SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pioneer Natural Resources 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
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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(1) Amount Previously Paid:
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1
PIONEER NATURAL RESOURCES COMPANY
5205 N.North O'Connor Boulevard
Suite 1400
Irving, Texas 75039
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Pioneer Natural Resources Company:
Notice is hereby given that the Annual Meeting of Stockholders of Pioneer
Natural Resources Company (the "Company") will be held in the Britain Room at
the Dallas Marriott Las Colinas Hotel, 223 West Las Colinas Blvd., Irving, Texas
75039, on Tuesday,Thursday, May 14, 2002,15, 2003, at 9:00 a.m. (the "Annual Meeting"). The
Annual Meeting is being held for the following purposes:
1. To elect three directors, each for a term of three years.
2. To ratify the selection of Ernst & Young LLP as the auditors of the
Company for the current year.
3. To transact such other business as may properly come before the
meeting.Annual Meeting.
These proposals are described in the accompanying proxy materials. You
will be able to vote at the Annual Meeting only if you are a stockholder of
record at the close of business on March 25, 2002.19, 2003.
YOUR VOTE IS IMPORTANT
Please date, sign, and return the enclosed Proxy promptly so that your
shares may be voted in accordance with your wishes and so we may have a quorum
at the Annual Meeting. Instead of returning the paper proxy, you may vote
through the Internet by accessing our transfer agent's website at
www.continentalstock.com. You will need the control numbers that are printed on
your personalized proxy card.
By Order of the Board of Directors
/s/ Mark L. Withrow
-----------------------------------------------------------------------------------------------
Mark L. Withrow, Secretary
Irving, Texas
April 10, 20027, 2003
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PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 1400
Irving, Texas 75039
PROXY STATEMENT
20022003 ANNUAL MEETING OF STOCKHOLDERS
The board of directors of Pioneer Natural Resources Company (the "Board
of Directors") requests your Proxy for the Annual Meeting of Stockholders that
will be held at 9:00 a.m., on Tuesday,Thursday, May 14, 2002,15, 2003, in the Britain Room at the
Dallas Marriott Las Colinas Hotel, Irving, Texas 75039 (the "Annual Meeting").75039. By granting the Proxy,
you authorize the persons named on the Proxy to represent you and vote your
shares at the Annual Meeting. Those persons will also be authorized to vote your
shares to adjourn the meetingAnnual Meeting from time to time and to vote your shares
at any adjournments or postponements of the meeting.Annual Meeting.
You may grant your Proxy by signing, dating and returning the enclosed
paper proxy card. Instead of returning the paper proxy card, you may complete a
proxy card electronically through the Internet by accessing the website of the
Company's transfer agent at www.continentalstock.com. You will need the control
numbers that are printed on your personalized paper proxy card. See "Internet
Voting."
If you attend the Annual Meeting, you may vote in person. If you are not
present at the Annual Meeting, your shares may be voted only by a person to whom
you have given a proper proxy, such as the accompanying Proxy or the Internet
Proxy. You may revoke the Proxy in writing at any time before it is exercised at
the Annual Meeting by delivering to the Secretary of the Company a written
notice of the revocation, or by signing and delivering to the Secretary of the
Company a proxy with a later date or by submitting your vote electronically
through the Internet with a later date. Your attendance at the Annual Meeting
will not revoke the Proxy unless you give written notice of revocation to the
Secretary of the Company before the Proxy is exercised or unless you vote your
shares in person at the Annual Meeting.
This Proxy Statement and the accompanying Notice of Annual Meeting and
Proxy are first being sent or given to stockholders of the Company on or about
April 10, 2002.9, 2003.
QUORUM AND VOTING
Voting Stock. The Company has twoone outstanding classesclass of securities that
entitle holders to vote generally at meetings of the Company's stockholders:
common stock, par value $.01 per share; and Special Preferred Voting Stock, par
value $.01 per share. A single share (the "Voting Share") of Special Preferred
Voting Stock was issued to Computershare Trust Company of Canada (the "Trustee")
as trustee under a Voting and Exchange Trust Agreement for the benefit of
holders of exchangeable shares issued by the Company's wholly-owned subsidiary,
Pioneer Natural Resources Canada Inc., in connection with the Company's December
1997 acquisition of Chauvco Resources Ltd. The common stock and the Voting Share
vote together as a single class on all matters except when Delaware law requires
otherwise. Each share of common stock outstanding
on the record date is entitled to one vote. The Voting Share is entitled to one vote for each exchangeable
share outstanding on the record date. The Trustee is required to vote the Voting
Share in the manner that holders of exchangeable shares instruct, and to abstain
from voting in proportion to the exchangeable shares for which the Trustee does
not receive instructions. Accordingly, references to "stockholders" in this
Proxy Statement include holders of common stock, the Trustee, and holders of
exchangeable shares. The procedures for holders of exchangeable shares to
instruct the Trustee about voting at the Annual Meeting are explained in the
"Information Statement for Holders of Exchangeable Shares of Pioneer Natural
Resources Canada Inc." that is enclosed with this Proxy Statement only for
holders of exchangeable shares.
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Record Date. The record date for stockholders entitled to notice of and
to vote at the Annual Meeting is the close of business on March 25, 2002.19, 2003. At the
record date, 103,350,967117,610,782 shares of common stock and one Voting Share were outstanding and entitled to
be voted at the Annual Meeting. At the record date,
942,847 exchangeable shares were outstanding and entitled to give voting
instructions to the Trustee. Accordingly, 104,293,814 votes are eligible to be
cast at the Annual Meeting.
Quorum and Adjournments. The presence, in person or by proxy, of the
holders of a majority of the votes eligible to be cast at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting.
If a quorum is not present, the stockholders entitled to vote who are
present in person or by proxy at the Annual Meeting have the power to adjourn
the Annual Meeting from time to time, without notice other than an announcement
at the Annual Meeting, until a quorum is present. At any adjourned Annual
Meeting at which a quorum is present, any business may be transacted that might
have been transacted at the Annual Meeting as originally notified.
Vote Required. Directors will be elected by a plurality of the votes
present and entitled to be voted at the Annual Meeting. Ratification of the
selection of the Company's auditors will require the affirmative vote of the
holders of a majority of the shares present and entitled to be voted at the
3
Annual Meeting. An automated system that the Company's transfer agent
administers will tabulate the votes. Brokers who hold shares in street name for
customers are required to vote shares in accordance with instructions received
from the beneficial owners. Brokers are permitted to vote on discretionary items
if they have not received instructions from the beneficial owners, but they are
not permitted to vote (a "broker non-vote") on non-discretionary items absent
instructions from the beneficial owner. Abstentions and broker non-votes will
count in determining whether a quorum is present at the Annual Meeting. Both
abstentions and broker non-votes will not have any effect on the outcome of
voting on director elections. For purposes of voting on the ratification of the
selection of auditors, abstentions will be included in the number of shares
voting and will have the effect of a vote against the proposal, and broker
non-votes will not be included in the number of shares voting and therefore will
have no effect on the outcome of the voting.
Default Voting. A Proxy that is properly completed and returned will be
voted at the Annual Meeting in accordance with the instructions on the Proxy. If
you properly complete and return a Proxy, but do not indicate any contrary
voting instructions, your shares will be voted as follows:
o FOR the election of the three persons named in this Proxy Statement
as the Board of Directors' nominees for election to the Board of
Directors.
o FOR the ratification of the selection of Ernst & Young LLP as the
Company's auditors.
If any other business properly comes before the stockholders for a vote at the
meeting, your shares will be voted in accordance with the discretion of the
holders of the Proxy. The Board of Directors knows of no matters, other than
those previously stated, to be presented for consideration at the Annual
Meeting.
ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors has nominated the following personsindividuals for
election as Class IIIII directors of the Company with their terms to expire at the
annual meeting of stockholders in 20052006 when their successors are elected and
qualified:
James R. Baroffio
Edison C. Buchanan
Scott D. SheffieldJerry P. Jones
Charles E. Ramsey, Jr.
Robert A. Solberg
Messrs. BaroffioJones, Ramsey and SheffieldSolberg are currently serving as directors of
the Company, and Mr. Buchanan is a new nominee to the Board of Directors.Company. Their biographical information is contained in "Directors and
Executive Officers."
4
The Board of Directors has no reason to believe that any of its nominees
will be unable or unwilling to serve if elected. If a nominee becomes unable or
unwilling to accept nomination or election, either the number of the Company's
directors will be reduced or the persons acting under the Proxy will vote for
the election of a substitute nominee that the Board of Directors recommends.
The Board of Directors recommends that stockholders vote FOR the election
of each of the nominees.
ITEM TWO
SELECTION OF AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as the auditors of the Company for 2002.2003. Ernst & Young LLP have audited the
Company's financial statements since 1998. The 20012002 audit was completed on
January 25, 2002.24, 2003.
4
Audit Fees. The aggregate fees billed by Ernst & Young LLP for
professional services rendered for the auditaudits of the Company's annual financial
statements and reviews of reports on Forms 10-Q for the years ended December 31,
2002 and 2001 were $482,078.
Financial Information Systems Design$448,326 and Implementation Fees. No
services were performed by, and no fees were incurred to, Ernst & Young LLP in
connection with financial information systems design and implementation projects
for 2001.
All Other$469,078, respectively.
Audit Related Fees. The aggregate fees for all other services renderedbilled by Ernst & Young LLP for
audit related services totaled $101,091 and $115,885 during the years ended
December 31, 2002 and 2001, respectively. Audit related services were $528,715,primarily
comprised of audits of the Company's benefit plans, reviews of merger and
acquisition transactions and procedures associated with the Company's registered
securities offerings.
Tax Services Fees. The aggregate fees billed by Ernst & Young LLP for tax
services totaled $73,116 and $40,830 during the years ended December 31, 2002
and 2001.
Other Fees. During the year ended December 31, 2002, the Company and the
Audit Committee engaged Ernst & Young LLP to perform audits, audit related
procedures and tax services. No other professional services were provided to the
Company by Ernst & Young LLP during the year ended December 31, 2002. Ernst &
Young LLP billed the Company $385,000 of fees for internal audit services
$40,830 for tax services, and $102,885 for other professional
services, consisting primarily of audit related services associated with a
securities registration. Effective January 1, 2002, Ernst & Young LLP no longer
serves as the Company's internal audit services provider.provided during 2001.
The Company expects that representatives of Ernst & Young LLP will be
present at the Annual Meeting to respond to appropriate questions and to make a
statement if they desire to do so.
The audit report of Ernst & Young LLP on the Company's annual financial
statements for 2002, 2001 2000 and 19992000 did not contain an adverse opinion or a
disclaimer of opinion and was not qualified or modified as to uncertainty or
audit scope.
In connection with the audits of the Company's annual financial
statements for 2002, 2001 2000 and 1999,2000, there were no disagreements with Ernst &
Young LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures which, if not resolved to
the satisfaction of such independent accountants, would have caused such
independent accountants to make reference to the matter in their audit report.
The Board of Directors recommends that stockholders vote FOR ratification
of the selection of Ernst & Young LLP.
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DIRECTORS AND EXECUTIVE OFFICERS
After the Annual Meeting, assuming the stockholders elect the nominees of
the Board of Directors as set forth in "Item One--ElectionOne - Election of Directors," the
Board of Directors and executive officers of the Company will be:
Name Age Position
---- --- --------
Scott D. Sheffield...... 49 Chairman of the Board, President and Chief
Executive Officer
Chris J. Cheatwood...... 41 Executive Vice President - Worldwide Exploration
Timothy L. Dove......... 45 Executive Vice President and Chief Financial
Officer
Dennis E. Fagerstone.... 53 Executive Vice President
Danny L. Kellum......... 47 Executive Vice President - Domestic Operations
Mark L. Withrow......... 54 Executive Vice President, General Counsel and
Secretary
James R. Baroffio....... 70
Name Age Position
- ------------------------ --- -------------------------------------------------
Scott D. Sheffield...... 50 Chairman of the Board, President and Chief
Executive Officer
Chris J. Cheatwood 42 Executive Vice President - Worldwide Exploration
Timothy L. Dove......... 46 Executive Vice President and Chief Financial Officer
Dennis E. Fagerstone.... 54 Executive Vice President - International Operations
Danny L. Kellum......... 48 Executive Vice President - Domestic Operations
Mark L. Withrow......... 55 Executive Vice President, General Counsel and
Secretary
James R. Baroffio....... 71 Director
Edison C. Buchanan...... 48 Director
R. Hartwell Gardner..... 68 Director
James L. Houghton....... 72 Director
Jerry P. Jones.......... 71 Director
Linda K. Lawson......... 57 Director
Charles E. Ramsey, Jr... 66 Director
Robert A. Solberg....... 57 Director
Edison C. Buchanan...... 47 Director
R. Hartwell Gardner..... 67 Director
James L. Houghton....... 71 Director
Jerry P. Jones.......... 70 Director
Linda K. Lawson......... 56 Director
Charles E. Ramsey, Jr... 65 Director
Robert A. Solberg....... 56 Director
5
The Company has classified its Board of Directors into three classes.
Directors in each class are elected to serve for three-year terms and until
their successors are elected and qualified. Each year, the directors of one
class stand for re-election as their terms of office expire. Messrs. Gardner and
Houghton, and Mrs. Lawson, are designated as Class I directors, and their terms
of office expire in 2004. Messrs. Baroffio, Buchanan and Sheffield are
designated as Class II directors, and their terms of office expire at the Annual Meeting.in 2005.
Messrs. Jones, Ramsey and RamseySolberg are designated as Class III directors, and
their terms of office expire in 2003.
Sinceat the last annual meeting of stockholders, Robert L. Stillwell voluntarily
resigned as a director of the Company. His resignation was for personal reasons
and was not the result of a disagreement with the Company or any matter relating
to the Company's operations, policies or practices. Mr. Edison C. Buchanan has
been nominated as a Class II director and stands for election at this Annual Meeting. In accordance with the Company's bylaws, the existing Board of
Directors filled two newly created directorships at its meeting on February 20,
2002, by electing Mrs. Linda K. Lawson, and Mr. Robert A. Solberg to the Board
of Directors effective May 14, 2002. Mrs. Lawson is designated as a Class I
director, and her term of office expires in 2004. Mr. Solberg is designated as a
Class III director and his term of office expires in 2003.
Executive officers serve at the discretion of the Board of Directors.
Set forth below is biographical information about each of the Company's
directors and executive officers named above.
Scott D. Sheffield. Mr. Sheffield, a distinguished graduate of the
University of Texas with a Bachelor of Science degree in Petroleum Engineering,
has been the President and Chief Executive Officer of the Company since August
1997, and assumed the position of Chairman of the Board in August 1999. He was
the President and a director of Parker & Parsley Petroleum Company ("Parker &
Parsley") since May 1990 and was the Chairman of the Board and Chief Executive
Officer of Parker & Parsley since October 1990. Mr. Sheffield was the sole
director of Parker & Parsley from May 1990 until October 1990. Mr. Sheffield
joined Parker & Parsley Development Company ("PPDC"), a predecessor of Parker &
Parsley, as a petroleum engineer in 1979. Mr. Sheffield served as Vice President
- --- Engineering of PPDC from September 1981 until April 1985, when he was elected
President and a director. In March 1989, Mr. Sheffield was elected Chairman of
the Board and Chief Executive Officer of PPDC. Before joining PPDC's
predecessor,PPDC, Mr.
Sheffield was employed as a production and reservoir engineer for Amoco
Production Company.
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Chris J. Cheatwood. Mr. Cheatwood was elected Executive Vice President
- - Worldwide Exploration in January 2002. Mr. Cheatwood joined the Company in
August 1997 and was promoted to Vice President of Domestic Exploration in July
1998 and Senior Vice President Exploration in December 2000. Before joining the
Company, Mr. Cheatwood spent ten years with Exxon where his focus included
exploration in the Deepwater Gulf of Mexico. Mr. Cheatwood is a graduate of the
University of Oklahoma with a Bachelor of Science degree in Geology and earned
his Master of Science degree in Geology from the University of Tulsa.
Timothy L. Dove. Mr. Dove was elected Executive Vice President and Chief
Financial Officer in February 2000. Prior to that, Mr. Dove held the position of
Executive Vice President - Business Development since August 1997. Mr. Dove
joined Parker & Parsley in May 1994 as Vice President--President - International and was
promoted to Senior Vice President--President - Business Development in October 1996, in
which position he served until August 1997. Before joining Parker & Parsley, Mr.
Dove was employed with Diamond Shamrock Corp., and its successor, Maxus Energy
Corp., in various capacities in international exploration and production,
marketing, refining, and planning and development. Mr. Dove earned a Bachelor of
Science degree in Mechanical Engineering from Massachusetts Institute of
Technology in 1979 and received his M.B.A. in 1981 from the University of
Chicago.
Dennis E. Fagerstone. Mr. Fagerstone, a graduate of the Colorado School
of Mines with a B.S.Bachelor of Science degree in Petroleum Engineering, became an
Executive Vice President of the Company in August 1997. Mr. Fagerstone served as
Executive Vice President and Chief Operating Officer of MESA Inc. ("Mesa") from
March 1997 until August 1997. Mr. Fagerstone served as Senior Vice President and
Chief Operating Officer of Mesa from October 1996 to February 1997, as Vice
President--President - Exploration and Production of Mesa from May 1991 to October 1996 and
as Vice President--President - Operations of Mesa from June 1988 until May 1991.
Danny L. Kellum. Mr. Kellum, who received a Bachelor of Science degree in
Petroleum Engineering from Texas Tech University in 1979, was elected Executive
Vice President - Domestic Operations in May 2000. From January 2000 until May
2000, Mr. Kellum served as Vice President - Domestic Operations. Mr. Kellum
served as Vice President - Permian Division from August 1997 until December
1999. From 1989 until 1994 he served as Spraberry District Manager and as Vice
President of the Spraberry and Permian Division for Parker & Parsley until
August of 1997. Mr. Kellum joined Parker & Parsley as an operations engineer in
1981 after a brief career with Mobil Oil Corporation.
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Mark L. Withrow. Mr. Withrow, a graduate of Abilene Christian University
with a Bachelor of Science degree in Accounting and Texas Tech University with a
Juris Doctorate degree, has been the Executive Vice President, General Counsel
and Secretary of the Company since August 1997. He served as Vice President -
--GeneralGeneral Counsel of Parker & Parsley from February 1991 until January 1995, and
served as Senior Vice President, General Counsel of Parker & Parsley from
January 1995 until August 1997. He was Parker & Parsley's Secretary from August
1992 until August 1997. Mr. Withrow joined Parker & Parsley in January 1991.
Before joining Parker & Parsley, Mr. Withrow was the managing partner of the law
firm of Turpin, Smith, Dyer, Saxe & MacDonald in Midland, Texas.
James R. Baroffio. Dr. Baroffio received a B.A.Bachelor of Arts degree in
Geology at the College of Wooster, Ohio, an M.S. in Geology at Ohio State
University, and a Ph.D. in Geology at the University of Illinois. Before
becoming a director of the Company in December 1997, Dr. Baroffio enjoyed a long
career with Standard Oil Company of California, the predecessor of Chevron
Corporation where he served as President, Chevron Research and Technology Center
from 1980 to 1985 and eventually retired as President of Chevron Canada
Resources in 1994. Dr. Baroffio was a member of the Board of Directors of the
Rocky Mountain Oil & Gas Association, and Chairman of the U.S. National
Committee of the World Petroleum Congress. His community leadership positions
included membership on the Board of Directors of Glenbow Museum and the Nature
Conservancy of Canada, as well as serving as President of the Alberta Nature
Conservancy.
Edison C. Buchanan. Mr. Buchanan received a Bachelor of Science degree
in Civil Engineering from Tulane University in 1977 and an M.B.A. in Finance and
International Business from Columbia University Graduate School of Business in
1981. From 1981 to 1997, Mr. Buchanan was a Managing Director of various groups
in the Investment Banking Division of Dean Witter Reynolds in that company'stheir New York and
Dallas offices. In 1997, Mr. Buchanan joined Morgan Stanley Dean Witter as a
Managing Director in the Real Estate Investment Banking group. In 2000, Mr.
Buchanan became Managing Director and head of the domestic Real Estate
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Investment Banking Group of Credit Suisse First Boston. In 2001, Mr. Buchanan
began working for The Trust for Public Land, a land conservation organization,
in Santa Fe, New Mexico. Mr. Buchanan became a director of the Company in 2002.
R. Hartwell Gardner. Mr. Gardner became a director of the Company in
August 1997. He served as a director of Parker & Parsley from November 1995
until August 1997. Mr. Gardner graduated from Colgate University with a Bachelor
of Arts degree in Economics and then earned an M.B.A. from Harvard University.
Until October 1, 1995, Mr. Gardner was the Treasurer of Mobil Oil Corporation
and Mobil Corporation from 1974 and 1976, respectively. Mr. Gardner is a member
of the Financial Executives Institute of which he served as Chairman in
1986/1987 and is a Director and Chairman of the Investment Committee of Oil
Investment Corporation Ltd. and Oil Casualty Investment Corporation Ltd., in
Pembroke, Bermuda.
James L. Houghton. Mr. Houghton is a Certified Public Accountant and a
graduate of Kansas University with a Bachelor of Science degree in Accounting,
as well as a Bachelor of Laws degree. Mr. Houghton has served as a director of
the Company since August 1997, and served as a director of Parker & Parsley from
October 1991 until August 1997. Until October 1, 1991, Mr. Houghton was the lead
oil and gas tax specialist for the accounting firm of Ernst & Young, was a
member of Ernst & Young's National Energy Group, and had served as its Southwest
Regional Director of Tax. Mr. Houghton is a member of the American Institute of
Certified Public Accountants, a member of the Oklahoma Society of Certified
Public Accountants and a former Chairman of its Federal and Oklahoma Taxation
Committee, and past President of the Oklahoma Institute on Taxation. He has also
served as a Director for the Independent Petroleum Association of America and as
a member of its Tax Committee. Mr. Houghton presently serves as a Trustee of the
J.E.J. E. and L.E.L. E. Mabee Foundation in Tulsa, Oklahoma.
Jerry P. Jones. Mr. Jones earned a Bachelor of Science degree from West
Texas State College in 1953 and a Bachelor of Laws degree from the University of
Texas School of Law in 1959. Mr. Jones has served as a director of the Company
since August 1997, and served as a director of Parker & Parsley from May 1991 until
August 1997. Mr. Jones was an attorney with the law firm of Thompson & Knight,
L.L.P., in Dallas, Texas, since September 1959 and was a shareholder in that firm
until January 1998, when he retired and became of counsel to the firm. Mr. Jones
specialized in civil litigation, especially in the area of energy disputes.
7
Linda K. Lawson. Mrs. Lawson holds a Bachelor of Science degree in
Accounting from the University of Denver. Mrs. Lawson was employed by business
units and the parent of The Williams Companies, as well as the parent organization from 1980 to
her retirement in 2001. During her tenure she served in a variety of capacities
including accounting and finance positions of the parent, and Controller of a
FERC regulated energy business unit, Vice President of Investor Relations, Vice
President of Human resources,Resources, and as Chief Operating OfficerCOO of several telecommunication start-up
businesses. She is a Certified Public Accountant and served the Tulsa community
in a variety of non-profit organizations. Mrs. Lawson became a director of the
Company in 2002, and resides in Denver, Colorado.
Charles E. Ramsey, Jr. Mr. Ramsey is a graduate of the Colorado School of
Mines with a Petroleum Engineering degree and a graduate of the Smaller Company
Management program at the Harvard Graduate School of Business Administration.
Mr. Ramsey has served as a director of the Company since August 1997. Mr. Ramsey
served as a director of Parker & Parsley from October 1991 until August 1997.
Since October 1991, he has operated an independent management and financial
consulting firm. From June 1958 until June 1986, Mr. Ramsey held various
engineering and management positions in the oil and gas industry and, for six
years before October 1991, was a Senior Vice President in the Corporate Finance
Department of Dean Witter Reynolds Inc. (Dallas,in the Dallas, Texas office).office. His
industry experience includes 12 years of senior management experience with May
Petroleum Inc. in the positions of President, Chief Executive Officer and
Executive Vice President. Mr. Ramsey is also a former director of MBank Dallas,
the Dallas Petroleum Club and Lear Petroleum Corporation.
Robert A. Solberg. Mr. Solberg earned a Bachelor of Science in Civil
Engineering from the University of North Dakota in 1969, and is a licensed
Petroleum Engineer in Louisiana. Mr. Solberg spent his entire career working for
Texaco Inc. in Houston and Midland, Texas, London and the Middle East, holding
the positions of Division President, President of International Exploration and
Production, President of Upstream Commercial Development, and retiringretired in March
2002 as Vice President of Texaco Inc. He became a director of the Company in
2002. Mr. Solberg recently served as a director of Greater Houston Partnership,
Central Houston Chamber of Commerce and Houston Grand Opera.
8
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors of the Company held 13ten meetings during 2001.2002. No
director attended fewer than 75%75 percent of the total number of meetings of the
Board of Directors. No director attended fewer than 75%75 percent of the total
number of meetings of all committees of the Board of Directors on which that
director served.
The Board of Directors has twothree standing committees: the "Audit
Committee", the "Compensation Committee" and the "Nominating and Corporate
Governance Committee".
Information regarding the functions performed by the Audit Committee and
its membership is set forth in the Compensation Committee."Audit Committee Report", included herein,
and the "Audit Committee Charter" that is attached to this proxy statement as
Annex A. The members of the Audit Committee are Messrs. Houghton (Chair)(Chairman),
Gardner, Jones and Jones.Solberg and Mrs. Lawson. The Audit Committee held eightseven
meetings during 2001. Information
regarding the functions performed by the Audit Committee is set forth in the
"Audit Committee Report" included in this annual proxy statement.2002.
The Compensation Committee periodically reviews the compensation,
employee benefit plans and fringe benefits paid to, or provided for, executive
officers of the Company, and approves the annual salaries, bonuses and stock
option awards of the Company's executive officers. The Compensation Committee
also administers the Company's Long-Term Incentive Plan. Additional information
regarding the functions performed by the Compensation Committee and its
membership is set forth in the "Compensation Committee Report on Executive
Compensation", included herein, and the "Compensation Committee Charter" that is
attached to this proxy statement as Annex B. The members of the Compensation
Committee are Messrs. Ramsey (Chairman), Baroffio and Baroffio. The Committee
also administers the Company's Long-Term Incentive Plan.Buchanan. The Compensation
Committee held threesix meetings during 2001.2002.
The Nominating and Corporate Governance Committee assists the Board of
Directors in evaluating potential new members of the Board of Directors,
recommending committee members and structure, and advising the Board of
Directors about corporate governance practices. Additional information regarding
the functions performed by the Nominating and Corporate Governance Committee and
8
its membership is set forth in "Corporate Governance", included herein, and the
"Nominating and Corporate Governance Committee Charter" that is attached to this
proxy statement as Annex C. The members of the Nominating and Corporate
Governance Committee include all non-employee directors; however, any director
whose term is expiring and who would be eligible for election at the Annual
Meeting shall not participate in the meeting(s) called for such nomination. The
Nominating and Corporate Governance Committee was formed in 2003 and did not
hold any meetings during 2002.
MANAGEMENT COMPENSATION
Compensation of Directors
Each non-employee director receives an annual base retainer fee of
$50,000 if$40,000 and an annual fee of $10,000 for service on one or more committees.
Audit committee members receive an additional $7,500 annual fee and Mr. Baroffio
in his role as geosciences advisor to the director serves onBoard of Directors receives an
additional $7,500 annual fee. The chairman of the audit committee also receives
a $5,000 annual fee and other committee and $40,000 ifchairmen receive a director does not. In
addition, each$2,500 annual fee.
Each non-employee director is also reimbursed for travel expenses to attend
meetings of the Board of Directors or its committees and an additional $2,500
for services as chairman of a committee.committees. No additional fees are
paid for attendance at boardBoard of Directors or committee meetings. The Company's
Chief Executive Officer does not receive additional compensation for serving on
the Board of Directors.
Under the Company's Long-Term Incentive Plan, non-employee directors are
eligible to receive awardstheir fees in the form of non-qualified stock options, stock
appreciation rights, restricted stock, or performance units. The Company can use
these awards instead of cash to pay its non-employee directors all or part of
their annual retainer fees. The Board of Directors determines the form (or combination of
forms) of consideration each year, based on the economic and other circumstances
at the time and based on its view of which awards will best align the interests
of the stockholders and the directors.
For the year following the Company's 20012002 annual stockholders' meeting,
the Board of Directors were given a choice to be compensated in(a) 100%in (a) 100 percent
cash, (b) 100%100 percent stock options, (c) 100%100 percent restricted stock, or (d) a
combination of 50/50 of any two, in payment of the non-employee directors'
annual fees. Messrs. Baroffio, Houghton, Jones, Ramsey and RamseySolberg and Mrs. Lawson elected
100%100 percent cash compensation, andcompensation; Mr. Gardner elected to receive 100%100 percent of his
compensation in stock options.options; Mr. Buchanan elected to receive 100 percent of
his compensation in restricted stock; and Mr. Houghton elected to receive 50
percent of his compensation in cash and 50 percent in restricted stock. The
number of shares subject to stock options granted to each non-employee directordirectors electing stock options was
determined by dividing the director'sdirectors' annual retainer feefees by the value of an option for
one share on May 16, 200113, 2002 (the last closing sale price before the date of the
award)grant). The options have a fair-market value exercise price, and the value of
each option was calculated using the Black-Scholes method based on assumptions
provided by the Company's executive compensation consulting firm. These options
vested 25%25 percent each quarter with the first vesting date on August 31,
2001.14, 2002.
The number of shares granted to non-employee directors electing restricted stock
was determined by dividing the director's fees elected to be paid by restricted
stock by the closing price of one share of the Company stock on May 13, 2002
(the last closing sale price before the date of the grant). The restricted stock
grants vested 25 percent each quarter with the first vesting date on August 14,
2002. On May 17, 2001,14, 2002, Mr. Gardner received an awarda grant of 4,8785,017 stock options to
compensate him for his annual retainer feefees (each stock option awardedgranted has an exercise
price of $22.09)$24.60). Mr. Buchanan received a restricted stock grant of 2,032 shares
to compensate him for 100 percent of his annual fees, and Mr. Houghton received
a restricted stock grant of 1,270 shares to compensate him for 50 percent of his
annual fees.
Each non-employee director, upon commencement of initial service as a
director, receives $125,000 of restricted stock. The price used to calculate the
number of shares to be granted is based on the closing stock price on the day
prior to the day the director is elected to serve on the Board of Directors. The
shares granted are subject to vesting and transfer restrictions that lapse with
respect to one-third of the shares each year following the grant over a three
year period. The vesting of ownership and the lapse of transfer restrictions may
be accelerated in the event of the death, disability or retirement of the
director or a change in control of the Company. Each recipient is required to
make an election under the Internal Revenue Code to include the value of the
restricted stock in the recipient's income in the year of grant, and the Company
agrees to provide a cash award to the non-employee director in an amount
9
sufficient to pay the federal income taxes due with respect to the grant and
such cash payment. On May 14, 2002, Mrs. Lawson and Messrs. Buchanan and
Solberg, as newly elected non-employee directors, each received a grant of 5,081
shares of Company common stock (which number was calculated by dividing $125,000
by $24.60, the closing stock price on May 13, 2002) and a cash payment of
$83,500 to pay the federal income taxes on the grant and the cash payment.
For the year following the Company's 20022003 annual scheduled meeting,
Directorsdirectors can again elect to receive their annual fees 100%100 percent in cash,
stock options or restricted stock or 50%50 percent each in any two of those three
forms of compensation.
9
Compensation of Executive Officers
The compensation paid to the Company's executive officers generally
consists of base salaries, annual bonuses, awards under the Long-Term Incentive
Plan, contributions to the Company's 401(k) retirement plan, contributions to
the Company's deferred compensation retirement plan, and miscellaneous
perquisites. The following table summarizes the total compensation for 2002,
2001 2000 and 19992000 awarded to, earned by or paid to the following persons:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
Annual Compensation ---------------------------------------------
------------------------------------- Value of Shares
Name and Other Annual Restricted Underlying All Other
Principal Position Year Salary Bonus(a) Compensation(b) StockStock(c) Options Compensation(c)Compensation(d)
- --------------------------------------------- ---- -------- -------- --------------- ---------- ---------- ------------------------ --------------
Scott D. Sheffield 2002 $700,000 $971,250 $ 19,211 $1,766,880 150,000 $ 92,797
President and 2001 $660,000 $617,891 $ 18,279 $ - 138,000 $ 87,774
President andChief Executive Officer 2000 $638,000 $626,350 $ 18,051 $ - 120,000 $ 83,422
ChiefTimothy L. Dove 2002 $315,000 $349,650 $ 4,954 $ 588,960 50,000 $ 51,531
Executive Officer 1999 $480,000 $270,000Vice President 2001 $300,000 $224,688 $ 14,4274,816 $ - 90,00053,000 $ 69,37847,577
and Chief Financial Officer 2000 $290,000 $174,000 $ 4,611 $ - 46,000 $ 45,546
Dennis E. Fagerstone 2002 $315,000 $349,650 $ 9,776 $ 588,960 50,000 $ 51,531
Executive Vice President - 2001 $300,000 $224,688 $ 9,488 $ - 53,000 $ 47,000
Executive Vice PresidentInternational Operations 2000 $290,000 $174,000 $ 9,295 $ - 46,000 $ 46,558
1999 $247,500Danny L. Kellum 2002 $315,000 $349,650 $ 92,8128,981 $ 8,478588,960 50,000 $ 51,531
Executive Vice President - 2001 $270,000 $201,563 $ 8,166 $ - 35,00053,000 $ 40,56446,223
Domestic Operations 2000 $240,000 $144,000 $ 2,923 $ - 46,000 $ 43,157
Mark L. Withrow 2002 $315,000 $349,650 $ 10,858 $ 588,960 50,000 $ 52,096
Executive Vice President 2001 $300,000 $224,688 $ 5,770 $ - 53,000 $ 47,000
Executive Vice Presidentand General Counsel 2000 $290,000 $174,000 $ 5,577 $ - 46,000 $ 46,104
(a) Represents the amount awarded under the Company's annual bonus program.
(b) This column represents miscellaneous perquisites.
(c) The value of the restricted stock reported in this column was determined
using the August 12, 2002 grant date closing price of $24.54 per share for
the Company's common stock as reported by the New York Stock Exchange. The
restricted stock grant replaced a like value of stock options that would
have been issued over the next three years and General Counsel 1999 $225,000 $ 84,376 $ 4,327 $ - 35,000 $ 38,855
Timothy L.includes vesting
restrictions that lapse on August 12, 2005. The restricted stock is
entitled to receive dividends, if any, paid on the Company's common stock.
Aggregate restricted Company common stockholdings as of December 31, 2002
and the corresponding value based on the closing price of the common stock
as reported on the New York Stock Exchange on December 31, 2002 are: Mr.
Sheffield, 72,000 shares, $1,818,000; Messrs. Dove, 2001 $300,000 $224,688 $ 4,816 $ - 53,000 $ 47,577
Executive Vice President 2000 $290,000 $174,000 $ 4,611 $ - 46,000 $ 45,546Fagerstone, Kellum and
Chief Financial Officer 1999 $225,000 $197,580 $ 4,611 $ - 35,000 $ 38,394
Danny L.Withrow, 24,000 shares each, $606,000 each.
10
(d) For 2002 this column includes (i) contributions to qualified retirement
plans for Mr. Sheffield of $19,457, and for Messrs. Dove, Fagerstone,
Kellum 2001 $270,000 $201,563 $ 8,166 $ - 53,000 $ 46,223
Executive Vice President 2000 $240,000 $144,000 $ 2,923 $ - 46,000 $ 43,157
Domestic Operations 1999 $192,500 $ 63,000 $ 15,835 $ - 25,000 $ 35,250
(a) Represents the amount awarded under the Company's annual bonus program and
forgiveness of a Company loan to Mr. Dove for $113,204 in 1999.
(b) This column represents miscellaneous perquisites.
(c) For 2001 this column includes (i) contributions to qualified retirement
plans for Messrs. Sheffield, Fagerstone, Withrow, Dove and Kellum of
$17,000 each; (ii) contributions to the Company's non-qualified deferred
compensation retirement plan for Messrs. Sheffield, Fagerstone, Withrow,
Dove and Kellum of $67,269, $30,000, $30,000, $30,577 and $27,519
respectively; (iii) a $1,330 premium with respect to a term life insurance
policy for the benefit of Mr. Sheffield; and (iv) reimbursement for
financial counseling services for Messrs. Sheffield and Kellum for $2,175
and $1,704and Withrow of $20,031 each; (ii) contributions to the Company's
non-qualified deferred compensation retirement plan for Mr. Sheffield of
$70,000 and Messrs. Dove, Fagerstone, Kellum and Withrow of $31,500 each;
(iii) a $4,042 premium with respect to a term life insurance policy for the
benefit of Mr. Sheffield; and (iv) reimbursement for financial counseling
services for Messrs. Sheffield and Withrow of $3,340 and $565,
respectively.
Long-Term Incentive Plan. The Long-Term Incentive Plan (the "Plan")
provides for employee and non-employee director awardsgrants in the form of stock
options, stock appreciation rights, restricted stock, and performance units
payable in stock or cash. The maximum number of shares of common stock that may
be issued under the Plan is equal to 10%10 percent of the total number of shares of
common stock equivalents outstanding from time to time minus the total number of
shares of stock subject to outstanding awardsgrants on the date of calculation under
any other stock-based plan for employees or directors of the Company and its
subsidiaries.Company. The Plan
had 3,933,3844,306,586 shares available for additional awards at December 31, 2001.
10
2002.
No restricted stock, performance units or stock appreciation rights have been awarded under
the Plan.
The following table sets forth information about stock option grants made
during 20012002 to the named executive officers.
OPTION GRANTS IN LAST FISCAL YEAR ENDING DECEMBER 31, 2002
Individual Grants
-----------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options Granted Exercise or
Underlying to Employees Base Price Expiration Grant Date
Name Options Granted In Fiscal Year Per Share (c) Date Value (d)
---- --------------- ------------------------------- ------------- ------------- ----------
Mr. Sheffield.........Scott Sheffield...... 90,000 (a) 5.48 $ 18.30 2/19/08-09-10 $ 763,200
60,000 (b) 3.65 $ 24.72 8/12/08-09-10 $ 571,800
Timothy Dove......... 30,000 (a) 3.69%1.83 $ 18.9618.30 2/14/07-08-0919/08-09-10 $ 534,600
78,000254,400
20,000 (b) 4.79%1.22 $ 17.6924.72 8/14/07-08-0912/08-09-10 $ 666,120
Mr. Fagerstone........ 23,000190,600
Dennis Fagerstone.... 30,000 (a) 1.41%1.83 $ 18.9618.30 2/14/07-08-0919/08-09-10 $ 204,930254,400
20,000 (b) 1.22 $ 24.72 8/12/08-09-10 $ 190,600
Danny Kellum......... 30,000 (a) 1.83 $ 18.30 2/19/08-09-10 $ 254,400
20,000 (b) 1.84%1.22 $ 17.6924.72 8/14/07-08-0912/08-09-10 $ 256,200
Mr. Withrow........... 23,000190,600
Mark Withrow......... 30,000 (a) 1.41%1.83 $ 18.9618.30 2/14/07-08-0919/08-09-10 $ 204,930
30,000254,400
20,000 (b) 1.84%1.22 $ 17.6924.72 8/14/07-08-0912/08-09-10 $ 256,200
Mr. Dove.............. 23,000190,600
(a) 1.41% $ 18.96 2/14/07-08-09 $ 204,930
30,000These options were granted on February 19, 2002, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have terms of five years from the dates of vesting. The Compensation
Committee retains discretion, subject to Plan limits, to modify the terms
of the options. In the event of a change in control of the Company as
defined in the Plan, the options will immediately become fully vested and
exercisable in full.
(b) 1.84% $ 17.69 8/14/07-08-09 $ 256,200
Mr. Kellum............ 23,000These options were granted on August 12, 2002, vest at the rate of
one-third each year commencing on the first anniversary of the grant date,
and have terms of five years from the dates of vesting. The Compensation
Committee retains discretion, subject to Plan limits, to modify the terms
of the options. In the event of a change in control of the Company as
defined in the Plan, the options will immediately become fully vested and
exercisable in full.
(c) The exercise price per share is equal to the closing price of the Company's
common stock on the New York Stock Exchange composite tape on the day
before the date of grant.
(d) The estimated grant date value of options described in footnotes (a) 1.41% $ 18.96 2/14/07-08-09 $ 204,930
30,000and
(b) 1.84% $ 17.69 8/14/07-08-09 $ 256,200
(a) These options were granted on February 14, 2001, vest at the rate of
one-third each year, commencing on the first anniversary of the grant date,
and have a term of five years from the date of vesting. The Compensation
Committee retains discretion, subject to Plan limits, to modify the terms
of the options. In the event of a change in control of the Company as
defined in the Plan, the options will immediately become fully vested and
exercisable in full.
(b) These options were granted on August 14, 2001, vest at the rate of
one-third each year commencing on the first anniversary of the grant date,
and have a term of five years from the date of vesting. The Compensation
Committee retains discretion, subject to Plan limits, to modify the terms
of the options. In the event of a change in control of the Company as
defined in the Plan, the options will immediately become fully vested and
exercisable in full.
(c) The exercise price per share is equal to the closing price of the common
stock on the New York Stock Exchange composite tape on the day before the
date of grant.
(d) The estimated grant date value of shares in footnotes (a) and (b) is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options include the following:
o An interest rate of 4.12% for footnote (a) and 4.17% for footnote
(b), which represents the interest rate on a U.S. Treasury
security with a maturity date corresponding to the expected
option term.
o Volatility of 48.2% for footnote (a) and 50% for footnote and (b)
calculated using the lesser of (1) daily stock prices for the
120-day period prior to the grant date or (2) 50%.were determined using the Black-Scholes model. The material assumptions
and adjustments incorporated in the Black-Scholes model in estimating the
value of the options included the following:
o Annual interest rates of 2.76 percent for footnote (a) and 2.92
percent for footnote (b), which represent the interest rates on
U.S. Treasury securities with maturity dates corresponding to the
expected option term.
11
o Volatility of 50 percent for footnote (a) and 39 percent for
footnote (b) and calculated using the lesser of (1) daily stock
prices for the 120-day period prior to the grant date or (2) 50
percent.
No other adjustments were made to the model for non-transferability or risk
of forfeiture. The ultimate values of the options will depend on the future
market price of the Company's common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, an optionee will realize
upon exercise of an option will depend on the excess of the market value of
the Company's common stock over the exercise price on the date the option
is exercised.
11
The following table sets forth, for each named executive officer,
information concerning the exercise of stock options during 2001,2002, and the value
of unexercised stock options as of December 31, 2001.
2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Shares Options at Fiscal Year End Options at Fiscal Year End (a)
Acquired on Value --------------------------- ----------------------------------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
Mr. Sheffield.........Scott Sheffield....... - $ - 132,500 193,000 $548,219213,500 262,000 $1,707,204 $1,603,270
Timothy Dove.......... 11,667 $146,633 116,500 100,665 $ 655,385
Mr. Fagerstone........ 11,668693,886 $ 67,733 171,164 95,332 $318,431 $ 450,452
Mr. Withrow........... 8,167 $ 98,988 95,501 95,332 $348,187 $ 450,452
Mr. Dove.............. 19,334 $213,593 87,500 95,332 $218,850 $ 450,452
Mr. Kellum............697,683
Dennis Fagerstone..... - $ - 63,667 91,999 $324,865208,689 100,665 $ 411,151788,518 $ 697,683
Danny Kellum.......... 52,334 $767,501 52,667 100,665 $ 239,450 $ 697,683
Mark Withrow.......... 15,835 $160,531 124,333 100,665 $ 870,091 $ 697,683
(a) Amounts were calculated by multiplying the number of unexercised options by
$25.25, which was the closing price of the Company's common stock on
December 31, 2002, and subtracting the aggregate exercise price, which was
determined by multiplying the unexercised option by their respective
exercise prices and summing the result.
(a) Amounts were calculated by multiplying the number of unexercised options by
$19.26, which was the closing sale price of the common stock on December
31, 2001, and subtracting the aggregate exercise price.
Retirement Plan. The Company does not provide a defined benefit
retirement plan or a restoration plan. Hewitt Associates, the Company's
compensation consultant, advised the Company that it was not providing
competitive retirement benefits for its officers by offering only a 401(k) plan.
To maintain a competitive position, the Company also provides a non-qualified
deferred compensation retirement plan for officers and certain key employees of the Company. Each
participant is allowed to contribute up to 25%25 percent of base salary. The
Company provides a matching contribution of 100%100 percent of the participant's
contribution limited to the first 10%10 percent of the officer's base salary (or 8% of the
key employee's base salary).salary. The
CompanyCompany's matching contribution vests immediately.
Severance Agreements. On August 8, 1997, theThe Company has entered into severance agreements
with its officers. Salaries and bonuses are set by the Compensation Committee
independent of these agreements, and the Compensation Committee can increase or
reduce base salaries at its discretion.
Either the Company or the officer may terminate the officer's employment
under the severance agreement at any time. The Company must pay the officer an
amount equal to one year's base salary if the officer's employment is terminated
because of death, disability, or normal retirement. The Company must pay the
officer an amount equal to one year's base salary and continue health insurance
for the officer's family for one year if the Company terminates the officer's
employment without cause or if the officer terminates employment for good
reason, which is when reductions in the officer's base annual salary exceed
specified limits or when the officer's responsibilities have been significantly
reduced. If within one year after a change in control of the Company, the
Company terminates the officer without cause, or if the officer terminates
employment for good reason, the Company must pay the officer an amount equal to
2.99 times the sum of the officer's base salary plus target bonus for the year
and continue health insurance for the officer's family for three years. Additionally, executive officers haveIf the right to purchase health insurance
from the acquiring company until age 65 by paying Consolidated Omnibus Budget
Reconciliation Act of 1985 rates. If an
officer terminates employment with the Company without reason between six months
and one year after a change in control, or at any time within one year after a
change in control if the officer is required to move, then the Company must pay
the officer one year's base salary and continue health insurance for the
officer's family for one year. Officers are also entitled to additional payments
for certain tax liabilities that may apply to severance payments following a
change in control.
12
Indemnification Agreements. The Company has entered into indemnification
agreements with each of its directors and officers, including the named
executive officers. Those agreements require the Company to indemnify the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law and to advance expenses in connection with certain claims
against directors and officers. The Company expects to enter into similar
agreements with persons selected to be directors and officers in the future.
Each indemnification agreement also provides that, upon a potential change in
control of the Company and if the indemnified director or officer so requests,
the Company will create a trust for the benefit of the indemnified director or
officer in an amount sufficient to satisfy payment of all liabilities and suits
against which the Company has indemnified the director or officer.
12
EQUITY COMPENSATION AND PLAN INFORMATION
The following table summarizes information about the Company's equity
compensation plans as of December 31, 2002:
(c)
Number of securities
(a) remaining available
Number of for future issuance
securities to be (b) under equity
issued upon Weighted average compensation plans
exercise of exercise price of (excluding securities
outstanding options* outstanding options reflected in column (a))**
-------------------- ------------------- --------------------------
Equity compensation plans approved by
security holders:
Pioneer Natural Resources Company:
Long-Term Incentive Plan 6,779,621 $ 19.11 4,306,586
Employee Stock Purchase Plan - $ - 622,199
Predecessor plans 488,671 $ 26.44 -
--------- ----------
Total 7,268,292 4,928,785
========= ==========
- ---------------
* There are no outstanding warrants or equity rights awarded under the
Company's equity compensation plans.
** The Company's Long-Term Incentive Plan provides for the issuance of a
maximum number of shares of common stock equal to 10 percent of the total
number of shares of common stock equivalents outstanding less the total
number of shares of common stock subject to outstanding awards under any
stock-based plan for the directors, officers or employees of the Company.
The number of remaining securities available for future issuance under the
Company's Employee Stock Purchase Plan is based on the original authorized
issuance of 750,000 shares less 127,801 cumulative shares issued through
December 31, 2002. See Note G of Notes to Consolidated Financial Statements
included in "Item 8. Financial Statements and Supplementary Data" in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002
for additional information about the Company's equity compensation plans.
The Company has no equity compensation plans that have not been approved
by security holders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2001,2002, no member of the Compensation Committee also
served as an executive officer of the Company. During fiscal year 2001,2002, there
were no Compensation Committee interlocks with other companies.
13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors submits the following
report with respect to the executive compensation program of the Company.
Compensation Principles and Philosophy
The overriding responsibility of the committee is to maintain the
Company's executive compensation program so that it attracts and retains a
capable and highly motivated senior management team and aligns the compensation
of the Company's executives with the Company's strategic business plan to
increase stockholder value. During 20012002 the committee retained an executive
compensation consulting firm ("Hewitt Associates") to assist and advise it in
its efforts to establish and administer fair and competitive compensation and
incentive policies. These policies emphasize variable compensation, structure
the annual bonus and long-term incentive awards to be a significant portion of
an executive's total compensation and result in total compensation that is
reflective of Company performance. StockA combination of stock option awards and
restricted stock will continue to be emphasized as part of each executive's compensation
package to align stockholder and executive interests. The committee has adopted
a policy of not repricing stock options and incorporated that policy into the
Company's Long-Term
Incentive Plan.long-term incentive plan. Other critical elements of the Company's
compensation and incentive policies provide for:
o Base salaries at or slightly above median levels compared to industry
industry survey information and peer group proxy analysis.analysis
o Annual target bonus levels slightly above mediummedian with payouts that are
based on both individual and Company performance.performance
o Long-term incentive award levels that are above median.median
o Significant stock ownership by the Directorsdirectors and the Chief Executive
Officer.
To support the commitment to significant stock ownership, the Company's
current common stock ownership guidelines are as follows:
o Non-employee directors' stock value equal to at least three times each
director's annual base retainer fee.fee
o Chairman of the Board and Chief Executive Officer stock value equal to
at least five times his annual base salary.
In determining compliance with these guidelines, the committee considers
its expectations of the long-term value of the Company's common stock and the
current trading levels. Mr. Sheffield and all Directorsdirectors are in compliance with
the ownership guidelines.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA93") placed
restrictions on the deductibility of executive compensation paid by public
companies. Under the restrictions, that were effective in 1994, the Company is not able to deduct
compensation paid to any of the named executive officers in excess of $1,000,000
unless the compensation meets the definition of "performance based compensation"
in the legislation. Non-deductibility could result in additional tax costs to
the Company. While the committee cannot assess with certainty how the Company's
compensation program will ultimately be affected by OBRA93, the committee
generally tries to preserve the deductibility of all executive compensation if
it can do so without interfering with the Company's ability to attract and
retain capable and highly motivated senior management.
13
Elements of Compensation
The elements of the compensation program the committee administers for
executive officers, including the Chief Executive Officer, consist of base
salaries, annual bonuses, awards made under the Company's Long-Term Incentive
Plan, contributions to the Company's 401(k) retirement plan, contributions to
the Company's deferred compensation retirement plan, and miscellaneous
14
perquisites. Base salaries, annual bonuses and long-term incentives are
discussed separately below; however, the committee considers the aggregate
remuneration of executives when evaluating the executive compensation program.
Base Salaries. An executive's base salary is viewed as a fixed component
of total compensation that should be competitive with companies of similar size
and business to the Company. The committee has targeted base salaries at or
slightly above the median level for companies of similar size and business to
the Company. The committee evaluates the base salaries of the Company's
executive officers on the basis of competitive base salary survey data provided
by its consultant and consideration of each officer's duties and
responsibilities. The committee views the named executives below the Chief Executive
Officer level as a team with diverse duties but with similar authority and
responsibility. Hewitt Associates historically has provided base salary survey
data on the majority of the Company's peer group companies, a group of
independent exploration and production companies with similar asset, revenue and
capital investment profiles as the Company. While the peer group provided by
Hewitt Associates includes some of the members of the Dow Jones Oil-SecondaryU.S. Oil
Companies, Secondary Index (the "DJ Oil-Secondary Group"Secondary Oil Index") reflected in the
performance graph set forth under "Company Performance" below, it does not
include all of the companies in that peer group and includes other companies
with which the Company competes. The committee determines the base salary for
all named executives, including Mr. Sheffield, using the same methodology.
The 2001 base salaries for the named executive officers as a group,
includingFor 2003, Mr. Sheffield, were identified by Hewitt Associates as being at
approximately the 50th percentile level. For 2002 Mr. Sheffield's annual base salary was not increased by 6% to $700,000 whichand will
remain at the 2002 level of $700,000. Hewitt Associates has identified as beingindicated Mr.
Sheffield's annual base salary is at or slightly above the 50th percentile. Hewitt Associates has indicatedThe
base salaries of the other named executive officer's 2002officers were also not increased for
2003, and Hewitt Associates advised their 2003 base salaries are, as a group,
are slightly above the 50th percentile.median.
Annual Bonuses. Each year the committee establishes a target bonus for
each executive based on the target bonus median levels of executives in similar
positions at peer group companies. To maintain internal equity, the level of
responsibility, scope and complexity of the executive's position are considered.
The range of awards for the annual incentive bonus plan has historically been
between 75%can range from 0 to 150%200
percent of target. For 2001 Hewitt Associates determined theThe target bonus
target levels for Mr. Sheffield and the named executive
officers were belowdid not change from the median levels for
peer group companies. Each named executive's target bonus level, including Mr.
Sheffield's, was increased to a level Hewitt Associates identified as being
approximately the 60th percentile level. Each named executive's 2002 target bonus level will belevels and were identified by
Hewitt Associates as being slightly above the same as their 2001 target bonusmedian level. In awarding 20012002
bonuses, the Company reviewed the following criteria that are important to the
success of the Company's business plan.
o Operating cost per BOE
o Debt/Book capitalization
o Reserve replacement
o Growth of share value
o Finding &and development cost per BOE
o Production growth
o General and administrative costs
o Net asset value
In determining the named executive officers' annual bonus awards, the committee
also evaluated the Company's stock performance in relation to its peer group.
The committee did not employ a formula, specific targets or predetermined
weighting of the above financial orand operational performance criteria. The
committee also evaluates Company performance in light of oil and gas industry
fundamentals and assesses how effectively management adapts to changing industry
conditions and opportunities during the year. The committee observes and
evaluates the individual performance of executive officers through the year and
discussesspecifically evaluates Mr. Sheffield's performance relative to the Company's
performance of these key executives with Mr. Sheffield.
14
in achieving the Company's goals.
For 2001,2002, the committee awarded Mr. Sheffield and the other named executives
cash bonuses above the target bonus levels. Specific Company performance which
resulted in bonus payouts above target for 20012002 included:
o Base operating costs of $2.76$2.86 per BOE
o Debt/Book capitalization of 55%Maintained leverage position
o Reserve replacement of 208% (268% excluding price
revisions)
o Return on equity of 9%258 percent
o Finding and development costs of $7.49$6.30 per BOE
($5.81 per BOE excluding price revisions)
o General &and administrative cost of $.89$1.17 per BOE
o 2002 stock price increase of 31 percent
15
Regarding stock performance, for the secondthird consecutive year, Pioneer'sthe
Company's annual stock price performance compared to other peer group companies
achieved a number
two ranking overall.top quartile ranking. Also, Pioneer'sthe Company's three year cumulative total
return based on stock price performance has exceeded both the SStandard & Poor's
500 Index (the "S&P 500500") and the DJ Secondary Oil Secondary
GroupIndex per the graph below. In
addition, Pioneer'sthe Company's stock price hit a threefour year high of $23.05$27.50 in May 2001.
COMPARISON OF THREE YEAR CUMULATIVE TOTAL RETURN *
AMONG PIONEER NATURAL RESOURCES COMPANY, THE STANDARD & POOR'S 500 INDEX
AND THE DOW JONES OIL -October,
2002.
COMPARISON OF THREE YEAR CUMULATIVE TOTAL RETURN *
AMONG PIONEER NATURAL RESOURCES COMPANY, THE STANDARD & POOR'S 500 INDEX
AND THE DOW JONES U.S. OIL COMPANIES, SECONDARY INDEX
Pioneer DJ
Natural Dow Jones StandardSecondary
Measurement Resources Oil & Poor'sS&P
(Fiscal Year Covered) Company SecondaryIndex 500
--------------------- --------- --------- -----------------
19981999 100 100 100
2000 220 160 91
2001 215 147 80
2002 283 150 62
---------------
* Assumes $100 invested on December 31, 1999 102 115 121
2000 225 184 110
2001 220 169 97in stock or
index, including reinvestment of dividends.
---------------
* Assumes $100 invested on December 31, 1998 in stock or index,
including reinvestment of dividends. Fiscal year ending December
31.
1998 1999 2000 2001
---- ---- ---- ----
Pioneer Natural Resources Company 100 102 225 220
Standard & Poor's 500 100 121 110 97
Dow Jones Oil - Secondary 100 115 184 169
16
Long-term Incentives. A significant portion of the namedan executive officers'
total compensation opportunity is comprised of long-term incentive awards, which
are intended to align executive management's interests in long-term growth and
success more closely with the interests of the Company's stockholders. The
committee has determined that annuala combination of stock option and restricted stock
awards should beis the primarymost appropriate method to awardmeet the Company's long-term incentives. To provide an averaging effectincentive
plan objectives of rewarding for long-term performance and encouraging
retention. The additional emphasis on restricted stock was achieved by reducing
the value of the stock option exercise prices,options awarded over a three-year period by the committee has electedvalue of
the restricted stock awards. The restricted stock includes a three year cliff
vesting restriction and was designed to make semiannualbe a one time award to replace a like
value of stock optionoptions that would have been issued over the next three years.
The value of the long-term incentive awards of approximately 50% of annual grant levels.
The number of options granted to Mr. Sheffield in
20012002 was determined by a comparison of optionlong-term incentive grants made to the
Chief Executive Officer'sOfficers' of peer group companies. The other named executive officers
were reviewed as a team. The levelvalue of options awardedlong-term incentives granted to each named
executive was determined by comparing the value of awards granted to peer
company executives holding similar positions, and their individual award levels
were averaged to determine the actual grants.awards to executives of the Company. The
award levels were not influenced by the current stock holdings of the
executives. The Company
has historically heldCompany's philosophy is to the philosophy of awardingaward long-term incentives with
values that
15
are above market averages.average. For 2001,2002, Mr. Sheffield was awarded
138,000150,000 stock options.options and 72,000 shares of restricted stock. Hewitt Associates
indicatedconcluded the 20012002 award levels placed Mr. Sheffield and the other named executives atas
a group slightly above the 60th percentile for long-term incentive awards among
the surveypeer group.
In summary, the Company believes a significant portion of executive
compensation should be variable and performance-based so that an executive's
total compensation opportunity is linked to the performance of the individual,
the Company and its stock price. The majority of the namedan executive officers' total
compensation is variable at-risk compensation.and at-risk. This structure allows the Company to
administer overall compensation that rises or falls based on the Company's
performance and to maintainwhile maintaining a balance between the Company's short-
termshort-term and
long-term objectives.
Compensation Committee of
theThe Board of Directors
Charles E,E. Ramsey, Jr., Compensation Committee Chairman
James R. Baroffio, Compensation Committee Member
16Edison C. Buchanan, Member
17
AUDIT COMMITTEE REPORT
The Audit Committee's purpose is to assist the Board of Directors in its
oversight of the Company's internal controls, financial statements and the audit
process. The Board of Directors, in its business judgment, has determined that
all members of the committee are independent as required under the listing
standards of the New York Stock Exchange. The committee operates pursuant to a
charter adopted by the Board of Directors and published inDirectors. A copy of the current charter is
attached to this proxy statement for the annual meeting of stockholders in 2001.as Annex A.
Management is responsible for the preparation, presentation and integrity
of the Company's financial statements, accounting and financial reporting
principles, and internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations. The independent
auditors, Ernst & Young LLP, are responsible for performing an independent audit
of the consolidated financial statements in accordance with generally accepted
auditing standards.
In performing its oversight role, the committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The committee has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. The committee has
received the written disclosures and the letter from the independent auditors
required by Independence Standards Board Standard No. 1, Independent with Audit
Committees, as currently in effect. The committee has also considered whether
the performance of other non-audit services by the independent auditors is
compatible with maintaining the auditor's independence and has discussed with
the auditors the auditors' independence.
Based on the reports and discussions described in this Report, and
subject to the limitations on the roles and responsibilities of the committee
referred to below and in the charter, the committee recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K for the fiscal year ended December 31, 2001,2002, for filing with the
Securities and Exchange Commission.Commission (the "SEC"). The committee and the board havehas also
recommended the selection of the Company's independent auditors.
The members of the committee are not professionally engaged in the
practice of auditing or accounting for the Company and are not experts in
auditor independence standards. Members of the committee rely without
independent verification on the information provided to them and on the
representations made by management and the independent auditors. Accordingly,
the committee's oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and financial reporting
principles or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the committee's considerations and discussions referred to above do
not assure that the audit of the Company's financial statements has been carried
out in accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles, or that Ernst & Young LLP is in fact independent.
Audit Committee of
The Board of Directors
James L. Houghton, Audit Committee Chairman
R. Hartwell Gardner, Audit Committee Member
Jerry P. Jones, Member
Linda K. Lawson, Member
Robert A. Solberg, Member
18
CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors believes that sound governance practices and
policies provide an important framework to assist it in fulfilling its duty to
shareholders. In March 2003, the Board of Directors formally adopted the Pioneer
Natural Resources Company Corporate Governance Principles , which cover the
following principal subjects:
o Role and functions of the board
o Qualifications and independence of directors
o Committee functions and independence of committee members
o Meetings of non-employee directors
o Self-evaluation
o Ethics and conflicts of interest policy (a copy of the
current Code of Business Conduct and Ethics is attached to
this annual proxy statement as Annex D)
o Reporting of concerns to non-employee directors or the Audit
Committee
Member
17o Compensation of the board and stock ownership requirements
o Succession planning and annual compensation review
of senior management
o Access to senior management and to independent advisors
o Director orientation and continuing education
o Evaluation of corporate governance principles
The Corporate Governance Principles are attached to this proxy statement
as Annex E and are posted on the Company's website at www.pioneernrc.com. The
Corporate Governance Principles will be reviewed periodically and as necessary
by the Company's Nominating and Corporate Governance Committee, and any proposed
additions to or amendments of the Corporate Governance Principles will be
presented to the Board of Directors for its approval.
The New York Stock Exchange (the "NYSE") has proposed rules that would
require listed companies to adopt governance guidelines covering certain
matters. The Company believes that the Corporate Governance Principles comply
with the proposed rules.
Director Independence
The Company's existing standards for determining director independence
require the assessment of directors' independence on an annual basis. In March
2003, the Board of Directors assessed the independence of each director in
accordance with its then-effective independence standards for directors, which
generally define an independent director as one who does not have any
relationship with management or the Company that may interfere with the exercise
of his or her independent judgement. The Board of Directors has determined,
after careful review, that each member of the Board of Directors is independent,
with the exception of Mr. Sheffield, who is an employee of the Company.
Accordingly, eight out of the nine current members of the Board of Directors are
independent directors.
The NYSE has proposed rules that would adopt a revised definition of
director independence for listed companies. Upon final approval of such rules,
the Board of Directors will amend the Corporate Governance Principles as
necessary to ensure that the Company's standards for director independence meet
or exceed those in the final rules, and will thereafter evaluate director
independence in accordance with those standards. Based on the rules as proposed
at the time of the Board of Director's evaluation of independence in March 2003,
the Board of Directors believes that all non-employee directors would be
independent under the proposed rules.
Election of Lead Director
In February 2003, the Board of Directors elected Mr. Ramsey, a
non-employee director, to serve as chairman of the regular private meetings of
the independent directors, and as Chairman of the Company's Nominating and
Corporate Governance Committee (the "Lead Director"). Utilizing input from all
19
directors, the Lead Director will work with the CEO and Chairman of the Board to
determine the appropriate agenda and information package for Board of Director
meetings; meet with the CEO and Chairman of the Board, senior management and
individual directors, as required, to facilitate effective communications and
information flow; take a leadership role in CEO succession and senior management
development; take a leadership role in director evaluation, continuing
education, recruiting and orientation; and serve as the Board of Directors
contact in the process for direct employee and stockholder communications with
the Board of Directors.
Financial Literacy of Audit Committee and Designation of Financial Experts
In March 2003, the Board of Directors evaluated the members of the Audit
Committee for financial literacy and the attributes of a financial expert. The
Board of Directors determined that each of the Audit Committee members is
financially literate and that three of the Audit Committee members (Mrs. Lawson
and Messrs. Gardner and Houghton) are financial experts as recently defined by
the SEC.
Procedure for Directly Contacting the Board and Whistleblower Policy
A means for stockholders and employees to contact the Board of Directors
directly has been established, and is published on the Company's website at
www.pioneernrc.com. Matters for which this contact may be used include
allegations about actions of the Company or its directors, officers or employees
involving (a) questionable accounting, internal controls and auditing matters;
(b) materially misleading statements or omissions in SEC reports, press
releases, or other public statements or other forms of wire, mail or securities
fraud; or (c) dishonest or unethical conduct, conflicts of interest, violations
of the Company's codes of ethics or business conduct, or violation of laws.
Information may be submitted confidentially and anonymously, although the
Company may be obligated by law to disclose the information or identity of the
person providing the information in connection with government or private legal
actions and in some other circumstances. The Company's policy is not to
retaliate against any director, officer or employee who provides truthful
information relating to a violation of law or Company policies.
20
COMPANY PERFORMANCE
The following graph and chart compare the Company's cumulative total
stockholder return on common stock during the period from December 31, 19961997 to
December 31, 2001,2002, with cumulative total stockholder return during the same
period for the DJ Oil-Secondary GroupSecondary Oil Index and the Standard and the Poor'sS&P 500 Index as prescribed by Securities and Exchange Commissionthe SEC
rules. The Company's
cumulative total stockholder return for the period from December 31, 1996 to
December 31, 2001 consists of Parker & Parsley's operating results prior to
August 8, 1997 and the Company's operating results beginning August 8, 1997. The graph and chart show the value, at December 31 in each of 1997, 1998, 1999,
2000, 2001 and 20012002 of $100 invested at December 31, 1996,1997, and assumesassume the
reinvestment of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG PIONEER NATURAL RESOURCES COMPANY, THE STANDARD & POOR'S 500 INDEX
AND THE DOW JONES OIL -COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG PIONEER NATURAL RESOURCES COMPANY, THE STANDARD & POOR'S 500 INDEX
AND THE DOW JONES U.S. OIL COMPANIES, SECONDARY INDEX
Pioneer DJ
Natural Dow Jones StandardSecondary
Measurement Resources Oil & Poor'sS&P
(Fiscal Year Covered) Company SecondaryIndex 500
--------------------- --------- --------- ---------
19961997 100 100 100
19971998 30 69 129
1999 31 79 100 133
1998 24156
2000 68 171
1999 25 79 208
2000 54 126 189141
2001 5367 116 166
125
2002 88 119 97
---------------
* Assumes $100 invested on December 31, 1997 in stock or
index, including reinvestment of dividends.
Fiscal year ending December 31, 1996 in stock or index,
including reinvestment of dividends.
Fiscal year ending December 31.
1996
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
Pioneer Natural Resources Company 100 30 31 68 67 88
DJ Secondary Oil Index 100 69 79 24 25 54 53
Standard & Poor's126 116 119
S&P 500 100 133 171 208 189 166
Dow Jones Oil - Secondary 100 100 68 79 126 116129 156 141 125 97
1821
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of common stock as of March 12, 2002,19, 2003, by (a) each person
who is known by the Company to own beneficially more than 5%five percent of the
outstanding shares of common stock, (b) each director of the Company, (c) each
named executive officer of the Company, and (d) all directors and executive
officers as a group.
Number of Percentage
Name of Person or Identity of Group Shares Of Class (1)
----------------------------------- --------------------- ------------
Southeastern Asset Management, Inc. (2)............ 25,831,096 24.8%....................... 20,588,394 17.5
Longleaf Partners Fund
O. Mason Hawkins
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
Richard E. Rainwater (3) (4) ...................... 5,779,961 5.5%
777 Main Street, Suite 2700
Fort Worth, Texas 76102
Scott D. Sheffield (3) (4) (5)......................... 350,305................................ 517,722 *
Timothy L. Dove (4)(3) (5) (6)............................ 134,097................................... 197,097 *
Dennis E. Fagerstone (4)........................... 216,096(3) (5).................................. 288,929 *
Danny L. Kellum (4)(3) (5) (7)............................ 88,202................................... 114,536 *
Mark L. Withrow (4)(3) (5) (8)............................ 174,019................................... 235,213 *
James R. Baroffio (4)(3) (9).......................... 48,849..................................... 58,849 *
Edison C. Buchanan (5)........................................ 7,113 *
R. Hartwell Gardner (4)............................ 54,244(3)....................................... 70,480 *
James L. Houghton (4)(3) (5) (10)......................... 49,761................................ 52,807 *
Jerry P. Jones (4)................................. 53,648(3)............................................ 56,648 *
Linda K. Lawson (5) (11)...................................... 5,981 *
Charles E. Ramsey, Jr. (4)......................... 48,000(3).................................... 45,307 *
Robert A. Solberg (5) ........................................ 5,581 *
All directors and executive officers as a group
(11(14 persons) (5) (12)....................................... 1,764,524 1.5
* Does not exceed one percent.
(1) Based on 117,610,782 shares of common stock outstanding.
(2) The Schedule 13G/A filed with the SEC on January 10, 2003, which is a joint
statement on Schedule 13G/A filed by Southeastern Asset Management, Inc.
("Southeastern"), Longleaf Partners Fund and O. Mason Hawkins ("Hawkins"),
states that the statement is being filed by Southeastern as a registered
investment adviser, and that all of the securities covered by the statement
are owned legally by Southeastern's investment advisory clients and none
are owned directly or indirectly by Southeastern. The Schedule 13G/A
further states that the statement is also being filed by Hawkins, Chairman
of the Board and C.E.O. of Southeastern, in the event he could be deemed to
be a controlling person of that firm as the result of his official
positions with or ownership of its voting securities. The existence of such
control is expressly disclaimed. Hawkins does not own directly or
indirectly any securities covered by the Schedule 13G/A for his own
account.
(3) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 19, 2003: Mr. Sheffield,
273,500; Mr. Dove, 141,833; Mr. Fagerstone, 234,022; Mr. Kellum, 78,000;
Mr. Withrow, 149,666; Mr. Baroffio, 48,096; Mr. Gardner, 57,991; Mr.
Houghton, 41,576; Mr. Jones, 41,096; and Mr. Ramsey, 36,307.
22
(4) Includes 5,000 shares held in Mr. Sheffield's investment retirement account
and 10,280 shares held in Mr. Sheffield's 401(k) account.
(5) Includes the following number of unvested restricted shares: Mr. Sheffield,
72,000; Mr. Dove, 24,000; Mr. Fagerstone, 24,000; Mr. Kellum, 24,000; Mr.
Withrow, 24,000; Mr. Buchanan, 5,589; Mr. Houghton, 317: Mrs. Lawson,
5,081; Mr. Solberg, 5,081; and all directors and executive officers as a
group, 208,068.
(6) Includes 339 shares held in Mr. Dove's 401(k) account.
(7) Includes 516 shares held in Mr. Kellum's 401(k) account.
(8) Includes 17,170 shares held in Mr. Withrow's 401(k) account.
(9) Includes 10,753 shares held in trust that are shares beneficially owned by
Mr. Baroffio.
(10) Includes 8,914 shares held by two trusts of which Mr. Houghton is a trustee
and over which shares he has sole voting and investment power and 2,000
shares held in Mr. Houghton's investment retirement account.
(11).......................... 1,273,815 1.2% Includes 900 shares held in Mrs. Lawson's investment retirement account.
(12) Includes 1,177,587 shares of common stock subject to stock options that
were exercisable at or within 60 days after March 19, 2003. Including
outstanding option awards to directors and executive officers for an
additional 650,802 shares of common stock which do not become exercisable
within 60 days after March 19, 2003, directors and executive officers as a
group own 2.0 percent of class.
* Does not exceed 1%.
(1) Based on 104,234,144 shares of common stock consisting of 103,290,626
outstanding shares of common stock and 943,518 outstanding exchangeable
shares that are exchangeable for the same number of shares of common stock.
(2) The Schedule 13G/A filed with the SEC on February 4, 2002, which is a joint
statement on Schedule 13G/A filed by Southeastern Asset Management, Inc.
("Southeastern"), Longleaf Partners Fund and O. Mason Hawkins ("Hawkins"),
states that the statement is being filed by Southeastern as a registered
investment adviser, and that all of the securities covered by the statement
are owned legally by Southeastern's investment advisory clients and none
are owned directly or indirectly by Southeastern. The Schedule 13G/A
further states that the statement is also being filed by Hawkins, Chairman
of the Board and C.E.O. of Southeastern, in the event he could be deemed to
be a controlling person of that firm as the result of his official
positions with or ownership of its voting securities. The existence of such
control is expressly disclaimed. Hawkins does not own directly or
indirectly any securities covered by the Schedule 13G/A for his own
account.
19
(3) Includes 109,324 shares owned directly by Rainwater, Inc., of which Mr.
Rainwater is the sole shareholder, 292,796 shares (of which Mr. Rainwater
disclaims beneficial ownership) owned by Mr. Rainwater's spouse and 19,300
shares owned by The Richard E. Rainwater Charitable Unit Trust #2.
(4) Includes the following number of shares subject to stock options that were
exercisable at or within 60 days after March 12, 2002: Mr. Rainwater,
18,147; Mr. Sheffield, 170,000; Mr. Dove, 102,833; Mr. Fagerstone, 185,189;
Mr. Kellum, 75,668; Mr. Withrow, 112,501; Mr. Baroffio, 38,096; Mr.
Gardner, 41,755; Mr. Houghton, 39,000; Mr. Jones, 31,096; and Mr. Ramsey,
37,000.
(5) Includes 1,100 shares held by Mr. Sheffield's children, 5,000 shares held
in Mr. Sheffield's investment retirement account and 10,263 shares held in
Mr. Sheffield's 401(k) account.
(6) Includes 339 shares held in Mr. Dove's 401(k) account.
(7) Includes 514 shares held in Mr. Kellum's 401(k) account.
(8) Includes 17,141 shares held in Mr. Withrow's 401(k) account.
(9) Includes 10,753 shares held in trust that are shares beneficially owned by
Mr. Baroffio.
(10) Includes 10,361 shares held by two trusts of which Mr. Houghton is a
trustee and over which shares he has sole voting and investment power and
400 shares that are owned by Mr. Houghton's children.
(11) Includes 880,972 shares of common stock subject to stock options that were
exercisable at or within 60 days after March 12, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The executive officers and directors of the Company are required to file
reports with the SEC, and with the various Canadian provincial securities
commissions (the "Canadian Commissions"), disclosing the amount and nature of their beneficial
ownership in common stock, as well as changes in that ownership.
Pursuant to applicable Canadian policies, the executive officers and
directors of the Company are exempted from filing reports with the Canadian
Commissions, provided that they timely file all reports required to be filed
with the SEC.
Based solely on its review of reports and written representations that
the Company has received, the Company is aware that Susan A. Spratlen, the
Company's Vice President - Investor Relations and Communication, did not timely
file one report on Form 4 covering one transaction effected during 2002. Other
than as discussed above, the Company believes that all required reports were
filed on time for 2001.2002.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 1, 1999,During 2002, the Company entereddid not enter into an amendedany transactions with
management and restated agreement with Rainwater, Inc., whereby the Company pays Rainwater,
Inc. $300,000 per yearothers, nor was it a party to business relationships or other
arrangements or transactions, that would be reportable as certain relationships
and reimburses Rainwater, Inc. for certain expenses in
consideration for certain consulting and financial analysis services providedrelated transactions. Mr. Jones is of counsel to the Company by Rainwater, Inc.firm of Thompson &
Knight, L.L.P. since his retirement from the firm in January 1998. Thompson &
Knight, L.L.P. provide periodic legal services to the Company. Thompson &
Knight, L.L.P. customarily gives the "of counsel" title to retired partners of
the firm. Mr. Jones has no role in, and its representatives. The termreceives no pay from, Thompson & Knight,
L.L.P. except payments under a retirement savings plan. Accordingly, the Board
of Directors does not consider this agreement expires on December 31, 2003.relationship to be relevant to Mr. Jones'
independence.
STOCKHOLDER PROPOSALS
Any stockholder of the Company who desires to submit a proposal for
action at the Company's annual meeting of stockholders for 20032004 and wishes to
have such proposal (a "Rule 14a-8 Proposal") included in the Company's proxy
materials, must submit such Rule 14a-8 Proposal to the Company at its principal
executive offices no later than December 11, 2002,2003, unless the Company notifies
the stockholders otherwise. Only those Rule 14a-8 Proposals that are timely
received by the Company and proper for stockholder action (and otherwise proper)
will be included in the Company's proxy materials.
Any stockholder of the Company who desires to submit a proposal for
action at the annual meeting of stockholders in 2003,2004, but does not wish to have
such proposal (a "Non-Rule 14a-8 Proposal") included in the Company's proxy
20
materials, must submit such Non-Rule 14a-8 Proposal to the Company at its
23
principal executive offices no later than February 24, 2003,2004, unless the Company
notifies the stockholders otherwise. If a Non-Rule 14a-8 Proposal is not
received by the Company on or before February 24, 2003,2004, then the Company intends
to exercise its discretionary voting authority with respect to such Non-Rule
14a-8 Proposal.
"Discretionary voting authority" is the ability to vote proxies that
stockholders have executed and returned to the Company, on matters not
specifically reflected in the Company's proxy materials, and on which
stockholders have not had an opportunity to vote by proxy.
Stockholders desiring to propose action at the annual meeting of
stockholders must also comply with Article Ninth of the Amended and Restated
Certificate of Incorporation of the Company. Under Article Ninth, a stockholder
must submit to the Company, no later than 60 days before the annual meeting or
ten days after the first public notice of the annual meeting is sent to
stockholders, a written notice setting forth (i) the nature of the proposal with
particularity, including the written text of the proposal, (ii) the
stockholder's name, address and other personal information, (iii) any interest
of the stockholder in the proposed business, (iv) the name of any persons
nominated to be elected or reelected as a director by the stockholder, and (v)
with respect to each such nominee, the nominee's name, address and other
personal information, the number of shares of each class and series of stock of
the Company held by such nominee, all information required to be disclosed
pursuant to Regulation 14A of the Securities and Exchange Act of 1934, and a
notarized letter containing such nominee's acceptance of the nomination, stating
his or her intention to serve as director if elected, and consenting to be named
as a nominee in any proxy statement relating to such election. The person
presiding at the annual meeting will determine whether business is properly
brought before the meeting and will not permit the consideration of any business
not properly brought before the meeting.
Written requests for inclusion of any stockholder proposal should be
addressed to Corporate Secretary, Pioneer Natural Resources Company, 5205 North
O'Connor Boulevard, Suite 1400, Irving, Texas 75039. The Company suggests that
any such proposal be sent by certified mail, return receipt requested.
The Board of DirectorsNominating and Corporate Governance Committee will consider any
nominee recommended by stockholders for election at the annual meeting of
stockholders to be held in 20032004 if that nomination is submitted in writing, not
later than January 10,
2003,9, 2004, to Corporate Secretary, Pioneer Natural Resources
Company, 5205 North O'Connor Boulevard, Suite 1400, Irving, Texas 75039. Each
submission must include a statement of the qualifications of the nominee, a
notarized consent signed by the nominee evidencing a willingness to serve as a
director, if elected, and a commitment by the nominee to meet personally with
members of the Board of Directors.Directors and its committees.
SOLICITATION OF PROXIES
Solicitation of Proxies may be made by mail, personal interview,
telephone or telegraph by officers, directors and regular employees of the
Company. The Company may also request banking institutions, brokerage firms,
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the common stock that those companies or persons hold of
record, and the Company will reimburse the forwarding expenses. In addition, the
Company has retained D.F. King & Co., Inc. to assist in solicitation for a fee
estimated not to exceed $7,500.$7,500.00. The Company will bear all costs of
solicitation.
STOCKHOLDER LIST
In accordance with the Delaware General Corporation Law, the Company will
maintain at its corporate offices in Irving, Texas, a list of the stockholders
entitled to vote at the Annual Meeting. The list will be open to the examination
of any stockholder, for purposes germane to the Annual Meeting, during ordinary
business hours for 10 days before the Annual Meeting.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2001,2002, is being mailed to stockholders concurrently with this Proxy
Statement and does not form part of the proxy solicitation material.
2124
Only a single copy of this Proxy Statement is being delivered to multiple
stockholders sharing a common address unless the Company receives contrary
instructions from stockholders sharing a common address. Upon written or oral
request to the Company's Investor Relations department at the address or
telephone number provided above, the Company will deliver promptly a separate
copy of the Proxy Statement to a stockholder at a shared address to which a
single copy of this Proxy Statement was delivered. By written or oral request to
the same address, (i) a stockholder may direct a notification to the Company
that the stockholder wishes to receive a separate annual report or proxy
statement in the future, or (ii) stockholders who share an address and who are
receiving delivery of multiple copies of the Company's annual reports or proxy
statements can request delivery of only a single copy of these documents to
their shared address.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001,2002, as filed with the SEC, will be sent to any stockholder
without charge upon written request addressed to Investor Relations, Pioneer
Natural Resources Company, 5205 North O'Connor Boulevard, Suite 1400, Irving,
Texas 75039. A copy of this proxy statement or our Annual Report on Form 10-K
will also be sent upon written or oral request to any stockholder of a shared
address to which a single copy of this proxy statement or Annual Report on Form
10-K was delivered. Requests may be made by writing to Investor Relations at the
address previously given or by calling 972-969-3583. The Annual Report on Form
10-K is also available at the SEC's web site in its EDGAR database
(www.sec.gov).
INTERNET VOTING
For shares of stock that are registered in your name, you have the
opportunity to vote through the Internet using a program provided by the
Company's transfer agent, Continental Stock Transfer & Trust Company.Company
("Continental"). Votes submitted electronically through the Internet under this
program must be received by 5:00 p.m., New York time, on Monday,Wednesday, May 13, 2002.14,
2003. The giving of such a proxy will not affect your right to vote in person
should you decide to attend the Annual Meeting. The Company has been advised by
counsel that the Internet voting procedures that have been made available
through Continental are consistent with the requirements of applicable law.
To vote through the Internet, please access Continental Stock Transfer &
Trust Company on the World Wide
Web at www.continentalstock.com. Select "ContinentaLink Proxy Voting" on the
screen. At the next screen, you will need to enter the Company Number, Proxy
Number and Account Number that are printed on your personalized proxy card.
The Internet voting procedures are designed to authenticate stockholder
identities, to allow stockholders to give their voting instructions, and to
confirm that stockholders' instructions have been recorded properly.
Stockholders voting through the Internet should remember that the stockholder
must bear costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies.
******
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN, AND
RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE OR TO VOTE
THROUGH THE INTERNET.
By Order of the Board of Directors
/s/ Mark L. Withrow
-----------------------------------------------------------------------------
Mark L. Withrow
Secretary
22Irving, Texas
April 7, 2003
25
Information Statement for HoldersAnnex A
PIONEER NATURAL RESOURCES COMPANY
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I Purpose
The Board of Exchangeable SharesDirectors (the "Board") of Pioneer Natural Resources Canada Inc.Company
(the "Company") has established the Audit Committee (the "Committee") of the
Board. The enclosed Proxy Statementpurposes of the Committee are to assist the Board in fulfilling its
oversight responsibilities by:
A. overseeing the reliability and integrity of the Company's
financial statements, accounting policies, and financial reporting
and disclosure practices,
B. overseeing the Company's compliance with legal and regulatory
requirements,
C. overseeing the independent auditor's qualifications and
independence,
D. overseeing the performance of the Company's internal audit
function and any independent internal auditors,
E. overseeing the Company's systems of internal controls regarding
finance, accounting, legal compliance and ethics that management
and the Board have established,
F. reviewing and appraising the audit efforts of the Company's
independent auditors and internal auditing department (reference
to internal auditors or the internal audit department in this
Charter shall include both internal audit activities and functions
conducted by employees of the Company or by outside auditors
engaged for such purposes) and, where appropriate, replacing the
independent auditors or internal audit department,
G. providing an open avenue of communication among the independent
auditors, financial and senior management, the internal auditors
or department, and the Board, always emphasizing that the
independent auditors are ultimately accountable to the Committee
and the Board, and
H. preparing annually the report the SEC rules require be included in
the proxy statement relating to the Company's annual meeting of
stockholders, and
I. performing such other duties as are directed by the Board.
Consistent with this Purpose, the Committee should encourage continuous
improvement of, and should foster adherence to, the Company's policies,
procedures and practices at all levels. The Committee will primarily fulfill
these responsibilities by carrying out the activities enumerated in Section V of
this Charter.
II Composition
The Committee shall be comprised of three or more Directors, as
determined by the Board or a nominating committee of the Board, none of whom
shall be an affiliate of the Company or an employee or a person who receives any
compensation from the Company other than fees paid for service as a Director.
The members of the Committee shall be elected by the Board or a nominating
committee of the Board annually and shall serve until their successors shall be
duly elected and qualified. Each member shall be "independent" as defined from
time to time by the listing standards of the New York Stock Exchange (the
"NYSE") and by applicable regulations of the Securities and Exchange Commission
26
(the "SEC") and shall meet any other applicable independence requirements of the
NYSE and SEC. Accordingly, the Board shall determine annually whether each
member is free from any relationship that may interfere with his or her
independence from management and the Company. No member shall serve on an audit
committee of more than two other public companies unless the Board determines
that such simultaneous service would not impair the ability of such director to
effectively serve on the Committee.
Each member shall be (or shall become within a reasonable time after
appointment) financially literate, and at least one member shall be a "financial
expert" as defined from time to time by applicable regulations of the SEC.
Members of the Committee may enhance their familiarity with finance and
accounting principles by participating in educational programs that the Company
or an outside consultant conducts.
Notwithstanding the foregoing membership requirements, no action of the
Committee shall be invalid by reason of any such requirement not being met at
the time such action is taken.
III Meetings and Structure
The Committee shall meet at least four times per year to review the
financial information of the Company, consistent with its duties and
responsibilities, and as many additional times as the members deem necessary. As
a part of its effort to foster open communications, the Committee should meet at
least annually with management, the director of the internal auditing
department, and the independent auditors in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately.
Unless the Board designates a Chair of the Committee, the members of the
Committee shall, by majority vote of the full Committee membership, appoint one
member of the Committee as chairperson. He or she shall be responsible for
leadership of the Audit Committee, including preparing the agenda, presiding
over the meetings, making committee assignments and reporting to the Board. The
chairperson will also maintain regular liaison with the Chief Executive Officer,
the Chief Financial Officer, the lead audit partner of the Company's independent
auditors and the Company's internal auditor.
IV Accountability of the Independent Auditors
The independent auditors are accountable to the Committee. The Committee
shall have the sole authority and responsibility with respect to the selection,
engagement, compensation, oversight, evaluation and, where appropriate,
dismissal of the Company's independent auditors. The Committee, or a member
thereof, must pre-approve any non-audit service provided to the Company by the
Company's independent auditors.
V Authority and Responsibilities
The Committee shall have the authority to take all actions it deems
advisable to fulfill its responsibilities and duties. The Committee shall have
the authority to retain professional advisors including, without limitation,
special legal counsel, accounting experts, or other consultants to advise the
Committee, which may be the same as or different from the Company's primary
legal counsel, accounting experts and other consultants as the Committee deems
necessary or advisable in connection with the exercise of its powers and
responsibilities as set forth in this Audit Committee Charter, all on such terms
as the Committee deems necessary and advisable. The Committee may require any
officer or employee of the Company or any of its subsidiaries, the Company's
outside legal counsel, and the Company's external auditors to attend a meeting
of the Committee or to meet with any member of, or consultant to, the Committee.
The Committee chairperson, or other designee of the Committee, may also meet
with the Company's investment bankers or financial analysts who follow the
Company.
The Committee shall be responsible for the resolution of any
disagreements between the independent auditors and management regarding the
Company's financial reporting.
The Company shall provide for appropriate funding, as determined by the
Committee, for payment of compensation to the independent auditors employed by
27
the Company for the purpose of rendering or issuing an audit report and to any
special legal counsel, accounting experts or other consultants employed by the
Committee.
To further fulfill the purpose, powers and responsibilities set forth
above, the Committee shall also:
A. Independent Auditors
o Annually select and engage the Company's independent
auditors retained to audit the financial statements of the
Company with such selection to be submitted to the
stockholders for ratification, if the Board of Directors so
chooses.
o Review the performance of the independent auditors and
approve any proposed discharge of the independent auditors
when circumstances warrant.
o Review and pre-approve the plan and scope of the independent
auditors' auditing services (including comfort letters),
non-audit services and related fees. The Company shall
disclose any non-audit services approved by the Audit
Committee in the Company's periodic reports filed with the
SEC.
o Ensure that the lead audit partner and reviewing audit
partner of the Company's independent auditors are rotated at
least every five years.
o Set clear hiring policies for employees or former employees
of the Company's independent auditors.
o Periodically obtain and review a report from the independent
auditors regarding all relationships between the independent
auditors and the Company that may affect the independent
auditors' objectivity and independence, and discuss the
report with the independent auditors. The Committee shall
also recommend any appropriate action to the Board in
response to the written report necessary to satisfy itself
of the independence and objectivity of the independent
auditors.
o Periodically obtain and review reports from the independent
auditors that include (i) all alternative treatments of
financial information within generally accepted accounting
principles ("GAAP") that have been discussed with
management, their ramifications and the preferences of the
independent auditors, and (ii) other material written
communications between the independent auditors and
management.
o Review and approve the appointment, termination or
replacement by management of a Director of Internal Auditing
or, at the discretion of the Board, select and contract with
outside auditors to perform the function of an internal
audit department.
o Direct the scope of the duties and activities of the
Director of Internal Auditing or any outside auditors
serving as internal auditors, who shall report directly to
the Audit Committee.
B. Review
o Periodically obtain and review reports from the independent
auditors that include all critical accounting policies and
practices used.
o Review with management and the independent auditors the
Company's quarterly or annual financial information
including matters required to be reviewed under applicable
legal, regulatory or NYSE requirements prior to the filing
of the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, as the case may be, or prior to the
release of earnings.
28
o Discuss with financial management the Company's earnings
releases, including the use of "pro forma", "adjusted" or
other non-GAAP measures, as well as financial information
and earnings guidance, if any, provided to the public,
analysts or rating agencies.
o Review and discuss with management and the independent
auditors the disclosures made in management's discussion and
analysis of financial condition and results of operations in
any of the Company's reports on Form 10-Q or Form 10-K.
o Upon completion of any annual audit, meet separately with
the independent auditors and management and review the
Company's financial statements and related notes, the
results of their audit, any report or opinion rendered in
connection therewith, any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information, any significant disagreements with management
concerning accounting or disclosure matters and any
significant adjustment proposed by the independent auditors.
o Regularly review with the Company's independent auditors any
audit problems or difficulties and management's response.
o Review and consider with the independent auditors and
management the matters required to be discussed by Statement
of Auditing Standards No. 61. These discussions shall
include consideration of the quality of the Company's
accounting principles as applied in its financial reporting,
including review of estimates, reserves and accruals, review
of judgmental areas, review of audit adjustments whether or
not recorded and such other inquiries as may be appropriate.
o Based on the foregoing review, make recommendation to the
Board as to the inclusion of the Company's audited financial
statements in the Company's annual report on Form 10-K.
o Review any disclosures provided by the Chief Executive
Officer or the Chief Financial Officer to the Committee
regarding significant deficiencies in the design or
operation of internal controls which could adversely affect
the Company's ability to record, process, summarize, and
report financial data.
o Review with management and the independent auditors any
significant transactions that are not a normal part of the
Company's operations and changes, if any, in the Company's
accounting principles or their application.
o At least annually, obtain and review a report by the
independent auditors describing the firm's internal
quality-control procedures; any material issues raised by
the most recent internal quality-control review, or peer
review, of the firm, or by any inquiry or investigation by
governmental or professional authorities, within the
preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal
with any such issues.
o Periodically meet and review with the Director of Internal
Auditing the regular internal reports to management prepared
by the internal auditing department and the progress of
activities and any findings of major significance stemming
from internal audits.
C. Financial Reporting Processes
o Periodically discuss separately with management, the
independent auditors and the internal auditors the adequacy
and integrity of the Company's accounting policies and
procedures and internal accounting controls, the
completeness and accuracy of the Company's financial
disclosure and the extent to which major recommendations
made by the independent auditors or the internal auditors
have been implemented or resolved.
29
o Consider and approve, if appropriate, major changes to the
Company's auditing and accounting principles and practices
as suggested by the independent auditors, management, or the
internal auditing department.
o Review with the independent auditors, the internal auditing
department and management the extent to which such changes
have been implemented. This review should be conducted at an
appropriate time subsequent to implementation of changes, as
the Committee determines.
D. Process Improvement
o Establish regular and separate systems of reporting to the
Audit Committee by each of management, the independent
auditors and the Director of Internal Auditing regarding any
significant judgments made in management's preparation of
the financial statements and the view of each as to
appropriateness of such judgments.
o Conduct annual evaluation with the Board regarding the
performance of the Audit Committee.
o Discuss with management and the Director of Internal
Accounting policies with respect to risk assessment and risk
management.
o Regularly apprise the Board, through minutes and special
presentations as necessary, of significant developments in
the course of performing these duties.
E. Ethical and Legal Compliance
o Establish procedures for the receipt, retention and
treatment of complaints received regarding accounting,
internal accounting controls, auditing matters and the
confidential, anonymous submissions by employees of concerns
regarding questionable accounting or auditing matters.
o Review any disclosures provided by the Chief Executive
Officer or the Chief Financial Officer to the Committee
regarding (i) significant deficiencies in the design or
operation of internal controls which could adversely affect
the Company's ability to record, process, summarize and
report financial data; and (ii) any fraud, including that
which involves management or other employees who have a
significant role in the Company's internal controls.
o Investigate at its discretion any matter brought to its
attention by, without limitation, reviewing the books,
records and facilities of the Company and interviewing
Company officers or employees.
o Review management's monitoring of the Company's compliance
programs and evaluate whether management has review systems
in place designed to ensure that the Company's financial
statements, reports and other financial information
disseminated to governmental organizations and the public
satisfy applicable legal, regulatory or NYSE requirements.
o Review with the Company's in-house or outside legal counsel
any legal matter that could have a significant effect on the
Company's financial statements, including the status of
pending litigation, taxation matters and other areas of
oversight to the legal and compliance area as may be
appropriate.
30
o Review with management and the independent auditors the
Company's policies and procedures regarding compliance with
its internal policies as well as applicable laws and
regulations, including without limitation with respect to
maintaining books, records and accounts and a system of
internal accounting controls in accordance with Section
13(b)(2) of the Securities Exchange Act of 1934.
F. General
o Perform any other activities consistent with this Charter,
the Company's Certificate of Incorporation and Bylaws, the
rules of the NYSE applicable to its listed companies, and
governing law as the Audit Committee or the Board deems
necessary or appropriate.
VI Review of Committee Charter
At least annually, the Committee shall review and reassess the adequacy
of this Charter. The Committee shall report the results of the review to the
Board and, if necessary, make recommendations to the Board to amend this
Charter.
VII Limitations
While the Committee has the responsibilities and powers set forth in this
Charter and management and the independent auditors for the Company are
accountable to the Committee, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete and accurate and are in accordance with GAAP. This is the
responsibility of management.
31
Annex B
PIONEER NATURAL RESOURCES COMPANY
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I Purposes
The Board of Directors (the "Board") of Pioneer Natural Resources Company
(the "Company") has established the Compensation Committee (the "Committee") of
the Board. The purposes of the Committee are to discharge the Board's
responsibilities relating to:
1. the compensation of the Company's executive officers;
2. the publishing in the annual meeting proxy statement a report on
executive compensation, and compliance with the compensation
reporting requirements of the Securities and Exchange Commission,
New York Stock Exchange, and any other regulatory bodies;
3. administering the Company's employee benefit plans; and
4. formulating and monitoring the Company's overall employee
compensation and benefits philosophy and strategy.
The Committee shall have such additional powers, authority and duties as are
described in this Charter, as are reasonably necessary to carry out the general
purposes of this Charter and the plan documents referred to herein, and as may
be assigned from time to time by the Board.
II Composition
The Committee will consist of a minimum of three (3) directors as
determined by the Board. Unless the Board designates a chair of the committee,
the members of the committee may designate a chair by majority vote of the full
committee membership. All members of the Committee at all times during his/her
tenure on the Committee must meet the definition of:
o A "non-employee director" within the meaning of Rule 16b-3
promulgated under the Securities and Exchange Act of 1934;
o An "outside director" within the meaning Section 162(m) of the
Internal Revenue Code of 1986, as amended; and
o An "independent director" within the meaning of the New York Stock
Exchange Inc. rules and regulations.
In appointing members to the Committee, the Board shall keep in mind the
following:
o Whether an individual has sufficient time to commit to services to
the Committee;
o Whether an individual has experience or knowledge with setting
compensation policies, procedures and programs, and the review and
administration of executive and director compensation programs;
o Whether an individual has a strong understanding of financial
performance measurements; and
32
o Whether an individual brings skills and abilities not otherwise
possessed by other Committee members that would aid the Committee
in the execution of its duties and responsibilities.
The Board may remove or replace the chairperson and any other member of the
Committee at any time.
III Meetings
The Committee customarily conducts a minimum of four (4) regularly
scheduled meetings each year, including executive sessions, as needed.
A majority of the Committee members will constitute a quorum. The
Committee shall have the authority to act on the affirmative vote of a majority
of members present at a meeting at which a quorum is present, and such act will
be the act of the Committee.
Attendance at meetings shall be permitted in person, by telephone
conference call or other means which allows members to effectively interact with
one another and fully discuss proposed actions, or in any other manner in which
the Board is permitted to meet under law or the Company's bylaws. Any action
permitted or required to be taken at a meeting of the Committee will be deemed
the action of the Committee if the Committee members execute, either before or
after the action is taken, a unanimous written consent and the consent is filed
with the Company's Corporate Secretary.
Regular meetings of the Committee shall be called according to the
schedule for the year approved by the Committee. Special meetings of the
Committee can be called by the chairperson, a majority of the members of the
Committee, the Chairman of the Board, or by a majority of the Board.
The Vice President - Administration, or such other officer as may from
time to time be designated by the Committee, shall act as management liaison to
the Committee and shall work with the Committee chairperson to prepare an agenda
for regularly scheduled meetings. The Committee chairperson will make the final
decision regarding the agenda for regularly scheduled meetings and shall develop
the agenda for special meetings based on the information supplied by the
party(ies) requesting the special meeting.
The agenda and all materials to be reviewed at the meetings should be
received by the Committee members as far in advance of the meeting day as
practicable (which for regularly scheduled meetings will normally be five days.)
The office of the Corporate Secretary shall coordinate and be responsible
for all mailings to the Committee members, to the extent practicable, and shall
be responsible for recording accurate Minutes of all Committee meetings and
distributing them to Committee members.
IV Duties and Responsibilities
The Committee shall have the following duties and responsibilities and
the necessary power and authority, including budgetary and fiscal authority, to
carry out such duties and responsibilities:
Executive Compensation
o Periodically review the Company's compensation philosophy and how
the pay programs align with philosophy, especially in relation to
the Company's business goals and strategies, determine whether any
change is needed or desired, and if so, modify and revise the
Company's compensation philosophy or compensation programs, plans
or awards accordingly.
o Annually review market data to assess the Company's competitive
position for each component of executive compensation (especially
base salary, annual incentives, long-term incentives and benefits)
by reviewing appropriate peer companies' market data compiled by
third party consultants.
33
o Approve, subject where appropriate to submission to stockholders,
all equity-related incentive compensation plans (including specific
provisions) in which the Company officers and any others subject to
the reporting and short-swing liability provisions of Section 16 of
the Securities Exchange Act of 1934 are participants, and perform
such acts and duties as are necessary to administer such plans
pursuant to their terms and conditions and in conformance with any
further restrictions placed thereon by the Board, including, but
not limited to the following:
o Approving equity incentive guidelines and the general size of
overall grants;
o Approving specific grants to Company officers, and any
others, subject to the reporting and short-swing liability
provisions of Section 16 of the Securities Exchange Act of
1934;
o Amending or interpreting the plans;
o Determining rules and regulations relating to the plans;
o Designating categories of employees eligible to participate
in the long-term incentive plans;
o Imposing limitations, restrictions and conditions upon any
award as the Committee deems appropriate; and
o Establishing, maintaining, revising and rescinding rules and
regulations relating to the Company's incentive plans.
o Review annually and determine the individual elements of the total
compensation and benefits paid to each of the Company's officers
after (a) determining such compensation and benefits to be
appropriate for the size of the Company and the scope and
performance of the Officers' duties and responsibilities, (b)
considering the recommendation made by the CEO for the compensation
of such officers, and (c) reviewing the Board's evaluation, if any,
of each such officer.
o Approve, and periodically review the terms of any employment
contract, severance agreement or change of control agreements for
individuals or groups of employees.
o Annually issue a report on executive compensation in accordance
with applicable rules and regulations of the Securities and
Exchange Commission for inclusion in the Company's proxy statement
for its annual meeting of stockholders.
CEO Compensation
o Review annually and determine the individual elements of total
compensation and benefits for the Chief Executive Officer after
taking into consideration the following:
o the size of the Company;
o market data compiled by third-party consultants;
o the CEO's duties and responsibilities;
o the performance of the CEO in meeting corporate goals and
objectives; and
o such other criteria as the Committee deems appropriate.
o Review and approve annually specific corporate goals and objectives
relative to CEO compensation for the next year, and discuss with
the entire Board;
34
o After receiving from the full Board the year-end evaluation of the
CEO in meeting the goals and objectives previously set for that
year, determine the total compensation of the CEO based upon that
evaluation.
o Recommend to the Board stock ownership requirements for the CEO.
Director and Committee Compensation
o Periodically review and recommend to the full Board total
compensation for each non-employee director and Committees of the
Board and determine the terms and awards of any equity compensation
for members of the Board.
o Conduct an annual performance evaluation of the Committee and its
members and submit the evaluation for review and evaluation by the
Board.
o Recommend to the Board stock ownership requirements for the
Directors.
V General
The Committee shall have the sole authority to retain, amend the
engagement with, and terminate any compensation consultant to be used to assist
in the evaluation of director, Chief Executive Officer or senior executive
compensation. The Committee shall have sole authority to approve the
consultant's fees and other retention terms and shall have authority to cause
the Company to pay the fees and expenses of such consultants. The Committee
shall also have authority to obtain advice and assistance from internal or
external legal, accounting or other advisors, to approve the fees and expenses
of such outside advisors, and to cause the Company to pay the fees and expenses
of such outside advisors.
The Committee shall regularly report to the Board on its activities and
decisions.
The Committee members will commit themselves, through the use of
consultants, review of current publications, surveys or other pertinent data
dealing with corporate director and/or officer compensation, to being
knowledgeable and current in compensation, benefit and related issues.
The Committee shall annually review and evaluate the Committee's Charter
and recommend any necessary revisions to the full Board.
35
Annex C
PIONEER NATURAL RESOURCES COMPANY
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
CHARTER
I Purposes
The Board of Directors (the "Board) of Pioneer Natural Resources Company
(the "Company") has established the Nominating and Corporate Governance
Committee (the "Committee") of the Board. The purposes of the Committee are:
1. To identify individuals qualified to become Board members, and to
recommend to the Board the director nominees for election at the
annual meetings of stockholders or for appointment to fill
vacancies;
2. To recommend to the Board director nominees for each committee of
the Board;
3. To advise the Board about appropriate composition of the Board and
its committees;
4. To advise the Board about, develop, and recommend to the Board
appropriate corporate governance practices and to assist the Board
in implementing those practices;
5. To oversee the evaluation of the Board through its annual review of
the performance of the Board and its committees and otherwise;
6. To oversee the evaluation of the management of the Company; and
7. To perform such other functions as the Board may assign to the
Committee from time to time.
II Composition
The Board shall appoint the members of the Committee. The Committee shall
consist of at least three members, all of whom are members of the Board. The
Lead Director of the Board shall serve as the chairperson of the Committee. Each
member of the Committee shall satisfy the independence requirements of the rules
of the New York Stock Exchange applicable to domestic listed companies.
The Board may remove or replace the chairperson and any other member of
the Committee at any time. On matters pertaining to the nomination of Directors
for election at the annual or any special meeting of stockholders, any members
of the Committee whose term is expiring and who would be eligible for election
at such stockholder meeting shall abstain from any vote and not participate in
the Committee meeting(s) called for such nomination.
III Authority and Responsibilities
The Committee is delegated all authority of the Board as may be required
or advisable to fulfill the purposes of the Committee. The Committee may form
and delegate some or all of its authority to subcommittees when it deems
appropriate. Without limiting the generality of the preceding statements, the
Committee shall have authority, and is entrusted with the responsibility, to do
the following actions.
1. The Committee shall prepare and recommend to the Board for adoption
appropriate corporate governance guidelines and modifications from
time to time to those guidelines.
36
2. The Committee shall develop criteria for Board members and shall
actively seek, interview, evaluate, and identify for recommendation
to the Board individuals qualified to become Board members.
3. The Committee shall seek to provide that a two-thirds majority of
the members of the Board are independent directors and that each
committee of the Board contains exclusively or, if appropriate, a
majority of members that are independent to the extent required by
law, applicable listing standards, the Company's charter or bylaws,
or the Company's Corporate Governance Principles.
4. The Committee shall determine whether or not each director and each
prospective director of the Company is independent, disinterested,
or a non-employee director under the standards applicable to the
committees on which such director is serving or may serve. The
Committee may survey any and all of the directors and prospective
directors to determine any matter or circumstance that would cause
the person not to qualify as an independent, disinterested or non-
employee director under applicable standards. The Committee shall
report to the Board the existence of any such matter or
circumstance.
5. The Committee shall oversee the evaluation of the management of the
Company at such times as it deems appropriate, but not less than
annually, and provide the evaluation together with recommendations
to the Board.
6. Each year, the Committee shall:
o review the advisability or need for any changes in the number
and composition of the Board;
o review the advisability or need for any changes in the
number, charters or titles of committees of the Board;
o recommend to the Board the composition of each committee of
the Board and, if in its discretion it so desires, the
individual director to serve as chairperson of each
committee;
o procure that the chairperson of each committee report to the
Board about his/her committee's annual evaluation of its
performance and evaluation of its charter;
o receive comments from all directors and report to the Board
an assessment of the Board's performance, to be discussed
with the full Board following the end of each fiscal year;
and
o review and reassess the adequacy of the Corporate Governance
Principles of the Company and recommend any proposed changes
to the Board for approval.
7. The Committee shall have the sole authority to retain, amend the
engagement with, and terminate any search firm to be used to
identify director candidates. The Committee shall have sole
authority to approve the search firm's fees and other retention
terms and shall have authority to cause the Company to pay the fees
and expenses of the search firm.
8. The Committee shall have authority to obtain advice and assistance
from internal or external legal, accounting or other advisors, to
approve the fees and expenses of such outside advisors, and to
cause the Company to pay the fees and expenses of such outside
advisors.
9. The Committee shall have authority to form and delegate authority
to subcommittees when it deems appropriate.
IV Procedures
1. Meetings. The Committee shall meet at the call of its chairperson,
two or more members of the Committee, or the Chairman of the Board.
Meetings may, at the discretion of the Committee, include members
of the Company's management, independent consultants, and such
37
other persons as the Committee or its chairperson may determine.
The Committee may meet in person, by telephone conference call, or
in any other manner in which the Board is permitted to meet under
law or the Company's bylaws.
2. Quorum and Approval. A majority of the members of the Committee
shall constitute a quorum. The Committee shall act on the
affirmative vote of a majority of members present at a meeting at
which a quorum is present. The Committee may also act by unanimous
written consent in lieu of a meeting.
3. Rules. Except as expressly provided in this Charter, the
certificate of incorporation or by-laws of the Company, or the
Corporate Governance Principles of the Company, the Committee may
determine additional rules and procedures to govern it or any of
its subcommittees, including designation of a chairperson pro
tempore in the absence of the chairperson and designation of a
secretary of the Committee or any meeting thereof.
4. Reports. The Committee shall make regular reports to the Board,
directly or through the chairperson.
5. Review of Charter. Each year the Committee shall review the need
for changes in this Charter and recommend any proposed changes to
the Board for approval.
6. Performance Review. Each year the Committee shall review and
evaluate its own performance and shall submit itself to the review
and evaluation of the Board.
7. Fees. Each member of the Committee shall be paid the fee set by the
Board for his or her services as a member of, or chairperson of,
the Committee.
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Annex D
PIONEER NATURAL RESOURCES COMPANY
CODE OF BUSINESS CONDUCT AND ETHICS
SECTION I
INTRODUCTION
The purpose of this Code of Business Conduct and Ethics ("Code") is to state the
principles of business conduct that the Board of Directors requires of each of
its members as well as all officers and employees of Pioneer Natural Resources
Company, and each of its subsidiaries (the "Company"). The Code outlines
specific guidelines for conduct in situations that affect all employees. Such
principles and guidelines are to be adhered to at all times and under all
circumstances and are applicable to all directors, officers and employees of the
Company. Unless specifically addressed herein, when the term "Employee(s)" is
used herein it also applies to all of the officers and directors of the Company.
All employees of the Company are expected to be guided by the basic principles
of honesty and fairness in the conduct of the Company's affairs. Employees are
encouraged to ask questions and voice concerns about the meaning or application
of the Company's business practices and compliance with applicable laws and
regulations. Enforcement of sound ethical standards is the responsibility of
every director, officer and employee of the Company. Employees are expected to
report suspected violations of Company policies and internal control procedures
or to make complaints regarding accounting, internal accounting controls or
accounting matters or to express concerns regarding questionable accounting or
auditing matters promptly to the Company's General Counsel or the Audit
Committee of the Board of Directors. With the "Compliance Line," the Company
provides employees with a confidential means to report any such suspected
violations or complaints. No action will be taken or threatened against any
employee for making a complaint or disclosing information to the employee's
supervisor or management personnel unless (1) the complaint or disclosure was
made with the knowledge that it was false or with willful disregard for its
truth or accuracy, or (2) the employee was involved in the improper activity.
The Compliance Line number is 1-800-750-4972.
The Board of Directors of the Company is charged with enforcing compliance with
this Code to ensure that the Company conducts itself in a manner consistent with
its obligations to society and its stockholders. The Board has established
procedures to monitor compliance. Violations by any employee will subject the
employee to disciplinary action, and in certain cases, discharge from
employment.
Due to the seriousness of this subject, any employee, officer or director with
any doubts about the applicability of this Code should talk to the appropriate
level of higher management or the Company's General Counsel. This Code of
Business Conduct and Ethics supersedes and replaces the Statement of Policy on
Standards of Business Conduct of the Company and that Statement of Policy on
Ethics and Conflicts of Interest of Parker & Parsley Petroleum Company dated
January 1, 1993 and policies of a similar nature of the corporate predecessors
of the Company.
SECTION II
ETHICS AND COMPLIANCE WITH ALL LAWS AND REGULATIONS
POLICY: The Company will conduct its business in accordance with the highest
ethical and legal standards. The Company is committed to being a good
corporate citizen of all states and countries in which it does business.
Employees must understand that the Company does care how results are
obtained, not just that they are obtained. The Company supports any employee
who passes up an opportunity or advantage which would sacrifice the
Company's ethical standards. Therefore, it continues to be the policy of the
Company to comply in all respects with all laws and regulations that are
applicable to its business, at all government levels in the United States
39
and abroad. If a law conflicts with a policy in this Code, the law must be
followed; however, if local custom or policy conflicts with this Code, this
Code must be followed. Any employee who does not adhere to these standards
is acting outside the scope of employment or agency. The Company expects
employees to report suspected violations of laws or Company policies to
Company management.
Other sections of the Code deal with specific laws and regulations and outline
general guidelines for compliance with such laws and regulations due to their
particular importance to the Company's business activities. The special emphasis
on these laws does not limit the general admonition to comply with all
applicable laws, regulations and judicial decrees of the United States (federal,
state and local) and of other countries where the Company transacts business.
The Company expects candor from its officers and managers and compliance with
Company policies and rules. Because attempts by officers and managers to conceal
information from higher management or the auditors might be seen by subordinates
as a signal that Company policies and rules can be ignored when inconvenient,
officers and managers will be strictly accountable.
No officer or employee should at any time take any action on behalf of the
Company which he or she knows or reasonably should know would violate any law or
regulation. The Company's interests are not served by unethical practices and
activities even if the practices and acts are not in technical violation of the
law. An officer or employee having even the slightest question as to the
validity of any action proposed to be taken on behalf of the Company should
immediately contact the Company's General Counsel for advice.
SECTION III
CONFLICTS OF INTEREST
POLICY: It is the policy of the Company that all directors, officers and
other employees avoid any conflict between their personal interests and the
interests of the Company in dealing with suppliers, customers, competitors,
organizations and third parties. Employees, officers and directors may not
use their positions, Company assets, or confidential information gained in
connection with their employment or involvement with the Company for
personal gain or for the benefit of a family member or any outside party.
It is not feasible to specify all activities that may give rise to a conflict of
interest; however, they generally occur in the areas of personal investments,
affiliations, business gifts and confidential information. The following
examples will serve as a non-exclusive guide to the circumstances or types of
activities that could cause conflicts and therefore are prohibited unless
specifically approved in writing by the Company through the employee's
supervisor or officer in charge of the employee's department, or in the case of
an officer, the Management Committee officer to whom such officer reports; and
then with such approval forwarded for review to a) the Management Committee
officer who has responsibility for the employee's or officer's department and b)
the Company's General Counsel:
(1) Ownership, by an employee or any immediate family member (spouse, parents,
children and their spouses) or associate, of any financial interest in any
non-public enterprise that does business with, or is a competitor of, the
Company.
(2) Ownership, by an employee or immediate family member, of 2% or more of the
outstanding shares of any publicly owned corporation regularly traded on
any open market that does business with, or is a competitor of, the
Company.
(3) Participation in any outside activity that competes directly or indirectly
with the Company or that interferes with (or has the appearance of
interfering with) the performance of the employee's duties to the Company.
(4) Service as a director, consultant or employee of an enterprise that
conducts or seeks to conduct business with the Company. This does not
include appointment to a position in an outside company as a representative
of the Company.
40
(5) Acceptance by an employee or close relative or associate of gifts of a size
that may tend to influence the employee's business decisions or compromise
the employee's independent judgment. In addition to excessive size gifts,
prohibited situations requiring Company approval before acceptance also
include, but are not limited to: loans, excessive entertainment, discounts,
hunting or fishing trips, golf outings, tickets to shows or athletic games,
services, sponsorships, contributions or other special favors from any
individual, enterprise or organization that does or is seeking to do
business with, or is a competitor of, the Company. Acceptance of minor
gifts such as meals and refreshments for immediate consumption,
entertainment, routine promotional sales gifts and other items of nominal
value are not prohibited by this provision provided such acceptance is in
keeping with good business ethics, gives no appearance of impropriety, does
not result in special or favored treatment for the donor and no effort is
made to conceal the full facts by the recipient or the donor and it does
not create or imply a business obligation or otherwise create a conflict
between the employee's personal interests and the best interests of the
Company.
(6) Ownership, by an employee, immediate family member, or associate, of a
contractual or real property interest (including royalty, working interest,
net profits interest, etc.) in any property owned or operated by the
Company or any of its subsidiaries or affiliates, other than an interest
acquired through a Company sponsored program.
(7) Disclosure or use by an employee of information that is confidential,
proprietary or privileged, for the benefit or gain of the employee or any
other person. The obligation to preserve confidential, proprietary or
privileged information continues even after employment or agency with the
Company ends.
(8) Use of Company opportunities discovered or learned through use of Company
information or one's Company position for personal gain or the gain of any
other person.
In the event that an employee senses possible involvement in a conflict of
interest situation, the employee should immediately report the matter to his or
her supervisor, making a full disclosure of all pertinent facts and
circumstances. The Company will develop a form for use by employees for
reporting such matters. Because each case may involve special circumstances, it
will be judged on its own merits considering the duties of the employee and the
relative significance of the factors involved. Directors and Management
Committee officers, while not required to get pre-approval for the types of
activities referenced in paragraphs (1) through (8), above, must promptly
disclose any such conflicts or potential conflicts to the Company's General
Counsel for periodic review by the Company's Audit Committee and Board.
Failure by any employee or officer to seek approval for, or in the case of
directors and Management Committee officers, to disclose, an activity which, in
the opinion of management or, in the case of directors and Management Committee
officers, the Board, would result, or has resulted, in a conflict of interest,
may result in disciplinary action up to and including discharge from employment.
In addition, the Board will take appropriate disciplinary action against any
Management Committee officers and directors whose disclosures reveal activities
which, when reviewed by the Audit Committee and Board, are determined to have
been a conflict of interest.
SECTION IV
HUMAN RESOURCES, EQUAL EMPLOYMENT
OPPORTUNITY AND NON-HARASSMENT
POLICY: The Company recognizes that its greatest assets are its employees
and realizes that the proper utilization, development and protection of
the Company's human resources are the key to continued success. It is the
policy of the Company to provide equal employment opportunity in
conformance with all applicable laws and regulations to individuals who
are qualified to perform job requirements, regardless of their race,
color, sex, religion, national origin, age, physical or mental handicap,
or veteran's status. Equal opportunity shall be provided in all aspects of
the employment relationship.
Further, the Company expressly prohibits any form of unlawful employee
harassment based on race, color, sex, religion, national origin, age,
physical or mental handicap, or veteran status. The Company's objective is
41
to provide a work environment that encourages mutual employee respect and
working relationships free of harassment. Harassment, whether it occurs in
the workplace or at a Company-sponsored function, will not be tolerated.
Forms of harassment include, but are not limited to unwelcome verbal or
physical advances and sexually, racially or otherwise derogatory or
discriminatory materials, statements or remarks. All employees, including
supervisors and managers, will be subject to disciplinary action up to and
including termination for any act of harassment. Supervisors and managers
have particular responsibility for maintaining a work environment free
from discrimination and harassment and for the prompt identification and
resolution of any problem areas regarding such issues.
Employees of Pioneer Natural Resources USA, Inc. ("Pioneer") should refer to the
"Policy Guides for Employees" for the procedures implementing and enforcing this
policy with regard to Pioneer.
SECTION V
RELATIONSHIP WITH GOVERNMENTAL OFFICIALS
POLICY: No funds or assets of the Company shall be paid, directly or
indirectly, in violation of applicable law, to any government official,
either inside or outside of the United States, or to any enterprise owned
or controlled by any government official.
A great deal of public attention has been directed to questionable payments that
some corporations have made to government officials both in this country and
abroad. The purpose of this Code is to reiterate the Company's longstanding
policy in the clearest possible terms. The success of the Company's operations
depends, to a great degree, upon its ability to build relationships with
government officials and employees based on honesty and integrity.
Payments, regardless of amount, or gifts of entertainment (of more than nominal
value) to government officials and other government personnel of the United
States and other domestic or foreign jurisdictions, regardless of motive, are
viewed by the Company as improper and are not permitted. In addition, laws such
as the Foreign Corrupt Practices Act, which is a U.S. law prohibiting bribery of
foreign officials, provide for serious criminal and civil penalties against
corporations, employees, officers and directors. The relationships of Company
personnel with public officials should in all respects be of such an open and
forthright nature that the integrity and reputation of the officials and the
Company will not be impugned in the event the full details of the relationship,
including any gifts or entertainment, become a matter of public record.
SECTION VI
COMMERCIAL BRIBERY
POLICY: No funds or assets of the Company shall be paid, loaned or
otherwise disbursed as bribes, kickbacks or other payments designed to
influence or compromise the conduct of the recipient, and no officer or
employee of the Company shall accept any funds or other assets for
assisting and obtaining business or securing special concessions from the
Company or any other person or legal entity.
The Company considers one of its most valuable assets to be its reputation and
integrity. It seeks stable and profitable business relationships -- based on
integrity -- with its employees, customers, suppliers and all others whose
activities touch upon its own. To that end, Company's directors, officers,
employees and agents should conduct their business affairs so as to guard and
protect the Company's reputation.
By way of illustrating the strict ethical standards that every director,
officer, employee and agent is expected to maintain, the following conduct is
expressly prohibited:
(1) Payment or receipt of money, gifts, loans or other favors that may tend to
influence business decisions with respect to the Company or compromise
independent judgment.
(2) Payment or receipt of rebates or kickbacks for obtaining business for the
Company.
42
(3) Payment of bribes to government officials, such as tax authorities, to
obtain favorable rulings on issues of local law for the Company.
Any other activities of this nature that, though not enumerated, could degrade
the Company's reputation and integrity are also prohibited.
These guidelines are not intended to prevent the Company from paying normal and
reasonable commissions to its agents, from taking normal prompt payment
discounts, and also from giving or receiving gifts or services that comport with
normal and customary social amenities and that do not tend to compromise the
conduct of the recipient.
Should an officer, employee or agent be requested to make or accept a gift or
payment that is prohibited by this Code, disclosure of the request and all the
surrounding circumstances should be made immediately to his or her supervisor.
If any situation arises in which the propriety of such request is in the least
manner questionable, the General Counsel of the Company should be consulted for
resolution of the question.
SECTION VII
PROPER RECORDING OF FUNDS, ASSETS AND DISBURSEMENTS
POLICY: All funds, assets, receipts and disbursements of the Company shall
be properly recorded on the books of the Company.
To assure that this policy is implemented, it is specifically understood that:
(1) No funds or accounts shall be established or maintained for purposes that
are not fully and accurately reflected on the books and records of the Company.
(2) No funds or other assets shall be received or disbursed without being fully
and accurately reflected on the books and records of the Company.
(3) No false, fictitious or intentionally misleading entries shall be made on
the books or records of the Company, and no false or misleading reports
pertaining to the Company or its operations shall be issued.
Any officer or employee having knowledge of any act or circumstance that is
prohibited by this policy shall immediately report the matter to the Company's
General Counsel and Audit Committee.
SECTION VIII
SUBSIDIARIES AND AFFILIATES
POLICY: All personnel of the Company who act as Company representatives on
the boards of directors, or in other management positions, of subsidiaries
or affiliates of the Company are expected to cast their votes, exert their
influence and otherwise conduct their activities in a manner which will
promote the observance of the policies in this Code by such subsidiaries
and affiliates, subject to their fiduciary obligations, if any, associated
with the nature of their representative positions.
SECTION IX
ENVIRONMENTAL AND TOXIC SUBSTANCES POLICY
POLICY: The Company has long been committed to the goal of safe, efficient
and environmentally sound business practices and operations and has been
supportive of endeavors aimed at preserving our environmental heritage.
Such commitment is entirely consistent with the Company's economic goals
and is in the best interests of its shareholders. The Company shall
conduct its business in a manner that protects employees, others involved
in its operations and the public from unacceptable risks due to toxic
substances which are produced or used in the Company's business. The
Company is committed to continuous efforts to identify and manage risks
associated with such substances. In addition, in the conduct of its
43
business it is the Company's policy to comply with all applicable
environmental laws and regulations and not to condone any failure by
Company employees to comply with such laws and regulations.
The Company is committed to complying with all applicable laws and regulations
relating to protection of the environment as well as to using all reasonable
efforts to operate in a manner that preserves the environment and conserves
natural resources. Numerous federal, state and local laws and regulations exist
which involve the protection of the environment. These laws and regulations are
diverse and far-reaching. Violation can produce severe consequences not only for
the Company but for any employee involved in a violation. In the conduct of the
Company's operations and business, each officer and employee is required to
comply with all applicable laws and regulations relating to the protection of
the environment. Any employee having questions about environmental laws or
regulations should consult the office of the Company's General Counsel.
SECTION X
SAFETY
POLICY: It is the Company's policy to conduct its operations and business
in a manner that protects the safety of employees, others involved in its
operations and the public. The Company will strive to prevent all
accidents, injuries and occupational illnesses through the active
participation of every employee. The Company is committed to complying
with all applicable laws and to continuous efforts to identify and
eliminate or manage safety risks associated with its activities.
The Company is committed to complying with all applicable laws and regulations
relating to maintenance of a safe workplace. Each employee should perform his or
her duties in a manner that will not endanger the employee or others. Employees
are required to use such safety equipment as may be required by law, regulation
or by Company manuals, handbooks and guidelines. Employees are also required to
use all reasonable efforts to maintain the work area in such condition as will
not pose a safety hazard for themselves or others. Employees are encouraged to
identify ways to improve safety and to bring these to the attention of the
supervisors.
SECTION XI
ANTITRUST LAWS
POLICY: It is in the best interest of the Company, as well as that of its
stockholders and employees to have vigorous and fair competition. The
antitrust laws were conceived and enacted as a means for helping to
preserve the free enterprise system by promoting healthy competition. It
is the policy of the Company that all its directors, officers and
employees shall, in carrying out their duties to the Company, comply in
all respects with the spirit as well as the letter of such antitrust laws,
domestic and foreign. In circumstances where there is a legitimate doubt
as to the proper interpretation of the law it is required that the matter
be referred through appropriate channels to the Company's General Counsel
for advice.
In the United States the body of laws that are generally referred to as
antitrust laws is a collection of statutes that have been enacted over a period
of many years both by the federal government and the various states. These laws
prohibit business practices that constitute unreasonable restraints of trade,
unfair trade practices and other anti-competitive activities. Depending on the
circumstances, certain prohibited practices include the following:
(1) Creation of a monopoly or attempts to create a monopoly;
(2) Agreements among competitors to increase, decrease or stabilize prices; to
divide territories or markets; to allocate customers; to limit the quality
of products or to limit the production of products; and
(3) Discrimination in price and other predatory trade practices.
44
Any failure to comply with antitrust laws can have far reaching affects, not
only on the Company, but also upon each employee involved in the violation. Any
employee having any question concerning compliance with antitrust laws should
seek advice from the office of the Company's General Counsel.
No employee of the Company has any authority whatsoever to engage in any
activity that could constitute a violation of the antitrust laws and all
employees are specifically directed not to do so. This direction is without any
qualification, limitation or restriction whatsoever.
SECTION XII
ELECTION CAMPAIGN LAWS
POLICY: No funds or assets of the Company shall be contributed to any
political party or organization, or to any individual who either holds
public office or is a candidate for public office, except where such
contribution is permitted by applicable law and has previously been
authorized by the Board of Directors or Management Committee of the
Company.
Federal and state laws restrict the contribution of corporate funds to
candidates for federal, state or local office or to committees formed to support
such candidates or advocate their political causes. The Company requires strict
compliance with these laws.
The following are examples of activities for candidates or committees that are
prohibited by these laws and by the policy of the Company:
(1) Contributions by an employee that are reimbursed through expense accounts
or in other ways;
(2) Purchases by the Company of tickets for special dinners or fund raising
events;
(3) Contributions in kind, such as: a) the loaning of employees to political
parties; or, b) the use of Company assets in political campaigns; and
(4) Indirect contributions by the Company through suppliers, customers or
agents.
It is acknowledged that political contributions by corporations are permitted by
the laws of some states and in some foreign countries they are not only
permitted but expected. Even under these circumstances, no Company funds or
assets shall be used for political purposes without the express authorization of
the Board of Directors or Management Committee of the Company.
Any officer or employee of the Company who fails to comply with the Company
policy regarding corporation contributions and expenditures in connection with
political activities shall be subject to appropriate disciplinary action, which
may include discharge. However, the Company's policy does not prohibit any
officer or employee from engaging in political activities in an individual
capacity (not as a representative of the Company) on his or her own time and own
expense, or from making political contributions from personal funds, or from
expressing personal views with respect to legislative or political matters.
SECTION XIII
ADMINISTRATION
Reinforcement of sound ethical standards is the responsibility of every
director, officer and employee of the Company. Nevertheless, all violations and
reasonable suspicions of violations of this Code shall be promptly reported to
the employee's department manager or supervisor, or the office of the General
Counsel, by the individual with knowledge of such a violation. This Code, as
amended from time-to-time, may be supplemented or implemented by more detailed
procedures, guidelines, manuals and handbooks issued by the Company or its
subsidiaries or affiliates. The Company reserves the right, in its sole
discretion, to amend, modify, interpret, supercede or rescind any or all of the
policies described in this Code, with or without notice. Any amendment to this
Code shall be made only by the Company's Board of Directors or the appropriate
committee thereof. If an amendment to this Code is made, appropriate disclosure
will be made in accordance with legal requirements and stock exchange
regulations.
45
Every director, officer or employee elected or employed after the effective date
of this Code may be required to sign a written affirmation acknowledging that
they have read and understood this Code and will comply with the Code, which
affirmation may be separate or part of another affirmation or acknowledgment
relating to employee manuals, handbooks, benefit packages, etc., supplied to new
directors, officers or employees. This signed affirmation shall be retained on
file in the Human Resources Department.
All employees, directors and officers shall be required from time to time to
sign a written affirmation stating they (1) have read this Code and understand
its contents, (2) have not violated this Code, (3) will continue to comply with
the Code and (4) have no knowledge of any violation of this policy which has not
been previously communicated to their supervisor or the office of the General
Counsel or the Audit Committee of the Board of Directors.
Waivers of any provision of this Code shall be made only by the Audit Committee
of the Board of Directors, or the full Board. Persons seeking a waiver should be
prepared to disclose all pertinent facts and circumstances, respond to inquiries
for additional information, explain why the waiver is necessary, appropriate, or
in the best interest of the Company, and comply with any procedures that may be
required to protect the Company in connection with a waiver. If a waiver of this
Code is granted for any officer, appropriate disclosure will be made in
accordance with legal requirements and stock exchange regulations.
SECTION XIV
CONCLUSION
The Company, as a publicly traded company, has certain obligations to its
stockholders as well as to society in general. These obligations and the
Company's commitment to open, honest, straightforward and ethical conduct
including full, fair, accurate, timely and understandable disclosure in reports
and documents that the Company files with, or submits to, the United States
Securities and Exchange Commission and in other public communications made by
the Company, warrant the implementation and enforcement of this Code of Business
Conduct and Ethics. It is quite clear to the Company that its reputation for
honesty and integrity is a direct result of the standards and acts of its
directors, officers and employees.
The Company, its stockholders and the general public expect and are entitled to
have the Company conduct itself in a manner consistent with basic principles of
honesty and fairness and the principles set forth in this Code. Therefore,
violations by any officer or employee will result in appropriate disciplinary
action, including dismissal when necessary.
46
Annex E
PIONEER NATURAL RESOURCES COMPANY
CORPORATE GOVERNANCE PRINCIPLES
The mission of the Board of Directors (the "Board") of Pioneer Natural
Resources Company ("Pioneer" or the "Company") is to be a strategic asset to
the Company, both collectively and as individual directors ("Directors"),
measured by the contribution it makes to the long-term success of the
Company and the creation of stockholder value.
Governance Principles
The following Principles have been providedapproved by the Board to all holdersemphasize its strong
commitment to good corporate governance practices. Along with the charters and
key practices of Exchangeable Sharesthe Board committees, these Principles are designed to provide
the framework for the governance of Pioneer Natural Resources Canada Inc.and to assist the Board in the
performance of its duties and the exercise of its responsibilities. The Board
recognizes that the issues involved in corporate governance are dynamic and
iterative and it will review these Principles and other aspects of Pioneer
governance not less than every three years or more often if deemed necessary.
These Principles, as well as the charters of the Board committees, the Company's
Bylaws and its Code of Business Conduct and Ethics, are all published on
Pioneer's corporate website and are available in print to any stockholder who
requests them.
1. Role of Board and Management. The business and affairs of Pioneer are
conducted and managed by its employees, officers and chief executive officer
("Pioneer Canada"CEO") under the direction and oversight of the Board, to enhance the long-term
value of the Company for its stockholders. The Board is elected by and
accountable to the purposesstockholders to oversee management, to provide strategic
direction and to assure that the long-term interests of Pioneer's annual meetingthe stockholders are
being served. In carrying out its responsibilities, the Board will exercise
sound, informed, and independent business judgment. Both the Board and
management recognize that the long-term interests of stockholders (the "Annual
Meeting")are advanced
by responsibly addressing and adhering to begood corporate governance principles.
The Board also recognizes that to do so requires individual preparation by each
Director and group deliberation by the Board, and that the Board's
responsibilities include both decision-making and oversight.
2. Functions of Board. The Board schedules a minimum of four meetings a year,
held quarterly, at which it reviews and discusses presentations by management on
May 14, 2002 at 9:00 a.m. (Dallas, Texas time),the performance of the Company, progress towards its goals, its strategic plans
and prospects, as well as immediate issues confronting Pioneer. The Board also
holds additional informational sessions each year called periodically by the CEO
as required to update the Board on important operational and other material
events. Except in extenuating circumstances, Directors are expected to attend
all scheduled meetings of the Britain Room at the Dallas Marriott Las Colinas Hotel, 223 West Las Colinas
Blvd., Irving, Texas 75039.Board and of committees on which they serve.
As a holderpart of Exchangeable Shares, you are entitled
to dividend andits oversight responsibilities, among other rights designed to be equivalent tothings, the attributesBoard
monitors:
a. the performance of the Common Stock of Pioneer, includingCompany;
b. the right, through a Votingperformance and Exchange
Trust Agreement (the "Voting Agreement"), to attend and to vote at the Annual
Meeting. Given the attributeseffectiveness of the Exchangeable Shares, you will not receive a
Notice, Information Circular or ProxyCEO and Management;
c. the selection, evaluation, development and compensation of senior
management;
d. the Company's compliance with legal requirements and ethical standards;
e. the Company's financial reporting and disclosure processes and internal
controls; and
47
f. the Company's processes for an annual meeting of shareholders of
Pioneer Canada, nor will a meeting of holders of Exchangeable Shares be held.
Exercise of Voting Rights
Pursuant tomaintaining the Voting Agreement, Computershare Trust Company of Canada
(the "Trustee") holds one share of special preferred voting stock of Pioneer
(the "Voting Share") for the benefitintegrity of the holders (other than Pioneerfinancial
statements, the integrity of compliance with law and ethics, the
integrity of relationships with partners, working interest owners, land
and mineral owners and suppliers.
In addition to its subsidiaries)general oversight of management, the Exchangeable Shares. The Voting Share carriesBoard also performs a
number of votes, exercisablespecific decision making functions, including, among other things:
a. reviewing, approving and monitoring the Company's mission, strategies,
objectives and policies as developed by Management;
b. selecting the CEO;
c. evaluating and compensating the CEO and overseeing CEO succession
planning;
d. selecting nominees for Board membership;
e. approving material investments or divestitures, strategic transactions,
and other significant transactions that are not in the ordinary course
of the Company's business;
f. reviewing, approving and monitoring fundamental financial and business
strategies;
g. assessing major risks facing the Company and reviewing options for
their mitigation; and
h. evaluating the performance of the Board and Committees of the Board.
3. Qualifications. Directors should possess the highest personal and
professional ethics, integrity and values, and be committed to representing the
long-term interests of the stockholders. They also should be intelligent,
inquisitive, independent and objective in thought, have practical wisdom and
mature judgment and a willingness to gain an understanding of Pioneer, its
competitive position in its industry and its business strategy. Pioneer
endeavors to have a Board representing diverse experience at policy-making
levels with a complimentary mix of skills and experience in areas relevant to
the Company's global activities.
Among other things, the Board expects each Director to:
a. understand Pioneer's businesses and the marketplaces in which they
operate;
b. review the materials provided in advance of meetings and any meeting atother
materials provided to the Board from time to time, and to take the time
and effort to be fully informed on the materials and issues presented;
c. strive for a collegial atmosphere showing mutual respect for all
Directors and opinions;
d. actively, objectively and constructively participate in meetings and
the strategic decision-making processes;
e. share his or her perspective, background, experience, knowledge and
insights as they relate to the matters before the Board and its
committees;
f. make decisions based on his/her honest, independent opinion of merit
and the best long-term interest of Pioneer; and
g. be available when requested to advise the CEO and Management on
specific issues not requiring the attention of the full Board, but
where an individual Director's insights might be helpful to the CEO or
Management.
Directors must be willing to devote sufficient time to carrying out their duties
and responsibilities effectively, and should be committed to serving on the
Board for an extended period of time. The Company values the experience
48
Directors bring from other boards on which Pioneer stockholders are entitledthey might serve and other activities
in which they participate, but recognizes that those boards and activities may
also present demands on a Director's time and availability that may present
conflicts or legal issues, including independence issues. Directors should
advise the chairperson of the Nominating and Corporate Governance Committee and
the CEO before accepting membership on other boards of directors or any Audit
Committee or other significant committee assignment on any other board of
directors; or before establishing other significant relationships with
businesses, institutions, governmental units or regulatory entities,
particularly those that may result in significant time commitments or a change
in the Director's relationship to vote (including the Annual Meeting), equal toCompany.
The Board believes that individuals should limit the number of outstanding
Exchangeable Shares (otherboards of
publicly traded, for-profit corporations on which they serve in order to give
proper attention to their responsibility to each board. As a general policy, the
Board believes that Directors should limit their service to not more than shares held by Pioneer and its subsidiaries).
You are entitledthree
boards of publicly traded companies in addition to instruct the Trustee to exercise onethat of the votes attachedCompany, but
exceptions to this policy may be made in appropriate cases. Where a Director
seeks to serve on more than three such boards, he/she should seek and obtain
approval of the Nominating and Corporate Governance Committee for that service.
At its discretion, the Nominating and Corporate Governance Committee may refer
the approval to the Voting Sharefull Board.
Members of Pioneer's Audit Committee who seek to serve on the Audit Committee of
another public company where that service will result in more than two public
company Audit Committee memberships simultaneously, should seek and obtain a
determination from the Company's Board in advance of accepting such service,
that such service will not impair the ability of such Director to effectively
serve on Pioneer's Audit Committee.
All memberships on other boards by the CEO will be considered and decided by the
full Board based upon the Nominating and Corporate Governance Committee's
recommendation. As a general rule, the Board will discourage the CEO from
serving on more than two boards in addition to the Board of the Company.
Regardless of whether Nominating and Corporate Governance Committee or Board
approval is required for service on other boards, a Director seeking to serve on
another board should notify the Nominating and Corporate Governance Committee,
the CEO and the General Counsel in advance of accepting such service, and should
defer final acceptance of such a position until advised by the CEO or General
Counsel that such service does not present legal or other serious problems for
Pioneer. The General Counsel will be expected to coordinate resolution (if
possible) or communication of any legal or business issues as expeditiously as
possible.
The Board does not believe that arbitrary term limits on Directors' service are
appropriate, nor does it believe that Directors should expect to be renominated
annually until they reach the mandatory retirement age. The Board
self-evaluation process will be an important determinant for Board tenure.
Directors of the Company shall not be nominated, elected, or stand for
re-election after reaching the age of 75, or if they will reach the age of 75
during the first year of such a term. Directors who reach the age of 75 during
their term of office as a Director must immediately resign or be removed from
the Board as a mandatory retirement.
Unless the Board affirmatively determines otherwise, any member of management
who is a Director will retire from the Board at the same time he or she retires
from active service with the Company, and will resign from the Board at the same
time he or she ceases employment with the Company for any reason.
If an outside Director's principal position, status or employment should
substantially change, the Director shall submit his or her resignation to the
Lead Director. The Nominating and Corporate Governance Committee shall decide
whether to accept the resignation.
4. Independence of Directors. While the Board recognizes that Directors who do
not meet the New York Stock Exchange ("NYSE") independence standards also make
valuable contributions to the Board and to the Company by reason of their
experience and wisdom, it is the Board's goal that at least two-thirds of the
Directors will be independent under the NYSE's guidelines and those additional
guidelines adopted by the Board.
49
The full Board will make affirmative determinations of the independence of each
Exchangeable Share you hold, orDirector. Such determinations shall be made using the standards and processes
approved and adopted from time to granttime by the full Board. Such determinations,
as well as the standards and processes applied in making them, will be disclosed
to Pioneer's management a proxy to exercise such votesstockholders in accordance with the enclosed Proxy Statement. Alternatively, you may instructrequirements of the TrusteeNYSE.
The Board has established the following guidelines to grant
to youassist it in determining
Director independence:
a. The Director has no material relationship with the Company, either
directly or your designee a proxy to attend the Annual Meeting and personally
exercise your voting rights. For this purpose, the Trustee has furnished (or
caused Pioneer to furnish) the enclosed Proxy Statement and certain related
materials to you as a holderpartner, shareholder or officer of Exchangeable Shares.
To instructan organization
that has a relationship with the Trustee as to how you want to exercise your voting
rights, you must complete, sign, date and returnCompany;
b. the enclosed formDirector, or any member of direction
(the "Direction") to the TrusteeDirector's family, has not been
employed by no later than 9:00 a.m. (Calgary time) on
May 10, 2002 (the "Due Time"). If the TrusteeCompany in the last five years;
c. the Director, or any member of the Director's family, has not been
employed by, or affiliated with, the Company's auditor in the last five
years;
d. the Director, or any member of the Director's family, has not been part
of an interlocking directorate in the last five years;
e. the Director, or any member of the Director's family, does not receive
your fully
completed Direction bynon-director compensation from the Due Time, your voting rights willCompany;
f. the Director does not be exercised.
You may revoke or amend your instructions to the Trustee (as indicated in your
Direction) at any time up to and including the Due Time by delivering to the
Trustee a written notice of revocation or by completing, signing and delivering
to the Trustee a new Direction bearing a later date. You may also revoke or
amend your instructions in person at the Annual Meeting prior to 9:00 a.m.
(Dallas, Texas time) on May 14, 2002, by submitting a written amendment or
revocation of your instructions and presenting satisfactory identification to
the Trustee's representatives at the Annual Meeting. In either case, your
instructionsown more than 4.9% of the later date will be bindingCompany's shares;
g. the Director does not serve on more than three other public company
boards; and
h. the Director does not serve on the Trustee.
General
Pioneer Canada and certainboard of another E&P company.
The following eight Directors are independent under the insiders thereof have been exempted
from certain disclosure and insider trading obligations prescribed by otherwise
applicable Canadian securities legislation pursuant to discretionary orders
granted by each of the provincial securities commissions in Canada. Pursuant to
such orders, Pioneer Canada is not required to prepare and file annual proxy and
related documentation, quarterly reports, certain material change reports or an
annual information form, provided that Pioneer prepares and files United States
continuous disclosure documentation in Canada which is equivalent to such
disclosure and which is set forth in the Multijurisdictional Disclosure System
adopted by the Canadian Securities Administrators.
# # #
Please complete, sign and date the enclosed Direction and return it to
the Trustee in the enclosed envelope by no later than 9:00 a.m. (Calgary time)
on May 10, 2002.
23
DIRECTION GIVEN BY HOLDERS OF EXCHANGEABLE
SHARES OF PIONEER NATURAL RESOURCES CANADA INC.
FOR THE MAY 14, 2002 ANNUAL MEETING OF STOCKHOLDERS OF
PIONEER NATURAL RESOURCES COMPANY
The undersigned acknowledges receipt of the Notice and Proxy Statement in
connection with the annual meeting (the "Meeting") of stockholders of Pioneer
Natural Resources Company to be held on May 14, 2002 at 9:00 a.m. (Dallas, Texas
time) at the Dallas Marriott Las Colinas Hotel, 223 West Las Colinas Blvd.,
Irving, Texas 75039. The undersigned hereby instructs and directs Computershare
Trust Company of Canada (the "Trustee"), pursuant to the provisions of the
Voting and Exchange Trust Agreement dated December 18, 1997 among Pioneer,
Pioneer Natural Resources Canada Inc. ("Pioneer Canada") and the Trustee, as
follows:
* * * *
(Please note: If no direction is made and you sign below, the Trustee is hereby
authorized and directed to vote for items 1 and 2 listed under Alternative A
below, and as to any other matters that may properly come before the Meeting in
its discretion.)
* * * *
(Please select one of A, B or C, and sign and date on the reverse side)
A. [ ] Exercise or cause to be exercised, whether by proxy given by the
Trustee to a representative of Pioneer or otherwise, the undersigned's
voting rights at the Meeting, or any postponement or adjournment
thereof, as follows:
1. To electforegoing guidelines:
James R. Baroffio, Edison C. Buchanan, R. Hartwell Gardner, James L. Houghton,
Jerry P. Jones, Linda K. Lawson, Charles E. Ramsey, Jr., and Scott D. Sheffield
as Class IIRobert A. Solberg.
The Company will not make any personal loans or extensions of credit to
Directors of Pioneer. If any such nominees should be
unavailable, the Trusteeor executive officers. No Director or family member may voteprovide
personal services for substitute nominee(s) at its
discretion:
[ ] FOR all nominees listed above [ ] TO WITHHOLD authority to
(except as markedcompensation to the voteCompany.
5. Size of Board and Selection Process. Approximately one-third of the Directors
are elected each year by the stockholders at the annual meeting of stockholders
in accordance with their classification.
Nominees for allDirector will be selected on the basis of their integrity,
experience, achievements, judgment, intelligence, personal character, ability to
make independent analytical inquiries, willingness to devote adequate time to
Board duties, and likelihood that he/she will be able to serve on the Board for
a sustained period. In connection with the selection of nominees contrary) listed above
[ ] WITHHOLD AUTHORITY for the following nominee(s) only:
----------------------------------------------------
2. To ratify the appointment of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To transact such other business as may properly come before the
Meeting or any postponement or adjournment thereof.
B. [ ] Deliver a proxy cardDirector,
due consideration will be given to the u ndersigned at the Meeting,Board's overall balance of diversity of
perspectives, backgrounds and experiences. The Nominating and Corporate
Governance Committee will consider any suggestions offered by other Directors or
stockholders with respect to all Exchangeable S hares of Pioneer Canada held of
recordpotential Directors. Stockholders may propose
nominees for consideration by the undersignedNominating and Corporate Governance Committee
by submitting the names and supporting information to: Secretary, Pioneer
Natural Resources Company, 5205 N. O'Connor Blvd., Suite 1400, Irving, TX 75039.
The Board proposes a slate of nominees to the stockholders for election to the
Board. The Board also determines the number of Directors on the record dateBoard provided
that there are at least three. Between annual stockholder meetings, the Board
may elect Directors to serve until the next annual meeting for electing that
class of Directors.
The Board as a whole will be responsible for nominating individuals for election
to the Board by the Stockholders, and for filling vacancies on the Board that
may occur between annual meetings of the Stockholders. The Nominating and
Corporate Governance Committee will be responsible for identifying, screening,
and recommending candidates to the entire Board.
50
6. Board Committees. The Board currently has three standing Committees - Audit
Committee, Compensation Committee and Nominating and Corporate Governance
Committee. The Board may, from time to time, expand the number of standing
committees or form ad hoc committees. Each of the Audit, Compensation and
Nominating and Corporate Governance committees will be composed entirely of
independent Directors and will have a written charter that complies with the
requirements of the NYSE. The current charters of these committees will be
published on the Pioneer website, and will be mailed to stockholders on written
request. The committee chairs report the highlights of their meetings to the
full Board following each meeting of the respective committees. The committees
normally hold meetings in conjunction with the full Board.
The size, membership, and chairs of each committee will be determined by the
Board and will comply with NYSE and legal requirements. The membership and
chairs of the standing committees may be rotated from time to time to allow
Directors to serve on various committees over time and to promote continuity of
membership and leadership on each committee. The Nominating and Corporate
Governance Committee will provide recommendations to the Board regarding the
size, membership, chairs and rotation of committees. The Chairman of the Board
("Chairman") and CEO may participate in any committee meeting except when such
participation would present a conflict of interest or, in the case of a Chairman
who is also the CEO, when the meeting is a non-management executive session of
the committee or Board.
7. Independence of Committee Members. In addition to the requirement that a
two-thirds majority of the Board satisfy the independence standards discussed in
section 4 above, members of the Audit Committee must also satisfy an additional
NYSE independence requirement. Specifically, they may not directly or indirectly
receive any compensation from Pioneer other than their Directors' compensation.
As a matter of policy, the Board will also apply this additional requirement to
members of the Compensation Committee and to members of the Nominating and
Corporate Governance Committee.
8. Meetings of Non-Employee Directors. To ensure free and open discussion and
communication among the non-employee Directors, these Directors shall meet in
executive session at least twice a year with no members of management present.
The non-employee Directors may meet without management present at such other
times as determined by the Lead Director, or as requested by any non-employee
Director. The Lead Director, who is also chairperson of the Nominating and
Corporate Governance Committee, shall preside at the executive sessions, unless
the non-management Directors determine otherwise. These executive sessions shall
also constitute meetings of the Nominating and Corporate Governance Committee,
with any non-management Directors who are not members of such committee
attending by invitation.
9. Self-Evaluation. The Board conducts an annual self-evaluation to assess its
effectiveness. The self-evaluation is conducted on the basis of criteria
developed by the Nominating and Corporate Governance Committee and approved by
the Board. Each of the Board's committees also conducts an annual self-
evaluation. Additionally, the ability of individual Directors to contribute to
the Board is assessed in connection with the evaluations and the renomination
process.
10. Setting Board Agenda. The Chairman, CEO (if not the Chairman), the Lead
Director and Secretary establish the agenda for each Board meeting, taking into
account suggestions of other Directors. Directors are encouraged to suggest the
inclusion of agenda items or revisions to meeting materials; the Chairman is
expected from time to time to ask Directors for their suggestions on these
items. Each Director is free to raise at any Board meetings items that are not
on the agenda for that meeting.
Proposed agendas and materials for meetings are generally delivered well in
advance of each Board and committee meeting. In certain cases, due to the
sensitive nature of a matter, presentations are provided only at the Board or
committee meeting. Directors are expected to review and devote appropriate time
to studying Board materials. In addition, the CEO periodically distributes to
all Board members items of topical interest relating to Pioneer, its operating
environment, and the markets that it serves.
11. Ethics and Conflicts of Interest. Pioneer's Board has adopted a Code of
Business Conduct and Ethics applicable to Directors, executive officers and all
Pioneer employees. The Board expects Pioneer Directors, as well as officers and
employees, to act ethically at all times and to acknowledge annually their
51
adherence to the policies comprising the Company's Code of Business Conduct and
Ethics, which is posted on the Company's website. The General Counsel's office
and the Audit Committee oversee implementation and compliance with the Code. If
a continuing conflict exists and cannot be resolved, the Director should resign.
All Directors will recuse themselves from any discussion or decision affecting
their personal, business or professional interests. The Board shall resolve any
conflict of interest question involving a Director, the CEO or an executive
officer, and the CEO and General Counsel shall resolve any conflict of interest
issue involving any other officer of the Company.
12. Reporting of Concerns to Non-Employee Directors or the Audit Committee.
Anyone who has a concern about Pioneer's conduct, or about the Company's
accounting, internal accounting controls or auditing matters, may communicate
that concern directly to the Company's General Counsel, Lead Director, or to the
Audit Committee. Such communications may be confidential or anonymous, and may
be e-mailed, submitted in writing, or reported by phone to special addresses and
a toll-free phone number that is published on the Company's website. All such
concerns will be forwarded to the appropriate Directors for their review, and
will be simultaneously reviewed and addressed by Pioneer's General Counsel's
office in the same way that other concerns are addressed by the Company. The
status of all outstanding concerns will be reported to the Board on a quarterly
basis. The Board or the Audit Committee may direct special treatment, including
the retention of outside advisors or counsel, for any concern addressed to them.
The Company is prohibited from retaliating or taking any adverse action against
anyone for raising or helping to resolve an integrity concern.
Pioneer will publish on its website and in its proxy statement a mailing address
and an e-mail address for communications with the chairperson of the Nominating
and Corporate Governance Committee or the non-management Directors as a group.
In addition, Pioneer will publish on its website and in its proxy statement a
procedure for communicating with the Audit Committee regarding accounting,
internal accounting controls or auditing matters.
13. Compensation of Board. The Compensation Committee shall have the
responsibility for recommending to the Board compensation and benefits for
non-employee Directors. In discharging this duty, the Compensation Committee
shall be guided by three goals: alignment of the long-term interests of
stockholders with the Directors' interests and compensation; fairly paying
Directors for work required in a company of Pioneer's size and scope; and making
the structure of the compensation simple, transparent and easy for stockholders
to understand. The Compensation Committee shall annually review non-employee
Director compensation and benefits.
14. Succession Plan. The Board shall approve and maintain a succession plan for
the Meeting
(and not subsequently disposed of) so thatCEO and certain senior executives. To assist the undersigned may
exercise personallyBoard, the undersigned's voting rights atCEO will
annually provide the Meeting,Board with an assessment of senior officers and of their
potential to succeed him or any postponement or adjournment thereof.
C. [ ] Deliverher. The CEO will also provide the Board with an
assessment of persons considered potential successors to certain senior
officers.
15. Annual Compensation Review of Senior Management. The non-employee Directors,
in a proxy card to _____________________________________ at
_______________________________________________, assession chaired by the designeeLead Director, will undertake a formal evaluation of
the undersignedCEO annually. The evaluation should be based on objective criteria including
but not limited to attendthe performance of Pioneer's businesses and act forthe
accomplishment of long-term and on behalfstrategic objectives. The chairperson of the
undersignedNominating and Corporate Governance Committee shall be responsible for reviewing
the evaluation with the CEO. The Compensation Committee will then consider the
CEO's performance as determined in the evaluation before setting the CEO's
salary, bonus and other incentive and equity compensation. The Compensation
Committee shall also annually approve the compensation structure for the
Company's officers, and shall consider the performance of the Company's
executive officers before approving their salary, bonus and other incentive and
equity compensation.
16. Access to Senior Management. Directors have complete and open access to the
Company's management. In addition, the Company's executive officers routinely
attend Board and committee meetings. The Board encourages its executive officers
to bring other officers and managers into Board or committee meetings or other
scheduled events from time to time to provide additional insight into matters
being considered or to expose the Board to individuals with high potential for
significant leadership roles in the Company. Additionally, Directors may from
time to time meet individually with members of management. Non-employee
Directors are encouraged to contact senior managers of the Company without
52
executive officers or the CEO present. Board members use judgment to be sure
that this contact is not distracting to the business operation of the Company.
Such contact, if in writing, is copied to the CEO.
17. Access to Independent Advisors. The Board and its committees shall have the
right at any time to retain independent outside financial, legal or other
advisors.
18. Director Orientation. The General Counsel and Secretary's office shall be
responsible for providing an orientation for new Directors, and for periodically
providing materials or briefing sessions for all Directors on subjects that
would assist them in discharging their duties. Each new Director shall, within
six months of election to the MeetingBoard, spend time at corporate headquarters for
personal briefing by the executive officers and CEO on the Company's strategic
plans, its financial statements, and its key policies and practices. New
Directors also receive a comprehensive package of orientation materials.
19. Continuing Education. Directors are encouraged to take advantage of
continuing education opportunities that will enhance their ability to fulfill
their responsibilities. To facilitate this participation, Pioneer will endeavor
to make the Directors aware of Director education programs and will pay the
expenses of any Director attending approved Director education programs. In
addition, Directors are expected to keep informed about Pioneer and its
activities and the industry conditions affecting independent exploration and
production companies generally.
20. Stock Ownership. The Board believes that it is important to align the
interests of Directors with those of the stockholders and for Directors to hold
equity ownership positions in the Company that are meaningful in their
individual circumstances. Directors are required to own Pioneer common stock
having a value of at least three times their annual retainer. Included in this
total are common stock and restricted common stock, but not stock options. Each
Director is given three years from the date of initial appointment or election
to reach this ownership level. The Nominating and Corporate Governance Committee
shall adopt and periodically review a policy with respect to all Exchangeable
Sharesminimum share
ownership requirements for Directors. Additionally, the Board believes that a
significant portion of Pioneer Canada heldDirectors' compensation should be made available to them
in stock, stock options or other forms of recordcompensation that correlate with the
market value of the Company.
21. Evaluation of Corporate Governance Principles. The Nominating and Corporate
Governance Committee will review Pioneer's Corporate Governance Principles from
time to time as developments or circumstances make review of particular
Principles appropriate. The entire Corporate Governance Principles will be
reviewed by the undersigned on
the record date for the Meeting (andCommittee not subsequently disposed
of) with all the powers that the undersigned would possess if
personally presentless frequently than every three years. The
Nominating and acting thereat including the powerCorporate Governance Committee will report to
exercise the undersigned's voting rights at the Meeting, or any
postponement or adjournment thereof.
24
* * * *
Please sign exactly as your name appears on your Exchangeable Share
certificate(s) and return this form in the enclosed envelope. When signing as
executor, administrator, attorney, trustee, guardian or custodian, or for a
corporation, please give the full titleBoard for
its consideration and adoption any recommendations for additions or amendments
to the Principles, as such.well as the process and results of the full review of the
Principles conducted every three years.
22. Confidentiality. The proceedings and deliberations of the Board and its
committees shall be confidential. Each Director shall maintain the
confidentiality of information received in connection with his or her service as
a Director.
53
PIONEER NATURAL RESOURCES COMPANY
5205 North O'Connor Boulevard
Suite 1400
Irving, Texas 75039
IMPORTANT NOTICE REGARDING DELIVERY OF SHAREHOLDER DOCUMENTS
The Securities and Exchange Commission has enacted rules that allow
multiple shareholder accounts with the same last name and the same address the
convenience of receiving a single annual report, proxy statement, prospectus or
other information statement. This is known as "householding." Each registered
shareholder will continue to receive a separate proxy card for voting.
Your participation in householding will reduce the volume of duplicate
information received at your household and can result in savings to the Company
related to printing and mailing costs.
Please note that if you do not respond by calling the Company's transfer
agent, Continental Stock Transfer and Trust Company ("Continental"), at
1-888-509-5586, or by writing to Continental at 17 Battery Place, 8th Floor, New
York, NY 10004, you will be deemed to have consented to householding, and
householding will begin 60 days after the mailing of this notice. Your implied
consent to householding will remain in effect until you revoke it. If you want
to revoke householding, you should contact Continental by one of the Exchangeable Shares are
held in a joint account, each joint owner must sign.
Signature:_____________________________ Date:_____________________________
Print Name:____________________________
Signature:_____________________________ Date:_____________________________
Print Name:____________________________
25methods
described above, and separate, individual mailings will resume within 30 days
after you revoke your consent to householding.
By Order of the Board of Directors
/s/ Mark L. Withrow
----------------------------------------
Mark L. Withrow, Secretary
Irving, Texas
April 7, 2003
54
PROXY BY MAIL Please mark your votes like this [ X ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. TO BE VALID, THIS PROXY MUST BE SIGNED.
The Board of Directors recommends a vote FOR Items 1 and 2.
ITEM 1 - ELECTION OF DIRECTORS
Nominees: FOR WITHHELD
FORALL FOR ALL
01 James R. Baroffio [ ] [ ]Jerry P. Jones
02 Edison C. BuchananCharles E. Ramsey, Jr. [ ] [ ]
03 Scott D. Sheffield [ ] [ ]Robert A. Solberg
WITHHELD FOR: (Write(List below each nominee's name in the space provided below.nominee that you do not wish to vote for.)
- --------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ___________________________________________ Signature _______________________________________________ Date _____________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- - You can now vote your shares electronically through the Internet.
- - This eliminates the need to return the proxy card.
- - Your electronic vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed, dated and returned the proxy
card.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
2655
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
ELECTRONICALLY
SECURITY CODE:
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PIONEER NATURAL RESOURCES COMPANY
The undersigned hereby appoints Scott D. Sheffield and Mark L. Withrow as
proxies, with power to act without the other and with power of substitution, and
hereby authorizes them to represent and vote, as designated on the other side,
all the shares of stock of Pioneer Natural Resources Company standing in the
name of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of the Company to be held May 14,
200215,
2003 or any adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
Access to Pioneerthe Company shareholder account
information and other shareholder services are now
available on the Internet!
Visit Continental Stock Transfer's website at
www.continentalstock.com
for their new Internet Shareholder Service -
ContinentaLink
Through this new service, shareholders can select a Personal Identification Number
or "PIN" to secure access to personal shareholder records. With a PIN,
shareholders can change addresses, receive electronic forms, and view account
transaction history and dividend history.
To access this new service, visit the website listed above. From the home page,
select ContinentaLink"ContinentaLink Full Service.Services". From there, you can either Test Drive the
service (choose "Test Drive" button)"View a Sample
Account" or you can Sign-Upsign-up (choose "Sign-Up"
button)"First Time Visitor" then "New Member
Sign-up"). If you choose to sign-up, enter your taxpayer identification number
or social security number as your ID Number. YourYou personal Security Code can be
found on the reverse side of this card in the bottom left corner. Enter any four
alphanumeric charactersThe PIN number
you would like to usechoose for your PIN.account should be 4 to 12 characters and can be letters or
numbers. Re-enter the same PIN in the PIN Verification field. Additional
guidance is provided on the website. Your PIN will be activated overnight, and
you will be able to access your shareholder recordsrecord the following day.
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PIONEER NATURAL RESOURCES USA, INC. 401(k) PlanAND MATCHING PLAN
To: THE VANGUARD GROUP,FIDUCIARY TRUST COMPANY, TRUSTEE FOR THE EMPLOYER MATCHING
CONTRIBUTION (STOCK ACCOUNT) OF THE PIONEER NATURAL RESOURCES USA, INC.
401(k) AND MATCHING PLAN
In connection with the proxy materials I received relating to the annual
meeting of shareholders of Pioneer Natural Resources Company to be held on
Tuesday,Thursday, May 14, 2002,15, 2003, I direct you to execute a proxy as indicated with
respect to all shares of common stock of Pioneerthe Company to which I have the right
to give voting directions under the 401(k) and matching plan. I understand you
will hold these directions strictly confidential.
(Continued, and to be marked, dated and signed, on the other side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
PROXY BY MAIL Please mark your votes like this [ X ]
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. TO BE VALID, THIS PROXY MUST BE SIGNED.
The Board of Directors recommends a vote FOR Items 1 and 2.
ITEM 1 - ELECTION OF DIRECTORS
Nominees: FOR WITHHELD
FORALL FOR ALL
01 James R. Baroffio [ ] [ ]Jerry P. Jones
02 Edison C. BuchananCharles E. Ramsey, Jr. [ ] [ ]
03 Scott D. Sheffield [ ] [ ]Robert A. Solberg
WITHHELD FOR: (Write(List below each nominee's name in the space provided below.nominee that you do not wish to vote for.)
____________________________________________- --------------------------------------------
ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN ITS DISCRETION, THE PROXY MAY VOTE ON ANY OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
IF YOU WISH TO VOTE ELECTRONICALLY PLEASE READ THE INSTRUCTIONS BELOW
COMPANY NUMBER:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ___________________________________________ Signature ______________________ Date _______
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
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- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
VOTE BY INTERNET
PIONEER NATURAL RESOURCES COMPANY
- - You can now vote your shares electronically through the Internet.
- - This eliminates the need to return the proxy card.
- - Your electronic vote authorizes the named proxy to vote your shares in the
same manner as if you marked, signed, dated and returned the proxy card.
TO VOTE YOUR PROXY BY MAIL
Mark, sign and date your proxy card above, detach it and return it in the
postage-paid envelope provided.
TO VOTE YOUR PROXY BY INTERNET
www.continentalstock.com
Have your proxy card in hand when you access the above website. You will be
prompted to enter the company number, proxy number and account number to create
an electronic ballot. Follow the prompts to vote your shares.
PLEASE DO NOT RETURN THE ABOVE CARD IF VOTED
ELECTRONICALLY
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