.00 80.00
1/00 317.00 122.00 158.00
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1/95 1/96 1/97 1/98 1/99 1/00
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 100 135 171 217 288 317
Dow Jones Oil -- Secondary 100 118 147 146 102 122
MEDC 100 116 151 176 80 158
</TABLE>
- ---------------
* Total return for each of the last five fiscal years ending January 31. Assumes
$100 was invested on January 31, 1995 in the Company's voting Common Stock or
in the indicated index and that dividends were reinvested as received.
14
<PAGE> 16
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.
GPM, Inc., a corporation wholly-owned by Mr. Mitchell, leases space from a
subsidiary of the Company. The total rent charged during fiscal 2000 was
$97,917. In addition, the Company provides, at cost, various administrative
services to GPM, Inc., including telephone, printing and insurance services, and
copier equipment, which during fiscal 2000 aggregated $66,538. GPM, Inc. was
also included in the Company's high deductible Workers' Compensation insurance
program prior to August 1, 1998. During fiscal 2000, GPM, Inc. reimbursed the
Company for runoff claims and/or losses under such insurance program in the
amount of $61,897.
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 2000.
PROPOSAL 2 -- PROPOSED AMENDMENT TO RESTATED ARTICLES
GENERAL
At the Annual Meeting, the shareholders of the Company will be asked to
consider and to vote upon a proposal (the "Proposal") to adopt amendments
(collectively, the "Reclassification Amendment") to Article Four of the Restated
Articles of Incorporation, as amended (the "Restated Articles"), of the Company:
(a) combining the Company's two classes of common stock, now
designated as Class A Common Stock, $0.10 par value, and Class B Common
Stock, $0.10 par value, into a single class of voting common stock by
reclassifying each issued share of Class B Common Stock into one share of
Class A Common Stock,
(b) increasing the number of authorized shares of Class A Common Stock
from 100,000,000 to 200,000,000, and
(c) establishing the preferences, limitations and relative rights of
the Class A Common Stock.
Subject to shareholder adoption of the Reclassification Amendment, the
Company expects to file related articles of amendment to the Restated Articles
with the Secretary of State of Texas shortly after the close of trading on the
New York Stock Exchange (the "NYSE") on the date of the Annual Meeting, June 28,
2000 (the "Effective Date"). Upon the acceptance of that filing, the
Reclassification Amendment will become effective, and thereupon each issued
share of the Class B Common Stock will automatically be reclassified,
15
<PAGE> 17
changed and converted into one share of Class A Common Stock. Dissenters' rights
of appraisal will not be available to any shareholder with respect to the
Reclassification Amendment.
As soon as practicable after the effectiveness of the Reclassification
Amendment, the Company's stock transfer agent, ChaseMellon Shareholder Services
(the "Exchange Agent"), will mail to each record holder of Class B Common Stock
on the Effective Date a letter of transmittal (the "Transmittal Letter") for use
in exchanging old for new share certificates. New certificates representing
Class A Common Stock will be issued to record holders of Class B Common Stock
who deliver properly executed Transmittal Letters accompanied by certificates
formerly representing shares of Class B Common Stock.
HOLDERS OF CLASS B COMMON STOCK SHOULD SURRENDER CERTIFICATES PREVIOUSLY
REPRESENTING CLASS B COMMON STOCK ONLY AFTER THEY HAVE RECEIVED A TRANSMITTAL
LETTER, AND THEN ONLY IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED IN THE
TRANSMITTAL LETTER. Although the Class B Common Stock certificates will no
longer specify the correct designation of shares after the Effective Date, these
certificates may be delivered in connection with a sale of the shares of Class A
Common Stock represented by the certificates. However, until the Class B Common
Stock certificates are surrendered to the Exchange Agent, the holders will not
be entitled to receive cash dividends or other distributions paid on the Class A
Common Stock.
HOLDERS OF CLASS A COMMON STOCK WILL NOT BE ASKED TO EXCHANGE THEIR STOCK
CERTIFICATES. After the Effective Date, these certificates will continue to
represent the same number of shares of Class A Common Stock.
SUMMARY OF THE PROPOSAL'S BENEFITS AND DISADVANTAGES
The Board of Directors believes that the Proposal offers the following two
principal benefits to the Company and its current shareholders:
(a) implementation of the Proposal should improve the market liquidity
for the Company's Common Stock and
(b) the Proposal will eliminate confusion within the financial
community regarding the current two-class capital structure.
Though the Board has determined that implementation of the Proposal is in
the best interests of the Company and its shareholders, the Proposal may also be
viewed as disadvantageous to the holders of the Class A Common Stock, because it
will reduce their relative voting power by more than 50%, assuming they own no
Class B Common Stock. Considering that George P. Mitchell beneficially owns
approximately 64% of the Class A Common Stock now outstanding and that he will
own approximately 57% of the recombined Common Stock after the Effective Date,
the Board believes that this reduction in the relative voting power of the
minority holders of the Class A Common Stock is of little practical consequence
to them. The Reclassification Amendment will not alter Mr. Mitchell's current
control of the Company through his ability to elect the entire Board of
Directors.
The cash dividend paid per share of Class B Common Stock must be equal or
greater in amount than the dividend paid per share of Class A Common Stock.
While the payment of cash dividends is discretionary with the Board of Directors
and necessarily dependent upon the Company's financial condition and other
factors, the Board intends to pay quarterly dividends on the Class A Common
Stock, after the Effective Date, at the same per share rate currently applicable
to the Class B Common Stock, representing an increase of 10% in the dividend
paid on the Class A Common Stock for the first quarter of fiscal 2000.
BACKGROUND AND REASONS FOR THE PROPOSAL
The Board of Directors implemented the current two-class capital structure,
with shareholder approval, in June 1992, chiefly to provide the Company with
increased flexibility to issue equity securities in connection with acquisitions
or corporate restructurings or to raise equity capital as a means to finance
future growth without diluting the voting power of Mr. Mitchell. The Company,
however, has not issued any equity
16
<PAGE> 18
securities for any of these purposes, except for its issuance of 5.9 million
shares of Class B Common Stock in an underwritten public offering in May 1993.
Since it implemented the current two-class capital structure, the Company
has detected significant confusion among its shareholders, securities' analysts,
broker-dealers, the financial media and other members of the financial community
with respect to the two-class capital structure. For instance, the use of
different trading symbols (MNDA and MNDB) for the two classes confuses some
prospective investors in the Common Stock as well as broker-dealers executing
trades in the Common Stock. This confusion is especially prevalent when trading
or accessing data electronically because of the many ways the trading symbols
may be depicted. The requirement that the Company report net earnings per share
separately for each class adds to the complexity of the Company's financial
reporting and leads to marketplace misunderstandings of the Company's actual
results. In addition, some firms have a policy that precludes buying the
non-voting shares.
The Board of Directors also believes that the current two-class capital
structure may have an adverse effect on trading markets for the Company's equity
securities, mainly through its impact on liquidity. Average daily trading volume
for the Class A Common Stock and the Class B Common Stock during 1999 was
approximately 20,100 and 32,300 shares, respectively, both relatively low
volumes for common stock listed on the NYSE. Recombining the two classes of
Common Stock into a single class should increase liquidity in the trading market
for the Common Stock. Heightened liquidity may also increase the number of
institutional holders that invest in the Company's equity securities.
The Board, after considering both the limited actual benefits that the
current two-class capital structure has provided the Company and the potential
benefits that it believes will accrue as a result of implementation of the
Proposal, determined that adoption of the Reclassification Amendment would be in
the best interests of the Company and its shareholders.
DESCRIPTION OF RECOMBINED COMMON STOCK
As indicated, the Reclassification Amendment will automatically reclassify,
change and convert each share of Class B Common Stock outstanding on the
Effective Date into one share of Class A Common Stock. The Reclassification
Amendment will also alter the preferences, limitations and relative rights of
the Class A Common Stock. The preferences, limitations and relative rights of
the Class A Common Stock following implementation of the Proposal are set forth
in full in the Reclassification Amendment. The following summary, therefore,
should be read in conjunction with, and is qualified in its entirety by
reference to, the full text of the proposed Reclassification Amendment, a copy
of which is attached hereto as Exhibit A.
Voting. As is currently the case with the Class A Common Stock, after the
reclassification each share of Class A Common Stock will entitle its holder to
one vote on all matters submitted to a vote of the shareholders, including the
election of directors. The Proposal will dilute the relative voting power of the
current holders of the Class A Common Stock, because the holders of the Class B
Common Stock have only limited voting rights conferred by statute. Please read
"Certain Effects of the Proposal -- Effects on Relative Ownership Interest and
Voting Power."
Convertibility. Like the current Class A Common Stock, after the
reclassification the Class A Common Stock will not be convertible into another
class of Common Stock or any other security of the Company. The Class B Common
Stock is convertible into the Class A Common Stock in remote circumstances and
otherwise it, too, is not convertible.
Preemptive Rights. Like the existing two classes of Common Stock, after the
Effective Date the Class A Common Stock will not carry any preemptive rights
entitling a holder to acquire any shares or other securities that the Company
may issue, sell or offer for sale.
Transferability; Trading Market. Also like the existing two classes of
Common Stock, the Class A Common Stock will be freely transferable after the
reclassification. Implementation of the Proposal will not affect the listing of
the Class A Common Stock on the NYSE. However, the trading symbol of Class A
Common Stock will change to "MND." The Company believes that this change in
trading symbol will reduce confusion among shareholders, broker-dealers and
other members of the financial community.
17
<PAGE> 19
Increase in Authorized Class A Common Stock. The Restated Articles now
authorize a total of 210,000,000 shares, consisting of 10,000,000 shares of
Preferred Stock, $0.10 par value, and 100,000,000 shares of each class of
existing Common Stock. The Proposal would have no effect on the Preferred Stock,
but would increase the total authorized number of shares of Class A Common Stock
from 100,000,000 to 200,000,000. After implementation of the Proposal,
approximately 49,000,000 million shares of Class A Common Stock would be issued
and outstanding. Approximately 151,000,000 million shares of Class A Common
Stock would, therefore, be available for issuance from time to time thereafter
for any proper corporate purpose, including stock splits, stock dividends,
acquisitions, corporate restructurings, financings and benefit programs. No
further action or authorization by the shareholders would be necessary prior to
the issuance of the additional Class A Common Stock authorized pursuant to the
Reclassification Amendment unless applicable laws or NYSE regulations would
require such approval in a particular case. However, the Company does not have
any agreements, understandings, arrangements or plans that would result in the
issuance of Class A Common Stock, except in relation to existing employee
benefit plans.
Shareholder Information. The Company will deliver to the holders of the
Class A Common Stock after the Effective Date the same proxy statements, annual
reports and other information and reports as it currently delivers to holders of
Class A Common Stock and to holders of Class B Common Stock.
CERTAIN EFFECTS OF THE PROPOSAL
Effects on Relative Ownership Interest and Voting Power. The relative
ownership interest of each holder of Common Stock will be the same immediately
after effectiveness of the Reclassification Amendment as it was immediately
prior thereto. The relative voting power of each current holder of Class A
Common Stock will be diluted by more than 50%, assuming the holder owns no Class
B Common Stock. However, the Reclassification Amendment will not alter George P.
Mitchell's current control of the Company through his ability to elect the
entire Board of Directors.
Effect on Market Price. The market price of Class A Common Stock after the
Effective Date will depend, as before the adoption of the Reclassification
Amendment, on many factors, including, among others, the future performance of
the Company, changes in the regulatory environment, market liquidity of the
Class A Common Stock, general market conditions and conditions relating to other
companies in the energy industry. Accordingly, the Company cannot predict the
prices at which the Class A Common Stock will trade following the Effective
Date, just as the Company could not predict the prices at which the two existing
classes of Common Stock would trade absent the Proposal. The Company expects,
however, that, at the Effective Date, the total market value of the Class A
Common Stock will not differ materially from the total market value of the two
existing classes of Common Stock.
Effective on Trading Market. Upon effectiveness of the Reclassification
Amendment, approximately 49,000,000 million shares of Class A Common Stock will
be issued and outstanding. The Company expects that the market liquidity for its
common shares immediately after the effectiveness of the Reclassification
Amendment will be augmented, both because of the larger number of common shares
outstanding and because institutional investors may be more inclined to acquire
the shares. Relative market liquidity in the future may be affected, however, by
the extent to which the Company issues additional shares of, or repurchases
shares of, Class A Common Stock.
Effect on Earnings Per Share. Implementation of the Proposal will permit
the Company to cease reporting separate earnings per share amounts for Class A
and Class B Common Stock, thereby eliminating a current source of confusion
among shareholders, securities' analysts, the financial media and other members
of the financial community.
Federal Income Tax Consequences. The Company's shareholders will not
recognize a taxable gain or loss upon the reclassification of Class B Common
Stock as Class A Common Stock.
Each Class B Common Stockholder's tax basis in, and holding period for, his
shares of Class B Common Stock prior to the reclassification will carry over to
the shares of Class A Common Stock received by him pursuant to the
Reclassification Amendment.
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<PAGE> 20
Neither the Class A Common Stock nor the Class B Common Stock received by
shareholders pursuant to the Proposal will constitute "section 306 stock" within
the meaning of section 306(c) of the Internal Revenue Code of 1986, as amended
(the "Code").
The Company believes that the foregoing discussion is a fair and accurate
summary of the material federal income tax consequences to the Company's
shareholders with respect to the Proposal, based on the current provisions of
the Code, applicable Treasury Regulations, judicial authority and administrative
rulings and practice. This discussion, however, does not consider any aspects of
state, local or foreign taxation. Further, this discussion assumes that all of
the Company's Class B Common Stockholders have held their shares of Class B
Common Stock as capital assets. Legislative, judicial or administrative changes
or interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or may
not be retroactive. Shareholders, therefore, are urged to seek the advice of
their own tax counsel on these matters.
Resale of Common Stock. Shares of Class A Common Stock received as a result
of the reclassification of the Class B Common Stock, other than any such shares
held by affiliates of the Company within the meaning of the Securities Act of
1933, may be offered for resale and resold without registration under the
Securities Act of 1933. Affiliates of the Company, including George P. Mitchell,
generally will continue to be subject to the restrictions on resale, including
the volume limitations and manner of sale conditions, specified in Rule 144
under the Securities Act of 1933.
Effects on Employee Benefit Plans. The reclassification is not expected to
have any material impact on the Company's stock option plans, its 1997 Bonus
Unit Plan, its thrift and savings plan or any other employee benefit plan.
However, technical amendments to some of these plans may be necessary to conform
their provisions to the results of the reclassification.
FINANCIAL INFORMATION
The Company believes that its shareholders can exercise prudent judgment
with respect to the decision whether to vote for adoption of the
Reclassification Amendment without reference to financial statements of the
Company. The fiscal 2000 audited consolidated financial statements of the
Company are contained in its Annual Report to Stockholders, which has been
mailed to all shareholders entitled to vote at the Annual Meeting. In addition,
the Company will provide without charge to any shareholder, on the request of
such shareholder, an additional copy of such Annual Report. Written or oral
requests for such copies should be directed to the Public Affairs Department,
Mitchell Energy & Development Corp., P. O. Box 4000, The Woodlands, Texas
77387-4000, telephone number (713) 377-5650. In addition, such copies can be
accessed on the Company's website at www.mitchellenergy.com.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD
The Texas Business Corporation Act requires the affirmative vote of the
holders of at least two-thirds of the outstanding shares of both the Class A
Common Stock and the Class B Common Stock entitled to vote thereon for adoption
of the Reclassification Amendment. THE BOARD OF DIRECTORS RECOMMENDS THAT ALL
SHAREHOLDERS VOTE "FOR" ADOPTION OF THE RECLASSIFICATION AMENDMENT.
19
<PAGE> 21
PROPOSAL 3 -- 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 financial statements
of the Company for the fiscal year ending January 31, 2001. 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.
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 2001 Annual Meeting,
stockholder proposals must be received by the Company on or before January 25,
2001.
OTHER MATTERS
The Board of Directors does not know of any other matter to be brought
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
Secretary
20
<PAGE> 22
EXHIBIT A
PROPOSED AMENDMENTS
TO
RESTATED ARTICLES OF INCORPORATION
OF
MITCHELL ENERGY & DEVELOPMENT CORP.
Article Four, as proposed to be amended, would read as set forth below.
Basically, paragraph 1 of existing Article Four respecting Preferred Stock would
be virtually unchanged, while the balance of the Article would be substantially
rewritten.
ARTICLE FOUR
AUTHORIZED SHARES
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 210,000,000 shares, consisting of
10,000,000 shares of Preferred Stock of the par value of $0.10 each, and
200,000,000 shares of Class A Common Stock of the par value of $0.10 each (the
Class A Common Stock being sometimes referred to as the "Common Stock").
RECLASSIFICATION OF CLASS B COMMON STOCK
Upon these Articles of Amendment to the Restated Articles of Incorporation
becoming effective pursuant to the Texas Business Corporation Act (the
"Effective Time") and without any further action on the part of the corporation
or its shareholders, each share of the corporation's Class B Common Stock, $0.10
par value (the "Class B Stock"), then issued (including shares held in the
treasury of the corporation) shall automatically be reclassified, changed and
converted into one fully paid and nonassessable share of Class A Common Stock.
After the Effective Time, each holder of an outstanding certificate
theretofore representing Class B Stock (a "Class B Stock Certificate") shall
surrender such certificate to ChaseMellon Shareholder Services or another bank
designated by the corporation to act as the Exchange Agent (herein so called).
As soon as practicable after the surrender to the Exchange Agent of a Class B
Stock Certificate, together with a duly executed transmittal letter and any
other documents the Exchange Agent may specify, the Exchange Agent shall
distribute to the person in whose name such certificate has been issued a
certificate registered in the name of such person representing the same number
of shares of Class A Common Stock as the number of shares of Class B Stock
previously represented by the surrendered certificate. Until surrendered as
contemplated by the preceding sentence, each Class B Stock Certificate shall be
deemed at and after the Effective Time to represent the number of shares of
Class A Common Stock contemplated by the preceding sentence, except as specified
in the next succeeding paragraph in relation to dividends or other
distributions.
No dividend or other distribution declared or made with respect to the
Class A Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Class B Stock Certificate with respect to the
shares of Class A Common Stock issuable upon surrender thereof until the holder
of such Class B Stock Certificate shall surrender such certificate to the
Exchange Agent in accordance with the next preceding paragraph. Subject to the
effect of applicable law, following surrender of any such Class B Stock
Certificate there shall be paid, without interest, to the record holder of each
certificate representing shares of Class A Common Stock issued in exchange
therefor: (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such shares of Class A Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender of such Class B Stock
Certificate and a payment date subsequent to such surrender payable with respect
to such shares of Class A Common Stock.
A-1
<PAGE> 23
No service changes, brokerage commissions or transfer taxes shall be
payable by any holder of any Class B Stock Certificate, except that, if any
certificates for Class A Common Stock are to be issued in a name other than that
in which the Class B Stock Certificates surrendered are registered, it shall be
a condition of such issuance that (i) the person requesting such issuance shall
pay to the corporation any transfer taxes payable by reason thereof (or of any
prior transfer of such surrendered certificate) or establish to the satisfaction
of the corporation that such taxes have been paid or are not payable, and (ii)
such surrendered certificate be properly endorsed and otherwise be in proper
form for transfer. The corporation may impose such other reasonable conditions
upon the exchange of certificates as it may deem to be necessary or desirable
and as are consistent with the provisions of this Article Four.
Upon the submission to the Exchange Agent of each Class B Stock
Certificate, the same shall forthwith be canceled.
DESCRIPTION OF DIFFERENT CLASSES
The descriptions of the different classes of capital stock of the
corporation and the designations, preferences, limitations and relative rights
thereof are as follows:
1. Preferred Stock. The Preferred Stock may be divided into and issued
in one or more series as herein provided, each series to be so designated
as to distinguish the shares thereof from the shares of all other series
and classes. The Board of Directors is hereby vested with the authority to
establish and designate such series from time to time and, within the
limitations prescribed by law or set forth herein, to fix and determine the
number, the preferences, limitations and relative rights, including voting
rights, of the authorized shares of any series so established, and to
increase or decrease the number of shares within each such series;
provided, however, that the Board of Directors may not decrease the number
of shares within a series below the number of shares within such series
that is then issued. The Board of Directors shall exercise such authority
by the adoption of a resolution or resolutions as prescribed by law. The
Preferred Stock of all series shall be identical, except as to the
following preferences, limitations and relative rights, as to which there
may be variations between different series:
(a) The rate at which dividends, if any, are to accrue with respect
to the shares of such series and the dates, terms and other conditions
on which such dividends shall be payable;
(b) The nature of any dividends payable with respect to the shares
of such series as cumulative, noncumulative or partially cumulative;
(c) Whether the shares of such series shall be subject to
redemption by the corporation, and, if made subject to such redemption,
the price at and the terms and conditions on which the shares of such
series may be redeemed;
(d) The rights and preferences, if any, of the holders of the
shares of such series upon the liquidation, dissolution or winding up of
the affairs of, or upon any distribution of the assets of, the
corporation, which amount may vary depending upon whether such
liquidation, dissolution or winding up is voluntary or involuntary and,
if voluntary, may vary at different dates, and the status of the shares
of such series as participating or nonparticipating after the
satisfaction of any such rights and preferences;
(e) Any requirements as to, and the terms and amount of, any
sinking fund or purchase fund for, or the redemption, purchase or other
retirement by the corporation of, the shares of such series;
(f) The right, if any, to exchange or convert the shares of such
series into (i) shares of any other series of the Preferred Stock or, to
the extent permitted by law, into shares of any other class of capital
stock of the corporation ranking on a parity with or junior to the
Preferred Stock as to dividends or distribution of assets upon
liquidation ("Junior Stock") or into other securities of the corporation
or (ii) shares of capital stock or other securities of another
corporation, and the rate or basis, time, manner and conditions of
exchange or conversion or the method by which the same shall be
determined;
A-2
<PAGE> 24
(g) The extent, if any, to which the holders of the shares of such
series shall be entitled to vote as a class or otherwise with respect to
any matter presented for that purpose to the shareholders of the
corporation;
(h) Any obligation of the corporation to repurchase any or all
shares of such series; and
(i) Any other relative rights and preferences of the shares of such
series consistent with these Articles of Incorporation and applicable
law.
The terms of any series of Preferred Stock may be amended without
consent of the holders of any other series of Preferred Stock or of any
class of Junior Stock, provided such amendment does not adversely affect
the holders of such other series of Preferred Stock or any class of
Junior Stock. Shares of any series of Preferred Stock which have been
issued and reacquired in any manner and are not held as treasury shares,
including shares redeemed by purchase (whether through the operation of
a retirement or sinking fund or otherwise), will have the status of
authorized and unissued Preferred Stock and may be reissued as a part of
the series of which they were originally a part or may be reclassified
into and reissued as a part of a new series.
2. Common Stock. Except as otherwise provided by law or by any
resolution adopted by the Board of Directors fixing relative rights and
preferences of any series of Preferred Stock, the entire voting power of
the shares of the corporation for the election of directors and for all
other purposes, as well as all other rights appertaining to shares of the
corporation, shall be vested exclusively in the Common Stock. Each share of
Common Stock shall have one vote upon all matters to be voted on by the
holders of the Common Stock, and shall be entitled to participate equally
in all dividends payable with respect to the Common Stock and to share
ratably, subject to the rights and preferences of the Preferred Stock, in
all assets of the corporation in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the corporation,
or upon any distribution of the assets of the corporation.
A-3
<PAGE> 25
MITCHELL ENERGY & DEVELOPMENT CORP.
[MITCHELL LOGO]
<PAGE> 26
CLASS A COMMON STOCK
PROXY
MITCHELL ENERGY & DEVELOPMENT CORP.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 28, 2000
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 28,
2000, 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 adoption of the proposed amendment to the Company's
Articles of Incorporation, 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 THE REVERSE SIDE)
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<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS 2 AND 3. PLEASE MARK
YOUR VOTE AS [X]
INDICATED IN
THIS EXAMPLE
1. Election of Directors
WITHHOLD NOMINEES: Robert W. Baldwin, Bernard F. Clark, William D. Eberle,
FOR all nominees listed AUTHORITY Shaker A. Khayatt, Ben F. Love, George P. Mitchell, J. Todd Mitchell,
(except as indicated to to vote for all M. Kent Mitchell, and W. D. Stevens.
the contrary) nominees listed
To withhold authority to vote for any individual nominee,
[ ] [ ] write that nominee's name in the space provided below:
---------------------------------------------------------------------
2. The adoption of the proposed amendment to the Company's Articles of 4. In their discretion, the Proxies are authorized to vote
Incorporation on such other business as may properly come before the
meeting.
FOR AGAINST ABSTAIN
I PLAN TO ATTEND THE MEETING. [ ]
[ ] [ ] [ ]
3. The appointment of Arthur Andersen LLP as the Company's independent
public accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Signature Signature Date
-------------------------------------------- -------------------------------------------- ---------------
NOTE: Please sign as name appears herein. Joint owners should each sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such.
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</TABLE>
<PAGE> 28
CLASS B COMMON STOCK
PROXY
MITCHELL ENERGY & DEVELOPMENT CORP.
PROXY SOLICITED BY BOARD OF DIRECTORS FOR
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 28, 2000
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 28,
2000, 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 in favor of the adoption of the
proposed amendment to the Company's Articles of Incorporation.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
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<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION. PLEASE MARK
YOUR VOTE AS [X]
INDICATED IN
THIS EXAMPLE
The adoption of the proposed amendment to
the Company's Articles of Incorporation.
FOR AGAINST ABSTAIN
I PLAN TO ATTEND THE MEETING. [ ]
[ ] [ ] [ ]
Signature Signature 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.
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</TABLE>
