UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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Nuevo Energy Company
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(Name of Registrant as Specified In Its Charter)
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[NUEVO LETTERHEAD]
April 25, 2002
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 22, 2002 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 2003; and
2. 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. We again point out our 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 or about April 25, 2002.
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/ JAMES L. PAYNE
James L. Payne
Chairman, President and
Chief Executive Officer
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TABLE OF CONTENTS PAGE
Questions and Answers......................................................... 3
Beneficial Ownership of Our Common Stock...................................... 5
Our Corporate Governance Principals........................................... 8
Proposal I. Election of Directors....................................... 13
Executive Compensation........................................................ 19
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QUESTIONS AND ANSWERS:
WHO IS ASKING FOR MY PROXY? ---------------------------------------------------
Your proxy is being solicited by our board of directors for use at our 2002
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? ---------------------------------------------------
At our 2002 annual meeting, stockholders will be asked to vote to elect our
board of directors to serve until the annual meeting of stockholders in 2003.
HOW DO I VOTE MY SHARES? ---------------------------------------------------
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.
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 at 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 that
described herein.
WHAT VOTE IS REQUIRED? ---------------------------------------------------
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 eight 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 eight 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? ---------------------------------------------------
You may mark "abstain" on your proxy card for any of the matters submitted to a
vote. With respect to the election of directors, abstentions have no effect in
determining if a plurality exists but it does affect the total votes received by
a particular nominee.
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 from the beneficial
owner of the shares to vote on issues other than routine stockholder matters
such as the election of directors and ratification of auditors. 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? ---------------------------------------------------
The board of directors unanimously recommends that you vote "For" each nominee
to our board.
HOW MANY SHARES MAY VOTE AT
THE ANNUAL MEETING? ---------------------------------------------------
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 17,052,376 shares of common stock
outstanding.
WHAT IS THE RECORD DATE? ---------------------------------------------------
April 5, 2002.
WHY HAVE YOU ADOPTED
CORPORATE GOVERNANCE
PRINCIPLES? ---------------------------------------------------
In 1997, Nuevo committed to the investment community that it 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 stockholders 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 stockholders.
CAN I REVOKE MY PROXY? ---------------------------------------------------
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 Bruce K. Murchison, 1021 Main,
Suite 2100, Houston, Texas 77002, and his phone number is (713) 652-0706.
HOW DO I NOMINATE A PERSON
FOR A POSITION ON THE
BOARD OF DIRECTORS? ---------------------------------------------------
Our certificate of incorporation and bylaws require that stockholders notify us
of their intent to nominate directors for the annual meeting in 2003 prior to
January 22, 2003. 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 23, 2002. No stockholder nominations were submitted.
WHEN ARE PROPOSALS BY
SHAREHOLDERS DUE FOR
THE 2003 MEETING? ---------------------------------------------------
Proposals to be included in our proxy, other than nominations for director, must
be received by us on or before December 16, 2002. 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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Artisan Partners Limited Partnership........................ 1,836,901 10.8(1)
Andrew A. Ziegler
Carlene M. Ziegler
1000 North Water Street, #1770
Chicago, Illinois 60602-4207
Franklin Resources, Inc. ................................... 1,366,045 8.0(2)
Charles B. Johnson
Rupert H. Johnson, Jr.
One Franklin Parkway
San Mateo, California 94403
Relational Investors, LLC................................... 1,165,100 6.8(3)
David H. Batchelder
Joel L. Reed
Ralph V. Whitworth
11975 El Camino Real, Suite 300
San Diego, California 92130
Dimensional Fund Advisors................................... 1,095,500 6.4(4)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
State Street Research & Management Co. ..................... 1,054,900 6.2(5)
One Financial Center, 30th Floor
Boston, Massachusetts 02111-0296
Cramer Rosenthal McGlynn, LLC............................... 862,800 5.1(6)
707 Westchester Avenue
White Plains, New York 10604
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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 63,750 23,410 112,160 *
David H. Batchelder.................. 1,165,100(3) 10,500 12,780 1,188,380 7.0
Charles M. Elson..................... 2,778 21,750 12,780 37,308 *
Robert L. Gerry III.................. 4,600 268,416 7,500 280,516 1.7
James T. Jongebloed.................. -- -- -- -- *
Sheryl K. Pressler................... -- -- -- -- *
Gary R. Petersen..................... 4,000 29,250 12,780 46,030 *
David Ross........................... 13,000 21,750 12,780 47,530 *
Robert W. Shower..................... 10,000 21,750 7,500 39,250 *
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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
----------- ------ --------- ------------ ---------- ------- -------
James L. Payne......... 19,073 -- -- -- -- 19,073 *
Phillip A. Gobe........ -- 2,292 50,000 12,224 -- 64,516 *
Janet F. Clark......... -- 261 -- 352 -- 613 *
Bruce K. Murchison..... 300 2,903 56,334 20,597 -- 80,134 *
George B. Nilsen....... -- -- -- -- -- -- *
John P. McGinnis....... -- 2,556 45,035 16,483 -- 64,074 *
Douglas L. Foshee...... -- -- 543,414 -- -- 543,414 3.2
Robert M. King......... -- 13,825 132,526 -- -- 146,351 *
Dennis A. Hammond...... 260 4,030 177,802 -- -- 182,092 1.1
Michael P. Darden...... -- 3,948 117,208 -- -- 121,156 *
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ALL DIRECTORS AND EXECUTIVE OFFICERS TOGETHER:
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TOTAL PERCENT
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2,972,597 17.4
Footnotes:
* Under 1%.
** Stock options include only options which may be exercised within 60 days.
(1) Artisan Partners Limited Partnership ("Artisan Partners") 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 1,836,901 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.
(2) Of the shares reported for Franklin Resources, Inc., Franklin Advisers, Inc.
is reported to have sole voting power over 1,301,045 shares and Franklin
Advisory Services, LLC has sole voting power over 65,000 shares. In
addition, Franklin Advisers, Inc. is reported to have sole dispositive power
over 1,301,045 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,
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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 1,301,045 shares which may be received upon conversion of our
outstanding term convertible securities ("TECONS").
(3) 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.
(4) 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 Schedule 13G are owned by the Funds. In its role as
investment advisor or manager, Dimensional possesses sole voting and sole
dispositive power with respect to all 1,095,500 shares. Dimensional
disclaims beneficial ownership of such securities.
(5) State Street Research & Management Company ("State Street"), an investment
advisor registered under Section 203 of the Investment Advisors Act of 1940,
reported sole power to vote or to direct the vote with respect to 1,032,500
shares and sole power to dispose or to direct the disposition of 1,054,900
shares. These securities are beneficially owned by State Street in its
capacity as investment advisor and are owned by clients of State Street.
(6) Cramer Rosenthal McGlynn, LLC, an investment adviser registered under
section 203 of the Investment Advisors Act of 1940, reported to hold shared
voting and shared dispositive power with respect to all 862,800 shares.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Exchange Act requires certain of our executive
officers and all directors and more than ten percent stockholders of our equity
securities (collectively, "Reporting Persons") to file an initial report of
ownership (Form 3) and reports of changes of ownership (Forms 4 and 5) with the
SEC. These reporting persons are required to furnish us with copies of all
Section 16(a) reports that they file.
To our knowledge, based solely upon a review of Section 16(a) reports
furnished to us for the fiscal year ended December 31, 2001 and written
representations from Reporting Persons that no other reports were required, we
believe that all Reporting Persons complied with all applicable Section 16(a)
filing requirements during the fiscal year ended December 31, 2001, except that
a Form 3 was filed late for James L. Payne and Michael P. Darden, Robert M. King
and Sandra D. Kraemer, who are no longer employed by us, filed late Form 4's.
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OUR CORPORATE GOVERNANCE PRINCIPLES:
Our management and board of directors remain committed to conducting
business consistent with good corporate governance practices. In 1998, our board
of directors established a nominating and governance committee whose members
currently are David Ross, who acts as Chairperson, 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 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.
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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 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 company'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 assist 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 company'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:
All of our current directors other than David Ross and Robert W. Shower
are standing for re-election at the 2002 annual meeting. The nominating and
governance committee has nominated Isaac Arnold, Jr., David H. Batchelder,
Charles M. Elson, Robert L. Gerry III, James T. Jongebloed, James L. Payne, Gary
R. Petersen, and Sheryl K. Pressler.
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INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
The following is information about our directors and executive officers.
James T. Jongebloed and Sheryl K. Pressler, our nominees standing for election
for the first time, have provided a statement regarding why each wishes to join
the Nuevo board. 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.
66 years old
Director since 1990
Shares owned directly and indirectly: 25,000
Options owned: 63,750
Restricted shares: 23,410
Board committees: Compensation, Audit
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Mr. Arnold has been a director of Legacy Holding Company since 1989 and
Legacy Trust Company since 1997. 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.
[PHOTO OF MR. BATCHELDER] DAVID H. BATCHELDER
52 years old
Director since 1999
Shares owned: 1,165,100 (beneficially through Relational
partnerships)
Options owned: 10,500 (beneficially through Relational
Partnerships)
Restricted shares: 12,780 (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.
-13-
[PHOTO OF MR. ELSON] CHARLES M. ELSON
42 years old
Director since 1998
Shares owned: 2,778 Options owned: 21,750
Restricted shares: 12,780
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 was a professor of law at Stetson
University College of Law from 1990 until 2001 and serves 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, Auto Zone, Inc., an automobile parts
retailer, a position he has held since 2000 and Alderwoods Group, a health care
services provider, a position he has held since 2002. 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.
[PHOTO OF MR. GERRY] ROBERT L. GERRY III
64 years old
Director since 1990
Shares owned: 4,600
Options owned: 268,416
Restricted shares: 7,500
Board committees: Audit(ex officio)
Relationship to Nuevo: Served as Nuevo's vice
chairman from 1994 to 1997 and president and
chief operating officer from 1990 to 1994
BIOGRAPHICAL INFORMATION
Since 1997, Mr. Gerry has been chairman and chief executive officer of
Vaalco Energy, Inc., a publicly traded 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.
[PHOTO OF MR. JONGEBLOED] JAMES T. JONGEBLOED
60 years old
Director since 2002
Shares owned: None
Options owned: None
Restricted shares: None
Board committees: None
Relationship to Nuevo: None, other than as
a director
-14-
WHY DID YOU JOIN NUEVO'S BOARD?
I decided to join Nuevo's board because the company has experienced
leadership and a high quality board of directors who are interested in growing
the company and increasing shareholder value. I believe my business experience
in the oilfield services sector of the energy industry will enable me to make a
significant contribution to Nuevo's board.
BIOGRAPHICAL INFORMATION
Mr. Jongebloed served as chairman, president and chief executive officer
of Pool Energy Services Company, an oilfield services company, from 1994 through
1999. Mr. Jongebloed resigned his position after Pool Energy merged with Nabors
Industries, Inc. in November 1999. From 1989 to 1994, he served as Pool Energy's
president and chief executive officer and as president of international
operations from 1981 to 1989. From 1978 to 1981, Mr. Jongebloed served as
executive vice president of western hemisphere operations for Pool Energy. Mr.
Jongebloed served as vice president for western operations from 1976 to 1978 and
from 1973 to 1976 as vice president and general counsel for Atwood Oceanics,
Inc., an offshore drilling contractor. In the late sixties and early seventies,
Mr. Jongebloed served as senior project engineer and as a process engineer for
Fluor Corporation, an engineering and construction contractor. Mr. Jongebloed
currently serves on the board of Studio of the Americas, Houston Athletic
Foundation and is an advisory board member of Spindletop International. Mr.
Jongebloed received his B.S. degree from the University of Houston in 1966 and
his J.D. from South Texas College of Law in 1971. He also attended the
Management Program at Rice University.
[PHOTO OF MR. PAYNE] JAMES L. PAYNE
65 years old
Director since 2001
Shares owned: 19,073
Options owned: None
Restricted shares: None
Board committees: None
Relationship to Nuevo: Chairman, president and
chief executive officer of Nuevo
BIOGRAPHICAL INFORMATION
James L. Payne joined Nuevo Energy Company as chairman, president and
chief executive officer in October 2001. Prior to joining Nuevo, Mr. Payne was
vice chairman of Devon Energy Corporation from September 2000 until his
retirement in January 2001. Prior to the merger with Devon Energy in August
2000, he served as chairman and chief executive officer of Santa Fe Snyder
Corporation. Prior to the May 1999 merger of Santa Fe Energy Resources and
Snyder Oil Corporation, Mr. Payne served as chairman and chief executive officer
of Santa Fe Energy Resources. In 1982 he joined Santa Fe Energy Corporation, a
wholly owned subsidiary of Santa Fe Pacific Corporation, as senior vice
president - exploration and land and was named president in 1986 and chairman
and chief executive officer in 1990 when the company became publicly traded.
Prior to Mr. Payne's career with Santa Fe, he spent twenty-three years with
Chevron Oil in various domestic and international exploration and management
positions.
Mr. Payne graduated from the Colorado School of Mines in 1959 with a
degree in geophysical engineering and he received the Cecil H. Green Award in
Geophysics upon graduation. In 1974 he received an M.B.A. from Golden Gate
University and in 1983 he completed the Stanford Executive Program. In 1993 he
became a School of Mines Distinguished Achievement Medallist.
Mr. Payne serves on the board of BJ Services Company, Global Industries,
Ltd. and Nabors Industries, Inc. He also serves on the board of the Domestic
Petroleum Council, the Independent Petroleum Association of America (IPAA) , the
Palmer Drug Abuse Program and the Offshore Energy Center and
-15-
serves as a member of the President's Council of the Colorado School of Mines.
Mr. Payne is a member of the Society of Exploration Geophysicists and the
American Association of Petroleum Geologists.
[PHOTO OF MR. PETERSEN] GARY R. PETERSEN
55 years old
Director since 1990
Shares owned: 4,000
Options owned: 29,250
Restricted shares: 12,780
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, a foreign investment company, Equus
II Incorporated and Plains All American Pipeline L.P. Mr. Petersen received his
B.B.A. from Texas Tech University in 1968 and his M.B.A. from Texas Tech
University in 1970.
[PHOTO OF MS. PRESSLER] SHERYL K. PRESSLER
51 years old
Ms. Pressler is standing for election to the
Nuevo board for the first time.
WHY ARE YOU STANDING FOR ELECTION TO NUEVO'S BOARD?
I am standing for election to Nuevo's board of directors because the
company has an excellent management team and a board of directors who are
committed to practicing sound governance. I expect to utilize my substantial
investment management and corporate governance experience to assist the company
in creating value for its shareholders.
BIOGRAPHICAL INFORMATION
Ms. Pressler has been a self-employed investment and strategy consultant
in Altanta, Georgia since 2001. From 2000 to 2001, Ms. Pressler was the chief
executive officer for Lend Lease Real Estate Investments - United States, a
subsidiary of Lend Lease Corporation, an Australian real estate services
company. From 1994 to 2000, she was the chief investment officer for the
California Public Employees' Retirement System (CalPERS), the nation's largest
pension fund. From 1981 to 1994, she was responsible for the management of the
Retirement Funds for the McDonnell Douglas Corporation, a leading aircraft
manufacturer and aerospace company. Since 2001, she has been a member of the
advisory committee for Peracon, a private company which furnishes information to
real estate brokerage firms, and also a member of the investment advisory
committee of Sterling Capital Partners Buyout Fund, which makes investment in
small to mid-sized companies. Since 1999, Ms. Pressler has been a director of
the California HealthCare Foundation, a foundation whose goal is to expand
healthcare access and promote improvements in the health status of the people of
California. Since 1997, she has served on the board of directors of the Robert
A. Toigo
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Foundation, whose goal is to increase participation of minorities in the
financial services industry. Ms. Pressler has been nominated to serve on the
board of Stillwater Mining Company. Ms. Pressler received her B.A. in Philosophy
from Webster University and her M.B.A. from Washington University.
EXECUTIVE OFFICERS
Phillip A. Gobe, 49, 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 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 M.B.A. from the University of
Southwestern Louisiana.
Janet F. Clark, 47, joined us as senior vice president and chief
financial officer in December 2001. Prior to joining Nuevo, Ms. Clark served as
executive vice president, corporate development and administration and senior
vice president and chief financial officer for Santa Fe Snyder Corporation and
its predecessor, Santa Fe Energy Resources, Inc. From 1982 to 1996 Ms. Clark
held positions in the investment banking industry at First Boston Corporation,
Southcoast Capital Corporation and Williams MacKay Jordan & Co., Inc. Ms. Clark
is a graduate of The Wharton School of The University of Pennsylvania with an
M.B.A. and Harvard University with an A.B. in economics.
Bruce K. Murchison, 52, joined us as vice president and general counsel
in June 1999. In December 2001, he became senior vice president. During 1998 and
1999, 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.
George B. Nilsen, 46, joined us as senior vice president of planning and
asset management in December 2001. Prior to joining us, Mr. Nilsen was an
independent consultant for small independent exploration and production
companies. From 1987 to 2000, Mr. Nilsen held various domestic and international
management positions in engineering and operations, most recently as division
manager - gulf division and corporate manager - exploration and production for
Santa Fe Snyder Corporation and its predecessor, Santa Fe Energy Resources, Inc.
Mr. Nilsen began his career with Santa Fe in California and then transferred to
Midland, Texas as engineering manager. Subsequently, he worked in Argentina and
Ecuador in various management positions helping Santa Fe to establish its
international program. Prior to joining Santa Fe, Mr. Nilsen worked for over ten
years in Bakersfield, California for Petro-Lewis Corporation and Gulf Oil
Company in various engineering and operations positions. Nr. Nilsen is a
graduate of Bucknell University with a B.S. in chemical engineering.
John P. McGinnis, 41, joined us as vice president - exploration in August
1999. Prior to joining us, 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.
W. Rufus Estis, 51, joined us as vice president finance and
administration in November 2001. Prior to joining us, Mr. Estis was vice
president finance, Southeast Asia for Devon Energy Corporation (formerly Santa
Fe Snyder Corporation) since 1996. From 1993 to 1996, Mr. Estis was manager,
financial and international accounting for Santa Fe Energy Resources, Inc. From
1988 to 1993, Mr. Estis was vice president and finance manager for British Gas
Exploration and Production, and from 1976 to 1988, he held various accounting
positions with Tenneco Oil Exploration and Production. Mr. Estis is a graduate
of the University of Houston with an M.B.A and Louisiana Tech University with a
B.S. in accounting. He is also a certified public accountant.
All of our executive officers and directors are United States citizens.
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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 receive $7,500 of his cash
retainer in restricted shares will be awarded restricted stock valued at $9,975.
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. The director has the option to continue the
restriction until retirement from the board. During 2001, our board of directors
held ten 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 (chairperson), Batchelder and Arnold. Mr. Arnold replaced Mr.
Thomas Barrow who resigned in February 2001. The audit committee held six
meetings in 2001. Mr. Shower will not stand for re-election to our board of
directors. After our annual meeting, the audit committee members will be Messrs.
James T. Jongebloed, who will act as chairperson, Isaac Arnold and Ms. Sheryl K.
Pressler.
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, approves awards of
stock options to those key employees who have been recommended by management.
Members are Messrs. Elson (chairperson), Arnold, Batchelder and Petersen. The
compensation committee met four times in 2001. After our annual meeting, the
compensation committee members will be Messrs. Charles M. Elson (chairperson),
David H. Batchelder and Gary R. Petersen.
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 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 (chairperson), Elson and
Shower. The nominating and governance committee met two times in 2001. Mr. Ross
will not stand for re-election to our board of directors. After our annual
meeting, the nominating and governance committee members will be Messrs. Isaac
Arnold, Jr, (chairperson) James T. Jongebloed and Gary R. Petersen.
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EXECUTIVE COMPENSATION:
The following summary compensation table includes cash compensation for
the past three years for our chief executive officer and our four other most
highly compensated executive officers in 2001.
NUEVO ENERGY COMPANY
SUMMARY COMPENSATION TABLE
LONG-TERM
RESTRICTED COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(6) STOCK AWARDS OPTIONS COMPENSATION
--------------------------- ---- ---------- ---------- ------------ ------------ ------------
James L. Payne 2001.. $ -- $ -- -- -- 9,073(1)
Chairman, President and Chief
Executive Officer
Phillip A. Gobe................... 2001 232,339(2) 116,404 -- 170,000(3) --
Chief Operating Officer
Bruce K. Murchison................ 2001 173,250 43,312 -- 30,001 --
Senior Vice President and 2000 165,000 82,500 -- 35,125(12) --
General Counsel 1999 93,333(4) 142,000(5) -- 48,000 --
Janet F. Clark 2001.. 13,375(6) 3,339 -- 150,000(7) --
Senior Vice President and Chief
Financial Officer
George B. Nilsen.................. 2001 12,003(8) 2,996 -- 75,000(9) --
Senior Vice President of
Planning and Asset Management
Douglas L. Foshee(10)............. 2001 142,564 200,000 -- 31,214 $1,576,800
Former Chairman, President 2000 400,000 200,000 -- 27,500(12) --
and Chief Executive Officer 1999 375,000 375,000 -- 55,000 --
Robert M. King(10)................ 2001 177,820 47,500 -- 31,951 $ 570,000
Former Senior Vice President and 2000 190,000 95,000 -- 17,125(12) --
Chief Financial Officer 1999 160,000 160,000 -- 34,250 --
Dennis A. Hammond(11)............. 2001 168,000 42,000 -- 33,322 --
Former Vice President - 2000 168,000 84,000 -- 17,125(12) --
Engineering 1999 160,000 160,000 -- 34,250 --
Michael P. Darden(11)............. 2001 173,250 43,312 -- 33,033 --
Former Vice President - Business 2000 165,000 82,500 -- 35,125(12) --
Development 1999 155,000 155,000 -- 34,250 --
------------------
(1) Mr. Payne was elected chairman, president and chief executive officer in
October 2001. Mr. Payne receives his entire compensation in shares of our
common stock. In 2001, Mr. Payne earned 9,073 shares of stock based on a
share equivalent of $400,000 annual salary and $200,000 bonus prorated
based on the time actually worked. He was awarded these shares on January
02, 2002.
(2) Mr. Gobe was hired by us in February 2001. Information regarding Mr. Gobe
is for the period during which he was employed by us.
(3) Mr. Gobe was granted 150,0000 options in February 2001 as part of his
employment agreement.
(4) Mr. Murchison became an employee in June 1999. Information regarding Mr.
Murchison is for the 1999 compensation period during which he was employed
by us.
(5) 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 our deferred
compensation plan in order to purchase shares of our common stock.
(6) Ms. Clark became an employee in December 2001. Information regarding Ms.
Clark is for the period during which she was employed by Nuevo.
(7) Ms. Clark was granted 150,000 options in December 2001 as part of the
compensation package offered to her to join Nuevo.
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(8) Mr. Nilsen was hired by Nuevo in December 2001. Information regarding Mr.
Nilsen is for the period during which he was employed by Nuevo.
(9) Mr. Nilsen was granted 75,000 options in December 2001 as part of the
compensation package offered to him to join Nuevo.
(10) Mr. Foshee resigned from his employment with us in May 2001. Mr. King
resigned from his employment with us in December 2001. Pursuant to
resignation agreements, Messrs. Foshee and King received $1,576,800 and
$570,000, respectively. Information about Messrs. Foshee and King is for
periods during which each was employed by us.
(11) Messrs. Darden and Hammond resigned from employment with us in January
2002.
(12) In lieu of an incentive bonus based on EVA performance in 2000, the
executive officers received a bonus equal to 50% of base salary. Messrs.
Foshee, King, Hammond, Murchison and Darden were awarded stock options of
31,214, 14,826, 16,197, 12,876 and 15,908, respectively. The options were
granted on March 28,2001.
The following table sets forth certain information concerning grants of
options to purchase our common stock made during 2001 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.
2001 STOCK OPTION GRANTS
% OF TOTAL
OPTIONS
NUMBER OF GRANTED PER SHARE GRANT DATE
OPTIONS TO EXERCISE EXPIRATION PRESENT
NAME GRANTED EMPLOYEES PRICE DATE VALUE(1)
---- --------- ---------- --------- ---------- ----------
James L. Payne............................. 0 0 0 0 $ 0
Phillip A. Gobe............................ 20,000 2.4% 17.32 8/21/11 237,600
150,000 17.9% 16.57 2/26/11 1,704,000
Bruce K. Murchison......................... 17,125 2.0% 17.32 8/21/11 203,445
12,876 1.5% 17.75 3/28/11 156,701
Janet F. Clark............................. 150,000 17.9% 12.00 12/05/11 1,234,500
George B. Nilsen........................... 75,000 9.0% 12.00 12/05/11 617,250
John P. McGinnis........................... 17,125 2.0% 17.32 8/21/11 203,445
13,980 1.7% 17.75 3/28/11 170,137
Douglas L. Foshee.......................... 31,214 3.7% 17.75 3/28/11(2) 379,874
Robert M. King............................. 17,125 2.0% 17.32 8/21/11(2) 203,445
14,826 1.8% 17.75 3/28/11(2) 180,432
Dennis A. Hammond.......................... 17,125 2.0% 17.32 8/21/11(2) 203,445
16,197 1.9% 17.75 3/28/11(2) 197,117
Michael P. Darden.......................... 17,125 2.0% 17.32 8/21/11(2) 203,445
15,908 1.9% 17.75 3/28/11(2) 193,600
---------------
(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) 54.5% expected future annual stock volatility for the options; (c)
a risk-free rate of return of 4% 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.
(2) Messrs. Foshee, King, Hammond and Darden all resigned from the company. Each
has one year from the date of his resignation to exercise the options with
the exception of Mr. King who has three years. .
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The following table shows the number of options owned by our executives
named in the Summary Compensation Table 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.
NUMBER OF VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS DECEMBER 31, 2001(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
James L. Payne............ -- $ -- -- -- $ -- $ --
Phillip A Gobe............ -- -- -- 170,000 -- --
Bruce K. Murchison........ -- -- 43,708 69,418 27,084 13,541
Janet F. Clark............ -- -- -- 150,000 -- 450,000
George B. Nilsen.......... -- -- -- 75,000 -- 225,000
John P. McGinnis.......... -- -- 40,375 68,855 -- --
Douglas L. Foshee......... 135,300 (2) 543,414 -- -- --
Robert M. King............ 24,200 220,227 115,401 17,125 80,600 --
Dennis A. Hammond......... -- -- 233,177 17,125 174,375 --
Michael P. Darden......... 20,200 166,474 141,333 17,125 37,975 --
---------------
(1) Based on $15.00 per share which was the closing price per share of our
common stock on the New York Stock Exchange Composite Tape on December 31,
2001.
(2) Mr. Foshee exercised options after he resigned from the company; therefore,
value realized is not available.
-21-
--------------------------------------------------------------------------------
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 2002 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 and
retaining 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. In 2001, we retained Towers Perrin to: (i) assist in the review of
our existing compensation programs, (ii) identify the competitive positioning
with respect to current market compensation practices and (iii) assist the
company in revising its compensation design. Accordingly, the compensation
program adopted by us for our executives consists of the following elements:
BASE SALARY. It is our position that base salaries should be
competitive with the pay practices followed by our peer group.
INCENTIVE BONUS. Bonuses are awarded at the discretion of the
compensation committee. It is our goal that base pay and annual incentive
bonus should be at or near the 50th percentile of our peer group. The
incentive bonus is awarded based on three measures: stock price
performance against the Company's peer group, attainment of personal
objectives and meeting or exceeding stated financial plan objectives. In
order to promote team focus, all employee bonuses are tied to the same
share performance and financial plan objectives. Our executive management
can earn a target bonus of 50% of base salary if all goals are attained.
The plan provides for a maximum payout of 100% of base salary and a
minimum payout of 0% of base salary.
The compensation committee has eliminated the Economic Value
Added (EVA) bonus program. The committee and management believed that our
share price did not consistently reflect the EVA value created. It is our
opinion that elimination of the EVA metric and institution of the new
bonus format better aligns management with shareholders.
STOCK OPTIONS. We believe that the issuance of stock options as
a component of compensation properly aligns the interests of employees
with our stockholders. The number of options granted to an employee is
based on the committee's view of the employee's ability to positively
impact the value of our results.
During 1997, the compensation committee established a stock ownership
program for our senior executives that provides incentives for each executive to
achieve and maintain a targeted level of ownership of our 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. Upon meeting and
maintaining the ownership target, the executive is eligible to receive an
accelerated vesting schedule on all options granted on or before October 15,
2001.
OVERVIEW
James L. Payne was appointed chairman, president and chief executive
officer of the company in October 2001. In December 2001, Janet F. Clark and
George B. Nilsen joined us as senior vice president and chief financial officer
and senior vice president planning and asset management, respectively. In
November 2001 W. Rufus Estis joined us as vice president finance and
administration. We reorganized our structure around clear functional lines. In
addition, we have terminated two outsource agreements reducing our cost
structure and bringing these functions in-house.
In determining compensation, the compensation committee continues to
review on an individual level each executive's leadership in his area of
expertise, and also evaluates years of service, experience level,
-22-
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. The committee did not approve any
executive salary increases for 2001. There have been two salary increases
awarded by the committee in the past five years. With respect to bonus
compensation in 2001, the committee followed its historic policy of allocating a
specific portion of the total compensation paid to executive officers as "at
risk" compensation in order to emphasize pay for performance.
In 2001, we entered into a compensation arrangement with James L. Payne
under which he receives a base salary of $400,000 payable quarterly in common
stock. In addition, Mr. Payne receives a bonus of $200,000, payable in our
common stock based on the objective performance criteria set out by the
compensation committee.
STOCK BASED COMPENSATION
The compensation committee believes the stock options that it has granted
in the past, and those granted in 2001, serve a valuable purpose by attracting
and retaining key executives, and encouraging increased job performance by the
recipients of such grants. The committee does not base the number of awards
granted to executive officers on a predetermined formula, but rather on each
individual's accomplishments, level of responsibility, and impact on our
performance for the year.
Messrs. Gobe, King, Hammond, Darden, Murchison and McGinnis were granted
a total of 20,000, 31,951, 33,322, 33,033, 30,001, and 31,105 options in 2001,
respectively. In addition, Ms. Clark and Messrs. Gobe, Nilsen and Estis received
150,000, 150,000, 75,000 and 30,000 options, respectively, upon joining our
company. The stock options granted to Ms. Clark and Mr. Nilsen were made outside
of our existing stock incentive plans and were made pursuant to an incentive
stock plan that was offered to such employee as a material inducement to enter
into an employment arrangement with us.
EXECUTIVE EMPLOYMENT CONTRACTS
In October 2001, we entered into a compensation agreement with Mr. Payne,
our chairman, president and chief executive officer. The agreement provides that
Mr. Payne is employed on an "at will" basis and that his compensation will be
paid in the form of our common stock in the following manner:
-- BASE SALARY. A base salary at the rate of $400,000 per year. In
2002, the base salary will be paid as 28,673 shares of our stock.
Such payment is made to Mr. Payne quarterly.
-- ANNUAL BONUS. Mr. Payne will receive an annual bonus between $0
and $400,000, paid in the form of common stock. In 2001, Mr. Payne
received 9,073 shares based on the portion of the year that he had
worked. In 2002, he will receive a guaranteed annual bonus of at
least 50% of the maximum target value.
-- OTHER. The agreement provides for reimbursement of certain
temporary rental costs incurred by Mr. Payne for a three-month
period.
In February 2001, we entered into a two-year employment agreement with
Phillip A. Gobe. Mr. Gobe's contract provides for a base salary of $275,000 and
a discretionary bonus based upon performance in an amount to be determined by
our compensation committee. Mr. Gobe's employment may be terminated by either
party, but in the event of termination for reasons other than just cause or
voluntary resignation during the term of the agreement, we are obligated to pay
him a sum equal to two times the aggregate of his base salary and average annual
bonus. In the agreement, just cause is defined as the failure to render services
to us as provided in the employment agreement or the commission of fraud or
other specified illegal act.
In 1999, we entered into an employment agreement with Bruce K. Murchison.
In the event that Mr. Murchison's employment is terminated for reasons other
than just cause or his voluntary resignation, the benefits Mr. Murchison is
entitled to are identical to those of Mr. Gobe. Under the agreement, Mr.
Murchison was paid an annual salary of $160,000 and a $60,000 signing bonus in
1999. Mr. Murchison contributed this entire bonus to purchase shares of our
common stock.
In 1999, we also entered into an employment agreement with John P.
McGinnis. Mr. McGinnis's contract was identical to that of Mr. Murchison except
that Mr. McGinnis was paid an annual salary of $140,000 and a $50,000 signing
bonus in 1999. Mr. McGinnis contributed his entire bonus to purchase shares of
our common stock.
In May 2001, we entered into a resignation agreement with Mr. Douglas L.
Foshee. Under the resignation agreement, Mr. Foshee was paid an amount equal to
the product of two times the sum of his salary for twelve months and any bonuses
paid to him, resulting in a severance payment of $1,576,800. Mr. Foshee
-23-
also received the amount in his deferred compensation plan and retained the
right to exercise stock options for a one-year period.
In December 2001, the company entered into a resignation agreement with
Robert M. King. The resignation agreement was substantially similar to that of
Mr. Foshee except that Mr. King received a severance payment of $570,000. In
addition, Mr. King surrendered certain options and retained other options for a
three-year period.
Messrs. Darden and Hammond entered into resignation agreements with us on
January 9 and January 11, 2002, respectively. The resignation agreements of
Messrs. Darden and Hammond are substantially similar to that of Mr. Foshee
except that Mr. Hammond was paid $462,000 and Mr. Darden was paid $354,000,
respectively. Both Mr. Darden and Mr. Hammond surrendered a portion of their
stock, and retained options for a one-year period beyond the termination date.
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. In addition, we adopted a broadly based plan in August 2001
under which 200,000 shares could be issued. 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 and the 2001 broadly based
stock incentive plan permit the award of restricted stock, restricted stock
units, performance share awards and performance units. Finally, we adopted
individual stock incentive plans for Ms. Clark and Mr. Nilsen as inducements for
employment. Ms. Clark's plan provided for the issuance of 150,000 stock options,
while Mr. Nilsen's plan provided for the issuance of 75,000 stock options. All
of the awards are designed to generate an increased incentive to contribute to
our future success resulting in the enhanced value of us for the benefit of our
stockholders.
CHANGE IN CONTROL BENEFIT
On December 6, 2000, the board of directors adopted a resolution that
would provide our key executive officers certain benefits in the event of
termination of employment without cause within two years of a change of control.
We are 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 our severance plan.
The board authorized that this benefit be formalized in separate Severance
Protection Agreements with each key executive officer. The change in control
benefits under the Severance Protection Agreements with Mr. Payne, Mr. Nilsen
and Ms. Clark are identical to those of Mr. Gobe, Murchison and McGinnis except
that the benefits are phased in over a one-year period.
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. The plan was amended in December 2001 to
provide the executives the alternative of investing in our common stock, a money
market account or other investment alternatives. The amended plan also removed
the 25% discount to market price that had previously been contained in the
deferred compensation plan for purchase of our common stock.
The compensation committee establishes stock ownership targets for each
of the company's executives other than Mr. Payne who receives all of his
compensation in our common stock. The executive may satisfy the ownership
requirement by directly investing in our common or by indirectly investing in us
through our
-24-
401(k) plan and deferred compensation plan. The actual investment does not
include shares, which may be issued pursuant to stock options. The actual
investment and target investment for each executive is as follows:
TARGET
NAME ACTUAL INVESTMENT INVESTMENT
---- ----------------- ----------
Phillip A. Gobe.................. $178,945 $687,500
Janet F. Clark................... 8,482 487,500
George B. Nilsen................. -0- 350,000
Bruce K. Murchison............... 314,543 346,500
John P. McGinnis................. 254,823 304,500
W. Rufus Estis................... 5,617 310,000
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 2001.
In addition to the retainer, non-officer directors receive a semi-annual
grant of 1,750 ten-year options to purchase shares of our common stock. In
addition, the directors receive a semi-annual grant of 1,250 restricted shares
of our 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
-25-
--------------------------------------------------------------------------------
AUDIT COMMITTEE REPORT:
--------------------------------------------------------------------------------
The audit committee of the board is responsible for providing
independent, objective oversight of our 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 our internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of our 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, 2001. 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 our Annual Report on Form 10-K for
the year ended December 31, 2001, filed with the Securities and Exchange
Commission.
During the fiscal year 2001, we retained Arthur Andersen LLP as our
principal auditor to provide services in the following categories and amounts:
----------------------------------------------------
Audit Fees $220,000
----------------------------------------------------
All Other Fees 225,370
----------------------------------------------------
The audit committee has considered whether the provision of non-audit
services by our principal auditor is compatible with maintaining auditor
independence.
The audit committee believes that it is in the best interest of the
company and its shareholders to delay its selection of an auditor for the year
ending December 31, 2002. Therefore, the company has not submitted its selection
of independent auditor to the company's shareholders for ratification. The audit
committee continues to evaluate the highly publicized events involving Arthur
Andersen and we are not prepared at this time to select Arthur Andersen to
perform our 2002 audit. It is our intention to evaluate other qualified
independent public accountants and we will select an independent accounting firm
in sufficient time to conduct the audit of the company's 2002 financials. The
company will again submit its selection of auditor for ratification by the
shareholders in our 2003 proxy.
THE AUDIT COMMITTEE
ROBERT W. SHOWER, CHAIRMAN
DAVID H. BATCHELDER
THOMAS L. BARROW
-26-
--------------------------------------------------------------------------------
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 (i) a peer group
of oil and gas exploration and production companies selected by us from January
1, 1997 until December 31, 2001. (*the "Current Peer Group")
NUEVO ENERGY CHART
[NUEVO ENERGY CHART]
--------------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------------------------------------------
Nuevo 100.00 78.37 22.12 36.06 33.29 28.85
--------------------------------------------------------------------------------------------------------------------
NYSE Market Index 100.00 131.56 156.55 171.42 175.51 159.81
--------------------------------------------------------------------------------------------------------------------
Peer Group 100.00 76.77 36.90 50.42 103.17 80.32
--------------------------------------------------------------------------------------------------------------------
Our Current Peer Group includes the following companies: Berry Petroleum,
Chesapeake Energy, Denbury Resources, Forest Oil, Key Production, Mangum Hunter
Resources, Meridian Resources, Patina Oil and Gas, Plains Resources, Pogo
Producing, Pure Resources, Range Resources, St. Mary's Land & Exploration, Stone
Energy, Swift Energy, Tom Brown, Vintage Petroleum and Westport Resources.
Consolidations and mergers within the former peer group resulted in a
smaller group and a less meaningful comparison. We believe that the Current Peer
Group is a larger group with sufficiently similar characteristics to us
resulting in an improved comparison.
-27-
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
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
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of FOR all nominees WITHHOLD
Directors listed below (except AUTHORITY
as marked to the for all nominees
contrary below) listed below
[ ] [ ]
NOMINEES FOR DIRECTOR: Isaac Arnold, Jr.
David H. Batchelder
Charles M. Elson
Robert L. Gerry III
James T. Jongebloed
James L. Payne
Gary R. Peterson
Sheryl K. Pressler
(INSTRUCTION: To withhold authority to vote for one or more
of the nominees, write the name of the nominee in the space
provided.)
___________________________________________________________
2. In their discretion, the proxies are aurthorized 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.
[ ] [ ] [ ]
SIGNATURES(S)______________________________ DATE _______ 2002
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.
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 22, 2002 AND AT ANY OTHER ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of April 5, 2002, hereby
authorizes James L. Payne and Janet F. Clark 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 22, 2002 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. 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 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 22, 2002, a Proxy Statement for
the Annual Meeting and the 2001 Annual Report to Stockholders (which may have
been previously mailed).
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.