NUEVO ENERGY COMPANY
1331 LAMAR, SUITE 1650
HOUSTON, TEXAS 77010-3039
March 1, 1999
RELATIONAL INVESTORS, LLC
4330 La Jolla Village Drive, Suite 220
San Diego, CA 92212
Gentlemen:
Relational Investors, LLC ("Relational") has submitted to Nuevo Energy
Company, a Delaware corporation (the "Company"), a letter, dated December 11,
1998 (the "Nomination Notice"), proposing one nominee to stand for election to
the Company's Board of Directors (the "Board") at the 1999 Annual Meeting of
Stockholders of the Company (the "1999 Annual Meeting"). As a result of
conversations between Relational and the Chairman of the Corporate Governance
Committee of the Board, the Board has agreed to consider the nomination of David
H. Batchelder or such other person proposed by Relational and reasonably
acceptable to the Governance Committee of the Board (the "Proposed Director") to
the Board, in light of (i) the fact that Relational is one of the Company's
largest stockholders, and (ii) the Company's desire to avoid the expense and
distraction of a possible proxy contest by Relational, subject to Relational
entering into this letter agreement.
In connection with the consideration of the Proposed Director by the
Board, Relational and the Company have agreed that if the Proposed Director is
elected by the Board to become a member of the Board beginning at the next
regularly scheduled Board meeting (which the Proposed Director shall be invited
to attend and shall be elected a director of the Company at the beginning of
such meeting) and in no case later than March 31, 1999, then upon such election:
1. Relational will withdraw the Nomination Notice, and Relational, on behalf
of itself and each of its affiliates and associates (as such terms are
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), will have waived any right to submit a new
Nomination Notice in connection with the 1999 Annual Meeting;
2. Upon his election to the Board, the Proposed Director will abide by the
Nuevo Energy Company Corporate Governance Guidelines as currently in effect
and neither Relational, nor any of its affiliates or associates shall,
directly or indirectly, take any action that is intended to frustrate the
requirements of such Guidelines;
3. So long as the Proposed Director is a member of the Board, and for a period
ending on the date that is 90 days after the date that the Proposed
Director is no longer a director of the Company, Relational will not, and
it will cause its affiliates and associates not to, directly or indirectly,
seek or propose to obtain additional representation on the Board, or
solicit any proxies or consents with respect to any securities of the
Company, or participate as a participant (as such term is defined in
Instruction 3 to Item 4 of Schedule 14A (Rule 14a-101) without giving
effect to the exception set forth in paragraph (b)(iii) of such
Instruction) in the
solicitation of any proxies or consents with respect to any securities of
the Company, or make or submit any proposal to the Company's stockholders
(pursuant to Rule 14a-8 under the Exchange Act or otherwise); provided,
however, that the foregoing shall not prohibit Relational or its affiliates
and associates from (a) soliciting to maintain representation on the Board
by the Proposed Director in the event of an "election contest" (as such
term is used in Rule 14a-11 under the Exchange Act), or (b) stating
publicly how they intend to vote their shares on any matter properly
brought before the Company's stockholders at any annual or special meeting
of the Company's stockholders as contemplated by Rule 14a-1(l)(2)(iv) of
the Exchange Act (including explaining their reasons for such position and
discussing such position with the Company's stockholders); provided,
further, that to the extent (i) the Proposed Director resigns from the
Board (other than pursuant to the penultimate paragraph of this letter
agreement) more than 90 days prior to any meeting of stockholders where
directors are to be elected, or (ii) this letter agreement is terminated
pursuant to the penultimate paragraph of this letter agreement, then, for a
period of fifteen days following the date that the Proposed Director is no
longer a member of the Board, the Company will take all necessary actions
to permit Relational to submit during such fifteen day period (a)
nominations for the election of directors notwithstanding the limitation
set forth in Section 2 of Article Six of the Company's Certificate of
Incorporation and (b) matters for business to be considered by the
Company's stockholders that may be properly brought before any such meeting
by exempting Relational from the application of any advance notice
provisions that would otherwise prevent such matters from being brought
before such meeting; or
4. So long as the Proposed Director is a member of the Board, neither
Relational nor any of its affiliates and associates will, directly or
indirectly, initiate, continue or enter into any discussions or
negotiations with any industry participant or other party regarding the
Company's pursuit of its strategic alternatives or such party's or the
Company's interest in pursuing a business combination, acquisition or
merger transaction or any other extraordinary transaction involving the
Company; provided, however, that the foregoing shall not prohibit
Relational or its affiliates or associates from having discussions with any
of the Company's stockholders, solely to the extent such discussions do not
involve such stockholder's interest in pursuing a business combination,
acquisition or merger transaction or other extraordinary transaction
involving the Company or otherwise involve discussion of any specific Board
deliberations regarding the Company's pursuit of its strategic
alternatives; provided, further, that to the extent Relational or any of
its affiliates or associates receives an unsolicited inquiry from a third
party relating to the Company's interest in pursuing a business
combination, acquisition or merger transaction or any other extraordinary
transaction involving the Company, the Proposed Director shall refer such
third party to the Company's Chairman of the Board and the Proposed
Director shall promptly inform the Company's Chairman of the Board of such
inquiry.
Notwithstanding the foregoing, so long as the Proposed Director is a member of
the Board, nothing shall prohibit Relational and its respective affiliates and
associates, from (a) communicating with the Proposed Director, or (b) making a
request, suggestion or proposal to the Proposed Director or the Chairman of the
Board (and either the Proposed Director or the Chairman of the Board conveying
such request, proposal or suggestions to the Board), provided, however, in each
case, that such action will not result in the Company, Relational, or the
affiliates or associates of Relational being required to make any public
announcement or public disclosure as a result of
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such action. Nothing in this letter agreement shall prohibit or otherwise
prevent the Proposed Director from exercising his fiduciary duties to the
Company's stockholders as a director of the Company as required by applicable
law.
This letter agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware, without giving
effect to the principles of conflicts of laws thereof. Venue for any action to
enforce the provisions of this letter agreement shall be properly laid only in
any federal court in the State of Delaware; provided, however, if jurisdiction
or venue may not be properly laid in any federal court in the State of Delaware
then venue for any action to enforce the provisions of this letter agreement
shall be properly laid only in any state court in the State of Delaware. It is
further understood and agreed that no failure or delay by the Company or
Relational in exercising any right, power or privilege under this letter
agreement shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder. The parties hereto acknowledge that
money damages are an inadequate remedy for breach of this letter agreement
because of the difficulty of ascertaining the amount of damage that will be
suffered in the event that this letter agreement is breached. Therefore, we
each agree that the parties to this letter agreement may obtain specific
performance of this letter agreement and injunctive or other equitable relief as
a remedy for any such breach, and each party further waives any requirement for
the securing or posting of any bond in connection with any such remedy. Such
remedy shall not be deemed to be the exclusive remedy for breach of this letter
agreement, but shall be in addition to all other remedies available at law or
equity. In the event that either party to this letter agreement believes that
the other party is in breach of this letter agreement, prior to commencing any
litigation with respect to such breach, the non-breaching party shall give
written notice of the alleged breach to the breaching party and provide the
breaching party with a reasonable opportunity to respond. If any term,
provision, covenant or restriction of this letter agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated. The agreements set forth in this letter agreement may be modified
or waived only by a separate writing between the Company and Relational
expressly so modifying or waiving such agreements.
If for any reason, other than a decision by the Proposed Director not
to stand for reelection, the Proposed Director is not nominated by the Board for
reelection to the Board at any meeting of the Company's stockholders where the
Proposed Director would otherwise stand for reelection, then this letter
agreement shall terminate (except for the provisions set forth in the "provided,
further," clause of numbered paragraph 3 of this letter agreement that are
intended to survive termination of this letter agreement) upon the decision by
the Board (or the Nominating Committee of the Board) not to renominate the
Proposed Director (which decision shall be communicated to the Proposed Director
in writing not later than the following business day). Prior to becoming a
member of the Board, the Proposed Director shall deliver to the Board an
executed, undated letter of resignation in the form attached to this letter
agreement as Exhibit A. Upon the good faith acceptance by the Board of such
letter of resignation (which acceptance shall be communicated in writing to the
Proposed Director no later than the following business day), this letter
agreement shall terminate (except for the provisions set forth in the "provided,
further," clause of numbered paragraph 3 of this letter agreement that are
intended to survive termination of this letter agreement).
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If you are in agreement with the foregoing, please so indicate by
signing and returning one copy of this letter agreement, which will constitute
our agreement with respect to the matters set forth herein. This letter
agreement may be executed in two counterparts which together shall constitute a
single agreement.
Very truly yours,
NUEVO ENERGY COMPANY
By: /s/ Douglas L. Foshee
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Confirmed and Agreed to as of the
date first above written:
RELATIONAL INVESTORS, LLC,
on behalf of itself and its affiliates
and associates (including the
Proposed Director)
By: /s/ Ralph Whitworth
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EXHIBIT A
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Board of Directors
Nuevo Energy Company
1331 Lamar, Suite 1650
Houston, Texas 77010-3039
Gentlemen:
I hereby resign as a director of Nuevo Energy Company, such
resignation being effective upon the good faith determination by a majority of
the Board of Directors of Nuevo Energy Company that acceptance of the
resignation is necessary to enable the Company to pursue its strategic
alternatives in a manner the Board of Directors reasonably believes to be in the
best interests of the Company's stockholders. This resignation letter is
irrevocable.
Sincerely,
/s/ David H. Batchelder
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