SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
NUEVO ENERGY COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(NUEVO LOGO)
April 24, 2003
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 21, 2003 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 2004;
2. to ratify the selection of our 2003 auditors;
3. to ratify certain stock incentive plans; and
4. 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 wish to point out our recently revised audit
committee charter and corporate governance principles as well as the new charter
that has been adopted for our governance committee. 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 24, 2003.
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.
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
Proposal II. Ratification of Selection of Our 2003 Auditors.............. 28
Proposal III. Ratification of Stock Incentive Plans....................... 29
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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 2003
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 2003 annual meeting, stockholders will be asked to vote:
-- to elect our board of directors to serve until the annual meeting
of stockholders in 2004;
-- to ratify the selection of KPMG LLP as our independent auditors
for 2003; and
-- to ratify certain stock incentive plans approved by the board of
directors.
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, in favor of the ratification of
the selection of KPMG LLP as our independent auditors and in favor of the
ratification of certain stock incentive plans.
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 of the
matters to be voted on at the annual meeting.
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 19,144,781 shares of common stock
outstanding.
WHAT IS THE RECORD DATE? ---------------------------------------------------
April 4, 2003.
WHY HAVE YOU AMENDED THE
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. In response to recent legislative and regulatory
developments, we have revised our governance principles to assure consistency
with all governmental requirements. We believe that the current principles
adopted unanimously by the board and published in this proxy continue to 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 2004 prior to
January 20, 2004. 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 22, 2003. No stockholder nominations were submitted.
WHEN ARE PROPOSALS BY
SHAREHOLDERS DUE FOR
THE 2004 MEETING? ---------------------------------------------------
Proposals to be included in our proxy, other than nominations for director, must
be received by us on or before December 15, 2003. 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 directors and executive
officers 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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The TCW Group, Inc. ........................................ 2,416,760 12.6(1)
(on behalf of the TCW
Business Unit)
865 South Figueroa Street
Los Angeles, California 90017
Yorktown Partners LLC....................................... 1,781,270 9.3(2)
Yorktown Energy Partners III, L.P.
Yorktown Energy Partners IV, L.P.
410 Park Avenue
New York, New York 10022-4407
Franklin Resources, Inc. ................................... 1,701,044 8.9(3)
Franklin Advisers, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
One Franklin Parkway
San Mateo, California 94403
Artisan Partners Limited Partnership........................ 1,699,901 8.9(4)
Artisan Investment Corporation
Andrew A. Ziegler
Carlene M. Ziegler
1000 North Water Street, #1770
Milwaukee, Wisconsin 53202
Barclays Global Investors, NA............................... 1,129,029 5.9(5)
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, California 94105
Dimensional Fund Advisors, Inc. ............................ 1,077,925 5.6(6)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Wellington Management Company, LLP.......................... 1,032,894 5.4(7)
75 State Street
Boston, Massachusetts 02109
Heartland Advisors, Inc. ................................... 1,027,500 5.4(8)
William J. Nasgovitz
789 North Water Street
Milwaukee, Wisconsin 53202
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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. .................... 42,250 67,250 26,295 135,795 *
Charles M. Elson...................... 4,028 25,250 15,665 44,943 *
Robert L. Gerry III................... 6,350 210,250 7,500 224,100 1.2
J. Frank Haasbeek..................... -- -- -- -- --
James T. Jongebloed................... -- 3,500 3,060 6,560 *
Gary R. Petersen...................... 3,416 32,750 12,780 48,946 *
Sheryl K. Pressler.................... -- 3,500 5,385 8,885 *
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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....... 60,864 3,305 66,667 226 -- 131,062 *
Phillip A. Gobe...... -- 4,720 106,666 21,184 -- 132,570 *
Janet F. Clark....... -- 2,481 83,334 6,639 -- 92,454 *
Bruce K. Murchison... 300 2,703 102,376 24,888 -- 130,267 *
George B. Nilsen..... -- 2,402 42,500 4,087 -- 48,989 *
John P. McGinnis..... -- 2,428 81,445 18,100 -- 101,973 *
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ALL DIRECTORS AND EXECUTIVE OFFICERS TOGETHER:
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TOTAL PERCENT
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1,106,544.. 5.8
Footnotes:
* Under 1%.
** Stock options include only options which may be exercised within 60 days.
(1) The TCW Group, Inc. is a parent holding company of the TCW Business Unit.
The TCW Business Unit is composed of Trust Company of the West, a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, TCW Asset
Management Company, and TCW Investment Management Company, investment
advisers registered under Section 203 of the Investment Advisers Act of
1940. TCW Business Unit is primarily engaged in the provision of investment
management services and reported that it possesses shared voting and
dispositive power with respect to all 2,416,760 shares. Persons other than
TCW Business Unit have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of the reported
shares.
(2) Yorktown Energy Partners III LP, Yorktown Energy Partners IV LP and Yorktown
Partners LLC together beneficially own 1,781,270 shares. Yorktown Energy
Partners III LP has sole voting and dispositive power of 1,245,149 shares
which it owns. Yorktown Energy Partners IV LP has sole voting and
dispositive power of 523,046 shares which it owns. Yorktown Partners LLC has
sole voting and dispositive power of the 13,075 shares it owns.
(3) Of the shares reported for Franklin Resources, Inc., Franklin Advisers, Inc.
is reported to have sole voting power over 1,341,044 shares and Franklin
Advisory Services, LLC has sole voting power over 360,000 shares. In
addition, Franklin Advisers, Inc. is reported to have sole dispositive power
over 1,341,044 shares and Franklin Advisory Services, LLC is reported to
have sole dispositive power over 360,000 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 1,341,044 shares which may be received upon conversion of our
outstanding term convertible securities ("TECONS").
(4) 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 1,699,901 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, Artisan Corp., Mr. Ziegler or Ms.
Ziegler, none of such persons has an economic interest in more than five
percent of the class of stock.
(5) Barclays Global Investors, NA. and Barclays Global Fund Advisors are banks
as defined in section 3(a)(6) of the Securities Exchange Act of 1934 and
reported a combined total of 1,129,029 shares. Barclays Global Investors, NA
has sole voting and dispositive power of 841,172 shares and Barclays Global
Fund Advisors has sole voting and dispositive power of 287,857 shares. The
shares reported are held in trust accounts for the economic benefit of the
beneficiaries of those accounts.
(6) 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 1,077,925 shares. Dimensional
disclaims beneficial ownership of such securities.
(7) Wellington Management Company, LLP ("WMC") reported shared voting power with
respect to 573,900 shares and shared dispositive power with respect to
1,032,894 shares. These securities are beneficially owned by WMC in its
capacity as investment adviser and are owned of record by the clients of
WMC. Those clients have the right to receive, or the power to direct the
receipt of, dividends from, or the proceeds from the sale of, such
securities. No such client is known to have such right or power with respect
to more than five percent of this class of securities.
(8) Heartland Advisors, Inc. is an investment adviser registered with the SEC
and William J. Nasgovitz is president and principal shareholder of Heartland
Advisors, Inc. Heartland Advisors, Inc. reported sole voting power of
274,600 shares and sole dispositive power of 1,027,500 shares. William J.
Nasgovitz reported sole voting power with respect to 665,200 shares.
1,027,500 shares may be deemed beneficially owned by Heartland Advisors,
Inc. by virtue of its investment discretion and William J. Nasgovitz, as a
result of his position with and stock ownership of Heartland. These
securities are held in investment advisory accounts of Heartland Advisors,
Inc. Various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the securities.
No such account is known to have such an interest resulting to more than
five percent of the class.
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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, 2002 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, 2002, except that
a Form 3 was filed late for James T. Jongebloed and Form 4s were filed late for
Isaac Arnold, Jr., James T. Jongebloed, Charles M. Elson, Robert L. Gerry III,
Gary R. Petersen and Sheryl K. Pressler.
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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 Isaac Arnold, Jr. who acts as Chairperson, Robert L. Gerry III,
James T. Jongebloed and Sheryl K. Pressler.
In 1998 the nominating and governance committee recommended, and the full
board of directors adopted, the "Nuevo Energy Company Corporate Governance
Guidelines." In 2003, the committee recommended and the board of directors
approved changes to the guidelines to be consistent with recently enacted
legislative and regulatory requirements. The guidelines are posted on our
website and published in our proxy 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 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
or her 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.
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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 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.
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 shall be independent. An
independent director must meet the independence requirements of the NYSE and SEC
which generally requires the following:
(1) No director qualifies as "independent" unless the Board
affirmatively determines that the director has no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship
with the Company), other than such director's capacity as a member
of the Board, the Committee or any other Board committee.
(2) No director who is a former employee of the Company or any
affiliate of the Company shall be considered "independent" until
five years after such employment has ended. A director that was
employed by a former parent or predecessor of the Company shall not
be considered "independent" until five years after the relationship
between the Company and the former parent or predecessor has ended.
(3) No director who is, or in the past five years has been, affiliated
with or employed by a present or former External Auditor of the
Company (or present or former external auditor of any of the
Company's affiliates) shall be considered "independent" until five
years after the end of either the affiliation or the auditing
relationship.
(4) No director shall be considered "independent" if such director is,
or in the past five years has been, employed by any company for
which any officer of the Company serves or served as a member of
its compensation committee (or, in the absence of a compensation
committee, the board committee performing equivalent functions, or,
in the absence of such committee, the board of directors) during
the time that such director is or was so employed.
(5) Directors with immediate family members in the categories described
in Section 2, 3 and 4 are likewise subject to the applicable
five-year "cooling off" provisions of those Sections for purposes
of determining "independence." However, employment of an immediate
family member of a director in a non-officer position (as defined
with reference to Rule 16a-1(f) under the Securities Exchange Act
of 1934, as amended, or any successor rule) does not preclude the
Board from determining that such director is "independent." The
term "immediate family member" includes a person's spouse, parents,
children, siblings, mother and father-in-law, sons and
daughters-in-law, brothers and sisters-in-law, and anyone (other
than such person's employees) who shares such person's home.
The committee shall annually review and make a presentation to the board
for its determination of the independence of each director.
Outside Directorships
The CEO and senior management of Nuevo should limit outside directorships
to no more than three; 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%.
-10-
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.
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.
-11-
Executive Session
Time will be allotted at the end of each regularly scheduled board
meeting for an executive session involving only the independent directors. The
Chair of the nominating and governance committee or other independent director
designated annually by the majority of independent directors shall preside at
the executive session.
Selection and 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 functions 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.
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 shall develop its own plan
for succession while collaborating with the CEO in deciding the timing and the
necessary qualifications for making a final decision.
Performance Evaluation
The nominating and governance committee shall perform an annual
evaluation of the committee's performance and shall oversee the evaluation of
the board and executive management.
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 are standing for re-election at the 2003
annual meeting. The nominating and governance committee has nominated Isaac
Arnold, Jr., Charles M. Elson, Robert L. Gerry III, J. Frank Haasbeek, James T.
Jongebloed, James L. Payne, Gary R. Petersen, and Sheryl K. Pressler.
--------------------------------------------------------------------------------
INFORMATION ABOUT OUR DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------------------------------------------------------
The following is information about our directors and executive officers.
J. Frank Haasbeek, our nominee standing for election for the first time, has
provided a statement regarding why he 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.
67 years old
Director since 1990
Lead Director: Appointed 2003
Shares owned directly and indirectly: 42,250
Options owned: 67,250
Restricted shares: 26,295
Board committees: Nominating and Governance
(Chairperson)
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. ELSON) CHARLES M. ELSON
43 years old
Director since 1998
Shares owned: 4,028
Options owned: 25,250
Restricted shares: 15,665
Board committees: Compensation (Chairperson)
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
national law firm of Holland & Knight LLP (since 1995). A member of that firm
other than Mr. Elson provided representation to the company on a discrete matter
for which the firm was paid $19,700. 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 Auto Zone, Inc., an automobile parts retailer,
a position he has held since
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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
65 years old
Director since 1990
Shares owned: 6,350
Options owned: 210,250
Restricted shares: 7,500
Board committees: Audit, Nominating and Governance
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. HAASBEEK) J. FRANK HAASBEEK
68 years old
Director since late 2002
Shares owned: none
Options owned: none
Restricted shares: none
Board committees: Audit (Chairperson)
Relationship to Nuevo: None, other than as a director
WHY DID YOU JOIN NUEVO'S BOARD?
In the current business climate with emphasis on corporate governance and
fuller disclosure to shareholders, I believe that with my professional
qualifications and career history, I can make an appreciable contribution to
Nuevo Energy. I have always enjoyed new challenges.
BIOGRAPHICAL INFORMATION
Mr. Haasbeek served as president and chief executive officer of
International Transquip Industries, Inc. from 1991 through 2002. He has held
various executive positions including president and chief executive officer of
Hurricane Industries, vice president, administration and finance with Reading
and Bates Construction Company and chief financial officer and director of Cope
Allman International Ltd. Mr. Haasbeek began his career as an auditor at
Deloitte, Haskins and Sells in Canada and France and is a graduate of the
University of Manitoba, in Winnipeg, Canada with accreditation as a chartered
accountant.
-14-
(PHOTO OF MR. JONGEBLOED) JAMES T. JONGEBLOED
61 years old
Director since 2002
Shares owned: None
Options owned: 3,500
Restricted shares: 3,060
Board committees: Audit, Compensation, Nominating and
Governance
Relationship to Nuevo: None, other than as a director
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
66 years old
Director since 2001
Shares owned: 60,864
Options owned: 200,000
Restricted shares: 60,000
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 Medalist.
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
-15-
Association of America (IPAA), the Palmer Drug Abuse Program and the Offshore
Energy Center and 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
56 years old
Director since 1990
Shares owned: 3,416
Options owned: 32,750
Restricted shares: 12,780
Board committees: Compensation
Relationship to Nuevo: None, other than as a director
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
52 years old
Director since 2002
Shares owned: None
Options owned: 3,500
Restricted shares: 5,385
Board committees: Audit, Compensation, Nominating and
Governance
Relationship to Nuevo: None, other than as a director
BIOGRAPHICAL INFORMATION
Ms. Pressler has been a self-employed investment and strategy consultant
in Atlanta, Georgia since 2001. From 2000 to 2001, she 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 public pension fund. From 1981
to 1994, she was responsible for the management of the Retirement Funds for the
McDonnell Douglas Corporation. Since 1999, Ms. Pressler has been a director of
the California HealthCare Foundation. Ms. Pressler is currently a director of
Stillwater Mining Company, a position she has held since 2002. Ms. Pressler
received her B.A. in Philosophy from Webster University and her M.B.A. from
Washington University.
EXECUTIVE OFFICERS
Phillip A. Gobe, 50, joined us as chief operating officer in February
2001. He is responsible for managing our domestic and international exploitation
and exploration operations. 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
-16-
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, 48, 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
serves on the board of Universal Compression, 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, 53, 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 joined Goodyear as an attorney in 1985 and 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, 47, 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. Mr. Nilsen is a
graduate of Bucknell University with a B.S. in chemical engineering.
John P. McGinnis, 42, 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 and
holds a B.S. in geology and an M.S. in geophysics, both from Purdue University.
All of our executive officers and directors are United States citizens.
--------------------------------------------------------------------------------
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.
Upon the recommendation of our compensation committee, the board of directors
eliminated, effective January 1, 2003, the semi-annual grant of 10-year options
to purchase 1,750 shares of common stock, and increased the semi-annual grant of
restricted stock from 1,750 to 2,125 shares. Restricted shares granted to
directors are subject to a three-year restricted period and the director has the
option to continue the restriction until retirement from the board. Each
director is entitled to also receive $1,000 for each committee meeting attended
while the committee chairperson receives $1,500. Payments for committee meetings
are accumulated and paid semi-annually. Each director has the option to receive
restricted shares in lieu of this cash payment for committee meetings at the
same discount as provided for the annual retainer. During 2002, our board of
directors held eight meetings and each director attended at least 75% of board
and committee 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
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Messrs. Haasbeek (chairperson), Gerry, Jongebloed and Ms. Pressler. The audit
committee held five meetings in 2002. After our annual meeting, the audit
committee members will be composed of the same directors.
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), Jongebloed, Petersen and Ms. Pressler.
In 2002, the compensation committee met once as a committee and three times with
the board of directors to make committee recommendations to the board. The
committee also took action through two unanimous consents. After our annual
meeting, the compensation committee members will be Messrs. Charles M. Elson
(chairperson), J. Frank Haasbeek, Robert L. Gerry III, Gary R. Petersen and Ms.
Sheryl K. Pressler.
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. Arnold (chairperson), Gerry,
Jongebloed, and Ms. Pressler. The nominating and governance committee met one
time in 2002. After our annual meeting, the nominating and governance committee
members will be Messrs. Isaac Arnold, Jr, (chairperson), Charles M. Elson and
Gary R. Petersen.
-18-
--------------------------------------------------------------------------------
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 2002.
NUEVO ENERGY COMPANY
SUMMARY COMPENSATION TABLE
RESTRICTED LONG-TERM
STOCK COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
James L. Payne........................ 2002 $ 26,061(3) $ -- 60,000 200,000 41,791(3)
Chairman, President and Chief 2001 -- -- -- -- 9,073(3)
Executive Officer
Phillip A. Gobe....................... 2002 275,000 137,500 10,000 50,000 --
Chief Operating Officer 2001 232,339(4) 116,404 -- 170,000(5) --
Bruce K. Murchison.................... 2002 173,250 87,625 10,000 50,000 --
Senior Vice President and 2001 173,250 43,312 -- 30,001(10) --
General Counsel 2000 165,000 82,500 -- 35,125 --
Janet F. Clark........................ 2002 195,000 97,500 15,000 25,000 --
Senior Vice President and Chief 2001 13,375(6) 3,339 -- 150,000(7) --
Financial Officer
George B. Nilsen...................... 2002 175,000 87,500 15,000 15,000 --
Senior Vice President of 2001 12,003(8) 2,996 -- 75,000(9) --
Planning and Asset Management
Dennis A. Hammond..................... 2002 11,312 -- -- -- $462,000(11)
Former Vice President -- 2001 168,000 42,000 -- 33,322(10) --
Engineering 2000 168,000 84,000 -- 17,125 --
Michael P. Darden..................... 2002 11,029 -- -- -- $354,000(11)
Former Vice 2001 173,250 43,312 -- 33,033(10) --
President -- Business 2000 165,000 82,500 -- 35,125 --
Development
---------------
(1) Incentive bonuses for the calendar year 2002 were paid in February 2003.
(2) Restricted stock awards were granted on January 22, 2003.
(3) Mr. Payne was elected chairman, president and chief executive officer in
October 2001. In 2002 Mr. Payne received his entire compensation in shares
of our common stock except for $26,061 being the sum of an amount that
permitted a valid tax-deferred contribution to the Company's 401(k) of
$12,000 in 2002, $12,000 in 2003 and $2,061 of imputed income. In 2002 Mr.
Payne earned 41,791 shares of stock based on a share equivalent of $400,000
annual salary and $200,000 bonus. He was awarded 20,403 shares during the
first three quarters of 2002 and 6,017 and 15,371 on January 2 and February
20, 2003, respectively. In 2001, Mr. Payne earned 9,073 shares prorated on
the time actually worked.
(4) Mr. Gobe was hired by us in February 2001. Information regarding Mr. Gobe
for 2001 is for the period during which he was employed by us.
(5) Mr. Gobe was granted 150,000 options in February 2001 as part of his
employment agreement.
(6) Ms. Clark became an employee in December 2001. Information regarding Ms.
Clark for 2001 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.
(8) Mr. Nilsen was hired by Nuevo in December 2001. Information regarding Mr.
Nilsen for 2001 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.
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(10) In lieu of an incentive bonus based on EVA performance in 2000, the
executive officers received a bonus equal to 50% of base salary and a stock
option grant. Messrs. Hammond, Murchison and Darden were awarded stock
options of 16,197, 12,876 and 15,908, respectively. The options were
granted on March 28, 2001.
(11) Messrs. Hammond and Darden resigned from employment with us in January 2002
and pursuant to resignation agreements, Messrs. Hammond and Darden received
$462,000 and $354,000, respectively.
The following table sets forth certain information concerning grants of
options to purchase our common stock made during 2002 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.
2002 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........................... 200,000 43.0% $15.38 06/03/2012 $1,884,000
Phillip A. Gobe.......................... 50,000 10.8% 15.38 06/03/2012 471,000
Bruce K. Murchison....................... 50,000 10.8% 15.38 06/03/2012 471,000
Janet F. Clark........................... 25,000 5.4% 15.38 06/03/2012 235,000
George B. Nilsen......................... 15,000 3.2% 15.38 06/03/2012 141,000
---------------
(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) 44.5% 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.
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, 2002(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
James L. Payne........ -- $ -- -- 200,000 $ -- $ --
Phillip A Gobe........ -- -- 56,667 163,333 -- --
Bruce K. Murchison.... -- -- 81,418 81,708 -- --
Janet F. Clark........ -- -- 75,000 100,000 -- --
George B. Nilsen...... -- -- 37,500 52,500 -- --
John P. McGinnis...... -- -- 76,786 32,444 -- --
Dennis A. Hammond..... -- -- 117,802 -- -- --
Michael P. Darden..... -- -- 117,208 -- -- --
---------------
(1) Based on $11.10 per share which was the closing price per share of our
common stock on the New York Stock Exchange Composite Tape on December 31,
2002.
Pursuant to resignation agreements entered into with Messrs. Hammond and
Darden, all unexercised options expired on January 21, 2003.
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EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about the Common Stock that
may be issued under all of the Company's existing equity compensation plans as
of December 31, 2002:
NUMBER OF
SECURITIES TO BE WEIGHTED
ISSUED UPON AVERAGE EXERCISE
EXERCISE OF PRICE OF NUMBER OF
OUTSTANDING OUTSTANDING SECURITIES
OPTIONS, OPTIONS, REMAINING
WARRANTS AND WARRANTS AND AVAILABLE FOR
PLAN CATEGORY RIGHTS RIGHTS FUTURE ISSUANCE
------------- ---------------- ----------------- -------------------
Equity compensation plans approved by
security holders......................... 2,367,482 $17.56 108,721
Equity compensation plans not approved by
security holders......................... 410,452 $13.10 257,472
--------- ------ -------
Total................................. 2,777,934 $16.90 366,193
========= ====== =======
Equity compensation plans approved by our shareholders include the 1990
Option Plan, the 1993 Stock Incentive Plan, and the 1999 Stock Incentive Plan.
The equity compensation plans that have not been approved by our
shareholders are the 2001 Stock Incentive Plan, the Janet F. Clark Stock Option
Plan and the George B. Nilsen Stock Option Plan.
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COMPENSATION COMMITTEE REPORT:
--------------------------------------------------------------------------------
Our compensation committee consists of four directors who are not
employees or executive officers of the company. The members of the compensation
committee in 2002 were Mr. Elson, who was chairperson and Messrs. Petersen,
Jongebloed and Ms. Pressler.
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. We again retained Towers Perrin in
2002 to assure that our approach to compensation remained consistent with market
practices. 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. In
2002, the incentive bonus was 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 in 2003 are tied to
share performance and to 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.
STOCK BASED COMPENSATION. We believe that the issuance of stock
options, restricted shares or other stock based compensation properly
aligns the interests of employees with our stockholders. The number of
incentive shares 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
In 2002, the Company significantly reduced capital expenditures and
expenses while generating a slight increase in production. This was accomplished
through the termination of remaining outsourcing contracts and successfully
transferring administrative, management information systems, human resources and
marketing functions in-house. The Company successfully pursued its strategy to
monetize non-core assets with the sale of properties east of the Rockies and in
California. These actions contributed to lowering our general and administrative
expenses in 2002 to $25.9 million, 29.9% lower than 2001.
In addition, we acquired Athanor Resources, Inc. for approximately $100
million in cash and common stock. The Athanor acquisition increased our natural
gas holdings and provided a new operational base outside of California.
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,
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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, 2002 or 2003 but did approve a 2003 merit
increase for non-executive employees. With respect to bonus compensation in
2002, 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 2002, we amended our compensation arrangement with James L. Payne
under which he receives a base salary of $400,000 payable quarterly in common
stock. The amendment permits Mr. Payne to receive in cash the maximum amount for
which a matching contribution may be made to the Company's 401(k) Retirement
Plan. The amount was $12,000 in 2002. In addition, Mr. Payne received 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 the stock based compensation granted in 2002, 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.
Ms. Clark, Messrs. Payne, Gobe, Nilsen and Murchison were granted a total
of 25,000, 200,000, 50,000, 15,000 and 50,000 options in 2002, respectively. In
addition, Ms. Clark and Messrs. Payne, Gobe, Nilsen and Murchison received
15,000, 60,000, 10,000, 15,000 and 10,000 restricted shares of the Company's
stock respectively, which shares vest over a three-year term.
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
2003, the base salary will be paid as 36,036 shares of our stock.
Such payment is made to Mr. Payne quarterly.
-- ANNUAL BONUS. Mr. Payne receives an annual bonus between $0 and
$400,000, paid in the form of common stock. In 2001, Mr. Payne
received 3,024 shares based on the portion of the year that he had
worked. In 2003, he received 15,371 shares which is the bonus
attributable to 2002.
-- OTHER. The agreement provided for reimbursement of certain
temporary rental costs incurred by Mr. Payne in the initial
three-month period.
The employment contract that we entered into with Mr. Gobe in February,
2001 expired in February, 2003. Mr. Gobe and other key executives without
employment contracts are entitled to the benefit discussed below if the
executive is terminated without cause.
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, Mr. Murchison is entitled to
receive two times his annual salary and average bonus. In addition, the
outstanding stock options held by Mr. Murchison would vest and he would have 365
days to exercise the options.
In 1999, we also entered into an employment agreement with John P.
McGinnis. Mr. McGinnis's contract was identical to that of Mr. Murchison.
In May 2002, the compensation committee adopted by resolution a benefit
to designated key executives without employment agreements if such executive is
terminated without cause. In the event of such termination, the executive is
entitled to receive two weeks of base salary for each year of service and one
week of base salary for each $10,000 of annual income. In addition, such
employee's stock options vest with 365 days to exercise.
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. This plan was amended in October
2002 to
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provide issuance of up to 450,000 shares. 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. 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 our enhanced value 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.
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 those executives designated by the committee 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 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...................... $320,545 $825,000
Janet F. Clark....................... 115,590 487,500
George B. Nilsen..................... 81,134 350,000
Bruce K. Murchison................... 365,544 320,000
John P. McGinnis..................... 270,627 320,000
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. Three of our
directors elected to receive all restricted shares, three directors elected to
receive a cash retainer and one took a combination of cash and restricted shares
in 2002.
In addition to the retainer, non-officer directors receive a semi-annual
grant of 1,250 restricted shares of our common stock and 1,750 ten-year options
to purchase common stock. Beginning in 2003, non-officer directors will receive
a semi-annual grant of 2,215 restricted shares of our common stock subject to a
three-
-24-
year restricted period and directors will have the option to roll over this
period until their retirement from the board. Upon recommendation of the
compensation committee, the board eliminated the semi-annual grant of 1,750
ten-year options to purchase the company's stock. The board approved the
recommendation that directors receive $1,000 and committee chairpersons receive
$1,500 for each committee meeting attended.
CHARLES M. ELSON, CHAIRMAN
ISAAC ARNOLD, JR.
GARY R. PETERSEN
SHERYL K. PRESSLER
-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, composed of four directors, meets the
independence requirements of 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 which was amended to address regulatory and
legislative requirements recently adopted is attached to this Proxy Statement as
Exhibit B.
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, 2002. 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, 2002, filed with the Securities and Exchange
Commission.
During the fiscal year 2002, we retained KPMG LLP as our principal
auditor to provide services in the following categories and paid them the
following amounts:
---------------------------------------------------------
Audit related(1) $439,000
Tax services 231,435
Other --
------------------
(1) Audit fees include fees paid to KPMG LLP for the re-audit of our 2001
financial statements that were previously audited by Arthur Andersen LLP.
The audit committee has considered the provision of non-audit services by
KPMG LLP is compatible with maintaining auditor independence.
The foregoing report is provided by the following directors who
constitute the audit committee.
THE AUDIT COMMITTEE
J. FRANK HAASBEEK, CHAIRMAN
ROBERT L. GERRY III
JAMES T. JONGEBLOED
SHERYL K. PRESSLER
-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 common stock of a
peer group of oil and gas exploration and production companies selected by us
from January 1, 1998 until December 31, 2002. (the "Peer Group")
NUEVO ENERGY CHART
[NUEVO ENERGY CHART]
--------------------------------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------------------------------------
Nuevo 100.00 28.22 46.01 42.49 36.81 27.24
NYSE Market Index 100.00 118.99 130.30 133.40 121.52 99.27
Peer Group 100.00 45.75 63.49 129.56 95.76 100.36
Our Peer Group includes the following companies: Berry Petroleum,
Chesapeake Energy, Cimarex Energy (merger of Helmerick & Payne and Key
Production), Denbury Resources, Forest Oil, Mangum Hunter Resources, Meridian
Resources, Patina Oil and Gas, Plains Resources, Pogo Producing, Range
Resources, St. Mary's Land & Exploration, Stone Energy, Swift Energy, Tom Brown,
Vintage Petroleum and Westport Resources.
-27-
--------------------------------------------------------------------------------
PROPOSAL II. RATIFICATION OF THE SELECTION OF OUR 2003 AUDITORS:
KPMG LLP has been recommended by the audit committee of the board for
reappointment as independent auditors for the Company.
The board of directors has appointed KPMG LLP for the examination of the
accounts and audit of our financial statements for the year ending December 31,
2003. At the annual meeting, the board of directors will present a proposal to
the stockholders to approve and ratify the engagement of KPMG. A representative
of KPMG will be present and will have the opportunity to make a statement, if he
desires, and to respond to appropriate questions. An adverse vote will be
considered as a direction to our audit committee to select other auditors in the
following year.
-28-
--------------------------------------------------------------------------------
PROPOSAL III. RATIFICATION OF STOCK INCENTIVE PLANS:
In addition to our shareholder approved stock incentive plans of 1990,
1993 and 1999, in 2001, the board of directors adopted a broadly based stock
incentive plan, which was amended in October 2002. Under this plan the company
can issue 450,000 shares of company common stock provided that a majority of the
shares are awarded to its employees other than officers or directors. In
addition, the company adopted individual stock incentive plans for Ms. Clark and
Mr. Nilsen comprised of 150,000 and 75,000 shares, respectively as material
inducements to enter into employment with the company. The board of directors
was permitted to adopt such plans without shareholder approval under existing
New York Stock Exchange rules.
The board desires that the shareholders approve and ratify the 2001
broadly based plan, as amended, and the individual employment inducement plans.
An adverse vote shall be taken into consideration by our compensation committee
when evaluating the issuance of incentive stock awards in the future.
-29-
EXHIBIT A
NUEVO ENERGY COMPANY
CHARTER OF THE NOMINATING AND GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
This Nominating and Governance Committee Charter (the "Charter') sets
forth the purpose and membership requirements of the Nominating and Governance
Committee (the "Committee") of the Board of Directors (the "Board") and
establishes the authority and responsibilities delegated to it by the Board.
1. PURPOSE. The Committee exists to assist the Board in the identification of
individuals qualified to become members of the Board and to make
recommendations to the Board regarding the nominees for director in
connection with the Company's annual meeting of stockholders. The Committee
also has the responsibility for developing and recommending to the Board the
Company's Corporate Governance Policy, recommending any modifications or
amendments thereto and taking a leadership role in shaping the Company's
corporate governance.
2. QUALIFICATIONS OF MEMBERS.
2.1. COMPOSITION. The Committee shall consist of three (3) or more
members of the Board. Annually, or more often if vacancies occur, the
Chairman shall make recommendations to the Board as to the
composition of the Committee. The full Board shall designate members
of the Committee and its Chairman and shall select only qualified,
independent directors to serve on the Committee.
2.2. INDEPENDENCE. Each member of the Committee shall be independent. To
be "independent," a director may not have a relationship with the
Company or its management or a private interest in the Company that
in any way may interfere with the exercise of such director's
independence from the Company and its management. In addition, each
member of the Committee must meet the independence requirements of
the New York Stock Exchange and applicable state and federal law,
including the rules and regulations of the SEC, including the
following requirements:
2.2.1. No director qualifies as "independent" unless the Board
affirmatively determines that the director has no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship
with the Company), other than such director's capacity as a member of
the Board, the Committee or any other Board committee.
2.2.2. No director who is a former employee of the Company or any
affiliate of the Company shall be considered "independent" until five
years after such employment has ended. A director that was employed
by a former parent or predecessor of the Company shall not be
considered "independent" until five years after the relationship
between the Company and the former parent or predecessor has ended.
2.2.3. No director who is, or in the past five years has been,
affiliated with or employed by a present or former External Auditor
of the Company (or present or former external auditor of any of the
Company's affiliates) shall be considered "independent" until five
years after the end of either the affiliation or the auditing
relationship.
2.2.4 No director shall be considered "independent" if such director
is, or in the past five years has been, employed by any company for
which any officer of the Company serves or served as a member of its
compensation committee (or, in the absence of a compensation
committee, the board committee performing equivalent functions, or,
in the absence of such committee, the board of directors) during the
time that such director is or was so employed.
2.2.5. Directors with immediate family members in the categories
described in Section 2.2.2, 2.2.3 and 2.2.4 are likewise subject to
the applicable five-year "cooling off" provisions of those Sections
for purposes of determining "independence." However, employment of an
immediate family member of a director in a non-officer position (as
defined with reference to Rule 16a-1(f) under the Securities Exchange
Act of 1934, as amended, or any successor rule) does not preclude the
Board from determining that such director is "independent." The term
"immediate family member" includes a person's spouse, parents,
children, siblings, mother and father-in-law, sons and
daughters-in-law, brothers and sisters-in-law, and anyone (other than
such person's employees) who shares such person's home.
A-1
The determination as to each Committee member's independence,
including any basis for the Board's determination that a relationship
is not material, shall be disclosed in the Company's proxy statement
prepared in connection with its annual meeting of stockholders.
3. MEETINGS.
3.1. PERIODIC MEETINGS. The Committee shall meet at least twice annually.
Special meetings shall be called from time to time, as the
circumstances dictate in the judgment of the Board or the Committee.
3.2. MINUTES. Minutes of each meeting of the Committee shall be kept to
document the discharge by the Committee of its responsibilities and a
copy thereof shall be sent to the members of the Board.
3.3. QUORUM. A quorum shall consist of at least one-half of the
Committee's membership, but no fewer than two persons. All action
taken by the Committee shall be deemed approved on the vote of a
majority of its members. However, nominations for directors that are
submitted to the Board must be approved by the two-thirds vote of the
standing members of the Committee.
3.4. ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise restricted by
the Certificate of Incorporation or the Bylaws of the Company, any
action required or permitted to be taken at any meeting of the
Committee may be taken without a meeting, if all members of the
Committee, consent thereto in writing, and the writing or writings
are filed with the minutes of the proceedings of the Committee.
4. BOARD AND COMMITTEE MATTERS.
4.1. NOMINEE CRITERIA AND QUALIFICATIONS. The Committee shall consider
the personal characteristics and core competencies as set out in the
corporate governance principles when evaluating persons to be
nominated for election to the Board, taking into account the
composition of the Board as a whole. In addition, the Committee shall
consider a candidate's qualification as "independent," as well as a
candidate's depth of experience and availability, the balance of the
business interest and experience of the incumbent or nominated
directors, and the need for any required expertise on the Board or
one of its committees. With respect to incumbent members of the
Board, the Committee shall also consider the performance of the
incumbent director.
4.2. IDENTIFICATION OF CANDIDATES TO BE PRESENTED TO SHAREHOLDERS. The
Committee shall identify and recruit candidates to serve on the Board
of Directors. Prior to the annual meeting, a slate of candidates
shall be recommended to the Board as qualified persons to be
nominated for election or re-election as directors. In connection
therewith, the Committee shall consider suggestions for Board
nominees submitted by shareholders in accordance with the notice
provisions and procedures set forth in the Company's organization
documents. The Committee shall consider recommendations by the CEO
who shall be included in the process on a non-voting basis.
4.3. CONSULTANT. The Committee shall have the authority to retain, at the
Company's expense, a search firm as it deems necessary to fulfill its
responsibilities. The Committee shall have sole authority to approve
any such search firm's fees and other terms of retention.
4.4. MATTERS AFFECTING DIRECTORS. The Committee shall evaluate the
Company's policies relating to the recruitment of directors,
including compensation and director and officer's insurance, as well
as indemnification protections provided in the Company's
organizational documents, and make recommendations to the Board or
any appropriate Board committee regarding such matters.
4.5. BOARD COMPOSITION AND STRUCTURE. The Committee shall review and make
recommendations to the Board regarding Board composition and
structure, including among other matters: recommending the term of
office for directors, whether or not the Board should be classified
according to terms and the advisability of shareholder protection
plans.
4.6. ORIENTATION AND EDUCATION. The Committee shall oversee a director
orientation and may recommend continuing education for all new
directors and, to the extent deemed necessary by the Committee, for
incumbent directors.
4.7. SUBCOMMITTEES. The Committee may delegate authority and
responsibilities to subcommittees as it deems proper.
A-2
5. EXECUTIVE OFFICER MATTERS.
5.1. MANAGEMENT SUCCESSION. The Committee shall receive periodically from
the CEO recommendations regarding the CEO's successor, the
development of other executive talent and the executive management
needs of the Company.
5.2. CEO SUCCESSION. The Committee shall recommend to the Board a
successor to the CEO when a vacancy occurs.
5.3 APPOINTMENT OF OFFICERS. The Committee shall review the CEO's
appointment of SEC reporting officers ("SEC reporting officers" are
those officers that file Forms 3 and 4 with the SEC under Section 16
of the Securities Exchange Act of 1934) and make recommendations to
the Board with respect to such persons to be elected officers by the
Board and review any proposed personnel changes involving such
officers.
6. CORPORATE GOVERNANCE OVERSIGHT.
6.1 CORPORATE GOVERNANCE POLICIES. The Committee shall periodically
review the Company's policies and programs in such areas as: Code of
Business Conduct and Ethics, Charitable Contributions, Corporate
Communications Policy, and Political Action/Legislative Affairs. The
Committee shall periodically review the corporate governance
principles to determine if changes are required.
The Committee shall also make recommendations to the Board with
respect to any changes, amendments and modifications that the
Committee deems desirable.
7. REPORTS AND ASSESSMENTS.
7.1. BOARD REPORTS. The Chairman will report from time to time to the
Board on Committee actions and on the fulfillment of the Committee's
responsibilities under this Charter.
7.2. COMMITTEE SELF-ASSESSMENT. The Committee shall annually review and
make a self-assessment of its performance, which shall include
eliciting input from management, the Board and the General Counsel on
the performance of the Committee.
7.3. ASSESSMENT OF BOARD. The Committee shall annually develop and
oversee an assessment of the full Board by collecting comments and
evaluations for each director and any other constituents the
Committee deems relevant to such assessment.
A-3
EXHIBIT B
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 shall consist
of at least three directors, who shall meet the independence and experience
requirements of the Company's Corporate Governance Principles, the New York
Stock Exchange and the rules and regulations of the Securities and Exchange
Commission (the "Commission"). 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 oversee the
integrity of the Company's financial statements and 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 function.
-- Provide an avenue of communication between the Board of Directors
and the independent auditors, management and the internal auditor.
-- 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, internal auditor and 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, (2) the Commission, and (3)
the Nuevo Energy Company Corporate Governance Guidelines. Committee members,
including the Audit Committee Chair, shall be appointed by the Board of
Directors.
The Committee shall meet at least quarterly, 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 may meet in executive session,
and shall do so at least annually. The Committee may meet privately with
management, the internal auditor, 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
Proxy Report
1. Prepare the Audit Committee Report required by the rules of the
Commission to be included in the Company's annual proxy statement.
Review Procedures
2. 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. Such review shall also include the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." 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 the Statement on Auditing Standards No.
61, as amended. Recommend to the Board of
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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.
3. Review with management, the independent auditors and the internal
auditors, (i) the Company's quarterly financial results prior to the release of
earnings and the Company's quarterly financial statements prior to filing or
distribution and (ii) the operation of the Company's internal controls and any
special steps adopted in light of material control deficiencies. 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 the
Statement on Auditing Standards No. 61, as amended.
4. In consultation with management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial reporting
processes and controls including computerized information system controls and
security. 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 auditors together
with management's responses, including the status of previous recommendations.
5. Review and discuss earnings, financial guidance and other press
releases of a material financial nature.
6. Although it is the job of the CEO and senior management to assess and
manage the Company's exposure to risks, the Audit Committee shall discuss
guidelines and policies to govern the process by which risk assessment and risk
management is addressed.
7. Review with the independent auditor any audit problems or difficulties
and management's response and resolve disagreements between auditors and
management.
8. Approve the hiring of any employee or former employee of the
independent auditor.
9. Regularly report to the full board on its activities including any
issues with respect to the quality or the integrity of the Company's financial
statements, legal compliance or the performance of the independent auditor or
internal audit function.
10. Prepare and conduct an annual performance evaluation of the Audit
Committee.
11. Review and periodically recommend modifications to the code of ethics
for senior financial officers.
12. Review disclosures made to the Audit Committee by the Company's CEO
and CFO during the certification process for the Form 10-K and 10-Q concerning
significant deficiencies or material weaknesses in internal controls and any
fraud.
Independent Auditors
13. 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.
14. Retain and terminate the independent auditor and approve the
compensation and terms of the audit engagement and other significant
compensation to be paid to the independent auditors. Periodically discuss
current year non-audit services performed by the independent auditors and review
and pre-approve all permitted non-audit service engagements.
15. 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.
16. 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.
17. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting, including critical accounting policies and
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practices used by the Company, GAAP alternatives discussed with management
(including the ramifications and the auditor's preferred treatment) and material
written communications.
18. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934, addressing the reporting of illegal acts, has
not been implicated.
Internal Audit Department and Legal Compliance
19. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal auditor. The internal auditor
function shall be responsible to senior management, but shall have a direct
reporting responsibility to the Board of Directors through the Committee.
20. Review and approve the appointment, performance, and replacement of
the internal auditor or the entity retained to provide internal audit services.
21. Review a summary of findings from completed internal audits and,
where appropriate, review significant reports prepared by the internal audit
department together with management's response and follow-up to these reports.
22. Discuss any difficulties encountered in the course of internal
audits, including any restrictions on the scope of work or access to required
information.
23. Assure that no internal audit functions are outsourced to the
Company's independent auditor.
24. Review with the General Counsel the results of his/her review of the
Company's compliance with the Company's code of conduct.
25. 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
26. Review with financial management and the independent auditor filings
with the SEC which contain or incorporate by reference the Company's financial
statements and consider whether the information in these documents is consistent
with information contained in the financial statements.
27. The Committee shall establish procedures to (i) receive, process,
retain and treat complaints received by the Company regarding accounting,
internal audit controls or auditing matters and (ii) the confidential and
anonymous submission by employees of concerns regarding questionable accounting
or audit practices.
28. Review and reassess the adequacy of this Charter at least annually
and recommend any proposed changes to the Board of Directors for approval.
29. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
30. Review policies and procedures with respect to executive officers'
expense accounts and prerequisites, including their use of corporate assets, and
consider the results of any review of these areas by the internal auditors or
the independent accountant.
32. 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.
The Audit Committee shall also undertake such additional activities
within the scope of its primary functions as the Committee may, from time to
time, determine or as may otherwise be required by law, the Company's bylaws or
charter or Board of Directors. The duties and responsibilities of a member of
the Audit Committee are in addition to those duties set out for a member of the
Board of Directors of the Company. While the Audit Committee has the
responsibilities and powers set forth by this charter, it is the responsibility
of management to prepare the financials and it is the responsibility of the
independent auditor to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate in accordance with generally
accepted accounting principles.
The material in this charter is not soliciting material, is not deemed
filed with the Securities and Exchange Commission and is not incorporated by
reference in any filing of the Company, under the Securities Exchange Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended.
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PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
FOR all
nominees
listed
below WITHHOLD
(except AUTHORITY
as marked for all
to the nominees
contrary listed NOMINEES FOR DIRECTOR: Isaac Arnold, Jr. FOR AGAINST ABSTAIN
below) below Charles M. Elson
Robert L. Gerry III 2. PROPOSAL to ratify [ ] [ ] [ ]
1. Election of J. Frank Haasbeek the appointment of
Directors [ ] [ ] James T. Jongebloed KPMG LLP as the
James L. Payne Company's
(INSTRUCTION: To withhold authority to Gary R. Petersen independent auditors
vote for one or more of the nominees, Sheryl K. Pressler for the fiscal year
write the name of the nominee in the ending December 31,
space provided.) 2003.
3. PROPOSAL to ratify [ ] [ ] [ ]
--------------------------------------- the 2001 broadly
based stock
incentive plan as
amended, and the
individual
employment
inducement stock
incentive plans.
4. In their discretion, the proxies are
authorized to vote with respect to approval
of the minutes of the last meeting of
stockholders, the election of any person as
a director if a nominee is unable to serve or
for good cause will not serve, matters
incident to the conduct of the meeting, and
upon such other matters as my properly come
before the meeting.
SIGNATURE(S) DATE 2003 [ ] [ ] [ ]
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NOTE: Please sign this exactly as your name 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 21, 2003 AND AT ANY OTHER ADJOURNMENT THEREOF.
The undersigned, being a stockholder of the Company as of April 4, 2003, 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 21, 2003 at 9:00 a.m.,
Central Daylight Time, and at any adjournment of said meeting, and thereat to
act with respect to all votes that the undersigned would be entitled to cast, if
then personally present, as follows:
The Board of Directors recommends that you vote FOR the Board of Directors'
nominees listed above and FOR Proposals 2 and 3. 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, FOR PROPOSALS 2 AND 3, 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 21, 2003, a Proxy Statement for the
Annual Meeting and the 2002 Annual Report to Stockholders (which may have been
previously mailed).
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.