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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NUEVO ENERGY COMPANY
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LOGO[NUEVO LETTERHEAD]
April 26, 2001
NOTICE OF ANNUAL MEETING
Dear Fellow Stockholder,
You are cordially invited to attend the Annual Meeting of Stockholders of
Nuevo Energy Company which will be held at the Four Seasons Hotel, 1300 Lamar,
Houston, Texas, on Wednesday, May 23, 2001 at 9:00 a.m. local time.
At this annual meeting you will be asked to vote on the following
matters:
1. to elect our board of directors to serve until the annual
meeting of stockholders in 2002;
2. to ratify the selection of our 2001 auditors; and
3. to conduct any other business which is properly raised at the
meeting.
The attached proxy statement provides information concerning the matters
to be voted on at this meeting. I am particularly proud of the corporate
governance principles which we have been operating under for the past several
years and I encourage you to read them carefully. I believe these principles
fully align management's efforts with the interests of our stockholders. Our
proxy materials are being sent to stockholders on April 26, 2001.
It is important that your shares be represented at the annual meeting,
regardless of the size of your holdings. We urge you to return the signed proxy
in the enclosed envelope as soon as possible. If you do attend the annual
meeting in person, you may withdraw your proxy and vote your stock at the
meeting. We value your opinions and encourage you to participate in the annual
meeting by voting your proxy.
We have adopted the SEC's "plain English" drafting principals in writing
our proxy statement. This was done to make our proxy materials easier to
understand which we hope will enable you to make the best informed decision
possible.
Thank you for your continued support and interest in Nuevo Energy.
Very truly yours,
/s/ Doutlas L. Foshee
Douglas L. Foshee
Chairman, President and
Chief Executive Officer
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TABLE OF CONTENTS PAGE
Questions and Answers.......................................................... 3
Beneficial Ownership of Our Common Stock....................................... 6
Our Corporate Governance Principals............................................ 9
Proposal I. Election of Directors...................................... 14
Executive Compensation......................................................... 21
Proposal II. Ratification of the Selection of Our 2001 Auditors......... 29
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QUESTIONS AND ANSWERS:
WHO IS ASKING FOR MY PROXY?
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Your proxy is being solicited by our board of directors for use at our 2001
annual meeting of stockholders. Our directors and officers may also solicit
proxies on behalf of our board of directors, in person, or by telephone, telefax
or mail. If our directors, officers or employees solicit proxies they will not
be specially compensated. Nuevo will pay all costs and expenses of this proxy
solicitation.
WHAT ARE STOCKHOLDERS BEING
ASKED TO VOTE ON?
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At our 2001 annual meeting, stockholders will be asked to vote:
-- to elect our board of directors to serve until the annual meeting
of stockholders in 2002;
-- to ratify the selection of Arthur Andersen LLP as our independent
auditors for 2001.
HOW DO I VOTE MY SHARES?
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A proxy card is included with the materials being sent to stockholders with
these proxy materials. If the proxy card is properly signed and returned to us,
shares covered by the proxy card will be voted in accordance with the directions
you specify on the card. Shares covered by a properly signed proxy card which
does not specify how to vote the shares will be voted for the election of the
director nominees named in this proxy statement and in favor of the ratification
of the selection of Arthur Andersen LLP as our independent auditors.
If any matters other than those described above are raised at the annual
meeting, the proxy card gives the proxy holders the right to vote for or against
such matter in their discretion. At the date of this proxy statement, we do not
know of any matters to be presented at the annual meeting other than those
described herein.
WHAT VOTE IS REQUIRED?
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Under Delaware law, we cannot conduct business at the annual meeting unless a
quorum is present. A quorum will be present if a majority of our outstanding
shares of stock on the record date are present at the meeting in person or by
proxy. If a quorum is present,
-- directors are elected by a plurality vote, which means that the
nine director nominees receiving the most votes will be elected;
With respect to the election of directors, you may (i) vote for the election of
all nine director nominees, (ii) withhold authority to vote for all director
nominees or (iii) withhold authority to vote for any director nominee by so
indicating in the appropriate space on the proxy card. Our stockholders do not
have the right to cumulate votes in the election of directors.
WHAT IS THE EFFECT OF AN
ABSTENTION OR A BROKER
NON-VOTE?
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You may mark "abstain" on your proxy card for any of the matters submitted to a
vote. An abstention is the equivalent of a no vote on all matters.
Many of our shares are held in "street name" which means that a depository,
broker-dealer or other institution holds shares in its name which are
beneficially owned by another person. The rules of the New York Stock Exchange
provide that a street name holder must receive the direction of the beneficial
owner of the shares to vote on issues other than routine stockholder matters
such as the election of directors. A "broker non-vote" refers to a proxy which
votes on one matter, but indicates that the holder does not have the authority
to vote on other matters. Broker non-votes will have the following effects at
our annual meeting:
-- For purposes of determining whether a quorum is present under
Delaware law, a broker non-vote is deemed to be present at the
meeting.
-- For purposes of the election of directors and other matters to be
voted on at the meeting, a broker non-vote will not be counted.
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HOW DOES THE BOARD OF
DIRECTORS RECOMMEND I
VOTE?
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The board of directors unanimously recommends that you vote "For" each of the
matters to be voted on at the annual meeting.
HOW MANY SHARES MAY VOTE AT
THE ANNUAL MEETING?
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The only stock with the right to vote at the meeting is our common stock, and
only shares owned on the record date may by voted at the meeting. Each share of
common stock is entitled to one vote on each matter voted on at the annual
meeting. On the record date, there were 16,506,268 shares of common stock
outstanding.
WHAT IS THE RECORD DATE?
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April 6, 2001.
WHY HAVE YOU ADOPTED
CORPORATE GOVERNANCE
PRINCIPLES?
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In 1997, our chairman and chief executive officer committed to the investment
community that Nuevo would become a leader in corporate governance. As a result,
several important initiatives were undertaken, including an exhaustive review of
our governance principles. The board felt it important for our shareholders and
other interested parties to know exactly where we stand on the important issues
surrounding the proper governance of a public company. We believe that the
principles adopted unanimously by the board and published in this proxy do in
fact make us a leader in corporate governance and that adhering to these
principles will help us provide superior returns to our shareholders.
CAN I REVOKE MY PROXY?
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Yes. You may revoke your proxy at any time before a vote is taken in any of the
following ways:
-- attend the annual meeting and vote in person;
-- submit a proxy with a later date; or
-- notify our corporate secretary in writing that you wish to revoke
your proxy.
Our corporate secretary's name and address is Sandra Kraemer, 1021 Main, Suite
2100, Houston, Texas 77002, and her phone number is (713) 374-4873.
HOW DO I NOMINATE A PERSON
FOR A POSITION ON THE
BOARD OF DIRECTORS?
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Our certificate of incorporation and bylaws require that stockholders notify us
of their intent to nominate directors for the annual meeting in 2002 prior to
January 23, 2002. The nomination should be in writing and addressed to our Board
of Directors c/o Nuevo Energy Company, 1021 Main, Suite 2100, Houston, Texas
77002 with copies to our president and corporate secretary. The nomination must
contain the name and address of the nominee and describe his or her
qualifications for being a director. All nominations will be forwarded to our
nominating and governance committee, which will make a recommendation to the
board of directors concerning nominations for director. The opportunity for
stockholders to submit nominations for this year's annual meeting ended on
January 24, 2001. No stockholder nominations were submitted.
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WHEN ARE PROPOSALS BY
SHAREHOLDERS FOR THE 2002
MEETING DUE?
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Proposals to be included in our proxy, other than nominations for director, must
be received by us on or before December 15, 2001. Such proposals should be
addressed to the attention of our corporate secretary at Nuevo Energy Company,
1021 Main, Suite 2100, Houston, Texas 77002. In order to avoid any controversy
as to the date you deliver a proposal to us, you should consider using
registered mail, return receipt requested. Under the SEC's rules, we are not
obligated to include all proposals made by stockholders in our proxy statement.
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BENEFICIAL OWNERSHIP OF OUR COMMON STOCK:
The following tables show the ownership of our common stock by (i) anyone
who is known by us to beneficially own 5% or more of our outstanding common
stock, (ii) each of our non-employee directors, (iii) our six most highly
compensated executive officers, and (iv) all of our executive officers and
directors taken together as a group. Unless otherwise indicated, each person
named in the following table has the sole power to vote and dispose of the
shares listed next to their name. Information in the tables has been obtained
from filings made with the SEC or, in the case of our directors and executive
officers, has been provided by such individuals. Unless otherwise indicated, the
information provided below is based on information available to us as of the
record date.
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OUR 5% STOCKHOLDERS:
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NUMBER OF SHARES PERCENT
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Franklin Resources, Inc. ................................ 2,498,876 14.0(1)
777 Mariners Island Blvd
San Mateo, California 94404
Wellington Management Company Ltd........................ 1,361,750 8.2(2)
75 State Street
Boston, Massachusetts 02109
Artisan Partners Ltd..................................... 1,296,500 7.9(3)
Andrew A. Ziegler
Carlene M. Ziegler
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
Relational Investors, LLC................................ 1,165,100 7.1(4)
David H. Batchelder
Joel L. Reed
Ralph V. Whitworth
Suite 300
11975 El Camino Real
San Diego, California 92130
Dimensional Fund Advisors................................ 973,900 5.9(5)
1299 Ocean Avenue, 11th floor
Santa Monica, California 90401
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MEMBERS OF OUR BOARD OF DIRECTORS WHO ARE NOT EMPLOYEES:
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SHARES BENEFICIALLY OWNED
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UNDER
STOCK RESTRICTED
OUTSTANDING OPTIONS** STOCK TOTAL PERCENT
------------ ---------- ---------- --------- -------
Isaac Arnold, Jr. ................. 25,000 53,250 7,465 85,715 *
David H. Batchelder................ 1,165,100(4) 7,000 7,465 1,179,565 7.1
Thomas D. Barrow................... 3,000(6) 63,250 7,465 73,715 *
Charles M. Elson................... 2,778 18,250 7,465 28,493 *
Robert L. Gerry III................ 4,600 264,916 5,000 274,516 1.6
Gary R. Petersen................... 4,000 25,750 7,465 37,215 *
David Ross......................... 13,000 18,250 7,465 38,715 *
Robert W. Shower................... 10,000 18,250 5,000 33,250 *
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OUR EXECUTIVE OFFICERS:
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SHARES BENEFICIALLY OWNED
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UNDER UNDER UNDER
401(K) STOCK DEFERRED RESTRICTED
OUTSTANDING PLAN OPTIONS** COMPENSATION STOCK TOTAL PERCENT
----------- ------ --------- ------------ ---------- ------- -------
Douglas L. Foshee..... 5,100 4,905 647,500 70,368 -- 727,873 4.3
Michael P. Darden..... -- 2,960 145,625 24,013 -- 172,598 1.0
Bruce K. Murchison.... 300 1,695 16,000 9,184 -- 27,179 *
John P. McGinnis...... -- 1,413 14,333 6,240 -- 21,986 *
Dennis A. Hammond..... 260 2,788 216,980 33,678 3,000 256,706 1.5
Robert M. King........ 3,684(7) 2,581 204,775 32,660 3,000 246,700 1.5
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ALL DIRECTORS AND EXECUTIVE OFFICERS TOGETHER:
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TOTAL PERCENT
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3,204,226 17.6%
Footnotes:
* Under 1%.
** Stock options include only options which may be exercised within 60 days.
(1) Of the shares reported for Franklin Resources, Inc., Franklin Advisers,
Inc. is reported to have sole voting power over 2,433,876 shares and
Franklin Advisory Services, LLC has sole voting power over 65,000. In
addition, Franklin Advisers, Inc. is reported to have sole dispositive
power over 2,433,876 shares and Franklin Advisory Services, LLC is
reported to have sole dispositive power over 65,000 shares. Franklin
Advisers, Inc. and Franklin Advisory Services, LLC are both wholly owned
investment advisory subsidiaries of Franklin Resources, Inc. Each of
Messrs. Charles B. Johnson and Rupert H. Johnson, Jr. own in excess of 10%
of the outstanding common stock of Franklin Resources, Inc. As the
principal shareholders of Franklin Resources, Inc., each of Messrs.
Charles B. Johnson and Rupert H. Johnson, Jr. may be deemed for certain
purposes to be beneficial owners of the shares beneficially owned by
Franklin Resources, Inc. Shares beneficially owned by Franklin Resources,
Inc. include 1,339,276 shares which may be received upon conversion of our
outstanding term convertible securities ("TECONS").
(2) Wellington Management Company, LLP ("WMC") reported shared voting power
with respect to 909,150 shares and shared dispositive power with respect
to 1,361,750 shares. These securities are beneficially owned by WMC in its
capacity as investment adviser and are owned of record by the clients of
WMC. Those clients have the right to receive, or the power to direct the
receipt of, dividends from, or the proceeds from the sale of, such
securities. No such client is known to have such right or power with
respect to more than five percent of this class of securities. WMC, in its
capacity as investment adviser, may be deemed to beneficially own all
1,361,750 shares.
(3) Artisan Partners Ltd. is an investment adviser registered under section
203 of the Investment Advisers Act of 1940. Artisan Investment Corporation
("Artisan Corp.") is the General Partner of Artisan Partners and Mr.
Ziegler and Ms. Ziegler are the principal stockholders of Artisan Corp.
Artisan Corp. reported shared dispositive and shared voting power with
respect to all 1,296,500 shares. The shares reported herein have been
acquired on behalf of discretionary clients of Artisan Partners. Persons
other than Artisan Partners are entitled to receive all dividends from,
and proceeds from the sale of, those shares. To the knowledge of Artisan
Partners, Mr. Ziegler or Ms. Ziegler, none of such persons has an economic
interest in more than five percent of the class of stock.
(4) Relational Investors, LLC, reported sole dispositive and voting power with
respect to all 1,165,100 shares. These shares are owned by an account
managed at Relational Investors, LLC and by the following limited
partnerships of which Relational Investors, LLC is the sole general
partner: Relational Investors, L.P., Relational Fund Partners, L.P.,
Relational Coast Partners, L.P. and Relational Partners, L.P. Each of
Messrs. Batchelder, Whitworth and Reed are managing members of Relational
Investors, LLC, and may be deemed for certain purposes to beneficially own
shares beneficially owned by Relational Investors, LLC.
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(5) Dimensional Fund Advisors Inc. ("Dimensional"), an investment adviser
registered under Section 203 of the Investment Advisers Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds." All securities
reported in the 13G are owned by the Funds. Dimensional has sole voting
power and sole dispositive power with respect to all 973,900 shares.
Dimensional disclaims beneficial ownership of such securities.
(6) Includes indirect ownership of 1,000 shares owned by individual retirement
accounts for Mr. Barrow and his wife.
(7) Includes 1,684 shares of common stock that would be received upon
conversion of 2,000 outstanding term convertible securities ("TECONS").
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OUR CORPORATE GOVERNANCE PRINCIPLES:
Upon his appointment as chief executive officer in August 1997, Mr.
Foshee committed publicly to our stockholders and to the investment community
that our management and board of directors would immediately begin the process
of reviewing our corporate governance principles. In 1998, our board of
directors established a nominating and governance committee whose members are
David Ross, who acts as Chairman, Charles M. Elson and Robert W. Shower.
In 1998 the nominating and governance committee recommended, and the full
board of directors adopted, the "Nuevo Energy Company Corporate Governance
Guidelines." These guidelines have been published in order to inform
stockholders of the board's current thinking with respect to selected corporate
governance issues. The board will continue to assess the appropriateness and
effectiveness of the guidelines, and it is likely that changes to the guidelines
will be considered from time to time. Compliance with the Corporate Governance
Guidelines is reviewed annually in connection with the preparation of our proxy
and each director has confirmed his compliance with the guidelines.
BOARD MISSION & OBJECTIVES
Mission Statement
The company's primary objective is to maximize stockholder value while
adhering to the laws of the jurisdictions wherein it operates and at all times
observing the highest ethical standards. The company will pursue this objective
primarily through participation in the energy industry.
Corporate Authority & Responsibility
All corporate authority resides in the board of directors as the
representative of the stockholders. Authority is delegated to management by the
board in order to implement the company's mission. Such delegated authority
includes the authorization of spending limits and the authority to hire
employees and terminate their services. The board retains responsibility to
recommend candidates to the stockholders for election to the board of directors.
The board retains responsibility for selection and evaluation of the CEO,
oversight of the succession plan, determination of senior management
compensation, approval of the annual budget, assurance of adequate systems,
procedures and controls, as well as assisting in the preparation and approval of
the strategic plan. Additionally, the board provides advice and counsel to
senior management.
DIRECTORS
Personal Characteristics & Core Competencies of Directors
Individual directors should possess all of the following personal
characteristics:
Integrity and Accountability - Character is the primary consideration in
evaluating any board member. Directors should demonstrate high ethical
standards and integrity in their personal and professional dealings and
be willing to act on and remain accountable for their boardroom
decisions.
Informed Judgment - Board members should have the ability to provide
wise, thoughtful counsel on a broad range of issues. Directors should
possess high intelligence and wisdom and apply it in decision making.
Financial Literacy - One of the important roles of the board is to
monitor the company's financial performance. Board members should be
financially literate. Directors should know how to read a balance sheet,
income statement and, cash flow statement, and understand the use of
financial ratios and other indices for evaluating company performance.
Mature Confidence - The board functions best when directors value board
and team performance over individual performance. Openness to other
opinions and the willingness to listen should rank as highly as the
ability to communicate persuasively. Board members should approach others
assertively, responsibly and supportively and raise tough questions in a
manner that encourages open discussion.
High Performance Standards - In today's highly competitive world, only
companies capable of performing at the highest levels are likely to
prosper. Board members should have a history of achievements that reflect
high standards for themselves and others.
Passion - Directors should be passionate about the performance of the
company, both in absolute terms and relative to its peers. That passion
should manifest itself in engaged debate about the future
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of the company and an esprit de corps among the board that both
challenges and inspires the company's employees.
Creativity - Success in the energy business will ultimately go to the
participants who adapt quickly to changing environments and implement
creative solutions to the significant challenges faced by industry
participants. Board members should possess the creative talents needed to
augment those of management.
Core Competencies of the Board as a Whole
To adequately fulfill the board's complex roles, from overseeing the
audit and monitoring managerial performance to responding to crises and
approving the company's strategic plan, a host of core competencies need to be
represented on the board. The board as a whole should possess the following core
competencies, with each member contributing knowledge, experience and skills in
one or more domains.
Accounting and Finance - Among the most important missions of the board
is ensuring that stockholder value is both enhanced through corporate
performance and protected through adequate internal financial controls.
The board should have one or more directors with specific expertise in
financial accounting and corporate finance, especially with respect to
trends in debt and equity markets.
Business Judgment - Stockholders rely on directors to make sensible
choices on their behalf. The majority of directors should have a record
of making good business decisions in the corporate sector.
Management - To monitor corporate management, the board needs to
understand management trends in general and industry trends in
particular. The board should have one or more directors who understand
and stay current on general management "best practices" and their
application in complex, rapidly evolving business environments.
Crisis Response - Organizations inevitably experience both short and
long-term crises. The ability to deal with crises can minimize
ramifications and limit negative impact on firm performance. Boards
should have one or more directors who have the ability and time to
perform during periods of both short-term and prolonged crises.
Industry Knowledge - Companies continually face new opportunities and
threats that are unique to their industries. The board should have one or
more members with appropriate and relevant industry-specific knowledge.
International Markets - To succeed in an increasingly global economy, the
board should have one or more directors who appreciate the importance of
global business trends and who have first-hand knowledge of international
business experience in those markets.
Leadership - Ultimately, a company's performance will be determined by
the directors' and CEO's ability to attract, motivate, and energize a
high-performance leadership team. The board should have one or more
directors who understand and possess empowerment skills and have a
history of motivating high-performing talent.
Strategy & Vision - A key board role is to approve and monitor company
strategy to ensure the company's continued high performance. The board
should have one or more directors with the skills and capacity to provide
strategic insight and direction by encouraging innovation,
conceptualizing key trends, evaluating strategic decisions, and
continuously challenging the organization to sharpen its vision.
Changes in Professional Responsibility
The board should consider whether a change in an individual's
professional responsibilities directly or indirectly impacts that person's
ability to fulfill directorship obligations. To facilitate the board's
consideration, the board requires that the CEO and other inside directors submit
a resignation as a matter of course upon retirement, resignation, or other
significant change in professional roles and responsibilities. All directors
should submit a resignation as a matter of course upon retirement, a change in
employer, or other significant change
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in their professional roles and responsibilities. If the board believes that a
director will continue to make a contribution to the organization, the continued
membership of that director may be supported.
Identification and Recruitment of Board Members
One of the tasks of the nominating and governance committee is to
identify and recruit candidates to serve on the board of directors. A list of
candidates shall be presented to the board for nomination and to the
stockholders for consideration. The committee may at its discretion seek
third-party resources to assist in the process. The CEO will be included in the
process on a non-voting basis. The nominating and governance committee will make
the final recommendation to the board.
Independent Directors
A substantial majority of the board of directors should be independent.
An independent director is defined as a director who:
-- has not been employed by the company in an executive capacity
within the last five years;
-- is not, and is not affiliated with a company that is, an adviser,
or consultant to the company or a member of the company's senior
management;
-- is not affiliated with a significant customer or supplier of the
company;
-- has no personal services contract(s) with the company, or a member
of the company's senior management;
-- is not affiliated with a not-for-profit entity that receives
significant contributions from the company;
-- within the last five years, has not had any business relationship
with the company (other than service as a director) for which the
company has been required to make disclosure under Regulation S-K
of the Securities and Exchange Commission as currently in effect;
-- is not employed by a public company at which an executive officer
of the company serves as a director;
-- has not had any of the relationships described above with any
affiliate of the company; and
-- is not a member of the immediate family of any person described
above.
Outside Directorships
The CEO and senior management of Nuevo should limit outside directorships
to one or two; non-employee directors who are employed on a full-time basis
should limit other directorships to three or four; and retired executives should
limit other directorships to five or six.
Directors are expected to attend all board and committee meetings in
person or by phone. Directors shall be prepared by reviewing in advance all
materials and be present at the meeting in person or by phone until its
adjournment.
Compensation of Directors
In order to align the interests of directors and stockholders, directors
will be compensated in the form of cash and company equity only, with equity
constituting a substantial portion of the total up to 100%.
Direct Investment in the Company Stock by Directors
Since a significant ownership stake leads to a stronger alignment of
interests between directors and stockholders, each director is required to
personally invest at least $100,000 in company stock within 3 years of joining
the board. Exceptions to this requirement may only be made by the board under
compelling mitigating circumstances.
Service Limitations of Directors
In order to replenish the board with fresh approaches to managing the
company, the maximum board tenure shall be 15 years.
A board member may not stand for reelection after age 70, but need not
resign until the end of his or her term.
In order to retain freshness in the process and to give new management
the unfettered ability to provide new leadership, a retiring CEO shall not
continue to serve on the board.
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BOARD ORGANIZATION
Board Size
In general, smaller boards are more cohesive, work better together and
tend to be more effective monitors than larger boards. Therefore, the board
shall be composed of six to twelve members. However, in order to accommodate the
availability of an outstanding candidate the number of positions on the board
may be expanded.
Committee Structure
It is the general policy of the company that all major decisions will be
considered by the board as a whole. As a consequence, the committee structure of
the board is limited to those committees considered to be basic to or required
for the operation of the company as a publicly owned entity. Standing committees
shall include audit, compensation, and nominating and governance. All of the
committees shall be composed solely of independent directors. The board may form
other committees as it determines appropriate.
Independent Chair
The board believes that the company is best served by unifying the
positions of Chairman and CEO. This structure provides a single leader with a
single vision for the company and results in a more effective organization.
BOARD OPERATIONS
Board Access to Senior Management
Board members have full access to senior management and to information
about the corporation's operations. Except in unusual circumstances, the CEO
should be advised of significant contacts with senior management.
Board Ability to Retain Advisors
The board shall retain advisors as it believes to be appropriate. If
management is retaining advisors to the board, such decision must be ratified by
the board. Individual directors should not retain their own advisors except in
exceptional circumstances.
Material in Advance of Meetings
The board must be given sufficient information to fully exercise its
governance functions. This information comes from a variety of sources,
including management reports, a comparison of performance to plans, security
analysts' reports, articles in various business publications, etc. Generally,
board members will receive information prior to board meetings so they will have
an opportunity to reflect properly on the items to be considered at the meeting.
The board will ensure that adequate time is provided for full discussion
of important items and that management presentations are scheduled in a manner
that permits a substantial proportion of board meeting time to be available for
open discussion.
Executive Session
Time will be allotted at the end of each board meeting for an executive
session involving only the independent directors.
Evaluation of CEO
The selection and evaluation of the chief executive officer and
concurrence with the CEO's selection and evaluation of the corporation's top
management team are the most important function of the board. In its broader
sense, "selection and evaluation" includes considering compensation, planning
for succession and, when appropriate, replacing the CEO or other members of the
top management team. The performance of the CEO will be reviewed at least
annually without the presence of the CEO or other inside directors. The board
should have an understanding with the CEO with respect to criteria on which he
or she will be evaluated, and the results of the evaluation will be communicated
to the CEO.
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Management Development
The CEO will report annually to the board on the company's program for
management development.
Succession Plan
CEO succession is a board-driven, collaborative process. Although the
current CEO has an important role to play, the board must develop its own plan
for succession while collaborating with the CEO in deciding the timing and the
necessary qualifications for making a final decision.
Outside Contacts
The board believes that the management speaks for the company. Individual
board members may, from time to time at the request of management, meet or
otherwise communicate with various constituencies that are involved with the
company. If comments from the board are appropriate, they should, in most
circumstances, come from the Chairman; however, this does not preclude
directors, in the exercise of their fiduciary duties and subject to
confidentiality constraints, from communicating with stockholders or others.
STOCKHOLDER RIGHTS
Annual Election of Directors
In order to create greater alignment between the board's and our
stockholder's interests and to promote greater accountability to the
stockholders, directors shall be elected annually.
Stockholder Rights Plan
The company believes that in the hands of a properly aligned and properly
governed board, a Terminable Stockholder Rights Plan is in the best interests of
all stockholders. Because the board acknowledges that conditions change, the
nominating and governance committee of the board will undertake a complete
review of the efficacy of the company's stockholder rights plan every three
years.
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PROPOSAL I. ELECTION OF DIRECTORS:
At the 1999 annual meeting, the stockholders elected to declassify our
board of directors so that all of our directors are elected annually.
Accordingly, all of our directors are standing for re-election at the 2001
annual meeting. The nominating and governance committee has nominated Isaac
Arnold, Jr., Thomas D. Barrow, David H. Batchelder, Charles M. Elson, Douglas L.
Foshee, Robert L. Gerry III, Gary R. Petersen, David Ross and Robert W. Shower
to serve as directors.
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INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
The following is information about our directors and executive officers.
In the following materials "options owned" includes all options owned by the
director, even those which have not vested.
DIRECTORS
[PHOTO OF MR. ARNOLD] ISAAC ARNOLD, JR.
65 years old
Director since 1990
Shares owned directly and indirectly: 25,000
Options owned: 53,250
Restricted Shares: 7,465
Board committees: Compensation
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Since 1984, Mr. Arnold has been chairman of the board of Quintana
Petroleum Corporation, a privately held production company which does not
compete with Nuevo. He is also chairman of the board of Legacy Trust Company. He
has been a director of Cullen Center Bank & Trust since its inception in 1969
and is a director of Cullen/Frost Bankers, Inc. Mr. Arnold is a trustee of the
Museum of Fine Arts and The Texas Heart Institute. Mr. Arnold received his
B.B.A. from the University of Houston in 1959.
WHY DID YOU JOIN NUEVO'S BOARD IN 1990?
I have been involved in the energy industry for many years. In 1990, I
saw Nuevo as an exciting young entrepreneurial company that was trying to do
things differently. It has been a gratifying experience to watch this company
grow into the organization it is today and I am equally excited about our
future.
[PHOTO OF MR. BARROW] THOMAS D. BARROW
56 years old
Director since 1990
Shares owned directly and indirectly: 3,000
Options owned: 63,250
Restricted shares: 7,465
Board committees: Audit
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Mr. Barrow is president of Barrow Energy Corporation, a position he has
held since its formation in 1988. Barrow Energy is a privately held company in
the business of exploring for oil and gas primarily in East Texas which does not
compete with Nuevo. Mr. Barrow is also a founder and director of Bargo Energy
Company, a public company engaged in the acquisition of oil and gas properties.
Bargo does not compete with Nuevo. Mr. Barrow serves on the Board of Trustees of
Good Shephard Medical Center and serves in numerous other civic organizations.
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WHY DID YOU JOIN NUEVO'S BOARD IN 1990?
I joined Nuevo's board because I believed in the concept of an
opportunistic acquisition company with low overhead due to outsourcing being
able to create significant shareholder value. We have in fact been able to do
just that and I think we've been good stewards of our shareholders' investments.
[PHOTO OF MR. BATCHELDER] DAVID H. BATCHELDER
51 years old
Director since 1999
Shares owned: 1,165,100 (beneficially through Relational
partnerships)
Options owned: 7,000 (beneficially through Relational
partnerships)
Restricted Shares: 7,465 (beneficially through Relational
partnerships)
Board committees: Compensation, Audit
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Mr. Batchelder has been chairman and chief executive officer of
Batchelder & Partners, Inc., a financial advisory and investment banking firm,
since 1988. He also has been a managing member of Relational Investors LLC, the
general partner of an active investment fund, since March 1996. Mr. Batchelder
is also a director of Washington Group International, Inc. and Apria Healthcare
Group Inc. Mr. Batchelder received a B.S. in accounting from Oklahoma State
University in 1971 and is a certified public accountant.
WHY DID YOU JOIN NUEVO'S BOARD IN 1999?
I joined Nuevo's board of directors because I believe that board
representation by a substantial shareholder with no conflicts of interests with
other shareholders is consistent with sound corporate governance and positively
impacts board dynamics. I expect to continue to utilize my substantial industry
experience to assist the company in understanding and responding to changes in
our business sector.
[PHOTO OF MR. ELSON] CHARLES M. ELSON
41 years old
Director since 1998
Shares owned: 2,778
Options owned: 18,250
Restricted shares: 7,465
Board committees: Compensation (chairman), nominating and
governance
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Mr. Elson has been the Edgar S. Woolard Jr. Professor of Corporate
Governance and the Director of the Center for Corporate Governance at the
University of Delaware since 2000. He has also been a professor of law at
Stetson University College of Law since 1990 and serves as of counsel to the law
firm of Holland & Knight (since 1995). He is a member of the American Law
Institute and the Advisory Council and Commissions on Director Compensation,
Audit Committees, and Director Professionalism of the National Association of
Corporate Directors. Mr. Elson is widely regarded as an expert on corporate
governance and has served on panels and blue ribbon commissions on such issues
as executive compensation, director compensation, director professionalism,
chief executive officer succession and others. He was a trustee of Talledega
College and is a Salvatori Fellow of the Heritage Foundation. Mr. Elson
currently serves as a director of Sunbeam Corporation, a consumer products
company, a position he has held since 1996 and Auto Zone, Inc., an automobile
parts retailer, a position he has held since 2000. He also served as a director
of Circon Corporation, a medical products manufacturer, from 1997 until its sale
in 1999. Mr. Elson received his B.A. from Harvard College in 1981 and his J.D.
from the University of Virginia in 1985.
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WHY DID YOU JOIN NUEVO'S BOARD IN 1998?
I was attracted to Nuevo because I sensed a true desire on the part of
its board and senior management to be a leader among public companies in terms
of corporate governance. The nominating and governance committee on which I
serve is committed to keeping Nuevo on the leading edge of shareholder-oriented
governance. I believe that our accomplishments in implementing governance
guidelines will in the long term increase shareholder wealth.
[PHOTO OF MR FOSHEE] DOUGLAS L. FOSHEE
41 years old
Director since 1997
Shares owned: 80,373
Options owned: 647,500
Board committees: None
Relationship to Nuevo: None, other than as chairman, president
and chief executive officer
BIOGRAPHICAL INFORMATION
Mr. Foshee became a director of Nuevo in 1997 concurrent with his
assumption of the position of president and chief executive officer in August.
In December 1997, Mr. Foshee was also appointed chairman of the board of
directors. Mr. Foshee served from 1993 until 1997 in various capacities for
Torch Energy Advisors Incorporated ("Torch"), including vice president special
projects, executive vice president acquisitions and financial analysis,
president, chief operating officer, and ultimately chief executive officer.
Prior to his tenure at Torch, Mr. Foshee was employed by ARCO International Oil
and Gas Company in various positions in finance and new business ventures. His
finance background also includes seven years in commercial banking, primarily as
an energy lender for major financial institutions. Mr. Foshee serves on the
board of Small Steps Nurturing Center, and is a member of the Independent
Petroleum Association of America, the National Petroleum Council, and the
Council of Overseers for the Jones Graduate School at Rice University. Mr.
Foshee received his B.B.A. from Southwest Texas State University in 1982 and his
M.B.A. from the Jesse H. Jones Graduate School at Rice University in 1992. He is
also a graduate of the Southwestern Graduate School of Banking at Southern
Methodist University (1991).
WHY DID YOU JOIN NUEVO IN 1997?
I had a unique perspective on Nuevo in 1997, having served as the chief
executive officer of Nuevo's largest service provider, Torch Energy Advisors. I
also ran Torch's acquisitions department during many of Nuevo's most significant
acquisitions, including having direct responsibility for negotiating the $480
million acquisition in 1996 of the company's California assets. So I knew a
great deal about the company's assets and I had worked with most of Nuevo's
talented staff for many years. That made my decision easy. Nuevo is endowed with
great assets and great people. I thought that I was uniquely qualified to lead
this incredible company.
[PHOTO OF MR GERRY] ROBERT L. GERRY III
63 years old
Director since 1990
Shares owned: 4,600
Options owned: 264,916
Restricted Shares: 5,000
Board committees: None
Relationship to Nuevo: Served as Nuevo's vice chairman from
1994 to 1997 and president and chief operating officer from
1990 to 1994
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BIOGRAPHICAL INFORMATION
Since 1997, Mr. Gerry has been chairman of the board of directors and
chief executive officer of Vaalco Energy, Inc., a public independent oil and gas
company which does not compete with Nuevo. From 1994 to 1997, Mr. Gerry was vice
chairman of Nuevo. Prior to that, he was president and chief operating officer
of Nuevo since its formation in 1990. Mr. Gerry currently serves as a trustee of
Texas Children's Hospital.
WHY DID YOU JOIN NUEVO IN 1990 AS ITS FIRST PRESIDENT?
We believed we had a unique opportunity to grow an underperforming
limited partnership into a powerhouse independent oil and gas company. We felt
we could build value by reinvesting income in prudent acquisitions and drilling
opportunities. Our vision was correct and Nuevo exceeded our wildest dreams.
Over this past year we have once again seen our highly competent management team
take significant steps to build a solid company into a major independent.
[PHOTO OF MR. PETERSEN] GARY R. PETERSEN
54 years old
Director since 1990
Shares owned: 4,000
Options owned: 25,750
Restricted Shares: 7,465
Board committees: Compensation
Relationship to Nuevo: In addition to participation on the
board, Mr. Petersen is a principal in a company which
participated with a group of lenders in 1992 in lending $12
million to a joint venture in which Nuevo was an owner. That
loan was repaid in full in 1997.
BIOGRAPHICAL INFORMATION
Mr. Petersen is a co-founder and is a partner of EnCap Investments, Inc.,
a firm which provides capital in the form of both debt and equity to the energy
industry. From 1984 to 1988, he served as senior vice president and manager of
the corporate finance division of the energy banking group for RepublicBanc
Houston. From 1979 to 1984, he was executive vice president and a director of
Nicklos Oil and Gas Company. He also served as a group vice president in the
petroleum and minerals division of RepublicBanc Dallas. He is a member of the
board of Energy Capital Investment Company, Equus II Incorporated and Bargo
Energy Company. Mr. Petersen received his B.B.A. from Texas Tech University in
1968 and his M.B.A. from Texas Tech University in 1970.
WHY DID YOU JOIN NUEVO'S BOARD IN 1990?
Nuevo is my kind of company. We take a different approach to the
exploration and production business. We manage this company's assets as a
portfolio, much like we do at EnCap where we serve institutional investors in a
different capacity. I think that's the right way to go about this business and I
think that's to a large degree why Nuevo has been so successful.
[PHOTO OF MR. ROSS] DAVID ROSS
60 years old
Director since 1997
Shares owned: 13,000
Options owned: 18,250
Restricted Shares: 7,465
Board committees: Nominating and governance (chairman)
Relationship to Nuevo: None, other than as a director
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BIOGRAPHICAL INFORMATION
Mr. Ross is a private investor. From 1987 to 1993, Mr. Ross was chairman
and chief executive officer of Sterling Consulting Group, which provided
corporate planning, treasury management and economic evaluation to the oil and
gas industry. He was a principal of The Sterling Group, a firm specializing in
leveraged buyouts, from 1986 to 1987. He currently serves on the Council of
Overseers and is an Adjunct Professor of Finance at the Jesse H. Jones Graduate
School of Administration at Rice University, where he has served since 1994 and
1979, respectively. Mr. Ross is a member of the board of Cooper Cameron
Corporation, an oilfield services equipment manufacturer. He also serves as an
advisory and a board member of Da Camera of Houston, a nonprofit arts
organization. Mr. Ross also serves on the board of the Nantucket Conservation
Foundation. Mr. Ross received his B.A. from Yale University in 1962 and his
M.B.A. from Harvard University in 1970.
WHY DID YOU JOIN NUEVO'S BOARD IN 1997?
I teach a finance course at Rice University which Doug Foshee attended,
so I was familiar with him, but not with Nuevo when I was approached in 1997 to
join the board. After meeting with management and the board as a whole, I was
convinced that this was a company that would succeed over the long term. I was
particularly impressed by the company's efforts to align compensation with
shareholder objectives. My experience in different industries tells me that when
management is on the hook financially, good things tend to happen.
[PHOTO OF MR. SHOWER] ROBERT W. SHOWER
63 years old
Director since 1998
Shares owned: 10,000
Options owned: 18,250
Restricted Shares: 5,000
Board committees: Audit (chairman), nominating and governance
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Mr. Shower served as executive vice president and chief financial officer
of Seagull Energy Corporation, an oil and gas company, from 1994 until his
retirement in 1996. From 1992 to 1994, he served as Seagull's senior vice
president and chief financial officer. From 1991 to 1992, Mr. Shower served as
senior vice president, corporate development, for Albert Fisher, Inc., a company
engaged in produce distribution. Mr. Shower served for 10 years as chief
financial officer for the Williams Companies and also served on its board from
1977 to 1986. Mr. Shower currently serves on the boards of Lear Corporation, one
of the world's largest automotive suppliers; Highlands Insurance Group, Inc.;
and Edge Petroleum Corporation, a technology-oriented exploration company. Mr.
Shower received his B.S. from the University of Tulsa in 1960. He also attended
the Program for Management Development at Harvard Business School in 1972.
WHY DID YOU JOIN NUEVO'S BOARD IN 1998?
In my capacity as chief financial officer at Seagull Energy, I worked
with Bob King, who subsequently became Nuevo's chief financial officer. So I had
some familiarity with Nuevo when I was approached by the board. I was convinced
after meeting the board and members of the management team that they were doing
some exciting things. The company has great long-lived assets and a talented and
motivated group of employees who continue to demonstrate their commitment to
creating shareholder value through implementing such programs as Economic Value
Added financial modeling.
EXECUTIVE OFFICERS
Phillip A. Gobe, 48, joined us as chief operating officer in February
2001. He is responsible for managing our domestic and international exploitation
and exploration operations and business development functions. Prior to coming
to us, Mr. Gobe had been the Senior Vice President for Production for Vastar
Resources, Inc. since 1997. From 1976 to 1997, Mr. Gobe worked for Atlantic
Richfield Company and its subsidiaries in positions of increasing
responsibility, primarily in the Gulf of Mexico and Alaska. Among his
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positions were Vice President for Human Resources and Public Affairs for ARCO
International Oil & Gas from 1995 to 1997, Vice President for Human Resources
for ARCO Alaska, Inc. from 1993 to 1995 and Operations Manager for ARCO Alaska
in Prudhoe Bay, Alaska from 1991 to 1993. Mr. Gobe is a graduate of the
University of Texas at Austin and holds an MBA from the University of
Southwestern Louisiana.
Robert M. King, 40, joined us as senior vice president and chief
financial officer in January 1996. Prior to that, Mr. King was vice president,
corporate development and treasurer of Seagull Energy Corporation, which he
joined in 1990 after having spent over seven years in energy finance with The
First National Bank of Chicago and Mellon Bank, N.A. Mr. King has a B.A. in
economics and political science from Southern Methodist University and an M.B.A.
in finance from the Cox School of Business at Southern Methodist University.
Michael P. Darden, 43, joined us as vice president -- business
development in May 1998. Prior to that he was special counsel for Baker Botts,
L.L.P., a law firm, since 1993, where his practice focused on international and
domestic oil and gas ventures, asset acquisitions and sales, and energy-based
financings. Mr. Darden was employed by Hunt Oil Company from 1990 to 1993 where
he was senior international counsel. From 1988 to 1990, he was employed by BHP
Petroleum (Americas) Inc. as attorney-international/ offshore and from 1986 to
1988 he was employed by Tenneco Oil Company as senior international negotiator.
Mr. Darden has worked extensively on petroleum projects outside the United
States and in all regions of the world. His experience encompasses petroleum
projects at all stages, working with governments, industry partners,
contractors, suppliers, lenders and insurers. Mr. Darden received a B.B.A. in
Petroleum Land Management from The University of Texas in 1980 and a J.D. from
the University of Houston Law Center in 1986.
Dennis A. Hammond, 45, joined us as vice president -- engineering in
1990. In 1983, he was a co-founder of IDM Engineering, Inc., a petroleum
engineering consulting firm. He has held various reservoir engineering positions
with Chevron and Pogo Producing Company. He holds a B.S. degree in petroleum
engineering from Texas A&M University and is a registered professional engineer
in the State of Texas. Mr. Hammond is a member of the Society of Petroleum
Engineers and the American Petroleum Institute.
John P. McGinnis, 40, joined our company as vice president -- exploration
in August 1999. Prior to joining our company, Dr. McGinnis worked for Amerada
Hess Corporation from 1995 to 1999 most recently as Division Explorationist, and
for Tenneco Oil Company from 1984 to 1988 as an Exploration Geophysicist. In
1995 Dr. McGinnis received his Ph.D. in Marine Geology and Geophysics from
Columbia University in New York. Much of his research was funded by the oil
industry and focused on the petroleum systems in West Africa. He has extensive
knowledge of and experience in many basins and hydrocarbon trends around the
world. Dr. McGinnis holds a B.S. in geology and an M.S. in geophysics, both from
Purdue University.
Bruce K. Murchison, 51, joined our company as vice president and general
counsel in June 1999. Most recently, he had been a consultant to Plains
Resources senior management on transactional matters. From 1994 to 1998, he
served as president of Celeron Corporation, the energy subsidiary of the
Goodyear Tire and Rubber Company and operator of the 1,200-mile All American
Pipeline System. Prior to assuming duties as president of Celeron, Mr. Murchison
was Celeron's general counsel for six years. From 1991 to 1994, in addition to
his general counsel responsibilities at Celeron, he was chief operating officer
of All American Pipeline Company. He began his career with Goodyear as an
attorney in 1985. From 1981 to 1985, Mr. Murchison practiced corporate law and
litigation at Texaco Inc. Mr. Murchison received a B.A. from Lafayette College
and holds a J.D. from St. John's School of Law.
David V. Andrews, 45 was elected treasurer of Nuevo in January 2001. Mr.
Andrews joined Nuevo in November 1997 as Director of Finance and Planning. Prior
to joining Nuevo, Mr. Andrews served as the Assistant Vice President of Tax at
Seagull Energy Corporation from 1989 to 1997. From 1980 to 1989, he was employed
by Moore, Stephens & Company as Tax Manager and from 1979 to 1980 he was
employed by Arthur Andersen as a Senior Tax Accountant. Mr. Andrews is a
graduate of Louisiana State University with a B.S. in Accounting and is a
Certified Public Accountant.
Sandra D. Kraemer, 33, has been our controller since 1993 and our
corporate secretary since 1997. Prior to 1993, she was employed by Torch Energy
Advisors Incorporated since 1991. From 1990 to 1991, Ms. Kraemer was employed by
Price Waterhouse in its audit department, specializing in the oil and gas
industry. She graduated summa cum laude from Stephen F. Austin State University
with a B.B.A. in Accounting in 1990 and is a Certified Public Accountant.
All executive officers and directors of the company are United States
citizens.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our directors and executive officers, and persons who beneficially own
more than ten percent of our common stock, to file with the SEC and the New York
Stock Exchange reports of ownership and reports of changes in ownership of
common stock. Officers, directors and greater than ten percent stockholders are
required by the SEC's regulations to furnish us with copies of all Section 16(a)
forms they filed with the SEC. Based on a review of the copies of such reports
furnished to us, we believe that all reporting obligations under Section 16(a)
were satisfied.
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OPERATION OF OUR BOARD OF DIRECTORS
--------------------------------------------------------------------------------
Our board of directors has regularly scheduled quarterly meetings, and
has special meetings as necessary. Each non-officer director receives an annual
retainer of $30,000 and he or she may elect to receive all or a portion of his
retainer in shares of restricted stock for service on the board. Elections are
made in 25% increments with a 33% increase in value for the amounts invested in
restricted stock, so that a director electing to convert $7,500 in cash retainer
will be awarded $9,975 in restricted stock. In addition, each director receives
a semi-annual grant of 10-year options to purchase 1,750 shares of common stock,
with an exercise price equal to the closing price of our common stock on the
date of grant. Each director also receives a semi-annual grant of 1,250 shares
of restricted stock subject to a three year restricted period and directors have
the option to roll-over this period until their retirement from the board.
During 2000, the board of directors of the company held nine meetings and each
director attended at least 75% of the meetings.
AUDIT COMMITTEE. The audit committee recommends the appointment of
independent public accountants to conduct audits of our financial statements,
reviews with the accountants the plan and results of the auditing engagement,
approves other professional services provided by the accountants and evaluates
the independence of the accountants. The audit committee also reviews the scope
and results of the company's procedures for internal auditing and the adequacy
of our system of internal accounting controls. In addition, the audit committee
also reviews our corporate disclosure policies and procedures. Members are
Messrs. Shower (chairman), Barrow, and Batchelder. The audit committee held
seven meetings during 2000.
COMPENSATION COMMITTEE. The compensation committee approves the
compensation of officers, administers the bonus plan for key employees, makes
recommendations to the board regarding any present or future employee incentive
stock option plans and, pursuant to our stock option plans, awards stock options
to those key employees who have been recommended by management. Members are
Messrs. Elson (chairman), Arnold, Batchelder and Petersen. The compensation
committee met five times in 2000.
NOMINATING AND GOVERNANCE COMMITTEE. The duties of our nominating and
governance committee include recommending the appropriate size of our board,
establishing and reviewing the qualification, stock ownership and mandatory
resignation and tenure of our directors. Our nominating and governance committee
also periodically evaluates our board and management's communication with the
board. The members of the nominating and governance committee are Messrs. Ross
(chairman), Elson and Shower. The nominating and governance committee met three
times in 2000.
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EXECUTIVE COMPENSATION:
The following summary compensation table sets forth cash compensation for
the past three years for our chief executive officer and our four other most
highly compensated executive officers in 2000.
NUEVO ENERGY COMPANY
Summary Compensation Table
LONG-TERM
RESTRICTED COMPENSATION
YEAR SALARY BONUS(6) STOCK AWARDS OPTIONS
---- ------ -------- ------------ -------
Douglas L. Foshee 2000 $400,000 $200,000 -- 27,500
Chairman, Chief Executive Officer 1999 375,000 375,000 -- 55,000
and President 1998 375,000 -- -- 220,000(1)
Robert M. King 2000 190,000 95,000 -- 17,125
Senior Vice President and 1999 160,000 160,000 -- 34,250
Chief Financial Officer 1998 160,000 30,000 -- 66,250
Dennis A. Hammond 2000 168,000 84,000 -- 17,125
Vice President - Engineering 1999 160,000 160,000 -- 34,250
1998 160,000 -- -- 66,250
Bruce K. Murchison 2000 165,000 82,500 -- 35,125
Vice President and General 1999 93,333(2) 142,000(3) -- 48,000
Counsel
Michael P. Darden 2000 165,000 82,500 -- 35,125
Vice President - Business 1999 155,000 155,000 -- 34,250
Development 1998 99,950(4) 100,000(5) -- 91,250
------------------
(1) Mr. Foshee was granted 100,000 options in August of 1998 as part of his
employment agreement.
(2) Mr. Murchison became an employee in June 1999. Information regarding Mr.
Murchison is for the periods during which he was employed by Nuevo.
(3) Mr. Murchison was hired by us in June 1999 and was paid a signing bonus of
$60,000. Mr. Murchison contributed 100% of the bonus to the company's
deferred compensation plan in order to purchase shares of Nuevo common
stock.
(4) Mr. Darden became an employee in May 1998. Information regarding Mr. Darden
is for the periods during which he was employed by Nuevo.
(5) Mr. Darden was hired by us in May 1998 and was paid a signing bonus of
$100,000. Mr. Darden contributed 75% of the bonus to the company's deferred
compensation plan in order to purchase shares of Nuevo common stock.
(6) In lieu of an incentive bonus based on EVA performance in 2000, the
executive officers received a bonus equal to 50% of base salary and the
following stock option award (granted on March 28, 2001):
-------------------------------------------------
OPTION AWARD
-------------------------------------------------
Mr. Foshee 31,214
Mr. King 14,826
Mr. Hammond 16,197
Mr. Murchison 12,876
Mr. Darden 15,908
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The following table sets forth certain information concerning grants of
options to purchase our common stock made during 2000 to the executive officers
named in the summary compensation table. The exercise price of options granted
to our executive officers is the closing price of the common stock on the date
of grant.
2000 STOCK OPTION GRANTS
% OF TOTAL
NUMBER OF OPTIONS PER SHARE GRANT DATE
OPTIONS GRANTED TO EXERCISE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES PRICE DATE VALUE(1)
---- ------- ----------- ----- ---- --------
Douglas L. Foshee.......... 27,500 6.6% $16.06 08/02/10 $415,525
Robert M. King............. 17,125 4.1% 16.06 08/02/10 258,759
Dennis A. Hammond.......... 17,125 4.1% 16.06 08/02/10 258,759
Bruce K. Murchison......... 18,000 4.3% 15.06 12/06/10 255,060
17,125 4.1% 16.06 08/02/10 258,759
John P. McGinnis........... 18,000 4.3% 15.06 12/06/10 255,060
17,125 4.1% 16.06 08/02/10 258,759
Michael P. Darden.......... 18,000 4.3% 15.06 12/06/10 255,060
17,125 4.1% 16.06 08/02/10 258,759
---------------
(1) We calculated the grant date present value using the "Black Scholes"
model, a widely accepted method of valuing options. This valuation model
is hypothetical; the actual value, if any, depends on the excess of the
market price of the shares over the exercise price on the date the
option is exercised. If the market price does not increase above the
exercise price, compensation to the grantee will be zero. The
Black-Scholes option pricing model is a mathematical formula used for
estimating option values that incorporates various assumptions. The
"Grant Date Present Value" set out in the above table is based on the
following assumptions: (a) a ten-year option term; (b) 112% expected
future annual stock volatility for the options; (c) a risk-free rate of
return of 5% for the options granted; and (d) no expected dividend
yield. The above model does not include any reduction in value for non-
transferability, forfeiture or vesting of options.
The following table shows the number of options owned by our named and
key executives. Options in the column marked "unexercisable" are subject to
vesting and will be forfeited if the named executive's employment with us is
terminated for certain reasons.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NUMBER OF SHARES OPTIONS DECEMBER 31, 2000(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
Douglas L. Foshee...... -- -- 620,000 27,500 $589,688 $ 34,375
Robert M. King......... -- -- 187,650 17,125 330,703 21,406
Dennis A. Hammond...... -- -- 199,855 17,125 330,703 21,406
Bruce K. Murchison..... -- -- 16,000 67,125 41,458 144,868
John P. McGinnis....... -- -- 14,333 63,792 20,729 103,410
Michael P. Darden...... 15,000 $110,794 127,625 18,000 259,297 40,545
---------------
(1) Based on $17.3125 per share which was the closing price per share of our
common stock on the New York Stock Exchange Composite Tape on December
29, 2000.
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COMPENSATION COMMITTEE REPORT:
--------------------------------------------------------------------------------
Our compensation committee consists of four directors who are not
employees or executive officers of the company. The members of the compensation
committee in 2000 were Mr. Elson, who was chairman, and Messrs. Arnold,
Batchelder and Petersen.
OUR EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program reflects a policy of attracting highly
qualified executives who strive to achieve outstanding individual performance
and who collectively seek outstanding corporate and share price performance
compared to that of peer group companies. The committee believes that Nuevo
should seek executives who desire a work environment characterized by a high
level of "at-risk" compensation, which rewards excellent performance and aligns
overall compensation with the objectives of our stockholders. Accordingly, our
compensation system consists of the following elements:
BASE SALARY. The base salaries for our named executive officers
are established by employment agreements with those officers. The base
salaries in these agreements are intended to represent approximately 50%
to 60% of the executives' total salary and cash bonus.
INCENTIVE BONUS. Under the employment agreements with most of
our executives, bonuses are awarded at the discretion of the compensation
committee. It has been the committee's overall objective that the sum of
base salaries plus cash bonuses should generally be at or about the 75th
percentile of peer group companies.
During 1999, the company adopted an Economic Value Added (EVA)
model for financial planning, capital allocation and 2000 bonus
calculations. Under EVA, our executives can earn bonuses set at or about
the 50th to 60th percentile of peer group companies if we have earned the
return on capital targeted in the EVA model. The bonus is reduced, or
eliminated altogether, if we fall short of the targeted return on
capital. The executive may receive more than the targeted bonus if our
performance exceeds the EVA targeted return on capital. In the event that
we exceed EVA targets, part of the incremental bonus is paid to the
executive and part is "banked" with the company. The banked portion is
paid over time but remains at risk to meeting future EVA targets.
Although EVA targets were exceeded by the company in 2000, the
committee and management did not believe that the Company's share price
at the end of the year reflected the EVA value that had been created.
Therefore, rather than paying a bonus in 2000 calculated under EVA, each
executive officer received a bonus equal to 50% of his base salary. In
addition, each executive officer will receive a stock option grant with a
Black-Scholes value equal to the difference between the cash bonus and
the EVA calculated bonus. The grant of options as part of the 2000
incentive bonus in lieu of cash aligns management and shareholders as
each will be compensated for the EVA value created when such value is
reflected in a higher share price. Whether the company elects to pay
future bonuses based on an EVA calculation is at the discretion of the
board of directors.
STOCK OPTIONS. Each of our employees receives stock options as a
component of his or her compensation, in order to align the interests of
employees with those of our stockholders. The number of options granted
to an employee is based on the committee's view of the employee's ability
to impact the value of Nuevo's shares. We believe that because we
outsource non-strategic functions, resulting in substantially fewer
employees eligible to receive options, we have a substantial advantage
over peer companies in the number of options that we can grant to our
employees. It is the committee's overall objective that the sum of base
salaries plus incentive bonuses plus options should generally compare at
or about the 80th to 90th percentile of peer group companies.
During 1997, the compensation committee established a stock ownership
program for Nuevo's senior executives that provides incentives for each
executive to achieve and maintain a targeted level of ownership of Nuevo common
stock. Target levels of stock ownership are set by the compensation committee
for each executive. Counted against this stock ownership are shares owned
directly by the executive or owned beneficially through an immediate family
member, shares acquired through the exercise of options and shares acquired
through our deferred compensation and 401 (k) plans. Shares that may be received
upon exercise of options do not count toward the ownership objectives. Under the
program, each executive's common stock ownership is reported to the committee
twice a year. An executive's progress toward meeting stated ownership objectives
is an important element of each executive's performance review.
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During 2000, Messrs. Foshee and Darden satisfied the stock ownership
targets set by the committee. During 1999, Messrs. Hammond and King satisfied
the stock ownership targets set by the committee. Upon meeting and maintaining
the ownership target, the executive is eligible for two benefits: the vesting
schedule on all options granted after implementation of the program is
accelerated; and, the investment options available under our deferred
compensation plan are broadened to include a diversified equity fund.
OVERVIEW
While our hedging policy and operational considerations in California
limited our ability to take full advantage of the high crude oil price
environment that existed in 2000, we did improve our financial flexibility and
were successful in our pursuit of exploration and development activities in our
core California properties. During 2000, we issued new ten year 9 3/8% Senior
Subordinated Notes and used the proceeds to pay the outstanding balance on our
credit facility, in its entirety. We successfully drilled and completed the Star
Fee 701 well in California and are pursuing follow-up opportunities. We
renegotiated our field operations service agreement both lowering cost and
bringing key professional positions in-house. Internationally, we acquired new
acreage positions in Tunisia and began new exploration efforts in Ghana on a
promoted basis.
CHIEF EXECUTIVE OFFICER. Douglas L. Foshee was appointed chief
executive officer in August 1997, at which time he entered into an
employment agreement providing for a base salary of $375,000. Mr. Foshee
received a bonus of $200,000 and was granted options to purchase 27,500
shares of common stock during 2000. In addition, Mr. Foshee will receive
a stock option grant with a Black-Scholes value equal to the difference
between the cash bonus and the EVA calculated bonus. This grant of
options was dated March 28, 2001.
KEY EXECUTIVE OFFICERS. The compensation committee continues to
review on an individual level each key executive's leadership in his area
of expertise, and also evaluates years of service, experience level,
position and general economic and industry conditions. However, no
specific weighting is assigned to these factors. The committee also
studies peer group compensation levels for comparable positions. With
respect to bonus compensation in 2000, the committee followed its
historic philosophy of allocating a specific portion of the total
compensation paid to executive officers as "at risk" compensation in
order to emphasize pay for performance.
The compensation committee reviews the role played by each key executive
officer in meeting the goals established for 2000. As a result of this
review, three of the six executive officers received salary increases of
five percent over their existing salaries. This is the second salary
increase awarded by the committee in the past four years.
STOCK BASED COMPENSATION
The compensation committee believes the stock options that it has granted
in the past, and those granted in 2000, serve a valuable purpose by attracting
and retaining key executives, and encouraging increased job performance by the
recipients of such grants. The committee bases the number of awards granted to
executive officers on no predetermined formula, but rather on each individual's
accomplishments, level of responsibility, and impact on Nuevo's performance for
the year.
Messrs. Foshee, King, Hammond, Darden, Murchison and McGinnis were
granted a total of 27,500, 17,125, 17,125, 35,125, 35,125, and 35,125 options in
2000, respectively during 2000. Grants of stock options were made at the market
price of the common stock of the company on the date of the grant (as defined in
the plan).
EXECUTIVE EMPLOYMENT CONTRACTS
In 1997, we entered into an employment contract with Mr. Foshee, our
Chief Executive Officer. The agreement provided for the following compensation
during 1997:
-- a base salary of $375,000,
-- discretionary bonuses based upon performance to be determined by
our compensation committee, and
-- reimbursement for membership fees to the Houston Center Club, the
Petroleum Club and the Young Presidents Organization.
-24-
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Mr. Foshee's employment agreement is terminable by either party but, in
the event that his employment is terminated for reasons other than just cause or
his voluntary resignation, we are obligated to pay him a sum equal to two times
the aggregate of:
-- his salary for the twelve months immediately preceding the date of
termination (less applicable withholdings and deductions required
by law), plus
-- any bonus paid to Mr. Foshee in the twelve-month period.
In the agreement, just cause is generally defined as the failure to
render services to Nuevo as provided in the agreement or the commission of fraud
or other specified illegal act.
In 1998, we entered into a two-year employment agreement with Robert M.
King. This contract was amended, effective December 31, 2000 and provides for
the following compensation:
-- an annual minimum compensation of $190,000;
-- reimbursement for reasonable country club dues.
Mr. King's employment agreement is terminable by either party but, in the
event his employment is terminated for reasons other than just cause or at his
option, we must pay him the greater of two times his annual salary and average
bonus. Just cause has the same meaning in Mr. King's contract as in Mr. Foshee's
contract.
In 1997, we entered into an employment agreement with Mr. Dennis A.
Hammond providing for a monthly salary of $13,333.34, payable in semi-monthly
installments and an annual discretionary bonus, stock option and stock bonus
awards as determined by our compensation committee. Mr. Hammond's employment
agreement is for no definite term and is terminable by either party at any time
for any lawful reason. While Mr. Hammond's agreement provides for a benefit in
the event his employment is terminated in connection with a change in control,
this provision and similar provisions in contracts with each executive officers
will be superceded by a new Severance Protection Agreement.
In 1998, the company entered into an employment agreement with Mr.
Michael P. Darden. The termination provisions of Mr. Darden's contract are
similar in all respects to Mr. King's. Mr. Darden was paid an initial minimum
annual salary of $155,000 and a signing bonus of $100,000. Mr. Darden
contributed 75% of the bonus to the company's deferred compensation plan in
order to purchase shares of Nuevo common stock.
In 1999, we entered into an employment agreement with Bruce K. Murchison.
Mr. Murchison's contract was also identical to that of Mr. Darden except that
Mr. Murchison was paid an annual salary of $160,000 and a $60,000 signing bonus.
Mr. Murchison contributed this entire bonus to purchase shares of Nuevo common
stock.
In 1999, we entered into an employment agreement with John P. McGinnis.
Mr. McGinnis's contract was also identical to that of Mr. Darden except that Mr.
McGinnis was paid $140,000 annually and a $50,000 signing bonus. Mr. McGinnis
contributed this entire bonus to purchase shares of Nuevo common stock.
In 2001, we entered into an employment contract with Phillip A. Gobe. The
agreement is similar to that of Mr. Foshee except that Mr. Gobe receives a base
salary of $275,000 and 150,000 stock options on his date of hire.
LONG-TERM INCENTIVE PLAN AWARDS
We do not have a long-term incentive plan for our employees, other than
the 1990 stock option plan, the 1993 stock incentive plan and the 1999 stock
incentive plan. Under the 1990 stock option plan and the 1993 stock incentive
plan, our executive officers, directors and employees are eligible to receive
awards of stock options or of shares of stock or other awards which have a value
which increases or decreases with the price of our stock. In addition to the
awards under the 1990 stock option plan and the 1993 stock incentive plan, the
1999 stock incentive plan permits the award of restricted stock, restricted
stock units, performance share awards and performance units. All of the awards
are designed to generate an increased incentive to contribute to the company's
future success resulting in the enhanced value of the company for the benefit of
its shareholders.
SEVERANCE PROTECTION
On December 6, 2000, the board of directors adopted a resolution that
would provide the key executive officers of the company certain benefits in the
event of termination of employment without cause
-25-
27
within two years of a change of control. The company is obligated to pay a
termination benefit of three times the sum of base salary and average annual
bonus. In the event that any benefit received in a change of control subjects
the executive to the excise tax imposed by Section 4999 of the Internal Revenue
Code, the executive is entitled to a tax gross up payment. This benefit is in
lieu of any other severance or termination benefit that might otherwise be owed
under an employment contract or company severance plan. The board authorized
that this benefit be formalized in separate Severance Protection Agreements with
each key executive officer. Severance benefits for Mr. Gobe are phased in over
time.
In 2000, the compensation committee revoked its 1999 resolution which
provided that under certain circumstances, in connection with a change of
control, if the exercise price of the options is greater than the consideration
to be received in the change of control transaction, the option holder will be
entitled to receive the Black-Scholes model value of his or her options. This
revocation was ratified by the board of directors.
DEFERRED COMPENSATION PLAN
During 1997, we adopted the Nuevo Energy Deferred Compensation Plan to
encourage senior executive officers to personally invest in our shares.
Executives at the level of vice president and above are eligible to participate
in the plan. The plan allows our senior executives to defer all or a portion of
their annual salaries and bonuses. Currently, such deferred salaries and bonuses
must be invested in our common stock or a money market account until the
employee satisfies the stock ownership criteria established by the compensation
committee. After the stock ownership thresholds are met (the "target"), deferred
amounts may be invested in any equity indexed investment selected by the
compensation committee. Stock is acquired under the plan at a discount of 25% to
the then current market price, and is subject to restrictions on transfer.
The following table shows the target stock ownership amounts under our
Deferred Compensation Plan. The actual investment column includes investments
directly and indirectly in our 401(k) plan and deferred compensation plan, but
does not include shares, which may be issued pursuant to stock options.
TARGET
NAME ACTUAL INVESTMENT INVESTMENT
---- ----------------- ----------
Douglas L. Foshee................ $1,216,856 $1,200,000
Robert M. King................... 795,142 475,000
Dennis A. Hammond................ 701,380 336,000
Michael P. Darden................ 412,331 330,000
Bruce K. Murchison............... 164,302 330,000
John P. McGinnis................. 123,579 290,000
REVISIONS TO STOCK BASED COMPENSATION
DIRECTOR COMPENSATION. In 1999, the compensation committee adopted
changes to the compensation paid to non-employee directors in order to encourage
greater stock ownership by directors and to bring director compensation in line
with the compensation paid by peer group companies.
Each non-officer director is entitled to receive an annual cash retainer
of $30,000 but may elect to receive all or a portion of the retainer in shares
of restricted stock. Elections are made in 25% increments and, to encourage
director ownership, the director receives a 33% increase in value for the amount
invested in restricted stock. For example, a director will receive $9,975 in
restricted stock for each $7,500 of compensation invested. Six of our directors
elected to receive all restricted shares while two directors elected to continue
to receive a cash retainer in 2000.
In addition to the retainer, non-officer directors receive a semi-annual
grant of 1,750 ten-year options to purchase shares of the company's stock. In
addition, the directors receive a semi-annual grant of 1,250 restricted shares
of the Company's common stock subject to a three year restricted period and
directors will have the option to roll-over this period until their retirement
from the board.
CHARLES M. ELSON, CHAIRMAN
ISAAC ARNOLD, JR.
DAVID H. BATCHELDER
GARY R. PETERSEN
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AUDIT COMMITTEE REPORT:
--------------------------------------------------------------------------------
The audit committee of the board is responsible for providing
independent, objective oversight of the Company's accounting functions and
internal controls. The audit committee is composed of three directors, each of
whom is independent as defined by the New York Stock Exchange listing standards.
The audit committee operates under a written charter approved by the board of
directors. A copy of the charter is attached to this Proxy Statement as Exhibit
A.
Management is responsible for the company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and to issue a report thereon. The audit committee's
responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the audit committee met with
management and the independent accountants to review and discuss the audited
financial statements as of and for the year ended December 31, 2000. The audit
committee also discussed with the independent accountants the matters required
by Statement on Auditing Standards No. 61 (Communication with Audit Committees),
as amended. The audit committee also received written disclosures from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the audit committee
discussed with the independent accountants that firm's independence.
Based upon the audit committee's reviews and discussions referred to
above, the audit committee recommended that the Board of Directors include the
audited consolidated financial statements in the Company's Annual Report on Form
10-K for the year ended December 31, 2000, to be filed with the Securities and
Exchange Commission.
During the fiscal year 2000, we retained KPMG LLP as our principal
auditor to provide services in the following categories and amounts:
----------------------------------------------------
Audit Fees $ 236,000
Financial Information Systems
Design and Implementation Fees --
All Other Fees 219,655
The audit committee has considered whether the provision of non-audit
services by the company's principal auditor is compatible with maintaining
auditor independence.
THE AUDIT COMMITTEE
ROBERT W. SHOWER, CHAIRMAN
DAVID H. BATCHELDER
THOMAS L. BARROW
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--------------------------------------------------------------------------------
PERFORMANCE GRAPH
--------------------------------------------------------------------------------
The following graph compares the yearly percentage change in our
cumulative total stockholder return on our common stock to the total return on
the New York Stock Exchange and the cumulative total return on a peer group of
oil and gas exploration and production companies selected by us from January 1,
1996 until December 31, 2000.
NUEVO ENERGY CHART
[NUEVO ENERGY CHART]
NUEVO NYSE MARKET INDEX PEER GROUP
----- ----------------- ----------
1995 100.00 100.00 100.00
1996 232.40 120.46 144.08
1997 182.12 158.48 125.35
1998 51.40 188.58 62.10
1999 83.80 206.49 76.32
2000 77.38 211.42 157.52
--------------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------------------------
Nuevo 100.00 232.40 182.12 51.40 83.80 77.38
NYSE Market Index 100.00 120.46 158.48 188.58 206.49 211.42
Peer Group 100.00 144.08 125.35 62.10 76.32 157.52
Our peer group includes the following companies: Belco Oil and Gas, Cross
Timbers Oil Company, EEX Corporation, Forest Oil, HS Resources, Inc., Newfield
Exploration Company, Plains Resources Inc., Pogo Producing Company, Range
Resources Corporation, Stone Energy Corporation and Vintage Petroleum, Inc.
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--------------------------------------------------------------------------------
PROPOSAL II. RATIFICATION OF THE SELECTION OF OUR
2001 AUDITORS:
The board of directors has appointed Arthur Andersen LLP ("Arthur
Andersen"), independent public accountants, for the examination of the accounts
and audit of our financial statements for the year ending December 31, 2001. At
the annual meeting, the board of directors will present a proposal to the
stockholders to approve and ratify the engagement of Arthur Andersen. A
representative of Arthur Andersen will be present and will have the opportunity
to make a statement, if he desires, and to respond to appropriate questions. An
adverse vote will be considered as a direction to our audit committee to select
other auditors in the following year.
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EXHIBIT A
NUEVO ENERGY COMPANY
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE PURPOSE
The Audit Committee (the "Committee") of Nuevo Energy Company (the
"Company") is a committee of the Board of Directors. The Committee's function is
to assist the Board in fulfilling its oversight responsibilities relating to the
Company's corporate accounting and financial reporting practices. In fulfilling
this function, the Committee's primary duties and responsibilities are to:
- Serve as an independent and objective party to monitor the Company's
financial reporting process and systems of internal controls regarding
financial, accounting, and legal compliance.
- Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
- Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
- Report actions of the Committee to the Board of Directors with such
recommendations as the Committee may deem appropriate.
The Committee shall be empowered to conduct or cause to be conducted any
investigation appropriate to fulfilling its responsibilities, and shall have
direct access to the independent auditors as well as Company employees as
necessary. The Committee shall be empowered to retain, at the Company's expense,
special legal, accounting, or other consultants or experts as the Committee
deems necessary in the performance of its duties.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
Committee members shall meet the requirements, as may be amended from
time to time, of (1) the New York Stock Exchange as described in Section 303 of
the New York Stock Exchange's Listed Company Manual and (2) the Nuevo Energy
Company Corporate Governance Guidelines. The Committee shall be comprised of
three or more directors as determined from time to time by resolution of the
Board. Committee members, including the Audit Committee Chair, shall be
appointed by the Board of Directors on recommendation of the Company's
Nominating and Governance Committee.
The Committee shall meet at least three times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall prepare
and/or approve an agenda in advance of each meeting. If the Audit Committee
Chair is not present, the members of the Committee may designate a Chair of the
meeting by majority vote of the Committee membership. The Committee shall meet
privately in executive session at least annually with management, the Director
of Internal Audit, the independent auditors, and as a committee to discuss any
matters that the Committee or each of these groups believe should be discussed
privately.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
The Committee shall:
Review Procedures
1. Review with management, the independent auditors and the internal
auditors, the Company's year-end financial results prior to the release of
earnings and the Company's year-end financial statements prior to filing or
distribution. Discuss with management, the independent auditors and the internal
auditors any significant issues or findings or any changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with Statement on Auditing Standards No. 61.
Recommend to the Board of Directors whether or not the audited financial
statements should be included in the Company's Annual Report on Form 10-K for
the last fiscal year.
2. Review with management, the independent auditors and the internal
auditors, the Company's quarterly financial results prior to the release of
earnings and the Company's quarterly financial statements prior to filing or
distribution. Discuss with management, the independent auditors and the internal
auditors any significant findings or any changes to the Company's accounting
principles and any items required to be communicated by the independent auditors
in accordance with Statement on Auditing Standards No. 61.
A-1
32
3. In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial reporting
processes and controls. Discuss significant financial risk exposures and the
steps management has taken to monitor, control, and report such exposures.
Review significant findings prepared by the independent auditors and the
internal auditing department together with management's responses, including the
status of previous recommendations.
Independent Auditors
4. Confirm with the independent auditors their ultimate accountability to
the Audit Committee and the Board of Directors. Review the performance of the
auditors and annually recommend to the Board of Directors the appointment of the
independent auditors or approve any discharge of auditors when circumstances
warrant.
5. Approve the fees and other significant compensation to be paid to the
independent auditors. Review and approve requests for significant management
consulting engagements to be performed by the independent auditors' firm and be
advised of any other significant study undertaken at the request of management
that is beyond the scope of the audit engagement letter.
6. Oversee the independence of the independent auditors by, among other
things, (1) on an annual basis, receiving from the independent auditors a formal
written statement delineating all relationships between the independent auditors
and the Company, consistent with Independence Standards Board Standard No. 1,
that could impair the auditors' independence; (2) actively engaging in a
dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the accountants; and (3) recommending to the Board of Directors the appropriate
action to be taken in response to the independent auditors' report to satisfy
itself of the independent auditors' independence.
7. Review the independent auditors' audit plan and engagement letter [and
discuss with the independent auditors and the internal auditor the scope of the
audit, staffing, locations, reliance upon management, and internal audit and
general audit approach].
Internal Audit Department and Legal Compliance
8. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal audit department, as needed. The
internal audit department shall be responsible to senior management, but shall
have a direct reporting responsibility to the Board of Directors through the
Committee.
9. Review the appointment, performance, and replacement of the Director
of Internal Audit.
10. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
11. On at least an annual basis, review with the Company's legal counsel
any legal matters that could have a significant impact on the Company's
financial statements or the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental agencies.
Other Audit Committee Responsibilities
12. Review and reassess the adequacy of this Charter at least annually
and recommend any proposed changes to the Board of Directors for approval.
13. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission to be included in the Company's annual proxy
statement.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
15. Review policies and procedures with respect to executive officers'
expense accounts and perquisites, including their use of corporate assets, and
consider the results of any review of these areas by the internal auditors or
the independent accountant.
16. Review with the General Counsel the results of his/her review of the
Company's compliance with the Company's code of conduct.
17. Perform any other activities consistent with this Charter, the
Company's by-laws and governing law, as the Committee or the Board deems
necessary or appropriate.
A-2
33
REVOCABLE PROXY
NUEVO ENERGY COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NUEVO ENERGY
COMPANY ("COMPANY") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO
BE HELD ON MAY 23, 2001 AND AT ANY OTHER ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of April 6, 2001, hereby
authorizes Douglas L. Foshee and Robert M. King or any successors thereto as
proxies with full powers of substitution, to represent the undersigned at the
Annual Meeting of Stockholders of the Company to be held at the Four Seasons
Hotel, 1300 Lamar, Houston, Texas 77010, on Wednesday May 23, 2001 at 9:00 a.m.,
Central Daylight Time, and at any adjournment of said meeting, and thereat to
act with respect to all votes that the undersigned would be entitled to cast, if
then personally present, as follows:
The Board of Directors recommends that you vote FOR the Board of Directors'
nominees listed above and FOR Proposal 2. Shares of common stock of the Company
will be voted as specified. IF NO SPECIFICATION IS MADE, SHARES WILL BE VOTED
FOR THE ELECTION OF THE BOARD OF DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS,
AND FOR PROPOSAL 2, AND OTHERWISE AT THE DISCRETION OF THE PROXIES. THIS PROXY
MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of the
Stockholders of the Company called for May 23, 2001, a Proxy Statement for the
Annual Meeting and the 2000 Annual Report to Stockholders (which may have been
previously mailed).
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
34
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD
listed below (except AUTHORITY
as marked to the for all nominees
contrary below) listed below NOMINEES FOR DIRECTOR: Isaac Arnold, Jr.
1. Election of Thomas D. Barrow
Directors [ ] [ ] David H. Batchelder
Charles M. Elson
Douglas L. Foshee
Robert L. Gerry III
Gary R. Petersen
David Ross
Robert W. Shower
(INSTRUCTION: To withhold authority to vote for one
or more of the nominees, write the name of the
nominee in the space provided.)
------------------------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL to ratify the appointment of Arthur [ ] [ ] [ ]
Andersen LLP as the Company's independent
auditors for the fiscal year ending December 31, 2001.
3. In their discretion, the proxies are authorized to vote with respect to
approval of the minutes of the last meeting of stockholders, the election
of any person as a director if a nominee is unable to serve or for good
cause will not serve, matters incident to the conduct of the meeting, and
upon such other matters as may properly come before the meeting.
SIGNATURE(S) DATE 2001 [ ] [ ] [ ]
---------------------------------------- ------
NOTE: Please sign this exactly as your name(s) appear(s) on this proxy. When
signing in a representative capacity, please give title. When shares
are held jointly, only one holder need sign.