<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
VASTAR RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------
(4) Date Filed:
<PAGE>
[LOGO OF VASTAR RESOURCES, INC. APPEARS HERE]
VASTAR RESOURCES, INC.
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
ON MAY 20, 1998
AND PROXY
STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
<PAGE>
VASTAR RESOURCES, INC.
15375 MEMORIAL DRIVE
HOUSTON, TEXAS 77079
March 23, 1998
Dear Stockholder:
You are cordially invited to join us at the 1998 Annual Meeting of
Stockholders on Wednesday, May 20, 1998, in the Main Conference Room of Vastar
Resources, Inc., 15375 Memorial Drive, Houston, Texas, 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 to be acted upon by the
stockholders. The meeting will also feature a report on the operations of your
Company, 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
<PAGE>
VASTAR RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1998
TO THE STOCKHOLDERS:
The 1998 Annual Meeting of Stockholders of Vastar Resources, Inc. ("Vastar" or
the "Company") will be held in the Main Conference Room of Vastar Resources,
Inc., 15375 Memorial Drive, Houston, Texas 77079, on Wednesday, May 20, 1998,
at 9:00 a.m., local time, for the following purposes, as more fully described
in the attached Proxy Statement:
(1) To elect nine directors to hold office for a one-year term;
(2) To approve the Company's Amended and Restated Executive Long-Term
Incentive Plan;
(3) To approve the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the Company for the year 1998; and
(4) To transact such other business as may properly come before the meeting.
The Board of Directors has fixed March 23, 1998, as the record date for the
meeting. Accordingly, only stockholders of record of the common stock, $0.01
par value, of the Company ("Common Stock") at the close of business on such
date are entitled to vote at the meeting.
Each such stockholder of record will receive a form of proxy pertaining to the
shares of Common Stock of the Company registered in his or her name. Each
participant in the Company's Capital Accumulation and Savings Plans will also
receive a form of proxy pertaining to shares of Common Stock credited to his
or her account in the plans.
YOU ARE URGED TO READ THE PROXY STATEMENT; THEN COMPLETE, SIGN AND DATE THE
FORM OF PROXY AND RETURN IT IN THE ENCLOSED, SELF-ADDRESSED, POSTAGE-PAID
ENVELOPE.
/s/ ALBERT D. HOPPE
Albert D. Hoppe Houston, Texas
Secretary March 23, 1998
<PAGE>
VASTAR RESOURCES, INC.
15375 MEMORIAL DRIVE
HOUSTON, TX 77079
----------------
PROXY STATEMENT
MARCH 23, 1998
----------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Vastar
Resources, Inc. ("Vastar" or the "Company"). The proxy may be revoked by the
stockholder at any time prior to the time it is voted by giving notice of such
revocation either personally or in writing to the Secretary of Vastar. Shares
represented by a properly executed proxy will be voted in accordance with the
instructions of the stockholder indicated thereon. In the absence of
instructions in such proxy, the persons named as proxies therein will vote FOR
the election of the nominees for director listed in this Proxy Statement, FOR
the approval of the Company's Amended and Restated Executive Long-Term
Incentive Plan and FOR the approval of the appointment of Coopers & Lybrand
L.L.P. as independent auditors for the Company for the year 1998. As to other
items of business that may come before the meeting, such persons will vote in
accordance with their best judgment.
VOTING SECURITIES
Holders of record of outstanding common stock, $0.01 par value, of the
Company ("Common Stock") at the close of business on March 23, 1998 (the
"Record Date") will be entitled to one vote per share. There were 97,307,127
shares of Common Stock outstanding on the Record Date. Fractional shares will
not be entitled to be voted. The presence, in person or by proxy, of
stockholders entitled to cast at least a majority of the votes that all
stockholders are entitled to cast shall constitute a quorum. The approximate
date on which this Proxy Statement and the form of proxy were first sent to
stockholders was March 30, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS; CONTROL OF THE COMPANY
The following is the only person known by the Company to own beneficially
more than five percent of any class of the Company's voting securities as of
the Record Date:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ------------------- ---------- --------
<S> <C> <C> <C>
Common Stock............... Atlantic Richfield Company 80,000,001(a) 82.2%
515 South Flower Street
Los Angeles, California 90071
</TABLE>
- --------
(a) Sole voting power, sole dispositive power.
Under applicable provisions of the Delaware General Corporation Law and the
Company's Second Restated Certificate of Incorporation, Atlantic Richfield
Company, a Delaware corporation ("ARCO"), is able, acting alone, to elect the
entire Board of Directors of the Company and to approve any action requiring
stockholder approval. ARCO's current level of ownership of the outstanding
voting stock precludes any acquisition of control of the Company not favored
by ARCO. ARCO has informed the Company that it intends to vote its shares in
favor of the nine nominees to the Board of Directors, for the approval of the
Company's Amended and Restated Executive Long-Term Incentive Plan and for the
approval of Coopers & Lybrand L.L.P. as independent auditors for the year
1998.
1
<PAGE>
The Company and ARCO have entered into an agreement, dated as of May 19,
1994, granting ARCO certain rights as a stockholder of the Company. In order
to allow ARCO to continue to include the Company as part of its "affiliated
group" for federal income tax purposes, ARCO has been granted, pursuant to
such agreement, the cumulative, continuing right to purchase from the Company
at the then-current market price such number of shares of Common Stock or
preferred stock, or both, as may be necessary to preserve that status.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of the Company's Common
Stock ("Vastar Common Stock") and the number of shares of ARCO Common Stock,
$2.50 par value ("ARCO Common Stock"), owned beneficially as of February 1,
1998, by each of Vastar's directors, Named Executive Officers (as hereinafter
defined) and all of the Company's directors and executive officers as a group.
Neither the directors or executive officers named below, nor all of the
Company's directors and executive officers as a group, beneficially owned any
other equity securities of the Company or ARCO, except as disclosed in the
footnotes to the table. The percentage of shares of any class of equity
securities of the Company or ARCO beneficially owned by any director or
executive officer named below or by all of the Company's directors and
executive officers as a group does not exceed one percent of the class so
owned. Unless otherwise noted, each individual has sole voting and investment
power.
<TABLE>
<CAPTION>
SHARES OF VASTAR COMMON STOCK SHARES OF ARCO COMMON
OWNED BENEFICIALLY AS OF STOCK OWNED BENEFICIALLY
NAME FEBRUARY 1, 1998 AS OF FEBRUARY 1, 1998(E)
---- ----------------------------- -------------------------
<S> <C> <C>
Jimmie D. Callison...... 5,000(a) 0
Terry G. Dallas......... 603 41,822(f)
Charles D. Davidson..... 118,285(b)(c) 1,876
Phillip A. Gobe......... 0 16,579(f)
Albert D. Hoppe......... 38,831(b)(d) 1,462
Marie L. Knowles........ 400 115,755(f)
Robert C. LeVine........ 6,500(a) 500
William D. Schulte...... 6,000(a) 0
Steven J. Shapiro....... 146,186(b)(c) 1,202
Robert P. Strode........ 4,157(b)(c) 8,636(f)
William E. Wade, Jr..... 1,000 286,561(f)
Michael E. Wiley........ 244,018(b)(c) 10,523(f)
All directors and
executive officers as a
group, including those
named above............ 649,876(a)(b)(c)(d) 486,923(f)
</TABLE>
- --------
(a) Includes 5,000 shares for each of Messrs. Callison, LeVine and Schulte
which they have the right to acquire through the exercise of stock options
granted under the Company's Stock Option Plan for Outside Directors.
(b) Includes 116,827, 38,531, 144,183, 4,125, 241,964 and 639,527 shares which
Messrs. Davidson, Hoppe, Shapiro, Strode and Wiley and all directors and
officers as a group, including those just named, respectively, have the
right to acquire currently or within 60 days of February 1, 1998, through
the exercise of stock options covering Vastar Common Stock ("Vastar
Options").
(c) Includes shares held by the trustees under the Vastar Capital Accumulation
Plan II and the Vastar Savings Plan II, except for Mr. Wiley whose shares
of Vastar Common Stock are held by the trustees under the Atlantic
Richfield Capital Accumulation Plan II and the Atlantic Richfield Savings
Plan II.
(d) Includes 300 shares held by Mr. Hoppe which are subject to shared voting
and investment power with his spouse.
2
<PAGE>
(e) Includes shares held by the trustees under the Vastar Capital Accumulation
Plan II, Vastar Savings Plan II, Atlantic Richfield Capital Accumulation
Plan II or Atlantic Richfield Savings Plan II, except for Mr. LeVine.
(f) Includes 32,293, 12,711, 96,260, 6,248, 233,754, 8,778 and 390,044 shares
which Mr. Dallas, Mr. Gobe, Mrs. Knowles, Mr. Strode, Mr. Wade, Mr. Wiley
and all directors and officers as a group, including those just named,
respectively, have the right to acquire currently or within 60 days of
February 1, 1998, through the exercise of stock options covering ARCO
Common Stock. Also includes 5,666, 1,858, 15,983, 914, 45,732 and 70,153
shares which are issuable in respect of dividend share credits allocated
to stock options covering ARCO Common Stock that Mr. Dallas, Mr. Gobe,
Mrs. Knowles, Mr. Strode, Mr. Wade and all directors and officers as a
group, including those just named, respectively, have the right to acquire
upon the exercise, surrender or expiration of the stock options covering
ARCO Common Stock reported above. Does not include 8,313 shares owned by a
spouse (who is an employee of ARCO). Also includes 1,003, 282, 2,431 and
3,643 shares of Restricted Stock granted under ARCO's Long-Term Incentive
Plan held by Mr. Dallas, Mr. Gobe, Mrs. Knowles and Mr. Wade.
ELECTION OF DIRECTORS
PROPOSAL 1 ON PROXY CARD
On July 23, 1997, the Board of Directors increased the number of directors
constituting the entire Board from eight to nine and appointed William E.
Wade, Jr. to fill the vacancy created thereby. On March 5, 1998, the Board of
Directors selected the nominees listed below, each of whom was recommended to
the Board by the Nominating Committee (described below), for election to a
term of one year. Each of the nominees is currently a director of the Company
and was elected at the 1997 Annual Meeting of Stockholders for a one-year term
(except for Mr. Wade who has served since his appointment on July 23, 1997).
All nominees have indicated a willingness to serve as a director, but if any
of them should decline or be unable to act as a director, the persons named as
proxies in the accompanying proxy will vote for the election of such nominee
or nominees as may be recommended by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES LISTED BELOW. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXIES.
3
<PAGE>
The following biographical information is furnished with respect to each of
the nominees. The information includes age as of May 20, 1998, the date of the
Annual Meeting, present position, if any, with Vastar, period served as a
director and other business experience during the past five or more years.
JIMMIE D. CALLISON, 65
[PHOTO] Director
Mr. Callison has been a Director of the Company since January
1995. He served as Vice President of Schlumberger Limited from
1989 to 1995, President of Dowell Schlumberger Incorporated
from 1987 to 1988 and Executive Vice President of Dowell
Schlumberger Incorporated from 1984 to 1989. He joined the
Dowell Division of the Dow Chemical Company (which later became
Dowell Schlumberger) in 1957.
TERRY G. DALLAS, 47
[PHOTO] Director
Mr. Dallas has been a Director of the Company since January
1994. He has been a Senior Vice President of ARCO since
November 1996 and the Treasurer of ARCO since January 1994. He
was Vice President of ARCO from June 1993 to November 1996,
serving as Vice President, 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, Planning
and Control of ARCO British, Ltd. from 1988 to 1990.
CHARLES D. DAVIDSON, 48
[PHOTO] President, Chief Executive Officer and Director
Mr. Davidson was elected President and Chief Executive Officer
in March 1997 and has been a Director of the Company since
March 1994. From September 1993 to March 1997, he served as a
Senior Vice President of the Company and from December 1992 to
October 1993, he held the position of Senior 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, 51
[PHOTO] Director
Mrs. Knowles has been a Director of the Company since December
1996. She has been a Director* and an Executive Vice President
and the Chief Financial Officer of ARCO since July 1996. She
served as a Senior Vice President of ARCO 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. Mrs. Knowles is also a Director of ARCO Chemical Company
and Phelps Dodge Corporation.
ROBERT C. LEVINE, 65
[PHOTO] Director
Mr. LeVine has been a Director of the Company since July 1994.
Mr. LeVine has been a private consultant for petroleum
investment since his retirement in February 1993 from the
position of Managing Director for J.P. Morgan Investment
Management, Inc., which he held from 1981 to 1993. 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.
- --------
* Mrs. Knowles and Messrs. Wade and Wiley recently announced that they were
not standing for re-election to the ARCO Board of Directors and thus will
not be Directors of ARCO after ARCO's May 4, 1998, Annual Stockholders
Meeting.
4
<PAGE>
WILLIAM D. SCHULTE, 65
[PHOTO] Director
Mr. Schulte has been a Director of the Company since July 1994.
Mr. Schulte has been a private investor since his retirement
from the position of Vice Chairman of KPMG Peat Marwick on
December 31, 1990. He served as Vice Chairman -- Western Region
from 1986 to 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 H. F.
Ahmanson & Company.
STEVEN J. SHAPIRO, 46
[PHOTO] Senior Vice President, Chief Financial Officer and Director
Mr. Shapiro has been a Senior Vice President and the Chief
Financial Officer of the Company since December 1993 and a
Director of the Company since January 1994. He was also
Treasurer of the Company from January 1994 to December 1995. He
was the President of ARCO Coal Australia, Inc. from October
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.
WILLIAM E. WADE, JR., 55
[PHOTO] Director
Mr. Wade has been a Director of the Company since July 1997. He
has been the President of ARCO since January 1998 and an ARCO
Director* since June 1993. He served as an Executive Vice
President of ARCO from June 1993 to January 1998, a Senior Vice
President of ARCO from May 1987 to May 1993, the President of
ARCO Oil and Gas Company from October 1990 to May 1993, the
President of ARCO Alaska, Inc. from July 1987 to July 1990, a
Vice President of ARCO from 1985 to 1987 and a Vice President
of ARCO Exploration Company from 1981 to 1985. Mr. Wade has
been an officer of ARCO since 1985.
MICHAEL E. WILEY, 47
[PHOTO] Chairman of the Board
Mr. Wiley has been a Director of the Company since September
1993 and was elected Chairman of the Board in December 1996. He
has been an Executive Vice President of ARCO since March 1997
and a Director* of ARCO since June 1997. He was President of
the Company 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.
- --------
* Mrs. Knowles and Messrs. Wade and Wiley recently announced that they were
not standing for re-election to the ARCO Board of Directors and thus will
not be Directors of ARCO after ARCO's May 4, 1998, Annual Stockholders
Meeting.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS DURING 1995, 1996 AND 1997
Effective March 31, 1997, Michael E. Wiley resigned from the positions of
President and Chief Executive Officer and was succeeded by Charles D.
Davidson. The following describes the compensation paid to Messrs. Davidson
and Wiley and additionally the top four highest paid executive officers of the
Company (all of such persons herein sometimes referred to as the "Named
Executive Officers") during 1995, 1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- -------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND SALARY BONUS COMPENSATION VASTAR ALL OTHER
PRINCIPAL POSITION YEAR ($) ($)(4) ($)(5) OPTIONS(#)(6) COMPENSATION($)
------------------ ---- -------- -------- ------------ ------------- ---------------
(A) (B) (C) (D) (E) (G) (I)
<S> <C> <C> <C> <C> <C> <C>
Charles D. Davidson..... 1997 $328,923 $282,000 $ 12,008 51,000 $ 51,010(7)
President and Chief 1996 $252,000 $165,000 $ 21,770 30,600 $ 42,883(8)
Executive Officer 1995 $252,000 $160,000 $ 10,412 17,300 $ 38,373(9)
Steven J. Shapiro....... 1997 $264,356 $188,000 $ 7,810 18,000 $ 54,010(7)
Senior Vice President 1996 $243,251 $136,000 $ 10,727(10) 23,000 $ 39,164(8)
and Chief Financial 1995 $243,251 $146,000 $ 6,128(10) 17,300 $204,990(9)
Officer
Phillip A. Gobe......... 1997 $240,046 $124,000 $ 60,055 23,000(11) $107,594(7)
Senior Vice 1996 $202,447 $ 52,065 $ 5,391 (11) $ 31,302(8)
President(1) 1995 $213,828 $ 49,939 $ 31,087 (11) $ 75,720(9)
Robert P. Strode........ 1997 $217,573 $112,000 $ 49,662 34,500(11) $ 97,073(7)
Vice President, 1996 $209,903 $ 45,691 $126,501 (11) $201,175(8)
Exploration 1995 $207,414 $ 42,722 $ 633 (11) $ 21,537(9)
and Land(2)
Albert D. Hoppe......... 1997 $207,147 $ 96,000 $ 4,626 9,000 $ 42,520(7)
Vice President, General 1996 $185,808 $ 84,000 $ 2,493 11,500 $ 32,259(8)
Counsel and Secretary 1995 $185,808 $ 84,000 $ 47,635 8,650 $ 98,568(9)
Michael E. Wiley........ 1997 $497,692 $450,000 $ 18,723 (11) $ 81,750(7)
Former President and 1996 $380,000 $290,000 $ 9,335 76,500 $ 62,027(8)
Chief Executive 1995 $365,000 $314,000 $ 7,700 62,300 $ 62,579(9)
Officer(3)
</TABLE>
- --------
(1) Mr. Gobe's compensation for the years 1995, 1996 and the first five months
of 1997 was paid to him by ARCO for services rendered to ARCO.
Compensation for the remaining seven months of 1997 (which includes
$145,477 in salary paid by Vastar for 1997) and Mr. Gobe's 1997 bonus was
paid to him by Vastar for services rendered to Vastar. Mr. Gobe was
elected to the position of Senior Vice President, effective May 26, 1997.
The stock options listed in column (g) for Mr. Gobe for the year 1997
include 5,000 shares granted on May 27, 1997, in connection with Mr.
Gobe's employment.
(2) Mr. Strode's compensation for the years 1995, 1996 and the first seven
weeks of 1997 was paid to him by ARCO for services rendered to ARCO.
Compensation for the remaining weeks of 1997 (which includes $185,769 in
salary paid by Vastar for 1997) and Mr. Strode's 1997 bonus was paid to
him by Vastar for services rendered to Vastar. Mr. Strode was elected to
the position of Vice President, Exploration and Land, effective
February 17, 1997. The stock options listed in column (g) for Mr. Strode
for the year 1997 include 16,500 shares granted on March 6, 1997, in
connection with Mr. Strode's employment.
(3) Mr. Wiley's compensation for the years 1995, 1996 and the first three
months of 1997 (which includes $113,077 in salary paid by Vastar for 1997)
was paid to him by Vastar for services rendered to Vastar. Compensation
paid to him for the remaining nine months of 1997 and his 1997 bonus was
paid to him by ARCO for services rendered to ARCO. Mr. Wiley continues to
serve in the capacity of Chairman of the Board of Vastar, but receives no
compensation from Vastar in connection with such position.
(4) Except as otherwise noted for Messrs. Gobe, Strode and Wiley in the
footnotes above, the cash bonuses for 1995, 1996 and 1997 performance were
paid under the Vastar Annual Incentive Plan and were approved by Vastar's
Compensation Committee in March 1996, 1997 and 1998, respectively.
6
<PAGE>
(5) Includes (i) tax gross-ups in respect of financial counseling
reimbursements, foreign service and certain relocation expense
reimbursements and certain items reported as imputed income, (ii) certain
other amounts reimbursed for the payment of taxes and (iii) the amount of
incremental interest accrued under the Company's Executive Deferral Plan
that exceeds 120% of a specified Internal Revenue Service rate.
(6) Represents Vastar Options granted under Vastar's Executive Long-Term
Incentive Plan.
(7) Except for Messrs. Gobe, Strode and Wiley whose amounts listed below were
paid under substantially similar ARCO compensation plans and programs
during the period described in the footnotes above, includes 1997
contributions to Vastar's Executive Supplementary Savings Plan,
incremental premiums for Vastar's Executive Medical Plan, Vastar's
financial counseling reimbursements, imputed income in respect of Vastar's
Long-Term Disability Plan, certain amounts in respect of Vastar's
Executive Life Insurance Plan, executive foreign service and relocation
expenses and miscellaneous moving expenses as follows:
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR. MR.
DAVIDSON SHAPIRO GOBE STRODE HOPPE WILEY
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Executive Supplementary
Savings Plan.............. $26,314 $21,149 $18,550 $17,161 $16,572 $39,815
Incremental Executive
Medical Plan premiums..... $ 8,554 $ 8,554 $ 8,918 $ 8,909 $ 8,554 $ 4,496
Financial counseling
reimbursements............ $ 500 $11,150 $ 8,400 $ 3,250 $ 9,040 $12,400
Long-Term Disability Plan
imputed income............ $ 3,841 $ 2,803 $ 1,473 $ 1,145 $ 1,643 $ 8,444
Executive Life Insurance
Plan...................... $11,801 $10,354 $ 4,232 $ 2,652 $ 6,711 $16,595
Executive foreign service
and relocation expenses... $ -- $ -- $ -- $63,956 $ -- $ --
Miscellaneous moving
expenses.................. $ -- $ -- $66,021 $ -- $ -- $ --
</TABLE>
(8) Except for Messrs. Gobe and Strode whose amounts listed below were paid
under substantially similar ARCO compensation plans and programs during
the period described in the footnotes above, includes 1996 contributions
to Vastar's Executive Supplementary Savings Plan, incremental premiums for
Vastar's Executive Medical Plan, Vastar's financial counseling
reimbursements, imputed income in respect of Vastar's Long-Term Disability
Plan, certain amounts in respect of Vastar's Executive Life Insurance Plan
and executive foreign service and relocation expenses as follows:
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR. MR.
DAVIDSON SHAPIRO GOBE STRODE HOPPE WILEY
-------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Executive Supplementary
Savings Plan............. $20,160 $19,460 $16,196 $ 14,826 $14,865 $30,400
Incremental Executive
Medical Plan premiums.... $ 8,554 $ 8,554 $ 9,907 $ 9,907 $ 8,554 $ 8,554
Financial counseling
reimbursements........... $ 2,300 $ -- $ 750 $ 5,400 $ 1,950 $ --
Long-Term Disability Plan
imputed income........... $ 2,716 $ 2,314 $ 1,149 $ 1,029 $ 1,291 $ 8,444
Executive Life Insurance
Plan..................... $ 9,153 $ 8,836 $ 3,300 $ 1,797 $ 5,599 $14,629
Executive foreign service
and relocation expenses.. $ -- $ -- $ -- $168,216 $ -- $ --
</TABLE>
(9) Except for Messrs. Gobe and Strode whose amounts listed below were paid
under substantially similar ARCO compensation plans and programs during
the period described in the footnotes above, includes 1995 contributions
to Vastar's Executive Supplementary Savings Plan, incremental premiums for
Vastar's Executive Medical Plan, Vastar's financial counseling
reimbursements, imputed income in respect of Vastar's Long-Term Disability
Plan, certain amounts in respect of Vastar's Executive Life Insurance
Plan, executive foreign service and relocation expenses and miscellaneous
moving expenses as follows:
<TABLE>
<CAPTION>
MR. MR. MR. MR. MR. MR.
DAVIDSON SHAPIRO GOBE STRODE HOPPE WILEY
-------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Executive Supplementary
Savings Plan............ $20,160 $ 19,460 $15,741 $15,386 $14,865 $ 29,200
Incremental Executive
Medical Plan premiums... $ 8,554 $ 8,554 $ 8,554 $ 4,277 $ 8,554 $ 8,554
Financial counseling
reimbursements.......... $ -- $ 9,000 $ 2,500 $ -- $ -- $ 5,700
Long-Term Disability Plan
imputed income.......... $ 2,333 $ 2,094 $ 1,039 $ 980 $ 1,157 $ 8,161
Executive Life Insurance
Plan.................... $ 7,326 $ 7,043 $ 2,274 $ 894 $ 4,220 $ 10,964
Executive foreign service
and relocation expenses. $ -- $119,098 $ -- $ -- $ -- $ --
Miscellaneous moving
expenses................ $ -- $ 39,741 $45,612 $ -- $69,772 $ --
</TABLE>
7
<PAGE>
(10) Does not reflect a net refund of $39,716 and $18,856 for taxes paid by
the Company on behalf of Mr. Shapiro in prior years and refunded to the
Company in the years 1995 and 1996, respectively.
(11) While in the employ of ARCO, Mr. Gobe received from ARCO 2,942, 4,012 and
3,794 ARCO stock options for the years 1995, 1996 and 1997, respectively.
Mr. Gobe also accrued dividend share credits of 381, 542 and 522 with
respect to such ARCO stock options for the years 1995, 1996 and 1997,
respectively. While in the employ of ARCO, Mr. Strode received from ARCO
900 and 3,698 ARCO stock options for the years 1995 and 1996,
respectively. Mr. Strode also accrued dividend share credits of 127, 260
and 272 with respect to such ARCO stock options for the years 1995, 1996
and 1997, respectively. While in the employ of ARCO, Mr. Wiley received
from ARCO during 1997 85,698 ARCO stock options for 1997. There are no
dividend share credits associated with Mr. Wiley's options. In connection
with his election to Executive Vice President of ARCO on March 31, 1997,
Mr. Wiley also received from ARCO 2,366 shares of one-year contingent
restricted ARCO stock (1997 performance period), 2,366 shares of two-year
contingent restricted ARCO stock (1997-1998 performance period) and 7,100
shares of three-year contingent restricted ARCO stock (1997-1999
performance period). The one-year contingent restricted stock was
converted to 4,732 shares of Performance-Based Restricted Stock ("PBRS")
on February 23, 1998 on a 2-for-1 basis since ARCO achieved the pre-
established performance criteria of ranking third in total shareholder
return versus its comparison group. This PBRS award has a value of
$350,168 based on its fair market value on the date of issuance of $74.00
per share. Restrictions generally lapse two years after issuance.
VASTAR OPTION GRANTS FOR 1997(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL EXERCISE PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED TO OR BASE FOR OPTION TERM(5)
OPTIONS VASTAR EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED(#) FOR 1997 ($/SH) DATE 5% 10%
- ------------------------ ---------- ------------------ -------- ------------- ---------- ----------
(A) (B) (C) (D) (E) (F) (G)
<S> <C> <C> <C> <C> <C> <C>
Mr. Davidson............ 51,000(2) 11.32% $39.125 March 5, 2008 $1,254,906 $3,180,105
Mr. Shapiro............. 18,000(2) 4.00% $39.125 March 5, 2008 $ 442,908 $1,122,390
Mr. Gobe................ 18,000(2) 4.00% $39.125 March 5, 2008 $ 442,908 $1,122,390
5,000(3) 1.11% $34.750 May 27, 2007 $ 109,270 $ 276,915
Mr. Strode.............. 18,000(2) 4.00% $39.125 March 5, 2008 $ 442,908 $1,122,390
16,500(4) 3.66% $29.688 March 6, 2007 $ 308,072 $ 780,698
Mr. Hoppe............... 9,000(2) 2.00% $39.125 March 5, 2008 $ 221,454 $ 561,195
Stock Price
3/6/97 Grant(6)......... $ 48.359 $ 77.003
5/27/97 Grant(6)........ $ 56.604 $ 90.133
3/5/98 Grant(6)......... $ 63.731 $ 101.480
</TABLE>
- --------
(1) All of the options reported on this table are ten-year options which are
accompanied by certain tax withholding rights and may be canceled upon an
optionee's termination of employment under certain specified
circumstances. Under the Vastar Resources, Inc. Executive Long-Term
Incentive Plan (the "1994 LTIP") currently in effect, the Compensation
Subcommittee has the right, in its sole discretion, to accelerate
exercisability of these options upon a change of control of the Company
and in certain other circumstances.
(2) Represents stock options granted pursuant to the 1994 LTIP on March 5,
1998. Such options become exercisable in 25 percent annual increments
beginning on March 5, 1999.
(3) Represents stock options granted pursuant to the 1994 LTIP on May 27,
1997, in connection with Mr. Gobe's employment with the Company. Such
options become exercisable in 25 percent annual increments beginning on
May 27, 1998.
8
<PAGE>
(4) Represents stock options granted pursuant to the LTIP on March 6, 1997, in
connection with Mr. Strode's employment with the Company. Such options
became exercisable in 25 percent annual increments beginning on March 6,
1998.
(5) These columns present hypothetical future value of Vastar Common Stock
obtainable upon exercise of the stock options net of the option's exercise
price, assuming that the market price of Vastar Common Stock appreciates
at a five and ten percent compound annual rate over the ten-year term of
the options. The five and ten percent rates of stock price appreciation
are presented as examples pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission") and do not
necessarily reflect management's assessment of Vastar's future stock price
performance. The potential realizable values presented are not intended to
indicate the value of the stock options.
(6) Based on the market price of Vastar Common Stock on the March 6, 1997, May
27, 1997, and March 5, 1998, grant dates, which were $29.688, $34.750 and
$39.125 per share, respectively.
AGGREGATED VASTAR STOCK OPTION EXERCISES IN
1997 AND YEAR-END OPTION VALUES
(AS OF DECEMBER 31, 1997)
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
SHARES NUMBER OF UNEXERCISED UNEXERCISED OPTIONS
ACQUIRED OPTIONS AT YEAR-END AT YEAR-END (1)
ON VALUE ------------------------- -------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- -------- -------- ----------- ------------- ----------- -------------
(A) (B) (C) (D) (E)
<S> <C> <C> <C> <C> <C> <C>
Mr. Davidson............ 0 $ 0 100,489 66,834 $ 807,233 $ 394,987
Mr. Shapiro............. 13,000 $312,000 129,746 65,138 $ 990,805 $ 366,105
Mr. Gobe................ 0 $ 0 0 5,000 $ 0 $ 5,000
Mr. Strode.............. 0 $ 0 0 16,500 $ 0 $ 100,023
Mr. Hoppe............... 0 $ 0 31,306 27,052 $ 191,726 $ 157,400
Mr. Wiley............... 16,700 $427,336 188,064 187,339 $1,279,434 $1,176,052
</TABLE>
- --------
(1) The fair market value of Vastar Common Stock on December 31, 1997, was
$35.75 per share.
9
<PAGE>
ESTIMATED VASTAR RETIREMENT BENEFITS
The following table shows estimated annual pension benefits payable to
officers and other key employees of the Company assuming retirement from
Vastar on January 1, 1998, at age 65 under the provisions of the Vastar
Resources, Inc. Retirement Plan II and the Supplementary Executive Retirement
Plan (collectively, the "Vastar Retirement Plan") currently in effect.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL BENEFIT
FOR YEARS OF MEMBERSHIP SERVICE INDICATED(2)(3)
-----------------------------------------------
RENUMERATION(1) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$1,000,000......................... $229,812 $306,416 $383,020 $459,624 $536,228
900,000......................... 206,712 275,616 344,520 413,424 482,328
800,000......................... 183,612 244,816 306,020 367,224 428,428
700,000......................... 160,512 214,016 267,520 321,024 374,528
600,000......................... 137,412 183,216 229,020 274,824 320,628
500,000......................... 114,312 152,416 190,520 228,624 266,728
400,000......................... 91,212 121,616 152,020 182,424 212,828
300,000......................... 68,112 90,816 113,520 136,224 158,928
200,000......................... 45,012 60,016 75,020 90,024 105,028
100,000......................... 21,912 29,216 36,520 43,824 51,128
</TABLE>
- --------
(1) The covered compensation for which retirement benefits are computed is the
average of the participant's highest three consecutive years of base
salary plus Annual Incentive Plan awards. Base salary and Annual Incentive
Plan awards are set forth in columns (c) and (d) of the Summary
Compensation Table.
(2) The amounts shown in the above table are based upon certain assumptions,
including retirement of the employee on January 1, 1998, and payment of
the benefit under the basic form of allowance provided under the Vastar
Retirement Plan (payment for the life of the employee only, with a
guaranteed minimum payment period of 60 months). The amounts will change
if the payment is made under any other form of allowance permitted by the
Vastar Retirement Plan, or if an employee's retirement occurs after
January 1, 1998, because the Social Security integration level of such
employee (one of the factors used in computing the annual retirement
benefits) may change during the employee's subsequent years of membership
service. The benefits shown are not subject to deduction for Social
Security benefits or other offset amounts.
(3) As of December 31, 1997, the credited years of service under the Vastar
Retirement Plan for the Named Executive Officers were: Mr. Davidson, 25
years, 7 months; Mr. Shapiro, 20 years, 6 months; Mr. Gobe, 8 months; Mr.
Strode, 11 months; Mr. Hoppe, 21 years, 4 months; and Mr. Wiley, 24 years,
10 months.
10
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE INITIAL PUBLIC OFFERING
The performance graph below compares, since June 27, 1994, the date of
Vastar's Initial Public Offering ("IPO"), the cumulative total stockholder
return of the Company with the cumulative total return of the S&P 500 Stock
Index and a 1998 Peer Group and 1997 Peer Group of independent oil and gas
companies selected by Vastar(1)(2).
[Graph appears here]
<TABLE>
<CAPTION>
YEAR JUN 27, 1994 JUN 1994 DEC 1994 JUN 1995 DEC 1995 JUN 1996 DEC 1996 JUN 1997 DEC 1997
---- ------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vastar.................. $100.0 $104.9 $ 89.1 $111.2 $114.9 $135.8 $138.7 $128.6 $131.6
S&P 500................. $100.0 $ 99.3 $102.7 $121.8 $137.7 $149.9 $167.1 $201.5 $222.9
1997 Peer Group......... $100.0 $ 98.4 $ 81.8 $ 90.0 $100.3 $116.4 $127.4 $113.1 $118.6
1998 Peer Group......... $100.0 $ 98.5 $ 81.1 $ 89.1 $ 99.0 $110.9 $125.0 $107.7 $110.9
</TABLE>
(1) As a result of certain mergers, acquisitions and dispositions occurring in
1997, the Company has determined to adjust the membership of its Peer
Group for 1998. The new Peer Group (herein sometimes referred to in this
Proxy Statement as the "1998 Peer Group") is composed of the following
companies: Anadarko Petroleum Corporation, Apache Corporation, Burlington
Resources, Inc. (merged with The Louisiana Land and Exploration Company in
1997), Enron Oil & Gas Company, Noble Affiliates, Inc., Oryx Energy
Company, Pioneer Natural Resources Company (the name of the Company
resulting from the merger of Parker & Parsley Petroleum Company and Mesa,
Inc. in 1997) and Union Pacific Resources Group, Inc. Santa Fe Energy
Resources, Inc. disposed of a significant portion of its assets in 1997
and as a result Vastar determined to exclude such company from its Peer
Group after December 31, 1997.
(2) Prior to January 1, 1998, the Company's Peer Group (sometimes referred to
in this Proxy Statement as the "1997 Peer Group") was composed of the
following companies: Anadarko Petroleum Corporation, Apache Corporation,
Burlington Resources, Inc., Enron Oil & Gas Company, The Louisiana Land
and Exploration Company, Noble Affiliates, Inc., Parker & Parsley
Petroleum Company and Santa Fe Energy Resources, Inc.
(3) Assumes initial investment of $100 and reinvestment of all dividends. The
1997 Peer Group and the 1998 Peer Group are weighted for market
capitalization as of the beginning of each six months for which
information is provided above.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation programs are administered by the Compensation
Committee of the Board of Directors (the "Compensation Committee"), composed
of Mr. Wiley, Chair, and Messrs. Dallas, LeVine and Schulte, none of whom are
officers/1/ or employees of Vastar currently, and the Compensation
Subcommittee, composed of Mr. LeVine, Chair, and Mr. Schulte, who are neither
officers nor employees of ARCO or Vastar. Mr. Wiley was President and Chief
Executive Officer of the Company until March 31, 1997. The Compensation
Committee is responsible for administering the Annual Incentive Plan ("AIP")
and for reviewing and approving other forms of executive compensation and
benefits, while the Compensation Subcommittee is responsible for administering
Vastar's Executive Long-Term Incentive Plan (the "1994 LTIP").
COMPENSATION PHILOSOPHY
Vastar's executive compensation philosophy is to provide competitive levels
of compensation in order to attract, motivate and retain talented executives.
The program is also intended to align the interests and individual performance
of the Company's executive officers with the interests of the Company's
stockholders by linking a significant portion of each executive officer's
compensation directly to the Company's performance.
The Compensation Committee reviewed the compensation practices and financial
and operational performance of a selected number of publicly traded companies,
primarily in the oil and gas industry (the "Market Comparison Companies") that
the Compensation Committee believes are comparable to Vastar for compensation
benchmarking. Depending on the available data and the particular analysis,
this Market Comparison Group included some or all of the companies in the 1997
and 1998 Peer Groups identified in the Performance Graph on page 11 of this
Proxy Statement. The 1997 Peer Group was used by the Compensation Committee in
calculating certain of the formula components of the AIP for 1997. As a result
of certain mergers, acquisitions and dispositions within the 1997 Peer Group
which occurred in 1997, the Compensation Committee adjusted this peer group
and created the 1998 Peer Group. The Compensation Committee intends to use the
1998 Peer Group for calculating the formula component of the 1998 AIP awards
and other compensation decisions made hereafter in 1998, but will also
continue to use the larger group of Market Comparison Companies for certain
benchmarking analyses.
After consideration of the Company's performance relative to the Market
Comparison Companies and the 1997 and 1998 Peer Groups, as applicable,
individual performance and the factors described below, the Compensation
Committee (or the Compensation Subcommittee, as appropriate) determined
appropriate base pay levels for 1998 and AIP award and 1994 LTIP award levels
for the Company's executive officers for 1997 performance.
COMPONENTS OF EXECUTIVE COMPENSATION
Base Salaries
Base salaries are targeted slightly above the median of the Market
Comparison Companies and are set at levels considered appropriate in light of
the scope of responsibilities of each executive officer's position. Base
salaries are reviewed each year and are generally adjusted relative to the
executive officer's responsibilities, individual performance and competitive
salaries for similar positions within Market Comparison Companies.
- --------
/1/Mr. Wiley, as Chairman of the Board of the Company, is an ex officio
officer of the Company under its Bylaws. Mr. Wiley receives no compensation
from the Company and is not eligible to participate in any Company benefit
plan as a result of his serving as Chairman of the Board, but does
participate in certain Vastar benefit plans as a former officer and
employee of the Company.
12
<PAGE>
Annual Incentive Plan Awards
Vastar's AIP is intended to motivate and reward key employees based on
Company and individual performance. Under the plan, award opportunities vary
by individual position and are initially set as a percentage of base salary.
The specific target percentage for an executive officer is determined using
median bonus award levels for similar positions at Market Comparison
Companies. However, the amount a particular executive may ultimately earn is
dependent on the Company's performance relative to the 1997 Peer Group and
Market Comparison Companies, the individual's position and responsibilities
relative to similar positions at 1997 Peer Group companies and Market
Comparison Companies and individual performance. In determining awards under
the AIP, the Compensation Committee utilizes two components, weighted equally:
a quantitative formula of four financial and operational measures of the
Company's performance; and a discretionary component which includes the
consideration of certain other performance criteria and the overall
performance of the Company. The formula component is comprised of four equally
weighted measures of Company performance: the Company's operating costs and
the ratio of discretionary cash flow to net revenue, both measured on a
relative basis to the 1997 Peer Group; and the Company's reserve replacement
ratio and reserve replacement cost averages over a three-year period compared
to internally developed targets. The Compensation Committee set threshold,
target and stretch performance criteria for each measure. Under the formula
component, the Company's 1997 performance met or exceeded the stretch
performance criteria established by the Compensation Committee in January of
1997 for the operating cost and discretionary cash flow to net revenue
measures, target performance criteria for the reserve replacement ratio
measure and threshold performance criteria for the reserve replacement costs
measure. The discretionary component is comprised of other performance
criteria, including the Company's total shareholder return relative to the
1997 Peer Group, the results of the Company's cost management efforts,
successful completion of a strategic marketing alliance forming Southern
Company Energy Marketing L.P., the Company's overall performance relative to
the 1997 Peer Group and other standardized measures of oil and gas company
performance, such as cash flow, net income, oil and gas production,
exploration performance and acquisition activity. As to the discretionary
component, the Compensation Committee did not apply any relative weight to
such factors or use any specific quantitative formula in arriving at its
decisions.
Executive Long-Term Incentive Plan Awards
Vastar's 1994 LTIP provides for the award of stock options which the
Compensation Subcommittee believes focuses the efforts of the Company's
executive officers on long-term growth in the Company's value. Stock options
align the interests of executive officers and stockholders by providing value
to the executive officers through stock price appreciation. The Compensation
Subcommittee makes its final decisions on stock option awards during the first
quarter of each year. The grants made on March 5, 1998, were determined after
consideration of the Company's performance relative to the Market Comparison
Companies, the 1997 Peer Group and the 1998 Peer Group, the executive
officer's position and responsibilities relative to similar positions within
the Company and at such other companies, and individual performance. The
Compensation Subcommittee did not apply any relative weight to Company
performance factors or any specific quantitative formulas in arriving at its
award decisions for 1997 under the 1994 LTIP. However, the Compensation
Subcommittee did consider the individual's total compensation relative to
similar positions at Market Comparison Companies and made adjustments to
reward individuals, consistent with the Company's compensation philosophy of
targeting total executive compensation above the median of the Market
Comparison Companies, for above average performance.
An outside compensation consultant reviewed the determinations of the
Compensation Committee and Compensation Subcommittee, as appropriate, with
respect to base pay levels for 1998 and AIP and 1994 LTIP awards for 1997
performance. The review included an assessment of Vastar's compensation levels
and Company performance relative to the 1997 Peer Group, the 1998 Peer Group
13
<PAGE>
and Market Comparison Companies. The consultant concluded that Vastar's
executive compensation program was consistent with the Company's philosophy of
providing compensation opportunities above the median provided by such
companies for above average performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
Charles D. Davidson was the Company's Chief Executive Officer for most of
1997./1/ In determining Mr. Davidson's 1997 compensation, the Compensation
Committee or Compensation Subcommittee, as appropriate, applied the
methodology for determining AIP, 1994 LTIP and base salary previously
described. In exercising their discretion with respect to AIP and 1994 LTIP
awards, the Compensation Committee and the Compensation Subcommittee, as
appropriate, recognized several substantial accomplishments in 1997. These
accomplishments included the replacement of oil and gas reserves equal to 154
percent of Vastar's 1997 production, increased cash flow and net income, an
enhanced deepwater exploration program, successful completion of a strategic
marketing alliance forming Southern Company Energy Marketing L.P. and a
successful acquisitions program. The Compensation Committee and Compensation
Subcommittee recognized that reserve replacement costs were up in 1997, due
primarily to the Company's up-front investments required to establish a
presence in the deepwater Gulf of Mexico, as well as substantially higher cost
of drilling rigs and related services. The Compensation Committee and
Compensation Subcommittee also noted in their deliberations that Vastar's
total shareholder return performance was -5 percent for 1997. The oil and gas
sector of the market appeared to move in a generally negative direction
overall in 1997 which the Compensation Committee believes was caused by
falling commodities prices. However, due to weaker total shareholder return
performance of the 1997 Peer Group, the Company placed third among this group
for 1997 and second among this group since Vastar's initial public offering.
Based on this analysis, on March 5, 1998, the Compensation Committee or
Compensation Subcommittee, as appropriate, implemented the following
compensation program for Mr. Davidson:
. Davidson's base salary of $380,000 was not adjusted. Due to his increased
responsibilities, his base salary was increased by approximately 20
percent in March 1997 and again by approximately 15 percent in December
1997. Mr. Davidson's salary is below the median for Chief Executive
Officers at Market Comparison Companies.
. An AIP award of $282,000 was approved for Mr. Davidson's 1997
performance. This award is higher than his award in 1996 and reflects
increased responsibilities assumed in 1997 and the Company's performance
and accomplishments in 1997 described above, but also takes into
consideration that certain year-to-year performance was below target
expectations. This places the AIP award below the median for Chief
Executive Officers at Market Comparison Companies.
. A 1994 LTIP award was approved which was targeted at a level that
positions Mr. Davidson's total compensation for 1997 at slightly above
the 50th percentile for similar positions at Market
- --------
/1/Michael E. Wiley resigned from, and Mr. Davidson assumed, the positions of
President and Chief Executive Officer, effective March 31, 1997. Mr. Wiley
received base pay of $113,077 for his service to the Company as President
and Chief Executive Officer during the first three months of 1997. His rate
of pay was set by the Compensation Committee in December 1996 and was
reported on in the 1997 Compensation Committee Report contained in the
Company's 1997 Proxy Statement. In recognition of his past service to the
Company and based upon the belief that Mr. Wiley's performance as Chairman of
the Board would benefit from a continued alignment of his financial interest
with those of the Company's stockholders, the Compensation Subcommittee
determined, pursuant to the provisions of the 1994 LTIP and his Conversion
Option Agreement, that the stock options previously granted to him by the
Company would not be canceled as a result of his termination of employment.
Mr. Wiley did not receive an AIP or 1994 LTIP award for his 1997 performance.
14
<PAGE>
Comparison Companies. Mr. Davidson was awarded 51,000 stock options. These
options will reward Mr. Davidson for his achievement of the Company's 1997
goals and represent an increased portion of his total compensation placed
at risk with the aim of focusing additional attention on improved total
shareholder return performance. It is the intent of the Compensation
Committee to increase Mr. Davidson's total compensation over time such
that his total compensation will approximate the 75th percentile of the
Market Comparison Companies in years when the Company achieves exceptional
performance as compared to the Market Comparison Companies.
The Compensation Committee and Compensation Subcommittee, as appropriate,
oversees the compensation program for Vastar's other Named Executive Officers.
Base salaries were increased slightly for certain of the Named Executive
Officers to reflect changing market conditions and/or increased responsibility
as is consistent with the Company's compensation philosophy. AIP and 1994 LTIP
awards were targeted such that total compensation for such Named Executive
Officers averaged near the 70th percentile of the Market Comparison Companies.
DEDUCTIBLE COMPENSATION LIMITATION
Under Section 162(m) of the Internal Revenue Code, public companies are
precluded from receiving a tax deduction on compensation paid to their Chief
Executive Officer and four highest compensated officers (other than the Chief
Executive Officer) in excess of one million dollars, unless the compensation
meets certain requirements. Vastar's stock option awards under the 1994 LTIP
comply with the provisions of Section 162(m), allowing the Company to deduct
compensation paid to such persons pursuant to such awards. Although
performance-based, Vastar's AIP is not currently structured to meet the
specific requirements of Section 162(m). Note that Proposal 2 in this Proxy
Statement relates to approval by the Company's stockholders of the Amended and
Restated Executive Long-Term Incentive Plan so that, among other things,
future stock option awards will continue to comply with the requirements of
Section 162(m) and the Company will continue to be allowed to deduct
compensation paid to the above-described officers pursuant to such awards. The
Compensation Committee supports this proposal and urges you to vote for
Proposal 2.
Michael E. Wiley, Chair
Terry G. Dallas
Robert C. LeVine
William D. Schulte
15
<PAGE>
BOARD OF DIRECTORS
DIRECTORS' MEETINGS
An annual meeting of the Board of Directors will be held each year in
conjunction with the annual meeting of the stockholders for the purposes of
organization, election or appointment of officers and the transaction of other
business. Regular meetings of the Board are held at such pre-determined times
as the Board may specify. Special meetings may be called by the Chairman of
the Board, the President or a majority of the directors in office. The
Company's Bylaws permit action to be taken without a meeting if all members of
the Board consent to such action in writing. The Board of Directors held seven
meetings in 1997.
EXECUTIVE COMMITTEE
Except as prohibited by Delaware law, the Executive Committee has and may
exercise all the authority of the Board of Directors in the management of the
business of the Company in the interim between meetings of the Board of
Directors. The Executive Committee held five meetings in 1997.
The Executive Committee presently consists of Mr. Wiley, Chair, Mrs. Knowles
and Messrs. Davidson, Shapiro and Wade.
AUDIT COMMITTEE
The objectives of the Audit Committee are to (i) assist the Board of
Directors in fulfilling its fiduciary responsibilities relating to the
Company's financial reporting standards and practices, (ii) determine the
adequacy of, and promote the Company's continued emphasis on, managerial and
financial control systems, (iii) maintain open, continuing and direct
communication between the Board of Directors and both the Company's
independent public accountants and its internal auditors and (iv) initiate any
special investigations as may be warranted. The Audit Committee also reviews
at least once a year the terms of all material agreements between the Company
and ARCO (including their respective subsidiaries and affiliates) to assure
that such agreements and the transactions provided for therein, taken as a
whole, are fair to the Company and its stockholders. The independent
accountants and the internal auditors have full and free access to the Audit
Committee and meet with it, with and without management being present, to
discuss all appropriate matters. No member of the Audit Committee is an
officer or employee of the Company or of ARCO (including their respective
subsidiaries and affiliates). The Audit Committee held three meetings in 1997.
The Audit Committee presently consists of Mr. Schulte, Chair, and Messrs.
Callison and LeVine.
COMPENSATION COMMITTEE AND COMPENSATION SUBCOMMITTEE
The Compensation Committee of the Board of Directors reviews and approves
employee compensation plans and such other benefits as it deems advisable and
when appropriate makes recommendations to the Board as to management
succession plans. The Compensation Subcommittee administers the Company's 1994
LTIP. No member of the Compensation Committee is currently an employee of the
Company. No member of the Compensation Subcommittee is an employee of the
Company or ARCO. No member of either committee is eligible to participate in
any benefit plan of the Company that is administered by the Compensation
Committee or the Compensation Subcommittee, except that Mr. Wiley holds
375,403 stock options granted to him under the 1994 LTIP while he was an
officer and employee of the Company and participates in certain other Vastar
benefit plans as a former officer and employee of the Company. Mr. Wiley
resigned from the positions of President and Chief Executive Officer and
terminated his employment with the Company, effective March 31, 1997. See
"Compensation Committee Interlocks and Insider Participation."
16
<PAGE>
Members of the Compensation Committee and the Compensation Subcommittee who
are Outside Directors (as hereafter defined) participate in the Company's
Retirement Plan for Outside Directors, Stock Option Plan for Outside Directors
and Deferral Plan for Outside Directors. See "Board of Directors --
Compensation of Directors." The Compensation Committee held four meetings in
1997. The Compensation Subcommittee held two meetings in 1997.
The Compensation Committee presently 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 the
Company's policies, procedures and practices relating to (i) the protection of
the environment and the health and safety of employees, customers, contractors
and the public, (ii) compliance with applicable laws and regulations and (iii)
development of Company environmental, health and safety goals and objectives,
and when appropriate makes recommendations to the Board as to such policies,
procedures and practices. The Environment, Health and Safety Committee held
three meetings in 1997.
The Environment, Health and Safety Committee presently consists of Mr.
Callison, Chair, and Messrs. Davidson and Wade.
FINANCE COMMITTEE
The function and responsibility of the Finance Committee is to review and
make recommendations to the Board as to proposals for issuance of securities
by the Company to the public and all commercial borrowings (other than project
financings), the Company's capital structure and dividend policy, and other
projects, proposals and activities submitted from time to time to the Finance
Committee by the Board of Directors. The Finance Committee held two meetings
in 1997.
The Finance Committee presently consists of Mrs. Knowles, Chair, and Messrs.
Dallas and Shapiro.
NOMINATING COMMITTEE
The Nominating Committee of the Board of Directors considers and makes
recommendations to the Board as to the number of directors constituting the
entire Board, the names of persons whom it concludes should be considered for
Board membership and the selection, tenure and retirement of directors. The
Nominating Committee will consider nominees recommended by stockholders. Such
recommendations should be submitted to the Secretary of the Company. The
Nominating Committee held two meetings in 1997.
The Nominating Committee presently consists of Mr. Wiley, Chair, and Messrs.
Davidson, LeVine and Shapiro.
COMPENSATION OF DIRECTORS
Directors' Fees
Directors who are employees of the Company or of ARCO are not paid any fees
or additional compensation for service as members of the Board or any
committee thereof. Directors who are not employees of the Company or of ARCO
or their respective subsidiaries ("Outside Directors") receive an annual
retainer of $25,000, plus $1,000 for each Board or committee meeting attended,
and are reimbursed for travel and other related expenses incurred in attending
such meetings. In addition, each Outside Director who serves as Chair of any
of the above-described committees or subcommittees of
17
<PAGE>
the Board of Directors receives an additional $5,000 per year for such
service. Outside Directors are not eligible to participate in the Company's
stock option or other benefit plan programs, but may participate in the plans
described below. The plans described below are administered by committees
composed of persons selected by the Board of Directors who are not members of
the Board of Directors.
Stock Option Plan for Outside Directors
The Vastar Stock Option Plan for Outside Directors provides that each newly
elected Outside Director will be granted ten-year nonqualified stock options
to purchase 5,000 shares of Common Stock at an exercise price per share equal
to Vastar's $28.00 initial public offering price for its Common Stock for
directors elected prior to the consummation of the Company's initial public
offering which was completed in July 1994, or equal to the fair market value
of Common Stock on the date of grant for directors elected thereafter. The
total number of shares of Common Stock which can be issued under the Stock
Option Plan for Outside Directors is 75,000. No stock options may be granted
under the plan after December 31, 2004.
Deferral Plan for Outside Directors
The Deferral Plan for Outside Directors permits Outside Directors to defer
up to 100 percent of their annual retainer and Board meeting fees and any
committee chair and committee meeting fees to which they are entitled.
Interest accrued in 1997 on deferrals made under the plan totaled $12,132 for
Mr. LeVine and $8,619 for Mr. Callison. Mr. Schulte did not maintain a
deferral account under the plan during 1997.
Retirement Plan for Outside Directors
Under the Retirement Plan for Outside Directors, Outside Directors who have
completed 36 months of service as a member of the Board are eligible to
receive a retirement benefit upon attainment of age 65 or retirement from the
Board of Directors, whichever is later. The normal form of retirement benefit
is a monthly allowance equal to the monthly equivalent of the Outside
Director's annual retainer. The retirement benefit may be received for a
"payment period" equal to the number of months an eligible director serves on
the Board, except that Outside Directors who have completed 180 months of
service on the Board are entitled to a lifetime benefit. Death benefits equal
to 50 percent of the Outside Director's accrued benefit (with a maximum of 180
months) are payable to the Outside Director's designated beneficiary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a number of agreements and has various other
relationships with ARCO. ARCO owns 80,000,001 shares or approximately 82.2
percent of the Company's Common Stock. See "Transactions Between the Company
and ARCO" for a description of the agreements. Mr. Wiley, the Chairman of the
Company's Board of Directors, is a Director and an Executive Vice President of
ARCO. Mrs. Knowles, a Director of the Company, is a Director and an Executive
Vice President and the Chief Financial Officer of ARCO. Mr. Wade, a Director
of the Company, is a Director and the President of ARCO. Mrs. Knowles and
Messrs. Wade and Wiley recently announced that they were not standing for re-
election to the ARCO Board of Directors and thus will not be Directors of ARCO
after ARCO's May 4, 1998, Annual Stockholders Meeting. Mr. Dallas, a Director
of the Company, is a Senior Vice President and the Treasurer of ARCO.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee presently consists of Mr. Wiley, Chair, and
Messrs. Dallas, LeVine and Schulte. The Compensation Subcommittee consists of
Mr. LeVine, Chair, and Mr. Schulte. Except
18
<PAGE>
for Mr. Wiley, none of such persons are or were during 1997 officers or
employees of the Company or any of its subsidiaries. Mr. Wiley was President
and Chief Executive Officer of the Company until March 31, 1997, and is
currently a Director and an Executive Vice President of ARCO. In addition, Mr.
Wiley, as Chairman of the Board of the Company, is an ex officio officer of
the Company under its Bylaws. Mr. Wiley receives no compensation from the
Company and is not eligible to participate in any Company benefit plan as a
result of his serving as Chairman of the Board, but does participate in
certain Vastar benefit plans as a former officer and employee of the Company.
Mr. Dallas is a Senior Vice President and the Treasurer of ARCO. Mrs. Knowles,
who served as Chair of the Compensation Committee until May 21, 1997, is a
Director and an Executive Vice President and the Chief Financial Officer of
ARCO.
TRANSACTIONS BETWEEN THE COMPANY AND ARCO
In October 1993, ARCO transferred to the Company (then ARCO's wholly owned
subsidiary) the producing properties and developed and undeveloped acreage
that comprise a substantial portion of the Company's assets. In connection
therewith, the Company issued additional shares of Vastar Common Stock to
ARCO, resulting in the ownership by ARCO of 80,000,001 shares representing all
of the issued and outstanding Common Stock prior to June 27, 1994 (the date of
the commencement of Vastar's initial public offering), and approximately 82.2
percent of the outstanding Common Stock at the Record Date for the Annual
Meeting of Stockholders to which this Proxy Statement relates.
In conjunction therewith, the Company and ARCO entered into a number of
agreements for the purpose of defining the ongoing relationship between them.
These agreements were developed in connection with the establishment of the
Company by ARCO and therefore were not the result of arm's-length negotiations
between independent parties. Because of the complexity of the various
relationships between the Company and ARCO (including their respective
subsidiaries), there can be no assurance that each of such agreements, or the
transactions provided for therein, has been or will be effected on terms at
least as favorable to the Company as could have been obtained from
unaffiliated third parties.
Subsequent to the Company's initial public offering, additional or modified
agreements, arrangements and transactions have been entered into by the
Company, ARCO and their respective subsidiaries, and additional or modified
agreements, arrangements and transactions may be entered into between such
parties in the future. Any such future agreements, arrangements and
transactions will be determined through negotiation between the Company and
ARCO or their respective subsidiaries, as the case may be. The Audit Committee
of the Board of Directors of the Company, none of the members of which are
affiliated with the Company or ARCO, except as Vastar directors or Vastar
and/or ARCO stockholders, has adopted policies and procedures for review of
the terms of all material contracts and agreements between the Company and
ARCO, and periodically reviews the application of such policies and
procedures. See "Board of Directors -- Audit Committee."
The following is a summary of the material arrangements and transactions
effective during or occurring in 1997 between the Company and ARCO or their
respective subsidiaries.
Technology Assignments and Licenses
In connection with the formation of the Company, ARCO agreed to transfer
certain technology and related intellectual property requested by the Company,
effective on October 1, 1993, through four technology transfer agreements and
one intellectual property license agreement. These agreements cover certain
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.
19
<PAGE>
The agreements provide the Company with the beneficial use of all such
transferred technology and intellectual property. The method used to effect
these transfers depended on whether ARCO owned such technology and
intellectual property and whether such technology and intellectual property is
used by other ARCO divisions or subsidiaries. For the most part, ARCO provided
the Company with full ownership, an undivided ownership interest or a paid-up,
nonexclusive license. In all cases where ARCO owned such technology and
intellectual property, ARCO retained the rights to use and benefit from same.
The term of the intellectual property license agreement will continue in
effect so long as Vastar is not in material default under certain provisions
thereof. The four technology transfer agreements and one intellectual property
license agreement discussed above are on file with the Securities and Exchange
Commission and the preceding discussion is qualified in its entirety by
reference to such agreements as so filed.
Services Agreements
The Company and ARCO have entered into a number of agreements under which
ARCO provides various services to the Company and the Company provides certain
services to ARCO. The principal agreements are (i) the ARCO Exploration and
Production Technology ("AEPT") Technical Services Agreement, effective as of
October 1, 1993, and (ii) the Corporate Services Agreement, effective as of
January 1, 1994.
The services that ARCO provides the Company under the AEPT Technical
Services Agreement include a variety of oil and gas technical services. The
services that ARCO provides the Company under the Corporate Services Agreement
include telecommunications, computer services, internal audit, financial
reporting, employee payroll and benefits administration, certain tax and legal
services and public affairs. The services that the Company may provide ARCO
under the Corporate Services Agreement include audit, tax and certain other
services as agreed.
In 1997, the Company paid ARCO aggregate fees of $12.4 million for services
performed by ARCO under the foregoing agreements. The fees for services under
the above agreements are based on the actual cost of providing such services.
The AEPT Technical Services Agreement is for an indefinite term and can be
terminated by either party on 30 days' written notice. Generally, either party
may terminate any type of service that it receives under the Corporate
Services Agreement at any time upon 60 days' prior written notice. The entire
Corporate Services Agreement or any part thereof can be terminated by either
party upon 90 days' prior written notice after October 1, 1996, except in the
case of the employee information system provided by ARCO, under which ARCO
must give Vastar 180 days' notice to terminate such service. The above-
discussed agreements are on file with the Securities and Exchange Commission
and the preceding discussion is qualified in its entirety by reference to such
agreements as so filed.
Insurance
ARCO has agreed to provide insurance coverage to the Company as part of the
group of entities insured under ARCO's policies. The insurance provided under
this agreement is customary for the industry and does not fully cover all
potential hazards. The coverages 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. The annual charge to the Company to be included in such
coverage is based upon an allocation of the costs by ARCO of the various
policies and totaled $3.1 million in 1997. The charge for insurance will be
reallocated annually based upon ARCO's cost for the various lines of insurance
and the Company's loss experience and exposure basis. In certain cases, the
Company has elected, and in the future may elect, to supplement or to obtain
its own insurance coverage and, in such event, may, but is not required to,
terminate the insurance coverage from ARCO after giving proper notice with
respect to the next expiration date of existing policies.
20
<PAGE>
Natural Gas, Crude Oil and Natural Gas Liquids Purchase and Sale Agreements
Vastar Gas Marketing, Inc., ("Vastar Gas") and Southern Company Energy
Marketing L.P., a strategic alliance between subsidiaries of the Company and
the Southern Company ("SCEM") provide fuel management services for the natural
gas requirements of certain California cogeneration facilities partially owned
by ARCO or its subsidiaries. In addition, for long-term gas supply contracts
signed prior to the October 1, 1993 formation of Vastar, as well as for
certain gas contracts entered into prior to May 16, 1994, ARCO has provided
performance guarantees for Vastar Gas or SCEM (with respect to certain of
these contracts which have been transferred by Vastar Gas to SCEM). These
guarantees will continue in effect until the underlying contracts expire.
There are no ARCO guarantees on contracts entered into on or after May 16,
1994.
Vastar and/or its subsidiaries also engage 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 1997, the Company's revenues from these transactions with ARCO and
such affiliates were $206.3 million, or approximately six percent of the
Company's sales and other operating revenues. The Company's purchases from
ARCO and such affiliates during 1997 were $25.8 million, or approximately one
percent of the Company's total purchases. Certain of the above-described
natural gas, crude oil and natural gas liquids purchase and sale agreements
are on file with the Securities and Exchange Commission and the preceding
discussion is qualified, as applicable, by reference to such agreements as so
filed.
Leases
Vastar's principal executive office is located in Houston, Texas, where it
has entered into a lease with ARCO for approximately 280,000 square feet of a
building owned by ARCO at 15375 Memorial Drive. The lease is for a term of ten
years 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 the Company and ARCO cannot agree on a market rate, the
lease provides for arbitration. Vastar also has a right of first offer for any
space in the building which becomes vacant or for purchase of the building
should ARCO decide to sell. Vastar provides on-site property management
services for the office building in Houston, for which ARCO has agreed to pay
Vastar a management fee of $100,000 per year.
In 1997, Vastar paid approximately $3.8 million to ARCO pursuant to such
lease agreement.
Cross-Indemnification Agreement
In connection with ARCO's transfer in October 1993 of certain oil and gas
producing properties to the Company, together with certain undeveloped acreage
and assets and liabilities related to such properties and acreage (all such
properties, acreage and related assets referred to as the "Properties"), the
Company and ARCO executed a Cross-Indemnification Agreement, effective October
1, 1993 (the "Cross-Indemnification Agreement"). In the Cross-Indemnification
Agreement, the Company agreed to indemnify ARCO against (i) any and all
liabilities incurred before or after October 1, 1993, the effective date of
that certain General Conveyance and Assumption Agreement, dated October 8,
1993, as amended, by and between the Company and ARCO (the "Conveyance") that
are associated with the ownership or operation of the Properties (including,
among other things, environmental liabilities), except for certain scheduled
litigation and other liabilities, (ii) all liabilities or obligations relating
to any ARCO bonus, retirement, pension, profit sharing, stock bonus, thrift,
stock option, incentive or other benefit plan (any such plan, an "ARCO benefit
plan") in respect of any ARCO employee who leaves ARCO and enters the employ
of Vastar, excluding retirement benefits accrued
21
<PAGE>
prior to leaving the employ of ARCO for any person who enters the employ of
Vastar after Vastar's initial public offering which was completed in July
1994, (iii) liabilities arising under guarantees by ARCO of the performance or
payment by Vastar Gas of any past, present or future natural gas marketing
contract between Vastar Gas and any third party, (iv) any and all liabilities
at any time recorded as such on the financial statements of Vastar and (v)
costs of borrowing, carrying and repaying debt incurred by Vastar. In
addition, Vastar is 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 ("Transfer Taxes"). All other taxes (other than
income taxes, which are addressed in the Tax Sharing Agreement as hereinafter
defined and described) attributable to the Properties imposed in respect of
oil, natural gas or other hydrocarbons or minerals (including severance,
production and excise taxes) will be apportioned between ARCO and the Company,
with ARCO paying all such taxes accrued in the ordinary course of business,
attributable to ownership of the Properties prior to October 1, 1993, and
contemporaneously reflected on ARCO's records and the Company being
responsible for paying all other such taxes. Any and all other out-of-pocket
expenses, taxes or fees (other than Transfer Taxes) incident to or arising out
of the preparation or consummation of the transactions contemplated by the
Conveyance will be paid by the party incurring such costs.
In the Cross-Indemnification Agreement, ARCO agreed to indemnify the Company
against (i) any and all liabilities (a) retained by ARCO in connection with
the Conveyance or (b) indemnified by ARCO under the Tax Sharing Agreement and
(ii) liabilities under ARCO benefit plans other than those assumed by Vastar
as described in clause (ii) of the preceding paragraph. The Cross-
Indemnification Agreement is on file with the Securities and Exchange
Commission and the preceding discussion is qualified in its entirety by
reference to such agreement as so filed.
Tax Sharing Agreement
The Company and its subsidiaries (the "Company Group") join with ARCO and
its domestic subsidiaries (the "ARCO Group" and, together with the Company
Group, the "ARCO Tax Group") in the filing of a consolidated federal income
tax return. As a member of the ARCO Tax Group, the Company is jointly and
severally liable for the consolidated federal income tax liability of the ARCO
Tax Group. The Company Group may also be included in certain state and local
income or franchise tax returns of members of the ARCO Group. The Company
Group has entered into a tax sharing agreement with ARCO (the "Tax Sharing
Agreement") effective as of October 1, 1993, as amended effective June 1, 1995
and January 1, 1997, relating to these taxes. Under the Tax Sharing Agreement,
as amended, ARCO agreed to indemnify the Company for (i) federal, state and
local income and franchise tax liabilities that relate to periods or portions
thereof ending on or before October 1, 1993, (ii) federal income tax
liabilities in excess of those properly computed under the Tax Sharing
Agreement to be the Company Group's share of such tax liabilities and (iii)
certain state and local income and franchise tax liabilities that may be
incurred by the Company Group, provided, in each case, that the Company has
made tax sharing payments in accordance with the Tax Sharing Agreement.
Pursuant to the Tax Sharing Agreement, the Company pays to ARCO, subject to
certain adjustments, the amounts of federal income taxes, including
alternative minimum taxes, that the Company would have to pay if the Company
Group were a separate federal consolidated group. The Company pays such amount
without regard to the amount of the ARCO Tax Group consolidated tax liability.
Tax credits of the Company Group provided under Sections 29 ("Section 29 Tax
Credits") and 43 of the Internal Revenue Code that reduce the current tax
liability of the ARCO Tax Group may be utilized by the Company to reduce the
Company Group's tax sharing payment (including a reduction below zero which
results in a tax refund from ARCO to the Company) for such year even if such
credits would not be currently usable on a separate return basis. However,
Section 29 Tax Credits generated after January 1, 1997, as well as Section 29
Tax Credits still being carried forward from prior years as of such date, in
each case generated from properties acquired by the Company prior to June 1,
1995,
22
<PAGE>
are allowed at 96.75 percent of the statutory amount. Tax credits generated
from properties acquired on or after June 1, 1995, are allowed at 100 percent
of the statutory rate but subject to a maximum of $15 million of credits
annually for years after 1995.
Tax credits, including Section 29 Tax Credits, that are not used by the
Company in the current year pursuant to the Tax Sharing Agreement, as amended,
will generally be carried forward and used in a subsequent year.
Payments under the Tax Sharing Agreement generally are made on each date on
which a quarterly payment of estimated tax for the ARCO consolidated group is
due, with any final settlement made after the consolidated, combined or
unitary return is filed. The Company is required to pay additional taxes to
ARCO in the event that the federal, state or local income tax liability
attributable to the Company Group is increased after audit or otherwise. The
Company is entitled to a refund of federal, state or local income taxes to the
extent that a refund received by the ARCO Tax Group is attributable to the
Company Group. Refunds of credits are to be calculated quarterly and will
generally be due within 60 days of the estimated federal income tax payment
due date for that quarter.
ARCO continues to have all the rights of a common parent of a consolidated
group, is the sole and exclusive agent for the Company in any and all matters
relating to the federal income tax liability of the Company, has sole and
exclusive responsibility for the preparation and filing of the consolidated
federal and consolidated, combined or unitary state income tax returns (or
amended returns) and has the exclusive power to contest or compromise any
asserted tax adjustment or deficiency and to file, litigate or compromise any
claim for refund on behalf of the Company Group.
Copies of the Tax Sharing Agreement, and amendments thereto, are on file
with the Securities and Exchange Commission and the preceding discussion is
qualified by reference to such documents as so filed.
Corporate Opportunities
In order to address certain potential conflicts of interest between the
Company and ARCO, the Company's Second Restated Certificate of Incorporation
(the "Charter") contains provisions regulating and defining the conduct of
certain affairs of the Company as they may involve ARCO. The Charter
recognizes and provides that ARCO and the Company may (i) engage in the same
or similar activities or lines of business, (ii) do business with the same
customers and suppliers or (iii) employ or otherwise engage any person as a
director, officer, employee or agent. The Charter further recognizes that the
Company and ARCO may have an interest in the same business opportunities and
provides that the Company and ARCO may agree upon a method for allocating such
business opportunities among them and their respective subsidiaries and
affiliates. To address such potential conflicts, the Company and ARCO have
entered into the Share Purchase Option and Business Opportunities Agreement,
dated as of May 19, 1994. Pursuant to such agreement, the Company and ARCO
have agreed that when an opportunity is offered to an officer and/or director
of the Company who is also an officer and/or director of ARCO in writing,
solely in his or her designated capacity with one of the two companies, such
opportunity shall belong to whichever company was so designated. Otherwise, a
business opportunity first offered (i) to any person who is an officer or an
officer and director of the Company and who is also a director of ARCO shall
belong to the Company, (ii) to any person who is a director of the Company 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 the Company and ARCO
shall belong to ARCO, (iv) to any person who is an officer and director of
both the Company and ARCO shall belong to ARCO and (v) to any person who is an
officer or an officer and director of the Company 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 by the foregoing (whether
because of the means by which it arose or was published, or otherwise), such
business opportunity may be pursued by either the Company or
23
<PAGE>
ARCO. The party to which a business opportunity is allocated pursuant to the
agreement shall have the right to provide the same to any of its subsidiaries
or affiliates or other entities under its control. A party may pursue a
business opportunity allocated under such agreement to the other party if an
officer of such other party advises that such other party (and its
subsidiaries and controlled entities) has no interest in pursuing such
business opportunity.
Certain Other Agreements Between ARCO and Vastar
On May 19, 1994, the Company and ARCO entered into an agreement granting
ARCO certain rights as a stockholder of the Company. In order to allow ARCO to
continue to include the Company as part of the ARCO Tax Group as described
under "Tax Sharing Agreement" above, ARCO was granted the cumulative,
continuing right to purchase from the Company, at the then-current market
price (as defined), such number of shares of the Company's Common Stock or
preferred stock, or both, as ARCO may determine to be necessary to preserve
that status. ARCO and the Company have also entered into a 30-year
Registration Rights Agreement, pursuant to which the Company has granted ARCO
"demand" registration rights at ARCO's sole expense. Copies of such agreements
are on file with the Securities and Exchange Commission and the preceding
discussion is qualified in its entirety by reference to such agreements as so
filed.
PROPOSAL TO APPROVE THE COMPANY'S EXECUTIVE LONG-TERM INCENTIVE PLAN
Proposal 2 on Proxy Card
Under Section 162(m) of the Internal Revenue Code, public companies are
precluded from receiving a tax deduction on compensation paid to their Chief
Executive Officer and four highest compensated officers (other than the Chief
Executive Officer) in excess of one million dollars, unless the compensation
meets certain requirements. Vastar's stock option awards under the Vastar
Resources, Inc. Executive Long-Term Incentive Plan (the "1994 LTIP") currently
comply with the provisions of Section 162(m), allowing the Company to deduct
compensation paid to such persons pursuant to such awards. However, in order
to continue to comply with the provisions of Section 162(m), the 1994 LTIP
needs to be reapproved by the Company's stockholders. In reviewing the current
version of the plan, the Company determined to amend certain provisions of the
plan including amendments to add provisions relating to the disposition of
stock options in the event of a Change of Control (as defined below), to
modify provisions relating to the disposition of stock options on termination
of employment and to eliminate dividend share credits. The Vastar Resources,
Inc. Amended and Restated Executive Long-Term Incentive Plan, effective March
5, 1998 (the "Amended LTIP"), reflects such amendments and is summarized
below. The full text of the Amended LTIP is attached to this Proxy Statement
as Appendix A.
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDED LTIP, AS DESCRIBED BELOW,
AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PLAN. PROXIES SOLICITED BY
THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
THE COMPANY'S AMENDED AND RESTATED EXECUTIVE LONG-TERM INCENTIVE PLAN
On February 25, 1994, the Company approved the 1994 LTIP for a select group
of management and other key employees. The plan was approved by ARCO, then the
Company's sole stockholder, on March 17, 1994, and became effective on June
26, 1994. On March 5, 1998, the Company's Board of Directors amended the plan
to add provisions relating to the disposition of stock options in the event of
a Change of Control, to modify provisions relating to the disposition of stock
options on termination of employment, to eliminate dividend share credits and
to make certain other minor clarifying changes. Stock option grants have been
made under the 1994 LTIP to approximately 39 management employees and 153
other key employees. The following is a brief description of the Amended LTIP
which is qualified in its entirety by reference to the full text of the
Amended LTIP attached hereto as Appendix A.
24
<PAGE>
The Amended LTIP is administered by the Compensation Subcommittee of
Vastar's Board of Directors, which is currently composed of Messrs. LeVine and
Schulte, neither of whom is or has ever been an officer or employee of the
Company or is eligible for awards under the Amended LTIP. Two million shares
of the Company's common stock, $0.01 par value ("Common Stock"), have been
registered on two separate Forms S-8, Registration Nos. 33-87814 and 333-2407,
filed with the Securities and Exchange Commission on December 27, 1994 and
March 27, 1997, respectively. These registration statements apply to Common
Stock issued under the 1994 LTIP and the Amended LTIP. The closing price per
share of the Company's Common Stock was $37 3/16 on February 27, 1998.
The Amended LTIP provides for the granting of restricted stock and stock
options relating to Common Stock to a select group of management and other key
employees determined from time to time by the Compensation Subcommittee. The
aggregate number of shares of Common Stock for which options may be granted or
which may be the subject of a grant of restricted stock during the ten-year
life (approximately six years remaining) of the Amended LTIP is 400,000 for
the year ended December 31, 1994, and, thereafter, two percent of the total
issued and outstanding shares of Common Stock as of December 31 of the next
preceding year, cumulative from March 17, 1994. Any shares of Common Stock
available for grant that are not granted during a calendar year, or portion
thereof, will be available for grant in any subsequent year, or portion
thereof. The total number of options granted to any single participant in the
plan in any calendar year may not exceed 20 percent of the options available
for grant during such calendar year.
Stock Options
The Amended LTIP provides for the granting of nonqualified stock options
(i.e., options which are not "qualified stock options" within the meaning of
the Internal Revenue Code) relating to the Common Stock. The Amended LTIP
generally provides that an optionee may not exercise a stock option granted
under the plan until at least one year after the date the stock option was
granted. Stock option grants are then exercisable in such increments as may be
determined by the Compensation Subcommittee at the time of the grant. The
Amended LTIP further provides that the option price per share of the stock
options granted following the initial 1994 grant may not be less than the fair
market value of Common Stock on the date of the grant. The maximum option
period is ten years.
The 1994 LTIP was amended by the Amended LTIP to modify provisions relating
to the disposition of stock options on termination of employment with the
Company. These Amended LTIP provisions apply unless the agreement relating to
the grant of stock options provides otherwise. For example, if an optionee's
employment with the Company is terminated due to (a) death, (b) becoming
entitled to benefits under a Company or a subsidiary long-term disability plan
or (c) any other reason (other than for cause) with a right to an immediate
monthly retirement allowance under a qualified benefit plan of the Company or
a subsidiary (events (a), (b) or (c) being a "Qualified Termination"), the
optionee's stock options will continue in accordance with their terms.
On the other hand, if an optionee's termination of employment is not a
Qualified Termination, the disposition of the stock options will depend on
whether the optionee's termination date is before or after the first
anniversary of the date of the grant of the stock options and whether the
termination is for cause. Stock options which have been held for less than one
year on the optionee's termination date are automatically canceled, unless the
Compensation Subcommittee determines otherwise, and in this case, the
Compensation Subcommittee will also determine the length of time the stock
options will remain exercisable. Stock options which have been held for one
year or more on the optionee's termination date are exercisable for a period
of 90 days from this date, to the extent otherwise exercisable, unless the
Company determines to shorten or lengthen this 90-day period. If an optionee's
employment is terminated for cause, the optionee's stock options are
automatically canceled on his or her termination date. Any action to prescribe
a longer or shorter post-termination exercise period or to
25
<PAGE>
cancel in connection with termination of employment any stock options held by
a Company officer holding the position of Vice President or above may only be
taken by the Compensation Subcommittee (or in the event of a Change of Control
the Special Plan Administrator (as defined below)). No action by the Company
or the Compensation Subcommittee may extend a stock option past the ten-year
maximum term provided for in the Amended LTIP.
An option is not transferable during an optionee's lifetime but, if an
optionee dies at the time when the option could have been exercised, the heirs
or executor of the optionee may exercise the option at any time prior to the
expiration thereof. Unless the agreement pursuant to which the stock option is
granted provides otherwise, an optionee who exercises an option must pay the
full option price in cash, in Common Stock or in a combination of cash and
Common Stock. No current director or nominee for election as a director is
entitled to receive or has received stock options under the 1994 LTIP or the
Amended LTIP in his or her capacity as a Director. Directors who are or have
been officers of the Company have received stock options in the past under the
1994 LTIP for service in their capacities as officers. Future grants of stock
options to any eligible employee under the Amended LTIP are within the sole
discretion of the Compensation Subcommittee.
Restricted Stock
The Amended LTIP also provides for the grant of restricted stock. Restricted
stock are shares of Common Stock which are subject to restrictions on transfer
for a specified period of time and which may be forfeited under certain
conditions. The restrictions on transfer and their duration and forfeiture
provisions are set by the Compensation Subcommittee at the time of grant. A
grantee who receives an award of restricted stock has the rights of a
stockholder with respect to the shares, including voting rights and the right
to receive dividends declared on Common Stock, subject to the specific
restrictions imposed by the Compensation Subcommittee in granting the shares.
No restricted stock awards have been granted under the 1994 LTIP or the
Amended LTIP and future grants of restricted stock to any eligible employee
are within the sole discretion of the Compensation Subcommittee.
Dividend Share Credits
The Amended LTIP eliminates provisions of the 1994 LTIP relating to dividend
share credits allocable to stock option awards. No dividend share credits have
been issued under the 1994 LTIP or the Amended LTIP.
Change of Control
The Amended LTIP adds provisions relating to the disposition of stock
options on a Change of Control of the Company. A "Change of Control" is
defined in the Amended LTIP to include (i) certain business combinations,
except when all or substantially all of Vastar's shareholders prior to the
business combination retain more than a 60 percent ownership of the resulting
entity in substantially the same proportions as their ownership prior to the
business combination, there is no new 20 percent (or larger percent)
shareholder and at least a majority of the Board of Directors of the resulting
entity were members of the Incumbent Board (as hereinafter defined), (ii) the
reduction of ownership by Atlantic Richfield Company ("ARCO") in Vastar below
50 percent and the acquisition by another entity of 20 percent or more of
Vastar, (iii) the initiation by ARCO of a tender offer for all or
substantially all of Vastar's Common Stock or voting stock or otherwise
attaining an ownership interest in Vastar of more than 85 percent,/1/ (iv) a
situation when individuals who, as of March 5, 1998, constitute the Board of
Directors of the Company (the "Incumbent Board"), cease for any reason to
constitute a majority of the Board of Directors of the Company at the end of
any 12-month period (generally individuals whose election or nomination for
election by the Company's stockholders was approved by at least a majority of
the then Incumbent Board shall also be considered members of the Incumbent
Board), (v) a change
26
<PAGE>
of control of ARCO occurring as such term is defined in the ARCO 1985
Executive Long-Term Incentive Plan/2/ or (vi) the approval by the stockholders
of the Company of a complete liquidation or dissolution of the Company.
On the occurrence of a Change of Control, all outstanding stock options will
vest and shall be exercisable and all restrictions on any outstanding
restricted stock will lapse, regardless of the period of time that has elapsed
since the date of grant. Thereafter, the Amended LTIP shall be administered by
a Special Plan Administrator./3/ The "Special Plan Administrator" is defined
to mean the entity designated in the Change of Control Trust (as defined
below) as having full administrative powers under the Amended LTIP on and
after a Change of Control. If no such entity has been designated, then the
Special Plan Administrator shall be a committee composed of all of the outside
directors of the Company, which shall act by majority vote of the members. The
term "Change of Control Trust" means the trust established, if any, by the
Company to provide for the payment of any benefits, in whatever form is
required, on and after a Change of Control.
Adjustment in Terms of Award
In the event of a reorganization, recapitalization, stock split, stock
dividend, distribution of assets other than pursuant to a normal cash
dividend, combination of shares, merger, consolidation, rights offering,
split-up, split-off, spin-off or any other change in the corporate structure
or shares of the Company (other than a Change of Control), the Compensation
Subcommittee may, in its discretion, after consultation with the Chairman of
the Board and the President, make appropriate adjustments to reflect such
event in respect of (a) the limitation on the maximum number of shares of
Common Stock on which stock options may be granted or which may be the subject
of a grant of restricted stock, (b) the number of shares of Common Stock
covered by, and the exercise price per share applicable to, outstanding stock
options and (c) the number of shares of Common Stock covered by outstanding
awards of restricted stock. In the event that the Compensation Subcommittee,
after consultation with the Chairman of the Board and the President,
determines that, because of a change (other than a Change of Control) in the
Company's business, operations, corporate structure, capital structure, assets
or manner in which it conducts business, which it deems to be extraordinary
and material, the terms of awards theretofore made are no longer suitable to
the objectives which the Compensation Subcommittee sought to achieve when it
made such awards, it may modify the terms of any or all of such awards in such
manner as it may decide is advisable; provided, however, that no award may be
modified in a manner which would deprive persons without their consent who
hold shares of restricted stock or who are entitled to exercise stock options
of their rights with respect thereto.
- --------
(1) Excludes certain transactions in which Vastar participates and in which
ARCO ownership of Vastar increases to more than 85 percent as a secondary
consequence. In this case, a committee composed of Vastar's outside
directors will decide if a Change of Control has occurred for the purposes
of the Amended LTIP. Under the Amended LTIP, the term "outside director"
means a member of Vastar's Incumbent Board who is not, and has never been,
an employee of the Company and is not, and has not been for at least ten
years, an employee of ARCO.
(2) A "change of control" under the ARCO 1985 Executive Long-Term Incentive
Plan, as amended through July 28, 1997, is defined to include (i) a
situation when individuals who, as of July 28, 1997, constitute the ARCO
Board of Directors (the "ARCO Incumbent Board"), cease for any reason to
constitute a majority of the Board of Directors of ARCO (generally
individuals whose election or nomination for election by ARCO's
shareholders was approved by a majority of the then ARCO Incumbent Board
shall also be considered members of the ARCO Incumbent Board), (ii)
certain business combinations except when all of ARCO's shareholders prior
to the business combination retain more than 60 percent of the resulting
entity, there is no new 25 percent (or larger percent) shareholder and a
majority of the Board of the resulting entity were members of the ARCO
Incumbent Board, (iii) the approval by ARCO shareholders of a complete
liquidation or dissolution of ARCO or (iv) acquisition by any person of 25
percent or more of ARCO's Common Stock.
(3) The Special Plan Administrator does not have the power to make new grants
of stock options or restricted stock under the Amended LTIP.
27
<PAGE>
Amendment
Generally, the Board of Directors of the Company may amend or discontinue
the Amended LTIP as it shall from time to time consider desirable without
approval of the stockholders of the Company. However, no amendment shall,
without further approval by the holders of a majority of the shares which are
represented in person or by proxy and entitled to vote on the subject at a
meeting of stockholders of the Company, change the terms of the Amended LTIP
so as to increase the maximum number of shares upon which stock options may be
granted or which may be issued upon award of restricted stock from the number
described above (other than pursuant to certain adjustments described above),
reduce the minimum option price or extend the maximum option period. Further,
no amendment, discontinuance or termination of the Amended LTIP shall deprive
persons who hold shares of restricted stock or who are entitled to exercise
stock options of their rights with respect thereto and the Amended LTIP may
not be amended or terminated on or after a Change of Control until all stock
options heretofore granted thereunder have been exercised or have expired. The
status of future plan awards under IRS Section 162(m) granted after an
amendment which has not been approved by stockholders of the Company will
depend on the nature of the amendment.
Term of Amended LTIP
No stock options or awards of restricted stock may be granted after June 26,
2004.
Accounting and Federal Income Tax Treatment
Grant of Nonqualified Options. Under the current accounting pronouncements
regarding the alternatives for accounting for stock options, no accounting
entry is required at the time of grant of nonqualified stock options at an
exercise price equal to (i) the fair market value on the date of grant, (ii)
at a premium over the fair market value on the date of grant or (iii) as to
the initial grants made on June 26, 1994, at Vastar's $28.00 initial public
offering price. Upon exercise of nonqualified stock options, the proceeds from
the exercise will result in an addition to Common Stock in an amount equal to
the aggregate par value and an addition to capital equal to the amount in
excess of par value. The grant of nonqualified options will have no current
federal income tax effect on either the Company or the optionee. The exercise
of nonqualified options will result in the recognition of ordinary income to
the optionee equal to the amount by which the fair market value of the
optioned shares on the date of exercise exceeds the option price. The Company
will be permitted a deduction for federal income tax purposes in the same
amount and at the same time as an optionee realizes income as a result of the
exercise of a stock option.
Restricted Stock. A grantee of restricted stock will generally recognize
ordinary income on the date the restrictions lapse in an amount equal to the
fair market value of the shares of restricted stock on such date. A grantee of
restricted stock will recognize ordinary income in an amount equal to the
dividends received at the time such dividends are received. The Company will
be entitled to a tax deduction at the same time and in the same amount as the
grantee recognizes income with respect to the restricted stock, including
dividends received prior to the date the restrictions lapse.
A debit against retained earnings will be made each year as dividends are
paid in respect of restricted stock. A charge against earnings in an amount
equal to the fair market value of the restricted stock on the date of grant
will be amortized over the vesting period.
Parachute Payments. The Amended LTIP permits the Compensation Subcommittee
to provide, in the agreement evidencing stock option or restricted stock
awards or in any other agreement with any plan participant, a limitation on
the acceleration of vesting or exercisability of unmatured awards of stock
options or restricted stock to the extent necessary to avoid or mitigate the
impact of the golden parachute excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended, on the
28
<PAGE>
plan participant or provide for a supplemental payment to be made to the
participant to offset or mitigate such tax.
PROPOSAL TO APPROVE THE APPOINTMENT OF INDEPENDENT AUDITORS
Proposal 3 on Proxy Card
The Board of Directors has appointed Coopers & Lybrand L.L.P., independent
accountants, to audit the consolidated financial statements of the Company and
its subsidiaries for the year ending December 31, 1998. The firm has acted as
the independent auditors for ARCO, the Company's principal stockholder, for
many years and for ARCO's subsidiaries and affiliates, including ARCO Chemical
Company. In addition, from time to time, the firm performs consulting work for
the Company and for ARCO. The firm has no other relationship with the Company
or ARCO or any of their subsidiaries or affiliates except the existing
professional relationships of independent accountants.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting and will have the opportunity to make a statement if they desire to do
so. These representatives will also be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. PROXIES SOLICITED BY THE BOARD OF
DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
VOTING PROCEDURES
The affirmative vote of the holders of a majority of the Company's voting
stock present in person or by proxy and entitled to vote at the Annual Meeting
of Stockholders at which a quorum is present is required for the election of
directors. The affirmative vote of the holders of a majority of the Company's
voting stock present in person or by proxy and entitled to vote at the Annual
Meeting of Stockholders at which a quorum is present is required for the
approval of the Amended and Restated Executive Long-Term Incentive Plan
provided that the total votes cast on the proposal must represent over 50
percent in interest of all voting stock entitled to vote on the proposal.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting. Abstentions and broker non-
votes (as hereafter defined) 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 approval of a proposal, the
election inspectors will treat shares held by a stockholder who abstains from
voting as being "present" and "entitled to vote" on the matter and, thus, an
abstention has the same legal effect as a vote against the matter. However, in
the case of a broker non-vote or where a stockholder withholds authority from
his proxy to vote the proxy as to a particular matter, such shares will not be
treated as "present" and "entitled to vote" on the matter, and, 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 but will effect the outcome
of the vote on the approval of the Amended and Restated Executive Long-Term
Incentive Plan for the purpose of determining whether the total votes cast on
the proposal are over 50 percent in interest of all voting stock entitled to
vote on the proposal. A "broker non-vote" refers to shares of the Company's
Common Stock represented at the meeting in person or by proxy by a broker or
nominee, where such broker or nominee (i) has not received voting instructions
on a particular matter from the beneficial owners or persons entitled to vote
and (ii) does not have the discretionary voting power on such matter.
29
<PAGE>
OTHER BUSINESS
The Board of Directors is not aware of any other matters to be presented at
the 1998 Annual Meeting of Stockholders. If any other matters should properly
come before the meeting, the persons named as proxies in the enclosed proxy
form will vote the proxies in accordance with their best judgment.
VOTING OF STOCK IN PLAN ACCOUNTS
The Company's Capital Accumulation and Savings Plans permit plan
participants to direct the plan trustees how to vote the Common Stock
allocated to their accounts. The trustee for each such plan will vote all
shares of Common Stock for which no participant directions are received in the
same proportion as those shares of Common Stock for which directions are
received.
PROXY SOLICITATION
The expense of soliciting proxies will be paid by the Company. Solicitations
will be made primarily through the use of the mails; in addition, some of the
officers and other employees of the Company 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.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy statement
relating to the 1999 Annual Meeting of Stockholders, a stockholder proposal
must be received by the Company no later than November 30, 1998. Such
proposals should be addressed to the Secretary at Vastar Resources, Inc.,
15375 Memorial Drive, Houston, Texas 77079.
ADDITIONAL INFORMATION AVAILABLE
The Company files an Annual Report on Form 10-K with the Securities and
Exchange Commission. Stockholders may obtain a copy of this report and any
amendments thereto (without exhibits), without charge, by writing to the
Company's Investor Relations Department, Vastar Resources, Inc., 15375
Memorial Drive, Houston, Texas 77079, Telephone: (281) 584-3477. Copies of
exhibits will be furnished upon prepayment of 25 cents per page.
By order of the Board of Directors
/s/ ALBERT D. HOPPE
Albert D. Hoppe
Secretary
Houston, Texas
March 23, 1998
30
<PAGE>
APPENDIX A
VASTAR RESOURCES, INC.
- --------------------------------------------------------------------------------
EXECUTIVE LONG-TERM INCENTIVE PLAN
AMENDED AND RESTATED
EFFECTIVE MARCH 5, 1998
<PAGE>
VASTAR RESOURCES, INC.
EXECUTIVE LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
ARTICLE I. GENERAL PROVISIONS
Section 1. Purposes of the Plan........................................... 1
Section 2. Definitions.................................................... 1
Section 3. Administration of the Plan..................................... 3
ARTICLE II. STOCK OPTIONS
Section 1. Grant of Stock Options......................................... 4
Section 2. Terms and Conditions of Stock Options.......................... 4
ARTICLE III. RESTRICTED STOCK
Section 1. Grant of Restricted Stock...................................... 5
Section 2. Waiver of Restrictions......................................... 5
Section 3. Change of Control.............................................. 5
ARTICLE IV. MISCELLANEOUS PROVISIONS
Section 1. Option and Restricted Stock Limits............................. 5
Section 2. Adjustment in Terms of Award................................... 6
Section 3. Governmental Regulations....................................... 6
Section 4. No Guaranty of Employment...................................... 6
Section 5. Assignment or Transfer......................................... 6
Section 6. Rights as Shareholder.......................................... 6
Section 7. Withholding Taxes.............................................. 7
Section 8. Amendment and Discontinuance of the Plan....................... 7
Section 9. Effective Date................................................. 7
Section 10. Term of Plan................................................... 7
Section 11. Parachute Payments............................................. 7
</TABLE>
<PAGE>
ARTICLE I
GENERAL PROVISIONS
Section 1. Purposes of the Plan
The purposes of this plan are to provide a select group of management and
other key employees with a specific incentive to work for the long-range
growth and success of the Company and to facilitate the attraction and
retention of employees of superior capability.
Section 2. Definitions
As used herein, the following terms shall have the following meanings:
(a) "Change of Control" means:
(i) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), unless, in each case, following such Business
Combination:
(1) All or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the then outstanding shares of
Common Stock (the "Outstanding Common Stock") of the Company and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities") of the Company immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 60 percent of, respectively, the then Outstanding Common
Stock and the then Outstanding Voting Securities, as the case may be,
of the corporation or other entity resulting from such Business
Combination (including, without limitation, a corporation or other
entity which, as a result of such transaction, owns the Company or all
or substantially all of the Company's assets either directly or through
one or more subsidiaries or other entities) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be;
(2) No Person (excluding any corporation or other entity resulting
from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation or other entity resulting
from such Business Combination) beneficially owns, directly or
indirectly, 20 percent or more of, respectively, the then Outstanding
Common Stock or the then Outstanding Voting Securities, as the case may
be, of such corporation or other entity, except to the extent that such
Person owned 20 percent or more of, respectively, the Outstanding
Common Stock or the Outstanding Voting Securities of the Company
immediately prior to the Business Combination; and
(3) At least a majority of the members of the board of directors of
the corporation or other entity resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the board of
directors, providing for such Business Combination; or
(ii) Atlantic Richfield Company ceases to own, directly or indirectly, at
least 50 percent of, respectively, the Outstanding Common Stock and the
Outstanding Voting Securities, as the case may be, of the Company and any
other Person (excluding any employee benefit plan or related trust of the
Company) owns, directly or indirectly, 20 percent or more of, respectively,
the Outstanding Common Stock or the Outstanding Voting Securities, as the
case may be, of the Company; or
(iii) Atlantic Richfield Company owns, directly or indirectly, more than
85 percent of, respectively, the Outstanding Common Stock or the
Outstanding Voting Securities, as the case
1
<PAGE>
may be, of the Company; provided, however, that in the event the Company or
any Subsidiary participates in, or is a party to, a transaction in which
Atlantic Richfield Company's ownership increases to more than 85 percent as
a secondary consequence of the transaction, then a committee composed of
all of the Company's Outside Directors shall determine, by majority vote,
whether a Change of Control has occurred; or
(iv) Individuals who, as of March 5, 1998, constitute the board of
directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the board at the end of any 12-month
period following March 5, 1998; provided, however, that any individual
becoming a director subsequent to March 5, 1998, whose election or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board, shall be considered as though such individual were a member of the
Incumbent Board, except that any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
shall not be considered to be a member of the Incumbent Board; or
(v) A Change of Control occurs under Article 1, Section 2(b) of the
Atlantic Richfield 1985 Executive Long-Term Incentive Plan, as amended
through July 28, 1997; or
(vi) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(b) "Change of Control Trust" means the trust established, if any, by the
Company to provide for the payment of any benefits, in whatever form is
required, on and after a Change of Control.
(c) "Committee" shall mean the Compensation Subcommittee of the Board of
Directors of the Company.
(d) "Common Stock" shall mean the common stock of the Company having a par
value of $0.01 per share.
(e) "Company" shall mean Vastar Resources, Inc.
(f) "Eligible Employees" shall mean members of a select group of management
and other key employees of the Company or a Subsidiary who, in the opinion of
the Committee, are in a position to contribute significantly to long-term
profit and growth objectives; provided, however, that no member of the
Committee nor any person owning stock possessing more than ten percent of the
total combined voting power of all classes of stock of the Company shall be an
Eligible Employee.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(h) "Fair Market Value" of a share of Common Stock shall be the mean between
the highest and lowest sales prices, or the closing sales price of a share of
Common Stock, whichever is higher, on the date in question as reported on the
composite tape for issues listed on the New York Stock Exchange. If no
transaction was reported on the composite tape in the Common Stock on such
date, the prices used shall be the prices reported on the nearest day
preceding the date in question. If the Common Stock should not then be listed
or admitted to trading on such Exchange, "Fair Market Value" shall be the mean
between the closing bid and asked prices on the date in question as furnished
by any member firm of the New York Stock Exchange selected from time to time
by the Committee for that purpose.
(i) "Outside Director" means a member of the Incumbent Board who is not, and
has never been, an employee of the Company and is not, and has not been for at
least ten years, an employee of Atlantic Richfield Company.
2
<PAGE>
(j) "Person" means any individual, corporation, firm, partnership,
governmental body, entity or group and shall include any person within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act.
(k) "Plan" shall mean this Executive Long-Term Incentive Plan, including any
amendments hereof, and rules and regulations hereunder.
(l) "Restricted Stock" shall mean Common Stock awarded under this Plan which
is subject to certain forfeiture and transferability restrictions as provided
in this Plan, in regulations of the Committee promulgated thereunder and in
the agreement evidencing the grant of such Restricted Stock.
(m) "Special Plan Administrator" means the entity designated in the Change
of Control Trust as having full administrative powers under Article I, Section
3 of the Plan on and after a Change of Control, including, but not limited to,
all interpretive and decision powers reserved to the Committee prior to a
Change of Control. If no such entity has been designated, then the Special
Plan Administrator shall be a committee composed of all of the Outside
Directors of the Company, which shall act by majority vote of the members.
(n) "Stock Options" shall consist of options to purchase the Common Stock of
the Company under the terms and conditions set forth in Article II. Such
options shall not be Incentive Stock Options as defined in Section 422(b) of the
Internal Revenue Code of 1986, as amended.
(o) "Subsidiary" shall mean any corporation in which the Company and/or one
or more Subsidiaries own or control directly or indirectly stock possessing 50
percent or more of the total combined voting power of all classes of stock of
such corporation, and any partnership or joint venture in which the Company
and/or one or more Subsidiaries own or control directly or indirectly 50
percent or more of the profits interest or capital interest in such a
partnership or joint venture.
Section 3. Administration of the Plan
(a) Prior to a Change of Control, the Plan shall be administered by the
Committee. The Committee is authorized to interpret the Plan, to adopt such
rules and regulations as may from time to time be deemed necessary for the
effective operation of the Plan and to act upon all matters relating to the
granting of awards under the Plan. Any determination, interpretation,
construction or other action made or taken pursuant to the provisions of the
Plan by or on behalf of the Committee shall be final, binding and conclusive
for all purposes and upon all persons including, without limitation, the
Company, the Company's stockholders and Eligible Employees and their
respective successors in interest.
(b) On and after a Change of Control, the Plan shall be administered by the
Special Plan Administrator which shall have all powers of the Committee
described in this Plan, except that the Special Plan Administrator will not
have the power to make new grants of Stock Options or Restricted Stock
hereunder.
(c) Neither the Special Plan Administrator nor any director, officer or
employee of the Special Plan Administrator (nor member of the committee
serving as Special Plan Administrator) nor any member of the Committee (each
an "Administrator"), as applicable, shall be personally liable by reason of
any contract or other instrument executed by such Administrator, or on such
Administrator's behalf, in such Administrator's capacity as an Administrator
nor for any mistake of judgment made in good faith, and the Company shall
indemnify and hold harmless each Administrator, as applicable, and each other
officer, employee or director of the Company and any Administrator or any
other person to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of
a claim with the approval of the Committee) arising out of any act or omission
in connection with the Plan unless arising out of such person's own fraud or
bad faith.
3
<PAGE>
ARTICLE II
STOCK OPTIONS
Section 1. Grant of Stock Options
The Committee may grant Stock Options to Eligible Employees on the terms and
conditions set forth in the Plan and on such other terms and conditions which
are consistent with the purposes and provisions of the Plan.
Section 2. Terms and Conditions of Stock Options
All Stock Options granted under the Plan shall be subject to the following
terms and conditions:
(a) Option Price. The Option Price per share with respect to each Stock
Option shall be fixed by the Committee, but shall not be less than the Fair
Market Value of the Common Stock on the date the Stock Option is granted.
(b) Period of Option. A Stock Option shall expire and all rights thereunder
shall end at the expiration of such period (not exceeding ten years) after the
date the Stock Option is granted as shall be fixed by the Committee at the
time it grants the Stock Option.
(c) Exercise of Option. Stock Options may be exercised at such time or
times, in whole or in part, as the Committee shall prescribe when it grants
such Stock Options, or by amending an outstanding Stock Option. In no event,
other than in the event of a Change of Control, may a Stock Option be
exercised until at least one year has expired following the date the Stock
Option is granted.
(d) Termination of Employment. Except to the extent provided otherwise in
the agreement relating to the Stock Option:
(i) if an optionee's employment is terminated due to (a) death, (b)
becoming entitled to benefits under a Company or a Subsidiary long-term
disability plan or (c) any other reason (other than for "cause" which shall
be determined by the President and the Vice President--Human Resources of
the Company) with a right to an immediate monthly retirement allowance
under a qualified benefit plan of the Company or a Subsidiary (events (a),
(b) or (c) being a "Qualified Termination"), the optionee's Stock Options
shall continue pursuant to their terms;
(ii) if an optionee's employment is terminated other than for a Qualified
Termination, and such termination is prior to the first anniversary of the
date of grant of a Stock Option, such Stock Option shall be automatically
canceled unpaid on the date of such optionee's termination of employment
unless and to the extent that the Committee, in its sole discretion,
determines that such Stock Option shall continue for such period of time,
not to exceed the expiration date of the Stock Option, as the Committee
shall so determine;
(iii) if an optionee's employment is terminated other than for a
Qualified Termination and such termination is on or after the first
anniversary date of grant of a Stock Option, such Stock Option shall be
exercisable for a period of 90 days from the date of such optionee's
termination of employment to the extent otherwise exercisable, and shall
thereafter be canceled unpaid unless and to the extent the Company, in its
sole discretion (evidenced by action in writing by the President and the
Vice President--Human Resources of the Company), determines to shorten or
extend such 90-day post-termination exercise period;
(iv) notwithstanding anything herein to the contrary in Section 2(d), if
an optionee's employment is terminated by the Company or a Subsidiary for
cause (evidenced by action in writing by the President and the Vice
President--Human Resources of the Company), the optionee's Stock Options
shall be automatically canceled unpaid on such date of termination; and
4
<PAGE>
(v) Notwithstanding anything to the contrary contained in Section 2(d),
any action to prescribe a longer or shorter post-termination exercise
period or to cancel in connection with termination of employment any Stock
Options held by an officer of the Company who holds the title of Vice
President or a higher officer rank with the Company or any similar position
shall be determined solely by the Committee (or in the event of a Change of
Control, the Special Plan Administrator).
(e) Death. If an optionee dies, his or her Stock Options may be exercised
during the period specified in the grant by the executor or administrator of
his or her estate, or by a person who acquired the right to exercise such
Stock Options by bequest or inheritance or by reason of his or her death.
(f) Payment for Shares. Every share purchased through the exercise of a
Stock Option shall be paid for in full, in cash, within ten business days
following the time of exercise or, unless the Stock Option expressly provides
otherwise, at the time of exercise in shares of Common Stock valued at their
Fair Market Value on the date on which such Stock Option is exercised, or in a
combination of cash and such shares.
(g) Change of Control. Upon the occurrence of a Change of Control, an
optionee shall be entitled to exercise any vested or unvested Stock Options
which were not otherwise exercisable immediately preceding such a Change of
Control.
ARTICLE III
RESTRICTED STOCK
Section 1. Grant of Restricted Stock
The Committee may grant Restricted Stock under this Plan to Eligible
Employees, and the Committee shall in each case determine the number of shares
of Restricted Stock to be awarded and the terms or duration of the
restrictions to be imposed upon those shares.
Section 2. Waiver of Restrictions
Restrictions upon vesting and transferability of Restricted Stock may be
permitted to lapse as originally provided by the Committee at the time of
grant or otherwise as the Committee may determine in its sole discretion.
Section 3. Change of Control
Upon the occurrence of a Change of Control, any restrictions upon vesting or
transferability of Restricted Stock shall lapse.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 1. Option and Restricted Stock Limits
The number of shares of Common Stock upon which Stock Options may be granted
or which may be the subject of a grant of Restricted Stock shall be, for the
year ended December 31, 1994, 400,000 shares, and, thereafter, two percent of
the total issued and outstanding shares of Common Stock as of December 31 of
the next preceding year, cumulative from March 17, 1994, provided, however,
that in no event may the number of shares of Restricted Stock and/or shares of
Common Stock subject to Stock Options granted to any participant for a
calendar year exceed 20 percent of the aggregate number of shares of Common
Stock subject to Stock Options and shares of Restricted Stock available
5
<PAGE>
for grant during such calendar year. Any shares of Common Stock available for
grant that are not made the subject of a grant during a calendar year, or
portion thereof, will be available for grant in any subsequent year, or
portion thereof. The number of available shares described in the preceding
sentences is subject to adjustment as provided in Section 2 of this Article
IV. The shares shall be made available from authorized but unissued Common
Stock or from Common Stock issued and held in the treasury of the Company as
shall be determined by the Committee.
Section 2. Adjustment in Terms of Award
In the event of a reorganization, recapitalization, stock split, stock
dividend, distribution of assets other than pursuant to a normal cash
dividend, combination of shares, merger, consolidation, rights offering,
split-up, split-off, spin-off or any other change in the corporate structure
or shares of the Company (other than a Change of Control), the Committee may,
in its discretion, after consultation with the Chairman of the Board and the
President, make appropriate adjustments to reflect such event in respect of
(a) the limitation in Section 1 of this Article IV on the maximum number of
shares of Common Stock upon which Stock Options may be granted or which may be
the subject of a grant of Restricted Stock, (b) the number of shares of Common
Stock covered by, and the exercise price per share applicable to, outstanding
Stock Options and (c) the number of shares of Common Stock covered by
outstanding awards of Restricted Stock. In the event that the Committee, after
consultation with the Chairman of the Board and the President, determines
that, because of a change (other than a Change of Control) in the Company's
business, operations, corporate structure, capital structure, assets or manner
in which it conducts business, which it deems to be extraordinary and
material, the terms of awards theretofore made are no longer suitable to the
objectives which the Committee sought to achieve when it made such awards, it
may modify the terms of any or all of such awards in such manner as it may
decide is advisable; provided, however, that no award may be modified in a
manner which would be inconsistent with the intent of Section 8 of this
Article IV.
Section 3. Governmental Regulations
The Plan and the grant and exercise of Stock Options and the award of
Restricted Stock hereunder shall be subject to all applicable rules and
regulations of governmental or other authorities.
Section 4. No Guaranty of Employment
The grant of a Stock Option or award of Restricted Stock under the Plan
shall not constitute an assurance of continued employment for any period.
Section 5. Assignment or Transfer
No Stock Option or share of Restricted Stock shall be assignable or
transferable by an Eligible Employee otherwise than by will or the laws of
descent and distribution.
Section 6. Rights as Shareholder
(a) An Eligible Employee under the Plan shall have no rights of a holder of
Common Stock by virtue of any award of Stock Options hereunder, unless and
until certificates for shares of Common Stock are issued to him or her
pursuant to the Plan.
(b) An Eligible Employee who has received an award of Restricted Stock shall
have all the rights of a shareholder with respect to the shares of Restricted
Stock, including, without limitation, the right to vote such Restricted Stock
and the right to receive all dividends paid with respect to such Restricted
Stock (net of withholding, if applicable), but shall hold such Restricted
Stock subject to such restrictions upon its transfer for such period or
periods as the Committee may determine and subject to such other terms and
conditions deemed appropriate by the Committee. Stock received with respect to
an award
6
<PAGE>
of Restricted Stock pursuant to a stock split, stock dividend or other change
in the capitalization of the Company will be held subject to the same
restrictions on transferability that are applicable to such shares of
Restricted Stock.
Section 7. Withholding Taxes
(a) The Company shall have the right to withhold from salary or otherwise or
to cause the employee (or the executor or administrator of his or her estate
or his or her distributee) to make payment of any federal, state, local or
foreign taxes required to be withheld with respect to any exercise of any
Stock Option, or award or vesting or deemed vesting of Restricted Stock.
(b) In the case of an exercise of Stock Options or the vesting or deemed
vesting of Restricted Stock, an employee may elect to have the withholding
obligation satisfied by having the Company withhold shares of Common Stock
received upon the exercise of Stock Options or the vesting or deemed vesting
of Restricted Stock, as the case may be.
Section 8. Amendment and Discontinuance of the Plan
The Board of Directors of the Company may amend or discontinue the Plan as
it shall from time to time consider desirable, provided that:
(a) No amendment shall, without further approval by the holders of a
majority of the shares which are represented in person or by proxy and
entitled to vote on the subject at a meeting of stockholders of the Company,
change the terms of the Plan so as to increase the maximum number of shares
upon which Stock Options may be granted or which may be issued upon award of
Restricted Stock from the number described in Section 1 of this Article IV,
reduce the minimum option price or extend the maximum option period set forth
in Section 2(b) of this Plan;
(b) No amendment, discontinuance or termination shall deprive persons
without their consent who hold shares of Restricted Stock, or who are entitled
to exercise Stock Options pursuant to the terms and provisions of the Plan, of
their rights with respect thereto; and
(c) The Plan may not be amended or terminated on or after a Change of
Control until all Stock Options granted prior to such Change of Control have
been exercised or have expired.
Section 9. Effective Date
The effective date of the Plan is June 26, 1994. March 5, 1998 shall be the
effective date of the amendments to the Plan as set forth in this Amendment
and Restatement of the Plan approved by the Board of Directors of the Company
on March 5, 1998.
Section 10. Term of Plan
No Stock Options or awards of Restricted Stock may be granted after June 26,
2004.
Section 11. Parachute Payments
Notwithstanding any contrary provision of the Plan, the Committee may
provide in the agreement evidencing the award of the Stock Option or of
Restricted Stock or in any other agreement with the participant for a
limitation on the acceleration of vesting and exercisability of unmatured
awards of Stock Options or Restricted Stock to the extent necessary to avoid
or mitigate the impact of the golden parachute excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), on the
participant or may provide for a supplemental payment to be made to the
participant as necessary to offset or mitigate the impact of the golden
parachute excise tax on the participant.
7
<PAGE>
- --------------------------------------------------------------------------------
[ ]
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, FOR
PROPOSAL 2 AND FOR PROPOSAL 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
(see reverse) listed below for all nominees listed below
</TABLE>
Nominees: Jimmie D. Callison, Terry G. Dallas, Charles D. Davidson, Marie L.
Knowles, Robert C. LeVine, William D. Schulte, Steven J. Shapiro,
William E. Wade, 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.)
*Exceptions
------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
2. Approval of the Company's Amended and Restated Executive Long-Term 3. Approval of Independent Auditors.
Incentive Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ] 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: , 1998
| -------------------------------
|
| ---------------------------------------------
| Signature
_______|
---------------------------------------------
Signature
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.) VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK [X]
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[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 20, 1998
The undersigned, revoking previous proxies relating to these shares, hereby
acknowledges receipt of the Notice and Proxy Statement dated March 23, 1998, in
connection with the Annual Meeting of Stockholders to be held at 9:00 a.m. on
May 20, 1998, 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 1998 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, William E. Wade, Jr.
and Michael E. Wiley.
Proposal 2. Approval of the Company's Amended and Restated
Executive Long-Term Incentive Plan.
Proposal 3. Approval of appointment of Coopers
& Lybrand L.L.P. as independent auditors.
VASTAR RESOURCES, INC.
P.O. BOX 11203
NEW YORK, N.Y. 10203-0203
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
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
[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
R MAY 20, 1998
O
X
Y
The undersigned, revoking previous proxies relating to these shares, hereby
acknowledges receipt of the Notice and Proxy Statement dated March 23, 1998, in
connection with the Annual Meeting of Stockholders to be held at 9:00 a.m. on
May 20, 1998, 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 1998 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, William E. Wade, Jr.
and Michael E. Wiley.
Proposal 2.
Approval of the Company's Amended and Restated Executive Long-Term Incentive
Plan.
Proposal 3.
Approval of appointment of Coopers & Lybrand L.L.P. 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 Plans 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.
-----------
SEE REVERSE
SIDE
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
__
[ 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, FOR Proposal 2 and FOR Proposal 3.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
--------------------------------------------------------------------------------------------------------------------------------
<S> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of Company's [ ] [ ] [ ]
Directors (See reverse) Amended and Restated
Executive Long-Term
For, except vote withheld from for the following nominee(s): Incentive Plan.
3. Approval of FOR AGAINST ABSTAIN
Independent [ ] [ ] [ ]
Auditors.
--------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
- --------------------------------------------------------------------------------
