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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
VINTAGE PETROLEUM, INC.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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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.
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VINTAGE PETROLEUM, INC.
4200 One Williams Center
Tulsa, Oklahoma 74172
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1999
To the Stockholders of
VINTAGE PETROLEUM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Vintage
Petroleum, Inc., a Delaware corporation (the "Company"), will be held at the
Adam's Mark Hotel, 100 East Second Street, Tulsa, Oklahoma, 74103, on Tuesday,
May 11, 1999, at 10:00 a.m., local time, for the following purposes:
1. To elect three directors of the Company;
2. To consider and act upon a proposal to approve an amendment to the
Vintage Petroleum, Inc. 1990 Stock Plan as described in the
accompanying proxy statement;
3. To consider and act upon a proposal to ratify the appointment of
Arthur Andersen LLP as the independent auditor of the Company for
1999;
4. To consider and act upon a stockholder proposal; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 25, 1999,
as the record date for the meeting, and only holders of the Company's Common
Stock of record at such time will be entitled to vote at the meeting or any
adjournment thereof. A complete list of the stockholders entitled to vote at
the meeting will be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours for a period of 10 days
prior to the date of the meeting at the offices of the Company and at the time
and place of the meeting.
By Order of the Board of Directors,
William C. Barnes
Secretary
Tulsa, Oklahoma
March 31, 1999
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND
VOTE IN PERSON.
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VINTAGE PETROLEUM, INC.
4200 One Williams Center
Tulsa, Oklahoma 74172
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 1999
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Vintage Petroleum, Inc., a Delaware corporation (the
"Company"), of proxies to be voted at the Annual Meeting of Stockholders of the
Company to be held on May 11, 1999, or at any adjournment thereof (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting. This Proxy Statement and accompanying proxy were first forwarded on or
about March 31, 1999, to stockholders of record on March 25, 1999.
If the accompanying proxy is properly executed and returned, the shares
represented by the proxy will be voted at the Annual Meeting. If a stockholder
indicates in his or her proxy a choice with respect to any matter to be acted
upon, that stockholder's shares will be voted in accordance with such choice.
If no choice is indicated, such shares will be voted "FOR" (a) the election of
all of the nominees for directors listed below, (b) the approval of the
amendment to the Vintage Petroleum, Inc. 1990 Stock Plan, and (c) the
ratification of the appointment of the independent auditor, and "AGAINST" the
stockholder proposal described herein. A stockholder giving a proxy may revoke
it by giving written notice of revocation to the Secretary of the Company at any
time before it is voted, by executing another valid proxy bearing a later date
and delivering such proxy to the Secretary of the Company prior to or at the
Annual Meeting, or by attending the Annual Meeting and voting in person.
The expenses of this proxy solicitation, including the cost of preparing
and mailing this Proxy Statement and accompanying proxy will be borne by the
Company. Such expenses will also include the charges and expenses of banks,
brokerage firms, and other custodians, nominees or fiduciaries for forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. Solicitation of proxies may be made by mail, telephone,
personal interviews or by other means by the Board of Directors or employees of
the Company who will not be additionally compensated therefor, but who may be
reimbursed for their out-of-pocket expenses in connection therewith.
STOCKHOLDERS ENTITLED TO VOTE
Stockholders of record at the close of business on March 25, 1999 (the
"Record Date"), will be entitled to vote at the Annual Meeting. As of the
Record Date, there were issued and outstanding 53,107,066 shares of Common
Stock, par value $.005 per share (the "Common Stock"), of the Company. Each
share of Common Stock is entitled to one vote. There is no cumulative voting
with respect to the election of directors. The presence in person or by proxy
of the holders of a majority of the shares issued and outstanding at the Annual
Meeting and entitled to vote will constitute a quorum for the transaction of
business. Votes withheld from nominees for directors, abstentions and broker
non-votes will be counted for purposes of determining whether a quorum has been
reached. Votes will be tabulated by an inspector of election appointed by the
Board of Directors of the Company. With regard to the election of directors,
votes may be cast in favor of or withheld from each nominee; votes that are
withheld will have the effect of a negative vote. Abstentions, which may be
specified on all proposals except the election of directors, will have the
effect of a negative vote.
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Under applicable Delaware law, a broker non-vote will have no effect on the
outcome of the election of directors or the other proposals.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation (the "Charter") of the Company
provides that the Board of Directors of the Company (the "Board of Directors")
shall consist of not less than three nor more than fifteen directors, as
determined from time to time by resolution of the Board of Directors. The number
of directors is currently fixed at seven and following the Annual Meeting will
be fixed at six. The Board of Directors is divided into three approximately
equal classes. The terms of such classes are staggered so that only one class
is elected at the annual meeting of stockholders each year for a three-year
term. The term of the Class III directors will expire at the Annual Meeting.
The terms of the Class I directors and the Class II directors will expire at the
annual meeting of stockholders to be held in 2000 and 2001, respectively.
The Board of Directors has nominated Charles C. Stephenson Jr., S. Craig
George and John T. McNabb, II, for re-election as directors. Messrs. Stephenson
and George, who currently serve as Class III directors and whose terms expire at
the Annual Meeting, are standing for re-election as Class III directors for
terms expiring at the annual meeting of stockholders in 2002. In order to
equalize the classes of the Board of Directors, Mr. McNabb, who currently serves
as a Class III director and whose term expires at the Annual Meeting, is
standing for re-election as a Class I director for a term expiring at the annual
meeting of stockholders in 2000. Accordingly, the accompanying proxy solicits
your vote for three directors. The persons named as proxies in the accompanying
proxy, who have been designated by the Board of Directors, intend to vote,
unless otherwise instructed in such proxy, for the election of Messrs.
Stephenson, George and McNabb. Should any of the nominees become unable for any
reason to stand for election as a director of the Company, it is intended that
the persons named in such proxy will vote for the election of such other person
as the Board of Directors may recommend. The Company knows of no reason why any
of the nominees will be unavailable or unable to serve.
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote is required for
the election of directors. The Board of Directors recommends a vote "FOR" each
of the following nominees for directors.
Nominees for Directors
Class III
(Term Expires May 2002)
Charles C. Stephenson, Jr., age 62. Mr. Stephenson, a co-founder of the
Company, has been a Director since June 1983 and Chairman of the Board of
Directors of the Company since April 1987. He was also Chief Executive Officer
of the Company from April 1987 to March 1994 and President of the Company from
June 1983 to May 1990. From October 1974 to March 1983, he was President of
Santa Fe - Andover Oil Company (formerly Andover Oil Company), an independent
oil and gas company ("Andover"), and from January 1973 to October 1974, he was
Vice President of Andover. Mr. Stephenson also serves as a Director of AAON,
Inc. Mr. Stephenson has a B.S. Degree in Petroleum Engineering from the
University of Oklahoma, and has approximately 39 years of oil and gas
experience.
S. Craig George, age 46. Mr. George has been a Director since October
1991, President of the Company since September 1995 and Chief Executive Officer
of the Company since December 1997. He was also Chief Operating Officer of the
Company from March 1994 to December 1997, an
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Executive Vice President of the Company from March 1994 to September 1995 and a
Senior Vice President of the Company from October 1991 to March 1994. From April
1991 to October 1991, Mr. George was Vice President of Operations and
International with Santa Fe Minerals, Inc., an independent oil and gas company
("Santa Fe Minerals"). From May 1981 to March 1991, he served in various other
management and executive capacities with Santa Fe Minerals and its subsidiary,
Andover. From December 1974 to April 1981, Mr. George held various management
and engineering positions with Amoco Production Company. He has a B.S. Degree in
Mechanical Engineering from the University of Missouri-Rolla.
Class I
(Term Expires May 2000)
John T. McNabb, II, age 54. Mr. McNabb has been a Director of the Company
since October 1990. He has been Chairman of the Board of Directors of Growth
Capital Partners, Inc., an investment and advisory firm in Houston, Texas
serving privately held and public middle market companies based in the
Southwest, since March 1992. From June 1990 to January 1992, he was a Managing
Director of Bankers Trust Company, managing commercial banking, investment
banking and financial advisory activities in the Southwest for Bankers Trust
Company, and head of BT Southwest, Inc., an affiliate of Bankers Trust New York
Corporation. From September 1984 to June 1990, Mr. McNabb was employed by
investment affiliates of The Prudential Insurance Company of America where he
provided a wide range of investment banking services and corporate finance
expertise to corporate clients. He holds undergraduate and graduate (M.B.A.)
degrees from Duke University.
Directors Continuing in Office
Class I
(Term Expires May 2000)
William C. Barnes, age 44. Mr. Barnes, a certified public accountant, has
been a Director, Treasurer and Secretary of the Company since April 1987, an
Executive Vice President of the Company since March 1994 and Chief Financial
Officer of the Company since May 1990. He was also a Senior Vice President of
the Company from May 1990 to March 1994 and Vice President - Finance of the
Company from January 1984 to May 1990. From November 1982 to December 1983, Mr.
Barnes was an audit manager for Arthur Andersen & Co., an independent public
accounting firm, where he dealt primarily with clients in the oil and gas
industry. He was Assistant Controller - Finance of Andover from December 1980
to November 1982. From June 1976 to December 1980, he was an auditor with
Arthur Andersen & Co., where he dealt primarily with clients in the oil and gas
industry. Mr. Barnes has a B.S. Degree in Business Administration from Oklahoma
State University.
Class II
(Term Expires May 2001)
Jo Bob Hille, age 57. Mr. Hille, a co-founder of the Company, has been a
Director of the Company since June 1983 and Vice Chairman of the Board of
Directors of the Company since September 1995. He was also President of the
Company from May 1990 to September 1995, Chief Executive Officer of the Company
from March 1994 to December 1997, Chief Operating Officer of the Company from
April 1987 to March 1994, Executive Vice President of the Company from June 1983
to May 1990 and Treasurer and Secretary of the Company from June 1983 to April
1987. From August 1972 to March 1983, Mr. Hille was employed by Andover, where
he served at various times primarily as Executive Vice President and Vice
President - Operations. Mr. Hille has a B.S. Degree in Petroleum Engineering
from the University of Tulsa, and has approximately 33 years of oil and gas
experience.
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Bryan H. Lawrence, age 56. Mr. Lawrence has been a Director of the Company
since January 1987. He is a founder and has been a senior manager of Yorktown
Partners LLC, which manages certain investment partnerships, since September
1997. Mr. Lawrence had been employed by Dillon Read & Co. Inc., an investment
banking firm ("Dillon Read"), since 1966, serving most recently as a Managing
Director until the merger of Dillon Read with SBC Warburg in September 1997. Mr.
Lawrence also serves as a Director of D & K Wholesale Drug, Inc., Hallador
Petroleum Company and TransMontaigne Oil Company (each a United States public
company), Benson Petroleum Ltd. and Cavell Energy Corp. (each a Canadian public
company) and certain non-public companies in the energy industry in which
Yorktown partnerships hold equity interests including Meenan Oil Co., Inc.,
Fintube Limited Partnership, PetroSantander Inc., Strega Energy, Inc., Savoy
Energy, L.P., Concho Resources Inc, Ricks Exploration, Inc. and Athanor
Resources, Inc. Mr. Lawrence is a graduate of Hamilton College and also has an
M.B.A. from Columbia University.
Compensation of Directors
Employee directors receive no additional compensation for service on the
Board of Directors or any committee thereof. Non-employee directors receive an
annual retainer of $12,000. Non-employee directors also automatically receive
non-qualified stock options under the Vintage Petroleum, Inc. Non-Management
Director Stock Option Plan (the "Director Plan"). Under the Director Plan, an
initial option to purchase up to 5,000 shares of Common Stock is granted to any
new non-employee director on the date of the organizational board meeting (the
board meeting immediately following the annual stockholders meeting) at which he
or she first serves as a member of the Board of Directors. Each non-employee
director also receives annually an option to purchase 1,000 shares of Common
Stock on the date of the organizational board meeting next following the date on
which such director received an initial option and on the date of each
succeeding organizational board meeting during the period of such director's
incumbency. The option exercise price of each option granted under the Director
Plan is equal to the fair market value of the Common Stock on the date of grant.
A total of 60,000 shares of Common Stock are available for issuance under the
Director Plan. As of March 1, 1999, there were 22,000 shares available for
future grants of options under the Director Plan. During fiscal 1998, Messrs.
Lawrence and McNabb were each granted an option to purchase 1,000 shares of
Common Stock at an exercise price of $19.28 per share. No options have been
exercised under the Director Plan. Non-employee directors will also be eligible
to receive awards under the Company's 1990 Stock Plan, if the proposed amendment
to such Plan is approved by stockholders at the Annual Meeting. See "Proposal
Two." All directors are reimbursed by the Company for out-of-pocket expenses
incurred by them in connection with their service on the Board of Directors and
any committee thereof.
Meetings and Committees of the Board of Directors
During 1998, the Board of Directors held four meetings. All of the
directors were present at each meeting. In addition, the Board of Directors
took action six times during 1998 by unanimous written consent. The Board of
Directors has a standing Audit Committee and a standing Compensation Committee.
The Audit Committee is composed of Messrs. Lawrence and McNabb. The Audit
Committee annually considers the qualifications of the independent auditor of
the Company and makes recommendations to the Board of Directors on the
engagement of the independent auditor. The Audit Committee also reviews (a) any
transactions between the Company and its officers, directors and principal
stockholders, (b) the plans for and results of audits of the Company, and (c)
the results of any internal audits, compliance with any of the Company's written
policies and procedures and the adequacy of the Company's system of internal
accounting controls. The Audit Committee met twice during 1998. All of the
members of the Audit Committee were present at each meeting.
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The Compensation Committee is composed of Messrs. Stephenson, Hille,
Lawrence and McNabb. The Compensation Committee reviews the compensation of
officers of the Company and makes recommendations to the Board of Directors
regarding such compensation and reviews the Company's executive compensation
policies and practices. The Compensation Committee also administers generally
the Company's 1990 Stock Plan, except that the Board of Directors administers
such Plan with respect to certain matters pertaining to officers of the Company.
The Compensation Committee met once during 1998. All of the members of the
Compensation Committee were present at such meeting.
The Company does not have a standing Nominating Committee. The Company's
Charter provides that nominations of candidates for election as directors of the
Company may be made at a meeting of stockholders by or at the direction of the
Board of Directors or by any stockholder entitled to vote at such meeting who
complies with the advance notice procedures set forth therein. These procedures
require any stockholder who intends to make a nomination for director at the
meeting to deliver notice of such nomination to the Secretary of the Company not
less than 45 nor more than 90 days before the meeting. The notice must contain
all information about the proposed nominee as would be required to be included
in a proxy statement soliciting proxies for the election of such nominee,
including such nominee's written consent to serve as a director if so elected.
If the Chairman of the meeting determines that a person is not nominated in
accordance with the nomination procedure, such nomination will be disregarded.
The Company's By-laws provide that the annual meeting of stockholders to be held
each year will be on the second Tuesday in May.
PROPOSAL TWO
APPROVAL OF AMENDMENT NUMBER 5 TO
THE VINTAGE PETROLEUM, INC.
1990 STOCK PLAN
General
Stockholder action at the Annual Meeting will be requested with respect to
the approval of Amendment Number 5 (the "Amendment") to the Vintage Petroleum,
Inc. 1990 Stock Plan, as amended (the "1990 Plan"). The purpose of the
Amendment is to allow non-employee directors of the Company to be eligible to
receive awards under the 1990 Plan, which will strengthen the ability of the
Company to attract and retain well-qualified persons to serve as non-employee
directors of the Company and to encourage stock ownership by such directors in
order to increase their proprietary interest in the Company's success. The
ownership by such directors of a greater proprietary interest in the Company
aligns such directors' interests more closely with interests of stockholders of
the Company. Currently, the 1990 Plan only permits the granting of awards to
key employees (including officers and directors who are employees) of the
Company or its subsidiaries.
A copy of the Amendment is attached hereto as Exhibit A. The Amendment,
which was approved by the Board of Directors on March 16, 1999, will not take
effect unless approved by the affirmative vote of the holders of a majority of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting and entitled to vote.
Summary of the 1990 Plan
General. On June 1, 1990, the Board of Directors adopted, and the
stockholders of the Company approved, the 1990 Stock Plan. Since then, the
Board of Directors and the stockholders of the Company have approved amendments
to the 1990 Plan which increased the total number of shares of Common Stock
available for issuance pursuant to awards granted under the 1990 Plan to the
current
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6,000,000 shares. The 1990 Plan currently provides for awards only to key
employees of the Company, including officers and directors who are also
employees of the Company.
The 1990 Plan contains no limitation on the number of shares that may be
awarded to any participant. The stock issuable under the 1990 Plan may be
authorized and unissued shares or treasury shares. If any shares subject to any
award are forfeited or payment is made in a form other than shares or the award
otherwise terminates without payment being made, the shares subject to such
awards will again be available for issuance under the 1990 Plan. In addition,
the number of shares deemed to be issued under the 1990 Plan upon exercise of a
stock option will be reduced by the number of shares surrendered in payment of
the exercise or purchase price of such stock option.
Except as discussed below, the 1990 Plan is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The members
of the Committee are currently not eligible for awards under the 1990 Plan. If
the Amendment is approved by stockholders, members of the Committee will be
eligible for awards under the 1990 Plan. The Committee is authorized to
determine plan participants, the types and amount of awards to be granted and
the terms, conditions and provisions of awards, prescribe forms of award
agreements, interpret the 1990 Plan, establish, amend and rescind rules and
regulations relating to the 1990 Plan and make all other determinations which
may be necessary or advisable for the administration of the 1990 Plan. Any and
all powers, authorizations and discretions granted by the 1990 Plan to the
Committee are likewise exercisable at any time by the Board of Directors. The
Board of Directors currently administers the 1990 Plan with respect to officers
of the Company. Although a determination has not been made as to the number of
employees currently eligible for consideration as participants in the 1990 Plan,
there are 78 employees who currently hold awards under the 1990 Plan.
Summary of Awards. The 1990 Plan permits the granting of any or all of the
following types of awards: (a) stock options, (b) stock appreciation rights
("SARs"), and (c) restricted stock. Generally, awards under the 1990 Plan are
granted for no consideration other than prior and future services. Awards
granted under the 1990 Plan may, in the discretion of the Committee, be granted
alone or in addition to, in tandem with or in substitution for any other award
under the 1990 Plan or other plan of the Company. Such grants could include
grants of options after a decline in the market price of the Company's Common
Stock in substitution for previously granted options having a higher exercise
price. The Company, however, has never "repriced" options previously granted.
Stock options granted pursuant to the 1990 Plan may, at the discretion of
the Committee, be either incentive stock options ("ISOs") (which may be granted
only to employees), within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended, or non-qualified stock options. The exercise price of
an ISO may not be less than the fair market value of the Common Stock on the
date of grant (or 110 percent of such fair market value in the case of ISOs
granted to employees who possess more than 10 percent of the combined voting
power of all classes of stock of the Company (a "10 percent employee")). In the
case of non-qualified stock options, the exercise price shall be as determined
by the Committee in its sole discretion, except that it shall not be less than
85 percent of the fair market value of the Common Stock on the date of grant.
The Company, however, has never granted any options under the 1990 Plan with an
exercise price below the fair market value of the Common Stock on the date of
grant. Options granted pursuant to the 1990 Plan are exercisable in whole or in
part at such time or times as determined by the Committee, except that ISOs may
not be exercised after the expiration of ten years from the date granted (5
years in the case of a 10 percent employee). Generally, options may be
exercised by the payment of cash, promissory notes, stock or a combination
thereof.
Any SARs granted under the 1990 Plan will give the holder the right to
receive cash or stock in an amount equal to the difference between the fair
market value of a share of Common Stock on the date of exercise and the grant
price. The grant price of an SAR is determined by the Committee
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but may not be less than the fair market value of a share of Common Stock on the
date of grant. Methods of exercise and settlement and other terms of SARs are
determined by the Committee.
The Committee may award restricted stock, generally consisting of shares
which may not be disposed of by participants until certain restrictions
established by the Committee lapse. Such restrictions may lapse in whole or in
installments as the Committee determines. A participant receiving restricted
stock will have all of the rights of a stockholder of the Company, including the
right to vote the shares and the right to receive any dividends, unless the
Committee otherwise determines. Upon termination of employment during the
restriction period, restricted stock will be forfeited, subject to such
exceptions, if any, as are authorized by the Committee.
Awards are not transferable other than by will or the laws of descent and
distribution. In the event of any change affecting the shares of Common Stock
by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares, or other corporate
change or any distributions to Common Stock holders, the Committee may make such
substitution or adjustment in the aggregate number or kind of shares which may
be distributed under the 1990 Plan and in the number, kind and exercise, grant
or purchase price of shares subject to the outstanding awards granted under the
1990 Plan, or make provisions for a cash payment relating to any award, as it
deems to be appropriate in order to maintain the purpose of the original grant.
Amendment to and Termination of the 1990 Plan. The Board of Directors may
amend, alter, suspend, discontinue or terminate the 1990 Plan without the
consent of stockholders or participants, except that stockholder approval of
such action will be sought if such approval is required by any federal or state
law or regulation, or if the Board of Directors in its discretion determines
that obtaining such stockholder approval is advisable. Unless earlier
terminated by the Board of Directors, the 1990 Plan will terminate when no
shares remain reserved and available for issuance, and the Company has no
further obligation with respect to any award granted under the 1990 Plan.
Change of Control. In the event of a Change of Control of the Company, all
outstanding awards under the 1990 Plan, regardless of any limitations or
restrictions, become fully exercisable and freed of all restrictions. In such
event, with certain exceptions, participants will receive cash payments equal to
the value of their outstanding awards based on the "change of control price" as
defined in the 1990 Plan. For purposes of the 1990 Plan, a Change of Control is
deemed to have occurred: (a) upon the acquisition by any person of 20 percent or
more of the Company's outstanding voting stock; (b) if individuals constituting
the Board of Directors, or those nominated by at least two-thirds of such
individuals or successors nominated by them, cease to constitute a majority of
the Board of Directors; (c) upon stockholder approval of a merger, consolidation
or similar transaction or consummation of any such transaction if stockholder
approval is not required; (d) upon stockholder approval of a plan of liquidation
of the Company or the sale or disposition of substantially all of the Company's
assets; or (e) if the Board of Directors or a committee thereof adopts a
resolution to the effect that a Change of Control has occurred.
Federal Income Tax Consequences. The Company believes that under present
Federal tax laws the following are the Federal income tax consequences generally
arising with respect to awards granted under the 1990 Plan. The grant of an
option or SAR, will create no tax consequences for the participant or the
Company. The participant will have no taxable income upon exercising an ISO
(except that the alternative minimum tax may apply) and the Company will receive
no deduction at that time. Upon exercising an option other than an ISO, a
participant will recognize ordinary income equal to the difference between the
exercise price and the fair market value of the stock acquired on the date of
exercise. Upon exercising an SAR, a participant will recognize ordinary income
equal to the cash or the fair market value of the stock received on the date of
exercise. In each case, the Company generally will be entitled to a deduction
for the amount recognized as ordinary income by the participant. The treatment
to a participant of a disposition of shares acquired upon the exercise of an
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SAR or option depends on how long the shares have been held and on whether such
shares are acquired by exercising an ISO or by exercising an option other than
an ISO. Generally, there will be no tax consequences to the Company in
connection with a disposition of shares acquired under an option except that the
Company will be entitled to a deduction (and the employee will recognize
ordinary income) if shares acquired under an ISO are disposed of before the
applicable ISO holding periods have been satisfied.
With respect to awards granted under the 1990 Plan involving stock that is
restricted as to transferability and subject to a substantial risk of
forfeiture, a participant will recognize ordinary income equal to the fair
market value of the shares received at the earlier of the time at which the
shares become transferable or not subject to a substantial risk of forfeiture
unless the participant elects to be taxed at the time of the award
notwithstanding the restrictions (to minimize the tax payable in respect of the
appreciation in the value of the stock from the time it is awarded until the
restrictions lapse). The Company generally will be entitled to a deduction for
the same amount.
The foregoing provides only a very general description of the application
of Federal income tax laws to awards under the 1990 Plan. The summary does not
address the effects of foreign, state and local tax laws. Because of the
complexities of the tax laws, participants under the 1990 Plan are strongly
urged to consult a tax advisor regarding these matters.
Awards Granted. As of March 23, 1999, incentive and non-qualified stock
options for a total of 4,626,142 shares at an average exercise price of $11.53
per share are outstanding under the 1990 Plan. All of these options were
granted at the fair market value of the Common Stock on the date of grant, and
expire up to 10 years after the date of grant. As of such date, no other awards
have been granted under the 1990 Plan. As of such date, there were 425,000
shares available for future grants of awards under the 1990 Plan. Since
inception of the 1990 Plan, (a) options for a total of 948,858 shares have been
exercised at an average exercise price of $5.76 and (b) options for the
following number of shares have been granted under the 1990 Plan to the named
executive officers of the Company and specified groups: S. Craig George
(President and Chief Executive Officer), 885,000 shares; William C. Barnes
(Executive Vice President and Chief Financial Officer), 705,000 shares; William
L. Abernathy (Executive Vice President and Chief Operating Officer), 610,000
shares; Robert W. Cox (Vice President-General Counsel), 232,000 shares; William
E. Dozier (Senior Vice President-Operations), 395,000 shares; all current
executive officers as a group, 4,062,000 shares; and all employees, excluding
executive officers, as a group, 1,513,000 shares. Messrs. Stephenson (Chairman
of the Board of Directors) and Hille (Vice Chairman of the Board of Directors)
and all current directors who are not executive officers are currently not
eligible to receive awards under the 1990 Plan. Future awards under the 1990
Plan are not yet determinable. The closing price for the Common Stock on the
New York Stock Exchange on March 23, 1999, was $8.125.
Vote Required
The affirmative vote of a majority of the shares present in person or by
proxy at the Annual Meeting and entitled to vote is required for approval of the
Amendment. The Board of Directors recommends a vote "FOR" approval of the
Amendment.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed Arthur Andersen LLP as the independent auditor of the Company for the
fiscal year ending December 31, 1999. Arthur Andersen LLP has been the
independent auditor of the Company since the Company's inception in 1983. A
proposal will be presented at the Annual Meeting asking the stockholders to
ratify
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<PAGE>
the appointment of Arthur Andersen LLP as the Company's independent auditor. If
the stockholders do not ratify the appointment of Arthur Andersen LLP, the Board
of Directors will reconsider the appointment.
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote is required for
the adoption of this proposal. The Board of Directors recommends a vote "FOR"
the ratification of Arthur Andersen LLP as independent auditor for 1999.
A representative of Arthur Andersen LLP will be present at the Annual
Meeting. Such representative will be given the opportunity to make a statement
if he desires to do so and will be available to respond to appropriate
questions.
PROPOSAL FOUR
STOCKHOLDER PROPOSAL CONCERNING COMPOSITION
OF THE BOARD OF DIRECTORS
The Company's Board of Directors recommends that stockholders vote
"AGAINST" the following stockholder proposal. The American Baptist Home Mission
Society, P.O. Box 851, Valley Forge, PA 19482-0851, the beneficial owner of
25,800 shares, has submitted the following supporting statement and stockholder
proposal:
Stockholder Proposal
BOARD INCLUSIVENESS
Employees, customers, and stockholders reflect a greater diversity of
backgrounds than ever before. We believe that the board composition of major
corporations should reflect the people in the workforce and marketplace of the
Twenty-first Century if our company is going to remain competitive.
The Department of Labor's 1995 Glass Ceiling Commission reported ("Good for
Business: Making Full Use of the Nation's Human Capital") that diversity and
inclusiveness in the workplace positively impact the bottom line. A Covenant
Fund report of S&P 500 companies revealed that ". . . firms that succeed in
shattering their own glass ceiling racked up stock-market records that were
nearly 2.5 times better than otherwise-comparable companies."
The Investor Responsibility Research Center (IRRC) reports that in 1996,
representation at senior management levels was only at 12 percent for the over
39,000 companies required to submit the EEO-1 Report. The Glass Ceiling
Commission reported that companies select from only half of the available talent
within the U.S. workforce.
If we are to be prepared for the 21st Century, we must learn how to compete
in an increasingly diverse global marketplace, by promoting and selecting the
best qualified people regardless of race, gender or physical challenge. Sun
Oil's CEO Robert Campbell stated (Wall Street Journal, 8/12/96): "Often what a
woman or minority person can bring to the board is some perspective a company
has not had before--adding some modern-day reality to the deliberation process.
Those perspectives are of great value, and often missing from an all-white, male
gathering. They can also be inspirational to the company's diverse workforce."
We believe that the judgment and perspectives of a more diverse board will
improve the quality of corporate decision-making. A growing proportion of
stockholders is attaching value to board inclusiveness, since the board is
responsible for representing shareholder interests. The Teachers
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<PAGE>
Insurance and Annuity Association and College Retirement Equities Fund, the
largest U.S. institutional investor, recently issued a set of corporate
governance guidelines which included a call for "diversity of directors by
experience, sex, age, and race."
We therefore, urge our company to enlarge its search for qualified board
members.
RESOLVED: Shareholders request that
1. The Company make available to shareholders, at reasonable expense, a
report four months from the date of the annual meeting, which includes
a description of
--Efforts to encourage diversified representation on the board;
--Criteria for board qualification;
--The process of selecting board nominees, and board committee
members;
--A public statement committing the company to a policy of board
inclusiveness, with a program of steps to be taken and the time
line expected to move in that direction.
2. The Board Nominating Committee make a greater effort to locate
qualified women and persons of color as candidates for nomination to
the board.
Board of Directors' Statement in Opposition
The Board of Directors strives to select for its membership highly
qualified individuals who are dedicated to advancing the interests of the
Company's stockholders. The oil and gas industry is intensely competitive, and
the Company believes that the composition of its Board of Directors is extremely
important to the Company's long-term success. The Board, among other things,
sets the strategic directions of the Company, selects and provides guidance to
management personnel, and makes key decisions affecting the business of the
Company. The Company believes that it is essential that its Board members are
highly qualified to serve as directors--without regard to race, age, or gender.
The Board has set neither requirements nor limits on diversity. It believes
that the Company and its stockholders are best served by a focus on the overall
qualifications of Board members and their individual contributions to the Board
as a whole, rather than by specific numeric goals for race, gender or any other
category. The Company is committed to considering candidates for Board
membership based on these qualifications without regard to their race, color,
national origin, gender, religion or disability.
Nominees for directors of the Company are generally selected based on an
analysis of a number of criteria, including, among others, overall business
experience, integrity and ability to make independent analytical inquiries;
experience in and understanding of the Company's business environment;
achievement in their personal careers; and willingness and ability to devote
adequate time to Board duties. Based on this evaluation, the Company seeks
nominees who, together with the other members of the Board, appear most
qualified to promote the interests of the Company's stockholders.
The proposal seeks information on how Board and committee members are
chosen. The Company has not felt it necessary to formally establish a
nominating committee for the purpose of proposing candidates for Board
membership, believing, instead, that the Board's consideration of candidates
provided from numerous sources has provided it with excellent candidates.
Candidates for Board membership are put forward from a variety of sources,
including Board members, employees, human resource specialists and the general
public. Stockholders who wish to propose a candidate for nomination to the
Board may do so by forwarding pertinent information to the Secretary of the
Company at its principle offices. The entire Board evaluates the most highly
qualified candidates for nomination to the Board. Once elected to the Board,
directors serve on committees based on their particular expertise and experience
as well as their own expressed preferences.
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<PAGE>
The stockholder proposal seeks to require the Board to select candidates
for the Board on the basis of race and gender. The proposal requests a step-by-
step, time line approach to a selection process that does not lend itself to a
strict procedure. In addition, the proposal seeks the creation of a report that
would impose an unnecessary expense. The Board believes that stockholders will
not be benefitted by abandoning the talents and experience of existing Board
members in pursuit of arbitrary numeric goals. In the Board's view, the best
interests of the Company and its stockholders are served by the existing
selection process and criteria which do not place limits or restrictions on the
selection of directors.
The Board recommends stockholders vote "AGAINST" this proposal.
The affirmative vote of the holders of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote is required for
the adoption of this proposal.
PRINCIPAL STOCKHOLDERS AND
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as of March 7, 1999,
regarding the ownership of the Company's Common Stock by (a) all persons known
by the Company to be beneficial owners of more than five percent of such stock,
(b) each director and nominee for director of the Company, (c) each of the
executive officers of the Company named in the Summary Compensation Table below,
and (d) all executive officers and directors of the Company as a group. Unless
otherwise noted, the persons named below have sole voting and investment power
with respect to such shares.
Shares
Beneficially Percentage
Name of Owner or Identity of Group Owned of Class(1)
- ---------------------------------- ---------------- -----------
Charles C. Stephenson, Jr.(2) 10,766,050 (3) 20.3%
Jo Bob Hille(2) 4,200,000 (4) 7.9
The Prudential Insurance Company of America(5) 2,953,330 5.6
William C. Barnes 1,021,000 (6) 1.9
William L. Abernathy 524,033 (7) 1.0
S. Craig George 428,837 (8) *
Robert W. Cox 369,816 (9) *
William E. Dozier 222,526 (10) *
Bryan H. Lawrence 58,900 (11) *
John T. McNabb, II 30,744 (12) *
All executive officers and directors as
a group (15 persons) 18,240,258 (13) 33.4
- --------------------
* Represents less than 1% of the Common Stock outstanding.
(1) Shares of Common Stock which were not outstanding but which could be
acquired by a person upon exercise of an option within sixty days of March
7, 1999, are deemed outstanding for the purpose of computing the percentage
of outstanding shares beneficially owned by such person. Such shares,
however, are not deemed to be outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by any other person.
(2) The stockholder's address is 4200 One Williams Center, Tulsa, Oklahoma
74172.
(3) Includes (a) 9,737,400 shares held by Stephenson Equity, Co., a general
partnership controlled by Mr. Stephenson, and (b) 236,850 shares held by
the Stephenson Family Charitable Foundation, of which Mr. Stephenson and
his wife are co-trustees. Mr. Stephenson and his
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<PAGE>
wife do not have a pecuniary interest in the shares held by the Foundation.
Does not include 200 shares owned by Mr. Stephenson's wife. Mrs. Stephenson
has full rights of ownership over such shares, including sole voting and
investment power. Mr. Stephenson disclaims beneficial ownership of such
shares.
(4) Represents shares held by the Jo Bob Hille Trust, a revocable living trust,
of which Jo Bob Hille and Mary Ann Hille, his spouse, are co-trustees.
Does not include 100,000 shares owned by the Jo Bob Hille and Mary Ann
Hille Charitable Remainder Trust. Mr. Hille disclaims beneficial ownership
of such shares.
(5) Information relating to the stockholder is as of December 31, 1998, and is
based on the stockholder's Schedule 13G dated February 2, 1999, which was
filed by The Prudential Insurance Company of America ("Prudential").
Prudential is an insurance company and a registered investment adviser and
may be deemed to beneficially own the shares which are held for the benefit
of its clients. Prudential has sole dispository and voting power over
1,598,500 shares and has shared dispository and voting power over 1,354,830
shares. Prudential does not admit being the beneficial owner of the
shares. The stockholder's address is 751 Broad Street, Newark, New Jersey
07102-3777.
(6) Includes 330,000 shares subject to stock options which are currently
exercisable at an average exercise price of $8.38 per share, and 3,000
shares held by the Vintage Petroleum, Inc. 401(k) Plan (the "401(k) Plan")
and allocated to the account of Mr. Barnes.
(7) Includes 234,554 shares subject to stock options which are currently
exercisable at an average exercise price of $9.01 per share, and 7,293
shares held by the 401(k) Plan and allocated to the account of Mr.
Abernathy.
(8) Includes 353,020 shares subject to stock options which are currently
exercisable at an average exercise price of $8.78 per share, and 7,817
shares held by the 401(k) Plan and allocated to the account of Mr. George.
(9) Includes 147,008 shares subject to stock options which are currently
exercisable at an average exercise price of $7.77 per share, and 7,816
shares held by the 401(k) Plan and allocated to the account of Mr. Cox.
(10) Includes 140,800 shares subject to stock options which are currently
exercisable at an average exercise price of $9.31 per share, and 2,526
shares held by the 401(k) Plan and allocated to the account of Mr. Dozier.
(11) Includes 18,000 shares subject to stock options which are currently
exercisable at an average exercise price of $11.28 per share.
(12) Includes 18,000 shares subject to stock options which are currently
exercisable at an average exercise price of $11.28 per share.
(13) Includes 1,564,142 shares subject to stock options which are currently
exercisable at an average exercise price of $8.87 per share, and 51,604
shares held by the 401(k) Plan and allocated to the accounts of such
individuals.
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation of the Company's Chairman of the Board of Directors, the Company's
Vice Chairman of the Board of Directors, the Company's Chief Executive Officer
and each of the Company's four most highly compensated executive officers other
than the Chief Executive Officer, based on salary and bonus earned during fiscal
1998, for services in all capacities to the Company and its subsidiaries during
each of the Company's last three fiscal years.
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
-------------------------------- ------------------------- ----------
Securities
Restricted Underlying Long-Term
Other Annual Stock Options/ Incentive All Other
Name and Salary Bonus Compensation Award(s) SARs Payouts Compensation
Principal Position Year ($) ($) ($)(1) ($) (#)(2) ($) ($)(3)
- --------------------------- ---- ------- ----- ------------ ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles C. Stephenson, Jr., 1998 50,000(4) -0- -0- -0- -0- -0- -0-
Chairman of the Board of 1997 40,000(4) -0- -0- -0- -0- -0- -0-
Directors 1996 40,000(4) -0- -0- -0- -0- -0- -0-
Jo Bob Hille, 1998 50,000(4) -0- -0- -0- -0- -0- -0-
Vice Chairman of the Board 1997 150,000 -0- -0- -0- -0- -0- -0-
of Directors 1996 150,000 -0- -0- -0- -0- -0- -0-
S. Craig George, 1998 225,000 -0- -0- -0- 100,000 -0- 9,600
President and Chief 1997 190,000 -0- -0- -0- 70,000 -0- 9,500
Executive Officer 1996 183,000 -0- -0- -0- 60,000 -0- 4,750
William C. Barnes, 1998 200,000 -0- -0- -0- 80,000 -0- 9,600
Executive Vice President 1997 180,000 -0- -0- -0- 70,000 -0- 9,500
and Chief Financial Officer 1996 173,000 -0- -0- -0- 80,000 -0- 4,750
Robert W. Cox, 1998 165,500 -0- -0- -0- 20,000 -0- 9,600
Vice President- 1997 163,000 -0- -0- -0- 30,000 -0- 9,500
General Counsel 1996 160,000 -0- -0- -0- 30,000 -0- 4,750
William L. Abernathy, 1998 163,000 -0- -0- -0- 70,000 -0- 9,600
Executive Vice President 1997 144,000 -0- -0- -0- 50,000 -0- 8,180
and Chief Operating Officer 1996 137,000 -0- -0- -0- 70,000 -0- 4,107
William E. Dozier, 1998 155,000 -0- -0- -0- 60,000 -0- 9,290
Senior Vice President- 1997 140,000 -0- -0- -0- 50,000 -0- 8,400
Operations 1996 133,000 -0- -0- -0- 50,000 -0- 3,643
</TABLE>
- --------------------
(1) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or 10 percent of the total amount of annual salary
and bonus for any named individual.
(2) Consists solely of options to acquire shares of Common Stock.
(3) Represents Company contributions to the 401(k) Plan.
(4) Mr. Stephenson and Mr. Hille are entitled to receive an annual base salary
of $100,000 pursuant to their employment agreements with the Company. They
have waived this right to receive any unpaid portion of base salary for
1998, 1997 and 1996, as the case may be. It is anticipated that the full
amount due under their employment agreements will not be paid during 1999.
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<PAGE>
Option/SAR Grants In Last Fiscal Year
The following table sets forth certain information with respect to options
granted to the named executive officers of the Company during fiscal 1998. The
Company has never granted any stock appreciation rights.
<TABLE>
<CAPTION>
Individual Grants
- -----------------------------------------------------------------------------------------
Number of % of Total
Securities Options/ Potential Realizable Value
Underlying SARs at Assumed Annual Rates
Options/ Granted to of Stock Price Appreciation
SARs Employees Exercise or for Option Term(3)
Granted in Fiscal Base Price Expiration ----------------------------
Name (#)(1) Year ($/Sh)(2) Date 5%($) 10%($)
- ---------------------------- --------- ---------- ----------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Charles C. Stephenson, Jr. -0- -0- -0- -0- -0- -0-
Jo Bob Hille -0- -0- -0- -0- -0- -0-
S. Craig George 100,000(4) 12.2 20.1875 3/10/08 1,269,581 3,217,368
William C. Barnes 80,000(4) 9.8 20.1875 3/10/08 1,015,665 2,573,894
Robert W. Cox 20,000(4) 2.4 20.1875 3/10/08 253,916 643,474
William L. Abernathy 70,000(4) 8.6 20.1875 3/10/08 888,707 2,252,157
William E. Dozier 60,000(4) 7.3 20.1875 3/10/08 761,749 1,930,421
</TABLE>
- --------------------
(1) Consists solely of options to acquire shares of Common Stock. The options
were granted for a term of ten years, subject to earlier termination in
certain events related to termination of employment. The exercise price of
the options is equal to the fair market value of the Common Stock on the
date of grant. Under the terms of the Company's 1990 Stock Plan, the
Compensation Committee retains discretion, subject to plan limits, to
modify the terms of the options and to reprice the options. In the event
of a Change in Control, as defined in the Company's 1990 Stock Plan, the
options become fully exercisable immediately.
(2) The exercise price of the options is equal to the fair market value of the
Common Stock on the date of grant.
(3) Potential realizable value illustrates the value that might be realized
upon exercise of the options immediately prior to the expiration of their
term (ten years from the date of grant), assuming that the Common Stock
appreciates in value from the date of grant to the end of the option term
at rates of 5% and 10%, respectively, compounded annually.
(4) These options become exercisable in increments over a one-year period
beginning March 11, 2001. The option exercise price may be paid in cash,
by delivery of already-owned shares, or a combination thereof, or, at the
discretion of the Compensation Committee, by a promissory note. Tax
withholding obligations, if any, related to exercise may be paid by offset
of the underlying shares, subject to certain conditions.
Aggregated Option/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
The following table sets forth certain information with respect to options
exercised by the named executive officers of the Company during fiscal 1998, and
the number and value of unexercised options held by such executive officers at
the end of the fiscal year. The Company has never granted any stock
appreciation rights.
-14-
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Securities In-the-Money
Acquired Underlying Unexercised Options/SARs at FY-End
on Value Options/SARs at FY-End(#) ($)(1)(2)
Exercise Realized -------------------------- --------------------------
Name (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles C. Stephenson, Jr. -0- -0- -0- -0- -0- -0-
Jo Bob Hille -0- -0- -0- -0- -0- -0-
S. Craig George -0- -0- 305,302 217,718 235,751 -0-
William C. Barnes -0- -0- 263,336 216,664 208,125 -0-
Robert W. Cox -0- -0- 127,330 69,678 168,750 -0-
William L. Abernathy -0- -0- 174,876 179,678 20,000 -0-
William E. Dozier 19,200 150,000 101,286 149,514 12,500 -0-
</TABLE>
- ---------------------------
(1) Market value of the underlying securities at exercise date or fiscal year-
end, as the case may be, minus the option exercise price.
(2) The closing price for the Common Stock on the New York Stock Exchange on
December 31, 1998, the last trading day of the fiscal year, was $8.63.
Employment Agreements and Change
in Control Arrangements
The Company has employment agreements with two of the named executive
officers of the Company.
On January 7, 1987, the Company entered into employment agreements with
Messrs. Stephenson and Hille, now Chairman of the Board and Vice Chairman of the
Board of the Company, respectively. Each agreement provides for (a) an annual
base salary of $100,000, subject to review and adjustment (upwards only) by the
Board of Directors, and (b) such other compensation and benefits as determined
by the Board of Directors. The initial term of each agreement extended through
December 31, 1991, and each agreement is automatically extended for additional
periods of one year each until terminated by either the employee or the Company.
Each agreement further provides that in the event of termination of the
employee's employment prior to expiration of the term of such agreement (a) by
the Company for any reason other than death, disability, cause or the employee's
material breach of such agreement, or (b) by the employee as a result of a
material breach of such agreement by the Company, the employee will be entitled
to receive his base salary and other compensation and benefits to which he is
entitled for the balance of such term.
All outstanding awards under the Vintage Petroleum, Inc. 1990 Stock Plan,
regardless of any limitations or restrictions, become fully exercisable and free
of all restrictions, in the event of a Change in Control of the Company, as
defined in such Plan. In such event, with certain exceptions, participants will
receive cash payments equal to the value of their outstanding awards based on
the "change of control price" as defined in such Plan.
Report on Executive Compensation
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program, except that the Board of Directors is
generally responsible for administering the Company's 1990 Stock Plan with
respect to the executive officers of the Company. During 1998, the Committee
was comprised of the two outside directors of the Company (Messrs. Lawrence and
McNabb), the Chairman of the Board of Directors of the Company (Mr. Stephenson)
and the Vice Chairman of the Board of Directors of the Company (Mr. Hille). All
decisions of the Committee relating
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<PAGE>
to the compensation of the executive officers of the Company are reviewed by the
full Board of Directors. Members of the Committee were not eligible to receive
options or awards under the Company's 1990 Stock Plan during 1998.
Overall Executive Compensation Policy. The overall policy of the Company's
executive compensation program is to attract, retain and reward executives who
are capable of leading the Company in achieving its business objectives and
strategies in a highly competitive industry. The executive compensation program
basically consists of two elements: salary and stock options.
Section 162(m) of the Internal Revenue Code of 1986, as amended, provides
that no publicly-held company shall be permitted to deduct from its income taxes
compensation exceeding $1 million paid to its chief executive officer or any of
its four other highest paid executive officers unless (a) the compensation is
payable solely on account of the attainment of performance goals, (b) the
performance goals are determined by a compensation committee of two or more
outside directors, (c) the material terms under which the compensation is paid
are disclosed to and approved by the stockholders, and (d) the compensation
committee certifies that the performance goals were met. Neither the Committee
nor the Company expects this Section to have an impact, or result in the loss of
a material deduction, with respect to compensation paid to such executive
officers, including stock options granted to such executive officers.
Salary. The Committee reviews each executive officer's salary annually.
The employment agreements of certain executive officers of the Company set
certain minimum salary levels for such officers. The Committee believes there
is necessarily some subjectivity in setting the salaries of the Company's
executive officers and does not follow specific objective performance criteria
when setting such salaries. In determining appropriate salary levels for 1998,
the Committee primarily considered the individual's past performance, the past
performance of the Company and the individual's contribution to that
performance. The Committee also considered the executive's level and scope of
responsibility, experience, internal equity of the Company's executive
compensation program, and the compensation practices of other companies in the
oil and gas industry for executives of similar responsibility.
Stock Options. The Board of Directors relies heavily upon stock options to
compensate the executive officers of the Company. The Board of Directors
believes that stock options encourage and reward effective management that
results in long-term corporate financial success, as measured by stock price
appreciation. Options granted by the Board of Directors are subject to a
vesting schedule and in most instances are not exercisable until after three
years from the date of grant. In addition, the exercise price of options
granted by the Board of Directors equals the fair market value of the Common
Stock on the date of grant. The Board of Directors believes that granting
options in this manner aligns the interests of the Company's executives with
those of the Company's stockholders since the value of an option bears a direct
relationship to the Company's stock price.
Options granted to executive officers during 1998 were based on the
subjective evaluation of the executive's ability to influence the Company's
long-term growth and profitability and to reward outstanding past individual
performance and contributions to the Company.
Chairman, Vice Chairman and CEO Compensation. Mr. Stephenson, who served
as Chairman of the Board of Directors of the Company during 1998, is entitled to
receive an annual base salary of $100,000 pursuant to his Employment Agreement
with the Company dated January 7, 1987, as described above. Mr. Stephenson,
however, elected to receive only $50,000 of his base salary for 1998, and waived
his right to receive the unpaid portion of his base salary for 1998. Mr.
Stephenson received no other compensation for 1998. Despite electing to receive
minimal compensation for his
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<PAGE>
efforts, Mr. Stephenson, as the Company's largest single stockholder, has strong
incentive to create value for stockholders.
Mr. Hille, who served as Vice Chairman of the Board of Directors of the
Company during 1998, is entitled to receive an annual base salary of $100,000
pursuant to his Employment Agreement with the Company dated January 7, 1987, as
described above. Mr. Hille, however, elected to receive only $50,000 of his
base salary for 1998, and waived his right to receive the unpaid portion of his
base salary for 1998. Mr. Hille received no other compensation for 1998.
Despite electing to receive minimal compensation for his efforts, Mr. Hille, as
the Company's second largest stockholder, also has strong incentive to create
value for stockholders.
During 1998, Mr. George served as President and Chief Executive Officer of
the Company. Mr. George received an increase in his base salary and option
grants for 1998 partly as a result of his assumption of the duties of Chief
Executive Officer in December 1997. His base salary for 1998 and options
granted to him during 1998 were otherwise determined in the same manner utilized
by the Committee and the Board of Directors when determining salaries and option
grants for the Company's other executive officers as described above.
Board of Directors Compensation Committee
- ------------------ ----------------------
Charles C. Stephenson, Jr. Charles C. Stephenson, Jr.
Jo Bob Hille Jo Bob Hille
S. Craig George Bryan H. Lawrence
William C. Barnes John T. McNabb, II
Bryan H. Lawrence
John T. McNabb, II
The Report on Executive Compensation shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
During 1998, the following executive officers of the Company were members
of the Compensation Committee and participated in deliberations concerning
executive officer compensation: Charles C. Stephenson, Jr. and Jo Bob Hille.
The other two members of the Compensation Committee during 1998 were the two
outside directors of the Company, Bryan H. Lawrence and John T. McNabb, II.
Mr. Stephenson is a director of Growth Capital Partners, Inc. and GCP
Securities, Inc. Mr. McNabb is an executive officer of these entities.
-17-
<PAGE>
Performance Graph
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the period
commencing January 1, 1994, and ending on December 31, 1998, with the cumulative
total return on the S&P 500 Index and an index of peer companies (weighted by
market capitalization) selected by the Company. Companies in the peer group are
as follows: Apache Corporation, Barrett Resources Corporation, Cabot Oil & Gas
Corporation, Cross Timbers Oil Company, Devon Energy Corporation, Forest Oil
Corporation, Noble Affiliates, Inc., Nuevo Energy Company, Ocean Energy, Inc.,
Oryx Energy Company, Pioneer Natural Resources Company, Pogo Producing Company,
Santa Fe Energy Resources, Inc., Seagull Energy Corporation and Snyder Oil
Corporation. United Meridian Corporation no longer appears in the peer group
because it was acquired by Ocean Energy, Inc. which now appears in the peer
group. The comparison assumes $100 was invested on December 31, 1993, in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
VINTAGE $100 $ 93 $125 $193 $213 $ 97
S&P 500 $100 $101 $139 $171 $229 $293
PEER GROUP $100 $ 88 $106 $161 $151 $ 83
The above performance graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
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<PAGE>
CERTAIN TRANSACTIONS
Since January 1, 1998, certain executive officers of the Company have been
indebted to the Company in amounts in excess of $60,000 under various notes.
The following table sets forth, as to the persons shown, the largest amounts of
their indebtedness outstanding during such period and the interest rates,
maturity dates and the outstanding balances of such indebtedness as of March 25,
1999:
<TABLE>
<CAPTION>
Largest Range of Outstanding
Amount of Maturity Balance at
Name Indebtedness(1)(2) Dates of Notes March 25, 1999(1)(2)
- ---- ------------------ -------------- --------------------
<S> <C> <C> <C>
S. Craig George $ 797,600 7/3/99 to $ 398,799
8/11/99
William C. Barnes 981,313 5/11/99 to 981,313
12/30/2000
Robert W. Cox 425,934 7/21/99 to 425,934
8/12/99
William L. Abernathy 1,274,734 4/7/99 to 1,274,734
7/10/2000
William E. Dozier 414,855 7/27/99 414,855
Michael F. Meimerstorf 382,179 5/12/99 to 382,179
2/22/2000
Robert E. Phaneuf 306,627 8/11/99 306,627
Barry D. Quackenbush 268,195 10/9/2000 268,195
Martin L. Thalken 397,581 2/3/2000 397,581
</TABLE>
____________
(1) This indebtedness was incurred to fund the purchase of shares of Common
Stock upon exercise of options under the Company's Stock Option Plans and
is secured by shares of Common Stock.
(2) This indebtedness bears interest at Mellon Bank, N.A. prime rate.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than 10
percent of the Common Stock, to report their initial ownership of the Common
Stock and any subsequent changes in that ownership to the SEC and the New York
Stock Exchange, and to furnish the Company with a copy of each such report. SEC
regulations impose specific due dates for such reports, and the Company is
required to disclose in this Proxy Statement any failure to file by these dates
during and with respect to fiscal 1998.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during and with respect to fiscal 1998, all Section 16(a)
filing requirements applicable to its officers, directors and more
-19-
<PAGE>
than 10 percent stockholders were complied with, except that Mr. Dozier, Senior
Vice President -Operations of the Company, inadvertently reported late one
transaction.
OTHER MATTERS
Matters Which May Come Before the Annual Meeting
The Board of Directors knows of no matters other than those described in
this Proxy Statement which will be brought before the Annual Meeting for a vote
of the stockholders. If any other matter properly comes before the Annual
Meeting for a stockholder's vote, the persons named in the accompanying proxy
will vote thereon in accordance with their best judgment. The Company's By-laws
require that for business to be properly brought before a meeting of
stockholders by a stockholder, notice must be received by the Secretary of the
Company not less than 45 nor more than 90 days before the meeting. The notice
must contain a brief description of the business proposed to be brought before
the meeting.
Proposals of Stockholders
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, proposals
of stockholders intended to be presented at the Company's 2000 Annual Meeting of
Stockholders must be received at the principal executive offices of the Company,
4200 One Williams Center, Tulsa, Oklahoma 74172, on or before December 1, 1999,
to be considered for inclusion in the Company's proxy statement and accompanying
proxy for that meeting.
In accordance with the Company's By-laws, any stockholder who intends to
present a proposal at the Company's 2000 Annual Meeting of Stockholders and has
not sought inclusion of the proposal in the Company's proxy statement and
accompanying proxy pursuant to Rule 14a-8, must provide the Company with notice
of such proposal no later than March 25, 2000, in order for such proposal to be
properly brought before the meeting.
By Order of the Board of Directors,
William C. Barnes
Secretary
March 31, 1999
Tulsa, Oklahoma
-20-
<PAGE>
EXHIBIT A
AMENDMENT NUMBER 5
TO
VINTAGE PETROLEUM, INC.
1990 STOCK PLAN
1. Introduction. On June 1, 1990, the Board of Directors of Vintage
Petroleum, Inc. (the "Company") adopted, and the stockholders of the Company
approved, the Vintage Petroleum, Inc. 1990 Stock Plan (as amended, the "Plan").
Currently, the Plan only permits the granting of awards to key employees
(including officers and directors who are employees) of the Company or its
subsidiaries.
The Board of Directors of the Company adopted on February 24, 1994, and the
stockholders of the Company approved on May 10, 1994, Amendment Number 2 to the
Plan which increased the total number of shares of common stock of the Company
available for issuance pursuant to awards granted under the Plan from 1,000,000
shares to 1,500,000 shares.
The Board of Directors of the Company adopted on March 15, 1996, and the
stockholders of the Company approved on May 14, 1996, Amendment Number 3 to the
Plan which increased the total number of shares of common stock of the Company
available for issuance pursuant to awards granted under the Plan from 1,500,000
shares to 2,250,000 shares.
On October 7, 1997, in accordance with the terms of the Plan, the total
number of shares of common stock of the Company available for issuance pursuant
to awards granted under the Plan was adjusted from 2,250,000 shares to 4,500,000
shares to give effect to the Company's two-for-one common stock split effected
on October 7, 1997.
The Board of Directors of the Company adopted on March 11, 1998, and the
stockholders of the Company approved on May 12, 1998, Amendment Number 4 to the
Plan which (a) increased the total number of shares of common stock of the
Company available for issuance pursuant to awards granted under the Plan from
4,500,000 shares to 6,000,000 shares, and (b) extended the date until which
incentive stock options may be granted under the Plan to May 11, 2008.
2. Purpose. The purpose of this Amendment is to allow non-employee
directors of the Company to be eligible to receive awards under the Plan, which
will strengthen the ability of the Company to attract and retain well-qualified
persons to serve as non-employee directors of the Company and to encourage stock
ownership by such directors in order to increase their proprietary interest in
the Company's success.
3. Amendments. The Plan shall be amended as follows:
(a) The following new sentence shall be added at the end of
Section 1 (Purpose) of the Plan:
"The Plan is also intended to advance the interests of the
Corporation and its stockholders by providing a means to attract and
retain highly qualified persons to serve as non-employee directors of
the Corporation and to promote ownership by such directors of a
greater proprietary interest in the Corporation."
A-1
<PAGE>
(b) The definition of "Participant" set forth in Section 2
(Definitions) of the Plan shall be deleted in its entirety and the
following shall be inserted in lieu thereof :
"Participant" means a key employee of the Corporation or any of
its Subsidiaries or a non-employee director of the Corporation granted
an Award under the Plan."
(c) The first sentence of Section 3 (Eligibility) of the Plan shall
be deleted in its entirety and the following shall be inserted in lieu
thereof:
"The individuals who shall be eligible to participate in the
Plan shall be (a) key or potential key employees (including officers
and directors who are employees) of the Corporation or of its
Subsidiaries, and (b) non-employee directors of the Corporation;
provided, however, that no Award shall be granted to Charles C.
Stephenson, Jr. or Jo Bob Hille."
4. No Change. Except as specifically set forth herein, this Amendment
does not change the terms of the Plan.
5. Effective Date. This Amendment shall take effect and be adopted on
the date that the stockholders of the Company approve this Amendment.
Executed this 16th day of March, 1999.
ATTEST: VINTAGE PETROLEUM, INC.
/s/ William C. Barnes By: /s/ S. Craig George
- --------------------------- -----------------------------
William C. Barnes S. Craig George
Secretary President and Chief Executive Officer
Approved by the Board of Directors on March 16, 1999.
A-2
<PAGE>
[LOGO] VINTAGE PETROLEUM, INC.
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders to be held May 11, 1999
The undersigned hereby appoints Charles C. Stephenson, Jr., S. Craig George
and William C. Barnes, and each of them, with full power of substitution, as
proxies to represent and vote all of the shares of Common Stock the undersigned
is entitled to vote at the Annual Meeting of Stockholders of Vintage Petroleum,
Inc. to be held on the 11th day of May, 1999, at 10:00 a.m., local time, at the
Adam's Mark Hotel, 100 East Second Street, Tulsa, Oklahoma, and at any and all
adjournments thereof, on all matters coming before said meeting.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE OTHER SIDE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(continued on other side)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED Please mark
IN THE MANNER DIRECTED HEREIN BY THE STOCKHOLDER. your votes as
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED indicated in [X]
"FOR" PROPOSALS 1, 2 AND 3 AND "AGAINST" STOCKHOLDER this example
PROPOSAL 4.
THE BOARD RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
1. Election of Directors.
Nominees: Charles C. Stephenson, Jr. and S. Craig George as Class III
Directors and John T. McNabb, II as a Class I Director.
[ ] FOR all nominees listed to the right [ ] WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees
in the space provided). listed to the right.
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided.
----------------------------------------------------------------------
2. Approval of Amendment Number 5 to Vintage Petroleum, Inc. 1990 Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of Arthur Andersen LLP as independent auditor of the Company for
1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD RECOMMENDS A VOTE AGAINST ITEM 4.
4. Stockholder Proposal concerning composition of the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any and all
adjournments thereof.
------------------------------------
Signature
------------------------------------
Signature if held jointly
Dated: ______________________, 1999
Please sign exactly as name appears
herein, date and return promptly.
When shares are held by joint
tenants, both must sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by duly authorized
officer and give title of officer.
If a partnership, please sign in
partnership name by authorized
person and give title or capacity of
person signing.
