SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Vastar Resources, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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Notes:
[LOGO OF VASTAR RESOURCES, INC. APPEARS HERE]
VASTAR RESOURCES, INC.
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
ON MAY 19, 1999
AND PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
Vastar Resources, Inc.
15375 Memorial Drive
Houston, Texas 77079
March 23, 1999
Dear Stockholder:
You are cordially invited to join us at the 1999 Annual Meeting of
Stockholders on Wednesday, May 19, 1999, in the Main Conference Room of Vastar
Resources, Inc., 15375 Memorial Drive, Houston, Texas 77079, beginning at 9:00
a.m., local time.
It is important that your shares be voted whether or not you plan to be
present at the meeting. Please complete, sign, date and return the enclosed
form of proxy promptly. If you attend the meeting and wish to vote your shares
personally, you may revoke your proxy and vote in person.
This booklet includes the notice of the meeting and the proxy statement, which
contains information about the formal business the stockholders will act on.
The meeting will also feature a report on the operations of Vastar, followed
by a question-and-answer period.
Sincerely yours,
/s/ MICHAEL E. WILEY
Chairman of the Board
/s/ CHARLES D. DAVIDSON
President and Chief Executive Officer
Vastar Resources, Inc.
Notice of Annual Meeting of Stockholders
to be held
May 19, 1999
To the Stockholders:
The 1999 Annual Meeting of Stockholders of Vastar Resources, Inc. will be held
in the Main Conference Room of Vastar Resources, Inc., 15375 Memorial Drive,
Houston, Texas 77079, on Wednesday, May 19, 1999, at 9:00 a.m., local time.
The purposes of the Annual Meeting are:
(1) To elect nine directors to hold office for a one-year term;
(2) To approve the appointment of PricewaterhouseCoopers LLP as independent
auditors for Vastar for the year 1999; and
(3) To transact such other business as may properly come before the meeting.
The board of directors has fixed March 22, 1999 as the record date for the
meeting. Only common stockholders of record at the close of business on March
22, 1999 may vote at the meeting.
If you are a stockholder of record you should receive a copy of this proxy
statement and a proxy card. On the proxy card, you can give directions on how
the shares of common stock of Vastar registered in your name should be voted.
If you are a participant in Vastar's Capital Accumulation or Savings Plans you
should also receive a copy of this proxy statement and a proxy card from the
plan trustee. On the proxy card for the plans you can give directions to the
plan trustee on how the shares of common stock credited to your account should
be voted. If a bank, broker or other nominee holds shares you own, you should
receive instructions from the nominee on how your shares can be voted.
You are urged to read this proxy statement; then complete, sign and date the
proxy card and return it in the enclosed self-addressed postage-paid envelope.
/s/ ALBERT D. HOPPE
Albert D. Hoppe Houston, Texas
Secretary March 23, 1999
Vastar Resources, Inc.
15375 Memorial Drive
Houston, TX 77079
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PROXY STATEMENT
March 23, 1999
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VOTING BY PROXY
The board of directors of Vastar is soliciting your proxy to vote your
shares at the 1999 annual stockholders' meeting. You may revoke your proxy at
any time before it is voted by giving notice, in person or in writing, to the
Secretary of Vastar. Unless you revoke your proxy, it will be voted in
accordance with the instructions on your proxy card. If you return a signed
proxy card but do not provide voting instructions, the persons named as
proxies on the proxy card will vote:
. For the election of the nine nominees for director listed in this proxy
statement; and
. For the approval of the appointment of PricewaterhouseCoopers LLP as
independent auditors for Vastar for the year 1999.
For other items of business that come before the meeting, the persons named as
proxies will vote in accordance with their best judgment.
WHO CAN VOTE
If you are listed on our stockholder register as a holder of common stock at
the close of business on March 22, 1999, you are entitled to vote your shares
at the annual stockholders' meeting. March 22, 1999 is the record date. Anyone
listed on this register on the record date is called a holder of record on
that date. There were 97,405,090 shares of common stock outstanding on March
22, 1999. Each share is entitled to one vote, but you will not be entitled to
vote any fractional shares you hold. The approximate date on which this proxy
statement and the proxy card were first sent to stockholders was March 29,
1999.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
March 22, 1999 is the date when we determined the identity of the holders of
record of our common stock entitled to vote at the 1999 annual stockholders'
meeting. On March 22, 1999, the only person known to us to own more than 5
percent of our common stock is:
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
-------------- ------------------- ---------- --------
Common Stock.................. Atlantic Richfield Company 80,000,001 82.1%
515 South Flower Street
Los Angeles, California 90071
ARCO (Atlantic Richfield Company) has both the voting power and the power to
dispose of these shares. It does not share this power with any other person.
ARCO is able, acting alone, to elect the entire board of directors of Vastar
and to approve any action requiring stockholder approval. ARCO's level of
ownership of our common stock precludes any acquisition of control of Vastar,
unless favored by ARCO. ARCO has informed us that it intends to vote its
shares in favor of the nine nominees to the board of directors and for the
approval of PricewaterhouseCoopers LLP as independent auditors for the year
1999.
1
SECURITY OWNERSHIP OF MANAGEMENT
The table below lists the number of shares of Vastar common stock and ARCO
common stock beneficially owned by the following persons:
(i) Each of our directors;
(ii) Our President and Chief Executive Officer;
(iii) The four highest-paid executive officers (other than our President
and Chief Executive Officer); and
(iv) All of Vastar's directors and executive officers as a group.
The date we chose to determine beneficial ownership was February 1, 1999.
Beneficial ownership of common stock by a person as of a particular date means
common stock directly or indirectly owned by that person on the date and
common stock which that person has the right to acquire within 60 days of the
date. On February 1, 1999, no Vastar director or executive officer
beneficially owned more than 1 percent of Vastar's common stock or more than 1
percent of any other class of equity securities of Vastar or ARCO. In
addition, all of the equity securities owned by our directors and officers as
a group did not exceed 1 percent of any class of equity securities of Vastar
or ARCO. Each individual has sole voting and investment power over the shares
indicated.
Shares of Vastar Common Stock Shares of ARCO Common Stock
Beneficially Owned as of Beneficially Owned as of
Name February 1, 1999(1)(2) February 1, 1999(2)(3)(4)
---- ----------------------------- ---------------------------
Jimmie D. Callison...... 5,000 0
Terry G. Dallas......... 605 57,070
Charles D. Davidson..... 162,150 1,876
Phillip A. Gobe......... 5,750 18,445
Albert D. Hoppe......... 52,696 1,463
Marie L. Knowles........ 400 148,015
Robert C. LeVine........ 6,500 500
William D. Schulte...... 6,000 0
Steven J. Shapiro....... 171,577 1,204
Robert P. Strode........ 12,080 8,940
Donald R. Voelte, Jr.... 0 90,302
Michael E. Wiley........ 298,639 43,948
All directors and
executive officers as a
group, including those
listed above........... 813,612 373,819
- ------------
(1) Some of the Vastar common stock reported as beneficially owned in this
column is obtainable on February 1, 1999, or within 60 days of February 1,
1999, only through the exercise of stock options. The number of these
stock options held by the following persons listed in the table is as
follows:
Callison................ 5,000
Davidson................ 160,448
Gobe.................... 5,750
Hoppe................... 52,696
LeVine.................. 5,000
Schulte.................... 5,000
Shapiro.................... 169,559
Strode..................... 12,000
Wiley...................... 296,578
Directors & officers as a
group..................... 804,247
(2) Some of the common stock reported in this column is held by trustees under
our Capital Accumulation and Savings Plans or ARCO's Capital Accumulation
and Savings Plans.
2
(3) Some of the ARCO common stock reported as beneficially owned in this
column is obtainable on February 1, 1999, or within 60 days of February 1,
1999, only through the exercise of stock options. The number of these
stock options held by the following persons listed in the table is as
follows:
Dallas.................. 44,303
Gobe.................... 14,000
Knowles................. 122,181
Strode.................. 6,248
Voelte..................... 87,326
Wiley...................... 37,324
Directors & officers as a
group..................... 311,382
(4) The shares reported for Mrs. Knowles do not include 11,542 shares owned by
her spouse, as to which shares she disclaims beneficial ownership.
The shares of ARCO common stock reported in this column include the
following restricted stock granted under ARCO's Long-Term Incentive Plan:
Dallas.................. 3,056
Gobe.................... 293
Knowles................. 7,409
Voelte.................. 2,821
Wiley................... 4,879
The shares of ARCO common stock reported in this column also include the
following shares of ARCO common stock which can be issued as dividend share
credits allocated to ARCO stock options:
Dallas.................. 6,734
Gobe.................... 2,424
Knowles................. 17,345
Strode.................. 1,218
ELECTION OF DIRECTORS
Proposal 1 on Proxy Card
The number of directors on the board is currently eight. There is one
vacancy which resulted from the resignation of William E. Wade, Jr. on January
20, 1999. At its regular meeting held on March 2, 1999, the board of directors
selected the following nine nominees for election to a term of one year, as
recommended by the nominating committee. Each of the nominees is currently a
director of Vastar and was elected at last year's annual stockholders' meeting
for a one-year term, except for Donald R. Voelte, Jr. who is a new nominee.
Jimmie D. Callison
Terry G. Dallas
Charles D. Davidson
Marie L. Knowles
Robert C. LeVine
William D. Schulte
Steven J. Shapiro
Donald R. Voelte, Jr.
Michael E. Wiley
Each nominee has indicated a willingness to serve as a director. However, if
any nominee were to decline or be unable to act as a director, the persons
named as proxies on the proxy card will vote for the nominees recommended by
the board of directors.
The board of directors recommends that you vote FOR the election of the
nominees listed below. If you sign and return the enclosed proxy card, it will
be voted for the election of the nominees listed below unless you specify
otherwise on the card.
3
BOARD OF DIRECTORS--BIOGRAPHICAL INFORMATION
Below is biographical information on each nominee for election to the board
of directors. The information includes the nominee's:
(i) age as of May 19, 1999, the date of the annual stockholders' meeting;
(ii) present position, if any, with Vastar;
(iii) period served as a director; and
(iv) other business experience during the past five or more years.
Jimmie D. Callison, 66
Director
Mr. Callison has been a director since January 1995. He served
[PHOTO OF as Vice President of Schlumberger Limited from 1989 to 1995,
JIMMIE D. President of Dowell Schlumberger Incorporated from 1987 to
CALLISON 1988, and Executive Vice President of Dowell Schlumberger
APPEARS Incorporated from 1984 to 1989. He joined the Dowell Division
HERE] of the Dow Chemical Company (which later became Dowell
Schlumberger) in 1957.
Terry G. Dallas, 48
Director
[PHOTO OF Mr. Dallas has been a director since January 1994. He has been
TERRY G. a Senior Vice President of ARCO since November 1996 and the
DALLAS Treasurer of ARCO since January 1994. He was Vice President of
APPEARS ARCO from June 1993 to November 1996, serving as Vice
HERE] President, Corporate Planning from June 1993 to January 1994.
He served as Assistant Treasurer, Corporate Finance of ARCO
from 1990 to 1993 and was the Manager, Finance, Control and
Planning of ARCO British, Ltd. from 1988 to 1990.
Charles D. Davidson, 49
President, Chief Executive Officer and Director
[PHOTO OF Mr. Davidson was elected President and Chief Executive Officer
CHARLES D. in March 1997 and has been a director since March 1994. From
DAVIDSON September 1993 to March 1997, he served as a Senior Vice
APPEARS President. From December 1992 to October 1993, he was Senior
HERE] Vice President of the Eastern District for ARCO Oil and Gas
Company. From 1988 to December 1992, he held various positions
with ARCO Alaska, Inc. Mr. Davidson joined ARCO in 1972.
Marie L. Knowles, 52
Director
[PHOTO OF Mrs. Knowles has been a director since December 1996. She has
MARIE L. been Executive Vice President and the Chief Financial Officer
KNOWLES of ARCO since July 1996. She was a director of ARCO from July
APPEARS 1996 to May 1998. She served as a Senior Vice President of ARCO
HERE] and President of ARCO Transportation Company from June 1993 to
July 1996. She served as Vice President and Controller of ARCO
from July 1990 to May 1993 and Vice President of Finance,
Control and Planning of ARCO International Oil and Gas Company
from July 1988 to July 1990. From October 1986 to July 1988,
she served as Assistant Treasurer of Banking of ARCO. Mrs.
Knowles is also a director of Phelps Dodge Corporation.
Robert C. LeVine, 66
Director
[PHOTO OF Mr. LeVine has been a director since July 1994. Mr. LeVine has
ROBERT been a private investor since his retirement in February 1993
C. LEVINE from the position of Managing Director for J.P. Morgan
APPEARS Investment Management, Inc., which he held from 1981 to 1993.
HERE] He served as First Vice President of the Energy Group for E.F.
Hutton & Co. from 1974 to 1981; as a Vice President and oil
analyst for Wertheim & Co. from 1972 to 1974; and as Manager,
Investor Relations for ARCO from 1969 to 1972.
4
William D. Schulte, 66
Director
[PHOTO OF Mr. Schulte has been a director since July 1994. Mr. Schulte
WILLIAM has been a private investor since his retirement from the
D. SCHULTE position of Vice Chairman of KPMG Peat Marwick on December 31,
APPEARS 1990. He served as Vice Chairman -- Western Region from 1986 to
HERE] 1990 and previously served as Managing Partner of the Los
Angeles office from 1979 to 1986. He joined Peat Marwick in
1961. Mr. Schulte is also a director of Washington Mutual, Inc.
Steven J. Shapiro, 47
Senior Vice President, Chief Financial Officer and Director
[PHOTO OF Mr. Shapiro has been Senior Vice President and Chief Financial
STEVEN J. Officer since December 1993 and a director since January 1994.
SHAPIRO He was also Treasurer from January 1994 to December 1995. He
APPEARS was the President of ARCO Coal Australia, Inc. from October
HERE] 1991 to December 1993. Previously, he held the position of Vice
President of Planning of ARCO from 1990 to October 1991. From
1988 to 1990, he was Assistant Treasurer for ARCO, serving in
both Los Angeles and London. Mr. Shapiro joined ARCO in 1977.
Donald R. Voelte, Jr., 46
Nominee for Director
[PHOTO OF Mr. Voelte will be a newly elected director of the Company at
DONALD R. the 1999 Annual Meeting of Stockholders. He has been an
VOELTE, JR. Executive Vice President of ARCO since October 1998. From April
APPEARS 1997 to October 1998, he held the position of Senior Vice
HERE] President, Corporate Planning of ARCO. Previously, he was
President of New Exploration and Producing Ventures with Mobil
Corporation. He served in a variety of other capacities with
Mobil subsequent to joining them in 1975, including General
Manager of Corporate Planning, Planning Manager for U.S.
Exploration and Producing and Vice President and General
Manager of U.S. Marketing.
Michael E. Wiley, 48
Chairman of the Board
[PHOTO OF Mr. Wiley has been a director since September 1993 and was
MICHAEL E. elected Chairman of the Board in December 1996. He has been
WILEY President and Chief Operating Officer of ARCO since October
APPEARS 1998. He was an Executive Vice President of ARCO from March
HERE] 1997 to September 1998 and a director from June 1997 to May
1998. He was President of Vastar from September 1993 to March
1997 and Chief Executive Officer from January 1994 to March
1997. He held the position of Senior Vice President of ARCO
from June 1993 to June 1994. He held the position of President
of ARCO Oil and Gas Company from June to October 1993.
Previously, from 1991 to 1993, he was a Vice President of ARCO
and Manager of ARCO Exploration and Production Technology. From
1989 to 1991, he was Vice President of ARCO Oil and Gas
Company's Southern District. Mr. Wiley joined ARCO in 1972.
5
COMPENSATION OF EXECUTIVE OFFICERS
The following table describes the compensation paid to Mr. Davidson and the
top four highest-paid executive officers of Vastar, other than Mr. Davidson,
in 1996, 1997 and 1998.
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
----------------------------------- ------------
Securities
Other Annual Underlying
Name and Salary Bonus Compensation Vastar All Other
Principal Position Year ($)(1) ($) ($) Options (#) Compensation ($)(2)
------------------ ---- -------- -------- ------------ ------------ --------------------
(a) (b) (c) (d) (e) (g) (i)
Charles D. Davidson..... 1998 $383,077 $364,000 $ 27,125 60,530 $ 54,375
President and Chief 1997 $328,923 $282,000 $ 12,008 51,000 $ 51,010
Executive Officer 1996 $252,000 $165,000 $ 21,770 30,600 $ 42,883
Steven J. Shapiro....... 1998 $256,731 $170,000 $ 18,200 22,000 $ 46,272
Senior Vice President
and 1997 $264,356 $188,000 $ 10,625 18,000 $ 54,010
Chief Financial
Officer(3) 1996 $243,251 $136,000 $ 10,727 23,000 $ 39,164
Phillip A. Gobe......... 1998 $237,969 $155,000 $ 10,341 22,000 $ 38,591
Senior Vice
President(4) 1997 $240,046 $124,000 $ 60,055 23,000 $107,594
1996 $202,447 $ 52,065 $ 5,391 (4) $ 31,302
Robert P. Strode........ 1998 $229,616 $160,000 $ 4,932 22,000 $ 33,432
Senior Vice
President(5) 1997 $217,573 $112,000 $ 49,662 34,500 $ 97,073
1996 $209,903 $ 45,691 $126,501 (5) $201,175
Albert D. Hoppe......... 1998 $201,731 $100,000 $ 6,470 11,000 $ 35,642
Vice President, General 1997 $207,147 $ 96,000 $ 4,626 9,000 $ 42,520
Counsel and Secretary 1996 $185,808 $ 84,000 $ 2,493 11,500 $ 32,259
- --------
(1) Salary is paid bi-weekly. There were 27 paydays in 1997 and 26 in each of
1996 and 1998. The apparent reduction in salary in 1998 for Messrs. Hoppe,
Gobe and Shapiro is a result of there being one additional bi-weekly
payday in 1997 than in 1998.
(2) The table below itemizes each of the items included in the "All Other
Compensation" column. The items are:
. Contributions to the Executive Supplementary Savings Plan;
. Incremental premiums paid for the Executive Medical Plan above a base
amount provided to all employees;
. Reimbursements for financial counseling services;
. Imputed income in respect of benefits under the Long-Term Disability
Plan;
. The value of insurance premiums paid under the Executive Life Insurance
Plan;
. Executive foreign service and relocation expenses; and
. Miscellaneous moving expenses.
Disability Foreign
Plan Service Misc.
Supplementary Medical Financial Imputed Life and Moving
Name Year Savings Plan Premiums Counseling Income Insurance Relocation Expenses
---- ---- ------------- -------- ---------- ---------- --------- ---------- --------
Mr. Davidson............ 1998 $30,646 $7,469 $ 971 $4,409 $10,880 $ 0 $ 0
1997 $26,314 $8,554 $ 500 $3,841 $11,801 $ 0 $ 0
1996 $20,160 $8,554 $ 2,300 $2,716 $ 9,153 $ 0 $ 0
Mr. Shapiro............. 1998 $20,539 $7,469 $ 6,200 $3,138 $ 8,926 $ 0 $ 0
1997 $21,149 $8,554 $11,150 $2,803 $10,354 $ 0 $ 0
1996 $19,460 $8,554 $ 0 $2,314 $ 8,836 $ 0 $ 0
Mr. Gobe................ 1998 $19,037 $7,469 $ 6,200 $1,932 $ 3,953 $ 0 $ 0
1997 $18,550 $8,918 $ 8,400 $1,473 $ 4,232 $ 0 $66,021
1996 $16,196 $9,907 $ 750 $1,149 $ 3,300 $ 0 $ 0
Mr. Strode.............. 1998 $18,369 $7,469 $ 3,250 $1,655 $ 2,689 $ 0 $ 0
1997 $17,161 $8,909 $ 3,250 $1,145 $ 2,652 $ 63,956 $ 0
1996 $14,826 $9,907 $ 5,400 $1,029 $ 1,797 $168,216 $ 0
Mr. Hoppe............... 1998 $16,139 $7,469 $ 4,200 $1,813 $ 6,021 $ 0 $ 0
1997 $16,572 $8,554 $ 9,040 $1,643 $ 6,711 $ 0 $ 0
1996 $14,865 $8,554 $ 1,950 $1,291 $ 5,599 $ 0 $ 0
6
(3) The amounts reported in the "Other Annual Compensation" column for Mr.
Shapiro do not reflect a net refund of $18,856 for taxes paid by Vastar on
behalf of Mr. Shapiro in prior years and refunded to Vastar in the year
1996.
(4) Mr. Gobe began his employment with Vastar in May 1997. Generally,
compensation reported on this chart prior to his Vastar employment was
paid by ARCO for his services to ARCO. While employed with ARCO, he
received 4,012 ARCO stock options for 1996 and 3,794 ARCO stock options
for 1997. He also accrued the following dividend share credits associated
with his ARCO stock options: 542 for 1996, 522 for 1997 and 538 for 1998.
(5) Mr. Strode began his employment with Vastar in late February 1997.
Compensation reported on this chart prior to his Vastar employment was
paid by ARCO for his services to ARCO. While employed with ARCO, he
received 3,698 ARCO stock options for 1996. He also accrued the following
dividend share credits associated with his ARCO stock options: 260 for
1996, 272 for 1997 and 284 for 1998.
7
STOCK OPTIONS
The board of directors granted stock options to our officers and key
employees at its regular meeting on March 2, 1999. The following table shows
the stock options granted to Mr. Davidson and the four other highest-paid
executive officers, other than Mr. Davidson, for their 1998 performance.
Vastar Option Grants for 1998
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- ------------------------------------------------------------------------------ ---------------------
Number of
Securities Percent of Total Exercise
Underlying Options Granted to or Base
Options Vastar Employees Price Expiration
Name Granted (#) for 1998 ($/Sh) Date 5% 10%
- ------------------------ ----------- ------------------ -------- ------------- ---------- ----------
(a) (b) (c) (d) (e) (f) (g)
Mr. Davidson............ 60,530 13.13% $39.8125 March 2, 2009 $1,515,544 $3,840,683
Mr. Shapiro............. 22,000 4.77% $39.8125 March 2, 2009 $ 550,834 $1,395,920
Mr. Gobe................ 22,000 4.77% $39.8125 March 2, 2009 $ 550,834 $1,395,920
Mr. Strode.............. 22,000 4.77% $39.8125 March 2, 2009 $ 550,834 $1,395,920
Mr. Hoppe............... 11,000 2.39% $39.8125 March 2, 2009 $ 275,417 $ 697,960
The stock options listed on this table are ten-year options which can be
exercised in 25 percent annual increments beginning on March 2, 2000. Each
stock option is accompanied by a tax withholding right which will allow us to
withhold a portion of the common stock due to an executive on the exercise of
an option to pay any taxes which may be due. If the executive terminates his
or her employment for reasons other than retirement or death, stock options
held for less than one year are cancelled, and stock options which are
exercisable on the date of termination of employment and which have been held
for more than one year are exercisable for 90 days after termination of
employment, unless we determine otherwise. All stock options automatically
vest and are exercisable if a change of control of Vastar occurs. The
definition of a change of control is summarized in the material under the
heading "Change of Control Arrangements" in this proxy statement.
The last two columns on the right of the table present the hypothetical
future value of Vastar common stock which might be received on the exercise of
the stock options, net of the option's exercise price. The hypothetical value
is based on the assumption that the market price of our common stock will
appreciate at a 5 and 10 percent compound annual rate over the ten-year term
of the options. The market price of our stock on the March 2, 1999 grant date
was $39.8125, and the future price of our stock using these same 5 and 10
percent compounding over ten years would be $64.8504 and $103.2634. The 5 and
10 percent rates of stock price appreciation are examples prepared in
accordance with SEC regulations and do not necessarily reflect our assessment
of our future stock price performance. These hypothetical values presented do
not indicate the value of the stock options.
8
The table below shows the number of stock options exercised in 1998 by the
executive officers listed below and the value received on the exercise. The
table also shows the number and value of the remaining stock options held by
each officer and states whether or not the stock options were exercisable on
December 31, 1998.
Aggregated Vastar Stock Option Exercises in
1998 and Year-End Option Values
(As of December 31, 1998)
Value of In-the-Money
Shares Number of Unexercised Unexercised Options
Acquired Options at Year-End At Year-End(1)
On Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- -------- -------- ----------- ------------- ----------- -------------
(a) (b) (c) (d) (e)
Mr. Davidson............ 0 $ 0 131,361 86,962 $1,960,224 $693,663
Mr. Shapiro............. 14,000 $427,412 150,622 48,262 $1,988,221 $482,651
Mr. Gobe................ 0 $ 0 1,250 21,750 $ 10,547 $104,766
Mr. Strode.............. 750 $ 13,406 3,375 30,375 $ 45,563 $240,188
Mr. Hoppe............... 0 $ 0 43,221 24,137 $ 547,044 $241,438
- --------
(1) The fair market value of Vastar Common Stock on December 31, 1998, was
$43.1875 per share.
9
ESTIMATED VASTAR RETIREMENT BENEFITS
The following table shows estimated combined annual pension benefits payable
to officers and other key employees, assuming retirement on January 1, 1999,
at age 65 under the provisions of our Retirement Plan and Supplementary
Executive Retirement Plan.
Pension Plan Table
Approximate annual benefit
for years of membership service indicated
Remuneration 15 Years 20 Years 25 Years 30 Years 35 Years
- ------------ -------- -------- -------- -------- --------
$1,000,000......................... $229,785 $306,380 $382,975 $459,570 $536,165
900,000......................... 206,685 275,580 344,475 413,370 482,265
800,000......................... 183,585 244,780 305,975 367,170 428,365
700,000......................... 160,485 213,980 267,475 320,970 374,465
600,000......................... 137,385 183,180 228,975 274,770 320,565
500,000......................... 114,285 152,380 190,475 228,570 266,665
400,000......................... 91,185 121,580 151,975 182,370 212,765
300,000......................... 68,085 90,780 113,475 136,170 158,865
200,000......................... 44,985 59,980 74,975 89,970 104,965
100,000......................... 21,885 29,180 36,475 43,770 51,065
We calculate retirement benefits by averaging the participant's highest
three consecutive years of base salary plus incentive bonuses. You can find
base salary and bonuses in columns (c) and (d) of the Summary Compensation
Table which appears previously in this proxy statement.
The amounts shown above are based on the following assumptions:
. That the participant retires on January 1, 1999; and
. That the retirement benefit will be paid for the life of the participant
with a guaranteed minimum payment period of 60 months.
The amount of the retirement benefit would change if the payment were made
under any other form permitted by the retirement plans or if the participant's
retirement occurs after January 1, 1999. The benefits shown are not subject to
deduction for Social Security benefits or other offset amounts.
As of December 31, 1998, the credited years of service under these plans for
the following executive officers were:
. Mr. Davidson--26 years, 7 months;
. Mr. Shapiro--21 years, 6 months;
. Mr. Gobe--1 year, 8 months;
. Mr. Strode--1 year, 11 months; and
. Mr. Hoppe--22 years, 4 months.
10
PERFORMANCE GRAPH
Comparison of Cumulative Total Return Since Initial Public Offering
This performance graph compares our cumulative total stockholder return with
the cumulative total stockholder return of the Standard & Poor's 500 Stock
Index and our peer group. Our peer group was selected by us and consists of
Vastar and the following companies: Anadarko Petroleum Corporation; Apache
Corporation; Burlington Resources, Inc.; Enron Oil & Gas Company; Noble
Affiliates, Inc.; Oryx Energy Company; Pioneer Natural Resources Company; and
Union Pacific Resources Group, Inc. The comparison begins on June 27, 1994,
the date of our initial public offering:
[GRAPH APPEARS HERE]
June 27, December 31, December 31, December 31, December 31, December 31,
Year 1994 1994 1995 1996 1997 1998
---- -------- ------------ ------------ ------------ ------------ ------------
Vastar Resources, Inc... $100.00 $ 89.10 $114.89 $138.67 $131.57 $160.14
S&P 500 Index........... $100.00 $102.70 $137.70 $167.10 $222.90 $286.60
Peer Group.............. $100.00 $ 81.04 $ 98.97 $125.06 $111.03 $ 74.11
The data represented on the table assumes an initial investment of $100 and
reinvestment of all dividends. The peer group companies are weighted for
market capitalization as of the beginning of each period.
11
CHANGE OF CONTROL ARRANGEMENTS
The Board of Directors has adopted certain arrangements that apply generally
to employees, including Mr. Davidson and the other top four highest-paid
executive officers of Vastar, which become operative only upon a change of
control of Vastar.*
If a change of control occurs, all unvested stock options granted to
Vastar's officers and employees under our long-term incentive plan will become
immediately vested and exercisable.
Also, if an eligible employee is terminated under specified conditions
within two years following a change of control, the employee will be entitled
to severance and welfare benefits. Under the severance program, Messrs.
Davidson, Gobe, Shapiro and Strode would receive (i) three times an amount
equal to the sum of their current base salary plus the average of their last
three years' bonus and (ii) for the calendar year in which termination occurs,
an amount equal to 50 percent of their target bonus for that year, if
termination occurs in the first six months of the year, or 100 percent of
their target bonus for that year, if termination occurs within the second six
months of the year. These officers would also receive payment from us for the
amount of any excise tax liability imposed pursuant to Internal Revenue Code
Section 4999 with respect to any benefits paid in connection with a change of
control. Mr. Hoppe would receive (i) two times an amount equal to the sum of
his current base salary plus the average of his last three years' bonus and
(ii) for the calendar year in which termination occurs, an amount equal to 50
percent of his target bonus for that year, if termination occurs within the
first six months of the year, or 100 percent of his target bonus for that
year, if termination occurs within the second six months of the year.
Messrs. Davidson, Gobe, Shapiro and Strode would also receive welfare
benefit coverage upon termination of employment within two years of a change
of control under the Vastar-sponsored health, dental and life insurance plans
for 36 months. Under this program, Mr. Hoppe would receive 24 months of
coverage.
One important limitation to receipt of the above-described severance,
health, dental and life insurance benefits is that in the event ARCO initiates
a tender offer for all or substantially all of our common stock or otherwise
attains an ownership interest in Vastar of more than 85 percent, our officers
or employees would not be entitled to these benefits and instead would receive
such benefits, if any, as may be determined by ARCO. However, with respect to
Messrs. Davidson and Shapiro, under an agreement with ARCO this limitation
does not apply. As a result, they would be entitled to the benefits as
described above, including severance benefits related to a constructive
termination.
- --------
* A "Change of Control" is defined as any one of six events:
(i) The Incumbent Directors (individuals who, as of March 5, 1998,
constitute our board of directors and directors who are recommended or
approved by a majority of the then-Incumbent Directors) cease for any
reason to constitute a majority of our board of directors at the end of any
12-month period;
(ii) Consummation of a merger, reorganization or sale of substantially all
of our assets, except:
(A) when all or substantially all of our stockholders prior to the
transaction retain more than a 60 percent ownership of the resulting
entity in substantially the same proportions as their ownership prior
to the transaction;
(B) there is no new 20 percent (or larger percent) stockholder; and
(C) at least a majority of the board of directors of the resulting
entity were Incumbent Directors;
(iii) ARCO reduces its ownership in Vastar below 50 percent and another
entity acquires 20 percent or more of Vastar;
(iv) ARCO initiates a tender offer for all or substantially all of our
common stock or otherwise attains an ownership interest in Vastar of more
than 85 percent;
(v) our stockholders approve a complete liquidation or dissolution of
Vastar; or
(vi) a change of control of ARCO occurs as defined in the ARCO 1985
Executive Long-Term Incentive Plan.
12
A change of control under ARCO's 1985 Long-Term Incentive Plan is defined as
any one of four events: (1) any person or group (other than ARCO or its
benefit plans) acquires 25 percent of ARCO's then-outstanding voting
securities other than pursuant to an acquisition from ARCO of up to 40% that
is approved by ARCO's board of directors; (2) Incumbent ARCO Directors
(directors as of July 28, 1997 and directors recommended or approved by a
majority of then-Incumbent ARCO Directors) no longer comprise a majority of
the board; (3) shareholder approval of a merger, reorganization or sale of
substantially all ARCO's assets, provided that if such shareholders
constitute over 60% of the shareholders of the resulting entity and Incumbent
ARCO Directors comprise a majority of the board of directors of, and no
person owns 25% or more of the resulting entity, then such event will not be
deemed a change of control; and (4) shareholder approval of a plan of
complete liquidation of ARCO.
The above definitions are summaries. Reference is made to our long-term
incentive plan filed with the SEC as Appendix A to our 1998 Proxy Statement
for the complete text and the discussion of the plan in the 1998 Proxy
Statement.
13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation committee and the compensation subcommittee of the board of
directors administer Vastar's compensation programs. The compensation
committee is composed of Mr. Wiley, Chair, and Messrs. Dallas, LeVine and
Schulte. None of these committee members are officers or employees of Vastar.
Messrs. Wiley and Dallas are officers and employees of ARCO. ARCO owns 82.1
percent of Vastar's common stock. The compensation subcommittee is composed of
Mr. LeVine, Chair, and Mr. Schulte. These subcommittee members are not
officers or employees of ARCO or Vastar. The compensation committee
administers the annual incentive plan and reviews and approves other forms of
executive compensation and benefits. The compensation subcommittee administers
the executive long-term incentive plan. The words "we" and "our" in this
report on executive compensation refer to the compensation committee or
compensation subcommittee as appropriate.
Compensation Philosophy
The compensation committee's executive compensation goal is to provide
competitive levels of compensation to attract, motivate and retain talented
executives. The committee's compensation philosophy is that Vastar's best
interests are served if the interests and performance of our executive
officers are aligned with the interests of our stockholders by linking a
significant portion of each executive officer's compensation directly to
Vastar's performance.
In its deliberations, the compensation committee reviewed the compensation
practices and the financial and operational performance of a number of
publicly traded companies. These companies are primarily in the oil and gas
industry and are called the market comparison companies in this report. The
compensation committee used the smaller group of peer group companies
identified in the performance graph on page 11 to calculate the formula
components of the annual incentive plan and used the larger group of market
comparison companies for its other compensation benchmarking analyses.
In our analysis, the compensation committee and the compensation
subcommittee compared Vastar's performance with the performance of the market
comparison companies and the peer group companies. We also considered the
individual performance of each executive officer and the other factors
described below.
An outside compensation consultant reviewed our executive compensation
program. The consultant assessed executive compensation and financial and
operational performance as compared to the peer group and market comparison
companies. The consultant concluded that our executive compensation program
was consistent with our philosophy of paying executives above the median when
Vastar achieves above-average performance.
Components of Executive Compensation
Base Salaries
The compensation committee targets base salaries slightly above the median
of the market comparison companies at levels the committee considers
appropriate in light of the job responsibilities associated with each
executive officer's position. The committee reviews base salaries every year
to determine if an adjustment is appropriate in light of the executive
officer's responsibilities, his or her individual performance and the
competitive salaries for similar positions within market comparison companies.
Annual Incentive Plan Awards
The purpose of the annual incentive plan is to motivate and reward key
employees based on Vastar and individual performance. Under the plan, cash
award opportunities vary by individual
14
position and are initially set as a percentage of base salary. This percentage
for each executive officer is determined using median bonus award levels for
similar positions at market comparison companies. The amount a particular
officer ultimately earns depends on the outcome of an analysis which has the
following two equally weighted components:
. Formula component--a quantitative formula of four specific financial and
operational measures of Vastar's performance; and
. Discretionary component--an analysis based on other financial and
operational performance criteria, Vastar's overall performance and
individual performance.
The formula component uses four measures of Vastar's performance, weighted
equally:
. Vastar's operating costs per thousand cubic feet equivalent of its
production, compared to its peer group companies;
. Vastar's ratio of discretionary cash flow to net revenue, compared to its
peer group companies;
. Vastar's reserve replacement ratio averaged over a three-year period,
compared to pre-determined targets set by the compensation committee; and
. Vastar's reserve replacement cost averaged over a three-year period,
compared to pre-determined targets set by the compensation committee.
At the beginning of each year, the compensation committee sets threshold,
target and stretch performance criteria for each measure. Under the formula
component, Vastar's 1998 performance met or exceeded the stretch performance
criteria set by the compensation committee for the operating cost,
discretionary cash flow to net revenue and reserve replacement ratio measures
and was above threshold performance criteria for the reserve replacement costs
measure.
Under the discretionary component the compensation committee considered the
following other matters:
. Vastar's total shareholder return compared to the total shareholder
return of the peer group companies;
. Vastar's cost management efforts;
. Successful completion of a large acquisition of producing oil and gas
properties in the Gulf of Mexico;
. Vastar's overall performance compared to its peer group companies;
. Other standardized measures of oil and gas company performance, such as
cash flow, net income, oil and gas production, exploration performance
and acquisition activity; and
. Each executive's individual performance.
The compensation committee did not apply any relative weight to these factors
or use any specific quantitative formula in its analysis of the discretionary
component.
Executive Long-Term Incentive Plan Awards
The compensation subcommittee administers the executive long-term incentive
plan. This plan provides for the award of stock options to Vastar's executive
officers and other key employees. The compensation subcommittee believes stock
options align the interests of employees and stockholders by providing value
to the executive officers only through stock price appreciation. The
compensation subcommittee makes final decisions on stock option awards in the
first quarter of each year. The subcommittee made grants to Vastar's executive
officers on March 2, 1999 after first considering:
15
. Vastar's financial and operational performance compared to the market
comparison companies and the peer group;
. Each executive's position and responsibilities compared to similar
positions within Vastar and at other similar companies; and
. Each executive's individual performance.
The compensation subcommittee did not apply any relative weight to these
performance factors or use any specific quantitative formulas to arrive at
stock option award decisions. Next, the compensation subcommittee compares
each executive officer's total cash compensation relative to similar positions
at market comparison companies. Then a stock option award is granted so that
the value of the executive's total cash and noncash compensation will be above
the median of the market comparison companies in years when Vastar achieves
above-average performance.
Chief Executive Officer Compensation
Charles D. Davidson was Vastar's Chief Executive Officer in 1998. In
determining Mr. Davidson's 1998 compensation, the compensation committee and
compensation subcommittee applied the methodology for determining compensation
described above. The compensation committee and the compensation subcommittee
recognized Mr. Davidson's substantial accomplishments in 1998, including:
. The replacement of oil and gas reserves equal to 215 percent of Vastar's
1998 production;
. Successful implementation of a deepwater exploration program and Vastar's
first deepwater discovery on the King prospect;
. Successful completion of a large acquisition of producing oil and gas
properties in the Gulf of Mexico; and
. A 1998 total shareholder return of approximately 22 percent and an
average annual total shareholder return since Vastar's initial public
offering in 1994 of approximately 11 percent. These percentages placed
Vastar first among its peer group in both instances and were achieved
despite significant decreases in commodity prices in 1998.
Based on this analysis, the compensation committee or compensation
subcommittee implemented the following compensation program for Mr. Davidson:
. Mr. Davidson's annual base salary was adjusted from $380,000 to $420,000
in December 1998 to remain competitive with salaries at the market
comparison companies. Mr. Davidson's salary is still slightly below the
median for chief executive officers at market comparison companies.
. An annual incentive plan award of $364,000 was approved on March 2, 1999
for Mr. Davidson's 1998 performance. This award is higher than his award
in 1998 and reflects Vastar's strong financial and operational
performance and Mr. Davidson's other accomplishments in 1998. This award
was above the median for chief executive officers at market comparison
companies.
. Mr. Davidson was awarded 60,530 stock options on March 2, 1999. This
award puts Mr. Davidson's total compensation at approximately the 60th
percentile for similar positions at market comparison companies. The
grant was intended to reward him for his achievements in 1998 and puts an
increased portion of his total compensation at risk. The compensation
committee intends to continue to increase Mr. Davidson's total
compensation over time so that his total compensation will approximate
the 75th percentile of the market comparison companies in years when
Vastar achieves above-average performance.
16
The compensation committee and compensation subcommittee oversee the
compensation program for Vastar's other executive officers. Base salaries were
increased slightly for certain officers to reflect changing market conditions.
Stock option awards and cash bonus awards were granted so that total
compensation for these officers averaged near the 70th percentile of the
market comparison companies.
In 1998, the compensation committee also approved the change of control
arrangements described on page 12 of this proxy statement. The compensation
committee believes that Vastar's best interest is served when executive
officers are not distracted by personal financial concerns in the event a
change of control were to occur.
Deductible Compensation Limitation
Under Section 162(m) of the Internal Revenue Code, publicly traded companies
may not receive a tax deduction on compensation in excess of $1 million paid
to their chief executive officer and the four other highest compensated
officers, unless the compensation meets certain requirements. One of these
requirements is that stock option grants be made by "independent" directors.
This is the reason Vastar's stock options are granted by the compensation
subcommittee which is composed of persons who are not officers or employees of
Vastar or ARCO. Our stock option awards under the long-term incentive plan
comply with Section 162(m) requirements, allowing Vastar to deduct
compensation paid to these officers with such awards when calculating our
federal income taxes. Although performance-based, our annual incentive plan is
not structured to meet the requirements of Section 162(m).
Michael E. Wiley, Chair
Terry G. Dallas
Robert C. LeVine
William D. Schulte
17
BOARD OF DIRECTORS
Directors' Meetings
The annual meeting of the board of directors takes place each year on the
same day as the annual stockholders' meeting. At the annual directors'
meeting, the board elects and appoints officers, adopts any necessary
organizational resolutions to direct the conduct of Vastar's business and
transacts any other necessary business. Regular meetings of the board occur at
predetermined times which are set by the board. Also, special meetings may be
called by the chairman of the board, the president or a majority of the
directors. Our bylaws permit the board to take action without a meeting if all
members give written consent. The board of directors held six meetings in
1998.
Executive Committee
The executive committee has and may exercise all the authority of the board
of directors in the management of the business of Vastar in the interim
between meetings of the board of directors, except that the full board must
review and take board action with respect to any matter which requires
stockholder approval under Delaware law. The executive committee held one
meeting in 1998. The executive committee consists of Mr. Wiley, Chair, Mrs.
Knowles and Messrs. Davidson and Shapiro.
Audit Committee
The objectives of the audit committee are:
. To assist the board of directors in fulfilling its fiduciary
responsibilities relating to our financial reporting standards and
practices;
. To determine the adequacy of, and promote continued emphasis on,
managerial and financial control systems;
. To maintain open, continuing and direct communication between the board
of directors, our independent public accountants and our internal
auditors; and
. To initiate special investigations, as warranted.
At least once a year, the audit committee also reviews the terms of all
material agreements between Vastar and ARCO to assure that these agreements,
taken as a whole, are fair to Vastar and its stockholders. The independent
accountants and the internal auditors have full and free access to the audit
committee and meet with the committee, with and without management being
present, to discuss all appropriate matters. No member of the audit committee
is an officer or employee of Vastar or ARCO. The audit committee held three
meetings in 1998. The audit committee consists of Mr. Schulte, Chair, and
Messrs. Callison and LeVine.
Compensation Committee and Compensation Subcommittee
The compensation committee reviews and approves employee compensation plans
and other benefits as it deems advisable. When appropriate, the compensation
committee makes recommendations on management succession plans to the Board.
The compensation subcommittee administers our long-term incentive plan under
which stock options are granted to officers and employees. No member of the
compensation committee is an employee of Vastar. No member of the compensation
subcommittee is an employee of Vastar or ARCO. No member of either committee
is eligible to participate in any benefit plan administered by the committees
except that Mr. Wiley holds 350,403 stock options granted to him under the
long-term incentive plan when he was an officer and employee of Vastar and
participates in other Vastar benefit plans as a former officer and employee of
Vastar. At the time he received these benefits he was not a member of the
compensation committee or the compensation subcommittee. Members of the
compensation committee and the compensation subcommittee who are not employees
of Vastar or ARCO participate in a retirement plan, a stock option plan and a
deferral plan specifically established for these nonemployee directors. The
18
compensation committee held five meetings in 1998. The compensation
subcommittee held two meetings in 1998. The compensation committee consists of
Mr. Wiley, Chair, and Messrs. Dallas, LeVine and Schulte. The compensation
subcommittee consists of Mr. LeVine, Chair, and Mr. Schulte.
Environment, Health and Safety Committee
The environment, health and safety committee reviews and assesses our
policies, procedures and practices relating to:
. The protection of the environment and the health and safety of employees,
customers, contractors and the public;
. Compliance with applicable environmental, health and safety laws and
regulations; and
. The development of environmental, health and safety goals and objectives.
When appropriate, this committee makes recommendations on these policies,
procedures and practices to the board. The environment, health and safety
committee held three meetings in 1998. The environment, health and safety
committee consists of Mr. Callison, Chair, and Mr. Davidson.
Finance Committee
The finance committee reviews and makes recommendations to the Board on:
. Proposals to issue securities to the public;
. Commercial borrowing, other than financing relating to specific projects;
. Our capital structure;
. Our dividend policy; and
. Other projects, proposals and activities submitted to the finance
committee by the board.
The finance committee held two meetings in 1998. The finance committee
consists of Mrs. Knowles, Chair, and Messrs. Dallas and Shapiro.
Nominating Committee
The nominating committee considers and makes recommendations to the board on
the:
. Number of directors on the board;
. Nominees for board membership; and
. Election, tenure and retirement of directors.
The nominating committee also considers nominees recommended by stockholders.
If you have a recommendation, you may submit it to the nominating committee to
our address indicated on the first page of this proxy statement addressed to
the attention of our corporate secretary. The nominating committee held one
meeting in 1998. The nominating committee consists of Mr. Wiley, Chair, and
Messrs. Davidson, LeVine and Shapiro.
Compensation of Directors
Directors' Fees
Directors who are employees of Vastar or ARCO do not receive fees or
additional compensation for service as members of the board or any board
committee. Directors who are not officers or
19
employees of Vastar or ARCO receive an annual retainer of $25,000, plus $1,000
for each board or committee meeting attended, and receive reimbursement for
travel and other related expenses incurred in attending such meetings. In
addition, each of these directors who serves as a committee chair receives an
additional $5,000 per year. Director status does not entitle a person to
participate in our employee stock option or other employee benefit plan
programs. Vastar officers who are directors are eligible to participate in
these programs as a result of their status as Vastar officers and employees.
Directors who are not officers or employees of Vastar or ARCO may participate
in the plans described below which are administered by director plan
committees selected by the board of directors. The members of these director
plan committees are not members of the board of directors.
Stock Option Plan for Outside Directors
This plan provides that each newly elected director who is not a Vastar or
ARCO officer or employee will be granted ten-year nonqualified stock options
to purchase 5,000 shares of common stock. For directors who were elected prior
to our initial public offering, which was completed in 1994, the exercise
price for these options is $28.00, which was the initial public offering price
for our common stock. For directors elected after our initial public offering
the exercise price is the fair market value of common stock on their election
date. The total number of shares of common stock that can be issued under this
plan is 75,000. No stock options may be granted under the plan after December
31, 2004.
Deferral Plan for Outside Directors
This plan permits directors who are not Vastar or ARCO officers or employees
to defer up to 100 percent of their annual retainer and board meeting fees and
any committee chair and committee meeting fees. Interest accrued in 1998 on
deferrals made under the plan totaled $16,919 for Mr. LeVine and $12,938 for
Mr. Callison. Mr. Schulte did not maintain a deferral account under the plan
during 1998.
Retirement Plan for Outside Directors
Under this plan, directors who are not Vastar or ARCO officers or employees
and who have completed 36 months of service as a member of the board are
eligible to receive a retirement benefit. The benefit is payable at age 65 or
on retirement from the board of directors, whichever is later. The normal form
of this benefit is a monthly allowance equal to one-twelfth of the director's
annual retainer. After retirement, this benefit will be paid to the director
for the same number of months as the director served on the board. However,
directors who have served for 180 or more months prior to retirement are
entitled to this monthly benefit for life. A death benefit equal to 50 percent
of the director's accrued benefit, with a maximum of 180 months, is payable to
a deceased director's designated beneficiary.
RELATIONSHIPS AND RELATED TRANSACTIONS WITH ARCO
We have entered into a number of agreements and have various other
relationships with ARCO. ARCO owns 80,000,001 shares, approximately 82.1
percent of our common stock. The discussion below describes the material
relationships and agreements between the two companies.
Compensation Committee Interlocks and Insider Participation
The members of our compensation committee are Mr. Wiley, Chair, and Messrs.
Dallas, LeVine and Schulte. The members of our compensation subcommittee are
Mr. LeVine, Chair, and Mr. Schulte. Except for Mr. Wiley, none of these
persons are or have ever been officers or employees of Vastar. Mr. Wiley is
currently the President and Chief Operating Officer of ARCO. In addition, Mr.
Wiley, as Chairman of the Board of Vastar, is an ex officio officer of Vastar
under its bylaws and was Vastar's
20
President and Chief Executive Officer until he resigned on March 31, 1997. Mr.
Wiley receives no compensation from Vastar and is not eligible to participate
in any of our benefit plans as a result of his serving as Chairman of the
Board. Mr. Wiley holds 350,403 stock options granted to him under the long-
term incentive plan when he was an officer and employee of Vastar and
participates in other Vastar benefit plans as a former officer and employee of
Vastar. At the time he received these benefits, he was not a member of the
compensation committee or the compensation subcommittee. Mr. Dallas, one of
our directors, is a Senior Vice President and the Treasurer of ARCO. Mrs.
Knowles, one of our directors, is an Executive Vice President and the Chief
Financial Officer of ARCO. Mr. Voelte, a nominee for director, is an Executive
Vice President of ARCO.
Transactions Between Vastar and ARCO
In October 1993, ARCO transferred to Vastar the producing properties and
developed and undeveloped acreage that comprise a substantial portion of our
assets. At the time of the transfer, Vastar was a wholly owned subsidiary of
ARCO. In conjunction with this property transfer, we issued additional shares
of common stock to ARCO. As a result, ARCO now owns 80,000,001 shares, which
represented all of the outstanding common stock prior to our initial public
offering in 1994. As of the record date on which we determined who is entitled
to vote at the 1999 annual stockholders' meeting, ARCO owned approximately
82.1 percent of our common stock.
Vastar and ARCO have entered into a number of agreements. Some of these
agreements were developed in connection with ARCO's establishment of Vastar.
Therefore, they were not the result of arm's-length negotiations between
independent parties. After Vastar's initial public offering, Vastar and ARCO
have entered into additional or modified agreements, arrangements and
transactions. The parties may enter into additional or modified agreements,
arrangements and transactions in the future. At least once a year, the audit
committee reviews the terms of all material agreements between Vastar and ARCO
to assure that these agreements, taken as a whole, are fair to Vastar and its
stockholders.
The following is a summary of the material arrangements and transactions
effective during or occurring in 1998 between Vastar and ARCO or their
respective subsidiaries. The descriptions of agreements are only summaries.
They do not contain everything contained in the agreements. Some of the items
not summarized may be important to you. If you are interested in all of the
terms and conditions of these agreements, you should read the entire
agreement. We have filed most of these agreements with, and copies can be
obtained from, the SEC.
Acquisition of Gulf of Mexico Properties
In October 1998, we acquired interests in 23 producing fields on the Gulf of
Mexico shelf through a three-company transaction involving Vastar, ARCO and
Mobil Exploration & Producing U.S. Inc. The net purchase price, comprised of
cash and the assumption of debt, was approximately $437.0 million (after
certain post-closing adjustments).
In this three-way transaction, we purchased all of the stock of Vastar
Offshore, Inc. from ARCO. Simultaneously with this purchase, Vastar Offshore
traded properties that it had owned in California for the above-described Gulf
of Mexico properties. Vastar Offshore was formerly called Western Midway
Company when it was a subsidiary of ARCO.
We paid approximately $137 million in cash to ARCO at closing. In addition,
Vastar Offshore had $300 million indebtedness to ARCO that was repaid on March
23, 1999.
21
The properties acquired include interests in 93 platforms with 295 active
wells and interests in over 80 lease blocks in the central and western Gulf of
Mexico. We also acquired interests in pipelines, gathering lines and a
shorebase in Cameron, Louisiana.
Technology Assignments and Licenses
In connection with the formation of Vastar, ARCO transferred technology and
related intellectual property requested by Vastar through four technology
transfer agreements and one intellectual property license agreement. These
agreements cover technology and intellectual property owned or otherwise
controlled by ARCO in the oil and gas exploration, drilling and production
areas in general, and in particular, commercially used technology in the
geophysical, geological, geotechnical and oceanographic areas, data
processing, data management and computer-based analytical techniques.
The agreements allow us to use the technology and intellectual property. The
exact method of transfer of this property depended on whether ARCO owned the
property outright or had rights to the property under a license and whether
the property was or would be used by other ARCO divisions or subsidiaries. For
the most part, ARCO provided Vastar with ownership outright, an undivided
ownership interest or a paid-up, nonexclusive license. In all cases where ARCO
owned the property, ARCO retained for itself the rights to use the property.
The licenses granted by ARCO to Vastar do not expire or terminate unless we
are in material default under the license.
Services Agreements
Vastar and ARCO have entered into a number of agreements under which Vastar
and ARCO provide services to each other. The principal agreements are:
(i) The ARCO Exploration and Production Technology Technical Services
Agreement, effective as of October 1, 1993; and
(ii) The Corporate Services Agreement, effective as of January 1, 1994.
The term of the Technical Services Agreement is indefinite. Either party can
terminate it on 30 days' written notice. Generally, either party may terminate
any type of service under the Corporate Services Agreement at any time upon 60
days' prior written notice or terminate the entire agreement on 90 days'
written notice. However, with respect to the employee information system
provided by ARCO, which is used in the administration of our employee payroll
and other benefits, ARCO must give us 180 days' notice prior to terminating
the service.
ARCO provides oil and gas technical services under the Technical Services
Agreement and the following services under the Corporate Services Agreement:
. Telecommunications;
. Computer services;
. Internal audit services;
. Financial reporting services;
. Employee payroll processing;
. Employee benefits administration;
. Tax and legal services;
. Public affairs services; and
. Other services, as agreed upon.
The services that Vastar can provide ARCO under the Corporate Services
Agreement are audit, tax and other services as agreed.
22
In 1998, Vastar paid ARCO $12.2 million for services ARCO performed under
these agreements. These services were provided by ARCO at cost.
Insurance
ARCO provides insurance coverage to us as part of the group of companies
insured under ARCO's policies. The insurance provided is customary for the
industry but does not fully cover all potential hazards. Coverage and
deductibles may be higher than typically maintained by other independent oil
and gas companies. The insurance includes public liability, workers'
compensation, marine liability, property damage, business interruption,
directors' and officers' liability, fiduciary liability and surety bonds. Our
annual charge for this insurance is based on an allocation by ARCO of the
costs of the various policies. The annual charge was $3.1 million in 1998. Our
allocation is reassessed annually based on ARCO's cost for the various lines
of insurance and our loss experience and exposure basis. In certain cases, we
have elected, and in the future may elect, to supplement or to obtain
insurance coverage as opposed to coverage under ARCO's policies. If this
happens, Vastar may, but is not required to, terminate insurance coverage
under ARCO's policies after giving proper notice.
Natural Gas, Crude Oil and Natural Gas Liquids Purchase and Sale Agreements
Vastar Gas and Southern Company Energy Marketing provide fuel management
services for the natural gas requirements of cogeneration facilities located
in California which are partially owned by ARCO or its subsidiaries. Vastar
Gas is one of our wholly owned subsidiaries and Southern Company Energy
Marketing is a strategic alliance between The Southern Company and us.
In addition, ARCO has provided performance guarantees for certain contracts
under which Southern Company Energy Marketing is required to sell gas to
unrelated cogeneration facilities. These guarantees will continue in effect
until the underlying contracts expire. There are no ARCO guarantees on
contracts entered into after May 15, 1994. The cogeneration contracts
guaranteed by ARCO were originally entered into by Vastar Gas and certain of
these contracts transferred to Southern Company Energy Marketing in connection
with the formation of Southern Company Energy Marketing in 1997.
Vastar also engages in purchases and sales of natural gas, natural gas
liquids and crude oil at market-related prices with certain other ARCO
affiliates and divisions.
During 1998, our revenues from these transactions with ARCO and its
affiliates were $119.8 million, or approximately 7 percent of our sales and
other operating revenue. Our purchases from ARCO and its affiliates during
1998 were $32.9 million, or approximately 5 percent of our total purchases.
Building Lease
Vastar's principal office is in Houston, Texas, where it leases
approximately 280,000 square feet of a building owned by ARCO at 15375
Memorial Drive. The primary term of the lease expires December 31, 2003, with
options to extend for two additional five-year periods. The rent of $294,508
per month was set based upon the rate paid by the other tenant of the
building, who is unrelated to ARCO. Under certain conditions, Vastar's lease
rent may be reestablished at then-current market rates for comparable office
space in Houston. If we cannot agree on a market rate with ARCO, the lease
provides for arbitration. We also have a right of first offer for any space in
the building that becomes vacant or for purchase of the building if ARCO
decides to sell. We provide on-site property management services for the
office building in Houston, for which ARCO has agreed to pay us a management
fee of $100,000 per year. In 1998, we paid approximately $3.8 million to ARCO
under this agreement.
23
Cross-Indemnification Agreement
In connection with ARCO's transfer in October 1993 of oil and gas producing
properties and undeveloped acreage and assets and liabilities related to the
properties and acreage, Vastar and ARCO executed a Cross-Indemnification
Agreement. In the agreement, Vastar agreed to indemnify ARCO against:
(i) Any and all liabilities associated with the ownership or operation of
the properties, including environmental liabilities, with the exception of
specific litigation stated in the agreement and other exceptions stated in
the agreement;
(ii) All liabilities or obligations relating to any ARCO employee
benefits plans for any ARCO employee who leaves ARCO and enters the employ
of Vastar, except for ARCO retirement benefits accrued under ARCO's plan by
employees who transferred to Vastar after our initial public offering which
was completed in July 1994;
(iii) Liabilities arising under any guarantees by ARCO which ARCO
executed to guarantee the performance or payment by Vastar Gas of any
natural gas marketing contract between Vastar Gas and any third party;
(iv) Any and all liabilities at any time recorded as of October 1, 1993
on financial statements; and
(v) The costs of borrowing, carrying and repaying any of our debt.
In addition, we agreed to be liable for any sales and use taxes, conveyance,
transfer and recording fees and real estate transfer stamps or taxes imposed
on any transfer of the properties. We agreed that all other taxes, except
income taxes, imposed in respect of oil, natural gas or other hydrocarbons or
minerals were to be apportioned between ARCO and us with ARCO paying all the
taxes attributable to ownership of the properties prior to October 1, 1993 and
Vastar being responsible for paying all other taxes. We agreed that all other
out-of-pocket expenses, taxes or fees associated with the consummation of the
transfer of the properties to us would be paid by the party incurring the
costs.
In the Cross-Indemnification Agreement, ARCO agreed to indemnify us against:
(i) Any and all liabilities:
(a) Retained by ARCO in the agreement or in the agreements
transferring the properties; or
(b) As to which ARCO indemnified us under the tax sharing agreement
described below; and
(ii) Liabilities under ARCO benefit plans other than those assumed by us.
Tax Sharing Agreement
Vastar and its subsidiaries join with ARCO and its domestic subsidiaries in
filing consolidated federal income tax returns. As a result, we are jointly
and severally liable for the consolidated federal income tax liability of ARCO
and its domestic subsidiaries. Vastar and its subsidiaries may also be
included in certain state and local income or franchise tax returns of ARCO or
its domestic subsidiaries. Vastar and its subsidiaries are parties to a tax
sharing agreement with ARCO, effective as of October 1, 1993, that has been
amended on several occasions. Under this agreement, ARCO agreed to indemnify
us for:
(i) Federal, state and local income and franchise tax liabilities that
relate to periods on or before October 1, 1993;
24
(ii) Federal income tax liabilities in excess of our share of such tax
liabilities as computed under the agreement; and
(iii) State and local income and franchise tax liabilities that may be
incurred by us and/or our subsidiaries.
The right to indemnification is valid only if we have made tax sharing
payments in accordance with the agreement.
As part of the tax sharing agreement, we pay ARCO the amounts of federal
income taxes, including alternative minimum taxes, that we would have to pay
if we and our subsidiaries were a separate federal consolidated tax group. We
agreed to pay these amounts without regard to the amount of the consolidated
tax liability of ARCO and its domestic subsidiaries.
Pursuant to the Internal Revenue Code, Section 29 tax credits can be used to
reduce the ARCO consolidated tax group's regular income liability after
foreign tax credits (the "Regular Tax"), but not below the ARCO consolidated
tax group's tentative minimum tax liability. To the extent that Section 29 tax
credits are not used by the ARCO consolidated tax group due to this
limitation, they are carried forward to be used in a subsequent year to the
extent they do not exceed the Regular Tax.
Under the tax sharing agreement, we are able to use Section 29 tax credits
to reduce our federal income tax payments to ARCO by the greater of (i) the
amount of these credits which could be used by Vastar if its tax liability was
calculated on a stand-alone tax basis and (ii) the amount of these credits
used by the ARCO consolidated tax group, in each case, less a 3.25 percent
discount on certain credits. Section 29 tax credits that are not used by us in
the current year under the tax sharing agreement can generally be carried
forward and used in subsequent tax years.
Payments under the agreement are generally made on each date on which a
quarterly payment of estimated tax for ARCO and its domestic subsidiaries must
be paid, with any final settlement made after the consolidated, combined or
unitary return is filed. We are required to pay additional taxes to ARCO if
the federal, state or local income tax liability attributable to us and our
subsidiaries increases after an audit or for any other reason. If a refund
received by ARCO is attributable to us, we are entitled to the refund. When we
are entitled to a refund from ARCO, the refund amount is calculated quarterly
and is due within 60 days of the due date for the estimated federal income tax
payment for that quarter.
The agreement appoints ARCO as our sole and exclusive agent in all matters
relating to our federal income tax liability. ARCO also has sole and exclusive
responsibility to prepare and file with the tax authorities the federal and
state income tax returns (including any amendments to these returns) that are
subject to the tax sharing agreement. These powers include the exclusive right
to contest or compromise any asserted tax adjustment or deficiency and to
file, litigate or compromise any claim for refund on our behalf.
Corporate Opportunities
To address potential conflicts of interest, provisions of our Second
Restated Certificate of Incorporation regulate the conduct of our affairs as
they may involve ARCO. This certificate of incorporation recognizes and
provides that ARCO and Vastar may:
(i) Engage in the same or similar activities or lines of business;
(ii) Do business with the same customers and suppliers; and
(iii) Employ or otherwise engage any person as a director, officer,
employee or agent.
Our certificate of incorporation further recognizes that ARCO and Vastar may
have an interest in the same business opportunities and provides that we may
agree upon a method for allocating such business opportunities among each
other. To address such potential conflicts, we entered into the
25
Share Purchase Option and Business Opportunities Agreement with ARCO. This
agreement is dated as of May 19, 1994. Under this agreement, when an
opportunity is offered in writing to someone who is an officer and/or director
of both Vastar and ARCO, solely in his or her designated capacity with one of
the two companies, the opportunity shall belong to whichever company the
opportunity was addressed. If neither Vastar nor ARCO was designated, a
business opportunity first offered:
(i) To any person who is an officer or an officer and director of Vastar
and who is also a director of ARCO, shall belong to Vastar;
(ii) To any person who is a director of Vastar and who is also an officer
and/or director of ARCO, shall belong to ARCO;
(iii) To any person who is an officer, but not a director, of both Vastar
and ARCO, shall belong to ARCO;
(iv) To any person who is an officer and director of both Vastar and
ARCO, shall belong to ARCO; and
(v) To any person who is an officer or an officer and director of Vastar
and who is also an officer or an officer and director of ARCO, shall belong
to ARCO.
In the case of any business opportunity not specifically allocated above,
whether because of the means by which it arose or was published, or otherwise,
either Vastar or ARCO may pursue the business opportunity. The party to which
a business opportunity is allocated under the agreement has the right to allow
any of its subsidiaries, or affiliates or other entities under its control to
pursue the opportunity. If one party to the agreement advises the other that
it has no interest in pursuing an opportunity, the other party may pursue the
opportunity.
Agreement Relating to Preferential Right to Purchase Vastar Common Stock
In the Share Purchase Option and Business Opportunities Agreement described
above we have agreed to grant ARCO certain rights to purchase our common
stock. Under our agreement, ARCO has a right to purchase from time to time the
number of shares of common stock or preferred stock, or both, as may be
necessary to allow it to continue to include us as part of its consolidated
federal tax group. The purchase price for this stock would be the market price
at the time of the purchase.
PROPOSAL TO APPROVE THE APPOINTMENT OF INDEPENDENT AUDITORS
Proposal 2 on Proxy Card
The board of directors has appointed PricewaterhouseCoopers LLP (formerly
known as Coopers & Lybrand L.L.P.), independent accountants, to audit our
consolidated financial statements for the year ending December 31, 1999. This
firm has acted as the independent auditors for ARCO, Vastar's principal
stockholder, for many years and for ARCO's subsidiaries and affiliates. In
addition, from time to time, the firm performs consulting work for Vastar and
for ARCO. Except for the existing professional relationships as independent
accountant, PricewaterhouseCoopers has no other relationships with ARCO or us.
Representatives of PricewaterhouseCoopers LLP will be present at the annual
stockholders' meeting and will have the opportunity to make a statement. These
representatives will also be available to respond to appropriate questions.
The board of directors recommends that you vote FOR the approval of the
appointment of PricewaterhouseCoopers LLP. If you sign and return the enclosed
proxy card, it will be voted for the election of the nominees listed below
unless you specify otherwise on the card.
26
VOTING PROCEDURES
The directors described in this proxy statement will be elected at the 1999
annual stockholders' meeting only if:
(i) The holders of more than one-half of our common stock who are
entitled to vote at the annual stockholders' meeting are present in person
or by proxy at the meeting, and
(ii) More than one-half of the shares of common stock represented at that
meeting are voted for the directors.
The board of directors has appointed election inspectors for the meeting who
will tabulate the votes. In tabulating the votes, abstentions and broker non-
votes will be counted as present by the election inspectors for the purpose of
determining the presence of a quorum. For the purpose of computing the vote
required for the election of directors, the election inspectors will treat
shares held by a stockholder who abstains from voting as being present and
entitled to vote on the matter. Thus, an abstention has the same legal effect
as a vote against the matter. However, in the case of a broker non-vote, or if
a stockholder withholds authority from his proxy to vote the proxy on a
particular matter, the shares represented by the proxy will not be treated as
present or entitled to vote on the matter. Thus, a broker non-vote or the
withholding of a proxy's authority will have no effect on the outcome of the
vote on the election of directors. A "broker non-vote" refers to shares of
common stock represented at the meeting by a bank, broker or a nominee, where
the bank, broker or nominee (i) has not received voting instructions on a
matter from persons entitled to vote and (ii) does not have the discretionary
voting power on the matter.
OTHER BUSINESS
The board of directors is not aware of any other matters to be presented at
the 1999 annual stockholders' meeting. If any other matters should properly
come before the meeting, the persons named as proxies in the enclosed proxy
card will vote the proxies in accordance with their best judgment.
VOTING OF STOCK IN PLAN ACCOUNTS
Our Capital Accumulation and Savings Plans permit plan participants to
direct the plan trustees on how to vote the common stock allocated to their
accounts. If the trustee does not receive participant directions for shares
held by it, those shares will be voted in the same proportion as those shares
of common stock for which directions are received.
PROXY SOLICITATION
We will pay all expenses of soliciting the proxies described in this proxy
statement. Solicitations will be made primarily by mail but some of our
officers and other employees may solicit proxies personally, by telephone and
by mail, if deemed appropriate. Brokers and nominees will be requested to
obtain voting instructions from beneficial owners of stock registered in their
names.
27
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Rule 14a-8 promulgated under the Securities and Exchange Act of 1934, as
amended, requires that we include certain stockholder proposals in our proxy
statement for the annual stockholders' meeting to be held in 2000 if the
proposal is submitted prior to the deadline calculated under the rule. If
stockholders desire their proposal to be considered for inclusion in our proxy
statement relating to the annual stockholders' meeting to be held in 2000, we
must receive the proposal no later than November 24, 1999.
If a stockholder desires a matter to be considered at the annual
stockholders' meeting to be held in 2000 and his or her proposal was not
submitted for inclusion in our proxy statement by the November 24, 1999
deadline described above, the matter may still be considered at the meeting if
the notice procedures outlined in our bylaws are followed. Information
regarding the matter would not, however, be contained in our proxy statement
relating to the meeting.
Our bylaws provide that only stockholders of record entitled to vote at an
annual meeting of stockholders may nominate a person for election to the board
of directors or propose other business to be considered by the stockholders at
an annual meeting. These stockholders must send us a written notice of the
nomination or proposal. We must receive the notice not earlier than the
ninetieth day nor later than the sixtieth day prior to the first anniversary
of the preceding year's annual meeting. For the annual stockholders' meeting
to be held in 2000, this means that we must receive the notice no earlier than
February 17, 2000 and no later than March 19, 2000.
Special rules described in the bylaws may apply (i) in the event that the
date of the annual meeting is more than thirty days before or more than sixty
days after the first anniversary of the preceding year's annual meeting, (ii)
for nominations for certain board vacancies created by an increase in the size
of the board and (iii) special stockholders' meetings. We have filed our
bylaws with, and a copy of these bylaws can be obtained from, the SEC.
Please address all notices to the Secretary of Vastar Resources, Inc., 15375
Memorial Drive, Houston, Texas 77079.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires certain of our
officers and directors, and persons who own more than 10 percent of a
registered class of Vastar's equity securities, to file reports of ownership
and changes in ownership with the SEC and with the New York Stock Exchange.
These reports are made on SEC Forms 3, 4 and 5. Such officers, directors and
greater than 10 percent stockholders are required by SEC regulations to
furnish us with copies of all Section 16(a) forms they file.
On the basis of reports and representations submitted by Vastar's directors
and executive officers, all Forms 3, 4 and 5 showing ownership of and changes
of ownership in Vastar's equity securities during 1998 were timely filed with
the SEC as required by Section 16(a) of the Exchange Act, except that, due to
an inadvertent oversight, Terry G. Dallas, a director of the Company, did not
timely file a report related to an aggregate of 2.518 shares acquired with
dividend reinvestments. A report on these shares has been filed.
28
ADDITIONAL INFORMATION AVAILABLE
We file an Annual Report on Form 10-K with the SEC. You may obtain a copy of
this report and any amendments to the report, without exhibits, at no charge,
by writing to our Investor Relations Department at the following address:
Vastar Resources, Inc., 15375 Memorial Drive, Houston, Texas 77079, Telephone:
(281) 584-3477. We will furnish copies of exhibits for 25 cents per page,
prepaid.
By order of the board of directors
/s/ Albert D. Hoppe
Albert D. Hoppe
Secretary
Houston, Texas
March 23, 1999
29
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[ ]
This Proxy when executed will be voted in the manner directed herein. If no direction is made, this Proxy will be voted FOR the
election of Directors and FOR Proposal 2.
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY to vote EXCEPTIONS
(see reverse) listed below [ ] for all nominees listed below [ ] [ ]
Nominees: Jimmie D. Callison, Terry G. Dallas, Charles D. Davidson, Marie L. Knowles, Robert C. LeVine, William D. Schulte,
Steven J. Shapiro, Donald R. Voelte, Jr. and Michael E. Wiley.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions" box and write that nominee's name in
the space provided below. This proxy will then be voted FOR the election of all directors except for the nominees
whose names are written below.)
Exceptions________________________________________________________________________________________________________________________
2. Approval of Independent Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Change of Address and
or Comments Mark Here [ ]
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such.
Dated:_______________________________________, 1999
____________________________________________________
Signature
____________________________________________________
Signature
Votes must be indicated
(x) in Black or Blue ink. [X]
(Please sign, date and return this proxy in the enclosed postage prepaid envelope.)
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[Vastar Resources, Inc. Logo Appears Here]
VASTAR RESOURCES, INC.
Proxy Solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting May 19, 1999
The undersigned, revoking previous proxies relating to these shares,
hereby acknowledges receipt of the Notice and Proxy Statement dated March 23,
1999, in connection with the Annual Meeting of Stockholders to be held at 9:00
a.m. on May 19, 1999, in the Main Conference Room of Vastar Resources, Inc.,
15375 Memorial Drive, Houston, Texas, and hereby appoints Charles D. Davidson,
Steven J. Shapiro and Albert D. Hoppe, and each of them (with full power to act
alone), the attorneys and proxies of the undersigned, with power of substitution
to each, to vote all shares of the Common Stock of VASTAR RESOURCES, INC. (the
"Company") registered in the name provided herein which the undersigned is
entitled to vote at the 1999 Annual Meeting of Stockholders, and at any
adjournments thereof, with all the powers the undersigned would have if
personally present. Without limiting the general authorization hereby given,
said proxies are, and each of them is, instructed to vote or act as follows on
the proposals proposed by the registrant set forth in said Proxy Statement.
Proposal 1. Election of all 9 Directors (or if any nominee is not available for
election, such substitute as the Board of Directors may designate). Nominees:
Jimmie D. Callison, Terry G. Dallas, Charles D. Davidson, Marie L. Knowles,
Robert C. LeVine, William D. Schulte, Steven J. Shapiro, Donald R. Voelte, Jr.
and Michael E. Wiley.
Proposal 2. Approval of appointment of PricewaterhouseCoopers LLP as independent
auditors.
SEE REVERSE SIDE. If you wish to vote
in accordance with the Board of Directors'
recommendations, just sign on the reverse
side. You need not mark any boxes. VASTAR RESOURCES, INC.
P.O. BOX 11203
CONTINUED AND TO BE SIGNED ON REVERSE SIDE NEW YORK, N.Y. 10203-0203
SEE REVERSE SIDE
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[Vastar Resources, Inc. Logo Appears Here]
VASTAR RESOURCES, INC.
Proxy Solicited on Behalf of the Board of Directors
P of the Company for the Annual Meeting
May 19, 1999
R
The undersigned, revoking previous proxies relating to these
O shares, hereby acknowledges receipt of the Notice and Proxy Statement
dated March 23, 1999, in connection with the Annual Meeting of
X Stockholders to be held at 9:00 a.m. on May 19, 1999, in the Main
Conference Room of Vastar Resources, Inc., 15375 Memorial Drive,
Y Houston, Texas, and hereby appoints Charles D. Davidson, Steven J.
Shapiro and Albert D. Hoppe, and each of them (with full power to act
alone), the attorneys and proxies of the undersigned, with power of
substitution to each, to vote all shares of the Common Stock of VASTAR
RESOURCES, INC. (the "Company") registered in the name provided herein
which the undersigned is entitled to vote at the 1999 Annual Meeting of
Stockholders, and at any adjournments thereof, with all the powers the
undersigned would have if personally present. Without limiting the
general authorization hereby given, said proxies are, and each of them
is, instructed to vote or act as follows on the proposals proposed by
the registrant set forth in said Proxy Statement.
Proposal 1.
Election of all 9 Directors (or if any nominee is not available for
election, such substitute as the Board of Directors may designate).
Nominees:
Jimmie D. Callison, Terry G. Dallas, Charles D. Davidson, Marie L.
Knowles, Robert C. LeVine, William D. Schulte, Steven J. Shapiro, Donald
R. Voelte, Jr. and Michael E. Wiley.
Proposal 2.
Approval of appointment of PricewaterhouseCoopers LLP as independent
auditors.
The number of shares specified on the reverse side of this proxy
represents the aggregate number of shares held for your account in the
Vastar Resources, Inc. Capital Accumulation and/or Savings Plan or in
certain employee benefit plans of Atlantic Richfield Company or ARCO
Chemical Company. This proxy covers all shares credited to your account
in these plans.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of
Directors' recommendations, just sign on the reverse side. You need not
mark any boxes.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
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[X] Please mark your 5658
votes as in this
example.
This proxy when executed will be voted in the manner directed herein. If no direction is made, this Proxy will be
voted FOR the election of Directors and FOR Proposal 2.
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The Board of Directors recommends a vote FOR Proposals 1 and 2.
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FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approval of
Directors [ ] [ ] Independent [ ] [ ] [ ]
(See reverse). Auditors.
For, except vote withheld from the following nominee(s):
____________________________________________________
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MARK HERE FOR
ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title
as such.
_________________________________________________________
_________________________________________________________
SIGNATURE(S) DATE
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