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. )
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mirant Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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or the Form or Schedule and the date of its filing.
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CONTENTS
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2003 PROXY STATEMENT
General Information....................................... 1
Compensation-Related Considerations....................... 3
Corporate Governance...................................... 4
Directors................................................. 9
Nominees for Election as Directors........................ 11
Proposal to Approve the Mirant Employee Stock Purchase
Plan................................................... 11
Stockholder Proposal to Expense Options................... 14
Compensation Committee Report............................. 18
Audit Committee Report.................................... 22
Auditor Independence...................................... 24
Executive Compensation Information........................ 25
Stock Ownership Table..................................... 28
Summary Compensation Table................................ 29
Stock Option Grants, Exercises and Year-End Values........ 31
Pension Plan Table........................................ 32
Five-Year Performance Graph............................... 33
Audit Committee Charter................................... A-1
2002 ANNUAL REPORT
Management Discussion and Analysis........................ --
Consolidated Financial Statements......................... --
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS -- MAY 22, 2003
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The Annual Meeting of Stockholders of Mirant Corporation will be held at 9:00
a.m. EDT, on Thursday, May 22, 2003, at the Atlanta Marriott Alpharetta, 5750
Windward Parkway, Alpharetta, Georgia 30005 for the following purposes:
(1) To elect 2 members of the Board of Directors;
(2) To consider and act upon a management proposal;
(3) To consider and act upon a stockholder proposal, if presented at the
meeting; and
(4) To transact such other business as may properly be brought before the
meeting and any and all adjournments thereof.
In accordance with the Bylaws and action by the Board of Directors, stockholders
owning Mirant common stock at the close of business on April 7, 2003, are
entitled to attend and vote at the meeting.
If you attend, please note that you may be asked to present valid picture
identification, such as a driver's license or passport. Also, you will need to
present the top half of your proxy card as proof of ownership.
The Proxy Statement and Annual Report and proxy form are included in this
mailing.
Even if you plan to attend the meeting, please provide us your voting
instructions in one of the following ways as soon as possible:
(1) Internet -- use the Internet address on the proxy form
(2) Telephone -- use the toll-free number on the proxy form
(3) Mail -- mark, sign, and date the proxy form and return in the enclosed
postage-paid envelope
By Order of the Board of Directors,
Elizabeth B. Chandler
Secretary
April 30, 2003
DIRECTIONS
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GA 400 North to Exit 11 Windward Parkway (approximately 14 miles North of
I-285). Turn right onto Windward Parkway. Hotel is then on the left. Turn left
onto North Point Parkway. Immediate left into hotel entrance. North Point
Parkway may be used as an alternate route.
GENERAL INFORMATION
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WHY AM I RECEIVING THIS PROXY STATEMENT?
The Board of Directors of Mirant Corporation is soliciting your proxy for the
2003 Annual Meeting of Stockholders and any adjournments thereof. The meeting
will be held at 9:00 a.m., EDT, on Thursday, May 22, 2003, at the Atlanta
Marriott Alpharetta, 5750 Windward Parkway, Alpharetta, Georgia 30005. This
Proxy Statement and proxy form are initially being provided to stockholders on
or about April 30, 2003.
WHAT'S BEING VOTED UPON AT THE MEETING?
The election of 2 directors for a three-year term, a proposal to approve the
amended Employee Stock Purchase Plan and a stockholder proposal to expense
options, if presented at the meeting. We are not aware of any other matters to
be presented to the meeting; however, the holders of the proxies will vote in
their discretion on any other matters properly presented.
HOW DO I GIVE VOTING INSTRUCTIONS?
You may give your voting instructions by the Internet, by telephone, by mail or
in person at the meeting. Instructions are on the proxy form. The proxy
committee, named on the enclosed proxy form, will vote all properly executed
proxies that are delivered pursuant to this solicitation and not subsequently
revoked in accordance with the instructions given by you.
CAN I CHANGE MY VOTE?
Yes, you may revoke your proxy by submitting a subsequent proxy or by written
request received by Mirant's Corporate Secretary before the meeting.
WHO CAN VOTE?
All stockholders of record on the record date of April 7, 2003. On that date,
there were 404,052,225 Mirant Corporation common shares outstanding and entitled
to vote.
HOW MUCH DOES EACH SHARE COUNT?
Each share counts as one vote. For the purpose of determining a quorum,
abstentions are counted, but shares held by a broker that the broker fails to
vote are not. Neither are counted for or against the matters being considered.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY FORM?
You will receive a proxy form for each account that you have. Please vote
proxies for all accounts to ensure that all your shares are voted. You may
consolidate multiple accounts online at www.melloninvestor.com or call our
transfer agent, Mellon Investor Services 866 647 2681.
WHY IS ONLY ONE ANNUAL REPORT AND PROXY STATEMENT SENT TO SOME STOCKHOLDERS
SHARING THE SAME ADDRESS?
In accordance with notices sent to certain stockholders who share a single
address, we are sending only one annual report and proxy statement to that
address unless we received contrary instructions from any stockholder at that
address. This practice, known as "householding", is designed to reduce
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our printing and postage costs. Any stockholder who wishes to receive a separate
annual report or proxy statement in the future and those receiving multiple
copies who would prefer single copies should contact their broker or send their
name, the name of their broker, and their account number to Householding
Department, 51 Mercedes Way, Edgewood, NY 11717. Additional copies of our annual
report may be obtained on our website (which is not part of this Proxy
Statement) at www.mirant.com. We will send stockholders a copy of this proxy
statement and our annual report upon written request to Mirant Stockholder
Services, 1155 Perimeter Center West, Atlanta, GA 30338 or call us at 678 579
7777.
WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE 2004 ANNUAL MEETING OF STOCKHOLDERS?
The deadline for the receipt of stockholder proposals to be considered for
inclusion in Mirant's proxy materials for the 2004 Annual Meeting of
Stockholders is January 1, 2004. Stockholder proposals must be submitted in
writing to our Corporate Secretary at 1155 Perimeter Center West, Atlanta,
Georgia 30338. For stockholder proposals that are not included in Mirant's proxy
materials to be presented at next year's meeting, you must comply with the
written notice procedures set forth in Section 1.10 of our Bylaws before
February 22, 2004. The proxy solicited by the Board of Directors for next year's
meeting will confer discretionary authority to vote on any proposal that does
not meet these requirements.
WHO PAYS THE EXPENSE OF SOLICITING PROXIES?
Mirant pays the cost of soliciting proxies. The officers or other employees of
Mirant or its subsidiaries may solicit proxies to have a larger representation
at the meeting.
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COMPENSATION-RELATED CONSIDERATIONS
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WHAT ARE THE OBJECTIVES OF MIRANT'S COMPENSATION PROGRAM?
In determining the compensation payable to Mirant's executive officers, the
Compensation Committee seeks to achieve the following objectives through a
combination of fixed and variable compensation:
- provide a total compensation opportunity that is consistent with competitive
practices, enabling Mirant to attract and retain qualified executives;
- create a direct link between the compensation payable to each executive
officer and the financial performance of Mirant; and
- create a common interest between executive officers and Mirant's stockholders
through the use of stock options and other stock awards that link a
significant portion of each executive officer's compensation opportunity
directly to the value of Mirant's common stock.
WERE THERE ANY ADDITIONAL CONSIDERATIONS SPECIFICALLY FOR 2002?
During 2002 Mirant faced an unprecedented amount of adversity. The fall-out from
the Enron bankruptcy, turmoil in the California power markets, and the overall
downturn in the economy have created difficult market conditions and uncertainty
throughout the competitive energy industry. All of these factors have ultimately
resulted in a significant reduction in the stock price of Mirant and all other
competitive energy companies. In response to these market conditions, throughout
2002 Mirant took aggressive steps to refocus its business: selling assets,
reducing expenses, cutting capital expenditures and conserving cash. A critical
success factor going forward will be retaining and motivating key employees to
stay with the Company as we focus on refinancing our major debt maturities.
Given the market environment of 2002 and 2003, many of the decisions regarding
Mirant's 2002 compensation programs were made to enhance the retention and
motivation of key employees.
HOW DID THESE CONSIDERATIONS SPECIFICALLY IMPACT BASE SALARY?
During 2002 raises overall were about 1.6%, with approximately half of these
raises being focused on Mirant's top performing employees (20% of the total
population).
HOW DID THESE CONSIDERATIONS SPECIFICALLY IMPACT SHORT-TERM INCENTIVES?
Mirant pays incentives to a broad range of employees, including employees in
foreign subsidiaries and unions that were eligible for short-term incentives.
For performance in 2002, Mirant paid incentives equal to about half of the total
amounts paid for 2001 performance. Again, these incentives were focused on our
top performing employees throughout the organization, with less than 5% of these
incentives being paid to senior executives and about 25% of all amounts earned
being deferred to encourage retention.
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CORPORATE GOVERNANCE
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At Mirant we See the Opportunity(R) to change the world with our energy. We also
See the Opportunity(R) to enhance shareholder value through effective corporate
governance.
We are proud to have a strong, independent Board of Directors with diverse
backgrounds. Our Audit, Compensation, and Nominating and Governance Committees
are comprised exclusively of independent directors.
Our corporate governance practices enhance our Board's ability to maintain its
independence. We are committed to maintaining and enhancing governance practices
which create value for our shareholders.
Mirant has undertaken a comprehensive review of its corporate governance
practices in light of the Sarbanes-Oxley Act of 2002, new Securities and
Exchange Commission regulations implementing this legislation, and corporate
governance listing standards proposed by the New York Stock Exchange. As a
result, on December 11, 2002, the Board of Directors approved Mirant's Corporate
Governance Guidelines. On February 25, 2003, the Board of Directors approved
updated charters for each of the Audit, Compensation, and Nominating and
Governance Committees that reflect new legislative and regulatory requirements.
The updated Audit Committee charter is attached as Appendix A to this Proxy
Statement. Mirant's Corporate Governance Guidelines, committee charters, Bylaws,
and other governance documents are available on the Corporate Governance section
of our website (which is not part of this Proxy Statement) at WWW.MIRANT.COM.
Stockholders may also request a copy through Stockholder Services at 678 579
7777.
HOW IS MIRANT ORGANIZED?
Mirant Corporation is managed by a core group of officers and governed by a
Board of Directors that has been set at 8 members effective May 22, 2003. The
directors consist of a non-employee Chairman, 6 other non-employees and the
Chief Executive Officer of Mirant. The Board has determined that each of the
directors serving on the Audit Committee, the Compensation Committee and the
Nominating and Governance Committee is independent under applicable New York
Stock Exchange listing standards -- that is, none of these directors has any
relationship to Mirant or its management that, in the judgment of the Board,
would interfere with the exercise of the director's independent judgment.
WHAT ARE THE DIRECTORS PAID FOR THEIR SERVICES?
Only non-employee directors are compensated for Board service. The pay
components are:
ANNUAL RETAINERS
$70,000 all or a portion of which may be deferred in accordance with the
terms of Mirant's Deferred Compensation Plan for Directors and Select
Employees until membership on the Board ends.
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MEETING FEES:
- $2,500 for each Board meeting attended
- $1,250 for each committee meeting attended
There is no pension plan for non-employee directors.
HOW IS THE CHAIRMAN OF THE BOARD COMPENSATED?
Through March 2003, Mr. Dahlberg, as the non-employee Chairman of the Board, was
paid annual cash compensation of $240,000 and equity compensation commensurate
with stock option grants made to the Chief Executive Officer.
At Mr. Dahlberg's request, the Board approved the following changes to his
compensation effective April 1, 2003:
- The Chairman will receive the same annual retainer and meeting fees (described
above) as the other non-employee directors
- The Chairman will receive no grant of stock options in 2003.
On February 5, 2003, Mr. Dahlberg voluntarily returned all 685,417 of his vested
and unvested stock options to Mirant. Mr. Dahlberg received no consideration for
this action.
During 2002, Mirant owned fractional shares of a business aircraft. Mr.
Dahlberg's personal use of such aircraft cost Mirant $45,355 in 2002.
HOW OFTEN DOES THE BOARD OF DIRECTORS MEET?
The Board of Directors met 9 times in 2002. Average director attendance at all
Board and committee meetings was 95 percent. Mr. Ghosn attended less than 75
percent of the meetings of the Board and committees on which he served. Each
other director attended at least 97 percent of meetings of the Board and
committees on which he or she served.
DO THE NON-MANAGEMENT DIRECTORS MEET SEPARATELY?
Yes. The non-management directors meet at least quarterly in executive sessions.
At least one executive session per year addresses succession planning and Chief
Executive Officer performance and compensation.
WHO IS THE PRESIDING DIRECTOR AT EXECUTIVE SESSIONS?
The Chairman of the Nominating and Governance Committee serves as the presiding
director at each executive session except that, when a specific topic that is
the responsibility of another Board committee will be discussed at a session,
then the chair of the responsible committee may chair the session.
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WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has standing Audit, Compensation, and Nominating and
Governance Committees, each of which is composed entirely of independent
directors. The table below provides information about the membership of these
committees during 2002 and through April 30, 2003.
NOMINATING AND
DIRECTORS AUDIT COMPENSATION GOVERNANCE
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A. D. CORRELL * X+ *
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A. W. DAHLBERG *
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STUART E. EIZENSTAT X X+
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S. MARCE FULLER
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CARLOS GHOSN * X
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DAVID J. LESAR X+ X
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ROBERT F. MCCULLOUGH X
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JAMES F. MCDONALD X X
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RAY M. ROBINSON X
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X Member + Chair
* Mr. Correll served on the Audit Committee from February 19, 2002 until April
25, 2002 and on the Nominating and Governance Committee until April 25, 2002,
Mr. Dahlberg served as chair of the Nominating and Governance Committee until
July 26, 2002 and Mr. Ghosn served on the Audit Committee until April 25,
2002.
AUDIT COMMITTEE:
- Met 24 times in 2002
- Oversees Mirant's financial reporting process, and oversees the quality and
integrity of Mirant's financial statements
- Supervises Mirant's relationship with its independent auditors and has sole
authority and responsibility to select, evaluate and, where appropriate,
replace the independent auditors, which report directly to the Committee
- Responsible for the pre-approval of all audit and permitted non-audit services
to be provided by the independent auditors as well as the compensation, fees
and terms for such services
- Reviews and discusses with management and the General Counsel legal,
regulatory and compliance matters that may have a material impact on the
financial statements
- Performs an annual self-evaluation to assess the Committee's effectiveness
- Has authority to engage independent counsel and other outside advisers
- Prepares the report required by the rules of the Securities and Exchange
Commission to be included in Mirant's annual proxy statement
Following the consideration of the qualifications of the members of the
engagement team and formal responses from the independent auditors as to their
independence, staffing plan and quality
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controls, the Audit Committee selected KPMG LLP as independent auditors for
2003. Representatives of KPMG LLP are expected to be present at the annual
meeting and will have an opportunity to make a statement if they desire and to
respond to appropriate questions from stockholders.
Since its initial public offering, Mirant has had an Audit Committee composed
entirely of independent directors. Each member of the Audit Committee continues
to meet the independence requirements of the New York Stock Exchange.
The Board of Directors has evaluated the members of the Audit Committee,
determined that each member is financially literate and designated Messrs.
Lesar, McCullough and McDonald as "audit committee financial experts" as defined
in Securities and Exchange Commission regulations.
COMPENSATION COMMITTEE:
- Met 3 times in 2002
- Approves and oversees compensation philosophy, amounts, plans, and policies
- Evaluates performance of executive officers and sets their compensation
- Administers executive compensation plans
- Reviews management succession plans
- Recommends compensation for non-employee directors
- Performs an annual self-evaluation to assess the Committee's effectiveness
- Has authority to engage independent counsel and other outside advisors
- Prepares the report required by the rules of the Securities and Exchange
Commission to be included in Mirant's annual proxy statement
NOMINATING AND GOVERNANCE COMMITTEE:
- Met 4 times in 2002
- Makes recommendations to the Board of Directors regarding the composition of
the Board, the classification of directors and the composition of committees
- Oversees Mirant's compliance with its Code of Ethics and Business Conduct
- Reviews and discusses with management and the General Counsel legal and
regulatory requirements, compliance matters and material litigation
- Assists the Board in:
- Identifying qualified individuals to become Board members
- Recommending to the Board the selection of director nominees for election
at the annual meeting of stockholders
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- Assessing director independence and Board effectiveness; and
- Developing and implementing Mirant's corporate governance guidelines
- Performs an annual self-evaluation to assess the Committee's effectiveness
- Has authority to engage independent counsel and other outside advisors
The Nominating and Governance Committee generally identifies from its own
resources qualified nominees but will accept from stockholders recommendations
of individuals to be considered as nominees. Stockholder recommendations,
together with a description of the proposed nominee's qualifications, relevant
biographical information, and signed consent to serve, must be submitted in
writing to Mirant's Corporate Secretary and received by that office by February
22, 2004 in accordance with the procedures set forth in Section 1.10 of our
Bylaws. Stockholder recommendations will be considered by the Nominating and
Governance Committee in determining nominees to recommend to the Board. The
final selection of the Board's nominees is within the sole discretion of the
Board of Directors.
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DIRECTORS -- TERM ENDING 2004
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S. MARCE FULLER -- Director since 1999
Ms. Fuller, 42, is president and chief executive officer of Mirant. She was
president and chief executive officer of Mirant Americas Energy Marketing from
September 1997 to July 1999; and one of our executive vice presidents from
October 1998 to July 1999, when she was appointed to her current position. From
May 1996 to September 1997, she was senior vice president in charge of our North
American operations and business development. Prior to that, from February 1994
to May 1996, she was our vice president for domestic business development. She
is also a director of Curtiss-Wright Corporation and EarthLink, Inc.
DAVID J. LESAR -- Director since 2000
Mr. Lesar, 49, is chairman, president and chief executive officer of Halliburton
Company, diversified energy services. He was president and chief operating
officer of Halliburton Company from June 1997 until August 2000, when he was
appointed to his current position. He was executive vice president and chief
financial officer of Halliburton Company from June 1995 until June 1997; and
president and chief executive officer of its Brown & Root, Inc. subsidiary from
September 1996 until June 1997. He is a director of Halliburton Company and
Lyondell Chemical Company.
RAY M. ROBINSON -- Director since 2001
Mr. Robinson, 55, is president of the Southern Region of AT&T Corporation,
telecommunications, until his retirement on May 1, 2003. He has been named vice
chairman of the East Lake Community Foundation, effective May 1, 2003. He served
as vice president - corporate relations of AT&T Corporation from 1994 to 1996,
when he was appointed to his current position. He joined AT&T in 1968 and held
numerous senior management positions in marketing, corporate relations,
engineering and regulatory affairs. He is a director of Aaron Rents, Inc.,
Acuity Brands, Inc., Avnet, Inc., and Citizens Trust Bank.
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DIRECTORS -- TERM ENDING 2005
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A. W. DAHLBERG -- Director since 1996
Mr. Dahlberg, 63, is chairman of the board of Mirant. He was appointed to his
current position in August 2000. He served as chairman of the board of the
Southern Company from March 1995 until April 2001, during which time Southern
Company was the parent of Mirant. He also served as chief executive officer of
Southern Company from March 1995 until March 2001. He is a director of Equifax,
Inc., Protective Life Corporation, and SunTrust Banks, Inc.
STUART E. EIZENSTAT -- Director since 2001
Mr. Eizenstat, 60, is a partner of Covington & Burling where he heads the law
firm's international practice. He served as Deputy Secretary of the United
States Department of the Treasury from July 1999 to January 2001. He was Under
Secretary for Economics, Business, and Agricultural Affairs of the United States
Department of State from 1997 to July 1999, and Under Secretary for
International Trade of the United States Department of Commerce from 1996 to
1997. He served as United States Ambassador to the European Union from 1993 to
1996. He was a director of the Overseas Private Investment Corporation from 1996
to 2001. From 1977 to 1981, he was President Jimmy Carter's Chief Domestic
Policy Advisor at the White House. He is a trustee of BlackRock Funds.
ROBERT F. MCCULLOUGH -- Director since February 2003
Mr. McCullough, 60, is a director and chief financial officer of AMVESCAP PLC,
independent global investment managers. He was managing partner of the Atlanta
office of Arthur Andersen LLP from 1987 until 1996, when he was appointed to his
current position. He was an accountant at Arthur Andersen from 1964 until 1973
and a partner from 1973 until 1996. He is a Certified Public Accountant, a
member of the American Institute of Certified Public Accounts and the Georgia
Society of Certified Public Accounts, and a director of Acuity Brands, Inc.
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NOMINEES FOR ELECTION AS DIRECTORS
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ITEM NO. 1 -- ELECTION OF DIRECTORS -- TERM ENDING 2006
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The persons named on the enclosed proxy form will vote, unless otherwise
instructed, each properly executed proxy for the election of the following
nominees as directors for the three-year term ending in 2006. If any named
nominee becomes unavailable for election, the board may substitute another
nominee. In that event, the proxy would be voted for the substitute nominee
unless instructed otherwise on the proxy form.
A. D. CORRELL -- Director since 2000
Mr. Correll, 62, is chairman of the board, and chief executive officer of
Georgia-Pacific Corporation, manufacturers and distributors of building
products, pulp, and paper. He served as president from 1991 until September 2002
and chief operating officer of Georgia-Pacific from 1991 to 1993, when he was
appointed to his current position. He is a director of Georgia-Pacific
Corporation, Norfolk Southern Corporation, and SunTrust Banks, Inc.
JAMES F. MCDONALD -- Director since 2001
Mr. McDonald, 63, is chairman, president and chief executive officer of
Scientific-Atlanta, Inc., telecommunications. He was a general partner of J. H.
Whitney venture capital from 1991 to 1993, when he was appointed to his current
position. From 1989 to 1991 he led the restructuring of Prime Computer as
president and chief executive officer. He is a director of Burlington Resources,
Inc., NDCHealth Corporation, and Scientific-Atlanta, Inc.
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The affirmative vote of a plurality of shares present and entitled to vote is
required for the election of directors. This means that the director nominee
with the most votes for a particular slot is elected for that slot.
The Board of Directors recommends a vote FOR the nominees listed in Item No. 1.
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ITEM NO. 2 -- PROPOSAL TO APPROVE THE MIRANT EMPLOYEE STOCK PURCHASE PLAN
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In order to encourage our employees to become stockholders, we established the
Mirant Corporation Employee Stock Purchase Plan. This plan is intended to comply
with Section 423 of the Internal Revenue Code and was approved by the
stockholders at our annual meeting in 2001.
This plan permits eligible employees to purchase our common stock through
payroll deductions at a price per share which is equal to the lesser of 85% of
the fair market value of the common stock on the first or last day of an
offering period. Each offering period will be up to, but not longer than 2
years.
Under this plan, participants will be permitted to purchase shares of common
stock with an aggregate fair market value of no more than $25,000 in any one
calendar year. Regular full-time
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employees of Mirant and participating subsidiaries (currently about 4,000
employees) are eligible to participate in the plan.
On February 25, 2003, the Board of Directors recommended increasing the number
of shares reserved for issuance under this plan from 4,000,000 to a total of
12,000,000 shares. This increase is expected to provide enough shares for the
plan to operate for the next four years based on the Compensation Committee's
intent to limit the number of shares that may be purchased by an employee to
1,000 per period. The Compensation Committee will administer this plan and the
Committee does not intend to open a new purchase period until November 2003, at
the earliest.
Federal Income Tax Consequences. The following general summary describes the
typical U.S. federal income tax consequences of this plan based upon provisions
of the Internal Revenue Code as in effect on the date hereof, current
regulations promulgated and proposed thereunder, and existing public and private
administrative rulings of the Internal Revenue Service, all of which are subject
to change (possibly with retroactive effect). This summary is not intended to be
a complete analysis and discussion of the federal income tax treatment of this
plan, and does not discuss gift or estate taxes or the income tax laws of any
municipality, state, or foreign country.
An employee will not recognize income upon electing to participate in this plan
or upon purchasing shares under this plan. If the participating employee holds
the common stock purchased under this plan for at least two years after the
first day of the offering period with respect to which the common stock was
acquired (the "Grant Date"), when the participating employee disposes of the
common stock, he or she will recognize as ordinary income an amount equal to the
lesser of:
- the excess of the fair market value of the common stock on the date of
disposition over the purchase price paid for the common stock; or
- 15% of the fair market value of the common stock on the Grant Date.
Any additional gain will be taxed as long-term capital gain. If the fair market
value of the common stock at the time of disposition is below the purchase
price, the employee will not recognize any ordinary income, and any loss will be
a long-term capital loss. Mirant will not have a deductible expense as a result
of the purchase of stock under this plan, unless there is a "disqualifying"
disposition, as described in the next paragraph.
If an employee disposes of shares purchased under this plan within two years of
the Grant Date, then that sale constitutes a "disqualifying" disposition in
which the employee will realize:
- ordinary income in an amount equal to the excess of the fair market
value of the shares on the date of purchase (i.e., the last day of
the Offering Period) over the purchase price, and
- a capital gain or loss equal to the difference between (i) the
amount received for the shares and (ii) the sum of the purchase
price and the amount of ordinary income recognized.
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If the disqualifying disposition occurs more than one year after the date of
purchase, any capital gain or loss will be long-term; otherwise it will be
short-term. If an employee recognizes ordinary income as a result of a
disqualifying disposition, Mirant will be entitled to a corresponding deduction.
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The vote needed to approve the increase in the number of shares available under
the plan is a majority of the shares of Mirant's common stock represented at the
meeting and entitled to vote.
The Board of Directors recommends a vote FOR Item No. 2. Proxies solicited by
the Board will be voted FOR this proposal unless stockholders specify a contrary
choice.
The following table sets forth the benefits received under the Plan from its
inception commensurate with our initial public offering on September 27, 2000
through the offering period ending April 30, 2003:
EMPLOYEE STOCK PURCHASE PLAN
DOLLAR VALUE ($)(2) SHARES OF COMMON
NAME AND POSITION OF BENEFIT RECEIVED STOCK (#)
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S. M. FULLER, PRESIDENT & CEO 36,201 10,032
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R. D. HILL, FORMER EVP & CFO 25,581 2,952
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R. J. PERSHING, EVP -- --
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F. D. KUESTER, SVP 25,581 2,952
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D. L. MILLER, SVP & GENERAL COUNSEL 36,201 10,032
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J. W. HOLDEN III, SVP & TREASURER 23,174 1,136
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EXECUTIVE OFFICERS AS A GROUP 281,063 41,653
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NON-EXECUTIVE DIRECTORS AS A GROUP(1) -- --
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ALL OTHER EMPLOYEES 17,518,451 3,284,099
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(1) Non-executive directors are not eligible to participate in this plan.
(2) This column represents in the aggregate the difference for each offering
period between the purchase price paid by the plan participants and the
closing price of our common stock on the purchase date.
13
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EQUITY COMPENSATION PLANS
The following table indicates the compensation plans under which equity
securities of Mirant are authorized for issuance as of December 31, 2002:
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION PLANS
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE (EXCLUDING SECURITIES TO
ISSUED UPON EXERCISE OF EXERCISE PRICE OF BE ISSUED UPON EXERCISE
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, OF OUTSTANDING OPTIONS,
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS WARRANTS AND RIGHTS)(1)
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Equity compensation plans approved by
security holders 20,633,996 $17.68 12,291,886
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Equity compensation plans not approved
by security holders -- -- --
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Total 20,633,996 $17.68 12,291,886
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(1) Includes 2,101,153 shares subject to issuance under the Mirant Corporation
Employee Stock Purchase Plan.
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ITEM NO. 3 -- STOCKHOLDER PROPOSAL TO EXPENSE OPTIONS
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The Trust for the International Brotherhood of Electrical Workers Pension
Benefit Fund, located at 1125 Fifteenth Street, N.W., Washington, D.C. 20005, is
the beneficial owner of 18,245 shares of Mirant Common Stock, and submits the
following resolution:
RESOLVED, that the shareholders of Mirant Corporation ("Company") hereby request
that the Company's Board of Directors establish a policy of expensing in the
Company's annual income statement the costs of all future stock options issued
by the Company.
SUPPORTING STATEMENT: Current accounting rules give companies the choice of
reporting stock option expenses annually in the company income statement or as a
footnote in the annual report (See: Financial Accounting Standards Board
Statement 123). Most companies, including ours, report the cost of stock options
as a footnote in the annual report, rather than include the option costs in
determining operating income. We believe that expensing stock options would more
accurately reflect a company's operational earnings.
Stock options are an important component of our Company's executive compensation
program. Options have replaced salary and bonuses as the most significant
element of executive pay packages at numerous companies. The lack of option
expensing can promote excessive use of options in a company's compensation
plans, obscure and understate the cost of executive compensation and promote the
pursuit of corporate strategies designed to promote short-term stock price
rather than long-term corporate value.
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A recent report issued by Standard & Poor's indicated that the expensing of
option grant costs would have lowered operational earnings at companies by as
much as 10%. "The failure to expense stock option grants has introduced a
significant distortion in reported earnings," stated Federal Reserve Board
Chairman Alan Greenspan. "Reporting stock options as expenses is a sensible and
positive step toward clearer and more precise accounting of a company's worth."
Globe and Mail, "Expensing Options Is a Bandwagon Worth Joining," Aug. 16, 2002.
Warren Buffet wrote in a New York Times Op-Ed piece on July 24, 2002:
There is a crisis of confidence in the earnings numbers reports and
the credibility of chief executives. And it is justified.
For many years, I've had little confidence in the earnings numbers
reported by most corporations. I'm not talking about Enron and
WorldCom -- examples of outright crookedness. Rather, I am referring
to the legal, but improper, accounting methods used by chief
executives to inflate reported earnings...
Options are a huge cost for many corporations and a huge benefit to
executives. No wonder, then, that they have fought ferociously to
avoid making a charge against their earnings. Without blushing, almost
all C.E.O.'s have told their shareholders that options are cost-
free...
When a company gives something of value to its employees in return for
their services, it is clearly a compensation expense. And if expenses
don't belong in the earnings statement, where in the world do they
belong?
Many companies have responded to investors' concerns about their failure to
expense stock options. In recent months, more than 100 companies, including such
prominent ones as Coca-Cola, Washington Post, and General Electric, have decided
to expense stock options in order to provide their shareholders more accurate
financial statements. Our Company has yet to act. We urge your support.
15
MIRANT'S STATEMENT IN OPPOSITION
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
STOCKHOLDER PROPOSAL.
The stockholder proposal above asks stockholders to approve a resolution that
would cause Mirant to adopt an alternative method of accounting for employee
stock options for which there is no uniform valuation methodology and that most
publicly traded companies do not follow. Moreover, the proposed accounting
method is currently under review for further changes by the bodies which set
accounting standards. The Board of Directors understands and shares investors'
need for transparent and accurate reporting of Mirant's earnings, financial
position and the total cost of our compensation programs. At the same time, we
believe that investors have an equally compelling need for financial statements
that allow comparisons between companies of similar size or industry. Although
we agree that stock options are an important component of our compensation
program and that reporting employee stock option expense in the income statement
could be a positive step toward clearer and more precise accounting for
companies, Mirant's current method of accounting is consistent with the
practices of most public companies and provides full disclosure. Until a uniform
alternative method of accounting is widely accepted, we believe the adoption of
this proposal would inhibit accurate comparisons. Therefore, we believe
stockholders should vote AGAINST this proposal.
The Board of Directors believes employee ownership of Mirant's common stock
serves the interest of all stockholders as a means of promoting a long-term view
to increasing stockholder value. In 2002, options were granted at market prices
to more than 3,000 of our regular full-time employees, including officers,
managers, exempt and non-exempt employees -- not just senior executives. Option
grants are a key element of Mirant's compensation plan to attract and retain the
talent that is critical to Mirant's success. Moreover, we believe that the use
of stock option grants at Mirant has always been modest and appropriate. The
effect of these options has been reflected as additional shares outstanding,
calculated using the treasury-stock method, and we have provided full disclosure
in the footnotes to our audited financial statements as if the options were
expensed using the fair-value method.
Current accounting rules give companies the choice of accounting for stock
options using the intrinsic-value method, which generally results in recording
no expense for stock option awards, or the fair-value method, which generally
results in expense recognition. Accounting rules further require that the impact
of the fair-value method be disclosed in the footnotes to the financial
statements if the intrinsic-value method is used. Mirant is in full compliance
with current accounting rules.
Most public companies, including Mirant, account for employee stock-based
compensation, including stock options, using the intrinsic-value method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." The "intrinsic value" of the option is the amount by which
the quoted market price of the stock exceeds the exercise price of the option on
the date of grant. Generally, option awards have zero intrinsic value on the
date of grant as the exercise price is set to be equal to the market price of
the stock on that date. In addition, all of the options granted to the employees
of Mirant are subject to vesting and cannot be exercised on the
16
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grant date. Therefore, the Board of Directors believes the intrinsic-value
method provides both a transparent and accurate picture of Mirant's earnings.
The fair-value method, prescribed by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock Compensation," computes compensation expense
based on the fair value of the option at the date of grant. "Fair value" is
determined using an option-pricing model that takes into account multiple
factors in estimating value that can have varying results depending on
assumptions used.
The Board of Directors believes it is in the best interest of stockholders for
Mirant to continue to follow its current practice until the appropriate bodies
which set accounting standards complete their review in this area. Meanwhile, we
believe that our current accounting practice will provide the greatest
transparency by promoting compatibility with disclosures by other public
companies. While an estimated value of expense for stock options is not included
in Mirant's consolidated statement of earnings, the impact of the potential
expense is clearly disclosed in the notes to the consolidated financial
statements giving investors information necessary to evaluate Mirant's earnings
under the alternate methodology. As part of Mirant's commitment to continuously
improve its financial disclosure, the estimated fair-value method of accounting
for stock options will be more frequently updated and included in each of
Mirant's quarterly reports on Form 10-Q.
We share the desire to have transparent and accurate accounting policies
implemented in a prudent manner with full and complete information as it
pertains to this issue. We believe the best way to accomplish this objective at
this time is to retain the current accounting policy with respect to stock
options and await consensus and/or clarity on how to expense stock options,
prior to adopting any alternate method of accounting.
---------------------------------------------------------
The vote needed to approve this proposal is a majority of the shares of Mirant's
common stock represented at the meeting and entitled to vote.
The Board of Directors recommends a vote AGAINST Item No. 3. Proxies solicited
by the Board will be voted AGAINST this proposal unless stockholders specify a
contrary choice.
17
COMPENSATION COMMITTEE REPORT
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Mirant's compensation program for its executive officers is administered and
reviewed by the Compensation Committee (the "Committee") of the Board of
Directors. The Committee is comprised of three directors who are independent
under New York Stock Exchange listing standards.
COMPENSATION PHILOSOPHY
In determining the compensation payable to Mirant's executive officers, the
Committee seeks to achieve the following objectives through a combination of
fixed and variable compensation:
- provide a total compensation opportunity that is consistent with competitive
practices, enabling Mirant to attract and retain qualified executives;
- create a direct link between the compensation payable to each executive
officer and the financial performance of Mirant; and
- create a common interest between executive officers and Mirant's stockholders
through the use of stock options and other stock awards that link a
significant portion of each executive officer's compensation opportunity
directly to the value of Mirant's common stock.
The Committee's compensation philosophy, and the strategically aligned programs
that implement this philosophy, were developed with the assistance of outside
consultants and counsel. The Committee annually reviews Mirant's compensation
policies and programs in light of this philosophy and of competitive practices.
2002 SPECIAL COMPENSATION-RELATED CONSIDERATIONS
During 2002 Mirant faced an unprecedented amount of adversity. The fall-out from
the Enron bankruptcy, turmoil in the California power markets, and the overall
downturn in the economy have created difficult market conditions and uncertainty
throughout the competitive energy industry. All of these factors have ultimately
resulted in a significant reduction in the stock price of Mirant and all other
competitive energy companies. In response to these market conditions, throughout
2002 Mirant took aggressive steps to refocus its business: selling assets,
reducing expenses, cutting capital expenditures and conserving cash. A critical
success factor going forward will be retaining and motivating key employees to
stay with the Company as we focus on refinancing our major debt maturities.
Given the market environment of 2002 and 2003, many of the decisions regarding
Mirant's 2002 compensation programs were made to enhance the retention and
motivation of key employees. Some of the specific decisions were:
- Base Salary: During 2002 raises overall were about 1.6%, with approximately
half of these raises being focused on Mirant's top performing employees (20%
of the total population); and
- Short-term Incentives: For performance in 2002, Mirant paid bonuses equal to
about half of the total amounts paid for 2001 performance. Again, these
bonuses were focused on our top performing employees and about 25% of all
amounts earned were deferred to encourage retention.
18
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BASE SALARY
The Committee establishes the base salary of each executive officer listed in
the Summary Compensation Table by comparison to competitive market levels for
the executive's job function. The "Peer Group" used in the Performance Graph on
page 33 of this proxy statement reflects Mirant's direct competitors in its
principal business. A broader group of companies, including the "Peer Group"
companies, was used for compensation comparisons. The broader group was used
because Mirant believes it competes with this larger group of companies for the
services of talented employees. Base salaries generally approximate the median
level of such competitive rates and may be adjusted based on individual
performance. Salaries are reviewed to determine competitive market levels at
regular intervals, approximately annually.
SHORT-TERM INCENTIVE
For 2002, the Committee established annual bonus targets based primarily on
corporate performance. For the executive officers listed in the Summary
Compensation Table, four equally-weighted corporate goals related to Mirant's
earnings per share (EPS), return on equity (ROE), year-end liquidity and cash
flow from operating activities were the primary determinants of each executive's
total bonus opportunity. Performance targets associated with the range of bonus
payouts were established for each goal. These goals and targets were established
to focus management on the business metrics considered critical to Mirant's
success in a very challenging year. In early 2002, the Committee endorsed these
measures, as appropriate, at the beginning of the performance period. Individual
performance was the secondary factor in determining the amount of the bonus
opportunity. Target bonuses are set at the median level of competitive rates.
The maximum payout is set at two times target to award recipients for
exceptional performance.
Based on the above goals, the Committee evaluated performance for 2002. Mirant
did not meet expectations in 2002 with regard to EPS and ROE. Mirant did,
however, exceed the performance thresholds in the areas of year-end liquidity
and cash flow from operating activities. Exceeding these thresholds allowed
Mirant to end the year in strong liquidity and cash positions. This was achieved
under difficult economic conditions during a time of ongoing realignment within
the competitive energy sector.
The Chief Executive Officer and the Compensation Committee evaluated Mirant's
performance against the previously stated goals and the continuing need to
motivate and retain our employees during these difficult times. Based on this
evaluation, Management recommended and the Committee approved a corporate bonus
of 25 percent of the maximum allowable under the plan. The bonuses were paid to
a broad range of employees, including employees in foreign subsidiaries
19
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and unions that were eligible for short-term incentives. A breakdown of
employees receiving incentives for 2002 is shown below.
Executive Officers Listed in the Summary Compensation Table 1.1%
Other Senior Executives 3.8%
All other employees
-- Amount Paid 71.7%
-- Amount Deferred 23.4%
In total, bonuses paid for 2002 performance were about 50% of the total paid for
2001 performance. In addition, the executive officers listed in the Summary
Compensation Table saw an 80% reduction in their bonuses versus 2001, which
approximates the reduction in Mirant's stock price during 2002. The Chief
Executive Officer and the former Chief Financial Officer received no bonus for
2002 performance.
LONG-TERM INCENTIVES
Mirant's long-term incentives in 2002 took the form of equity grants consisting
of Mirant stock options and Mirant performance restricted stock units. These
grants were based on the median level of competitive rates.
Mirant Stock Options. Stock options are Mirant's primary long-term incentive.
In awarding stock options to executive officers in 2002, Mirant's intent was
that such options would represent a significant portion of each such officer's
total compensation opportunity, thus aligning the officer's economic interests
with those of Mirant's stockholders. Consistent with this goal, all option
awards in 2002 were made at the fair market value of the common stock as of the
date of grant. The Committee believes that these awards were reasonable compared
to similar awards made by Mirant's competitors.
Mirant Performance Restricted Stock Units. Performance restricted stock units
were awarded in 2002 to certain executives, including the executive officers
listed in the Summary Compensation Table, based upon similar factors as for the
stock option grants. The Committee's purpose for awarding these units was to (i)
mitigate the dilutive effects of awarding equity-based long-term incentives and
(ii) incent such executive officers to achieve stock appreciation targets.
Consistent with this purpose, the Committee granted units in 2002 that would be
paid out in cash in 20 percent increments based on the attainment of
predetermined levels of stock price appreciation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee reviews the compensation of the chief executive
officer on an annual basis. The Committee made decisions regarding Ms. Fuller's
compensation based on an annual review of her individual performance, Mirant's
performance and independent market data.
20
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Base Salary
During 2002, Marce Fuller served as Mirant's chief executive officer and
received base compensation of $800,000. The Committee did not increase Ms.
Fuller's base salary in 2003 and has not granted her a base salary increase
since March 1, 2001.
Short-term Incentive
Ms. Fuller was eligible for an incentive for 2002 performance, but she
recommended to the Committee that she receive no short-term incentive payout.
Based on this recommendation and the Committee's assessment of Corporate
performance, the Committee elected not to pay Ms. Fuller a bonus for 2002.
Long-term Incentives
Ms. Fuller received long-term incentives as set forth in the Summary
Compensation Table. These long-term incentives were granted on February 19,
2002. The stock options awarded to Ms. Fuller in 2002 become exercisable in
equal annual installments over a period of three years and have an exercise
price of $9.08. The performance restricted stock units vest in 20% increments
each time the stock increases 20% over the base price of $9.08. All of the
performance restricted stock units will have vested once the 10-day average
closing price of Mirant's common stock is $18.16.
POLICY AS TO SECTION 162(M) OF THE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly traded company a Federal income tax deduction for compensation
in excess of $1 million paid to certain of its executive officers unless the
amount of such excess is payable based solely upon the attainment of objective
performance criteria. Mirant has undertaken to qualify substantial components of
the incentive compensation it makes available to its executive officers for the
performance exception to nondeductibility. However, in appropriate
circumstances, it may be necessary or appropriate to pay compensation or make
special incentive or retention awards that do not meet the performance based
exception and therefore may not be deductible by reason of Section 162(m). In
2002, about $800,000 of compensation was not deductible under Section 162(m).
Members of the Compensation Committee as of December 31, 2002:
A. D. Correll, Chairman
David J. Lesar
James F. McDonald
21
AUDIT COMMITTEE REPORT
--------------------------------------------------------------------------------
The Audit Committee (the "Committee") oversees Mirant's financial reporting
process and supervises Mirant's relationship with the independent auditors. The
Committee reviewed its charter and practices in light of the Sarbanes-Oxley Act
of 2002, new Securities and Exchange Commission regulations implementing this
legislation, and proposed listing standards of the New York Stock Exchange
regarding audit committee procedures and responsibilities. Although the Audit
Committee's existing practices complied in many respects with the requirements
of these rules and standards, the Board of Directors has adopted amendments to
the Committee's charter to implement voluntarily certain of the proposed rules
and to formalize the Committee's continued adherence to others. A copy of the
amended charter is included as Appendix A to this Proxy Statement.
The Audit Committee met 24 times in 2002. Significant activities during 2002
included reviewing and discussing with management annual and quarterly financial
statements as well as earnings announcements, overseeing an independent review,
performed by counsel, of accounting issues identified by management related to
Mirant's risk management and marketing operations, appointing and supervising
Mirant's independent auditors, authorizing a reaudit of Mirant's 2000 and 2001
financial statements, and overseeing management's procedures for providing the
Chief Executive Officer and Chief Financial Officer certifications required by
the Sarbanes-Oxley Act of 2002 and Securities and Exchange Commission
regulations. The Committee had separate private discussions with the independent
auditors and the director of internal audit at each regularly scheduled meeting.
In discharging its duties and responsibilities, the Audit Committee has:
- reviewed and discussed Mirant's audited financial statements for the year
ended December 31, 2002 with management and the independent auditors
- discussed with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended
- received from the independent auditors a formal written statement describing
all relationships between the auditors and Mirant that might affect the
auditors' independence as required by Independence Standards Board Standard
No. 1
- discussed with the independent auditors any relationships (including nonaudit
services) that may impact their objectivity and independence
- pre-approved all audit and permitted non-audit services provided by the
independent auditors, and the compensation, fees and terms for such services;
and
- approved a policy authorizing the Audit Committee Chairman to pre-approve
permitted non-audit services to be performed by the independent auditors
22
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The Audit Committee has considered whether the provision of the non-audit
services is compatible with maintaining the principal auditors' independence.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity, whereas management is responsible for preparing the
financial statements and reports. The Audit Committee relies on the work and
assurances of management and the independent auditors, who express an opinion on
the conformity of Mirant's annual financial statements to generally accepted
accounting principles.
Further, although the Board of Directors has designated several members as
"audit committee financial experts," as defined in Securities and Exchange
Commission regulations, the Committee is not providing any special assurance as
to Mirant's financial statements or any professional certification as to the
independent auditors' work. Based on the reviews and discussions noted above,
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in Mirant's Annual Report for the year ended
December 31, 2002 for filing with the Securities and Exchange Commission.
Members of the Audit Committee as of December 31, 2002:
David J. Lesar, Chairman
Stuart E. Eizenstat
James F. McDonald
23
AUDITOR INDEPENDENCE
--------------------------------------------------------------------------------
KPMG LLP was named as our independent auditors effective May 16, 2002. Arthur
Andersen LLP served as our independent auditors from January 1 through May 15,
2002. On May 15, 2002, following the decision of the Board of Directors to
replace Arthur Andersen as Mirant's independent auditors, Mirant filed with the
Securities and Exchange Commission a current report on Form 8-K, which is
incorporated by reference herein. KPMG LLP, the independent auditors, billed and
is expected to bill the following fees for 2002:
AUDIT FEES (IN MILLIONS)
The aggregate fees billed and expected to be billed by
the independent auditors for professional services
rendered for the audit of Mirant's 2002 annual
financial statements and reviews of financial
statements included in our Forms 10-Q for 2002......... $11.9
ALL OTHER FEES
The aggregate fees billed through December 31, 2002 by
the independent auditors for all other services,
consisting of:
AUDIT-RELATED -- including securities offerings
and controls testing and reporting.................. 2.8
TAX CONSULTING.................................... 1.6
OTHER............................................. 0
------
TOTAL ALL OTHER FEES.............................. 4.4
------
TOTAL.................................................. $16.3
------
------
REAUDIT FEES (IN MILLIONS)
The aggregate fees billed since December 31, 2002 and
expected to be billed by the independent auditors for
professional services rendered for the reaudit of
Mirant's annual financial statements for 2000 and 2001. $7.4
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
KPMG LLP did not provide professional services rendered for financial
information systems design and implementation during 2002.
24
EXECUTIVE COMPENSATION
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EMPLOYMENT CONTRACTS
Mirant has entered into an employment agreement with each of the executive
officers named in the Summary Compensation Table. The compensation provided for
in each employment agreement is discussed below. The amounts granted under these
agreements are forfeited upon termination for cause or resignation. Amounts are
paid immediately if the employee dies, becomes disabled, or is terminated
without cause. The Board is solely responsible for administering these
agreements.
MS. FULLER.
On October 5, 1999, Southern Company, Mirant Services, LLC and S. Marce Fuller
entered into an employment agreement. The agreement provides for the award of
$400,000 in phantom Southern Company stock, valued as of the date of the
agreement and paid out on July 1, 2003 if Ms. Fuller is still employed by us.
The phantom Southern Company stock was converted into 19,942 shares of phantom
Mirant common stock upon Mirant's separation from the Southern Company. If Ms.
Fuller is employed by Mirant on July 1, 2003, she will receive a payment of the
phantom stock in cash, valued as of that date, including the reinvestment of any
dividends paid during the period of the agreement. Based on Mirant's
performance, the taxes due on any payment will not be grossed-up. This agreement
will terminate at the earlier of (1) when Ms. Fuller terminates her employment
with us or (2) when the phantom stock is paid. As of December 31, 2002, the
value of the shares under this agreement was $37,291.
MR. HILL.
In October 1999, we entered into a compensation agreement with Raymond D. Hill,
which provided for an award of $300,000 in phantom Southern Company stock,
valued as of the date of the agreement. The phantom Southern Company stock was
converted to phantom Mirant common stock upon Mirant's separation from the
Southern Company. Mr. Hill would have received the phantom stock payment on
March 1, 2003 and his retirement payments would have been calculated as if 10
additional years of service were included in the pension and supplemental
executive retirement plan calculations, if he were still employed by us on that
date. This agreement terminated upon his retirement on December 31, 2002. As
part of his severance agreement, upon his leaving Mirant, the phantom stock due
to vest on March 1, 2003 was paid in the amount of $26,472 and his retirement
payments were calculated as if 10 additional years of service were included in
the pension and supplemental executive retirement plan calculations.
MR. PERSHING.
In October 1999, we entered into a compensation agreement with Richard J.
Pershing. The agreement provides for an award of $300,000 in phantom Southern
Company stock, valued as of the date of the agreement. The phantom Southern
Company stock was converted into 14,956 shares of phantom Mirant common stock
upon Mirant's separation from the Southern Company. Mr. Pershing will receive
the phantom stock payment on May 1, 2003 if he is still employed by us on that
date. Also under this agreement, because Mr. Pershing was still employed by us
on November 1, 2002, his
25
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retirement payments are calculated as if three years of additional service are
included in the pension and supplemental executive retirement plan calculations.
This agreement terminates at the earlier of (1) when Mr. Pershing terminates his
employment with us or (2) when the phantom stock is paid. As of December 31,
2002, the value of the shares under this agreement was $27,968.
MR. KUESTER.
Effective December 9, 1999, we entered into a compensation agreement with
Frederick D. Kuester. This agreement provides for the award of $100,000 in our
phantom stock, at the December 31, 1998 base value under the SEI Value Creation
Plan. Under the terms of the agreement, since Mr. Kuester was still employed by
us on January 1, 2003, this award was paid at $100,000, being the greater of the
then current value of Mirant stock or $100,000. In addition, on December 20,
2000, we entered into another agreement with Mr. Kuester for employment through
January 1, 2004. This agreement guarantees him annual retirement income of
$225,000 if he retires from Mirant after January 1, 2004, and provides that all
of his then outstanding options became vested upon his return from his
assignment at Mirant Asia-Pacific.
MR. MILLER.
Effective October 1, 1999, we entered into an employment agreement with Douglas
L. Miller. This agreement provides for compensation and benefits during the
five-year term of the agreement. Under the terms of the agreement, if Mr. Miller
is still employed by us on September 30, 2004, his retirement payments are
calculated as if 5 years of additional service are included in the pension and
supplemental executive retirement plan calculations.
MR. HOLDEN.
Effective July 9, 2002, we entered into a retention agreement with J. William
Holden III. This agreement provides for cash retention payments totaling
$1,500,000 from July 9, 2002 through February 15, 2003. In the event that Mr.
Holden voluntarily resigns prior to February 15, 2004, he must repay 50% of all
after-tax amounts of retention payments he received. Subject to conditions
specified in the agreement, if Mr. Holden is still employed by us on May 1,
2005, his retirement benefits are calculated as if 5 years of additional service
and age are included in the pension and supplemental executive retirement plan
calculations.
RELATED PARTY TRANSACTIONS
Mr. Ed Adams was elected senior vice president of Mirant in February 2002. His
wife Susan Adams was an employee of Mirant until October 24, 2002. In 2002, she
received an aggregate salary of $100,879, as president of Mirant Intellectual
Asset Management and Marketing, LLC, and severance payment of $86,765, in
accordance with Mirant's standard severance plan. Mr. Richard Pershing is
executive vice president of Mirant. His son-in-law, Ethan Davies, is employed by
Mirant as an application server administrator. Mr. Davies received an aggregate
salary and bonus of $65,836 for 2002.
26
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CERTAIN LEGAL PROCEEDINGS
Ms. Fuller served as an executive officer of Mobile Energy Services Company, LLC
(Mobile Energy) from July 1995 to July 2001, and as an executive officer of its
parent company Mobile Energy Services Holdings, Inc. (MESH) from February 1995
to January 1999. Mobile Energy owns a generating facility which provides power
and steam to a tissue mill in Mobile, Alabama. Mobile Energy and MESH filed for
bankruptcy on January 14, 1999 in response to the announcement by its then
largest customer, a pulp mill, of plans to cease operations in September 1999. A
proposed plan of reorganization for Mobile Energy and MESH is pending before the
bankruptcy court.
CHANGE IN CONTROL ARRANGEMENTS
Our executive officers named in the Summary Compensation Table have change in
control agreements that are effective upon a change in control of Mirant.
Within two years following a change in control, if an executive is involuntarily
terminated, other than for cause, or voluntarily terminated for good reason,
which is defined as a meaningful and detrimental change in duties, a significant
reduction in compensation or benefits or relocation, the agreements provide for:
- a lump sum payment of three times annual compensation (base salary and average
actual bonus for the last two years);
- a lump sum payment of three times the annual cost of health and life insurance
coverage;
- immediate vesting of all stock options and stock appreciation rights
previously granted;
- payment of any accrued short-term bonuses and performance restricted stock
units; and
- payment of any excise tax liability incurred as a result of payments made
under the agreement.
The agreements also provide for pro-rata payments at the greater of target-level
performance or actual performance for some incentive plans if a change in
control occurs and the plans are not continued or replaced with comparable
plans.
The definition of "change in control" includes the following events:
- acquisition by a person of at least 20% of our stock;
- a defined change in the majority of the members of our Board of Directors;
- a merger or other business combination that results in our stockholders
immediately before the merger owning less than 65% of the voting power after
the merger; or
- a sale of substantially all of our assets.
27
STOCK OWNERSHIP TABLE
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This table shows the number of shares owned by directors, nominees, and
executive officers as of March 1, 2003, and all known beneficial owners of more
than 5% of Mirant common stock as of December 31, 2002. The shares owned by all
directors and executive officers as a group constituted less than one percent of
the total number of shares of Mirant common stock outstanding as of March 1,
2003.
SHARES INDIVIDUALS
COMMON SHARES NON-CONVERTIBLE HAVE RIGHTS TO
TOTAL BENEFICIAL BENEFICIALLY ECONOMIC ACQUIRE WITHIN
OWNERSHIP(1) OWNED(2) INTERESTS(3) 60 DAYS(4)
----------------------------------------------------------------------------------------------------------------------------
A. D. CORRELL 127,398 43,736 83,662 --
----------------------------------------------------------------------------------------------------------------------------
A. W. DAHLBERG 145,655 51,162 94,494 --(5)
----------------------------------------------------------------------------------------------------------------------------
STUART E. EIZENSTAT 34,372 -- 34,372 --
----------------------------------------------------------------------------------------------------------------------------
S. MARCE FULLER 2,403,943 27,632 1,602,608 773,703
----------------------------------------------------------------------------------------------------------------------------
CARLOS GHOSN 34,540 34,540 -- --
----------------------------------------------------------------------------------------------------------------------------
RAYMOND D. HILL 229,482 6,832 35,786 186,864
----------------------------------------------------------------------------------------------------------------------------
J. W. HOLDEN III 195,213 9,224 15,152 170,837
----------------------------------------------------------------------------------------------------------------------------
FREDERICK D. KUESTER 554,070(6) 9,958(6) 204,362 339,750
----------------------------------------------------------------------------------------------------------------------------
DAVID J. LESAR 65,490(7) 5,000(7) 60,490 --
----------------------------------------------------------------------------------------------------------------------------
ROBERT F. MCCULLOUGH -- -- -- --
----------------------------------------------------------------------------------------------------------------------------
JAMES F. MCDONALD 29,540 29,540 -- --
----------------------------------------------------------------------------------------------------------------------------
DOUGLAS L. MILLER 469,473 6,887 321,227 141,359
----------------------------------------------------------------------------------------------------------------------------
RICHARD J. PERSHING 648,103 32,490 211,676 403,937
----------------------------------------------------------------------------------------------------------------------------
RAY M. ROBINSON 30,040 2,500 27,540 --
----------------------------------------------------------------------------------------------------------------------------
DIRECTORS, NOMINEES AND EXECUTIVE
OFFICERS AS A GROUP (19 PEOPLE) 6,636,084(8) 295,852(8) 4,079,909 2,260,323
----------------------------------------------------------------------------------------------------------------------------
BARROW, HANLEY, MEWHINNEY & STRAUSS, INC. 29,283,683(9) 29,283,683(9) -- --
----------------------------------------------------------------------------------------------------------------------------
VANGUARD WINDSOR FUNDS -- VANGUARD WINDSOR II FUND 28,956,600(10) 28,956,600(10) -- --
----------------------------------------------------------------------------------------------------------------------------
(1) "Beneficial ownership" means the sole or shared power to vote, or to direct
the voting of, a security, or investment power with respect to a security,
or any combination thereof. This column includes ownership interests in
Mirant Common Shares, Non-Convertible Economic Interests, and Shares
Individuals Have Rights to Acquire within 60 days (as of 3/01/2003).
(2) Indicates shares of Mirant common stock beneficially owned. Shares
indicated are included in the Total Beneficial Ownership column.
(3) Indicates stock units and performance restricted stock units held in
various benefit plans. Although these rights track the market value of
Mirant common stock, they are payable in cash and are not convertible into
common stock. Shares indicated are included in the Total Beneficial
Ownership column.
(4) Indicates shares of Mirant common stock that certain directors and
executive officers have the right to acquire within 60 days, by exercising
stock options. The numbers and values of exercisable stock options as of
December 31, 2002 are shown on a table on page 31. Shares indicated are
included in the Total Beneficial Ownership column.
(5) On February 5, 2003, Mr. Dahlberg voluntarily returned all 685,417 of his
vested and unvested options to Mirant. Mr. Dahlberg received no
consideration for this action.
(6) Includes 1,512 shares held by family members.
(7) Includes 5,000 shares held by a Family Limited Partnership. Mr. Lesar
disclaims beneficial ownership of 71.06% of these shares.
(8) Includes 12,027 shares held by family members.
(9) According to a Schedule 13G filed with the Securities and Exchange
Commission on February 12, 2003, Barrow, Hanley, Mewhinney & Strauss, Inc.
(3232 McKinley Avenue, 15th Floor, Dallas, TX 75204-2429), had sole voting
power over 86,554 shares, shared voting power over 29,197,129 shares and
sole investment power over 29,283,683 shares or 7.25% of Mirant common
stock as of December 31, 2002.
(10) According to a Schedule 13G filed with the Securities and Exchange
Commission on February 13, 2003, Vanguard Windsor Funds -- Vanguard Windsor
II Fund (100 Vanguard Blvd., Malvern, PA 19355) had sole voting power and
shared investment power over 28,956,600 shares or 7.17% of Mirant common
stock as of December 31, 2002. Mirant believes these shares are included in
the shares beneficially owned by Barrow, Hanley, Mewhinney & Strauss, Inc.
reported above.
28
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------
This table shows information concerning Mirant's president and chief executive
officer, and each of the other five most highly compensated executive officers
of Mirant serving during 2002.
LONG-TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION NUMBER OF LONG-TERM
---------------------------------- SECURITIES INCENTIVE
OTHER ANNUAL RESTRICTED UNDERLYING PLAN ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK AWARDS STOCK OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)(7)
--------------------------------------------------------------------------------------------------------------------------
S. M. FULLER 2002 800,000 -- 170,057 4,214,800 425,000 -- 36,000
President & CEO 2001 740,238 700,000 -- 2,222,234 260,417 -- 33,150
2000 416,385 630,000 3,000 1,666,676 305,320 -- 21,762
--------------------------------------------------------------------------------------------------------------------------
R. D. HILL 2002 425,000 -- 62,946 635,600 100,000 -- 443,375
EVP & CFO 2001 410,102 462,188 -- 849,997 99,609 -- 18,376
(retired 12/31/02) 2000 320,481 357,500 16,365 1,166,660 212,967 -- 16,447
--------------------------------------------------------------------------------------------------------------------------
R. J. PERSHING 2002 425,000 159,375 60,987 635,600 100,000 -- 19,406
EVP 2001 410,102 483,438 -- 849,997 99,609 -- 18,376
2000 320,481 357,500 13,398 1,166,660 212,967 -- 17,319
--------------------------------------------------------------------------------------------------------------------------
F. D. KUESTER 2002 325,000 113,750 2,942 544,800 82,000 -- 14,625
SVP 2001 317,980 312,812 -- 489,447 59,570 -- 14,252
2000 268,096 302,500 6,379 416,658 133,988 18,765 13,842
--------------------------------------------------------------------------------------------------------------------------
D. L. MILLER 2002 300,000 120,000 905 326,880 50,000 -- 53,476
SVP & General Counsel 2001 292,882 273,500 -- 456,819 54,688 -- 33,778
2000 250,000 262,500 -- 333,344 102,438 -- 938
--------------------------------------------------------------------------------------------------------------------------
J. W. HOLDEN III 2002 268,333 1,527,500 6,427 222,460 34,000 -- 9,825
SVP & Treasurer 2001 227,500 228,650 -- -- 52,246 -- 10,239
2000 171,666 171,000 -- -- 77,580 -- 9,917
--------------------------------------------------------------------------------------------------------------------------
(1) Mr. Holden's bonus for 2002 performance was $90,000. The majority of the
additional $1,437,500 disclosed in this column was specifically for
retention and is pursuant to the agreement described in the above section:
"Executive Compensation -- Employment Contracts". The remaining amount is
for his work as an expatriate for our European operations.
(2) During 2002, Mirant owned fractional shares of a business aircraft which Ms.
Fuller, Mr. Hill and Mr. Pershing each used at a cost to Mirant of $141,020,
$46,797 and $54,029, respectively.
(3) The values for awards are restricted stock units payable in cash upon
vesting. The units vest 20% each time Mirant's stock price increases 20%
over the price on the day of grant. As of December 31, 2002 the following
number and value of the restricted stock units were held by each executive
officer listed in the table: (Fuller 406,071 units, $759,353); Hill (55,282
units, $103,377); Pershing (55,282 units, $103,377); Kuester (43,813 units,
$81,930); Miller (28,893 units, $54,030); and Holden (14,700 units,
$27,489). No dividends are paid on restricted stock units.
(4) 2000 included units granted under the Southern Energy, Inc. Value Creation
Plan that were converted into Mirant stock options at the time of Mirant's
initial public offering and Southern Company options that were converted
into Mirant Options on March 19, 2001.
(5) Payout under the Southern Company Performance Incentive Plan for the 4-year
period ending December 31, 2000.
(6) In conjunction with his separation from Mirant, Mr. Hill received a payment
of $425,000. This payment is consistent with the Mirant Services Severance
Pay Plan in effect for employees during 2002.
29
--------------------------------------------------------------------------------
(7) 2002 and 2001 include contributions to the Mirant Services Employee Savings
Plan, Profit Sharing Arrangement within the Mirant Services Employee Savings
Plan, as well as non-pension related accruals under the Supplemental Benefit
Plan. 2001 also includes contributions to the Southern Company Employee
Savings Plan and Southern Company Performance Sharing Plan. 2000
contributions to the Southern Company Employee Savings Plan, Southern
Company Employee Stock Ownership Plan, as well as non-pension related
accruals under the Supplemental Benefit Plan. The break-out of the 2002
contributions is provided in the following table:
PROFIT
ESP ($) SHARING ($) SBP ($)
----------------------------------------------------------------------------------------
S. M. Fuller 9,000 -- 27,000
----------------------------------------------------------------------------------------
R. D. Hill 8,250 -- 10,125
----------------------------------------------------------------------------------------
R. J. Pershing 9,000 -- 10,406
----------------------------------------------------------------------------------------
F. D. Kuester 9,000 -- 5,625
----------------------------------------------------------------------------------------
D. L. Miller 8,250 13,225 32,001
----------------------------------------------------------------------------------------
J. W. Holden III 8,250 -- 1,575
----------------------------------------------------------------------------------------
30
STOCK OPTION GRANTS, EXERCISES AND YEAR-END VALUES
--------------------------------------------------------------------------------
STOCK OPTION GRANTS IN 2002
NUMBER OF POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL ANNUAL RATES OF STOCK PRICE
UNDERLYING OPTIONS GRANTED EXERCISE OR APPRECIATION FOR OPTION TERM ($)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------------------------
NAME GRANTED (1) FISCAL YEAR (2) ($/SH)(1) DATE (1) 0% 5% 10%
-------------------------------------------------------------------------------------------------------------------------
S. M. FULLER 425,000 5.42 $9.08 2/19/12 0 2,426,904 6,150,252
-------------------------------------------------------------------------------------------------------------------------
R. D. HILL 100,000 1.28 $9.08 2/19/12 0 571,036 1,447,118
-------------------------------------------------------------------------------------------------------------------------
R. J. PERSHING 100,000 1.28 $9.08 2/19/12 0 571,036 1,447,118
-------------------------------------------------------------------------------------------------------------------------
F. D. KUESTER 82,000 1.05 $9.08 2/19/12 0 468,250 1,186,637
-------------------------------------------------------------------------------------------------------------------------
D. L. MILLER 50,000 0.64 $9.08 2/19/12 0 285,518 723,559
-------------------------------------------------------------------------------------------------------------------------
J. W. HOLDEN III 34,000 0.43 $9.08 2/19/12 0 194,152 492,020
-------------------------------------------------------------------------------------------------------------------------
ALL OPTIONEES 7,838,845 100.00 $9.08 (3) 0 44,759,201 113,428,604
-------------------------------------------------------------------------------------------------------------------------
ALL STOCKHOLDERS (4) N/A N/A N/A N/A 0 2,306,341,563 5,844,722,343
-------------------------------------------------------------------------------------------------------------------------
(1) These grants vest annually at a rate of one-third on the anniversary date of
the grant. Grants continue to vest normally upon termination as a result of
death, total disability, or retirement and expire five years after
retirement, three years after death or total disability, or their normal
expiration date if earlier.
(2) A total of 7,838,845 Mirant stock options were granted in 2002 to
approximately 3,500 employees around the world. This represents almost all
of our employees who are not covered by a collective bargaining agreement.
(3) The exercise price shown is an average of the price of all options granted
in 2002. Options expire at various times between January 2, 2012 and
December 1, 2012.
(4) "All Stockholders" values are calculated using the average exercise price
for all options awarded in 2002, $9.08, based on the outstanding shares of
common stock on December 31, 2002.
AGGREGATED STOCK OPTION EXERCISES IN 2002 AND YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF VALUE OPTIONS AT YEAR-END (#) YEAR-END ($)(2)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------------
S. M. FULLER 0 0 483,555 717,105 0 0
------------------------------------------------------------------------------------------------------------------------
R. D. HILL 0 0 362,993 254,116 0 0
------------------------------------------------------------------------------------------------------------------------
R. J. PERSHING 0 0 289,463 254,116 0 0
------------------------------------------------------------------------------------------------------------------------
F. D. KUESTER 0 0 238,042 176,231 0 0
------------------------------------------------------------------------------------------------------------------------
D. L. MILLER 0 0 86,521 120,605 0 0
------------------------------------------------------------------------------------------------------------------------
J.W. HOLDEN III 0 0 127,930 96,680 0 0
------------------------------------------------------------------------------------------------------------------------
(1) The Value Realized is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares or rights
at the time of exercise above the exercise price.
(2) These columns represent the excess of the fair market value of Mirant's
common stock of $1.87 per share, as of December 31, 2002, above the exercise
price of the options. The amounts under the Exercisable column report the
"value" of options that are vested and therefore could be exercised. The
Unexercisable column reports the "value" of options that are not vested and
therefore could not be exercised as of December 31, 2002.
31
PENSION PLAN TABLE
--------------------------------------------------------------------------------
YEARS OF ACCREDITED SERVICE
----------------------------------------------------
COMPENSATION 10 15 20 25 30
-------------------------------------------------------------------
$ 250,000 $ 42,500 $ 63,750 $ 85,000 $106,250 $127,500
-------------------------------------------------------------------
500,000 85,000 127,500 170,000 212,500 255,000
-------------------------------------------------------------------
750,000 127,500 191,250 255,000 318,750 382,500
-------------------------------------------------------------------
1,000,000 170,000 255,000 340,000 425,000 510,000
-------------------------------------------------------------------
1,250,000 212,500 318,750 425,000 531,250 637,500
-------------------------------------------------------------------
1,500,000 255,000 382,500 510,000 637,500 765,000
-------------------------------------------------------------------
1,750,000 297,500 446,250 595,000 743,750 892,000
-------------------------------------------------------------------
The table below shows the estimated annual pension benefit payable (rounded to
$000) at normal retirement age under Mirant's qualified pension plan,
non-qualified pension plans and pension-related contracts, based on the stated
compensation (rounded to $000) and years of Accredited Service with Mirant's
subsidiaries. The amounts shown in the table were calculated according to the
final average pay formula and are based on a single life annuity without
reduction for joint and survivor annuities or computation of Social Security
offset that would apply in most cases. Compensation for pension purposes is
limited to the average of the highest three (five for Mr. Miller) of the final
10 years' compensation. For Ms. Fuller, compensation is base salary plus the
excess of short-term incentive compensation over 10 percent of base salary. For
the other executive officers listed in the Summary Compensation Table, it is
base salary plus the excess of short-term incentive compensation over 15 percent
of base salary.
During 2002, Mirant funded a portion of the non-qualified benefits through the
purchase of annuity contracts in the names of the individual employees,
including each of the executive officers listed in the Summary Compensation
Table that have a 1.7% multiplier for their pension (see table below). The
purchase of these annuity contracts did not increase the benefit amounts payable
to the executive officers under these plans. The amount funded under these
annuities total approximately $17 million.
As of December 31, 2002, the applicable compensation and Accredited Service for
determination of pension benefits would have been:
ACCREDITED ANNUAL
COMPENSATION ($) SERVICE MULTIPLIER BENEFIT ($)
------------------------------------------------------------------------------------
S. M. FULLER 1,438,000 17.3 1.7% 423,000
------------------------------------------------------------------------------------
R. D. HILL 838,000 19.0 1.7% 271,000
------------------------------------------------------------------------------------
R. J. PERSHING 813,000 33.8 1.7% 467,000
------------------------------------------------------------------------------------
F. D. KUESTER 560,000 29.9 1.7% 285,000
------------------------------------------------------------------------------------
D. L. MILLER 491,000 0.6 1.0% 3,000
------------------------------------------------------------------------------------
J. W. HOLDEN III 358,000 16.6 1.7% 101,000
------------------------------------------------------------------------------------
32
FIVE-YEAR PERFORMANCE GRAPH
--------------------------------------------------------------------------------
(PERFORMANCE GRAPH)
This performance graph compares the cumulative total stockholder return on
Mirant's common stock with the Standard & Poor's Multi-Utilities Index and the
Standard & Poor's 500 Index since the first day of trading on the date after our
initial public offering. The graph assumes that $100 was invested on September
27, 2000 in Mirant's common stock and each of the above indices, and that all
dividends are reinvested. The stockholder return shown below may not be
indicative of future performance.
9/27/00 DEC 00 MAR 01 JUN 01 SEP 01 DEC 01 MAR 02 JUN 02 SEP 02 DEC 02
----------------------------------------------------------------------------------------------------------------------
Mirant Corporation $100 100.22 125.66 121.77 77.52 56.71 51.15 25.84 7.82 6.62
----------------------------------------------------------------------------------------------------------------------
S & P 500 Index 100 92.78 81.78 86.56 73.86 81.75 81.97 70.99 58.73 63.68
----------------------------------------------------------------------------------------------------------------------
S & P Multi-Utilities 100 97.82 79.21 67.85 45.24 21.69 22.04 12.82 6.78 6.85
----------------------------------------------------------------------------------------------------------------------
Peer Group 100 90.21 88.74 72.45 36.98 34.18 28.40 12.66 3.90 5.16
----------------------------------------------------------------------------------------------------------------------
The Peer Group shown above consists of the following publicly traded companies
in the power generation industry: AES Corporation, Calpine Corporation, Dynegy,
Inc. and Reliant Resources, Inc. In accordance with the rules of the Securities
and Exchange Commission, the returns are indexed to a value of $100 at September
26, 2000 and the returns of each company in the Peer Group have been weighted
according to their market capitalization as of the beginning of the period.
33
--------------------------------------------------------------------------------
OTHER DOCUMENTS NOT A PART OF THIS PROXY STATEMENT
This Proxy Statement is being distributed to stockholders as part of a larger
publication containing other documents and information of interest to
stockholders concerning the Annual Meeting. Such other documents and information
include a letter to stockholders from Marce Fuller, President and Chief
Executive Officer; the Annual Report to Stockholders, including Management's
Discussion and Analysis and the Consolidated Financial Statements; and Other
Stockholder Information. Such documents and certain information in this Proxy
Statement, specifically, the Audit Committee Report (other than any information
contained therein not permitted to be so excluded), the report on Executive
Compensation and the Performance Graph, shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission under or
pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934 as
currently in effect and shall not be deemed to be incorporated by reference into
any filing by the Corporation under such Acts, unless specifically provided
otherwise in such filing.
34
MIRANT CORPORATION AUDIT COMMITTEE CHARTER APPENDIX A
--------------------------------------------------------------------------------
Adopted February 25, 2003
FUNCTION
The Audit Committee is charged with responsibility for oversight of the
Company's financial reporting process, including supervising the Company's
relationship with its independent auditors. The independent auditors shall
report directly to the Committee. The Committee shall have the sole authority
and responsibility to select, evaluate and, where appropriate, replace the
independent auditors.
PURPOSE
The Committee's purpose is to assist Board oversight of the:
- Quality and integrity of the Company's financial statements
- Company's compliance with legal and regulatory requirements
- Independent auditors' qualifications, independence and performance, and
- Performance of the Company's internal audit function; and
to prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
MEMBERSHIP
The Committee shall consist of at least three directors. Members of the
Committee shall meet the independence and financial literacy requirements of the
New York Stock Exchange, as determined by the Board. At least one member of the
Committee must have accounting or related financial management expertise, as
determined by the Board. Committee members shall not simultaneously serve on the
audit committees of more than two other public companies. The Committee and its
Chair shall be appointed annually by the Board of Directors, based upon the
recommendation of the Nominating and Governance Committee.
MEETINGS
The Committee shall meet at least six times each year and shall have special
meetings if and when required, as determined by the Chair of the Committee. For
the transaction of business at any meeting of the Committee, a majority of the
members shall constitute a quorum. The act of a majority of the members
participating at any meeting of the Committee at which a quorum is present shall
be the act of the Committee. Management of the Company, the internal and
independent auditors and the Company General Counsel and Corporate Secretary may
attend each meeting or portions thereof as required by the Committee. The
Committee shall provide an open avenue of communications between the internal
and independent auditors and the Committee, and periodically shall meet
separately in private sessions with management, the internal auditor, and the
independent auditors. The Committee shall report on its activities to the Board
of Directors on a regular basis.
A-1
MIRANT CORPORATION AUDIT COMMITTEE CHARTER
--------------------------------------------------------------------------------
AUTHORITY, DUTIES AND RESPONSIBILITIES
The key responsibilities of the Committee in carrying out its oversight function
shall include the following:
Oversight of the Company's Relationship with the Independent Auditor
- Be directly responsible, in its capacity as a committee of the Board, for the
appointment, compensation and oversight of the work of the independent
auditors. In this regard, the Committee shall exercise sole authority to
appoint, evaluate, and, as necessary, replace the independent auditors, who
shall report directly to the Committee.
- At least annually, obtain and review a report by the independent auditors
describing any relationships between the firm and the Company and any other
relationships that may adversely affect the independence of the auditors, and
consider the independence of the outside auditors, including whether the
auditors' performance of permissible non-audit services is compatible with the
auditors' independence.
- Preapprove all audit and permitted non-audit services, and the compensation,
fees and terms for such services provided by the independent auditors. (By
approving the audit engagement, an audit service within the scope of the
engagement shall be deemed to have been preapproved). In addition, the
Committee shall establish policies and procedures for the engagement of the
independent auditors to provide permitted non-audit services, which shall
include approval in advance by the Audit Committee Chair of all permitted
non-audit services to be performed by the independent auditors. The Chair
shall report to the Committee all non-audit work on a quarterly basis.
- Review with the independent auditor any audit problems or difficulties and
management's response, including any restrictions on the scope of the
independent auditors' activities or on access to requested information, and
any significant disagreements between management and the independent auditors.
- At least annually, obtain and review a report by the independent auditors
describing: the auditing firm's internal quality-control procedures; any
material issues raised by the most recent internal quality-control review, or
peer review, of the firm, or by any inquiry or investigation by governmental
or professional authorities, within the preceding five years, respecting one
or more independent audits carried out by the firm, and any steps taken to
deal with any such issues.
- Set clear hiring policies for employees and former employees of the
independent auditors.
Financial Reporting and Disclosure Matters
- Review and discuss with management the Company's financial reporting process,
financial statements and major disclosures, and the adequacy and effectiveness
of the Company's system of internal controls and disclosure controls and
procedures.
A-2
--------------------------------------------------------------------------------
- Review and discuss with the independent auditors the Company's system of
internal controls, financial statements and related disclosures, the adequacy
of the Company's financial reporting process and the scope of the independent
audit, and receive from the independent auditors reports required by rules of
the Securities and Exchange Commission.
- Review and discuss with management and the independent auditors the Company's
annual audited financial statements and quarterly financial statements,
including the Company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and its critical
accounting policies and practices, prior to the filing of the annual report on
Form 10-K and the quarterly reports on Form 10-Q.
- Review and discuss with management and the independent auditors their analyses
of significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, the
appropriateness of accounting principles followed by the Company, significant
changes in the Company's selection or application of accounting principles,
and major issues regarding the Company's accounting principles and financial
statement presentations.
- Discuss generally earnings press releases, as well as financial information
and earnings guidance provided to analysts and rating agencies.
- Prepare a report for inclusion in the Company's proxy statement, disclosing
that the Committee reviewed and discussed the audited financial statements
with management and discussed with the independent auditors the matters
required by SAS 61 (Codification of Statement of Auditing Standards,
AUsec.380) and, based upon these discussions, recommend to the Board of
Directors whether the audited financial statements should be included in the
annual report on Form 10K.
Oversight of the Company's Internal Audit Function
- Review the annual internal audit program in terms of scope of audits conducted
or scheduled to be conducted, and review the internal audit department budget
and staffing levels.
- Review and discuss with the Company's Director of Corporate Audit major
findings and recommendations resulting from internal audits, special projects
and investigations conducted across the Company.
- Review the appointment and replacement of the Company's Director of Corporate
Audit.
Compliance Oversight Responsibilities
- Establish procedures for the receipt, retention, and treatment of complaints
received by the Company regarding accounting, internal accounting controls, or
auditing matters; and procedures for the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
- Review and discuss with management and the General Counsel, legal, regulatory
and compliance matters that may have a material impact on the Company's
financial statements.
A-3
MIRANT CORPORATION AUDIT COMMITTEE CHARTER
--------------------------------------------------------------------------------
Additional Responsibilities
- Review and discuss with management, the independent auditors, and the Director
of Corporate Audit the Company's policies for assessing and managing
significant risks and exposures and assess the steps management has taken to
manage such risks and exposures.
- Review with the internal and independent auditors the coordination of their
respective activities.
- Evaluate the performance of the Committee annually, and review and reassess
the adequacy of the Committee's Charter annually and recommend any revisions
deemed appropriate to the Board of Directors.
OUTSIDE ADVISERS
The Committee shall have the authority to engage independent counsel and other
advisers, as the Committee determines necessary to carry out its duties. The
Company shall provide appropriate funding, as determined by the Committee for
payment of compensation to the independent auditor; and to any advisers retained
by the Committee.
A-4
[MIRANT LOGO]
MIRANT CORPORATION
1155 PERIMETER CENTER WEST
ATLANTA, GA 30338
YOUR VOTE IS IMPORTANT!
YOU CAN VOTE IN ONE OF THREE WAYS:
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off
date or meeting date. Have your proxy card in hand when you call. You will be
prompted to enter your 12-digit Control Number which is located below and then
follow the simple instructions the Vote Voice provides you.
VOTE BY MAIL Mark, sign, and date your proxy card and return it in the postage-
paid envelope we have provided or return it to Mirant Corporation, c/o ADP, 51
Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
MIRANT CORPORATION
This proxy card, when properly executed, will be voted in the manner directed
herein by the undersigned. If no direction is made, but the card is signed, this
proxy card will be voted for the election of all nominees, for proposal
No. 2 and against proposal No. 3.
To withhold authority to vote, mark "For
FOR WITHHOLD FOR ALL All Except" and write the nominee's number
ALL ALL EXCEPT on the line below.
ELECTION OF DIRECTORS
1. Nominees: 01 A.D. Correll, 02 J.F. McDonald [ ] [ ] [ ] ----------------------------------------
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE MIRANT EMPLOYEE STOCK PURCHASE PLAN [ ] [ ] [ ]
3. STOCKHOLDER PROPOSAL TO EXPENSE OPTIONS [ ] [ ] [ ]
Please sign exactly as name appears. If acting as attorney, executor, trustee or
in other representative capacity, sign name and title.
For comments, please check this box and write them on the back
where indicated. [ ]
YES NO
Please indicate if you wish to view meeting materials
electronically via the Internet rather than receiving [ ] [ ]
a hard copy, please note that you will continue to
receive a proxy card for voting purposes only.
-------------------------------------------------- ------------------------------------------------------
-------------------------------------------------- ------------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
(BRING THIS TICKET WITH YOU IF YOU ARE ATTENDING THE MEETING)
ADMISSION TICKET
ANNUAL MEETING OF STOCKHOLDERS OF MIRANT CORPORATION
THURSDAY, MAY 22, 2003
9:00 A.M., LOCAL TIME
ATLANTA MARRIOTT ALPHARETTA
5750 WINDWARD PARKWAY
ALPHARETTA, GEORGIA
DIRECTIONS
GA 400 North to Exit 11 Windward Parkway (approximately 14 miles North of
I-285). Turn right onto Windward Parkway. Hotel is then on the left. Turn left
onto North Point Parkway. Immediate left into hotel entrance. North Point
Parkway may be used as an alternate route.
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[MIRANT LOGO]
MIRANT CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 22, 2003
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS OF MIRANT CORPORATION
The undersigned hereby appoints S. M. FULLER AND H. A. WAGNER, or either of
them, proxies with full power of substitution in each, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Stockholders of MIRANT
CORPORATION, to be held at the Atlanta Marriott Alpharetta, 5750 Windward
Parkway, Alpharetta, Georgia at 9:00 a.m. (ET), and any adjournments thereof, on
all matters legally coming before the meeting, including, without limitation,
the proposals listed on the reverse side of this form. The Annual Meeting of
Stockholders of Mirant Corporation will be held on Thursday, May 22, 2003, at
9:00 a.m. (ET), at the Atlanta Marriott Alpharetta, 5750 Windward Parkway,
Alpharetta, Georgia. Stockholders owning shares at the close of business on
April 7, 2003, are entitled to attend and vote at the meeting. Stockholders will
act on the election of 2 members of the Board of Directors, and transact such
other business as may properly come before the meeting.
COMMENTS: ----------------------------------------------------
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(If you noted any Comments above, please mark corresponding box
on the reverse side.)
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)