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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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-12
Conoco Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[CONOCO LOGO]
CONOCO INC.
600 NORTH DAIRY ASHFORD
HOUSTON, TEXAS 77079
March 26, 2001
Dear Stockholder:
On behalf of your board of directors and management, you are cordially
invited to attend the annual meeting of stockholders to be held at the Omni
Houston Hotel Westside, 13210 Katy Freeway, Houston, Texas on May 8, 2001 at
10:30 a.m.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend the meeting, please either complete and return the
enclosed proxy card in the accompanying envelope or vote using the Internet or
telephone voting procedures provided. Please note that voting using any one of
these methods will not prevent you from attending the meeting and voting in
person.
You will find information regarding the matters to be voted on at the
meeting in the enclosed proxy statement. Conoco's 2000 Annual Report to
Stockholders is also enclosed with these materials.
In addition to the formal items of business to be brought before the
meeting, there will be a report on Conoco's operations during 2000, followed by
a question and answer period. Your interest in Conoco is appreciated. We look
forward to seeing you on May 8th.
Sincerely,
/s/ Archie W. Dunham
Archie W. Dunham
Chairman, President and Chief
Executive Officer
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[CONOCO LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 2001
To the Stockholders of Conoco Inc.:
The annual meeting of stockholders of Conoco Inc. will be held at the Omni
Houston Hotel Westside, 13210 Katy Freeway, Houston, Texas on May 8, 2001 at
10:30 a.m. The purpose of the meeting is to vote on the following proposals
described in the accompanying proxy statement, and any other business that may
properly be presented at the meeting or any reconvened meeting after any
adjournment of the meeting:
Proposal 1. Election of three directors to serve for a three-year
term.
Proposal 2. Ratification of the appointment of PricewaterhouseCoopers
LLP as Conoco's independent accountants for 2001.
ONLY STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 12, 2001 MAY VOTE
AT THE MEETING.
You are cordially invited to attend the meeting in person. If you are
unable to attend the meeting, please vote by Internet, telephone, or by signing,
dating and returning the accompanying proxy card as soon as possible.
By Order of the Board of Directors
/s/ E. Julia Lambeth
E. Julia Lambeth
Corporate Secretary
March 26, 2001
600 North Dairy Ashford
Houston, Texas 77079
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CONOCO INC.
600 NORTH DAIRY ASHFORD
HOUSTON, TEXAS 77079
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PROXY STATEMENT
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION.......................... 1
VOTING PROCEDURES..................... 1
Who May Vote........................ 1
How to Vote......................... 1
Proxies Can Be Revoked.............. 2
Meeting Attendance.................. 2
Required Votes...................... 2
Expenses of Solicitation............ 2
Proxies for Participants in Conoco
Plans............................ 2
PRINCIPAL STOCKHOLDERS................ 3
Principal Stockholders Table........ 3
PROPOSAL 1 -- Election Of Directors... 5
Nominees for Class II Directors for
a Three-Year Term to Expire in
2004............................. 5
Information on Directors Continuing
in Office........................ 6
Committees of the Board of
Directors........................ 8
Board Compensation.................. 9
STOCK OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS.................. 11
Beneficial Ownership Table.......... 11
Section 16(a) Beneficial Ownership
Reporting Compliance............. 12
COMPENSATION OF EXECUTIVE OFFICERS.... 13
Summary Compensation Table.......... 13
PAGE
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Option Grants Table................. 14
Option Exercises Table.............. 14
Retirement Benefits................. 15
Pension Plan Table.................. 15
Severance Arrangements.............. 15
COMPENSATION COMMITTEE REPORT......... 18
Compensation Philosophy and
Strategy......................... 18
Compensation Programs............... 18
Compensation of the Chief Executive
Officer.......................... 20
AUDIT AND COMPLIANCE COMMITTEE
REPORT.............................. 21
STOCK PERFORMANCE GRAPHS.............. 22
PROPOSAL 2 -- Ratification of the
Appointment of Independent
Accountants...................... 23
ADDITIONAL INFORMATION................ 24
Stockholder Proposals for the 2002
Annual Meeting................... 24
Advance Notice Required for
Stockholder Nominations and
Proposals........................ 24
Annual Report on Form 10-K.......... 24
APPENDIX A -- Audit and Compliance
Committee of the Board of Directors
Charter
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INTRODUCTION
The board of directors of Conoco Inc. is soliciting proxies to be used at
the 2001 annual meeting of stockholders. We expect to mail this proxy statement
and the accompanying proxy card to stockholders beginning on or about March 26,
2001. The mailing address of Conoco's principal executive offices is 600 North
Dairy Ashford, Houston, Texas 77079. For a period of ten days prior to the
annual meeting, a complete list of stockholders of record entitled to vote at
the annual meeting will be available at Conoco's executive offices for
inspection by stockholders during ordinary business hours for proper purposes.
VOTING PROCEDURES
WHO MAY VOTE
Holders of record of Class A common stock and Class B common stock at the
close of business on March 12, 2001 will be entitled to vote their shares at the
annual meeting. As of the record date, Conoco had 187,426,258 shares of Class A
common stock and 437,326,495 shares of Class B common stock outstanding. Each
share of Class A common stock is entitled to one vote. Each share of Class B
common stock is entitled to five votes. The holders of Class A common stock and
Class B common stock vote together as a single class on the matters to be
considered at the annual meeting, and their votes are counted and totaled
together.
HOW TO VOTE
If you are a stockholder of record, you may vote in one of four ways:
1. By attending the meeting;
2. By voting on the Internet at the address listed on your proxy card;
3. By using the toll-free number listed on your proxy card; or
4. By signing, dating and returning your proxy card in the envelope
provided.
For Internet addresses and telephone numbers for voting, please review your
proxy card. Also, please review your proxy card for the specific date and time
your proxy card must be received.
If your shares are held in an account at a brokerage firm or bank that
participates in a voting program provided by ADP Investor Communication
Services, you may submit your voting instructions over the Internet or by
telephone using the toll-free number shown on your voting instruction form.
If your shares are held through a broker, bank or other account custodian
that does not participate in a voting program provided by ADP Investor
Communication Services, you may vote your shares only by signing and timely
returning the enclosed voting instruction form or providing other proper voting
instructions to the registered owner of your shares.
If you either return your signed proxy card or vote using the Internet or
telephone voting procedures that may be available to you, your shares will be
voted as you direct. You can specify whether your shares should be voted for
all, some or none of the nominees for director. You can also specify whether you
approve, disapprove or abstain from the second proposal. IF YOU RETURN YOUR
SIGNED PROXY CARD AND DO NOT SPECIFY HOW YOU WANT TO VOTE YOUR SHARES, YOUR
SHARES WILL BE VOTED FOR EACH OF THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT. If any other items of business properly come before the meeting, the
persons named in the proxy card will vote in accordance with their best
judgment.
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PROXIES CAN BE REVOKED
You can revoke your proxy at any time before its exercise in any of the
following ways:
1. By submitting written notice of revocation to the Corporate
Secretary of Conoco;
2. By submitting another proxy card that is properly signed and later
dated;
3. By submitting a later Internet or telephone vote; or
4. By voting in person at the annual meeting.
MEETING ATTENDANCE
Because of limited seating, only stockholders, their proxy holders and
Conoco's guests may attend the annual meeting. If you plan to attend, you must
be a stockholder of record as of March 12, 2001, or you must bring with you a
brokerage statement or other evidence showing beneficial ownership of common
stock on March 12, 2001. Directions to the meeting site are on the back cover of
this booklet.
REQUIRED VOTES
The presence, in person or by proxy, of stockholders entitled to cast at
least a majority of the votes that all stockholders are entitled to cast will
constitute a quorum. Abstentions and broker non-votes (proxies submitted by
brokers that do not indicate a vote for a proposal because they do not have
discretionary voting authority and have not received instructions as to how to
vote on that proposal) are counted as present in determining whether the quorum
requirement is satisfied. Abstentions from voting on the proposal to ratify the
appointment of independent accountants will be included in the voting tally and
will have the same effect as a vote against such proposal. Although broker
non-votes are considered present for quorum purposes, they are not considered
entitled to vote with respect to either matter. Accordingly, broker non-votes
will not affect the outcome of the voting.
The directors will be elected by a plurality of the votes of shares of
common stock present in person or represented by proxy at the annual meeting.
Ratification of the appointment of the independent accountants will require the
affirmative vote of holders of a majority of the votes of common stock present
in person or represented by proxy at the meeting and entitled to vote on the
matter.
EXPENSES OF SOLICITATION
Solicitation of proxies for use at the annual meeting may be made by mail,
telephone or in person, by directors, officers and regular employees of Conoco.
Such persons will receive no additional compensation for any solicitation
activities. Conoco will request banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of common stock held of record by such entities, and
Conoco will, upon the request of such record holders, reimburse reasonable
forwarding expenses. The costs of preparing, printing, assembling and mailing
the proxy materials used in the solicitation of proxies from Conoco stockholders
will be borne by Conoco.
PROXIES FOR PARTICIPANTS IN CONOCO PLANS
If you are a participant in the Thrift Plan for Employees of Conoco Inc. or
the Thrift Plan for Retail Employees of Conoco Inc. (the "Thrift Plans"), and
you are a participant in a Merrill Lynch Blueprint Account, you will receive
combined voting instructions for such holdings in addition to the voting
instructions you will receive for your individual holdings. If you are a record
holder of common stock or a participant in any eligible stock plans for
employees outside the United States, you will receive a separate proxy card for
each of these holdings. Please complete, sign and mail all proxy cards you
receive, or vote all of your holdings via Internet or telephone to ensure that
all of your shares are represented at the annual meeting. An independent
fiduciary for the Thrift Plans will vote in its discretion all shares held in
the Thrift Plans for which no voting instructions are received by May 1, 2001.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership as of March 1, 2001 of shares of Class A and Class B common stock by
each person or entity known to Conoco to be a beneficial owner of 5% or more of
either class of Conoco's voting securities.
PRINCIPAL STOCKHOLDERS TABLE
CLASS A COMMON STOCK CLASS B COMMON STOCK
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NUMBER PERCENT NUMBER PERCENT
NAME AND ADDRESS OF SHARES OF CLASS OF SHARES OF CLASS
- ---------------- ---------- -------- ---------- --------
AXA Financial, Inc. and related entities(1).............. 14,804,276 8.0% -- --
1290 Avenue of the Americas
New York, New York 10104
Barrow, Hanley, Mewhinney & Strauss(2)................... 13,821,800 7.3% -- --
One McKinney Plaza
3232 McKinney Avenue
15th Floor
Dallas, Texas 75204
Capital Research and Management Company(3)............... 10,172,300 5.5% -- --
333 South Hope Street
Los Angeles, California 90071
FMR Corp.(4)............................................. -- -- 48,096,313 11.0%
82 Devonshire Street
New York, New York 10004
Putnam Investments, LLC and related entities(5).......... 10,837,570 5.8% -- --
One Post Office Square
Boston, Massachusetts 02109
Scudder Kemper Investments, Inc.(6)...................... 11,156,810 6.0% -- --
345 Park Avenue
New York, New York 10154
Vanguard Windsor Funds -- Vanguard Windsor II Fund(7).... 11,981,000 6.4% -- --
P.O. Box 2600
Valley Forge, Pennsylvania 19482
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(1) Based on a Schedule 13G filed with the SEC on February 12, 2001 by AXA
Financial, Inc. on behalf of itself, AXA, which beneficially holds a
majority interest in AXA Financial, Inc., and the four companies organized
under French law, as a group, acting as the parent holding company of AXA,
consisting of AXA Conseil Vie Assurance Mutuelle, AXA Assurances I.A.R.D
Mutuelle, AXA Assurances Vie Mutuelle and AXA Courtage Assurance Mutuelle.
Includes 14,784,276 shares beneficially owned by AXA Financial, Inc. through
the control of Alliance Capital Management L.P. and 20,000 shares
beneficially owned by AXA National Mutual -- Australia, a subsidiary of AXA.
(2) Based on a Schedule 13G filed with the SEC on February 9, 2001. Barrow,
Hanley, Mewhinney & Strauss has sole voting power with respect to 1,204,500
shares, shared voting power with respect to 12,617,300 shares and sole
dispositive power with respect to 13,821,800 shares.
(3) Based on a Schedule 13G/A filed with the SEC on February 9, 2001. Capital
Research and Management Company is deemed to be the beneficial owner of
these shares as a result of acting as an investment advisor to various
investment companies.
(4) Based on a Schedule 13G/A filed with the SEC on February 13, 2001 by FMR
Corp. on behalf of itself, Mr. Edward C. Johnson, chairman of FMR Corp., Ms.
Abigail P. Johnson, a director of FMR Corp., and Fidelity Management and
Research Company ("Fidelity"), a wholly owned subsidiary of FMR Corp.
Includes 44,097,179 shares beneficially owned by Fidelity, which acts as an
investment advisor to various registered investment companies (the "Fidelity
Funds"), 2,261,957 shares beneficially owned by Fidelity Management and
Trust Company ("FMT"), a wholly owned subsidiary of FMR and 1,367,177 shares
beneficially owned by Fidelity International Limited ("FIL"), a company of
which Mr. Johnson is the chairman, although FMR disclaims beneficial
ownership of shares owned by FIL. Each of Mr. Johnson and FMR Corp., through
the control of Fidelity and FMT, has sole power to dispose of 46,729,136
shares and sole voting power with respect to
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2,239,133 shares. Each of the Fidelity Funds' boards of trustees has voting
power over the shares held by each fund. Mr. Johnson and Ms. Johnson, who
together own 36.5% of the outstanding voting stock of FMR Corp., may be
deemed to be part of a controlling group with respect to FMR Corp.
(5) Based on Schedule 13G/A filed with the SEC on February 15, 2001 by Putnam
Investments, LLC. ("PI"), a wholly owned subsidiary of Marsh & McLennan
Companies, Inc. ("MMC"), on behalf of itself, MMC, Putnam Investment
Management, LLC. ("PIM") and The Putnam Advisory Company, LLC. ("PAC").
Consists of 9,128,690 shares beneficially owned by PIM and 1,708,880 shares
beneficially owned by PAC, both wholly owned registered investment advisors
of PI. Both subsidiaries have dispositive power over the shares as
investment managers, but each of the mutual funds' trustees have voting
power over shares held by each fund, and PAC has shared voting power over
the shares held by institutional clients. The address of MMC is 1166 Avenue
of the Americas, New York, New York 10036.
(6) Based on a Schedule 13G/A filed with the SEC on February 14, 2001. Scudder
Kemper Investments, Inc. has sole voting power with respect to 9,198,253
shares, shared voting power with respect to 1,889,227 shares and sole
dispositive power with respect to 9,420,183 shares.
(7) Based on a Schedule 13G filed with the SEC on February 14, 2001. Vanguard
Windsor Funds -- Vanguard Windsor II Fund has sole voting power and shared
dispositive power with respect to such shares.
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PROPOSAL 1
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
Conoco's current restated certificate of incorporation provides that the
board of directors will consist of not less than six nor more than 15 directors.
The current number of authorized directors is set at nine. The board of
directors is classified into three classes, designated Class I, Class II and
Class III, with terms expiring in 2002, 2003 and 2001, respectively. The terms
of office of the members of one class of directors expire each year in rotation
so that the members of one class are elected at each annual meeting to serve
full three-year terms, or until their successors are elected and qualified. Each
class consists, as nearly as may be possible, of one-third of the total number
of directors constituting the entire board of directors.
Unless you withhold authority to vote for directors in the proxy, your
shares will be voted for the election of the three nominees listed below. The
directors will be elected by a plurality of the votes of shares of common stock
present in person or represented by proxy at the meeting. All nominees have
indicated a willingness to serve as directors, but if any of them should decline
or be unable to act as a director, the persons named in the proxy will vote for
the election of another person or persons the board of directors recommends.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ELECTION OF EACH
NOMINEE LISTED BELOW. PROPERLY SUBMITTED PROXY CARDS AND VOTING INSTRUCTIONS
WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
The terms of office for the three directors in Class III expire at this
annual meeting. The board of directors has selected the nominees listed below
for election as Class III directors. If elected, each director will serve until
the annual meeting of stockholders in 2004 or until he is succeeded by another
qualified director who has been elected. The terms of office of all other
directors expire at the annual meeting in 2002 or 2003, as the case may be. The
board of directors held five meetings in 2000. All directors attended at least
75% of the meetings of the board of directors and the committees thereof of
which they are members. The following biographical information regarding the
nominees for director and each current director is as of March 15, 2001.
NOMINEES FOR CLASS III DIRECTORS FOR A THREE-YEAR TERM TO EXPIRE IN 2004
[Kenneth M. Duberstein Kenneth M. Duberstein, age 56, has been a Class III director
Photo] since May 2000. He is Chairman and CEO of the Duberstein
Group, a strategic planning and consulting company. Mr.
Duberstein served as White House Chief of Staff and Deputy
Chief of Staff to President Ronald Reagan and Deputy Under
Secretary of Labor during the Ford Administration. He serves
on the boards of the Boeing Company, Fannie Mae, the St.
Paul Companies and Global Vacation Group, and is on the
Board of Governors for the NASD and the American Stock
Exchange. He also is a trustee of Franklin & Marshall
College and Johns Hopkins University and serves on a wide
range of commissions, tasks forces and cultural, educational
and volunteer boards: Vice Chairman of the Kennedy Center
for Performing Arts, Harvard University/Kennedy School's
Institute of Politics Senior Advisory Committee, the Reagan
Institute of Emergency Medicine and the National Alliance to
End Homelessness. Mr. Duberstein is a member of the Council
on Foreign Relations and Chairman of the Ethics Committee
for the U.S. Olympics Committee.
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[William R. Rhodes William R. Rhodes, age 65, has been a Class III director
Photo] since October 1998. He is a Vice Chairman of Citigroup, Inc.
and Citibank, N.A. Mr. Rhodes is Chairman of the Americas
Society and Council of the Americas, Vice Chairman of the
Institute of International Finance, Chairman of CHIPCo, a
Director of the Private Export Funding Corporation and a
member of South African President Thabo Mbeki's
International Advisory Board. He also serves on many Boards
including The Group of Thirty, The Africa-America Institute
and the U.S-Egypt Presidents' Council. He is also a member
of the Council on Foreign Relations and the Foreign Policy
Association. Mr. Rhodes is a past Chairman of the U.S.
Advisory Committee of the Export-Import Bank of the United
States, past Chairman of the U.S. Section of the
Venezuela-U.S. Business Council, past President of the
Venezuela-American Chamber of Commerce and past President of
the Bankers Association for Foreign Trade. He is a Governor
and Trustee of The New York Presbyterian Hospital, a
Director of the New York City Partnership and Chamber of
Commerce and a Vice Chairman of the Metropolitan Museum of
Art Business Committee and Chairman's Committee. He is a
member of the Board of Overseers of the Watson Institute for
International Studies at Brown University and Chairman of
the Board of Trustees of the Northfield Mount Hermon School.
[A. R. (Tony) Sanchez, A. R. "Tony" Sanchez, Jr., age 58, has been a Class III
Jr. Photo] director since August 1999. He has been active in the oil
and gas industry since 1973. Mr. Sanchez has been the Chief
Executive Officer and Chairman of the Board for Sanchez Oil
& Gas Corp. since 1974. A member of the University of Texas
System Board of Regents, Mr. Sanchez is on the boards of
directors of International Bancshares Corporation, ZixIt
Corporation, the University of Texas Investment Management
Company, the University of Texas Foundation for
Entrepreneurial Excellence, the Texas Water Foundation, the
Smithsonian Institution, the LBJ Foundation, the American
Petroleum Institute, the Independent Petroleum Institute of
America, the National Petroleum Council, the InterState Oil
and Gas Compact Commission and Little League Baseball.
INFORMATION ON DIRECTORS CONTINUING IN OFFICE
Class I Directors with Terms Expiring in 2002
[Ruth R. Harkin Photo] Ruth R. Harkin, age 56, has been a Class I director since
October 1998. She is Senior Vice President, International
Affairs and Government Relations of United Technologies
Corporation and Chair of United Technologies International,
UTC's international representation arm. Previously, Mrs.
Harkin was the President and Chief Executive Officer of the
Overseas Private Investment Corporation in the Clinton
administration from 1993 to 1997. Mrs. Harkin was elected as
a prosecutor in the office of the County Attorney of Story
County, Iowa in 1973. She also served as Deputy General
Counsel at the U.S. Department of Agriculture and was Of
Counsel at the law firm of Akin, Gump, Strauss, Hauer &
Feld. Mrs. Harkin is a member of the Board of Visitors of
the College of Business Administration, University of Iowa.
She also sits on the boards of the National Association of
Manufacturers, the Korea Society and the U.S.-Russia
Business Council, and was the Year 2000 U.S. Working Chair
of the TransAtlantic Business Dialogue.
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[Frank A. McPherson Frank A. McPherson, age 67, has been a Class I director
Photo] since October 1998. He served as Chairman and Chief
Executive Officer of Kerr-McGee Corporation from 1983 until
retirement on February 1, 1997. He joined Kerr-McGee in 1957
and held many technical, operational and managerial
positions, including President from 1980 to 1983. He is a
past director of the Federal Reserve Bank of Kansas City and
the Oklahoma State University Foundation Board of Trustees.
Mr. McPherson serves on the boards of directors of
Kimberly-Clark Corp., BOK Financial Corp., Bank of Oklahoma,
Tri-Continental Corporation, Seligman Quality Fund, Inc.,
Seligman Select Municipal Fund, Inc. and the Seligman Group
of Mutual Funds. He is also a member of the boards of the
American Petroleum Institute, Baptist Medical Center,
Oklahoma Chapter of Nature Conservancy, Oklahoma City
Chamber of Commerce, Oklahoma City Public School Foundation,
Oklahoma Medical Research Foundation and Oklahoma Foundation
for Excellence in Education.
[General Charles C. General Charles C. Krulak, age 59, has been a Class I
Krulak Photo] director since May 2000. He is Chairman and Chief Executive
Officer of MBNA Europe and served as Senior Vice Chairman of
MBNA America from September 9, 1999 through January 1, 2001.
During his 35-year career in the Marine Corps, General
Krulak served two tours of duty in Vietnam and rose through
several command and staff positions to the position of
Commandant of the Marine Corps and member of the Joint
Chiefs of Staff. Among many decorations, he holds the
Defense Distinguished Service Medal, the Silver Star Medal,
the Bronze Star Medal with Combat "V" and two gold stars,
the Purple Heart with gold star and the Meritorious Service
Medal.
Class II Directors with Terms Expiring in 2003
[Archie W. Dunham Photo] Archie W. Dunham, age 62, has been a Class II director since
July 1998. He has been President and Chief Executive Officer
of Conoco since 1996 and Chairman of the Board since August
12, 1999. He joined Conoco in 1966 and subsequently held a
number of commercial and managerial positions within Conoco
and E. I. du Pont de Nemours and Company ("DuPont"). Mr.
Dunham is also a member of the board of directors of
Louisiana-Pacific Corporation, Phelps Dodge Corporation and
Union Pacific Corporation. Mr. Dunham is a former Executive
Vice President, Exploration Production and Executive Vice
President, Refining, Marketing, Supply and Transportation
for Conoco. He was also a Senior Vice President, Polymers
and Senior Vice President, Chemicals and Pigments for
DuPont. He is a director of the American Petroleum
Institute, the U.S.-Russia Business Council and the Greater
Houston Partnership. He is the past Chairman of the United
States Energy Association, Chairman of the National
Petroleum Council and a member of The Business Council. Mr.
Dunham is also a member of the Board of Visitors and the
Energy Center board of directors at the University of
Oklahoma. He also serves on the board of directors of the
Memorial Hermann Healthcare System, and the boards of
trustees of the Houston Symphony, the George Bush
Presidential Library and the Smithsonian Institution. Mr.
Dunham is also President and a trustee of the Houston Grand
Opera.
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[William K. Reilly William K. Reilly, age 61, has been a Class II director
Photo] since October 1998. He is currently President and Chief
Executive Officer of Aqua International Partners, an
investment group that finances water improvements in
developing countries. Formerly, Mr. Reilly was a visiting
professor at the Institute of International Studies at
Stanford University and served as Administrator of the U.S.
Environmental Protection Agency from February 1989 to
January 1993. Mr. Reilly was president of the Conservation
Foundation from 1973 to 1989 and, after its affiliation with
the World Wildlife Fund in 1985, served as President of both
groups. He also serves on the boards of DuPont, Royal
Caribbean International, Evergreen Holdings and Ionics, Inc.
He is Chairman of the Board of the American Farmland Trust
and serves on the boards of the American Academy in Rome,
National Geographic Society, World Wildlife Fund and Yale
University. Mr. Reilly also serves as a member of the board
of the Presidio Trust of San Francisco.
[Franklin A. Thomas Franklin A. Thomas, age 66, has been a Class II director
Photo] since October 1998. He has been a consultant to the TFF
Study Group, a non-profit initiative assisting development
in southern Africa, since April 1996. Mr. Thomas was
President and Chief Executive Officer of The Ford Foundation
from 1979 to 1996. He also serves as a director of ALCOA,
Inc., Avaya Inc., Citigroup, Inc., Cummins, Inc., Lucent
Technologies, Inc. and PepsiCo, Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit and Compliance Committee
Members: Frank A. McPherson, Chairman
Kenneth M. Duberstein
Ruth R. Harkin
A. R. Sanchez, Jr.
Number of meetings in 2000: Eight
The Audit and Compliance Committee is responsible for:
- monitoring the integrity of the Company's financial reporting process
and systems of internal controls;
- discussing with the management, the independent auditors, and the
internal auditors, the integrity of the Company's financial reporting
processes and controls, significant corporate risk exposures, and the
steps management has taken to monitor, control, and report such
exposures, as well as discussing significant findings prepared by the
independent auditors and the internal auditors together with
management's responses;
- discussing and appraising the performance and independence of Conoco's
independent auditors and internal auditors, including responsibility
for selecting (subject to shareholder ratification), evaluating, and,
where appropriate, replacing the independent auditors, who are
ultimately responsible to the board of directors and the Audit and
Compliance Committee;
- monitoring the Company's compliance and Safety, Health, and
Environmental programs for adherence to applicable laws and
regulations and discussing with management all significant Legal and
Safety, Health, and Environmental issues and incidents; and
- maintaining direct lines of communication with the board of directors
and Conoco's management, internal auditors and independent auditors
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The Audit and Compliance Committee charter, which is attached as Appendix A to
this proxy statement, contains a detailed description of the committee's duties
and responsibilities.
Compensation Committee
Members: Franklin A. Thomas, Chairman
General Charles C. Krulak
William K. Reilly
William R. Rhodes
Number of Meetings in 2000: Six
The Compensation Committee is responsible for:
- overseeing and administering Conoco's executive compensation policies,
plans and practices;
- establishing and adjusting from time to time compensation for the
President and Chief Executive Officer, the other executive officers
and senior management;
- authorizing the issuance of, and the purchase in the open market of,
common stock in connection with the administration of Conoco's
executive and non-executive compensation and benefit plans;
- overseeing succession planning for the Chief Executive Officer and
other key executives; and
- reporting to the board of directors a summary of its findings and
recommendations.
Executive Committee
Members: Archie W. Dunham, Chairman
Frank A. McPherson
Franklin A. Thomas
Number of Meetings in 2000: One
The Executive Committee is responsible for:
- exercising all powers and authority of the board of directors in
directing the management of the business and affairs of Conoco in
intervals between board meetings, except for:
(i) those matters which are expressly delegated to another committee
of the board of directors;
(ii) matters which, under Delaware law, Conoco's certificate of
incorporation or Conoco's by-laws, cannot be delegated by the
board of directors to a committee; and
(iii) approval of expenditures or the acquisition or disposition of
property and assets of Conoco to the extent already delegated to
the Chief Executive Officer by the board of directors, or to the
extent any such expenditures, acquisitions or dispositions exceed
$5 billion U.S. dollars per expenditure or transaction;
- subject to the foregoing limitations and at the committee's
discretion, delegating to others the authority to direct the
management of the usual and ordinary affairs of Conoco or one or more
of its subsidiaries, divisions or departments; and
- reporting to the board of directors a summary of its actions.
BOARD COMPENSATION
Directors who are employees of Conoco receive no additional compensation
for serving on the board of directors. Upon election to the board, nonemployee
directors receive a grant of restricted stock units with an aggregate value on
the date of grant equal to $100,000. On an annual basis, nonemployee directors
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receive a fee of $50,000 per year, and a grant of restricted stock units with an
aggregate value on the grant date of $50,000.
Restricted stock units representing common stock are awarded pursuant to
the terms of the 1998 Stock and Performance Incentive Plan of Conoco Inc. Shares
underlying restricted stock units granted to directors upon initial election to
the board may not be sold or voted for a period of five years. Dividend
equivalents in the form of additional units are credited during this period.
Restricted stock units granted upon initial election to the board become vested
at a rate of 20% of the grant per year of completed board service following the
award. Shares underlying restricted stock units that are granted annually to
directors may not be sold or voted for a period of three years, but dividend
equivalents in the form of additional units are credited during such period.
Restricted stock units which are annually awarded vest immediately upon grant.
Directors are expected to own stock with a value equivalent to two times
their annual fee and grant of restricted stock units, or $200,000 at current
grant levels. Existing board members are expected to achieve this level of stock
ownership by October 2002. Future directors will have three years from their
initial election to the board to achieve this level of stock ownership. Actual
shares of stock, restricted stock units, and deferred stock units owned
individually or jointly can be counted in satisfying stock ownership guidelines.
Unexercised stock options may not be used to satisfy director stock ownership
guidelines.
Pursuant to the terms of Conoco's Deferred Compensation Plan for
Nonemployee Directors, which was established under the 1998 Stock and
Performance Incentive Plan, awards of restricted stock units are deferred and
annual fees may be deferred. An election to defer must generally be made prior
to the commencement of the fiscal year in which it will be earned. Once made for
a particular award, the election is generally irrevocable. The deferred amounts
are deemed to be invested, pursuant to the election of the director, in common
stock or in an interest-bearing account. Deferrals under the Plan are unfunded.
Each deferral election will indicate the time (either on the date of
termination of service as a director or on the date that is five years following
such date) and form of payment for the amounts to be deferred. Distributions to
the director for deferrals into stock units will be made in common stock and
distributions for deferrals into an interest bearing account will be made in
cash. Such distribution will be made at the time irrevocably selected on the
deferral form, or, in the event of the director's death, to the director's
designated beneficiary. Upon a change in control of Conoco, at the director's
election, all deferred amounts (including deferred restricted stock units) may
be paid in full.
All directors are eligible to participate in the Directors' Charitable Gift
Plan, which provides that, upon a director's death, Conoco will make a donation
in an amount equal to $200,000 per year for five years to the tax-exempt
educational institutions or charitable organizations recommended by such
director and approved by Conoco. Each director will be fully vested in the
Directors' Charitable Gift Plan after completing one year of service as
director. Conoco may fund the Directors' Charitable Gift Plan through, among
other vehicles, the purchase of life insurance policies on the lives of the
directors. Conoco will be the beneficiary of and will own such policies.
Directors derive no personal financial or tax benefit from the Directors'
Charitable Gift Plan because the charitable, tax-deductible donations and
insurance proceeds, if any, accrue solely to the benefit of Conoco.
Directors receive a fee of $1,000 for each board or committee meeting
attended. In addition, a board member who serves as chairman of a standing
committee receives a supplement of $5,000 annually.
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STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Class A and Class B
common stock beneficially owned on March 1, 2001, by each Conoco director and
director nominee, by each executive officer named in the Summary Compensation
Table below and by all directors, director nominees and executive officers as a
group.
BENEFICIAL OWNERSHIP TABLE
CLASS A SHARES CLASS B SHARES
BENEFICIALLY PERCENT BENEFICIALLY PERCENT
NAME OWNED(1)(2) OF CLASS OWNED(3)(4) OF CLASS
- ---- -------------- -------- -------------- --------
Archie W. Dunham(5)............................ 3,258,891 1.7 % 2,266,448 *
Kenneth M. Duberstein.......................... -- -- 6,287 *
Charles C. Krulak.............................. -- -- 5,458 *
Ruth R. Harkin(6).............................. 11,263 * 725 *
Frank A. McPherson............................. 12,885 * 1,951 *
William K. Reilly.............................. 10,218 * 3,402 *
William R. Rhodes.............................. 54,213 * 725 *
Franklin A. Thomas............................. 9,213 * 2,258 *
A.R. Sanchez, Jr. ............................. -- -- 4,447 *
Gary W. Edwards................................ 1,577,824 * 305,119 *
Robert E. McKee III(7)......................... 1,270,713 * 317,855 *
Jimmy W. Nokes(8).............................. 661,759 * 251,727 *
Robert W. Goldman(9)........................... 410,851 * 124,476 *
Directors and Executive Officers as a Group (14
persons)..................................... 7,712,482 4.0 % 3,414,404 *
- ---------------
* Less than 1%.
(1) Includes restricted or deferred stock units credited under the 1998 Stock
and Performance Incentive Plan and the Deferred Compensation Plan for
Non-employee Directors, the following number of which may be voted or sold
only upon passage of time: Mr. Dunham -- 227,042; Ms. Harkin -- 5,148; Mr.
McPherson -- 6,320; Mr. Reilly -- 6,153; Mr. Rhodes -- 5,148; and Mr.
Thomas -- 5,148.
(2) Includes beneficial ownership of the following number of shares of Class A
common stock which may be acquired within 60 days of March 1, 2001 through
stock options awarded under compensation plans: Mr. Dunham -- 2,884,372; Ms.
Harkin -- 4,065; Mr. McPherson -- 4,065; Mr. Reilly -- 4,065; Mr.
Rhodes -- 4,065; Mr. Thomas -- 4,065; Mr. Edwards -- 1,477,718; Mr.
McKee -- 1,217,147; Mr. Nokes -- 638,170; and Mr. Goldman -- 392,971. Of
such options, the following number are subject to stock price hurdles which
have not yet been met: Mr. Dunham -- 392,846; Mr. Edwards -- 182,324; Mr.
McKee -- 173,427; Mr. Nokes -- 115,938; and Mr. Goldman -- 52,562.
(3) Includes restricted or deferred stock units credited under the 1998 Stock
and Performance Incentive Plan and the Deferred Compensation Plan for
Non-employee Directors, the following number of which may be voted or sold
only upon passage of time: Mr. Dunham -- 94,276; Ms. Harkin -- 725; Mr.
McPherson -- 725; Mr. Reilly -- 3,402; Mr. Rhodes -- 725; Mr.
Sanchez -- 4,447; Mr. Thomas -- 2,258; Mr. Krulak -- 5,458; Mr.
Duberstein -- 6,287; Mr. Edwards -- 18,162; Mr. McKee -- 19,387; and Mr.
Nokes -- 30,768.
(4) Includes beneficial ownership of the following number of shares of Class B
common stock which may be acquired within 60 days of March 1, 2001 through
stock options awarded under compensation plans: Mr. Dunham -- 2,105,900; Mr.
Edwards -- 223,500; Mr. McKee -- 235,300; Mr. Nokes -- 194,800; and Mr.
Goldman -- 111,500. Of such options, the following number are subject to
stock price hurdles which have not yet been met: Mr. Dunham -- 1,400,000.
(5) Includes 10,000 shares of Class A common stock and 40,556 shares of Class B
common stock held in Dunham Management Trust, a revocable grantor trust.
(6) Includes 50 shares of Class A common stock owned by Ms. Harkin's daughter.
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(7) Includes 24,567 shares of Class B common stock owned by the McKee Family
Trust.
(8) Includes 413 shares of Class B common stock owned by Mr. Nokes's daughter.
(9) Includes 1,471 shares of Class B common stock owned by Mr. Goldman's wife
and 245 shares of Class B common stock owned by Mr. Goldman's son.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Conoco's directors and executive officers, and persons
who own more than 10% of a registered class of Conoco's equity securities, to
file with the SEC and the New York Stock Exchange initial reports of ownership
and reports of changes in ownership of Conoco common stock. Officers, directors
and greater than 10% stockholders are required by SEC regulation to furnish
Conoco with copies of all Section 16(a) forms they file.
To Conoco's knowledge, based solely on review of the copies of such reports
furnished to it and written representations that such reports accurately reflect
all reportable transactions and holdings, during the year ended December 31,
2000, all Section 16(a) reports applicable to its officers and directors were
filed on a timely basis, except the Form 3 filed on behalf of Thomas Knudson,
which was filed late.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table provides information about the compensation of the
Company's chief executive officer and four other most highly compensated
executive officers at the end of 2000 (the "Named Officers"). Two additional
tables provide detailed information about the employees' stock options.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------------
----------------------------------------- SHARES
OTHER UNDERLYING
NAME AND ANNUAL RESTRICTED STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) GRANTED(4) COMPENSATION(5)
- ------------------ ---- ---------- ---------- --------------- ---------------- ---------- ---------------
Archie W. Dunham............. 2000 $1,200,000 $3,000,000 $124,168 $ 750,019 705,900 $130,583
Chairman, President and 1999 1,100,040 3,500,000 148,324 -- 1,400,000 66,002
Chief Executive Officer 1998 901,261 1,300,000 29,946 1,100,090 1,693,040 51,750
Gary W. Edwards.............. 2000 593,200 1,019,000 25,670 -- 235,539 63,835
Senior Executive Vice
President, 1999 560,080 1,293,000 22,038 -- -- 33,492
Corporate Strategy and 1998 469,460 389,000 16,347 -- 567,974 27,620
Development
Robert E. McKee III.......... 2000 547,000 1,049,000 29,888 400,031 235,300 58,753
Executive Vice President, 1999 511,000 1,330,000 17,990 -- -- 30,540
Exploration Production 1998 418,775 372,000 30,573 -- 561,677 24,563
Jimmy W. Nokes............... 2000 467,200 752,000 24,975 400,031 196,647 49,975
Executive Vice President, 1999 360,480 432,000 2,325 -- -- 21,629
Refining, Marketing, Supply
and 1998 302,160 257,000 4,065 -- 270,208 17,870
Transportation
Robert W. Goldman............ 2000 348,400 399,000 9,365 -- 111,500 36,907
Senior Vice President,
Finance, 1999 321,800 911,000 754 -- -- 19,257
and Chief Financial Officer 1998 262,750 140,000 6,211 -- 164,191 15,390
- ---------------
(1) Approximately 25% of 2000 and 1999 variable compensation (i.e., bonus) was
paid in Conoco Class B common stock, and about 25% of 1998 variable
compensation was paid in Conoco Class A common stock. Included in the 1999
bonus amounts are the following Special Compensation Awards in recognition
of such individual's contributions to the success of Conoco's initial public
offering and split-off from DuPont: Mr. Dunham -- $1,500,000; Mr.
Edwards -- $500,000; Mr. McKee -- $500,000; Mr. Nokes -- $15,000; and Mr.
Goldman -- $600,000. Mr. Nokes' 1998 bonus amount includes a Special
Compensation Award of $35,000 in recognition of his contributions to the
success of Conoco's initial public offering.
(2) As permitted by the rules of the SEC, this column excludes perquisites and
other personal benefits for the Named Officer if the total incremental cost
in a given year did not exceed the lesser of $50,000 or 10% of such
officer's combined salary and bonus for that year. Accordingly, for Mr.
Dunham in 1998 and for Messrs. Edwards, McKee, Nokes and Goldman in all
periods, the amounts shown exclude such perquisites and only represent
reimbursements for the payment of taxes. Of the amounts shown for Mr. Dunham
in 2000, $72,288 represents reimbursement for the payment of taxes, and
$28,512 represents insurance premiums paid on Mr. Dunham's behalf for his
participation in the executive group life insurance program. Of the amounts
shown for Mr. Dunham in 1999, $48,187 represents reimbursement for the
payment of taxes, and $86,095 represents the approximate incremental cost to
Conoco for Mr. Dunham's personal use of company aircraft, which Conoco
required for security reasons.
(3) Dividend equivalents on restricted stock units will be credited to each
officer's account in the form of additional stock units. The restricted
stock units held by the Named Officers, as of December 31, 2000, had an
aggregate value of $1,051,842 for Mr. Dunham and $561,012 for both Mr. McKee
and Mr. Nokes, based on the closing price on the New York Stock Exchange on
such date of $28.94. Mr. Dunham's 1998 restricted stock unit grant and
accumulated dividend equivalents vested in 2000.
(4) For 2000 and 1999, options granted are for the purchase of Class B common
stock. For 1998, options granted are for the purchase of Class A common
stock. For Mr. Edwards and Mr. Nokes, the amounts shown include options to
purchase 12,039 and 1,847 shares of Class A common stock respectively,
representing reload options which were granted when a previously granted
option was exercised.
(5) 2000 amounts consist of matching contributions and profit sharing made
pursuant to Conoco's Thrift Plan and the following amounts credited under
Conoco's savings restoration plan: Mr. Dunham -- $113,300; Mr. Edwards --
$46,552; Mr. McKee -- $41,470; Mr. Nokes -- $32,692; and Mr.
Goldman -- $19,624.
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OPTION GRANTS TABLE
INDIVIDUAL OPTION GRANTS IN 2000
------------------------------------------------ POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SHARES TOTAL STOCK APPRECIATION FOR
UNDERLYING OPTIONS OPTION TERM(2)
OPTIONS GRANTED EXERCISE EXPIRATION ------------------------------
NAME GRANTED IN 2000 PRICE(1) DATE 5% 10%
- ---- ---------- ---------- -------- ---------- ------------- --------------
Archie W. Dunham.......... 705,900(3) 10.92% $21.25 02/07/10 $9,433,648 $23,906,735
Gary W. Edwards........... 223,500(3) 3.46% 21.25 02/07/10 2,986,854 7,569,275
4,013(4) 0.06% 24.91 01/28/02 8,545 17,416
4,013(4) 0.06% 24.91 01/26/03 13,948 28,992
4,013(4) 0.06% 24.91 03/03/04 19,932 42,691
Robert E. McKee III....... 235,300(3) 3.64% 21.25 02/07/10 3,144,549 7,968,905
Jimmy W. Nokes............ 194,800(3) 3.01% 21.25 02/07/10 2,603,307 6,597,292
1,847(4) 0.03% 24.34 01/28/02 3,776 7,697
Robert W. Goldman......... 111,500(3) 1.73% 21.25 02/07/10 1,490,086 3,776,171
- ---------------
(1) The exercise price is the average of the high and low prices of Conoco
common stock as reported on the New York Stock Exchange on the date of the
grant.
(2) Represents total appreciation over the exercise price at the assumed annual
appreciation rates of 5% and 10%, compounded annually for the term of the
options.
(3) Represents options to purchase Class B common stock. These stock options
vest in one year and have a term of 10 years. These options become
exercisable when the closing price per share of the Class B common stock on
the New York Stock Exchange equals or exceeds $26.50 for a period of five
consecutive days, which occurred during 2000. Reload rights are attached to
these options.
(4) Represents reload options to purchase Class A Common Stock granted when a
previously held option was exercised by tendering stock already owned. The
number of reload options granted is equal to the number of shares tendered
in payment of the option exercise price. The exercise price of a reload
option is the average of the high and low prices of Conoco Class A common
stock as reported on the New York Stock Exchange on the date of exercise of
the previously held option. Reload options become exercisable six months
from the date of grant and have a term equal to the remaining term of the
previously held option. Shares acquired as a result of the reload exercise
may not be sold for two years.
OPTION EXERCISES TABLE
(AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES)
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2000 (2) DECEMBER 31, 2000(3)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
Archie W. Dunham...... 145,462 $2,833,038 2,361,944 3,497,862(4) $30,081,341 $18,334,585
Gary W. Edwards....... 146,568 2,581,131 1,251,134 595,151(5) 16,409,477 4,561,660
Robert E. McKee III... -- -- 1,145,605 595,955(6) 14,692,110 4,553,854
Jimmy W. Nokes........ 11,662 195,693 524,838 400,810(7) 6,170,309 3,136,013
Robert W. Goldman..... -- -- 327,358 218,795(8) 4,095,572 1,678,825
- ---------------
(1) Represents the pre-tax gain, which is the difference between the market
value of the shares on the date of exercise of the options and the exercise
price.
(2) Unless otherwise indicated, shares underlying exercisable and unexercisable
options represent shares of Class A common stock.
(3) Represents the closing price for Conoco Class A and Class B common stock on
December 31, 2000 of $28.63 and $28.94, respectively, less the exercise
price for all outstanding exercisable and unexercisable options for which
the exercise price is less than such closing price. Exercisable options have
been held at least one year from the date of grant and have met any other
requirements for vesting and exercisability, such as stock price hurdles.
Unexercisable options have not met the applicable vesting schedules,
exercisability requirements, or stock price hurdles.
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(4) Includes options to purchase 1,391,962 shares of Class A common stock and
options to purchase 2,105,900 shares of Class B common stock.
(5) Includes options to purchase 371,651 shares of Class A common stock and
options to purchase 223,500 shares of Class B common stock.
(6) Includes options to purchase 360,655 shares of Class A common stock and
options to purchase 235,300 shares of Class B common stock.
(7) Includes options to purchase 206,010 shares of Class A common stock and
options to purchase 194,800 shares of Class B common stock.
(8) Includes options to purchase 107,295 shares of Class A common stock and
options to purchase 111,500 shares of Class B common stock.
RETIREMENT BENEFITS
Retirement benefits for Conoco employees are provided under the Retirement
Plan of Conoco Inc., and are based on an employee's years of service and average
monthly pay during the employee's three highest paid years. "Average monthly
pay" for this purpose includes regular compensation and 100% of annual variable
compensation payments, but excludes other bonuses and compensation in excess of
limits imposed by the Internal Revenue Code of 1986, as amended (the "Code").
The Code limits the amount of annual benefits which may be payable from the
pension trust. Retirement benefits in excess of these limitations are paid from
Conoco's general revenues under separate, nonfunded pension restoration plans.
The table below illustrates the straight-life annuity amounts payable under
the Conoco retirement plan and retirement restoration plans to Conoco employees
retiring at age 65 in 2000. These amounts reflect an offset based on Social
Security benefits. The current years of service credited for retirement benefits
for the Named Officers are as follows: 34 years for Archie W. Dunham; 36 years
for Gary W. Edwards; 32 years for Robert E. McKee III; 28 years for Jimmy W.
Nokes; and 35 years for Robert W. Goldman.
PENSION PLAN TABLE
ESTIMATED ANNUAL RETIREMENT BENEFITS ON SERVICE OF:
--------------------------------------------------------------
SALARY AND VARIABLE COMPENSATION 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- -------------------------------- ---------- ---------- ---------- ---------- ----------
$700,000......................... $ 273,000 $ 328,000 $ 383,000 $ 439,000 $ 495,000
1,450,000........................ 573,000 688,000 803,000 919,000 1,035,000
2,200,000........................ 873,000 1,048,000 1,223,000 1,399,000 1,575,000
2,950,000........................ 1,173,000 1,408,000 1,643,000 1,879,000 2,115,000
3,700,000........................ 1,473,000 1,768,000 2,063,000 2,359,000 2,655,000
4,450,000........................ 1,773,000 2,128,000 2,483,000 2,839,000 3,195,000
SEVERANCE ARRANGEMENTS
On October 19, 2000, Conoco and Mr. Dunham agreed to certain changes to Mr.
Dunham's employment agreement that had been previously entered into on May 10,
1998 and amended on August 17, 1999. The modified employment agreement has a
term that expires on December 20, 2003. The agreement provides that Mr. Dunham
is entitled to an annual base salary, subject to annual reviews and increases,
bonuses and long-term equity-based compensation that are competitive with
industry practices, and participation in the most favorable incentive,
retirement, welfare and other benefits Conoco offers to its senior executives.
During the term of the agreement, Mr. Dunham has agreed not to terminate
his employment within six months following a "change of control," as defined in
the agreement. The agreement provides that if, during the term of the agreement,
Mr. Dunham's employment is terminated under any of the following circumstances:
- by Mr. Dunham or Conoco for any reason within 30 days following the
expiration of six months after a change in control;
- by Mr. Dunham at any time for "good reason," as defined in the
agreement; or
- by Conoco at any time other than for cause or by reason of Mr.
Dunham's death or disability;
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then Mr. Dunham will be entitled to the following:
- a lump sum severance payment equal to the sum of his salary, deferred
compensation and vacation accrued to the date of termination and the
salary and bonus that would have been payable to him through the three
years following the date of termination of his employment, based on
his then current salary and an annual bonus equal to the average of
the two highest annual bonus awards to Mr. Dunham in the three fiscal
years preceding termination;
- welfare and other benefits continuation through the three years
following the date of termination of his employment plus a sum in
cash, undiscounted, equal to the additional retirement benefit he
would have accrued if he had remained employed for three years
following the date of termination of his employment;
- grants of options, restricted stock and other compensatory awards Mr.
Dunham would have received had his employment continued through the
third anniversary following the date of termination of his employment,
based upon grants of options and restricted stock and other
compensatory awards received by Mr. Dunham in the preceding three
years;
- vesting of, and termination of restrictions on, any unvested equity or
performance-based awards;
- if a change of control precedes termination of employment, or occurs
within one year following termination, at Mr. Dunham's request, the
cash value of his equity-based compensatory awards based on the
highest price per share paid by specified persons during the six-month
period prior to the date of the change of control, less any applicable
exercise price; and
- until the earlier of Mr. Dunham's death or the expiration or exercise
of all his Conoco stock options, at no cost to him, the financial and
tax planning and life insurance benefits afforded during employment.
If Mr. Dunham's employment is terminated under circumstances described above
following or in contemplation of a change of control, for three years Mr. Dunham
will be maintained as Chairman of the Board and receive as compensation for
service as Chairman (i) an annual cash payment of $1,000,000, (ii) participation
in the Director's Charitable Gift Program and (iii) participation in welfare
benefit plans and fringe benefits arrangements applicable as if Mr. Dunham had
remained employed. In addition, Mr. Dunham will participate in the same
comprehensive security program applicable during his service as Chief Executive
Officer and coverage by the Conoco domestic relocation policy will continue with
respect to a single relocation. If Conoco does not maintain Mr. Dunham as
Chairman, he will receive the compensation and benefits described herein, except
that the total unpaid cash payments shall be paid immediately without discount.
If Mr. Dunham's employment is terminated by Conoco for cause or by Mr.
Dunham for any reason other than good reason, in each case other than during the
30-day period following six months after a change of control, or if Mr. Dunham's
employment is terminated by reason of his death or disability, then he will
receive a lump sum severance payment equal to the sum of his salary, deferred
compensation and vacation accrued to the date of termination. If Mr. Dunham
remains employed until December 20, 2003, upon any termination of his employment
thereafter he is entitled to vesting of, and termination of restrictions on, any
unvested equity or performance-based award.
Mr. Dunham will also be entitled to receive an additional payment
sufficient to compensate him for the amount of any excise tax imposed on
payments made under the agreement or otherwise pursuant to Section 4999 of the
Code and for any taxes imposed on that additional payment.
Conoco has established three severance plans that cover key Conoco
employees, including the Named Officers: the Conoco Inc. Key Employee Severance
Plan, the Conoco Inc. Key Employee Temporary Severance Plan, and the Conoco Inc.
Temporary Severance Plan. Benefits payable under any of the three plans are
reduced by amounts payable pursuant to any other severance plan, policy, or
program of Conoco.
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The Key Employee Severance Plan provides that if the employment of a
participant in the plan is terminated
- within two years of a "change in control" of Conoco; or
- after a "potential change in control" of Conoco but prior to a change
in control, whether or not a change in control ever occurs, in either
case by Conoco other than for "cause," or by the participant for "good
reason," as such terms are defined in the plan, the participant will
be entitled to:
(a) a lump sum severance payment equal to one-and-one-half, two,
or three times the sum of the employee's base salary, previous year's
bonus, and economic equivalent of the previous year's stock option
award;
(b) the present value of the increase in retirement benefits
resulting from the crediting of an additional one-and-one-half, two, or
three times the employee's number of years of age and service under the
applicable retirement plan;
(c) 36 months of welfare benefits continuation;
(d) a pro rata portion of the annual bonus for which the employee
is eligible in the year of termination; and
(e) if necessary, a gross-up payment sufficient to compensate the
participant for the amount of any excise tax imposed on payments made
under the plan or otherwise pursuant to Section 4999 of the Code and
for any taxes imposed on this additional payment.
Prior to October 19, 2005, the Key Employee Severance Plan may not be
amended or terminated if such amendment would be adverse to the interests of any
eligible employee, without the employee's written consent. Amounts payable under
the plan will be in lieu of any payments or benefits that may be payable to the
severed employee under any other plan, policy or program of Conoco relating to
severance.
Under the Key Employee Temporary Severance Plan, if the employment of a
participant is involuntarily terminated due to a reduction in workforce or if a
participant experiences specified adverse employment changes, including
relocation and reductions in pay or position, the individual will be entitled to
one year's base salary and variable bonus. The Key Employee Temporary Severance
Plan expires in May 2001.
Under the Temporary Severance Plan, benefits are paid to a participant upon
termination of employment in the same circumstances as are described under the
Key Employee Temporary Severance Plan, but only if such termination occurs after
a "change in control," as defined in the Temporary Severance Plan. Benefits
under the Temporary Severance Plan are equal to two weeks' pay for each
completed year of service, up to a maximum of 52 weeks' pay. The Temporary
Severance Plan expires in May 2001.
Conoco also has established a revocable trust that may hold assets set
aside to fund Conoco's obligations under certain of its benefit programs as well
as the trustee's expenses incurred in disputes concerning obligations to the
trust. In the event of a change in control of Conoco, the trust becomes
irrevocable and Conoco is obligated to immediately contribute to the trust the
cost of the benefit programs.
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COMPENSATION COMMITTEE REPORT
COMPENSATION PHILOSOPHY AND STRATEGY
Conoco's goal is to provide a total compensation package that will enable
Conoco to attract and retain key employees, inspire and reward superior
performance, and align employees' interests with those of the shareholders. The
compensation committee strives to fulfill this goal by:
- establishing competitive overall levels of compensation;
- establishing challenging short- and long-range business objectives and
significantly varying compensation with performance against these
objectives;
- encouraging stock ownership; and
- integrating all elements of compensation into a comprehensive package
that supports Conoco's business direction.
The compensation committee believes that Conoco's resulting compensation program
provides significant rewards for superior short- and long-term performance.
In determining overall executive compensation levels, the compensation
committee considers the compensation levels paid by a benchmark peer group of
major petroleum companies. These include the U.S.-based integrated international
companies shown in the stock performance graphs on page 22. Because of the
declining number of integrated petroleum companies based in the U.S., the
committee also considers prominent U.S.-based diversified energy companies, and
large upstream or downstream "independents."
Variable compensation levels for executives are designed to be
approximately at the median of the peer group when both Conoco and the executive
meet performance objectives, to exceed the peer group median when performance
exceeds objectives, and to fall below the median when objectives are not
achieved. The compensation committee draws upon compensation surveys from
several outside consultants in determining competitive compensation levels.
Although the compensation of all employees varies from year to year based
on individual and company performance, the opportunity for variable compensation
increases as an employee's level of responsibility increases. Accordingly,
variable compensation comprises a significant portion of the total compensation
package for executives. Total company, business unit and personal performance
all affect the total level of compensation.
The company encourages Conoco stock ownership primarily through annual
stock option awards and the payment of approximately 25% of annual incentive
awards in the form of Conoco stock. Because the compensation committee believes
that significant stock ownership will align executives' interests with those of
shareholders, it has established target stock ownership levels for senior
executives, ranging from five times annual salary for the CEO to three times
annual salary for vice presidents. Conoco's objective is for each executive to
meet the target ownership level within five years of assuming his or her
position.
COMPENSATION PROGRAMS
Base Salary and Annual Incentive
Base salaries are initially set based on competitive compensation levels
for similar positions in peer companies, and are reviewed annually and adjusted
over time to recognize individual levels of contribution and competency.
Conoco's objective is to provide base salary levels that approximate the median
of salaries paid by its peers to persons with comparable positions in the peer
companies.
Annual incentive awards for executives are made under the Global Variable
Compensation Plan ("GVC"), Conoco's annual incentive program for executives and
managers. GVC payments are authorized by the 1998 Stock and Performance
Incentive Plan. The compensation committee annually establishes performance
objectives under the GVC plan after consideration of long-term internal growth
targets and peer company performance.
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Each executive is assigned a target award at the beginning of the
performance year based on a competitive assessment of annual incentive
opportunities available to persons holding comparable positions within Conoco's
peer group. Incentive awards are usually made in February of each year in
respect of the prior year. The final award is calculated by adjusting the target
up or down based on both company and individual performance. The resulting
actual award could range from 0% to over 200% of the individual target.
Company Performance. In determining the actual incentive award, the
compensation committee initially reviews Conoco's performance for the year.
First, the target award is adjusted based on Conoco's total company performance
in meeting predetermined objectives for after-tax operating income ("ATOI") and
cash flow from operations before asset sales ("CFO"). Each of these metrics is
weighted equally, and the average is assigned a rating varying from 50% to 150%
based on actual performance relative to the goals. For 2000, target awards were
adjusted upward by the maximum of 150% for performance relative to the ATOI and
CFO goals.
The resulting target award is next adjusted up or down based on the ranking
of Conoco's total shareholder return relative to the total shareholder return of
the companies in the peer group shown in the performance graphs. This adjustment
can be as great as 25% up or down, depending on the quartile within which
Conoco's stock performance ranks relative to that of each of the other peer
companies. Target awards for 2000 were adjusted upward by 25% based on the
average total shareholder return of 20% for Conoco Class A and Class B common
stock, which was the second highest total stockholder return in the peer group,
and placed Conoco in the first quartile. For this purpose, rankings are
calculated by considering separately the total shareholder return of each of the
companies in the peer group. By contrast, the performance graphs reflect the
average stockholder return of all of the peer companies taken together, weighted
by market capitalization, as specified by the SEC.
Finally, an adjustment to the target award may also be made for Conoco's
performance on its core values, which include safety, environmental stewardship,
business ethics, and valuing all people. Any such adjustment is subjective in
nature, without assigning any of the factors any particular weight. In prior
years, this adjustment has affected target awards by as much as 5%. A positive
5% core values adjustment was made at the total Conoco level for 2000.
After the target award has been adjusted for total company performance,
each executive's individual award is adjusted based on individual and business
unit performance. Such components are weighted 40% and 60%, respectively.
Individual Performance. The 40% individual component is determined by an
assessment of each executive's personal performance versus pre-set individual
objectives, and a subjective evaluation of how the individual has performed
versus five Leadership Criteria: Business Direction (Strategy), Implementation
(Results), Networking and Team Building, People Development, and Personal
Leadership, including demonstration of core values. A Performance and Leadership
rating varying from 50% to 150% is assigned based on an overall assessment of
these factors.
Business Unit Performance. The 60% business unit component is calculated by
averaging the performance of up to three "tiers" of organization in meeting
their ATOI and CFO objectives. The application of specific tiers reflects the
specific responsibilities of the executive. Each business unit is assigned a
rating from 50% to 150% relative to Conoco's overall performance, and the
results are averaged.
One-fourth of the GVC award is paid in stock, and the remainder in cash.
Executives may choose to defer annual incentive awards until a future date
certain or until retirement. The cash portion of deferred balances are credited
with notional investment earnings based on the performance of several
"investment" choices, including Conoco stock, equity mutual funds, or a "stable
value" income account. The stock portion of deferred annual incentives must be
held as stock units, which are credited with dividend equivalents and ultimately
paid out in the form of Conoco stock.
A total of $64.2 million in GVC awards was paid to 1,350 participants in
February 2001 for 2000 performance, of which $6.2 million was paid to the Named
Officers. This compares with a 1999 total payout of $49 million. The increase in
2000 awards over 1999 was primarily due to improved earnings and cash
generation, and to first quartile performance in total shareholder return.
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Long-Term Incentive Compensation
Conoco's primary long-term compensation vehicles are stock options and
restricted stock. Stock-based compensation is designed to provide competitive
compensation, to offer an incentive to employees primarily responsible for the
growth and success of the company, to retain key employees, and to align
employees' interests with those of shareholders.
A guideline number of options to be awarded is established for each level
of management. The guideline is based on a competitive analysis of long-term
compensation opportunities for persons holding comparable positions in the peer
group companies. Each executive's individual award may be adjusted up or down
from the target by as much as 50% based on the compensation committee's
subjective evaluation of the individual's long-term potential and performance.
Conoco's intent is to grant awards that match in value the median awarded by its
peers. Current stock ownership is not considered when determining individual
awards.
Restricted stock awards were made in February 2000 to Messrs. Dunham,
McKee, and Nokes as detailed in the Summary Compensation Table. Options to
purchase 6.3 million shares of Conoco Class B common stock were granted to 870
employees in February 2000. Of those options, approximately 1.5 million options
were granted to the Named Officers. Stock option and restricted stock awards to
Vice Presidents, Executive Vice Presidents, and the CEO were made pursuant to
the Stock and Performance Incentive Plan. Stock options to other employees were
granted under the Key Employee Stock Performance Plan.
Deductibility of Performance-based Compensation
The compensation committee has, where it deems appropriate, taken steps to
preserve the deductibility of performance-based compensation to the CEO and
executive officers. The committee may award non-deductible compensation when it
believes that such grants are in the best interest of the shareholders,
balancing tax efficiency with long-term strategic objectives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Dunham received a Global Variable Compensation award of $3.0 million in
recognition of his 2000 performance. This award represents 227% of the 2000
target award for the CEO. Mr. Dunham's award was calculated in the same manner
as other awards under the GVC Plan. The main factors considered in establishing
Mr. Dunham's Performance and Leadership rating were:
- Record earnings and cash performance;
- Significant reserve additions through exploration and acquisitions;
- Continued recognition as an efficient operator;
- Sustained high level of safety and environmental performance, and
development of people;
- Healthy relations with the investment community and with host
governments;
- The achievement of substantially all personal objectives agreed to with
the Committee.
Based on a review of base salaries for other CEOs within Conoco's peer group,
the Compensation Committee increased Mr. Dunham's annual salary, effective
January 1, 2000, to $1,200,000.
After reviewing the terms of Mr. Dunham's severance agreement and
considering competitive business practices, the compensation committee
determined to modify Mr. Dunham's severance agreement in order to provide
appropriate incentives, obtain certain flexibility for Conoco and foster
leadership continuity. The provisions of the severance agreement as so modified
are described above on page 15.
The Compensation Committee
Franklin A. Thomas, Chairman
General Charles C. Krulak
William K. Reilly
William R. Rhodes
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AUDIT AND COMPLIANCE COMMITTEE REPORT
The Audit and Compliance Committee (the "Audit Committee") of the Board of
Directors of Conoco is responsible for providing independent, objective
oversight for Conoco's financial reporting functions and internal control
systems. The Audit Committee is currently composed of four directors. Each of
the members of the Audit Committee is independent as defined by the Securities
and Exchange Commission regulations and the New York Stock Exchange listing
standards. The Audit Committee operates under a written charter adopted by
Conoco's Board of Directors, a copy of which is attached to this Proxy Statement
as Appendix A.
Review with Management. The Audit Committee has reviewed and discussed with
management the Company's audited consolidated financial statements for the year
ended December 31, 2000.
Review and Discussions with Independent Auditing Firm. The Audit Committee
has discussed with PricewaterhouseCoopers LLP, independent accountants for the
Company, the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as amended.
The members of the Audit Committee have received and reviewed the written
disclosures and the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees, as amended, and have reviewed, evaluated and discussed with that
firm its independence from the Company.
Recommendation to the Conoco Board of Directors. Based on its review of the
audited financial statements and the various discussions noted above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in Conoco's Annual Report on Form 10-K for the year ended
December 31, 2000.
The Audit and Compliance Committee
Frank A. McPherson, Chairman
Kenneth M. Duberstein
Ruth R. Harkin
A.R. Sanchez, Jr.
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STOCK PERFORMANCE GRAPHS
The following performance graphs compare the cumulative stockholder return
on the Class A common stock and Class B common stock to the cumulative total
return of the Standard & Poor's 500 Stock Index and a peer group of companies.
The peer group companies are BP Amoco, Chevron, ExxonMobil, Marathon, Phillips,
Royal Dutch Petroleum, and Shell Transport and Trading (which together comprise
the Royal Dutch/Shell Group), and Texaco. The graphs assume that the value of
the investment in each index was $100 at the initial point of each graph and
that all dividends were reinvested. The initial point of the graph for Class A
common stock is October 21, 1998, the date of Conoco's initial public offering.
The initial point of the graph for Class B common stock is August 16, 1999, the
first day of regular-way trading of the Class B common stock on the New York
Stock Exchange.
CUMULATIVE TOTAL RETURNS
------------------------
CLASS A COMMON STOCK -- OCTOBER 21, 1998 TO DECEMBER 31, 2000
[GRAPH]
OCTOBER 21, 1998 DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31, 2000
---------------- ----------------- ----------------- -----------------
Conoco............... $100.00 $ 90.76 $110.53 $132.12
S&P 500.............. $100.00 $114.89 $137.32 $123.40
Peer Group........... $100.00 $101.66 $124.36 $125.72
CLASS B COMMON STOCK -- AUGUST 16, 1999 TO DECEMBER 31, 2000
[GRAPH]
AUGUST 16, 1999 DECEMBER 31, 1999 DECEMBER 31, 2000
--------------- ----------------- -----------------
Conoco...................... $100.00 $ 91.10 $109.38
S&P 500..................... $100.00 $110.66 $ 99.44
Peer Group.................. $100.00 $ 96.24 $ 97.29
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PROPOSAL 2
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Item 2 on Proxy Card)
It is the responsibility of the Audit and Compliance Committee to employ,
subject to stockholder ratification at each annual meeting, independent
accountants to audit the financial statements of Conoco for the year and to
perform such other duties as prescribed from time to time by the Audit and
Compliance Committee.
PricewaterhouseCoopers LLP has served Conoco for over 15 years through
various services performed in connection with the audit of Conoco's former
parent company, DuPont. In 1998, Conoco appointed PricewaterhouseCoopers LLP as
the independent accountants in conjunction with its initial public offering.
Conoco believes that the firm's knowledge of Conoco's business and operations
gained through these periods of service is most valuable. Partners and employees
of the firm who work on Conoco's account are periodically changed, thus giving
Conoco the benefit of new thinking and approaches in the audit area.
PricewaterhouseCoopers LLP's fees for professional services totaled $6.1
million for the calendar year 2000 out of a total of $9.8 million in fees paid
for professional services to all accounting firms. PricewaterhouseCoopers LLP
fees for professional services included the following:
Audit Fees -- PricewaterhouseCoopers LLP fees relating to the calendar
year 2000 consolidated audit and quarterly reviews were $1.8 million.
Financial Information Systems Design and Implementation Fees -- There
were no fees incurred for financial information system design and
implementation services.
All Other Fees -- All other PricewaterhouseCoopers LLP fees totaled
$4.3 million and related primarily to (1) audits of various subsidiary and
affiliated companies and employee benefit plans (2) expatriate tax
services, and (3) tax and accounting consulting services.
The Audit and Compliance Committee considered the non-audit services
provided to the Company and whether they impaired the independence of
PricewaterhouseCoopers LLP.
Subject to ratification by the stockholders, the Audit and Compliance
Committee has reappointed PricewaterhouseCoopers LLP as independent accountants
to perform an audit of Conoco's consolidated financial statements for the year
2001 and to render other services as required of them.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the annual meeting and will have an opportunity to address the meeting and
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS. PROPERLY
SUBMITTED PROXY CARDS AND VOTING INSTRUCTIONS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.
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ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
In order to be included in the proxy material for the 2002 annual meeting,
Conoco must receive eligible proposals of stockholders intended to be presented
at the annual meeting on or before November 26, 2001, directed to the Corporate
Secretary of Conoco at the address indicated on the first page of this proxy
statement.
ADVANCE NOTICE REQUIRED FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
Conoco's By-laws require timely advance written notice of stockholder
nominations of director candidates and of any other proposals to be presented at
an annual meeting of stockholders. In order to be presented at the 2002 annual
meeting, the By-laws require that written notice of director nominations by
stockholders be delivered to Conoco's Corporate Secretary at Conoco's executive
offices no earlier than January 8, 2002, and no later than February 7, 2002. The
written notice must set forth for each person whom the stockholder proposes to
nominate for election or re-election as a director: (a) the name, age, business
address and residence address of such person; (b) the principal occupation or
employment of such person; (c) the number of shares of each class of capital
stock of Conoco beneficially owned by such person; and (d) the written consent
of such person to have such person's name placed in nomination at the meeting
and to serve as a director if elected. The stockholder giving the notice must
also include: (a) the name and address, as they appear on Conoco's books, of
such stockholder; (b) the number of shares of each class of voting stock of
Conoco that are then beneficially owned by such stockholder; (c) a description
of all arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder; (d) a representation
that such stockholder intends to appear in person or by proxy at the annual
meeting to nominate the persons named in its notice; and (e) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder.
In the case of other proposals by stockholders for the 2002 annual meeting,
the By-laws require that written notice be delivered to Conoco's Corporate
Secretary at Conoco's executive offices no earlier than January 8, 2002, and no
later than February 7, 2002. The stockholder's notice to the Corporate Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (a) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and record address of such stockholder, (c) the
class or series and number of shares of capital stock of Conoco which are owned
beneficially or of record by such stockholder, (d) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (e) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting. A copy of the By-laws of Conoco setting forth the requirements for the
nomination of director candidates by stockholders and the requirements for
proposals by stockholders may be obtained from Conoco's Corporate Secretary at
the address indicated on the first page of this proxy statement.
In order for director nominations and stockholder proposals to have been
properly submitted for presentation at this annual meeting, notice must have
been received by the Corporate Secretary between the dates of January 16, 2001
and February 15, 2001. Conoco received no such notice, and no stockholder
director nominations or proposals will be presented at the annual meeting.
ANNUAL REPORT ON FORM 10-K
CONOCO WILL PROVIDE TO EACH STOCKHOLDER, WITHOUT CHARGE AND UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS, SCHEDULES AND A LIST OF EXHIBITS. ANY SUCH WRITTEN REQUESTS SHOULD
BE DIRECTED TO CONOCO SHAREHOLDER RELATIONS, P.O. BOX 2197, HOUSTON, TEXAS
77252-2197.
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APPENDIX A
AUDIT AND COMPLIANCE COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
PURPOSE
As a standing committee of the Board of Directors (the "Board"), the
primary function of the Audit and Compliance Committee (the "Committee") is to
assist the Board in carrying out its oversight responsibilities as they relate
to the Company's financial reporting process, internal control systems,
corporate governance, management systems for compliance with the law, and
strategic Safety, Health and Environmental policy and direction. The Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls;
- Discuss with the management, the independent auditors, and the
internal auditors, the integrity of the Company's financial reporting
processes and controls, significant corporate risk exposures, and the
steps management has taken to monitor, control, and report such
exposures. Discuss significant findings prepared by the independent
auditors and the internal auditors together with management's
responses;
- Discuss and appraise the performance and independence of Conoco's
independent auditors and internal auditors, including responsibility
to select (subject to shareholder ratification), evaluate, and, where
appropriate, replace the independent auditors, who are ultimately
responsible to the Board and the Committee;
- Monitor the Company's compliance and Safety, Health, and Environmental
programs for adherence to applicable laws and regulations. Discuss
with management all significant Legal and Safety, Health, and
Environmental issues and incidents; and
- Maintain direct lines of communication with the Board and Conoco's
management, internal auditors and independent auditors.
The Committee has the authority to conduct or authorize investigations into any
matters within the Committee's scope of responsibilities. The Committee shall be
empowered to retain, at the Company's expense, independent counsel and other
professionals to assist in the conduct of any investigation.
COMPOSITION AND MEETINGS
The Committee shall be comprised of between three and five members, as
appointed by the Board. The Board should also appoint a chairperson and
determine the term for Committee members.
The Committee shall be comprised of directors who are free from any
relationship that, in the opinion of the Board, may interfere with the exercise
of his or her independent judgment. In addition, each member shall be (or shall
become within a reasonable period of time) financially literate and at least one
member shall have accounting or related financial management expertise, in each
case as the Board interprets such qualifications in the exercise of its business
judgment.
In fulfilling their responsibilities hereunder, it is recognized that
members of the Committee are not full-time employees of the Company and are not,
and do not represent themselves to be, accountants or auditors by profession or
experts in the fields of accounting, law, Safety, Health and Environment, or
auditing. As such, it is not the duty or responsibility of the Committee or its
members to conduct "field work" or other types of auditing, legal, or accounting
reviews or procedures. The Company's management is responsible for preparing the
Company's financial statements and the independent auditors are responsible for
auditing those financial statements. Each member of the Committee shall be
entitled to
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30
assume and rely on (1) the integrity of those persons and organizations within
and outside the Company that it receives information from and (2) the accuracy
of the financial, legal, Safety, Health and Environment, and other information
provided to the Committee by such persons or organizations absent actual
knowledge to the contrary (which shall be promptly reported to the Board).
The Committee shall meet five times annually, with special meetings called
as circumstances dictate. The Committee should meet periodically with
management, the General Auditor, and the independent auditors in order to
maintain direct lines of communication. The Committee may hold executive
sessions with these individuals to discuss any matters that they or the
Committee believe should be discussed privately.
RESPONSIBILITIES & DUTIES
The fulfillment of the following will assist the Committee in carrying out
its oversight responsibilities in a manner that complies with suggested
standards and regulatory requirements. The Committee shall:
1. Prepare a report to shareholders as required by the SEC (Securities
and Exchange Commission) to be included in the Company's annual proxy
statement;
2. Discuss with financial management and the independent auditors the
Company's quarterly financial results prior to their filing with the SEC;
3. Discuss with management and the independent auditors the audited
annual financial statements including significant issues regarding
accounting principles, practices, and judgements;
4. Discuss with the independent auditors the matters required to be
discussed by AICPA SAS 61 (Communication with Audit Committees);
5. Ensure that the independent auditors submit on a periodic basis to
the Committee a formal written statement delineating all relationships
between the independent auditors and the Company, actively engage in a
dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and independence
of the independent auditors, and recommend that the Board take appropriate
action in response to the independent auditor's report to satisfy itself of
the auditors' independence;
6. Based on the discussions listed in (3) through (5) above, determine
whether to recommend to the Board that the Company's financial statements
be included in the Annual Report on Form 10-K for filing with the
Commission;
7. Discuss audit plans including scope, staffing, locations, reliance
upon management and the internal auditors, and general audit approach of
the independent auditors;
8. Discuss the independence and performance of the independent
auditors and annually select the independent auditors, subject to
shareholder ratification;
9. Discuss the fees and other significant compensation to be paid to
the independent auditors;
10. Discuss annually, the charter, budget, audit plan, significant
changes in plans, activities, organizational structure, and qualifications
of the internal audit staff. Discuss and approve the appointment,
replacement, or dismissal of the General Auditor;
11. Provide oversight of the Corporate Safety, Health and
Environmental program including the Company's performance with regard to
the established policies, standards, and goals. Discuss with management,
significant Safety, Health, and Environmental incidents including
management's response;
12. Provide strategic oversight to the Company's Risk Management
program to insure appropriate processes are in place to identify, manage,
and control business risks associated with the
A-2
31
Company's business objectives. Discuss with management, significant risk
management failures including management's response.
13. Discuss written reports evaluating internal controls, compliance
with the business ethics policy, annual corporate risk assessment, and
incidents of theft and fraud;
14. Review and discuss annually the adequacy of the Committee Charter,
report the results of this review to the Board and, if necessary, recommend
that the Board amend the Charter. Periodically assess the effectiveness of
the Committee;
15. Annually discuss audit results associated with directors and
officers expense accounts and perquisites;
16. Discuss reports from the Company's Corporate Compliance Committee
and assess the Company's Compliance Program;
17. Discuss the status of significant legal and tax matters that could
have a material impact on the organization's financial statements and the
Company's compliance with applicable laws and regulations;
18. Perform such other duties as may be assigned to it from time to
time by the Board; and
19. Maintain minutes of meetings and report to the Board on
significant results and recommendations.
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[CONOCO LOGO]
DIRECTIONS TO THE ANNUAL MEETING OF STOCKHOLDERS
FROM DOWNTOWN HOUSTON
OMNI HOUSTON HOTEL WESTSIDE
13210 KATY FREEWAY
HOUSTON, TEXAS 77079
(281) 558-8338
- Take I-10 West 3 miles past Sam Houston
Tollway.
- Exit Eldridge Parkway, Exit 753A.
- Turn right (North) on Eldridge Parkway.
- The hotel will be immediately on your
left.
33
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED, OR IF NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election [ ] [ ] Nominees: 2. Ratification of the [ ] [ ] [ ]
of appointment of
Directors 01. Kenneth M. PricewaterhouseCoopers
Duberstein, LLP as Conoco's
02. William R. independent accountants
Rhodes, for the year ending
03. A.R. "Tony" December 31, 2001
Sanchez, Jr.
For, except vote withheld from
the following nominee(s):
- ---------------------------------------
Check this box if you have
comments or change of address [ ]
and use the back of this card.
SIGNATURE(S)____________________________________________________________________ DATE___________________
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. If signing as a
Corporation, please give full corporate name by authorized officer. If you are voting by mail,
please sign, date and return the Proxy Card promptly using the enclosed envelope.
- ------------------------------------------------------------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
[CONOCO LOGO]
CONOCO INC. - ANNUAL MEETING - MAY 8, 2001
CONOCO ENCOURAGES INTERNET OR PHONE VOTING
24 HOURS A DAY, 7 DAYS A WEEK
THIS ELIMINATES THE NEED TO RETURN THE PROXY CARD.
Log onto the Internet and type: http://www.eproxyvote.com/coc
o Have your proxy card ready and follow the instructions.
o You will be able to elect to receive future mailings via the Internet.
Your electronic vote authorizes the proxies named on the reverse of this card to
vote your shares to the same extent as if you marked, signed, dated and returned
the proxy card.
On a touch-tone phone, call toll-free 1-877-779-8683. You will hear these
instructions:
o Enter the last four digits from your social security number.
o Enter the control number from the box above, just below the perforation.
o You will then have two options:
OPTION 1: To vote as the Board of Directors recommends on all proposals; or
OPTION 2: To vote on each proposal separately.
o Your vote will be repeated to you and you will be asked to confirm it.
IF YOU HAVE VOTED BY INTERNET OR PHONE, PLEASE DO NOT RETURN THE PROXY CARD.
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CONOCO INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 8, 2001
R
The undersigned hereby appoints Rick A. Harrington and Archie W.
O Dunham and each of them, proxies, with full power of substitution and
resubstitution, to vote all shares of common stock of Conoco Inc.
X which the undersigned is entitled to vote if personally present at the
annual meeting of stockholders of Conoco Inc. to be held on May 8,
Y 2001 or at any adjournment thereof, on each of the items on the
reverse side and in accordance with the directions given there, and in
their discretion on all other matters that may properly come before
the annual meeting and any adjournment thereof, hereby revoking any
proxy heretofore given.
If you have any comments or a change of address, mark the appropriate
box on the reverse side and use the following space:
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SEE REVERSE
SIDE
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ONLINE ACCOUNT ACCESS
Registered stockholders may access their accounts and obtain online
answers to stock transfer questions by signing up for Internet account access.
Call 1-877-843-9327 (outside North America, call 201-536-8071) to obtain by mail
a temporary personal identification number and information on viewing your
account online.
CONOCO CONNECTION
An automatic dividend reinvestment plan is available to all
stockholders of record. Participants may also add cash for the purchase of
additional shares. A detailed account statement is mailed after each investment.
You may also view your account over the Internet if you have Online Account
Access (see above). To enroll, please call EquiServe at (800) 317-4445, outside
North America call (201) 324-0313.
DIRECT DEPOSIT OF DIVIDENDS
Stockholders who would like their dividends directly deposited in a
U.S. bank account should contact EquiServe at (800) 870-2340, outside North
America call (201) 324-0313.
ONLINE DELIVERY OF PROXY MATERIAL
If you vote using the Internet as shown on the reverse, you may elect
to receive proxy materials electronically next year in place of receiving
printed materials. You will save Conoco printing and mailing expenses, reduce
the impact on the environment and obtain immediate access to the annual report,
proxy statement and voting form when they become available. If you used a
different method to vote, sign up anytime using your stockholder account number
at the Internet web site: http://www.econsent.com/coc.
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