<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
COMMISSION FILE NUMBER 1-13108
VASTAR RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4446177
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
15375 MEMORIAL DRIVE
HOUSTON, TEXAS 77079
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
__________________
(281) 584-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
__________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [_]
NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE, OUTSTANDING AS OF
MARCH 31, 1999: 97,412,140.
<PAGE>
PART I. FINANCIAL INFORMATION
VASTAR RESOURCES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended
March 31,
----------------------------
1999 1998
-------------- -----------
(Millions of dollars, except
per share amounts)
REVENUES
Net sales and other operating
revenues............................. $221.2 $217.4
Earnings from equity affiliate........ 5.0 5.3
Other revenues........................ 13.2 20.7
------ ------
Net revenues........................ 239.4 243.4
------ ------
EXPENSES
Operating expenses.................... 50.5 34.5
Exploration expenses.................. 39.0 68.2
Selling, general and administrative
expenses............................. 12.7 12.0
Taxes other than income taxes......... 8.8 13.0
Depreciation, depletion and
amortization......................... 113.3 70.5
Interest.............................. 20.5 12.6
------ ------
Total expenses...................... 244.8 210.8
------ ------
Income (loss) before income taxes..... (5.4) 32.6
Income tax benefit.................... (24.4) (15.4)
------ ------
Net income.......................... $ 19.0 $ 48.0
====== ======
Basic earnings per share.............. $ 0.20 $ 0.49
====== ======
Diluted earnings per share............ $ 0.19 $ 0.49
====== ======
Cash dividends paid per share
of common stock....................... $0.075 $0.075
====== ======
The accompanying notes are an integral part of these statements.
1
<PAGE>
VASTAR RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
March 31, December 31,
1999 1998
--------- ------------
(Millions of dollars)
ASSETS
Current assets:
Cash and cash equivalents......................... $ 11.0 $ 4.3
Accounts receivable:
Trade............................................ 105.5 110.0
Related parties.................................. 77.1 130.9
Inventories....................................... 9.4 10.2
Prepaid expenses and other assets................. 23.9 37.5
-------- --------
Total current assets............................. 226.9 292.9
Oil and gas properties and equipment, net.......... 2,236.6 2,220.8
Other long-term assets............................. 69.2 60.3
-------- --------
Total assets..................................... $2,532.7 $2,574.0
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade............................................ $ 174.4 $ 179.2
Related party.................................... 10.3 9.8
Accrued liabilities............................... 40.8 61.5
-------- --------
Total current liabilities....................... 225.5 250.5
Long-term debt..................................... 1,276.1 1,288.6
Deferred liabilities and credits................... 207.3 205.4
Deferred income taxes.............................. 196.6 214.3
-------- --------
Total liabilities................................ 1,905.5 1,958.8
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized,
110,000,000 shares; issued and outstanding,
97,412,140 shares as of March 31, 1999 and
97,403,340 shares as of December 31, 1998......... 1.0 1.0
Capital in excess of par value of stock............ 457.7 457.4
Accumulated earnings............................... 168.5 156.8
-------- --------
Total stockholders' equity....................... 627.2 615.2
-------- --------
Total liabilities and stockholders' equity........ $2,532.7 $2,574.0
======== ========
The accompanying notes are an integral part of these statements.
2
<PAGE>
VASTAR RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1999 1998
------------- ------------
(Millions of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 19.0 $ 48.0
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization........... 113.3 70.5
Deferred income taxes.............................. (17.7) 5.5
Dry hole expense and undeveloped leasehold
amortization..................................... 14.1 35.8
Gain on asset sales................................ (8.5) (17.9)
Earnings from equity affiliate..................... (5.0) (5.3)
Net change in accounts receivable, inventories
and accounts payable............................. 54.8 (26.1)
Other.............................................. (16.4) (20.5)
------- -------
Net cash provided by operating activities............ 153.6 90.0
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to oil and gas properties and equipment,
including dry hole costs.......................... (141.8) (171.3)
Proceeds from asset sales............................ 13.9 40.5
Other................................................ 0.5 2.5
------- -------
Net cash used by investing activities................ (127.4) (128.3)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock............................. 0.3 0.2
Proceeds from long-term debt issuance................ 632.8 68.3
Repayments of long-term debt......................... (645.3) (24.7)
Dividends paid....................................... (7.3) (7.3)
------- -------
Net cash provided (used) by financing activities..... (19.5) 36.5
------- -------
Net change in cash and cash equivalents.............. 6.7 (1.8)
Cash and cash equivalents at beginning of period..... 4.3 10.2
------- -------
Cash and cash equivalents at end of period........... $ 11.0 $ 8.4
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. INTRODUCTION.
The accompanying financial statements are unaudited and have been prepared
from our records. In the opinion of our management, these financial statements
reflect all adjustments (consisting only of items of a normal recurring nature)
necessary for a fair presentation of our financial position and results of
operations in conformity with generally accepted accounting principles. These
statements are presented in accordance with the requirements of Regulation S-X,
which does not require all disclosures normally required by generally accepted
accounting principles or those normally required on Form 10-K. These interim
financial statements should be read in conjunction with the annual financial
statements for the year ended December 31, 1998 and the related Notes contained
in our Form 10-K for the year ended December 31, 1998. Certain previously
reported amounts have been restated to conform to classifications adopted in
1999.
NOTE 2. NET SALES AND OTHER OPERATING REVENUES.
For the Three Months Ended
March 31,
----------------------------
1999 1998
------------- ------------
(Millions of dollars)
Sales and other operating revenues:
Unrelated parties.................... $ 188.6 $ 216.6
Related parties (1).................. 165.2 191.3
------- -------
Total............................... 353.8 407.9
Less:
Purchases (2)........................ (130.3) (188.6)
Delivery expense..................... (2.3) (1.9)
------- -------
Net sales and
other operating revenues............. $ 221.2 $ 217.4
======= =======
- -----------------
(1) The weighted average lifting and purchase cost per thousand cubic feet
equivalent associated with proprietary production and third-party purchased
volumes multiplied by the related party sales volumes results in average costs
of $168.2 million for the three months ended March 31, 1999 and $161.2 million
for the three months ended March 31, 1998.
(2) Includes purchases from related parties at a cost of $16.3 million for the
three months ended March 31, 1999 and $23.9 million for the three months ended
March 31, 1998.
4
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -(Continued)
(Unaudited)
NOTE 3. SOUTHERN COMPANY ENERGY MARKETING L.P.
Southern Company Energy Marketing is a strategic marketing alliance between
Southern Energy, Inc. and Vastar Resources, Inc. Through subsidiaries, we
currently hold a 40 percent interest in Southern Company Energy Marketing and
Southern Energy holds a 60 percent interest.
We account for our interest in Southern Company Energy Marketing using the
equity method of accounting. Our equity investment in Southern Company Energy
Marketing of $39.6 million is reflected as other long-term assets in our
consolidated balance sheet. During the first three months of 1999 we recorded
revenues of $5.0 million related to the earnings from Southern Company Energy
Marketing and $5.3 million for the first three months of 1998.
For the first five years of operation, Vastar is entitled to receive, subject
to certain exceptions, minimum cash distributions from Southern Company Energy
Marketing of $20 million for the year 1998, $20 million for the year 1999, $25
million for the year 2000, $30 million for the year 2001, and $30 million for
the year 2002. As a result of the minimum earnings distribution exceeding our
ownership interest in Southern Company Energy Marketing's earnings for the three
month period ending March 31, 1999, we are recognizing our accrued share of the
1999 minimum earnings level within the current period net of any contractual
obligations. For additional details regarding Southern Company Energy Marketing,
refer to our Report on Form 10-K for the year ended December 31, 1998.
NOTE 4. EXPLORATION EXPENSES.
For the
Three Months Ended
March 31,
1999 1998
-------- ----------
(Millions of dollars)
Dry hole costs....................... $ 5.4 $27.0
Geological and geophysical........... 14.1 21.3
Undeveloped leasehold amortization... 8.7 8.8
Staff................................ 9.4 10.1
Lease rentals........................ 1.4 1.0
----- -----
Total............................... $39.0 $68.2
===== =====
5
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 5. EARNINGS PER SHARE.
For the
Three Months Ended
March 31,
1999 1998
-------- -------
(Millions of dollars, except
per share amounts and
millions of shares)
Basic earnings per share:
Income available to common shareholders.... $19.0 $48.0
Average shares of stock outstanding........ 97.4 97.3
Basic earnings per share................... $0.20 $0.49
Diluted earnings per share:
Income available to common shareholders.... $19.0 $48.0
Incremental shares assuming the exercise
of stock options.......................... 0.5 0.4
Average shares of stock outstanding plus
effect of dilutive securities............. 97.9 97.7
Diluted earnings per share................. $0.19 $0.49
Our board of directors adopted various arrangements that become operative only
upon a change of control of Vastar. One of these arrangements, our Amended and
Restated Long-Term Incentive Plan, provides that if a change of control occurs,
all unexercisable and/or unvested stock options granted to Vastar's officers
and employees under the plan will become immediately vested and exercisable. The
exercise prices of the stock options reflected in the table below range from
$14.00 to $46.66 per share. Stock options outstanding as of March 31, 1999
consisted of the following:
Vested and exercisable........... 1.4 million
Vested and unexercisable......... 0.7 million
Non-vested....................... 0.4 million
-------------
Total............................ 2.5 million
-------------
Stock options generally vest one year after the date of grant, and
become exercisable in increments of 25 percent per year and expire ten
years after the date of grant.
In March 1999, ARCO (Atlantic Richfield Company), which owns 82.1 percent of
our common stock, entered into a merger agreement with BP Amoco, p.l.c. If this
transaction is consummated it would constitute a change of control under the
above-described arrangements, including our Amended and Restated Long-Term
Incentive Plan. For additional information on the change of control
arrangements, refer to our 1999 Proxy Statement filed with the SEC on March 23,
1999. A copy of the Amended and Restated Long-Term Incentive Plan was filed as
Appendix A to our 1998 Proxy Statement, which was filed with the SEC on March
26, 1998.
6
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES.
Vastar and its subsidiaries are involved in a number of lawsuits, all
of which have arisen in the ordinary course of our business. We believe that any
ultimate liability resulting from these suits will not have a material adverse
effect on our financial position or results of operations.
Our operations and financial position continue to be affected from time to
time in varying degrees by domestic and foreign political developments as well
as legislation and regulations pertaining to restrictions on oil and gas
production, imports and exports, natural gas regulation, taxes, environmental
regulations and cancellation of contract rights. Both the likelihood of such
occurrences and their overall effect on us vary greatly and are not predictable.
These uncertainties are among a number of items that we have taken and will
continue to take into account in periodically establishing accounting reserves.
Vastar and ARCO have agreements whereby we have agreed to indemnify ARCO
against certain claims or liabilities. Our indemnity obligations cover claims
and liabilities, which could be made against ARCO relating to ARCO's historical
ownership and operation of the properties ARCO transferred to us upon the
formation of Vastar. They also included liabilities under laws relating to the
protection of the environment and the workplace and liabilities arising out of
certain litigation described in the agreements. ARCO has agreed to indemnify
Vastar with respect to other claims and liabilities and other litigation matters
not related to our business or properties as reflected in our consolidated
financial statements.
In September 1996, we entered into a contract with Diamond Offshore Drilling
Company for the major upgrade and operation of a semisubmersible drilling rig,
Ocean Victory, for a three-year deepwater drilling program in the Gulf of
Mexico, which began in November 1997. Since November 1997, scheduled increases
in the day rates and our request of Diamond to make improvements to the rig have
resulted in higher costs during the remaining contract term. This contract has
a remaining life as of March 31, 1999 of 1.9 years and remaining costs of $116.4
million. This amount does not take into consideration any reimbursements we
might receive from partners or potential partners.
In December 1998, we finalized an agreement with R&B Falcon Drilling Co. for
the operation of a semisubmersible, ultra-deepwater drilling rig, for a three-
year deepwater drilling program in the Gulf of Mexico. The drilling program is
scheduled to commence in 2001. This contract is for three years and has an
anticipated cost of approximately $220.0 million, before any reimbursements from
partners or potential partners and operating cost escalations. We have several
options relating to the term and pricing of the contract including the option to
extend the term of the contract for up to five additional years.
Vastar and Southern Energy have agreed to guarantee certain obligations of
Southern Company Energy Marketing. Refer to our Report on Form 10-K for the
year ended December 31, 1998 for a description of these obligations.
Vastar has significant credit risk exposure to Southern Company Energy
Marketing and Southern Energy. The credit risk exposure consists of three
principal items. First, Southern Company Energy Marketing has promised to make
certain minimum cash distributions to Vastar. Southern Energy has guaranteed
this obligation as well as the amounts due to Vastar upon the exercise of
Vastar's option to sell its remaining interest on January 1, 2003. Second,
Southern Company Energy Marketing is obligated to pay, and Southern Energy has
guaranteed
7
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 6. COMMITMENTS AND CONTINGENCIES - continued.
payment, for gas purchased under the Gas Purchase and Sale Agreement between
Vastar and Southern Company Energy Marketing, pursuant to which Vastar has
agreed to sell substantially all of its production to Southern Company Energy
Marketing. Third, Vastar has been indemnified by Southern Energy, with certain
limitations, with respect to amounts we may be required to pay under guarantees
we have issued to secure certain obligations of Southern Company Energy
Marketing. If Southern Energy does not maintain in effect an investment grade
rating from Moody's or Standard and Poors, Southern Energy has agreed to provide
credit enhancement to secure the payment of these guaranteed obligations. As of
March 31, 1999, Southern Energy has maintained the required investment grade
rating.
We have performed and continue to perform ongoing credit evaluations of our
other customers and generally do not require collateral on our credit sales.
Any amounts anticipated as uncollectible are charged to income and credited to a
valuation account. The amounts included in the allowance for uncollectible
accounts receivable at March 31, 1999 and 1998, were insignificant.
In March 1999, ARCO entered into a merger agreement with
BP Amoco, p.l.c. The merger is subject to the approval of ARCO's shareholders,
BP Amoco's shareholders and various regulatory authorities. ARCO and Vastar have
entered into a number of agreements including technology assignments and
licenses, services agreements, insurance agreements and a building lease. These
agreements are more fully described in our 1999 Proxy Statement filed with the
SEC on March 23, 1999 and copies of many of these agreements have also been
filed. We do not anticipate that the rights and obligations of the parties under
these agreements, including any termination rights, will be affected by the
merger. Any amendments to these agreements would have to be negotiated and
agreed to by us. We do not believe that the termination of any or all of the
above-listed agreements with ARCO would have a material adverse effect on our
operations, cash flows or financial condition.
Vastar and ARCO are also parties to a tax sharing agreement which requires
Vastar, as a member of ARCO's consolidated tax group, to pay its share of the
group's federal and certain state income taxes to ARCO. In the event the merger
is consummated we expect that the agreement would continue to govern
consolidated tax matters involving Vastar and ARCO and its successors.
NOTE 7. TAXES.
The benefit from taxes on income is comprised of the following:
For the Three Months Ended
March 31,
--------------------------
1999 1998
--------- -----------
(Millions of dollars)
Federal:
Current............................ $ (6.7) $(21.3)
Deferred........................... (17.6) 5.2
------ ------
Total federal.................... (24.3) (16.1)
------ ------
State:
Current............................ 0.0 0.4
Deferred........................... (0.1) 0.3
------ ------
Total state...................... (0.1) 0.7
------ ------
Total income tax benefit.............. $(24.4) $(15.4)
======= =======
8
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 7. TAXES - (continued).
A reconciliation of the income tax benefit with tax at the
federal statutory rate for the specified period is as follows:
For the Three Months Ended
March 31,
-----------------
1999 1998
------- -------
(Millions of dollars)
Income (loss) before taxes...... $ (5.4) $ 32.6
====== ======
Tax at the statutory rate....... $ (1.9) $ 11.4
Increase (reduction) in taxes
resulting from:
State income taxes (net
of federal effect)........... (0.1) 0.4
Tax credits and other......... (22.4) (27.2)
------ ------
Income tax benefit............. $(24.4) $(15.4)
====== ======
Pursuant to the Internal Revenue Code, Section 29 tax credits can be used to
reduce the ARCO consolidated tax group's regular income tax liability after
foreign tax credits (the "Regular Tax"), but not below the ARCO consolidated tax
group's tentative minimum tax liability. If Section 29 tax credits are not used
by the ARCO consolidated tax group due to this limitation, the portion of the
unused credits that does not exceed the Regular Tax is carried forward to be
used in a subsequent year. The likelihood of deferral of the Section 29 tax
credits increases in a low commodity price environment. Given the range of
commodity prices during the first quarter of this year, it is difficult to
predict the timing of cash receipts from tax credits. Currently, we estimate
that it is likely that some of the tax credits generated this year will be
deferred.
9
<PAGE>
VASTAR RESOURCES, INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
NOTE 8. LONG-TERM DEBT.
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------------- ------------
(Millions of dollars)
<S> <C> <C>
8.75% Notes, issued February 1995, due 2005.... $ 149.6 $ 149.6
6.95% Notes, issued November 1996, due 2006*... 75.0 75.0
6.96% Notes, issued February 1997, due 2007*... 75.0 75.0
6.39% Notes, issued January 1998, due 2008*.... 50.0 50.0
6.50% Notes, issued March 1999, due 2009....... 299.1 ---
6.00% Putable/Callable Notes, issued
April 1998, due 2010.......................... 100.0 100.0
Notes due to ARCO, due 2003.................... --- 300.0
Revolving Credit Agreement..................... --- 320.0
Commercial Paper............................... 527.4 219.0
-------- --------
Total.......................................... $1,276.1 $1,288.6
======== ========
</TABLE>
- --------------
* Issuances pursuant to our Medium Term Note Program.
During first quarter 1999, we issued $300.0 million (face amount) of 6.5
percent unsecured notes, due March 2009 and additional commercial paper. During
the same period, we repaid our note due to ARCO and our debt under the revolving
credit agreement. At March 31, 1999 our total long-term debt outstanding
decreased $12.5 million from the amount outstanding at December 31, 1998.
We had one interest rate swap for $100.0 million outstanding at March 31, 1999
related to the putable/callable notes. This swap will terminate in April
2000. The swap effectively changes the 6.0 percent fixed rate to a floating
rate. The financial impact of settling this swap was immaterial.
NOTE 9. NEW ACCOUNTING STANDARDS.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This standard requires us to recognize all our
derivative and hedging instruments in our statements of financial position as
either assets or liabilities and measured at fair value. In addition, all
hedging relationships must be designated, reassessed and documented
periodically. This statement is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. We have not yet completed our evaluation of
the impact the provisions of this standard will have on us.
NOTE 10. SUBSEQUENT EVENT.
On April 15, 1999, Vastar declared a quarterly dividend of $0.075 per
share of common stock, payable on June 1, 1999, to stockholders of record
on May 7, 1999.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS.
Sales and production volumes and average price statistics for the
specified periods are as follows:
Three Months Ended
March 31,
--------------------
1999 1998
------ ------
NATURAL GAS
Sales (MMcfd)*....................... 1,566 1,300
Production (MMcfd)................... 1,168 902
Average sales price (per Mcf)*....... $ 1.61 $ 1.90
Average wellhead price (per Mcf)..... $ 1.62 $ 1.92
CRUDE OIL
Sales (MBbld)*....................... 118.0 120.2
Production (MBbld)................... 46.7 36.1
Average realized price (per Bbl)*.... $11.16 $17.09
NATURAL GAS LIQUIDS ("NGLS")
Production (MBbld)................... 9.2 15.5
Average realized price (per Bbl)..... $ 8.10 $10.99
Total production (MMcfed)*............ 1,503 1,212
- ---------------------
* As generally used in the oil and gas business and in this Form 10-Q,
the following terms have the following meanings:
MMcfd = million cubic feet per day MBbld = thousand barrels per day
Mcf = thousand cubic feet Bbl = barrel
MMcfed = million cubic feet equivalent per day
In calculating Mcf and Bbl equivalents, we use a generally recognized standard
in which one Bbl is equal to six Mcf.
11
<PAGE>
RESULTS OF OPERATIONS - (continued).
The following table sets forth the statement of income for the specified
periods:
Three Months Ended
March 31,
-----------------------
1999 1998
--------- -----------
(Millions of dollars)
REVENUES
Natural gas:
Sales............................... $227.1 $ 222.0
Purchases........................... (58.9) (75.3)
Delivery expense.................... (0.6) (0.1)
------ -------
Net sales - natural gas.......... 167.6 146.6
------ -------
Crude oil:
Sales............................... 117.5 166.9
Purchases........................... (69.2) (110.0)
Delivery expense.................... (1.4) (1.4)
------ -------
Net sales - crude oil............. 46.9 55.5
------ -------
NGLs and other:
Sales............................... 9.2 19.0
Purchases and other costs........... (2.5) (3.7)
------ -------
Net sales - NGLs and other........ 6.7 15.3
------ -------
Net sales and other operating
revenues........................ 221.2 217.4
Earnings from equity affiliate........ 5.0 5.3
Other revenues........................ 13.2 20.7
------ -------
Net revenues...................... 239.4 243.4
------ -------
EXPENSES
Operating expenses.................... 50.5 34.5
Exploration expenses.................. 39.0 68.2
Selling, general and administrative
expenses............................ 12.7 12.0
Taxes other than income taxes......... 8.8 13.0
Depreciation, depletion and
amortization........................ 113.3 70.5
Interest.............................. 20.5 12.6
------ -------
Total expenses.................... 244.8 210.8
------ -------
Income (loss) before income taxes..... (5.4) 32.6
Income tax benefit.................... (24.4) (15.4)
------ -------
Net income........................ $ 19.0 $ 48.0
====== =======
12
<PAGE>
FIRST QUARTER 1999 vs. FIRST QUARTER 1998.
Our net income for first quarter 1999 was $19.0 million compared to $48.0
million for first quarter 1998. This 60 percent earnings decrease was primarily
due to significantly lower commodity prices for all of our products. A 24
percent increase in production partially offset the impact of lower prices.
Natural gas sales revenues increased slightly for first quarter 1999 as
compared to first quarter 1998. The slight increase in sales was due to a 20
percent increase in volumes available for sale, partially offset by a 15 percent
decrease in sales prices. Natural gas purchases decreased as compared to first
quarter 1998, primarily due to the lower commodity prices.
Average natural gas wellhead prices for first quarter 1999 decreased 30 cents
per Mcf from first quarter 1998 levels. The 1999 average price for gas sold at
Henry Hub, Louisiana (a benchmark from which general natural gas price trends
can be analyzed) was $1.78 per Mcf for first quarter 1999 compared to $2.21 per
Mcf for the same period last year. When compared to first quarter 1998, our
first quarter 1999 wellhead price decline was less than the general market
decline at Henry Hub because (i) the prices for our production in the San Juan
basin did not decline as much as at Henry Hub and (ii) our natural gas hedging
activity for first quarter 1999 resulted in a $9.8 million gain as compared to a
$2.9 million loss in first quarter of 1998.
Our average first quarter 1999 natural gas production increased by 266
MMcfd from the same period last year. The higher production level was a result
of volumes added from our interests in 23 Gulf of Mexico shelf fields we
acquired late last year and production increases we achieved from Mississippi
Canyon 148, West Cameron 645, Main Pass 199, the San Juan basin and other
fields. These increases more than offset the impact of natural production
declines that normally occur in oil and gas fields.
Revenues from first quarter 1999 crude oil sales decreased as compared to
first quarter 1998 due to significantly lower commodity prices. The average
first quarter 1999 market price was lower as compared to first quarter 1998 as
reflected in the first quarter 1999 average price for NYMEX-WTI-at-Cushing (a
crude oil price benchmark from which general crude oil price trends can be
analyzed) of $11.85 per Bbl compared to first quarter 1998 average price of
$17.24 per Bbl. As a result of an agreement by OPEC countries to limit
production, crude oil prices began to improve late in the first quarter 1999.
Our average crude oil production in first quarter 1999 increased 29 percent as
compared to first quarter 1998. Production increased as a result of volumes
added from our interests in 23 Gulf of Mexico shelf fields we acquired late
last year and production increases achieved from West Delta 41 and other
fields. These increases more than offset the impact of natural field decline.
Net sales for NGLs (natural gas liquids) for first quarter 1999 were
significantly lower as compared to first quarter 1998. First quarter 1999 net
NGL sales reflect both a decrease in NGL commodity prices and a decrease in our
NGL production when compared to first quarter 1998. NGL prices often fluctuate
with the price of crude oil, and as crude oil prices decreased, NGL prices
generally followed the same trend. Our lower NGL production was primarily due
to selective decisions to bypass the NGL extraction process in order to capture
a higher value in the natural gas price.
Other revenues for first quarter 1999 were lower as compared to first quarter
1998. First quarter 1999 included an $8.5 million gain associated with the sale
of our interests in various oil and gas properties, whereas first quarter 1998
included a $17.7 million gain associated with the payment received in the
formation of Southern Company Energy Marketing.
Operating expenses for first quarter 1999 were higher than first quarter 1998
primarily resulting from additional operating costs associated with the 23 Gulf
of Mexico shelf properties we acquired in late 1998.
13
<PAGE>
Exploration expenses for first quarter 1999 were lower than first quarter
1998, primarily as a result of lower dry hole expenses and geological and
geophysical costs. Dry hole expenses in first quarter 1999 were
$5.4 million, lower than the same period last year due to our successful
drilling program. Of the 14 exploration wells that completed drilling in the
first quarter of 1999, 11 were declared successful. First quarter 1998 dry hole
expenses of $27.0 million included the cost of an unsuccessful co-owner operated
deepwater well. Geological and geophysical costs for first quarter 1999 were
$14.1 million, compared to $21.3 million in first quarter 1998. The decrease is
the result of the timing of the expenditures as they occur during the year.
First quarter 1999 taxes other than income taxes were lower than first quarter
1998, primarily as a result of lower commodity prices and tax refunds.
Depreciation, depletion and amortization increased for first quarter 1999 as
compared to first quarter 1998. The increase resulted primarily from the
additional production from the 23 Gulf of Mexico shelf properties we acquired in
late 1998 and the start-up of new producing fields with higher depletable cost
basis.
The income tax benefit of $24.4 million for first quarter 1999 was greater
than first quarter 1998 because of lower pre-tax earnings. The income tax
benefit for first quarter 1999 included the net benefit of $22.5 million of
Internal Revenue Code Section 29 tax credits for non-conventional fuels. The
income tax benefit for first quarter 1998 included $27.3 million for Section 29
tax credits. The first quarter 1999 Section 29 tax credits are lower than first
quarter 1998 as a result of accounting adjustments.
LIQUIDITY AND CAPITAL RESOURCES.
In the first quarter of 1999, cash flow provided by operating activities was
$153.6 million as compared to $90.0 million for first quarter 1998. This
increase was primarily due to a lower working capital position as of the end of
first quarter of 1999 as compared to the same time last year.
Net cash used in investing activities in first quarter 1999 was $127.4
million, which was relatively flat when compared to first quarter of 1998.
Capital spending was down in first quarter 1999 due to the deferral of some
capital projects because of the low price environment and lower rig costs than
experienced in the first quarter of last year. Proceeds from asset sales were
$13.9 million in the first three months of 1999, compared to $40.5 million
received in the first quarter of 1998.
The following table summarizes our capital investments for the comparative
periods.
For the Three Months Ended
March 31,
--------------------------
1999 1998
------------ -----------
(Millions of dollars)
Exploratory drilling........... $ 46.6 $ 51.1
Development drilling........... 58.2 69.8
Property acquisitions.......... 17.4 35.9
Other additions................ 19.6 14.5
------ ------
Total additions to property,
plant and equipment.......... 141.8 171.3
Geological and geophysical..... 14.1 21.3
------ ------
Total capital program... $155.9 $192.6
====== ======
14
<PAGE>
Our planned 1999 capital spending is about the same as the 1998 base capital
spending program (which excludes amounts expended for our purchase of 23 Gulf of
Mexico shelf properties in late 1998).
Cash flows used by financing activities were $19.5 million in the first
quarter 1999, which included a $12.5 million decrease in long-term debt (net of
long-term borrowings).
In March 1999, we issued $300.0 million (face amount) of 6.5 percent unsecured
Notes, due March 2009. We issued additional commercial paper during the first
quarter 1999. During the first quarter we also paid off the Note due to ARCO and
repaid our revolving credit agreement debt.
Vastar's ratio of earnings to fixed charges was 0.8 for the three months ended
March 31, 1999, and 3.6 for the three months ended March 31, 1998. We computed
these ratios by dividing earnings by fixed charges. For this calculation,
earnings include income before income taxes and fixed charges. Fixed charges
include interest, amortization of debt expenses and the estimated interest
component of rental expense.
RISK MANAGEMENT AND MARKET-SENSITIVE INSTRUMENTS.
The following discussion of our risk-management activities includes "forward-
looking statements" that involve various uncertainties. Actual results could
differ materially from those projected in the forward-looking statements.
Refer to the "Cautionary Statement for Purposes of the Private Litigation Reform
Act of 1995" in Items 1 and 2 of our Form 10-K for the year ended December 31,
1998.
We use various financial instruments for non-trading purposes in the normal
course of our business to manage and reduce price volatility and other market
risks associated with our natural gas and petroleum liquids production. This
activity is referred to as hedging. Hedging instruments have the effect of
providing a minimum price and/or locking in the price that we will receive for
the volumes and the time periods identified in the instruments. We structure
these arrangements to reduce our exposure to commodity price decreases, but they
can also limit the benefit we might otherwise receive from commodity price
increases. Our risk management activity is generally accomplished by purchasing
and/or selling exchange-traded futures and over-the-counter options.
We realized approximately a $9.8 million pre-tax gain in the first three
months of 1999 compared to a $2.0 million pre-tax loss in the first three months
of 1998, as a result of all of our hedging transactions for natural gas and
crude oil.
The following table summarizes our open hedging positions as of March 31,
1999:
Average Weighted
Financial Instrument Time Period Volume Average Prices
- -------------------- ----------- ------- --------------
Collars April - Sept 1999 138 MMcfd $2.31 - $2.95
Puts Sold April - Sept 1999 138 MMcfd $2.00
Calls Sold April - June 1999 75 MMcfd $2.83
A "collar" is a financial instrument or a combination of financial
instruments which establishes a range of prices to be received relating to a set
commodity volume. This arrangement, in effect, allows us to receive no less
than a stated floor price per Mcf and no more than a stated ceiling price per
Mcf.
A "put" is an option contract that gives the holder the right to sell the
underlying commodity at a specified price for a certain fixed period of time.
A "call" is an option contract that gives the holder the right to buy the
underlying commodity at a specified price for a certain fixed period of time.
15
<PAGE>
As of March 31, 1999, the fair value (our unrealized pre-tax loss or gain)
for the hedged natural gas transactions for 1999 would be a $6.7 million gain.
This hypothetical gain is calculated based on broker's forward price quotes and
NYMEX forward price quotes as of March 31, 1999, which averaged $2.11 per Mcf
for the remainder of 1999. We had no oil hedges outstanding as of March 31,
1999. The actual gains or losses we realize from our hedge transactions may
vary significantly due to the fluctuation of prices in the commodity markets.
For example, a hypothetical 10 percent increase in the forward price quotes
would reduce our unrealized gain by approximately $4.4 million. In order to
calculate the hypothetical gain, the relevant variables are (i) the type of
commodity, (ii) the delivery price and (iii) the delivery location. We do not
take into account the time value of money because of the short-term nature of
our hedging instruments. These calculations are used to analyze the gains and
losses we might realize on our financial hedging contracts and do not
reflect the effects of price changes on our actual physical commodity sales.
Natural gas prices fluctuated between $1.65 per Mcf and $2.11 per Mcf (Henry
Hub) and crude oil prices fluctuated between $11.38 per Bbl and $16.80 per Bbl
(NYMEX-WTI-at-Cushing) during the first quarter 1999.
We also have long-term contracts with certain cogeneration facilities, which
have an average remaining life of 12 years. These contracts cover an average of
75 MMcfd of our natural gas production for the remainder of 1999 at
approximately $2.59 per Mcf.
During first quarter 1999, our long-term sales commitments did not exceed the
total of our proprietary production and other natural gas production controlled
by us through call rights with third-party producers and marketing agreements
with royalty owners.
The borrowings under our commercial paper program and $1.1 billion committed
bank line of credit are subject to interest rate risk. Assuming the principal
amount of our borrowings had remained unchanged, higher interest rates would
have increased interest expense. For example, a 10 percent increase in the
London Interbank Offered Rate (a benchmark pursuant to which the Company's
interest rates may be set) would have increased our first quarter 1999 interest
expense by $2.7 million.
At March 31, 1999, we had an outstanding interest rate swap covering $100
million relating to our putable/callable notes. The swap effectively changed
the fixed rate debt of 6.0 percent to a floating rate, which averaged 5.0
percent for the first three months of 1999.
NEW ACCOUNTING STANDARDS.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This standard requires us to recognize all our
derivative and hedging instruments in our statements of financial position as
either assets or liabilities and measured at fair value. In addition, all
hedging relationships must be designated, reassessed and documented
periodically. This statement is effective for all fiscal quarters of all fiscal
years beginning after June 15, 1999. We have not yet completed our evaluation of
the impact the provisions of this standard will have on us.
IMPACT OF THE YEAR 2000 ISSUE.
Progress in the First Quarter
There have been no material developments with respect to our approach on the
Year 2000 issue as previously reported in our Report on Form 10-K for the year
ended December 31, 1998, except as follows.
Since the start of the project, we have incurred and expensed approximately
$2.2 million related to our assessment of Year 2000 issues and the development
and implementation of our remediation plan. The total cost of the Year 2000
project, including expenses which will be incurred in 2000, is currently
estimated at approximately $5.0 million.
16
<PAGE>
The analysis process continues, and we have made significant additional
progress. Using an average phase completion method of estimation, we estimate
that approximately 86 percent of the high priority items are complete with an
expected completion date before the end of 1999. Similarly, we estimate that 91
percent of the medium priority items and 87 percent of the low priority items
are complete. The activities relating to the medium and low priority items
may not be completed by January 1, 2000, but we continue to believe that the
failure of such items to be Year 2000 ready will not have a material adverse
effect on our financial condition, cash flows or results of operations.
In addition to assessing our own systems that may be affected by the Year 2000
issue, we continued our efforts in first quarter 1999 to determine if we will be
affected by Year 2000 issues affecting third parties with which we have a
material relationship. The complexity of our analysis is increased because of
our dependence on the representations of these third parties and the
correctness of their assessment of their Year 2000 issues, including their
exposure to third-party risks. This analysis is substantially complete and all
high-priority items which we have identified are being addressed and are
expected to be resolved before the end of 1999.
Further, we are continuing our process of developing contingency plans to
handle the most reasonably likely worst case scenarios caused by an interrelated
failure of key components or widespread outages of key services. Our enterprise-
wide contingency planning continues and we expect it to be completed by August
1, 1999.
Conclusion
The most significant difficulty associated with predicting the impact of Year
2000 failures stems from the interdependence of the various third parties on
which we rely. As a result of the general uncertainty inherent in the Year 2000
problem, we are unable to determine at this time whether the consequences of
Year 2000 failures would have a material impact on our results of operations,
cash flows or financial condition. Completion of our Year 2000 readiness program
as scheduled is expected to reduce the possibility of significant interruptions
of normal operations.
The preceding discussion of our Year 2000 readiness includes forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements. Please refer
to the "Cautionary Statement for the Purpose of the Private Litigation Reform
Act of 1995" in Items 1 and 2 in our Form 10-K for the year ended December 31,
1998 for further information on these risks and uncertainties. This disclosure
is also subject to protection under the Year 2000 Information and Readiness
Disclosure Act of 1998, Public Law 105-271, as a "Year 2000 Statement" and "Year
2000 Readiness Disclosure" as defined therein.
------------------------
We caution against projecting any future results based on present earnings
levels because of economic uncertainties, the extent and form of existing or
future governmental regulations and other possible actions by governments.
The foregoing financial information is unaudited and has been prepared
from the books and records of Vastar. In the opinion of our management, the
financial information reflects all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments with respect to Vastar's
legal proceedings as previously reported in Vastar's Report on Form 10-K
for the period ending December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Amendment No. 1 to Vastar Annual Incentive Plan, effective as of
March 10, 1999
10.2 Vastar Amended and Restated Executive Deferral Plan, effective as of
March 24, 1999
10.3 Vastar Comprehensive Management Medical Plan, dated March 10, 1999
10.4 Vastar Executive Medical Plan, dated March 10, 1999
10.5 Amendment No. 1 to Vastar Executive Life Insurance Plan, effective as of
March 10, 1999
10.6(a) Amendment No. 2 to Vastar Supplementary Executive Retirement Plan,
effective as of January 1, 1999
10.6(b) Vastar Amended and Restated Supplementary Executive Retirement Plan,
effective as of March 24, 1999
10.7(a) Vastar Special Termination Allowance Plan, effective as of July 1, 1994
10.7(b) Amendment No. 1 to Vastar Special Termination Allowance Plan, effective
as of May 1, 1998
10.7(c) Amendment No. 2 to Vastar Special Termination Allowance Plan, effective
as of March 10, 1999
10.8 Amendment No. 5 to Vastar Capital Accumulation Plan, effective as of
December 1, 1998
10.9 Amendment No. 5 to Vastar Capital Accumulation Plan II, effective as of
December 1, 1998
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K.
The following current report on Form 8-K was filed during the quarter
ended March 31, 1999 and through the date hereof:
Date of Report Item No. Financial Statements
-------------- -------- --------------------
March 29, 1999 5 None
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VASTAR RESOURCES, INC.
(Registrant)
Dated: April 29, 1999 /s/ Joseph P. McCoy
------------------------------
Joseph P. McCoy
Vice President and Controller
(Duly Authorized Officer and
Principal Accounting Officer)
19
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.1 Amendment No. 1 to Vastar Annual Incentive Plan, effective as of
March 10, 1999
10.2 Vastar Amended and Restated Executive Deferral Plan, effective as
of March 24, 1999
10.3 Vastar Comprehensive Management Medical Plan, dated March 10, 1999
10.4 Vastar Executive Medical Plan, dated March 10, 1999
10.5 Amendment No. 1 to Vastar Executive Life Insurance Plan, effective
as of March 10, 1999
10.6(a) Amendment No. 2 to Vastar Supplementary Executive Retirement Plan,
effective as of January 1, 1999
10.6(b) Vastar Amended and Restated Supplementary Executive Retirement
Plan, effective as of March 24, 1999
10.7(a) Vastar Special Termination Allowance Plan, effective as of
July 1, 1994
10.7(b) Amendment No. 1 to Vastar Special Termination Allowance Plan,
effective as of May 1, 1998
10.7(c) Amendment No. 2 to Vastar Special Termination Allowance Plan,
effective as of March 10, 1999
10.8 Amendment No. 5 to Vastar Capital Accumulation Plan, effective
as of December 1, 1998
10.9 Amendment No. 5 to Vastar Capital Accumulation Plan II, effective
as of December 1, 1998
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
AMENDMENT NO. 1
TO
VASTAR RESOURCES, INC.
ANNUAL INCENTIVE PLAN
-----------------------------
The Vastar Resources, Inc. Annual Incentive Plan (the "Plan") is hereby amended
effective March 10, 1999.
1. Subsection 2(d) is hereby amended to read as follows:
"(d) "Committee" means (i) prior to a Change of Control, the
Compensation Committee of the Board, and (ii) on and after a Change of
Control, the Special Plan Administrator."
2. Subsections (n), (o), (p), (q) and (r) are added to Section 2 of the Plan to
read as follows:
"(n) The term "Anticipatory Change of Control" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(o) The term "Change of Control" shall be ascribed the meaning set
forth for such term on Annex A attached hereto, but excluding an event
described under paragraph (3) of the definition of such term on Annex A.
(p) "Change of Control Trust" means the trust established by the
Company to provide for the payment of any benefits, in whatever form is
required, under the Plan on and after a Change of Control.
(q) The term "Special Plan Administrator" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(r) "Target AIP Award" means the target award determined by the
Compensation Committee of the Board under the Vastar Resources, Inc. Annual
Incentive
<PAGE>
Plan for the relevant Plan Year, or if none was determined for
that Plan Year, the most recent target award determined."
3. Sections 7 through 9 are renumbered as Sections 8 through 10 and a new
Section 7 is added to the Plan to read as follows:
"SECTION 7. CHANGE OF CONTROL
(a) Within 60 days following a Change of Control, each Participant
shall be paid an amount equal to (i) (A) if the Change of Control occurred
during the first six months of a Plan Year, an amount equal to 50 percent
of the Participant's Target AIP Award for such Plan Year, and (B) if the
Change of Control occurred during the second six months of a Plan Year, an
amount equal to 100 percent of the Participant's Target AIP Award for such
Plan Year, plus (ii) the Target AIP Award applicable to such Participant
for the Plan Year ending immediately prior to the Change of Control if a
specific Award has not been paid to such Participant with respect to such
Plan Year.
(b) Upon the earlier to occur of an Anticipatory Change of Control or
a Change of Control, the Company or any successor to the obligations of the
Company shall fund the Change of Control Trust in accordance with its
terms."
3. Subsection 8(a) of the Plan is amended to read as follows:
"(a) The Company intends to establish a grantor trust to aid in
accumulating the amounts necessary to pay any amount awarded to any
Participant for any Plan Year, and any Award deferred pursuant to Section 6
or any interest credited thereon. All Awards, and any interest credited
thereon, shall be paid from the general funds of the Company or any
successor to the obligations of the Company to the extent not paid from the
grantor trust (including, if applicable, the Change of Control Trust).
Under no circumstances shall a
2
<PAGE>
Participant or other person have any interest whatsoever in any particular
property or assets of the Company as a result of this Plan or any Award
made thereunder."
4. Subsection 8(d) of the Plan is added to the Plan to read as follows:
"(d) Any action required to be taken under this Plan by the Chief
Financial Officer and the General Counsel of the Company may be taken by
either individual if the other position is then vacant, and if both
positions are vacant, such action may be taken by any other officer of the
Company with a position of vice president or above. Any action required to
be taken by the Vice President, Human Resources of the Company may, if such
position is vacant, be taken by any other officer of the Company with a
position of vice president or above."
5. Section 9 of the Plan is amended to read as follows:
"SECTION 9. AMENDMENT, SUSPENSION OR TERMINATION
(a) Amendment or Termination Generally. Except as provided under
Subsections 9(b) and (c), the Board may suspend, terminate or amend the
Plan at any time. Amendment, suspension or termination of the Plan shall
not alter the amount of an Award accrued for a Plan Year and not yet paid
prior to such amendment, suspension or termination.
(b) Amendment or Termination During Anticipatory Change of Control.
The Plan may not be terminated or amended during the period after the
occurrence of an Anticipatory Change of Control and prior to a Change of
Control or a written determination by the Chief Financial Officer and the
General Counsel of the Company, approved by either the Board of Directors
of the Company (the "Board"), the Outside circumstances shall a Directors
or the Executive Committee of the Board, that an Anticipatory Change of
Control has ended without concluding in a Change of Control, except that
the Board may amend the Plan during such
3
<PAGE>
a period as it may deem reasonably necessary provided, that if any such
amendment reduces, or could reduce, the value of any benefit of a
Participant, as determined in the sole discretion of the Special Plan
Administrator, the Company or any successor to the obligations of the
Company shall, prior to, and as a condition precedent to, such amendment
going into effect, provide substantially equivalent value in replacement
thereof to the Participant in the reasonable determination of the Special
Plan Administrator.
(c) Amendment or Termination on or After a Change of Control. The
Plan may not be amended or terminated on or after a Change of Control until
all payments that may be due pursuant to Subsection 7(a) of the Plan, as
determined in the sole discretion of the Special Plan Administrator of the
Change of Control Trust, have been made, unless consent to such amendment
is obtained from all of the Participants or, in the alternative, the
Participants whose Plan benefits are affected by such amendment. After a
Change of Control the Plan will terminate upon the payment of all amounts
due and payable under Section 7(a) hereof, provided, however, that such
termination shall not affect any right of an Employee which shall have
accrued prior to such termination."
Executed as of the 10th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
-------------------------- -------------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
4
<PAGE>
EXHIBIT 10.2
VASTAR RESOURCES, INC.
__________________________________________
Executive Deferral Plan
Amended and Restated Effective March 24, 1999
<PAGE>
VASTAR RESOURCES, INC.
EXECUTIVE DEFERRAL PLAN
TABLE OF CONTENTS
Page No.
ARTICLE I GENERAL PROVISIONS............................ 1
Section 1.1 Purpose and Intent of Plan.................... 1
Section 1.2 Effective Date of Plan........................ 1
Section 1.3 Definitions................................... 1
ARTICLE II PARTICIPATION AND DEFERRAL COMMITMENTS........ 6
Section 2.1 Eligibility and Participation................. 6
Section 2.2 Basic Forms of Deferral....................... 6
Section 2.3 Deferral Elections............................ 7
Section 2.4 Limitation on Deferral........................ 7
Section 2.5 Termination of Deferral Commitments........... 7
Section 2.6 Transfers..................................... 7
Section 2.7 Modification of Deferral Commitments.......... 8
Section 2.8 Special Transfer.............................. 9
ARTICLE III DEFERRED COMPENSATION ACCOUNTS................ 10
Section 3.1 Accounts...................................... 10
Section 3.2 Deferred Compensation......................... 10
Section 3.3 Interest Rate................................. 10
Section 3.4 Vesting of Accounts........................... 10
Section 3.5 Statement of Accounts......................... 10
ARTICLE IV PLAN BENEFITS................................. 11
Section 4.1 Plan Benefit.................................. 11
Section 4.2 Form of Retirement Distribution............... 11
Section 4.3 Form of Distribution Upon Termination
of Employment................................. 12
Section 4.4 Survivor Benefits............................. 13
Section 4.5 In Service Distributions...................... 14
Section 4.6 Unscheduled Distributions..................... 15
Section 4.7 Disability.................................... 15
Section 4.8 Valuation and Settlement...................... 15
Section 4.9 Small Benefit................................. 16
Section 4.10 Change in Control............................. 16
ARTICLE V DESIGNATION OF BENEFICIARY.................... 17
Section 5.1 Designation of Beneficiary.................... 17
Section 5.2 Failure to Designate Beneficiary.............. 17
i
<PAGE>
ARTICLE VI ADMINISTRATION................................ 18
Section 6.1 Rules of Conduct.............................. 18
Section 6.2 Legal, Accounting, Clerical and
Other Services................................ 18
Section 6.3 Interpretation of Provisions.................. 18
Section 6.4 Records of Administration..................... 18
Section 6.5 Denial of Claim............................... 18
Section 6.6 Liability of Committee........................ 18
ARTICLE VII AMENDMENT AND TERMINATION..................... 19
Section 7.1 Amendment of Plan............................. 19
Section 7.2 Termination................................... 19
Section 7.3 Effect of Amendment or Termination............ 19
ARTICLE VIII MISCELLANEOUS................................. 20
Section 8.1 Unfunded Benefit Plan......................... 20
Section 8.2 Grantor Trust................................. 20
Section 8.3 Tax Withholding............................... 20
Section 8.4 Payments and Benefits Not Assignable.......... 20
Section 8.5 No Right of Employment........................ 21
Section 8.6 Adjustments................................... 21
Section 8.7 Obligation to Vastar.......................... 21
Section 8.8 Protective Provisions......................... 21
Section 8.9 Gender, Singular and Plural................... 21
Section 8.10 Law Governing................................. 22
Section 8.11 Notice........................................ 22
Section 8.12 Successors and Assigns........................ 22
Section 8.13 Provisions for Incapacity..................... 22
Section 8.14 Payments or Deposits.......................... 22
ii
<PAGE>
ARTICLE I
GENERAL PROVISIONS
Section 1.1 Purpose and Intent of Plan
This Plan is intended to provide the opportunity for eligible Employees to
accumulate supplemental funds through the deferral of portions of their regular
salary, Annual Incentive Plan and Variable Pay Plan awards and Executive
Supplementary Savings Plan benefits for retirement or special needs prior to
retirement and to provide certain make-up deferrals with respect to the CAP
Plan.
Section 1.2 Effective Date of Plan
The Plan was originally adopted effective June 26, 1994. This Plan as
amended and restated shall be effective as of March 24, 1999.
Section 1.3 Definitions
(a) "Account" means a separate bookkeeping account maintained by Vastar for
each Participant and which measures and determines the amounts to be paid to the
Participant under the Plan for each component of Deferred Compensation, and
amounts described in Section 2.8. Separate subaccounts will be established for
separate components of Deferred Compensation, as applicable, deferred by a
Participant and for any amounts described in Section 2.8 applicable to such
Participant.
(b) "Administrative Committee" means the administrator of the CAP Plan or such
other committee as shall be appointed by the Vice President-Human Resources
of Vastar.
(c) "Anticipatory Change of Control" shall be ascribed the meaning set forth
for such term on Annex A attached hereto.
(d) "Administrator" means (1) prior to the earlier to occur of a Change of
Control or an Anticipatory Change of Control, Vastar or, as applicable, the
Administrative Committee and (2) on and after the earlier to occur of a Change
of Control or an Anticipatory Change of Control, the Special Plan Administrator,
which shall also assume all powers and duties of the Administrator described in
the Plan. Upon a written determination by the Chief Financial Officer and
General Counsel of Vastar, approved by either the Board of Directors of Vastar
(the "Board"), the Outside Directors or the Executive Committee of the Board,
that an Anticipatory Change of Control has ended without concluding in a Change
of Control (an "Anticipatory Change Termination"), Vastar or, as applicable, the
Administrative Committee will again become the Administrator. For purposes of
this definition a Change of Control shall not include an ARCO Acquisition.
(e) "ARCO" means Atlantic Richfield Company.
1
<PAGE>
(f) "ARCO Acquisition" means a change of control as defined in paragraph (3) of
the definition of Change of Control on Annex A attached hereto.
(g) The term "ARCO Deferral Commitment" means a promise made by a person to
defer compensation pursuant to the provisions of the Atlantic Richfield
Company Executive Deferral Plan (the "ARCO Deferral Plan") which correspond
to Article III of this Plan and as to which the liability for such person's
account balance in the ARCO Deferral Plan has been transferred to and
accepted by Vastar.
(h) "Awards" means awards made under the Vastar Resources, Inc. Annual
Incentive Plan or the Vastar Resources, Inc. Variable Pay Plan.
(i) "Base Pay" means base salary or wages paid to an Employee during the year
for the Employee's personal services, excluding all extra pay such as, but
not limited to: overtime, premium, bonuses, Awards, or other allowances.
(j) "Beneficiary" means a person who is entitled to receive an Employee's
interest under this Plan in the event of the Employee's death.
(k) "CAP Plan" means the Vastar Resources, Inc. Capital Accumulation Plan II
maintained by Vastar, or any successor plan.
(l) "Cause" shall mean (1) the conviction of the Employee for any felony
involving dishonesty, fraud or breach of trust or (2) the willful engagement by
the Employee in gross misconduct in the performance of his or her duties that
materially injures the Surviving Entity.
(m) "Change of Control" shall be ascribed the meaning set forth for such term
on Annex A attached hereto, and shall also mean a Secondary Change of Control.
(n) "Code" means the Internal Revenue Code of 1986, as amended.
(o) "Deferral Commitment" means a promise made by an Employee to defer
compensation pursuant to Article II for which a Participation Agreement has been
submitted by the Employee to Vastar. For the purpose of calculating any Death
Benefit pursuant to Section 4.4(b), a Deferral Commitment shall be deemed
effective as of the date the applicable Participation Agreement is delivered by
the Participant to Vastar.
(p) "Deferral Period" means the period of years the maximum number of which is
established by the Administrator in advance of the Deferral Commitment, over
which the Employee elects to defer Base Pay, Awards or ESSP benefits. A new
Deferral Period shall normally start each January 1, except that with respect to
an Employee who is immediately eligible upon his or her commencement of
employment or who otherwise attains eligibility following the Effective Date,
the Deferral Period shall commence no later than 31 days following the
Employee's first day of employment or notification of attainment of eligibility,
as applicable.
2
<PAGE>
(q) "Deferred Compensation" means the amount of Base Pay, Awards and/or ESSP
benefits that a Participant elects to defer pursuant to a Deferral Commitment
and, if applicable, CAP Plan Make-up Deferrals under Section 2.2(b) and special
transfers pursuant to Section 2.8.
(r) "Disability" means a disability as determined under the provisions of the
Vastar Resources, Inc. Executive Long-Term Disability Plan or any successor
plan.
(s) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(t) "ESSP" means the benefit under the Vastar Resources, Inc. Executive
Supplementary Savings Plan, or any successor plan.
(u) "Effective Date" means June 26, 1994.
(v) "Employee" means an individual who is a regular employee of Vastar or its
subsidiaries on or after June 26, 1994.
(w) "Financial Hardship" means a condition of financial difficulty, determined
by the Administrator, upon advice of its counsel, on the basis of written
information supplied by the Participant in accordance with such standards as
are, from time to time, established by the Administrator and which condition is
sufficient, in the judgment of such counsel, to justify a change of election
under the Plan without causing the receipt of taxable income by any other
Participant in the Plan in advance of the time the Participant actually receives
his or her benefit.
(x) "In-Service Distribution" means a distribution pursuant to Section 4.5
prior to Termination of Employment.
(y) "Interest Rate" means the interest rate announced by Vastar in advance of
the election period for a Plan Year that shall constitute the interest rate
applicable to that Plan Year. After a Change of Control, the Interest Rate
shall be determined by the Special Plan Administrator for each year based on an
allocation of the highest rate of return of the Trust for that year or, if the
Trust holds corporate-owned life insurance, the highest rate of return that the
Insurance Administrator determines is sustainable for the projected life of the
Trust; provided, however, that during the Transition Window, if any, the
Interest Rate shall be calculated using the same formula used to calculate the
Interest Rate in the first full year preceding the year in which the applicable
Anticipatory Change of Control occurs.
(z) "Outside Director" shall be ascribed the meaning set forth for such term on
Annex A attached hereto.
(aa) "Participant" means any Employee or a former Employee who by participating
in this Plan as provided in Article II has an Account in the Plan.
3
<PAGE>
(bb) "Participation Agreement" means the agreement submitted by a Participant to
Vastar prior to the beginning of the Deferral Period, with respect to one or
more Deferral Commitments made for such Deferral Period.
(cc) The "Payment Period" shall mean the period of time beginning on the first
day of the month immediately following the Participant's date of death and
ending on the first day of the month in which the Participant would have reached
age 65.
(dd) "Plan" means this Vastar Resources, Inc. Executive Deferral Plan, as
amended and restated effective on the date provided for herein.
(ee) "Plan Year" means each calendar year beginning on January 1 and ending on
December 31.
(ff) "Retirement" means, with respect to any Participant:
(i) prior to a Change of Control, a Termination of Employment:
(1) with a right to an immediate monthly benefit allowance under a
retirement plan maintained by Vastar, ARCO or their affiliates or
respective successors in interest;
(2) the attainment of age 55 and with at least 10 years of service
with Vastar, ARCO, or their affiliates or their respective successors
in interest; or
(3) the attainment of age 65; or
(ii) on and after a Change of Control, a Termination of Employment:
(1) meeting any of the conditions described in (i) (1), (2) or (3)
above; or
(2) that is an involuntary termination of employment other than for
Cause.
(gg) "Retirement Distribution" means a distribution of a Participant's Account
in accordance with an effective election of a Participant made under
Section 4.2.
(hh) "Salary" means the Employee's regular, bi-weekly salary, excluding Awards
and any other special or additional compensatory payments made by Vastar or its
subsidiaries.
(ii) "Secondary Change of Control" shall mean a sale by ARCO (directly or
indirectly) within one year after an ARCO Acquisition of 85% or more of the
assets held by Vastar Resources, Inc. immediately prior to the ARCO Acquisition.
(jj) "Special Plan Administrator" shall be ascribed the meaning set forth for
such term on Annex A attached hereto.
4
<PAGE>
(kk) "Termination of Employment" means the Employee's termination of employment
from Vastar, ARCO and their affiliates and their respective successors in
interest.
(ll) "Transition Window" shall mean the period of up to one year after an ARCO
Acquisition, which period shall begin on the date of the consummation of the
ARCO Acquisition and end on the earlier of the date of the consummation of a
Secondary Change of Control, as hereafter defined, or the expiration of one year
from the date of the consummation of the ARCO Acquisition.
(mm) "Trust" means the Vastar Resources, Inc. Amended and Restated Executive
Deferral Plan and Supplementary Executive Retirement Plan Trust Agreement
entered into between Vastar Resources, Inc. and Wachovia Bank, N.A., effective
March 10, 1999, as thereafter amended or any successor trust agreement.
(nn) "Valuation Date" means the last day of each month, or such other dates as
the Administrator may determine in its discretion, which may be either more or
less frequent, for the valuation of Participants' Accounts.
(oo) "Vastar" shall mean Vastar Resources, Inc. or its successor.
5
<PAGE>
ARTICLE II
PARTICIPATION AND DEFERRAL COMMITMENTS
Section 2.1 Eligibility and Participation
(a) Eligibility. Eligibility to make a Deferral Commitment shall be limited to
Employees who are classified in the Vastar executive management group Tier 1, 2
or 3, or are in job grades VR08 or VR07 in Vastar's exempt grade structure and,
with respect to job grade VR07, have an annual Base Pay of at least $130,000.
(b) Participation. An eligible Employee may elect to participate in the Plan
by submitting a Participation Agreement, in accordance with rules, including any
rules with respect to the time and form of submission, established by the
Administrator.
(c) Change of Control. An Employee who was not a Participant in the Plan prior
to a Change of Control shall not be eligible to become a Participant after a
Change of Control.
(d) Special Transfer. An Employee who has a transfer pursuant to Section 2.8
shall be considered a Participant.
Section 2.2 Basic Forms of Deferral
A Participant may elect to defer the following forms of compensation in a
Participation Agreement:
(a) Base Pay, Awards and ESSP Benefit Deferral. A Participant may elect to
defer the Participant's Base Pay, Awards and ESSP benefits earned during a
Deferral Period, subject to any limitations, conditions or restrictions, such as
minimum or maximum amounts that may be deferred, as are prescribed in Section
2.4 hereof or, subject to Section 2.4, otherwise prescribed by the Administrator
in advance of the Deferral Period.
(b) Cap Plan Make-Up Deferral. To the extent that amounts are deferred into
this Plan, Vastar will credit a CAP Plan make-up amount, if any, to the Account
of any Participant who (i) is not a participant in the ESSP , and (ii) has
contributed to the CAP Plan at least the minimum percentage required so as to be
entitled to the maximum possible matching Vastar contribution to the CAP Plan.
This CAP Plan make-up amount shall be based upon the matching Vastar
contribution formula then in effect under the CAP Plan and shall be equal to the
additional amount that Vastar would have contributed to the CAP Plan on behalf
of the Participant had (x) the deferral under this Plan not been made, and (y)
the Participant contributed the portion of the amount deferred under this Plan
which would have been required under the CAP Plan to receive the maximum
possible matching Vastar contribution under the CAP Plan. All limitations
imposed upon the Participant's contribution and the matching Vastar contribution
by the Code shall be taken into consideration when calculating the above-
described CAP Plan make-up amount. However, in the event that any amount of Base
Pay that any Participant elects to defer
6
<PAGE>
into the CAP Plan is not permitted to be deferred into the CAP Plan because of
limitations imposed by the Code (e.g., Section 415 of the Code), other than the
limitation on the amount of CAP Plan deferrals imposed by Section 402(g) of the
Code, such amount shall be deferred under this Plan to the extent that but for
such limitation imposed by the Code such amount would have received a matching
Vastar contribution under the CAP Plan. The Account of such Participant shall
also be credited with the matching Vastar contribution which Vastar would have
made to the CAP Plan had the deferral been made into the CAP Plan.
Section 2.3 Deferral Elections
Prior to each Deferral Period, at a time and on a form prescribed by the
Administrator, each Participant may execute an election form to defer Base Pay,
Awards and/or ESSP benefits, as applicable, which shall be irrevocable except as
modifications are authorized pursuant to Section 2.7 of this Article.
Section 2.4 Limitation on Deferral
Deferral Commitments shall be subject to the following limitations:
(a) A Participant may not defer more than 50 percent of the Participant's Base
Pay during a Plan Year.
(b) A Participant may defer up to 100% of the Participant's Award or ESSP
benefit.
(c) A minimum amount, if any, that may be deferred for the Deferral Period
relating to a Deferral Commitment, shall be established by the Administrator in
advance of the Deferral Period and shall be allocable among the forms of
Deferred Compensation described in Sections 2.2(a).
Section 2.5 Termination of Deferral Commitments
(a) Termination of Employment. A Participant's Deferral Commitments shall
terminate upon the Participant's Termination of Employment. However, any
Deferral Commitment relating to Base Pay, Awards or ESSP benefits to which a
Participant is or becomes entitled on or after Termination of Employment shall
remain binding.
(b) Change of Control. A Participant's Deferral Commitment shall terminate on
a Change of Control. However, if the Change of Control results from an ARCO
Acquisition, then it shall terminate upon the expiration of the Transition
Window.
Section 2.6 Transfers
(a) Except as provided in Section 2.6(b), a Participant's Deferral
Commitments shall be irrevocable regardless of a transfer of employment between
Vastar and ARCO.
7
<PAGE>
(b) In the case of a transfer prior to a Change of Control, the
Participant's Deferral Commitment shall apply to the compensation to which the
Participant is entitled under the plans and programs of the transferee company.
The executive deferral plan of the transferee company shall assume
responsibility for any deferral commitment which the Participant made under the
executive deferral plan of the transfer or company for the remaining portion of
the Deferral Period. The transferee company may, however, in its discretion,
permit a transferring Employee to make a re-election with respect to his or her
future deferral commitments.
(c) In the case of a transfer from Vastar to ARCO (or to any of ARCO's
subsidiaries or affiliates) on or after an ARCO Acquisition, a Participant's
Deferral Commitment shall also apply to awards, salary or Executive Supplemental
Savings Plan benefits under the applicable plans and programs of ARCO, or its
subsidiaries and affiliates, to which the Participant is entitled during the
Transition Window.
(d) During the Transition Window, Vastar shall credit to the Participant's
Account in the Plan all Deferred Compensation and the portion of any
corresponding compensation paid under any plan or program of ARCO, or its
subsidiaries or affiliates, to which the Participant's Deferral Commitment
applies. With respect to any capital accumulation or similar plan of ARCO, or
its subsidiaries or affiliates, in which a Participant is participating, the
term Deferred Compensation shall include any amount that would be required to be
credited pursuant to Section 2.2(b), if the term "CAP Plan" included such
capital accumulation or similar plan.
(e) Vastar shall subtract from amounts credited to a Participant's Account
under Section 2.6(d) any amounts credited to an executive deferral plan by ARCO,
or its subsidiaries or affiliates (other than Vastar), relating to the same
compensation and deferral commitment. ARCO, and its subsidiaries and
affiliates, shall be permitted to withhold from amounts payable to the
Participant under any applicable plans or program of ARCO, or its subsidiaries
or affiliates, any amount considered deferred and credited under Section 2.6(d)
to the Plan. The Administrator shall allow Participants to make any election
under this Plan during the Transition Window at such appropriate time, all in
accordance with the practice used prior to the Change of Control.
Section 2.7 Modification of Deferral Commitments
Deferral Commitments shall be irrevocable except as follows:
(a) Financial Hardship. The Administrator may permit a Participant to
reduce the amount to be deferred under this Plan under a Deferral Commitment,
or to waive the remaining deferrals under a Deferral Commitment upon a finding
that the Participant has suffered a Financial Hardship.
(b) Accelerated Deferral. Subject to the limitations imposed by Section
2.4 hereof, at the discretion of the Administrator, prior to the beginning of
any Plan Year in any Deferral Period as to which two or more Plan Years remain,
a Participant may elect, on a form prescribed
8
<PAGE>
by the Administrator, to accelerate the amount of Deferred Compensation
previously elected for the remaining Plan Years in such Deferral Period.
(c) Increases in Deferrals. Subject to the limitations imposed by Section
2.4 hereof, the Administrator may permit a Participant, on any Deferral
Commitment form prescribed by the Administrator, to increase the amount elected
to be deferred under a prior Deferral Commitment with respect to any Plan Year
beginning after the date of the election.
Section 2.8 Transfer From Supplemental Executive Retirement Plan
Any lump-sum benefit described in Section 5.3 of the Vastar Resources, Inc.
Supplementary Executive Retirement Plan shall be transferred to the Plan and
credited to the Participant's Account at the time specified in such section and
such amount shall thereafter be governed by the Plan provisions applicable to
Deferred Compensation, including, without limitation, distribution elections.
9
<PAGE>
ARTICLE III
DEFERRED COMPENSATION ACCOUNTS
Section 3.1 Accounts
For record-keeping purposes only, an Account shall be maintained for each
Participant.
Section 3.2 Deferred Compensation
Deferred Compensation shall be credited to the Participant's Account as of
the date when the corresponding non-deferred portion of the compensation is paid
or would have been paid. The Participant's Account shall be debited by the
amount of distributions as of the date such distributions are made.
Section 3.3 Interest Rate
(a) Prior to a Change of Control, a Participant's Account shall be credited
with interest each day during each Plan Year with interest at the Interest Rate.
This interest shall be compounded annually based on a 365/366 day year such that
interest credited in any current Plan Year shall not be added to principal or
accrue interest until January 1 of the next Plan Year.
(b) After a Change of Control, other than an ARCO Acquisition, a
Participant's Account shall be credited with interest at the Interest Rate.
Unless the Administrator determines that a more frequent crediting of interest
is administratively practical, this interest shall be compounded quarterly, such
that interest credited at the end of each quarter shall be added to principal
and accrue interest beginning on the first day of the succeeding quarter.
Section 3.4 Vesting of Accounts
Each Participant shall be 100 percent vested at all times in the
undistributed amounts credited to his or her Account.
Section 3.5 Statement of Accounts
The Administrator shall submit to each Participant periodic statements
of the Participant's Account.
10
<PAGE>
ARTICLE IV
PLAN BENEFITS
Section 4.1 Plan Benefit
If a Participant is entitled to a distribution under this Plan for any
reason, Vastar shall be obligated to make distributions of the Participant's
Account at such time or times as shall be required hereunder, provided, however,
that a Participant's Account shall continue to be credited with interest at the
Interest Rate until the Account is distributed in full.
Section 4.2 Form of Retirement Distribution
(a) A Retirement Distribution shall be paid to the Participant at
Retirement at the time and in the manner elected by the Participant in the
election that is effective on the Participant's date of Termination of
Employment. Any election that is not effective on the Participant's Termination
of Employment shall never become effective. A Participant's election shall be
irrevocable, except as follows:
(i) Prior to each Deferral Period prior to a Change of Control, on a
form prescribed by the Administrator, each Participant who is then an
Employee may change the time and/or form of the Retirement
Distribution of the Participant's Account. The change, when it
becomes effective, shall apply to all amounts in the Participant's
Account, whether attributable to Deferred Compensation credited to the
Participant's Account before or after the change. The election shall
not be effective until one year after the election is filed.
(ii) Within 30 days after the earlier to occur of an Anticipatory
Change of Control or a Change of Control, on a form prescribed by the
Administrator each Participant may change his or her previous
Retirement Distribution election and may make an election as to the
time and/or the form of Retirement Distribution of the Participant's
Account which would be paid in the event of the Participant's
involuntary termination other than for Cause after a Change of
Control. Each Participant may also make changes to such elections
annually thereafter, on a form prescribed by the Administrator,
provided, however, that any subsequent annual election shall not be
effective until one year after the election is filed.
(iii) At any time prior to Retirement or the commencement of the
payment of benefits (or in the case of a Participant who has elected
installment payments, at any time prior to the payment of the last
installment) a Participant may request, by application to the
Administrator, that a prior Retirement Distribution election be
changed. Such request will be approved and the Participant's Account
will be paid in accordance with such election without any reduction
in, or imposition of any penalty on, the Participant's Account if the
Administrator (i) determines that the Participant has experienced a
Financial Hardship justifying the request for a
11
<PAGE>
change of election; or (ii) determines, in its discretion, that it is
appropriate to approve the Participant's requested change based on the
interests of Vastar, or its subsidiaries or affiliates, or the grantor
trust established under Section 8.2.
(iv) If a Participant fails to make an election under this Plan as to
the form and/or commencement date of his or her Retirement
Distribution, payment of the Participant's Account will be made in a
lump sum immediately following the Participant's Retirement.
(b) Notwithstanding anything in this Plan to the contrary, the only
available forms and times of payment upon Retirement are as follows:
(i) Lump Sum. A single payment.
(ii) Installment Payments. Monthly installment payments in
substantially equal payments of principal and interest over payment
period elected by the Participant and communicated by the
Administrator on the applicable election form. However, on and after
a Change of Control, the available payment periods shall be 1, 2, 3,
5, 10, 15 or 20 years as elected by the Participant. The amount of
each of the monthly installments shall be redetermined effective as of
January 1 of each year during the payment period elected by the
Participant. This redetermination shall be based on the total amounts
remaining in the Participant's Account on each such date (including
any interest that may have accrued) and the remaining number of months
in the payment period.
(iii) When Payments Begin. The lump sum shall be paid or installment
payments shall begin on or after Retirement on the date elected by the
Participant and communicated by the Administrator on the applicable
election form. However, the dates available for payments to begin on
and after a Change of Control shall be either (i) a stated number of
months or number of January's elapsed after Retirement or (ii) the
date of the Participant's attainment of a specified age, as elected by
the Participant. Notwithstanding anything to the contrary in this
Plan, the latest date on which payments can begin is the Participant's
attainment of age 70 1/2. If there is no effective election in
place, the lump sum payment shall be made or installment payments
shall begin when the Participant has attained age 65.
Section 4.3 Form of Distribution Upon Termination of Employment
(a) On the Retirement of a Participant, the Participant's Account shall be
paid in accordance with the Participant's Retirement Distribution election.
(b) Subject to Section 4.3(c), on a Participant's Termination of
Employment (including for Cause) other than due to Retirement or death, the
Participant's Account shall be paid in a lump sum. This lump sum payment shall
be paid as soon as practical following Termination of
12
<PAGE>
Employment, unless the Administrator, in its sole discretion, determines that
the Participant's Account shall be paid in monthly installments over a period
not to exceed three years.
(c) If a Participant is not eligible to receive a Retirement Distribution
upon his or her date of Termination of Employment and such Participant's
employment is terminated involuntarily as a result of a reduction-in-force,
internal reorganization, job elimination or similar circumstance other than for
Cause (as determined by Vastar's Vice President-Human Resources); the
Participant's Account will be distributed in accordance with the Participant's
Retirement Distribution election and payments shall begin on the earliest date
the Participant would have become eligible to receive a payment had the
Participant remained employed until and terminated on such date. Absent a
Retirement Distribution election by the Participant, payment will be made in a
lump sum upon Termination of Employment.
Section 4.4 Survivor Benefits
(a) Death on or After Age 65. If a Participant dies on or after attaining
age 65 the survivor benefits shall be the Participant's Account, payable to the
Beneficiary in the form previously elected by the Participant.
(b) Termination of Employment by Death Prior to Age 65. If a
Participant's Termination of Employment as a result of death occurs prior to the
Participant obtaining age 65, a survivor benefit shall be paid to the
Participant's Beneficiary in monthly installments and shall be the greater of
(i) forty percent (40%) of the Participant's total Deferral Commitment or (ii)
the actual Account balance of the Participant, assuming a payout for the number
of years between the Participant's death and the year the Participant would have
attained age 65, but in no event less than ten years, increased by the
applicable Interest Rate credited on unpaid Account balances of deceased
Participants during each year of the payment period to the survivor.
Notwithstanding the foregoing, in the event the Participant's Termination of
Employment due to death occurs after any Change of Control other than an ARCO
Acquisition, the survivor benefits shall be the Participant's Account, payable
in monthly installments pursuant to this Section 4.4(b).
(c) Death After Termination of Employment and Prior to Age 65. If a
Participant dies after Termination of Employment and prior to age 65, the
Participant's Account, if any, shall be paid at the time and in the form that
would have been made to the Participant if the Participant had lived.
(d) Special Rule. If the Participant dies before age 65, the Survivor
Benefit will be paid in monthly installments until the Participant would have
attained age 65; provided, however, that if payment is made pursuant to Section
4.4 (b) of this Article, and the number of years between the Participant's death
and the year the Participant would have attained age 65 is less than the period
of installments elected by the Participant to be payable upon retirement, then
the Survivor Benefit will be paid in accordance with the Participant's
Retirement Distribution election.
13
<PAGE>
(e) Payments and Distributions. Amounts paid to a Beneficiary pursuant to
this Section shall be treated as distributions from the Participant's Account.
Section 4.5 In-Service Distributions
A Participant may elect to receive a distribution from his or her Account while
still an Employee (an "In-Service Distribution") subject to the following
restrictions:
(a) Timing of Election. The election to take an In-Service Distribution
from the Participant's Account must be made at the same time the Participant
makes an annual Deferral Commitment.
(b) Amount of Distribution. The amount that a Participant can elect to
receive as an In-Service Distribution shall be such portion of the Participant's
Account, as prescribed by the Administrator prior to the election. If a
previously elected amount exceeds the amount of funds in the Participant's
Account when an In-Service Distribution is to be made, only the amount of funds
in the Participant's Account will be distributed.
(c) Timing and Form of In-Service Distribution. The In-Service Distribution
shall begin at the time and in the form elected by the Participant, subject to
any reasonable limitations imposed by the Administrator. However, on the
Participant's Termination of Employment other than due to Retirement or death,
any In-Service Distribution election will be canceled and the Participant's
Account shall be distributed in accordance with Section 4.3. On the
Participant's Termination of Employment due to Retirement, any In-Service
Distribution election will be canceled and the Participant's Account shall be
distributed in accordance with the Participant's applicable effective Retirement
Distribution election. In no event shall an In-Service Distribution be made
prior to seven years following the start of the Deferral Period.
(d) Payments and Distributions. Amounts paid to a Participant pursuant to
this Section shall be treated as distributions from the Participant's Account.
Section 4.6 Unscheduled Distributions
(a) Upon a finding by the Administrator that a Participant has suffered a
Financial Hardship, following submission of an application by the Participant,
the Administrator shall make a distribution of all or a portion of the
Participant's Account, consistent with the finding of Financial Hardship but in
no event exceeding the amount of the Participant's request or the amount of
funds in the Participant's Account, without any reduction in, or imposition of
any penalty on, the Participant's Account. The distribution shall be made as
soon as administratively practical following the finding of Financial Hardship.
(b) A Participant may apply for a distribution of all or part of his or her
Account, without regard to any condition of Financial Hardship. Such
distribution shall be made as soon as practical following the Participant's
application. The Administrator may impose whatever penalty, in the form of a
forfeiture of a percentage of the amount requested and/or a suspension
14
<PAGE>
of participation, as determined by the Administrator upon the advice of counsel
for the Plan, as is deemed necessary to preclude the constructive receipt of
taxable income by any Participant in the Plan. However, following a Change of
Control such forfeiture percentage shall not exceed 25% in the absence of
controlling legal authority.
(c) The Administrator shall periodically engage counsel to review legal and
tax developments to assure continuous compliance with the relevant authorities
governing plan design to prevent constructive receipt.
(d) The Administrator shall notify Participants in writing of the specific,
current penalty in effect as described under Section 4.6(b), and shall update
this written notification periodically and in advance of any subsequent change
of which it is notified as a result of the review under Section 4.6(c). If it
is administratively impossible to provide such advance notification, the
notification shall be provided no later than 30 days following the effective
date of the change.
Section 4.7 Disability
If a Participant suffers a Disability, the Participant's Deferral
Commitments will cease except for any Awards or ESSP benefits which may be
payable thereafter. Distribution of the Deferred Compensation will not be made
due to the Disability and the Participant's Account will be distributed in
accordance with the method which the Participant had elected for payment of
Retirement Distributions with respect to such Deferred Compensation if and when
the Participant's Retirement occurs following his Disability. Absent a
Retirement Distribution election by the Participant, payment will be made in a
lump sum upon Termination of Employment.
Section 4.8 Valuation and Settlement
The date on which a lump sum is paid or the date on which installment
payments commence shall be the "Settlement Date." The Settlement Date shall be
no more than 30 days after the last day of the month in which the Participant or
his Beneficiary becomes entitled to payments on account of Retirement or other
Termination of Employment, unless the Participant elects to defer commencement
of payments following Retirement to a later date pursuant to the Participant's
applicable effective election. The Settlement Date for an In-Service
Distribution or delayed payments following Retirement shall be the month which
the Participant elects for commencement of such payments in the applicable
effective election form. The amount of a lump sum and the initial amount of
installment payments shall be based on the value of the Participant's Account as
of the Valuation Date at the end of the month immediately preceding the
Settlement Date. For example, the Valuation Date at the end of December shall be
used to determine lump sum or the initial amount of installment payments which
will be made in the following January.
15
<PAGE>
Section 4.9 Small Benefit
Notwithstanding any election made by the Participant, the Administrator,
shall pay any benefit in the form of a lump sum payment to the Participant or
the Participant's Beneficiary if the Account following a distribution is less
than $5,000, or the Account as of the date when payments to such Participant or
the Participant's Beneficiary would otherwise commence, is less than $5,000.
The determinations made under this Section 4.9 shall be in the sole discretion
of the Administrator.
Section 4.10 Change in Control
Upon a Change of Control, the interests of all then remaining Participants
shall continue subject to Section 2.5(b), and provisions shall be made in
connection with such transaction for the continuance of the Plan and the
assumption of the obligations of Vastar under the Plan by Vastar's successor(s)
in interest.
16
<PAGE>
ARTICLE V
DESIGNATION OF BENEFICIARY
Section 5.1 Designation of Beneficiary
Each Participant shall have the right to designate a Beneficiary or
Beneficiaries to receive Participant's interest in Participant's Account upon
Participant's death. Such designation shall be made on a form prescribed by and
delivered to the Administrator. The Participant shall have the right to change
or revoke any such designation from time to time by filing a new designation or
notice of revocation with the Administrator. No notice to any Beneficiary nor
consent by any Beneficiary shall be required to effect any such change or
revocation.
Section 5.2 Failure to Designate Beneficiary
If a Participant shall fail to designate a Beneficiary before the
Participant's death, or if no designated Beneficiary survives the Participant,
the Administrator shall pay the balance in each of the Participant's Accounts in
a lump sum to the executor or administrator for his or her estate.
17
<PAGE>
ARTICLE VI
ADMINISTRATION
Section 6.1 Rules of Conduct
The Administrator shall adopt such rules for the conduct of its
business and administration of this Plan as it considers desirable, provided
they do not conflict with the provisions of this Plan.
Section 6.2 Legal, Accounting, Clerical and Other Services
The Administrator may authorize one or more of its members, if any, or
any agent to act on its behalf and may contract for legal, accounting, clerical
and other services to carry out this Plan. All expenses of the Administrator
shall be paid by Vastar or by the trustee of the grantor trust described in
Section 8.2 (the "Trustee").
Section 6.3 Interpretation of Provisions
The Administrator shall have the right to interpret the provisions of
this Plan and to decide questions arising in its administration. The decisions
and interpretations of the Administrator shall be final and binding on Vastar,
Participants, the Trustee and all other persons.
Section 6.4 Records of Administration
The Administrator shall keep records reflecting the administration of
this Plan, which shall be subject to audit by Vastar, the Trustee and the
Special Plan Administrator (if it is not the Administrator).
Section 6.5 Denial of Claim
The Administrator shall provide adequate notice in writing to any
Participant or Beneficiary whose claim for benefits under this Plan has been
denied, setting forth the specific reasons for such denial. The Participant or
Beneficiary will be given an opportunity for a full and fair review by the
Administrator of the decision denying the claim. The Participant or Beneficiary
shall be given 60 days from the date of the notice denying any such claim within
which to request such review.
Section 6.6 Liability of Committee
The Administrator shall not be liable for any action taken in good
faith or for exercise of any power given to it or, with respect to the
Administrative Committee, for the actions of other members of said Committee.
18
<PAGE>
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Amendment of Plan
Prior to the earlier to occur of an Anticipatory Change of Control or
a Change of Control, and subject to Section 7.3 hereof, this Plan may be amended
from time to time by the Board of Directors of Vastar or its designee.
Notwithstanding the above, upon the earlier to occur of (i) an Anticipatory
Change Termination (as defined in Section 1.3(d)) or (ii) the expiration of the
Transition Window (other than by a Secondary Change of Control), this Plan may
again be amended, subject to Section 7.3, from time to time by the Board of
Directors of Vastar or its designee.
Section 7.2 Termination
Vastar intends to continue this Plan indefinitely, but reserves the
right to terminate it at any time, subject to Section 7.3. However, upon the
earlier to occur of an Anticipatory Change of Control or a Change of Control,
this Plan cannot be terminated until the earlier to occur of (i) an Anticipatory
Change Termination (as defined in Section 1.3(d)), (ii) 50 years from the date
of the consummation of a Change of Control or (iii) the date all benefits
payable hereunder have been paid in accordance with the terms and conditions of
the Plan. Upon termination pursuant to (ii) above, all benefits accrued shall
be paid to Plan Participants or their Beneficiaries in a lump sum.
Notwithstanding the above, upon the expiration of the Transition Window (other
than by a Secondary Change of Control), this Plan may again be terminated, at
any time subject to Section 7.3.
Section 7.3 Effect of Amendment or Termination
No amendment or termination of this Plan may adversely affect the
benefit payable or rights afforded to any Participant as of the effective date
of the amendment or termination, or any Beneficiary who, as of such date, was
then eligible to receive a benefit under this Plan.
Section 7.4 Special Amendments Approved by Participants
Notwithstanding anything to the contrary in this Article VII, after
the earlier to occur of an Anticipatory Change of Control or a Change of
Control, this Plan may be amended, subject to Section 7.3, by a vote of 80% or
more of the votes cast by the Participants with regard to such amendment. Each
Participant shall be entitled to a number of votes equal to the number of
dollars credited to his or her Account as of the last day of the month
immediately preceding the vote. In the event any material amendment is approved
as provided above, the Participants who vote against the amendment shall be
given an option to receive a lump sum distribution of their Account as soon as
practicable after the effective date of the amendment.
19
<PAGE>
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Unfunded Benefit Plan
This Plan is intended to constitute a plan which is unfunded and maintained
primarily for the purpose of providing deferred compensation in the form of
additional retirement benefits to a select group of management or highly
compensated employees, as defined in (S)201(a)(2), (S)301(a)(3) and (S)401(a)(1)
of ERISA.
Section 8.2 Grantor Trust
Although Vastar is responsible for the payment of all benefits under the
Plan, Vastar may, in its discretion, contribute funds to a grantor trust for the
purpose, as it deems appropriate, of paying benefits under this Plan. Such
trust may be irrevocable, but assets of the trust shall be subject to the claims
of creditors of Vastar or its successors to the extent provided in such trust.
Upon the earlier to occur of a Change of Control or an Anticipatory Change of
Control, Vastar shall be required to make certain contributions to grantor trust
pursuant to the terms of that certain trust agreement between Vastar or its
successors and Wachovia Bank, N.A., as trustee dated as of March 10, 1999 or
any successor trust agreement including any amendments or supplements thereto or
if such trust agreement has not been executed such grantor trust of Vastar
designated by the Senior Vice President and Chief Financial Officer and the
General Counsel of Vastar. To the extent any benefits provided under the Plan
are actually paid from the trust, Vastar shall have no further obligation with
respect thereto but to the extent not so paid, such benefits shall remain the
obligation of, and shall be paid, by Vastar. The Participants shall have the
status of unsecured creditors insofar as their legal claim for benefits under
the Plan, and the Participants shall have no security interest in the assets of
the grantor trust.
Section 8.3 Tax Withholding
Vastar shall have the right to withhold from Salary (or otherwise to
cause the Participant or the executor or administrator of his or her estate, or
his or her Beneficiary to make payment to Vastar of) any federal, state local or
foreign taxes required to be withheld with respect to the Participant's Account
and any payments therefrom, or if not satisfied in such manner, the
Participant's Account may be debited for such taxes paid by or on behalf of
Vastar. The Administrator shall withhold from Plan distributions such amount as
shall be necessary to satisfy applicable federal, state and local tax
withholding requirements with respect to such distribution.
Section 8.4 Payments and Benefits not Assignable
Payments to and benefits under this Plan are not assignable,
transferable or subject to alienation since they are primarily for the support
and maintenance of the Participants and their joint annuitants or Beneficiaries
after retirement. Similarly, subject to Section 8.2, such
20
<PAGE>
payments shall not be subject to attachments by creditors of, or through legal
process against, Vastar, the Administrator or Participant.
Section 8.5 No Right of Employment
The provisions of this Plan shall not give a Participant the right to
be retained in the service of Vastar nor shall this Plan or any action taken
under the Plan be construed as a contract of employment.
Section 8.6 Adjustments
The Administrator may, with respect to a Participant, adjust such
Participant's benefit under this Plan or make such other adjustments with
respect to such Participant as are required to correct administrative errors or
provide uniform treatment of Participants in a manner consistent with the intent
and purpose of this Plan.
Section 8.7 Obligation to Vastar
If a Participant becomes entitled to a distribution of benefits under
the Plan, and if at such time the Participant has outstanding any debt,
obligation, or other liability representing an amount owing to Vastar or its
subsidiaries and affiliates, or any benefit plan maintained by Vastar or its
subsidiaries and affiliates, then, prior to the earlier to occur of a Change of
Control or an Anticipatory Change of Control, Vastar may offset such amount owed
to it or such benefit plan against the amount of benefits otherwise
distributable. Determinations under this Section 8.7 shall be made by the
Administrator.
Section 8.8 Protective Provisions
(a) Each Participant shall reasonably cooperate with the Administrator by
furnishing information and taking such other actions as may be requested by the
Administrator in order to facilitate the payment of benefits hereunder.
(b) The Administrator may withhold payment under the Plan until a
Participant provides reasonable cooperation with information or other requests
of the Administrator pertaining to this Plan. Prior to the earlier to occur of
an Anticipatory Change of Control or a Change of Control, in the Administrator's
sole discretion, benefits may be payable in an amount reduced to compensate
Vastar for any loss, cost, damage or expense suffered or incurred by Vastar as a
result in any way of any action, misstatement or nondisclosure by the
Participant pertaining to the Plan.
Section 8.9 Gender, Singular and Plural
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, or neuter, as the identity of the person or persons may
require. As the context may require, the singular may be read as the plural and
the plural as the singular.
21
<PAGE>
Section 8.10 Law Governing
This Plan shall be construed, regulated and administered under the
laws of the State of Texas.
Section 8.11 Notice
Any notice or filing required or permitted to be given to the
Administrator under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office of
Vastar, directed to the attention of the Secretary of Vastar or, after the
earlier to occur of a Change of Control or an Anticipatory Change of Control, to
Wachovia Bank, N.A., 301 N. Church Street, Winston-Salem, NC 27101. Such notice
shall be deemed given as to the date of delivery or, if delivery is made by
mail, as of the date shown on the postmark on the receipt for registration or
certification.
Section 8.12 Successors and Assigns
This Plan shall be binding upon Vastar and its successors and assigns.
Section 8.13 Provisions for Incapacity
If the Administrator deems any person entitled to receive any payment
under the provisions of this Plan incapable of receiving or disbursing the same
by reason of minority, illness or infirmity, mental incompetency, or incapacity
of any kind, the Administrator may, in its sole discretion, take any one or more
of the following actions: it may apply such payment directly for the comfort,
support and maintenance of such person; it may reimburse any person for any such
support theretofore supplied to the person entitled to receive any such payment;
or it may pay such payment to any other person selected by the Administrator to
disburse such payment for the comfort, support and maintenance of the person
entitled thereto, including, without limitations, to any relative who has
undertaken, wholly or partially, the expense of such person's comfort, care and
maintenance, or any institution in whose care or custody the person entitled to
the payment may be. The Administrator may, in its sole discretion, deposit any
payment due to a minor to the minor's credit in any savings or commercial bank
of the Administrator's choice.
Section 8.14 Payments or Deposits
Payments or deposits made pursuant to any provisions of Section 8.13
shall be a complete discharge, to the extent thereof, of all liability under the
provisions of this Plan, or otherwise, of the Administrator, Vastar and this
Executive Deferral Plan, and the receipt by the person or persons receiving any
such payment, distribution or deposit shall be a complete acquittance therefore,
and there shall be no liability to see to the application of any payments,
distributions or deposits so made.
22
<PAGE>
Executed as of the 24th day of March, 1999.
ATTEST: VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
------------------------------ -------------------------------
Jonathan D. Edelfelt Jeffrey M. Bender
Associate Secretary Vice President, Human Resources
23
<PAGE>
EXHIBIT 10.3
VASTAR RESOURCES, INC.
COMPREHENSIVE MANAGEMENT MEDICAL PLAN
---------------------------
The formal plan documentation for the Vastar Resources, Inc.
Comprehensive Management Medical Plan (the "Plan") for purposes of the Employee
Retirement Income Security Act of 1974 and any other applicable legal authority
consists of (a) the summary plan description, prepared for this Plan as in
effect from time to time (the "Summary Plan Description"), (b) the Group Policy
No. GP-697987, contained in Exhibit A hereto, with an effective date of July 1,
1994, and (c) the contents of this document.
The named fiduciary for the Plan is the Plan Administrator except that
as to responsibilities for processing of claims and payment of benefits
described in the Summary Plan Description, the named fiduciary is Aetna U.S.
Healthcare.
Aetna U.S. Healthcare, as to basic administration matters and initial
claims determinations, and the Plan Administrator, as to the review of claims
determinations and eligibility, (a) shall act with care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims, and shall have no liability for
any action or forbearance on its part with respect to which it has so acted, and
(b) shall have full discretion and final authority to determine eligibility for
benefits and to construe the terms of the Plan.
The following provisions shall apply in the event of an Anticipatory
Change of Control or a Change of Control as defined hereafter:
1. The following definitions shall be applicable in the event of an
Anticipatory Change of Control or a Change of Control:
<PAGE>
(a) The term "Anticipatory Change of Control" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(b) "Applicable Period" means the period specified in Subparagraph
2(c) during which the coverage under the Plan shall remain in effect for a
particular class of Terminated Participants.
(c) "Benefit Trigger Window" means the 24-month period commencing on
the date that a Change of Control occurs.
(d) "Cause" shall mean (i) the conviction of the Employee for any
felony involving dishonesty, fraud or breach of trust or (ii) the willful
engagement by the Employee in gross misconduct in the performance of his or
her duties that materially injures the Surviving Entity.
(e) The term "Change of Control" shall be ascribed the meaning set
forth for such term on Annex A attached hereto.
(f) "Change of Control Trust" means the trust established by the
Company to provide for the payment of any benefits, in whatever form is
required, under the Plan on and after a Change of Control.
(g) "Employee" means an individual who is employed by the Company or
any of its subsidiaries, but shall exclude individuals in an employment
status which is ineligible for participation in the Plan.
(h) The term "Outside Director" shall be ascribed the meaning set
forth for such term on Annex A attached hereto.
2
<PAGE>
(i) "Participant" means an Employee of the Company and its
subsidiaries who is eligible to participate in the Plan under the terms of
the Summary Plan Description and Exhibit A.
(j) "Plan Administrator" means the Welfare Plans Committee.
(k) "Qualifying Pay" means the Employee's annualized rate of regular
wages or salary, excluding all extra pay such as overtime, premiums,
bonuses, living or other allowances, determined as of the relevant date.
(l) The term "Special Plan Administrator" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(m) "Surviving Entity" means the Company, or any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company after a
Change of Control, and its affiliates.
(n) "Target Award" means the annual target performance bonus award
applicable to the Employee for the relevant period.
(o) "Welfare Plan Committee" means, (i) prior to the earlier to occur
of a Change of Control or an Anticipatory Change of Control, the Vastar
Resources, Inc. Welfare Plans Committee, and (ii) on and after the earlier
to occur of a Change of Control or an Anticipatory Change of Control, the
Special Plan Administrator. Upon a written determination by the Chief
Financial Officer and the General Counsel of the Company, approved by
either the Board of Directors of the Company (the "Board"), the Outside
Directors or the Executive Committee of the Board, that an Anticipatory
Change of Control has ended without concluding in a Change of Control (an
"Anticipatory Change
3
<PAGE>
Termination"), the Vastar Resources, Inc. Welfare Plan Committee will be
reinstated. For purposes of this definition, a Change of Control shall not
include an ARCO Acquisition as defined in Section 2(b)(ii).
2. CONTINUATION OF COVERAGE - CHANGE OF CONTROL
(a) If an Employee who is a Participant in the Plan as of the date of
a Change of Control is terminated from employment during the Benefit
Trigger Window under any of the circumstances described under Subparagraph
2(b) (a "Terminated Participant"), coverage under this Plan shall remain in
effect with respect to such Terminated Participant for the Applicable
Period described under Subparagraph 2(c) below, under terms and provisions
(including but not limited to the amount of the Participant contribution,
if any) which are no less favorable than were in effect for active
employees immediately prior to the date of the Change of Control, provided
that the Terminated Participant complies with any requirements of the
Special Plan Administrator regarding the administration of the Plan that
are no less favorable than those available under the health insurance
continuation requirements of applicable law ("COBRA"), including the amount
or time for making Participant contributions, if any, and provided further,
that failure of the Terminated Participant to so comply shall result in a
cancellation of coverage on the date of such delinquency or, if coverage
cannot be canceled as of such date, on the earliest date after such
delinquency occurs on which the coverage can be canceled, in either case,
with no right of reinstatement.
(b) (i) For the purposes of Subparagraph 2(a) above, termination of
employment shall mean:
4
<PAGE>
(A) a termination of employment during the Benefit Trigger
Window by the Surviving Entity, other than for Cause, or
(B) the Employee's voluntary termination within the Benefit
Trigger Window as a result of the Surviving Entity's implementation
of:
(I) a ten percent or more reduction of such Employee's
Qualifying Pay from the Qualifying Pay determined as of the date
immediately prior to the date of the Change of Control, or a ten
percent or more reduction (based on dollar value) in the
Employee's aggregate Qualifying Pay plus Target Award ("Total
Pay") from the Employee's Total Pay determined as of the date
immediately prior to the date of the Change of Control; or
(II) a required relocation of the Employee's principal place
of work to a location which would satisfy the conditions
specified in (S) 217(c)(1) of the Internal Revenue Code of 1986,
as amended (the "Code"), for a deduction by such Employee of
moving expenses under (S) 217 of the Code.
(C) No Employee shall be deemed to have a termination of
employment solely due to a transfer of employment directly between the
Company, a Surviving Entity or any of their affiliates.
(ii) Notwithstanding anything to the contrary in this Plan, if a
Change of Control as described under paragraph (3) of the definition of
such term on Annex A attached hereto (an "ARCO Acquisition") occurs, no
person shall be entitled to benefits under Paragraph 2 as a result of such
a Change of Control, but shall instead receive the benefits to
5
<PAGE>
which they may otherwise be entitled, whether under this Plan or any other
employee welfare benefit plan, as determined in the sole discretion of
Atlantic Richfield Company; provided that benefits for medical costs
incurred and reimbursable under the Plan as of the date of the Change of
Control, but not yet reimbursed, shall be paid in accordance with the terms
of this Plan in existence immediately prior to the Change of Control.
(c) In the event of termination of employment under Subparagraph 2(b),
a Terminated Participant will be entitled to maintain the coverage under
this Plan, as described in Subparagraph 2(a) above, during the Applicable
Period as follows:
APPLICABLE PERIOD OF MEDICAL CONTINUATION
FOLLOWING TERMINATION
===============================================
PERIOD OF BENEFIT
EMPLOYEE CONTINUATION
LEVEL (MONTHS)
==================================================
Tier 1 36
--------------------------------------------------
Tier 2 24
--------------------------------------------------
All Others 18
--------------------------------------------------
The expiration of the Applicable Period shall be deemed to be the date of
termination of employment for purposes of COBRA, so that COBRA shall
commence on that date. In the event that after a Change of Control
identical benefit coverage under this Plan is not reasonably available, the
Plan Administrator shall substitute reasonably equivalent coverage, taking
into consideration the benefits offered, the Employee deductible, co-
insurance and out-of-pocket limits, and cost to the Surviving Entity.
(d) Upon the earlier to occur of an Anticipatory Change of Control or
a Change of Control (excluding an ARCO Acquisition), the Company or any
successor to the
6
<PAGE>
obligations of the Company will fund the Change of Control Trust in
accordance with its terms.
3. AMENDMENT AND TERMINATION OF PLAN
(a) Amendment or Termination Generally. Except as provided in
Subparagraphs 3(b) and (c) below, this Plan may be amended or terminated at
any time by a written instrument executed by the Company acting through its
Vice President, Human Resources. Such amendment or termination may be
effective with respect to the Company or to any participating subsidiary of
the Company under the Plan. No such amendment or termination shall
adversely affect medical benefits incurred under the Plan but not yet paid
prior to the effective date of the amendment or termination.
Notwithstanding anything in this Plan to the contrary, this Plan may be
amended to the extent necessary to comply with applicable law.
(b) Amendment or Termination During Anticipatory Change of Control.
The Plan may not be terminated or amended during the period after the
occurrence of an Anticipatory Change of Control and prior to a Change of
Control or an Anticipatory Change Termination (as defined in Section 1(o)),
except that the Board of Directors of the Company may amend the Plan during
such a period as it may deem reasonably necessary, provided, that in the
event any such amendment reduces, or could reduce, the value of any benefit
of a Plan Participant, as determined in the sole discretion of the Special
Plan Administrator, the Company or any successor to the obligations of the
Company shall, prior to, and as a condition precedent to, such amendment
going into effect, provide substantially equivalent value in replacement
thereof to the Participant in the reasonable determination of the Special
7
<PAGE>
Plan Administrator, taking into consideration the benefits offered, the
employee deductible, co-insurance and out-of-pocket limits, and cost to the
Company.
(c) Amendment or Termination on or After a Change of Control. The
Plan may not be terminated or amended on or after a Change of Control, in
any manner that would negatively affect a Participant's rights arising as a
result of the Change of Control under Paragraph 2 without the consent of
all of the Participants or, in the alternative, the Participants whose Plan
benefits are affected by such termination or amendment. The Plan will
terminate on the third anniversary of the expiration of the Benefit Trigger
Window, provided, however, that such termination shall not affect benefits
incurred or accrued by a Participant prior to such termination.
(d) Acquisition by ARCO. An ARCO Acquisition shall not be treated as
a Change of Control for purposes of this Paragraph 3.
4. AUTHORIZED OFFICER
Any action required to be taken under this Plan by the Chief Financial
Officer and the General Counsel of the Company may be taken by either
individual if the other position is then vacant, and if both positions are
vacant, such action may be taken by any other officer of the Company with a
position of vice president or above. Any action required to be taken by
the Vice President, Human Resources of the Company may, if such position is
vacant, be taken by any other officer of the Company with a position of
vice president or above.
8
<PAGE>
Executed as of the 10th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
------------------------- -------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
9
<PAGE>
EXHIBIT 10.4
VASTAR RESOURCES, INC.
EXECUTIVE MEDICAL PLAN
__________________________
The formal plan documentation for the Vastar Resources, Inc. (the
"Company") Executive Medical Plan (the "Plan") for purposes of the Employee
Retirement Income Security Act of 1974 and any other applicable legal authority
consists of (a) the summary plan description prepared for this Plan, as in
effect from time to time (the "Summary Plan Description"), (b) the Group Policy
No. GP-697987, contained in Exhibit A hereto, with an effective date of July 1,
1994, and (c) the contents of this document.
The named fiduciary for the Plan is the Plan Administrator except that
as to responsibilities for processing of claims and payment of benefits
described in the Summary Plan Description, the named fiduciary is Aetna U.S.
Healthcare.
Aetna U.S. Healthcare, as to basic administrative matters and initial
claims determinations, and the Plan Administrator, as to the review of claims
determinations and eligibility, (a) shall act with care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims, and shall have no liability for
any action or forbearance on its part with respect to which it has so acted, and
(b) shall have full discretion and final authority to determine eligibility for
benefits and to construe the terms of the Plan.
The following provisions shall apply in the event of an Anticipatory
Change of Control or a Change of Control as defined hereafter:
1. The following definitions shall be applicable in the event of an
Anticipatory Change of Control or a Change of Control:
<PAGE>
(a) The term "Anticipatory Change of Control" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(b) "Applicable Period" means the period specified in Subparagraph
2(c) during which the coverage under the Plan shall remain in effect for a
particular class of Terminated Participants.
(c) "Benefit Trigger Window" means the 24-month period commencing on
the date that a Change of Control occurs.
(d) "Cause" shall mean (i) the conviction of the Employee for any
felony involving dishonesty, fraud or breach of trust or (ii) the willful
engagement by the Employee in gross misconduct in the performance of his or
her duties that materially injures the Surviving Entity.
(e) The term "Change of Control" shall be ascribed the meaning set
forth for such term on Annex A attached hereto.
(f) "Change of Control Trust" means the trust established by the
Company to provide for the payment of any benefits, in whatever form is
required, under the Plan on and after a Change of Control.
(g) "Employee" means an individual who is employed by the Company or
any of its subsidiaries, but shall exclude individuals in an employment
status which is ineligible for participation in the Plan.
(h) The term "Outside Director" shall be ascribed the meaning set
forth for such term on Annex A attached hereto.
2
<PAGE>
(i) "Participant" means an Employee of the Company and its
subsidiaries who is eligible to participate in the Plan under the terms of
the Summary Plan Description and Exhibit A.
(j) "Plan Administrator" means the Welfare Plans Committee.
(k) "Qualifying Pay" means the Employee's annualized rate of regular
wages or salary, excluding all extra pay such as overtime, premiums,
bonuses, living or other allowances, determined as of the relevant date.
(l) The term "Special Plan Administrator" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
(m) "Surviving Entity" means the Company, or any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company after a
Change of Control, and its affiliates.
(n) "Target Award" means the annual target performance bonus award
applicable to the Employee for the relevant period.
(o) "Welfare Plans Committee" means, (i) prior to the earlier to occur
of a Change of Control or an Anticipatory Change of Control, the Vastar
Resources, Inc. Welfare Plans Committee, and (ii) on and after the earlier
to occur of a Change of Control or an Anticipatory Change of Control, the
Special Plan Administrator. Upon a written determination by the Chief
Financial Officer and the General Counsel of the Company, approved by
either the Board of Directors of the Company (the "Board"), the Outside
Directors or the Executive Committee of the Board, that an Anticipatory
Change of Control has ended without concluding in a Change of Control (an
"Anticipatory Change
3
<PAGE>
Termination"), the Vastar Resources, Inc. Welfare Plans Committee will be
reinstated. For purposes of this definition, a Change of Control shall not
include an ARCO Acquisition as defined in Section 2(b)(ii).
2. CONTINUATION OF COVERAGE - CHANGE OF CONTROL
(a) If an Employee who is a Participant in the Plan as of the date of
a Change of Control is terminated from employment during the Benefit
Trigger Window under any of the circumstances described under Subparagraph
2(b) (a "Terminated Participant"), coverage under this Plan shall remain in
effect with respect to such Terminated Participant for the Applicable
Period described under Subparagraph 2(c) below, under terms and provisions
(including but not limited to the amount of the Participant contribution,
if any) which are no less favorable than were in effect for active
employees immediately prior to the date of the Change of Control, provided
that the Terminated Participant complies with any requirements of the
Special Plan Administrator regarding the administration of the Plan that
are no less favorable than those available under the health insurance
continuation requirements of applicable law ("COBRA"), including the amount
or time for making Participant contributions, if any, and provided further,
that failure of the Terminated Participant to so comply shall result in a
cancellation of coverage on the date of such delinquency or, if coverage
cannot be canceled as of such date, on the earliest date after such
delinquency occurs on which the coverage can be canceled, in either case,
with no right of reinstatement.
(b) (i) For the purposes of Subparagraph 2(a) above, termination of
employment shall mean:
4
<PAGE>
(A) a termination of employment during the Benefit Trigger Window
by the Surviving Entity, other than for Cause, or
(B) the Employee's voluntary termination within the Benefit
Trigger Window as a result of the Surviving Entity's implementation
of:
(I) a ten percent or more reduction of such Employee's
Qualifying Pay from the Qualifying Pay determined as of the date
immediately prior to the date of the Change of Control, or a ten
percent or more reduction (based on dollar value) in the
Employee's aggregate Qualifying Pay plus Target Award ("Total
Pay") from the Employee's Total Pay determined as of the date
immediately prior to the date of the Change of Control; or
(II) a required relocation of the Employee's principal place
of work to a location which would satisfy the conditions
specified in (S)217(c)(1) of the Internal Revenue Code of 1986,
as amended, (the "Code"), for a deduction by such Employee of
moving expenses under (S) 217 of the Code.
(C) No Employee shall be deemed to have a termination of
employment solely due to a transfer of employment directly between the
Company, a Surviving Entity or any of their affiliates.
(ii) Notwithstanding anything to the contrary in this Plan, if a
Change of Control as described under paragraph (3) of the definition of
such term on Annex A attached hereto (an "ARCO Acquisition") occurs, no
person shall be entitled to benefits under this Paragraph 2 as a result of
such a Change of Control, but shall instead receive the benefits to
5
<PAGE>
which they may otherwise be entitled, whether under this Plan or any other
employee welfare benefit plan, as determined in the sole discretion of
Atlantic Richfield Company; provided that benefits for medical costs
incurred and reimbursable under the Plan as of the date of the Change of
Control, but not yet reimbursed, shall be paid in accordance with the terms
of this Plan in existence immediately prior to the Change of Control.
(c) In the event of termination of employment as defined under
Subparagraph 2(b), a Terminated Participant will be entitled to maintain
the coverage under this Plan, as described in Subparagraph 2(a) above,
during the Applicable Period as follows:
APPLICABLE PERIOD OF MEDICAL CONTINUATION
FOLLOWING TERMINATION
===============================================
PERIOD OF BENEFIT
EMPLOYEE CONTINUATION
LEVEL (MONTHS)
==================================================
Tier 1 36
--------------------------------------------------
Tier 2 24
--------------------------------------------------
The expiration of the Applicable Period shall be deemed to be the date of
termination of employment for purposes of COBRA, so that COBRA shall
commence on that date. In the event that after a Change of Control
identical benefit coverage under this Plan is not reasonably available, the
Special Plan Administrator shall substitute reasonably equivalent coverage,
taking into consideration the benefits offered, the Employee deductible,
co-insurance and out-of-pocket limits, and cost to the Surviving Entity.
(d) Upon the earlier to occur of an Anticipatory Change of Control or
a Change of Control (excluding an ARCO Acquisition), the Company or any
successor to the obligations of the Company will fund the Change of Control
Trust in accordance with its terms.
6
<PAGE>
3. AMENDMENT AND TERMINATION OF PLAN
(a) Amendment or Termination Generally. Except as provided in
Subparagraphs 3(b) and (c) below, this Plan may be amended or terminated at
any time by a written instrument executed by the Company acting through its
Vice President, Human Resources. Such amendment or termination may be
effective with respect to the Company or to any participating subsidiary of
the Company under the Plan. No such amendment or termination shall
adversely affect medical benefits incurred under the Plan but not yet paid
prior to the effective date of the amendment or termination.
Notwithstanding anything in this Plan to the contrary, this Plan may be
amended to the extent necessary to comply with applicable law.
(b) Amendment or Termination During an Anticipatory Change of Control.
The Plan may not be terminated or amended during the period after the
occurrence of an Anticipatory Change of Control and prior to a Change of
Control or an Anticipatory Change Termination (as defined in Section 1(o)),
except that the Board of Directors of the Company may amend the Plan during
such a period as it may deem reasonably necessary, provided, that in the
event any such amendment reduces, or could reduce, the value of any benefit
of a Plan Participant, as determined in the sole discretion of the Special
Plan Administrator, the Company or any successor to the obligations of the
Company shall, prior to, and as a condition precedent to, such amendment
going into effect, provide substantially equivalent value in replacement
thereof to the Participant in the reasonable determination of the Special
Plan Administrator, taking into consideration the benefits offered, the
employee deductible, co-insurance and out-of-pocket limits, and cost to the
Company.
7
<PAGE>
(c) Amendment or Termination on or After a Change of Control. The
Plan may not be terminated or amended on or after a Change of Control, in
any manner that would negatively affect a Participant's rights arising as a
result of the Change of Control under Paragraph 2 without the consent of
all of the Participants or, in the alternative, the Participants whose Plan
benefits are affected by such termination or amendment. The Plan will
terminate on the third anniversary of the expiration of the Benefit Trigger
Window, provided, however, that such termination shall not affect any right
of a Participant which shall have accrued prior to such termination.
(d) ARCO Acquisition. An ARCO Acquisition shall not be treated as a
Change of Control for purposes of this Paragraph 3.
4. AUTHORIZED OFFICER
Any action required to be taken under this Plan by the Chief Financial
Officer and the General Counsel of the Company may be taken by either
individual if the other position is then vacant, and if both positions are
vacant, such action may be taken by any other officer of the Company with a
position of vice president or above. Any action required to be taken by
the Vice President, Human Resources of the Company may, if such position is
vacant, be taken by any other officer of the Company with a position of
vice president or above.
8
<PAGE>
Executed as of the 10th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
-------------------------- ---------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
9
<PAGE>
EXHIBIT 10.5
AMENDMENT NO. 1
TO
VASTAR RESOURCES, INC.
EXECUTIVE LIFE INSURANCE PLAN
__________________________
The Vastar Resources, Inc. Executive Life Insurance Plan (the "Plan") is hereby
amended effective March 10, 1999.
1. Paragraph 1.1 of the Plan is deleted, and all references to "Administrator"
in the Plan are amended to refer to "Administrative Committee."
2. Paragraphs 1.2, 1.3, 1.4 and 1.5 of the Plan are renumbered as 1.1, 1.2,
1.3 and 1.4. Renumbered Paragraphs 1.1, 1.3 and 1.4 are amended to read as
follows:
"1.1 "Administrative Committee" means (i) prior to the earlier to
occur of a Change of Control or an Anticipatory Change of Control, Vastar
Resources, Inc. and (ii) on and after the earlier to occur of a Change of
Control or an Anticipatory Change of Control, the Special Plan
Administrator. Upon a written determination by the Chief Financial Officer
and the General Counsel of the Company, approved by either the Board of
Directors of the Company (the "Board"), the Outside Directors or the
Executive Committee of the Board, that an Anticipatory Change of Control
has ended without concluding in a Change of Control (an "Anticipatory
Change Termination"), Vastar Resources, Inc. will again become the
Administrative Committee. For purposes of this definition, a Change of
Control shall not include an ARCO Acquisition as defined in Section
9.2(b)."
1.3 "Beneficiary(s)" means the person or persons designated by the
Participant in accordance with Article XIII of this Plan.
<PAGE>
1.4 The term "Change of Control" shall be ascribed the meaning set
forth for such term on Annex A attached hereto."
3. Paragraphs 1.6 through 1.27 of the Plan are renumbered as 1.5 through 1.26,
and Paragraphs 1.27, 1.28, 1.29 , 1.30, 1.31, 1.32, 1.33, 1.34, 1.35 and 1.36
are added to Article 1 of the Plan to read as follows:
"1.27 The term "Anticipatory Change of Control" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
1.28 "Applicable Period" means the period specified in Paragraph 9.3
during which benefits under the Plan shall remain in effect for a
particular class of Terminated Participants.
1.29 "Benefit Trigger Window" means the 24-month period commencing on
the date that a Change of Control occurs.
1.30 "Cause" shall mean (i) the conviction of the Eligible Employee
for any felony involving dishonesty, fraud or breach of trust or (ii) the
willful engagement by the Eligible Employee in gross misconduct in the
performance of his or her duties that materially injures the Surviving
Entity.
1.31 "Change of Control Trust" means the trust established by the
Company to provide for the payment of any benefits, in whatever form is
required, under the Plan on and after a Change of Control.
1.32 The term "Outside Director" shall be ascribed the meaning set
forth for such term on Annex A attached hereto.
1.33 "Qualifying Pay" means the Eligible Employee's annualized rate
of regular wages or salary, excluding all extra pay such as overtime,
premiums, bonuses, living or
2
<PAGE>
other allowances, determined as of the relevant date.
1.34 The term "Special Plan Administrator" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
1.35 "Surviving Entity" means Company, or any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company after a
Change of Control, and its affiliates.
1.36 "Target Award" means the annual target performance bonus award
applicable to the Eligible Employee for the relevant period."
4. Articles IX through XIII of the Plan are renumbered as Articles X through
XIV and a new Article IX is added to the Plan to read as follows:
"ARTICLE IX
CONTINUATION OF COVERAGE - CHANGE OF CONTROL
9.1 CONTINUATION REQUIREMENTS
(a) If an Eligible Employee who is a Participant in the Plan as
of the date of a Change of Control is terminated from employment during the
Benefit Trigger Window under any of the circumstances described under
Paragraph 9.2 (a "Terminated Participant"), the coverage under this Plan
shall remain in effect with respect to such Terminated Participant for the
Applicable Period described under Paragraph 9.3, under terms and provisions
(including, but not limited to, the amount of Participant contribution, if
any) which are no less favorable than were in effect for active Eligible
Employees as of the date of the Change of Control, provided that the
Terminated Participant complies with any requirements of the Special Plan
Administrator regarding the administration of the Plan that are no less
favorable than the requirements in effect immediately prior to the Change
of
3
<PAGE>
Control, including the amount or time for making Participant contributions,
if any, and provided, further, that failure of the Terminated Participant
to so comply shall result in a cancellation of coverage on the date of such
delinquency or, if coverage cannot be canceled as of such date, the
earliest date after such delinquency occurs on which the coverage can be
canceled, in either case, with no right of re-instatement.
(b) In the event of a Change of Control, coverage under this Plan
shall remain in effect during the Window Period (as defined below) with
respect to each Eligible Employee who is a Participant in the Plan as of
the date of the Change of Control under the same terms and conditions as
would apply to coverage during the Applicable Period. Each Participant who
is receiving benefits pursuant to this Article IX shall also receive a cash
bonus from the Company during the Window Period and during the Applicable
Period equal to the amount of premiums paid by the Participant pursuant to
Section 4.2 to provide the basic death benefit described in Section 3.1,
plus such amount (the "Tax Payment") which shall be necessary to satisfy
the applicable federal, state and local taxes associated with the cash
bonus and the Tax Payment, calculated at the highest applicable individual
tax rate. The term "Window Period" shall mean with respect to any
Participant the period beginning on the date of the Change of Control and
ending on the earlier to occur of the end of the Benefit Trigger Window or
the beginning of such Participant's Applicable Period.
9.2 TERMINATION OF EMPLOYMENT
(a) For the purposes of Paragraph 9.1 above, termination of
employment shall mean:
(i) a termination of employment during the Benefit Trigger
Window by the Surviving Entity, other than for Cause, or
4
<PAGE>
(ii) the Eligible Employee's voluntary termination within
the Benefit Trigger Window as a result of the Surviving Entity's
implementation of:
(A) a ten percent or more reduction of such Eligible
Employee's Qualifying Pay from the Qualifying Pay determined
as of the date immediately prior to the date of the Change
of Control, or a ten percent or more reduction (based on
dollar value) in the Eligible Employee's aggregate
Qualifying Pay plus Target Award ("Total Pay") from the
Eligible Employee's Total Pay determined as of the date
immediately prior to the date of the Change of Control; or
(B) a required relocation of the Eligible Employee's
principal place of work to a location which would satisfy
the conditions specified in (S)217(c)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), for a
deduction by such Eligible Employee of moving expenses under
(S)217 of the Code.
(iii) No Eligible Employee shall be deemed to have a
termination of employment solely due to a transfer of employment
directly between the Company, a Surviving Entity or any of their
affiliates.
(b) Notwithstanding anything to the contrary in this Plan, if a
Change of Control as described under paragraph (3) of the definition
of such term on Annex A attached hereto (an "ARCO Acquisition")
occurs, no person shall be entitled to benefits under Article IX of
this Plan as a result of such a Change of Control, but shall instead
receive the benefits to which they may otherwise be entitled under
this
5
<PAGE>
Plan or any other employee welfare benefit plan, as determined in the
sole discretion of Atlantic Richfield Company; provided that any
insurance benefits which have accrued as of the date of the Change of
Control but are unpaid shall be paid in accordance with the terms of
this Plan in existence immediately prior to the Change of Control.
9.3 APPLICABLE PERIOD
In the event of termination of employment as defined under Paragraph
9.2, the Terminated Participant will be entitled to maintain coverage under
this Plan, as described in Paragraph 9.1, during the Applicable Period as
follows:
APPLICABLE PERIOD OF LIFE INSURANCE
CONTINUATION FOLLOWING TERMINATION
===============================================
PERIOD OF BENEFIT
EMPLOYEE CONTINUATION
LEVEL (MONTHS)
===============================================
Tier 1 36
-----------------------------------------------
Tier 2 24
-----------------------------------------------
All Others 18
-----------------------------------------------
In the event that after a Change of Control identical benefit coverage
under this Plan is not reasonably available, the Administrative Committee
shall substitute reasonably equivalent coverage, taking into consideration
the benefits offered, the Employee premium, if any, and the cost to the
Surviving Entity.
9.4 CHANGE OF CONTROL TRUST
Upon the earlier to occur of an Anticipatory Change of Control or
Change of Control (excluding an ARCO Acquisition), the Company or any
successor to the obligations of the Company shall fund the Change of
Control Trust in accordance with its terms."
6
<PAGE>
5. Article XI of the Plan is amended to read as follows:
"ARTICLE XI
AMENDMENT AND TERMINATION OF PLAN
11.1 Amendment and Termination Generally. Except as provided in
Paragraph 11.3 and 11.4, the Company acting through its Vice President,
Human Resources, may at any time amend or terminate this Plan in whole or
in part. If this Plan is terminated by the Company prior to the
commencement of any benefit payments with respect to a Participant such
Participant, as the case may be, shall retain the rights, if any, under
Article X of this Plan.
11.2 Amendment and Termination After Commencement of Plan Benefit
Payments. If this Plan is amended or terminated by the Company after the
commencement of any benefit payments to the Participant or to the
Beneficiary, the Company or any successor to the obligations of the Company
shall be obligated to continue such payments in accordance with the terms
of this Plan as in existence immediately prior to amendment or termination
of this Plan. Notwithstanding anything in this Plan to the contrary, this
Plan may be amended to the extent necessary to comply with applicable law.
11.3 Amendment or Termination During Anticipatory Change of Control.
The Plan may not be terminated or amended during the period after the
occurrence of an Anticipatory Change of Control and prior to a Change of
Control or an Anticipatory Change Termination (as defined in Section 1.1),
except that the Board of Directors of the Company may amend the Plan during
such a period as it may deem reasonably necessary, provided that if any
such amendment reduces, or could reduce, the value of any benefit of a
Participant, as determined in the sole discretion of the Special Plan
Administrator, the Company or any
7
<PAGE>
successor to the obligations of the Company shall, prior to, and as a
condition precedent to such amendment going into effect, provide
substantially equivalent value in replacement thereof to the Participant,
as the case may be, in the reasonable determination of the Special Plan
Administrator.
11.4 Amendment or Termination on or After a Change of Control. The
Plan may not be terminated or amended on or after a Change of Control, in
any manner that would negatively affect a Participant's rights arising as a
result of the Change of Control under Article IX without the consent of all
of the Participants or, in the alternative, the Participants whose Plan
benefits are affected by such termination or amendment. The Plan will
terminate on the third anniversary of the expiration of the Benefit Trigger
Window, provided, however, that such termination shall not affect benefits
accrued by a Participant or Beneficiary prior to such termination.
11.5 Acquisition by ARCO. An ARCO Acquisition shall not be treated
as a Change of Control for purposes of this Article XI."
6. Article XIV of the Plan is amended by adding the following Paragraph 14.9
thereto to read as follows:
"14.9 Authorized Officers. Any action required to be taken under
this Plan by the Chief Financial Officer and the General Counsel of the
Company may be taken by either individual if the other position is then
vacant, and if both positions are vacant, such action may be taken by any
other officer of the Company with a position of vice president or above.
Any action required to be taken by the Vice President, Human Resources of
the Company may, if such position is vacant, be taken by any other officer
of the Company with a position of vice president or above."
8
<PAGE>
Executed as of the 10th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
-------------------------- ---------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
9
<PAGE>
EXHIBIT 10.6(a)
AMENDMENT NO. 2
TO
VASTAR RESOURCES, INC.
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
__________________
Pursuant to the power of amendment reserved therein, the Vastar Resources,
Inc. Supplementary Executive Retirement Plan (the "Plan") is hereby amended
effective as of January 1, 1999.
A new Article XII is added to the Plan to read as follows:
"ARTICLE XII
SPECIAL PROVISIONS APPLICABLE TO
FORMER PARTICIPANTS IN THE ARCO CHEMICAL
COMPANY SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
SECTION 1. AGREEMENT
Pursuant to an Agreement dated June 18, 1998 (the "Agreement"), between
Atlantic Richfield Company ("ARCO"), ARCO Chemical Company ("Chemical") and
Lyondell Petrochemical Company ("Lyondell"), Lyondell purchased Chemical.
Effective January 1, 1999, the assets and liabilities of the ARCO Chemical
Company Retirement Plan (the "ACC Retirement Plan") were transferred to the
Vastar Resources, Inc. Retirement Plan (the "VRI Plan") with respect to
certain Employees having an Accrued Benefit in the Chemical Plan ("Chemical
Members"). In conjunction with the sale of Chemical, the benefits of the
ARCO Chemical Company Supplementary Executive Retirement Plan ("ACC SERP")
were distributed to ACC SERP Members ("SERP Members").
SECTION 2. RIGHTS AND BENEFITS
The rights and benefits under the Plan of ACC SERP Members shall be
governed by the Plan, except as provided in this Article XII. The benefit
under the Plan of any ACC SERP Member shall include an amount based on
Membership Service under the ACC Retirement Plan only with respect to ACC
SERP Members who pay to the Plan, by February 1, 1999, the amount of the
distribution from the ACC SERP."
Executed this 24th day of March, 1999.
ATTEST: VASTAR RESOURCES, INC.
/s/ Jonathan D. Edelfelt /s/ Charles D. Davidson
------------------------------- -------------------------------------
JONATHAN D. EDELFELT CHARLES D. DAVIDSON
ASSOCIATE SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
EXHIBIT 10.6(b)
VASTAR RESOURCES, INC.
___________________________________________________
Supplementary Executive Retirement Plan
As Amended and Restated Effective March 24, 1999
<PAGE>
VASTAR RESOURCES, INC.
SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page No.
--------
<S> <C> <C>
ARTICLE I
Section 1.1 Purpose and Intent of Plan........................................................... 1
Section 1.2 Effective Date of Plan............................................................... 1
Section 1.3 Definitions.......................................................................... 1
Section 1.4 Costs of Plan........................................................................ 4
ARTICLE II SUPPLEMENTAL BENEFIT DEFERRED SALARY AND ANNUAL INCENTIVE AWARDS
Section 2.1 Eligibility.......................................................................... 5
Section 2.2 Amount of Benefit.................................................................... 5
ARTICLE III
Section 3.1 Eligibility.......................................................................... 8
Section 3.2 Amount of Benefit.................................................................... 8
ARTICLE IV SPECIAL SUPPLEMENTAL RETIREMENT BENEFITS............................................. 10
ARTICLE V FORM AND TIMING OF BENEFIT
Section 5.1 Benefits Payable Under Articles II and III........................................... 11
Section 5.2 Benefits Payable Under Article IV.................................................... 12
Section 5.3 Benefits Payable After a Change of Control........................................... 12
ARTICLE VI ADMINISTRATION
Section 6.1 Rules of Conduct..................................................................... 14
Section 6.2 Legal, Accounting, Clerical and Other Services....................................... 14
Section 6.3 Interpretation of Provisions......................................................... 14
Section 6.4 Records of Administration............................................................ 14
Section 6.5 Denial of Claim...................................................................... 14
Section 6.6 Liability of Committee............................................................... 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE VII FACILITY OF PAYENT AND LAPSE OF BENEFITS
Section 7.1 Provisions for Incapacity............................................................ 15
Section 7.2 Payments of Deposits................................................................. 15
ARTICLE VII MISCELLANEOUS
Section 8.1 Unfunded Benefit Plan................................................................ 16
Section 8.2 Grantor Trust........................................................................ 16
Section 8.3 Payments and Benefits Not Assignable................................................. 16
Section 8.4 No Right of Employment............................................................... 16
Section 8.5 Adjustments.......................................................................... 17
Section 8.6 Obligation to Company................................................................ 17
Section 8.7 Protective Provisions................................................................ 17
Section 8.8 Gender, Singular and Plural.......................................................... 17
Section 8.9 Law Governing........................................................................ 17
Section 8.10 Validity............................................................................. 17
Section 8.11 Notice............................................................................... 18
Section 8.12 Successors and Assigns............................................................... 18
Section 8.13 Tax Withholding...................................................................... 18
ARTICLE IX AMENDMENT AND TERMINATION
Section 9.1 Amendment of Plan.................................................................... 19
Section 9.2 Termination.......................................................................... 19
Section 9.3 Effect of Amendment or Termination................................................... 19
2
</TABLE>
<PAGE>
ARTICLE I
GENERAL PROVISIONS
1.1 PURPOSE AND INTENT OF PLAN
(a) This Plan is adopted in conjunction with the Atlantic Richfield Company
Supplementary Executive Retirement Plan. Recognizing that an Employee
may transfer between Vastar Resources, Inc. and Atlantic Richfield
Company during his or her service, each company has agreed to pay a pro
rata share of the Employee's benefit as described under Articles II and
III of each Plan.
(b) This Plan is intended to provide supplemental retirement allowances in
accordance with the provisions of the Plan contained herein, to those
Employees who:
(1) Have received an award under the Vastar Resources, Inc. Annual
Incentive Plan or the Atlantic Richfield Company Annual Incentive
Plan.
(2) Have deferred a portion of their Salary under the Vastar
Resources, Inc. Executive Deferral Plan or the Atlantic Richfield
Company Executive Deferral Plan.
(3) Have had the amount of their retirement benefit reduced due to
federal legal requirements, under a tax-qualified, defined benefit
retirement plan maintained by Vastar Resources, Inc. or Atlantic
Richfield Company, or
(4) Have been granted a Special Supplemental Retirement Benefit in
accordance with the provisions of this Plan.
1.2 EFFECTIVE DATE OF PLAN
The Plan was originally adopted effective June 26, 1994. This Plan as
amended and restated shall be effective as of March 24, 1999.
1.3 DEFINITIONS
(a) "Actuarial Equivalent" means, in comparing benefits payable in
different forms or at different times or in different circumstances, a
value under one such set of circumstances which is the same as the value
under a different set of circumstances. Such value shall be computed and
determined with reference to
1
<PAGE>
mortality assumptions, interest rates and other actuarial factors and
assumptions then in effect under the Retirement Plan for the purpose of
calculating the actuarial equivalent under that Plan.
(b) "Administrator" means (1) prior to the earlier to occur of a Change of
Control or an Anticipatory Change of Control, Vastar Resources, Inc. or the
Administrative Committee, and (2) on and after the earlier to occur of a
Change of Control or an Anticipatory Change of Control, the Special Plan
Administrator, which shall also assume all powers and duties of the
Administrator under the Plan. Upon a written determination by the Chief
Financial Officer and the General Counsel of the Company, approved by
either the Board of Directors of the Company (the "Board"), the Outside
Directors or the Executive Committee of the Board, that an Anticipatory
Change of Control has ended without concluding in a Change of Control (an
"Anticipatory Change Termination"), Vastar Resources, Inc. or the
Administrative Committee will again become the Administrator. For purposes
of this definition a Change of Control shall not include an ARCO
Acquisition.
(c) "Administrative Committee" means the Retirement Plan Committee of the
Vastar Retirement Plan or such other committee as shall be appointed by the
Vice President, Human Resources of the Company.
(d) "Anticipatory Change of Control" shall be ascribed the meaning set
forth for such term in Annex A attached hereto.
(e) "ARCO" means Atlantic Richfield Company.
(f) "ARCO Acquisition" shall mean a change of control as defined in
paragraph (3) of the definition of Change of Control on Annex A attached
hereto.
(g) "ARCO Takeover" shall mean a change of control as defined in paragraph
(5) of the definition of Change of Control on Annex A attached hereto.
(h) "Awards" means an award made under the Vastar Resources, Inc. Annual
Incentive Plan or the Atlantic Richfield Company Annual Incentive Plan,
whether paid in cash or deferred.
(i) "Base Pay" means "Annual Base Pay" as defined in the Retirement Plan.
(j) "Basic Allowance" means an annuity payable for the life of the
Participant, with a guarantee that an amount equal to 60 monthly payments
will be paid to the Participant and his or her Beneficiary.
(k) "Beneficiary" means a person who is entitled to receive a Survivor
Benefit in the event of the Participant's death. The Beneficiary under
Articles II and III of this Plan shall be the same person.
2
<PAGE>
(l) "Change of Control" shall be ascribed the meaning set forth for such
term as Annex A attached hereto.
(m) "Code" means the Internal Revenue Code of 1986, as amended.
(n) "Company" means Vastar Resources, Inc. and any of its subsidiaries.
(o) "Deferred Compensation" means any amount of Salary which a Participant
elects to defer pursuant to the provisions of the Vastar Resources, Inc.
Executive Deferral Plan or the Atlantic Richfield Company Executive
Deferral Plan.
(p) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
(q) "Employee" means any person who is or was regularly employed by the
Company.
(r) "Fifty Percent Joint and Survivor Annuity" means an annuity providing
payments for the life of a Participant, with a survivor annuity for the
life of his or her Beneficiary under which each payment to the Beneficiary
is 50 percent of the amount payable during the life of the Participant.
Each payment during the life of the Participant shall be a percentage of
the amount otherwise payable to the Participant in the form of a Basic
Allowance, so that the Fifty Percent Joint and Survivor Annuity is the
Actuarial Equivalent of the Basic Allowance otherwise payable to the
Participant.
(s) "Financial Hardship" means a condition of financial difficulty,
determined by the Administrator, upon advice of counsel, to be sufficient
to justify a change of election of the form of benefit under Article V
without causing, in the judgment of counsel, the receipt of taxable income
by any other Participant in the Plan in advance of the payment to him or
her of Plan benefits.
(t) "Lump Sum" means a single payment of the benefit which is the Actuarial
Equivalent of (1) the Basic Allowance, or (2) remaining installments under
a form of annuity in pay status, as applicable.
(u) The term "Outside Director" shall be ascribed the meaning set forth
for such term on Annex A attached hereto.
(v) "Participant" means a person who is or was an Employee and who (1)
received an Award during the computation period which would be used in
computing the Employee's Average Final Base Pay under the Retirement Plans
if the Award were recognized as a part of Base Pay under the Retirement
Plans, (2) deferred a portion of his or her Salary during the computation
period which
3
<PAGE>
would be used in calculating the Employee's Average Final Base Pay under
the Retirement Plans if the Deferred Compensation were recognized as a part
of Base Pay under the Retirement Plans, (3) has had his or her benefit
under the Retirement Plans reduced due to required limitations under the
Code or ERISA and/or (4) is granted a Special Supplemental Retirement
Benefit pursuant to this Plan.
(w) "Plan" means this Vastar Resources, Inc. Supplementary Executive
Retirement Plan.
(x) "Pre-Retirement Annuity" means the annuity paid under the Retirement
Plans to a survivor, which is attributable to Company contributions and
which is payable on account of the Participant's death prior to commencing
a retirement allowance and following attainment of entitlement to a
retirement allowance derived from Company contributions.
(y) "Retirement Plans" means the Vastar Retirement Plan and any defined
benefit, tax-qualified retirement plan, as defined in (S)3(35) of the ERISA
and (S)401(a) of the Code, maintained by ARCO.
(z) "Salary" means the Employee's regular base salary, excluding any Award,
and any other special or additional compensatory payments made by the
Company or ARCO.
(aa) "Secondary Change of Control" shall mean a sale by ARCO (directly or
indirectly) within one year after an ARCO Acquisition of 85% or more of the
assets held by Vastar immediately prior to the ARCO Acquisition.
(bb) "Special Plan Administrator" shall be ascribed the meaning set forth
for such term on Annex A attached hereto.
(cc) "Special Supplemental Retirement Benefit" means a supplementary
retirement benefit approved for payment under Article IV of this Plan to an
Employee by the Compensation Committee of the Board of Directors of Vastar
Resources, Inc.
(dd) "Survivor Benefit" means the benefit payable upon the death of the
Participant under Section 2.2(c) or 3.2(c).
(ee) "Vastar Retirement Plan" means the Vastar Resources, Inc. Retirement
Plan, and any other defined benefit tax-qualified retirement plan, as
defined in (S)3(35) of ERISA and (S)401(a) of the Code, maintained by the
Company.
1.4 COSTS OF PLAN
4
<PAGE>
All costs of this Plan, including the administration thereof, shall be
borne by the Company and no Employee contributions shall be required or
permitted.
5
<PAGE>
ARTICLE II
SUPPLEMENTAL BENEFIT
DEFERRED SALARY AND ANNUAL INCENTIVE AWARD
2.1 ELIGIBILITY
(a) The following Participants shall automatically be eligible for benefits
provided by this Article without the necessity for filing an
application for such benefits:
(1) A Participant retiring with an allowance from the Retirement Plans
which commences immediately (or which could have commenced
immediately) upon separation from employment, and
(2) A Participant terminating employment with a right to an allowance
from the Retirement Plans commencing on a later date.
(b) Any person who is designated by the Participant as a Beneficiary will
be eligible to receive the survivor benefit under Section 2.2(c).
Benefits under this Article will automatically be paid to such person
without the necessity for filing an application. In the case of the
Participant's death prior to commencement of the benefit without his or
her having designated a Beneficiary, the Beneficiary shall be the
participant's spouse if the Participant was married at the time of
death and the Participant's estate if the Participant was single at the
time of death.
2.2 AMOUNT OF BENEFIT
(a) GENERAL. The amount of the benefit payable under this Article is a
portion of the sum of separate, identical benefits prescribed under
provisions of this Article, and the corresponding provisions of the
Atlantic Richfield Company Supplementary Executive Retirement Plan, the
determination of which entails the general calculation of an aggregate
benefit payable from the Plans, followed by the allocation of a specific
benefit to this Plan, as described hereafter, which benefit is payable by
this Plan.
(b) PARTICIPANT BENEFIT
(1) GENERAL CALCULATION. The amount of a Participant's monthly benefit
under this Article will be a percentage, as described in the next
paragraph of this Subsection, of the difference, if any, between (i)
the amount of monthly allowance the Participant would have received
under
6
<PAGE>
the Retirement Plans at retirement, under the Basic Allowance, if the
Base Pay used in calculating the monthly allowance under the
Retirement Plans had included each Award made to the Participant in
each applicable period and the Participant's Deferred Compensation in
each applicable period, and (ii) the amount of monthly allowance the
Participant is entitled to receive at retirement from the Retirement
Plans, under the Basic Allowance under the Retirement Plans.
(2) SPECIFIC BENEFIT. The percentage of the difference in the monthly
benefit calculated under Section 2.2(b)(1) of this Article II (which
shall be the actual retirement benefit payable under this Article)
shall be the percentage equivalent to a fraction of which the
numerator is the normal monthly retirement allowance to which the
Participant is entitled under the Vastar Retirement Plan and the
denominator of which is the normal monthly retirement allowance to
which the Participant is entitled under the Retirement Plans.
(c) SURVIVOR BENEFIT
(1) DEATH OF PARTICIPANT PRIOR TO COMMENCEMENT OF BENEFIT.
(i) General Calculation. If a Participant who is entitled to
receive a benefit under this Article dies prior to commencing
receipt of the benefit, then the Participant's Beneficiary will
be paid a monthly survivor benefit under this Article equal to a
percentage, as described in the next paragraph of this
Subsection, of the difference, if any, between (A) the monthly
Pre-Retirement Annuity that would have been payable to the
Participant's Beneficiary under the Retirement Plans if the Base
Pay used in computing benefits under the Retirement Plans
included each Award made to the Participant in each applicable
period and the Participant's Deferred Compensation in each
applicable period and (B) the monthly Pre-Retirement Annuity
payable to the Participant's Beneficiary under the Retirement
Plans.
(ii) Specific Survivor Benefit. The percentage of the difference
in the monthly benefit calculation under Section 2.2(c)(1)(i)
(which shall be the actual survivor benefit payable under this
Article) shall be the percentage equivalent to a fraction of
which the numerator is the normal monthly retirement allowance to
which the Participant would have been entitled under the Vastar
Retirement Plan and the denominator of which is the normal
monthly retirement allowance to which the Participant would have
been entitled to under the Retirement Plans.
7
<PAGE>
(2) DEATH OF PARTICIPANT AFTER COMMENCEMENT OF BENEFIT. If a
Participant dies after commencing receipt of the benefit, then the
Participant's Beneficiary will be paid a monthly survivor benefit, if
applicable, pursuant to the Participant's form of allowance elected
under the Retirement Plans and Article V of this Plan.
8
<PAGE>
(d) MAXIMUM LIMITATION ON BENEFITS
(1) The benefit calculation under Section 2.2(b)(1) or 2.2(c)(1)(i) of
this article, as the case may be, shall not cause the annual benefit
under the form of allowance elected under the Retirement Plans and
Article III of this Plan, when added to the annual benefit payable
under this article, and Article II of the Atlantic Richfield Company
Supplementary Executive Retirement Plan, to exceed 65 percent of the
greater of (i) the sum of the Participant's annual Salary as of his or
her termination of employment plus his or her most recent Award, or
(ii) the average, during the Participant's prior ten years of
employment, of the Participant's highest three consecutive years of
Salary (whether or not deferred) and Award in each such year.
(2) Annuities resulting from voluntary employee contributions to the
Retirement Plans and increased benefits resulting from election of a
Level Income Option under the Retirement Plans shall not be considered
in applying the foregoing limitations.
(e) COMPUTATION PROCEDURE. For purposes of computing the amount of monthly
benefit payable under Sections 2.2(b) and 2.2(c) of this Article, it shall
be assumed that an Award has been made with respect to the calendar year in
which a Participant's termination or death occurs equal in amount to a pro
rata share of the Award, if any, made to such Participant with respect to
the calendar year immediately preceding such year, or if no such Award has
been made, then equal in amount to a pro rata share of the most recent
Award made to such Participant (the "Pro Rata Calculation"). If, following
termination or death and after commencement of benefits under this Article,
the Participant (or the Participant's estate or beneficiary) receives an
Award with respect to the year of termination or death, the benefit under
this Article shall be recalculated to take into account such Award,
provided however, that such recalculation shall not result in a reduction
of the benefit that has commenced under this Article. If, following
termination or death and after commencement of benefits under this Article,
the Participant (or the Participant's estate or beneficiary) receives an
Award with respect to the year immediately preceding the year of
termination or death, the benefit payable under this Article (including the
Pro Rata Calculation, if applicable) shall be recalculated to take into
account such Award provided however, that such recalculation shall not
result in a reduction of the benefit that has commenced under this Article.
9
<PAGE>
(f) SEPARATION FROM EMPLOYMENT. Unless a Participant at the time of
separation from Company employment is eligible for an immediate or deferred
retirement allowance from the Retirement Plans or unless a survivor benefit
is payable under Section 2.2(c) of this Article upon the death of the
Participant, rights of the Participant, and any person claiming under or by
right of the Participant, to any benefits under this Article shall cease
upon the Participant's separation from the employment of the Company.
10
<PAGE>
ARTICLE III
SUPPLEMENTAL BENEFIT
LEGALLY REQUIRED LIMITATIONS UNDER QUALIFIED PLANS
3.1 ELIGIBILITY
(a) The following Participants shall automatically be eligible for benefits
provided by this Article without the necessity for filing an application
for such benefits:
(1) A Participant retiring on an allowance from the Retirement Plans
which commences immediately (or which could have commenced
immediately) upon separation from employment, and
(2) A Participant terminating employment with a right to an allowance
from the Retirement Plans commencing on a later date.
(b) Any person who is designated by the Participant as a Beneficiary will
be eligible to receive the survivor benefit under Section 3.2(c). Benefits
under this Article will automatically be paid to such person without the
necessity for filing an application. In the case of the Participant's death
prior to commencement of the benefit without his or her having designated a
Beneficiary, the Beneficiary shall be the Participant's spouse if the
Participant was married at the time of death, and the Participant's estate
if the Participant was single at the time of death.
3.2 AMOUNT OF BENEFIT
(a) GENERAL. The amount of the benefit payable under this Article is a
portion of the sum of separate, identical benefits prescribed under
provisions of this Article, and the corresponding provisions of the
Atlantic Richfield Company Supplementary Executive Retirement Plan, the
determination of which entails the general calculation of an aggregate
benefit payable from the Plans, followed by the allocation of a specific
benefit to this Plan, as described hereafter, which benefit is payable by
this Plan.
(b) PARTICIPANT BENEFIT
(1) GENERAL CALCULATION. The amount of a Participant's monthly benefit
under this Article will be a percentage, as described in the next
paragraph of this Subsection, of the difference, if any, between (i)
the amount of monthly allowance the Participant would have received
under the Retirement Plans at retirement, under the Basic Allowance,
if the calculation of the benefit were not subject to limitations or
reductions required under the Code or ERISA, and (ii) the amount of
monthly
11
<PAGE>
allowance the Participant is entitled to receive at retirement from
the Retirement Plans, under the Basic Allowance under the Retirement
Plans.
(2) SPECIFIC BENEFIT. The percentage of the difference in the monthly
benefit calculated under Section 3.2(b)(1) (which shall be the actual
retirement benefit payable under this Article) shall be the percentage
equivalent to a fraction of which the numerator is the number of years
of service credited to the Participant for benefit accrual purposes
under the Vastar Retirement Plan and the denominator of which is the
total number of years of service credited to the Participant for
benefit accrual purposes under the Retirement Plans.
(c) SURVIVOR BENEFIT
(1) DEATH OF PARTICIPANT PRIOR TO COMMENCEMENT OF BENEFIT.
(i) General Calculation. If a Participant who is entitled to
receive a benefit under this Article dies prior to commencing
receipt of the benefit, then the Participant's Beneficiary will
be paid a monthly survivor benefit under this Article equal to a
percentage, as described in the next paragraph of this
Subsection, of the difference, if any, between (A) the monthly
Pre-Retirement Annuity that would have been payable to the
Participant's Beneficiary under the Retirement Plans if the
calculation of the Pre-Retirement Annuity were not subject to
limitations or reductions required under the Code or ERISA, and
(B) the monthly Pre-Retirement Annuity payable to the
Participant's Beneficiary under the Retirement Plans.
(ii) Specific Survivor Benefit. The percentage of the difference
in the monthly benefit calculation under Section 3.2(c)(1)(i)
(which shall be the actual survivor benefit payable under this
Article) shall be the percentage equivalent to a fraction of
which the numerator is the number of years of service credited to
the Participant for benefit accrual purposes under the Vastar
Retirement Plan and the denominator of which is the total number
of years of service credited to the Participant for benefit
accrual purposes under the Retirement Plans.
(2) DEATH OF PARTICIPANT AFTER COMMENCEMENT OF BENEFIT. If a
Participant dies after commencing receipt of the benefit, then the
Participant's Beneficiary will be paid a monthly survivor benefit, if
applicable, pursuant to the Participant's form of allowance elected
under the Retirement Plans and Article V of this Plan.
12
<PAGE>
ARTICLE IV
SPECIAL SUPPLEMENTAL RETIREMENT BENEFITS
At its sole discretion the Compensation Committee of the Board of Directors of
Vastar Resources, Inc. may award a Special Supplemental Retirement Benefit to
any Employee in such amount, or to be computed on such basis, as it may
determine. Such awards may be granted for any reason deemed appropriate by the
Compensation Committee, including without limitation, recognition of all or any
part of the Employee's years of service with an organization or entity acquired
by, or merged into, Vastar Resources, Inc., any of its subsidiaries or
affiliates, or by any predecessor company of Vastar Resources, Inc. or any of
its subsidiaries or affiliates. In no event shall a Special Supplemental
Retirement Benefit be granted under the Plan to or on account of any Employee
who is not a member of a select group of management or other highly compensated
employees as defined from time to time by the Compensation Committee. A
certified copy of the resolutions granting a Special Supplemental Retirement
Benefit shall be furnished to the Administrator prior to the date any payment on
account thereof is to be made under the Plan.
13
<PAGE>
ARTICLE V
FORM AND TIMING OF BENEFIT
5.1 BENEFITS PAYABLE UNDER ARTICLES II AND III
(a) OPTIONAL FORMS OF BENEFIT. The Participant may elect to receive payment
of his or her benefit under Articles II and III in any form available for
payment of the normal retirement benefit under the Vastar Retirement Plan,
provided that (1) the same form of payment must be elected under Articles
II and III, and (2) if the Participant elects a form of annuity under
Articles II and III and under the Retirement Plans, then he must elect the
same form of annuity under this Plan and the Retirement Plans. Participant
benefits payable under Articles II and III shall commence at the same time
as the benefits of the Participant under the Retirement Plans commence.
(b) ELECTIONS
(1) The Participant shall elect the form of payment of his or her
benefit to be received under Articles II and III of this Plan within
the time frame, and on the election form, prescribed by the
Administrator and communicated to the Participant in advance of the
date the Participant is eligible to commence benefit payments.
(2) If the Participant fails to elect the form of benefit payment
within the time frame designated by the Administrator, then upon
retirement the Participant will receive (i) if the Participant is
married at the time of retirement, an annuity payment in the form of a
Fifty Percent Joint and Survivor Annuity, with the surviving spouse as
the Beneficiary or (ii) if the Participant is single at the time of
retirement, an annuity in the form of the Basic Allowance.
14
<PAGE>
(3) If the Participant makes an election of the form of payment of his
or her benefit within the time frame designated by the Administrator
and subsequently wishes to change this election prior to commencement
of the benefit or, in the case of an annuity form of payment under
which payments have commenced, to receive the remaining monthly
payments in a Lump Sum which is the Actuarial Equivalent of the
remaining annuity installments, then he may request, by application to
the Administrator, to change the form of payment previously elected,
(i) without any reduction in, or imposition of any penalty on, the
Participant's Account, provided that the Administrator determines that
the Participant has experienced a Financial Hardship justifying the
request for a change of election, or (ii) the Administrator, in its
sole discretion, determines that it is appropriate to grant the
Participant's request based on the interests of the Company or the
grantor trust established under Section 8.2.
(4) The Participant may elect the form of payment of the Survivor
Benefit that will apply in the event of the Participant's death prior
to commencement of his or her benefit, which shall be one of the
optional forms available under the Vastar Retirement Plan, or an
immediate Lump Sum payment on the death of the Participant. If the
Participant fails to make the election, payment to the Beneficiary
will be an annuity payable in the form prescribed by the Vastar
Retirement Plan. However, the Beneficiary may request the
Administrator to change the Participant's prior election provided that
the Administrator makes a finding described under either Section
5.1(b)(3)(i) or (ii). Benefits paid in one of the optional forms of
payment available under the Vastar Retirement Plan to the Beneficiary
shall commence on the earliest date the Participant would have become
eligible to begin receiving a retirement allowance; provided, however,
that the Beneficiary may elect to receive a Lump Sum, subject to the
requirements described in Section 5.1(b)(3)(i) or (ii).
5.2 BENEFITS PAYABLE UNDER ARTICLE IV
The form of payment of any benefit under Article IV, including any
survivor benefit provisions, and the time for commencement of payment,
shall be as determined by the Compensation Committee of the Board of
Directors of Vastar Resources, Inc. and prescribed in the Committee's
resolutions granting such benefit.
5.3 BENEFITS PAYABLE AFTER A CHANGE OF CONTROL
(a) GENERAL. Notwithstanding anything to the contrary in any other Section
of this Plan, effective immediately upon a Change of Control, other than an
ARCO Acquisition or an ARCO Takeover, the Administrator shall cause an
15
<PAGE>
amount equal to the Lump Sum payment for each Participant to be transferred
from the Plan to the Vastar Resources, Inc. Executive Deferral Plan and
credited to the Participant's account in the Executive Deferral Plan,
provided, however, that if a Participant does not have an account in the
Executive Deferral Plan, the Lump Sum payment applicable to such
Participant's benefit under this Plan shall be immediately paid to the
Participant in complete satisfaction of the Participant's rights hereunder.
Thereafter, the benefits payable under this Plan shall be governed by the
terms of the Executive Deferral Plan. However, with respect to (i) the
remaining annuity payments to be received by any Participant or
Beneficiary pursuant to this Plan whose annuity payments have commenced as
of the date of the Change of Control and (ii) the benefit payable to any
Participant who terminated his or her employment prior to a Change of
Control (or a Beneficiary who became entitled to a benefit under this Plan
as a result of a death of a Participant occurring prior to a Change of
Control) which has not commenced as of the date of a Change of Control, the
benefits payable to such persons shall continue as provided for in this
Plan.
(b) ARCO TAKEOVER. The Chief Financial Officer and the General Counsel of
the Company may elect, by means of a written determination made in their
sole discretion either prior to but not longer than 15 days after an ARCO
Takeover to apply the provisions of Section 5.3(a) and Article IX as if a
Change of Control (other than an ARCO Acquisition or an ARCO Takeover) had
occurred on the date of such determination. In the absence of such a
determination, the benefits payable to Participants shall continue as
provided for in this Plan, as amended from time to time pursuant to
Article IX.
(c) ARCO ACQUISITION. In the event of an ARCO Acquisition the benefits
payable to Participants shall continue as provided for in this Plan, as
amended from time to time pursuant to Article IX; provided, however, that
in the event a Secondary Change of Control occurs, the provisions of
Section 5.3(a) and Article IX shall apply as if the Secondary Change of
Control were a Change of Control.
16
<PAGE>
ARTICLE VI
ADMINISTRATION
6.1 RULES OF CONDUCT
The Administrator shall adopt such rules for the conduct of its
business and administration of this Plan as it considers desirable,
provided they do not conflict with the provisions of this Plan.
6.2 LEGAL, ACCOUNTING, CLERICAL AND OTHER SERVICES
The Administrator may authorize one or more of its members (if
applicable) or any agent to act on its behalf and may contract for legal,
accounting, clerical and other services to carry out this Plan. All
expenses of the Administrator shall be paid by the Company or by the
trustee of the grantor trust described in Section 8.2 (the "Trustee").
6.3 INTERPRETATION OF PROVISIONS
The Administrator shall have the right to interpret the provisions of
this Plan and to decide questions arising in its administration. The
decisions and interpretations of the Administrator shall be final and
binding on the Company, the Participants, the Trustee and all other
persons.
6.4 RECORDS OF ADMINISTRATION
The Administrator shall keep records reflecting the administration of
this Plan which shall be subject to audit by the Company and the Trustee.
6.5 DENIAL OF CLAIM
The Administrator shall provide adequate notice in writing to any
Participant or Beneficiary whose claim for benefits under this Plan has
been denied, setting forth the specific reasons for such denial. The
Participant or Beneficiary will be given an opportunity for a full and fair
review by the Administrator of the decision denying the claim. The
Participant or Beneficiary shall be given 60 days from the date of the
notice denying any such claim within which to request such review.
17
<PAGE>
6.6 LIABILITY OF COMMITTEE
No member of the Administrator shall be liable for any action taken in
good faith or for exercise of any power given the Administrator, or for the
actions of other members, if any, of said Administrator.
18
<PAGE>
ARTICLE VII
FACILITY OF PAYMENT AND LAPSE OF BENEFITS
7.1 PROVISIONS FOR INCAPACITY
If the Administrator deems any person entitled to receive any payment
under the provisions of this Plan incapable of receiving or disbursing the
same by reason of minority, illness or infirmity, mental incompetency, or
incapacity of any kind, the Administrator may, in its sole discretion, take
any one or more of the following actions:
(1) it may apply such payment directly for the comfort, support and
maintenance of such person;
(2) it may reimburse any person for any such support theretofore
supplied to the person entitled to receive any such payment;
(3) or it may pay such payment to any other person selected by the
Administrator to disburse such payment for the comfort, support and
maintenance of the person entitled thereto, including, without
limitation, to any relative who has undertaken, wholly or partially,
the expense of such person's comfort, care and maintenance, or any
institution in whose care or custody the person entitled to the
payment may be. The Administrator may, in its sole discretion, deposit
any payment due to a minor to the minor's credit in any savings or
commercial bank of the Administrator's choice.
7.2 PAYMENTS OF DEPOSITS
Payments or deposits made pursuant to any provisions of this Article
shall be a complete discharge, to the extent thereof, of all liability
under the provisions of this Plan, or otherwise, of the Administrator, the
Company and this Supplementary Executive Retirement Plan, and the receipt
by the person or persons receiving any such payment, distribution or
deposit shall be a complete acquittance therefore, and there shall be no
liability to see to the application of any payments, distributions or
deposits so made.
19
<PAGE>
ARTICLE VIII
MISCELLANEOUS
8.1 UNFUNDED BENEFIT PLAN
(a) Benefits under Articles II and IV of this Supplementary Executive
Retirement Plan are intended to constitute a plan which is unfunded and
maintained primarily for the purpose of providing deferred compensation in
the form of additional retirement benefits to a select group of management
or highly compensated employees as defined in (S)201(a)(2), (S)301(a)(3)
and (S)401(a)(1) of ERISA.
(b) Benefits under Article III of this Plan are intended to constitute an
unfunded "Excess Benefit Plan" within the meaning of (S)3(36) of ERISA.
8.2 GRANTOR TRUST
Although the Company is responsible for the payment of all benefits
under the Plan, the Company may, in its discretion, contribute funds to a
grantor trust for the purpose, as it deems appropriate, of paying benefits
under this Plan. Such trust may be irrevocable, but assets of trust shall
be subject to the claims of creditors of Vastar Resources, Inc. or its
successors to the extent provided in the terms governing such trust. Upon
the earlier to occur of a Change of Control or an Anticipatory Change of
Control, the Company shall be required to make certain contributions to a
grantor trust pursuant to the terms of that certain trust agreement between
the Company or its successors and Wachovia Bank, N.A., as trustee, dated as
of March 10, 1999, or any successor trust agreement including any
amendments or supplements thereto or if such trust agreement has not been
executed such grantor trust of the Company designated by the Senior Vice
President and Chief Financial Officer and the General Counsel of the
Company. To the extent any benefits provided under the Plan are actually
paid from the trust, the Company shall have no further obligation with
respect thereto but to the extent not so paid, such benefits shall remain
the obligation of, and shall be paid by, the Company. The Participants
shall have the status of unsecured creditors insofar as their legal claim
for benefits under the Plan and the Participants shall have no security
interest in any assets of the grantor trust.
20
<PAGE>
8.3 PAYMENTS AND BENEFITS NOT ASSIGNABLE
Payments to and benefits under this Plan are not assignable,
transferable or subject to alienation since they are primarily for the
support and maintenance of the Participants and their joint annuitants or
Beneficiaries after retirement. Similarly, subject to Section 8.2, such
payments shall not be subject to attachments by creditors of, or through
legal process against, the Company, the Administrator or any Participant.
8.4 NO RIGHT OF EMPLOYMENT
The provisions of this Plan shall not give a Participant the right to
be retained in the service of the Company nor shall this Plan or any action
taken under the Plan be construed as a contract of employment.
8.5 ADJUSTMENTS
At the request of the Company, the Administrator may, with respect to
a Participant, adjust such Participant's benefit under this Plan or make
such other adjustments with respect to such Participant as are required to
correct administrative errors or provide uniform treatment of Participants
in a manner consistent with the intent and purpose of this Plan.
8.6 OBLIGATION TO COMPANY
If a Participant becomes entitled to a distribution of benefits under
the Plan, and if at such time the Participant has outstanding any debt,
obligation, or other liability representing an amount owing to the Company,
or any benefit plan maintained by the Company, then, prior to the earlier
to occur of a Change of Control or an Anticipatory Change of Control, the
Company may offset such amount owed to it or such benefit plan against the
amount of benefits otherwise distributable. Such determination shall be
made by the Administrator.
8.7 PROTECTIVE PROVISIONS
(a) Each Participant shall reasonably cooperate with the Administrator by
furnishing information and taking such other actions as may be requested by
the Company in order to facilitate the payment of benefits hereunder.
21
<PAGE>
(b) The Administrator may withhold payment under the Plan until a
Participant provides reasonable cooperation with information or other
requests of the Administrator. Prior to the earlier to occur of an
Anticipatory Change of Control or a Change of Control, in the Company's
sole discretion, benefits may be payable in an amount reduced to compensate
the Company for any loss, cost, damage or expense suffered or incurred by
the Company as a result in any way of any action, misstatement or
nondisclosure by the Participant.
8.8 GENDER, SINGULAR AND PLURAL
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine, or neuter, as the identity of the person or
persons may require. As the context may require, the singular may be read
as the plural and the plural as the singular.
8.9 LAW GOVERNING
This Plan shall be construed, regulated and administered under the
laws of the State of Delaware.
8.10 VALIDITY
In the event any provision of this Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of this Plan.
8.11 NOTICE
Any notice or filing required or permitted to be given to the
Administrator under the Plan shall be sufficient if in writing and hand
delivered, or sent by registered or certified mail, to the principal office
of the Administrator, directed to the attention of the Manager, Vastar
Benefit Plans Compliance. Such notice shall be deemed given as of the date
of delivery or, if delivery is made by mail, as of the date shown on the
postmark on the receipt for registration or certification.
8.12 SUCCESSORS AND ASSIGNS
This Plan shall be binding upon the Company and its successors and
assigns.
22
<PAGE>
8.13 TAX WITHHOLDING
The Company shall have the right to withhold from Salary (or otherwise
to cause the Participant or the executor or administrator of his or her
estate, or his or her Beneficiary to make payment to the Company of) any
federal, state, local or foreign taxes required to be withheld with
respect to any payments made pursuant to this Plan. The Administrator
shall withhold from Plan distributions such amount as shall be necessary
to satisfy applicable federal, state and local tax withholding
requirements with respect to such distributions.
23
<PAGE>
ARTICLE IX.
AMENDMENT AND TERMINATION
Section 9.1 AMENDMENT OF PLAN
Prior to the earlier to occur of an Anticipatory Change of Control or
a Change of Control, and subject to Section 9.3 hereof, this Plan may be amended
from time to time by the Board of Directors of Vastar or its designee.
Notwithstanding the above, after the earlier to occur of an Anticipatory Change
Termination (as defined in Section 1.3(b)) or the expiration of the Transition
Window, this Plan may again be amended, subject to Section 9.3, from time to
time by the Board of Directors of Vastar or its designee.
Section 9.2 TERMINATION
Vastar intends to continue this Plan indefinitely, but reserves the
right, subject to section 9.3, to terminate it at any time prior to an
Anticipatory Change of Control or a Change of Control by action of its Board of
Directors or its designee. Notwithstanding the above, after the earlier to occur
of an Anticipatory Change Termination (as defined in Section 1.3(b)) or the
expiration of the Transition Window, this Plan may again be amended, subject to
Section 9.3, from time to time by the Board of Directors of Vastar or its
designee.
Section 9.3 EFFECT OF AMENDMENT OR TERMINATION
No amendment or termination of this Plan may adversely affect the
benefit payable or rights afforded to any Participant as of the effective date
of the amendment or termination, or any Beneficiary who, as of such date, was
then eligible to receive a benefit under this Plan.
Section 9.4 SPECIAL AMENDMENTS APPROVED BY PARTICIPANTS
Notwithstanding anything to the contrary in this Article IX, after the
earlier to occur of an Anticipatory Change of Control or a Change of Control,
this Plan may be amended, subject to Section 9.3, by a vote of 80% or more of
the votes cast by the Participants with regard to such amendment. Each
Participant shall be entitled to a number of votes equal to the number of
dollars credited to his or her Account as of the last day of the month
immediately preceding the vote. In the event any material amendment is approved
as provided above, the Participants who vote against the amendment shall be
given an option to receive a lump sum distribution of their Account as soon as
practicable after the effective date of the amendment.
24
<PAGE>
Executed as of the 24th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By /s/ Jonathan D. Edelfelt By /s/ Jeffrey M. Bender
------------------------- -------------------------------
Jonathan D. Edelfelt Jeffrey M. Bender
Associate Secretary Vice President, Human Resources
25
<PAGE>
EXHIBIT 10.7(a)
VASTAR RESOURCES, INC.
SPECIAL TERMINATION ALLOWANCE PLAN
EFFECTIVE AS OF
JULY 1, 1994
<PAGE>
VASTAR RESOURCES, INC.
SPECIAL TERMINATION ALLOWANCE PLAN
To record the adoption of the Vastar Resources, Inc. Special Termination
Allowance Plan, effective July 1, 1994, the undersigned, being duly authorized
to act on behalf of Vastar Resources, Inc. has executed this plan document at
Houston, Texas on the 20th day of October, 1994.
ATTEST: VASTAR RESOURCES, INC.
BY: /s/ Albert D. Hoppe BY: /s/ Jeffery M. Bender
-------------------------- -------------------------------
Jeffrey M. Bender
Vice President
Human Resources
<PAGE>
VASTAR RESOURCES, INC.
SPECIAL TERMINATION ALLOWANCE PLAN
Table of Contents
Page
No.
SECTION 1
Purpose.................................................... 1
SECTION 2
Effective Date............................................. 2
SECTION 3
Definitions................................................ 3
SECTION 4A
Eligibility, Payment and Duration.......................... 5
SECTION 4
Eligibility, Payment and Duration.......................... 9
SECTION 5
Amount of Allowance........................................ 12
SECTION 6
Administration............................................. 13
SECTION 7
General.................................................... 16
SECTION 8
Amendment and Termination.................................. 17
<PAGE>
SECTION 1
PURPOSE
1.1 The purpose of this Plan is to offer special allowances to certain eligible
Employees whose service with the Company ceases as a result of termination
of employment, other than by discharge for cause including unacceptable
performance, and whose termination results in a net long-term savings or
other significant tangible long-term advantage to the Company.
1
<PAGE>
SECTION 2
EFFECTIVE DATE
2.1 The Plan is effective July 1, 1994.
2
<PAGE>
SECTION 3
DEFINITIONS
3.1 Administrator means Vastar Resources, Inc.
3.2 Company means Vastar Resources, Inc. and Subsidiaries or Affiliates whose
management has adopted this Plan.
3.3 Employee means a regular, full-time or regular, part-time employee,
excluding employees represented by a collective bargaining agent which has
not negotiated the benefit of this Plan.
3.4 Expatriate Employee means a regular, full-time Employee, on the U.S. dollar
payroll who is permanently assigned to a foreign subsidiary of the Company
with a work location and domicile outside the United States.
3.5 Participant means an Employee who satisfies the requirements as set forth in
Section 4.
3.6 Pay means the weekly rate of regular wages or salary on the date of
termination of Company employment, excluding all extra pay such as overtime,
premiums, bonuses, living or other allowances.
3.7 Physical Relocation means a change of principal work location which, in the
sole judgment of the Company, requires a move of the Employee's place of
residence.
3.8 Plan means the Vastar Resources, Inc. Special Termination Allowance Plan.
3.9 Plan Year means the calendar year.
3
<PAGE>
3.10 Service means Credited Company service as defined by the Company and
confirmed by current practices.
3.11 Subsidiary or Affiliate means:
(a) All corporations which are members of a controlled group of
corporations within the meaning of (S)1563(a) of the Internal Revenue
Code of 1954 [determined without regard to (S)1563(a)(4) and
(S)1563(e)(3)(c) of such Code] and of which Vastar Resources, Inc. is
then a member; or
(b) All trades or businesses whether or not incorporated, which, under the
regulations prescribed by the Secretary of the Treasury pursuant to
(S)210(d) of the Employee Retirement Income Security Act of 1974
("ERISA") are then under common control with Vastar Resources, Inc.
3.12 United States means the fifty states of the United States of America.
4
<PAGE>
SECTION 4A/1/
ELIGIBILITY, PAYMENT AND DURATION
4A.1 An Employee shall be eligible for the allowance under this Plan, as set
forth in Paragraphs 4A.3 and 4A.4, if the Employee satisfies the following
conditions and is not excluded from eligibility under Paragraph 4A.2
(hereinafter "Eligible Participant"):
(a) Is not covered by a collective bargaining agreement unless coverage
under this Plan is required by such agreement or negotiated with the
collective bargaining agent;
(b) Terminates employment due, directly or indirectly, to the Vastar
Resources, Inc. Property Sale/ Consolidation Program, on the date
designated by the Company, but in no case later than December 31, 1995.
A termination of employment due to the Vastar Resources, Inc. Property
Sale/Consolidation Program shall not be deemed to have occurred if the
Employee is retained in employment with a purchaser of Company assets
or stock pursuant to an agreement between the Company and purchaser;
(c) Executes a Separation Agreement and General Release no later than sixty
days following termination of employment;
(d) Is not discharged for misconduct;
- -----------
/1/ Section 4 and 5 of this Plan are suspended and replaced by the provisions
of this section for the period commencing on July 1, 1994 and ending on
December 31, 1995. It applies to the Employees who are terminated due, either
directly or indirectly, to the Vastar Resources, Inc. Property
Sale/Consolidation Program.
5
<PAGE>
(e) With respect to the benefit described in Paragraph 4A.3 of the Plan,
was, at the time his or her employment is terminated, accruing
Membership Service in the Vastar Resources, Inc. Retirement Plan or the
Vastar Resources, Inc. Retirement Plan II; and
(f) With respect to the benefit described in Paragraph 4A.4 of the Plan,
was, at the time his or her employment is terminated, classified as a
Regular Full-time or Regular Part-time Employee, as defined in the
Administrator's Employment Classification Policy.
4A.2 Paragraph 4A.1 shall not apply to any person who:
(a) Except as provided in Paragraph 4A.3, has elected and is in receipt of,
or entitled to, the benefits of any Enhanced Retirement Program
maintained by the Company or a Subsidiary or Affiliate;
(b) With the exception of an Expatriate Employee, is offered employment by
the Company, which does not require a Physical Relocation, regardless
of whether there is a change of salary grade; or
(c) Is an Expatriate Employee who is offered employment with the Company in
the United States, provided such employment is not at a lower salary
grade, unless, prior to such offer, the Expatriate Employee has
accepted a transfer to an assignment outside the United States
coincident with written notification that a post-transfer assignment in
the United States at a specifically designated salary grade will be
offered upon completion of the assignment.
6
<PAGE>
4A.3 With respect to an Eligible Participant who is entitled to the benefits of
the Enhanced Retirement Program pursuant to Section 26 of the Vastar
Resources, Inc. Retirement Plan or Section 26 of the Vastar Resources, Inc.
Retirement Plan II and has elected to receive such benefits, the allowance
shall be computed:
(a) For a Full-Time Employee, in accordance with the Attachment 1 matrix.
(b) For a Part-Time Employee, in accordance with the Attachment 3
worksheet.
4.A4 With respect to an Eligible Participant who has elected not to receive the
benefits of the Enhanced Retirement Program pursuant to Section 26 of the
Vastar Resources, Inc. Retirement Plan or Section 26 of the Vastar
Resources, Inc. Retirement Plan II or who is not entitled to make such
election, the allowance shall be calculated:
(a) For a Regular Full-Time Employee, in accordance with the Attachment 2
matrix.
(b) For a Regular Part-Time Employee, in accordance with the Attachment 3
worksheet.
4A.5 At the discretion of the Company, payments under this paragraph will be
made as follows:
(a) A lump sum at the time employment terminates;
(b) A lump sum in the January of the calendar year following termination of
employment; or
7
<PAGE>
(c) In no more than three annual installments payable as follows: (i) at
the time employment terminates, (ii) in the January of the calendar
year following termination of employment, and (iii) in the January of
the second calendar year following termination of employment.
4A.6 If an Eligible Participant dies before receiving all payments due under
this Plan, such remaining payments will be paid in a lump sum to the
Eligible Participant's beneficiary. Absent the Eligible Participant having
designated a beneficiary prior to his or her death, such remaining payments
will be paid in a lump sum to his or her estate.
4A.7 The Company reserves the right to offset the allowance described in
Paragraph 4A.3 or 4A.4., as applicable, by any monies the Employee owes the
Company and by the amount of any statutory benefits attributable to
termination of employment or disability.
4A.8 Notwithstanding anything in this Section 4A to the contrary, the total
allowance paid under this Plan shall not exceed the equivalent of twice the
Employee's Annual Compensation, as defined in 29 CFR (S)2510.3-2(b)(2)(i),
during the year immediately preceding the termination of the Employee's
service.
8
<PAGE>
SECTION 4
ELIGIBILITY, PAYMENT AND DURATION
4.1 An Employee shall be eligible for the allowance under this Plan, as set
forth in Section 5, if the Company determines that:
(a) It is appropriate to extend the Plan to the group or class of which the
Employee is a member;
(b) The Employee terminates employment involuntarily. A termination of
employment will not be deemed to have occurred if the Employee continues
in the employment of a company that purchases a Subsidiary or Affiliate,
or assets of the Company;
(c) The Employee's termination results in a net long-term savings or other
significant tangible long-term advantage to the Company;
(d) The Employee is not discharged for cause, including unacceptable
performance or unsatisfactory conduct;
(e) The Employee is not receiving short-term or long-term disability
benefits. Such Employee shall be eligible for payments under this Plan
upon termination of such disability benefits;
(f) The Employee terminates in good standing at a time determined by the
Company; and
9
<PAGE>
(g) The Employee executes, no later than 60 days following termination of
employment, a `Separation Agreement and General Release' as described in
Appendix A of this Plan.
Notwithstanding anything to the contrary in this Paragraph 4.1, Employees
who elect to voluntarily terminate employment with the Company are not
entitled to an allowance from this Plan.
An Employee described in Subparagraph 4A.1(b) of the Plan shall not be
entitled to an allowance under this Paragraph 4.1 of the Plan.
4.2 With the exception of Expatriate Employees, an Employee who otherwise
satisfies the requirements of Paragraph 4.1, shall not become eligible for
the allowance under Subparagraph 5.1(a) of this Plan if such Employee is
offered employment with the Company; provided such employment does not
require Physical Relocation and is not at a lowered salary grade and
provided further that an Expatriate Employee who otherwise satisfies the
requirements of Paragraph 4.1, shall not become eligible for an allowance
under this Plan if such Expatriate Employee is offered employment with the
Company in the United States provided such employment is not at a lower
salary grade, unless, prior to such offer, the Employee has accepted a
transfer to an assignment outside of the United States coincident with
written notification that a post-transfer assignment in the United States at
a specifically designated lower salary grade will be offered upon completion
of the assignment.
4.3 At the discretion of the Company, payments under this Plan may be made in a
lump sum at the time of termination or at some future date, or in
installments. Notwithstanding the foregoing, payments must be completed
within 24 months after termination of the Employee's Service.
10
<PAGE>
4.4 If a Participant dies before receiving all payments due under this Plan,
such remaining payments will be paid in a lump sum to the Participant's
beneficiary.
11
<PAGE>
SECTION 5
AMOUNT OF ALLOWANCE
5.1 (a) For a Regular Full-Time Employee, the payments made to a Participant
under this subparagraph shall be computed by reference to the Attachment
2 matrix.
(b) For a Regular Part-Time Employee, payments made to a Participant under
this subparagraph shall be computed by reference to the Attachment 3
worksheet.
5.2 The Company reserves the right to offset the allowance described in
Paragraph 5.1, above, by any monies the Employee owes the Company and by the
amount of any statutory benefits attributable to termination of employment
or disability.
5.3 Notwithstanding anything in this Section 5 to the contrary, the total
allowance paid under this Plan shall not exceed the equivalent of twice the
Employee's gross salary or wages during the year immediately preceding the
termination of the Employee's Service.
12
<PAGE>
SECTION 6
ADMINISTRATION
6.1 The Administrator may at any time delegate to any other named person or
body, or reassume therefrom, any of his or her respective fiduciary
responsibilities or administrative duties with respect to this Plan
including the power to delegate and reassume such responsibilities and
duties by written action naming the person or body to whom the
responsibility or duty has been delegated.
6.2 The named fiduciary with respect to this Plan is the Administrator.
6.3 The Administrator may contract with one or more persons to render advice
with regard to any responsibility it has under this Plan.
6.4 Subject to the limitation of provisions of the Plan, the Administrator shall
from time to time establish such rules for the administration of the Plan as
the Administrator may deem desirable.
6.5 In performance of their respective duties hereunder, the Administrator and
each other fiduciary with respect to this Plan, shall act with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of like character and with like aims,
and shall have no liability for any action or forbearance on its part with
respect to which they have so acted.
6.6 If a request for benefits is denied, in whole or in part, the Administrator
shall notify the claimant in writing of such denial and of the claimant's
right to a review by the Administrator and shall set forth in a manner
calculated to be understood by the claimant, specific reasons for such
denial, specific references to pertinent Plan
13
<PAGE>
provisions on which the denial is based, a description of any additional
material or information necessary for the claimant to perfect his or her
request, an explanation of why such material or information is necessary, and an
explanation of the Plan's review procedure. Any person, or a duly authorized
representative thereof, who is denied an allowance in whole or in part, may
appeal from such denial to the Administrator for a review of the decision by
submitting to the Administrator within 60 days after receiving notice of denial,
a written statement:
(a) Requesting a review of the claim for an allowance by the Administrator;
(b) Setting forth all of the grounds upon which the request for review is based
and any facts in support thereof; and
(c) Setting forth any issues or comments which the claimant deems relevant to
the claim.
The Administrator shall act upon such claim within 60 days after the later of
receipt of the claimant's request for review by the Administrator or receipt of
any additional materials reasonably requested by the Administrator from such
claimant.
The Administrator shall make a full and fair review of each such claim and any
written materials submitted by the claimant or the Company in connection
therewith and may require the Company or the claimant to submit within 30 days
written notice by the Administrator therefor, such additional facts, documents,
or other evidence as the Administrator, in its sole discretion, deems necessary
or advisable in making such a review. On the basis of its review, the
Administrator shall make an independent determination of the claimant's
eligibility for an allowance under this Plan. The decision of the Administrator
on any claim for an allowance shall be
14
<PAGE>
final and conclusive upon all persons if supported by substantial evidence in
the record.
If the Administrator denies a claim in whole or in part, the Administrator shall
give written notice of its decision to the claimant setting forth in a manner
calculated to be understood by the claimant the specific reasons for such denial
and specific references to the pertinent Plan provisions on which the
Administrator's decision was based.
15
<PAGE>
SECTION 7
GENERAL
7.1 Subject to Paragraph 5.2, payments to and benefits under this Plan are not
assignable or subject to alienation since they are primarily for the support
and maintenance of the Participants. Likewise, such payments shall not be
subject to attachment by creditors of or through legal process against the
Company or any Participant.
7.2 The cost of this Plan shall be paid by the Company out of its general costs.
7.3 This Plan is intended to be an employee welfare benefit plan, as defined in
(S)3(1), Subtitle A of Title I of the ERISA. The Plan will be interpreted to
effectuate this intent.
16
<PAGE>
SECTION 8
AMENDMENT AND TERMINATION
8.1 The Plan may be amended for any reason and at any time by the Vice
President, Human Resources, Vastar Resources, Inc. if, as amended, it
continues for the exclusive benefit of Participants of the Plan.
8.2 This Plan and payments thereunder may be terminated at any time by the Vice
President, Human Resources, Vastar Resources, Inc.
17
<PAGE>
Attachment 1
<TABLE>
<CAPTION>
ENHANCED RETIREMENT PROGRAM
SPECIAL PAYMENT ALLOWANCE MATRIX
COMPANY SERVICE VS. WEEKS OF PAY
COMPLETED PLUS COMPLETED DAYS OF SERVICE SINCE PRIOR ANNIVERSARY DATE
YEARS OF SERVICE 0-30 31-61 62-91 92-121 122-152 153-182 183-212 213-243 244-273 274-303 304-334 335-364
- ---------------- ---- ----- ----- ------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
1 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
2 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
3 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00
4 6.00 6.13 6.25 6.38 6.50 6.63 6.75 6.88 7.00 7.13 7.25 7.38
5 7.50 7.63 7.75 7.88 8.00 8.13 8.25 8.38 8.50 8.63 8.75 8.88
6 9.00 9.13 9.25 9.38 9.50 9.63 9.75 9.88 10.00 10.13 10.25 10.38
7 10.50 10.63 10.75 10.88 11.00 11.13 11.25 11.38 11.50 11.63 11.75 11.88
8 12.00 12.13 12.25 12.38 12.50 12.63 12.75 12.88 13.00 13.13 13.25 13.38
9 13.50 13.63 13.75 13.88 14.00 14.13 14.25 14.38 14.50 14.63 14.75 14.88
10 15.00 15.13 15.25 15.38 15.50 15.63 15.75 15.88 16.00 16.13 16.25 16.38
11 16.50 16.63 16.75 16.88 17.00 17.13 17.25 17.38 17.50 17.63 17.75 17.88
12 18.00 18.13 18.25 18.38 18.50 18.63 18.75 18.88 19.00 19.13 19.25 19.38
13 19.50 19.63 19.75 19.88 20.00 20.13 20.25 20.38 20.50 20.63 20.75 20.88
14 21.00 21.13 21.25 21.38 21.50 21.63 21.75 21.88 22.00 22.13 22.25 22.38
15 22.50 22.63 22.75 22.88 23.00 23.13 23.25 23.38 23.50 23.63 23.75 23.88
16 24.00 24.13 24.25 24.38 24.50 24.63 24.75 24.88 25.00 25.13 25.25 25.38
17 25.50 25.63 25.75 25.88 26.00 26.13 26.25 26.38 26.50 26.63 26.75 26.88
18 27.00 27.13 27.25 27.38 27.50 27.63 27.75 27.88 28.00 28.13 28.25 28.38
19 28.50 28.63 28.75 28.88 29.00 29.13 29.25 29.38 29.50 29.63 29.75 29.88
20 30.00 30.13 30.25 30.38 30.50 30.63 30.75 30.88 31.00 31.13 31.25 31.38
21 31.50 31.63 31.75 31.88 32.00 32.13 32.25 32.38 32.50 32.63 32.75 32.88
22 33.00 33.13 33.25 33.38 33.50 33.63 33.75 33.88 34.00 34.13 34.25 34.38
23 34.50 34.63 34.75 34.88 35.00 35.13 35.25 35.38 35.50 35.63 35.75 35.88
24 & Over 36.00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT 2
SPECIAL TERMINATION ALLOWANCE
COMPANY SERVICE VS. WEEKS OF PAY
COMPLETED PLUS COMPLETED DAYS OF SERVICE SINCE PRIOR ANNIVERSARY DATE
YEARS OF SERVICE 0-30 31-61 62-91 92-121 122-152 153-182 183-212 213-243 244-273 274-303 304-334 335-364
- ---------------- ---- ----- ----- ------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
1 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
2 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
3 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
4 12.00 12.25 12.50 12.75 13.00 13.25 13.50 13.75 14.00 14.25 14.50 14.75
5 15.00 15.25 15.50 15.75 16.00 16.25 16.50 16.75 17.00 17.25 17.50 17.75
6 18.00 18.25 18.50 18.75 19.00 19.25 19.50 19.75 20.00 20.25 20.50 20.75
7 21.00 21.25 21.50 21.75 22.00 22.25 22.50 22.75 23.00 23.25 23.50 23.75
8 24.00 24.25 24.50 24.75 25.00 25.25 25.50 25.75 26.00 26.25 26.50 26.75
9 27.00 27.25 27.50 27.75 28.00 28.25 28.50 28.75 29.00 29.25 29.50 29.75
10 30.00 30.25 30.50 30.75 31.00 31.25 31.50 31.75 32.00 32.25 32.50 32.75
11 33.00 33.25 33.50 33.75 34.00 34.25 34.50 34.75 35.00 35.25 35.50 35.75
12 36.00 36.25 36.50 36.75 37.00 37.25 37.50 37.75 38.00 38.25 38.50 38.75
13 39.00 39.25 39.50 39.75 40.00 40.25 40.50 40.75 41.00 41.25 41.50 41.75
14 42.00 42.25 42.50 42.75 43.00 43.25 43.50 43.75 44.00 44.25 44.50 44.75
15 45.00 45.25 45.50 45.75 46.00 46.25 46.50 46.75 47.00 47.25 47.50 47.75
16 48.00 48.25 48.50 48.75 49.00 49.25 49.50 49.75 50.00 50.25 50.50 50.75
17 51.00 51.25 51.50 51.75 52.00 52.25 52.50 52.75 53.00 53.25 53.50 53.75
18 54.00 54.25 54.50 54.75 55.00 55.25 55.50 55.75 56.00 56.25 56.50 56.75
19 57.00 57.25 57.50 57.75 58.00 58.25 58.50 58.75 59.00 59.25 59.50 59.75
20 60.00 60.25 60.50 60.75 61.00 61.25 61.50 61.75 62.00 62.25 62.50 62.75
21 63.00 63.25 63.50 63.75 64.00 64.25 64.50 64.75 65.00 65.25 65.50 65.75
22 66.00 66.25 66.50 66.75 67.00 67.25 67.50 67.75 68.00 68.25 68.50 68.75
23 69.00 69.25 69.50 69.75 70.00 70.25 70.50 70.75 71.00 71.25 71.50 71.75
24 & Over 72.00
</TABLE>
<PAGE>
ATTACHMENT 3
WORKSHEET FOR CALCULATION OF SEVERANCE ALLOWANCE
FOR REGULAR PART-TIME EMPLOYEES WHO HAVE
EMPLOYMENT SERVICE AS REGULAR FULL-TIME EMPLOYEES
- -------------------------------------- ----------------------------
Print Employee Name Social Security #
1. Full and fractional years of Total Credited Company
Service (use Adjusted Service Date on EDB, and divide
days in a partial year by 365--
Example: 5 years and 355 days = 5.97) ------------
2. Full and fractional years of Regular Part-time service
(From date of change to part-time to termination date) ------------
3. Full and fractional years of Regular Full-time service ------------
(LINE 2 PLUS LINE 3 MUST EQUAL LINE 1)
4. Hours in current weekly part-time work schedule ------------
5. Line 2 multiplied by Line 4, divided by 40 ------------
6. Line 5 divided by Line 1 ------------
7. Line 3 divided by Line 1 ------------
8. Line 6 plus Line 7 (Full-time equivalancy) ------------
9. Current hourly part-time base pay (if salaried employee,
use EDB weekly base pay divided by the hours in their
current part-time work schedule) ------------
10. Enter matrix factor for appropriate allowance
(either 3 week or 1-1/2 week schedule) for total
Credited Company Service ------------
11. Line 9 multiplied by Line 10 ------------
12. Line 11 multiplied by Line 8 ------------
13. Line 12 multiplied by Line 40 ------------
- ------------------------------------------- ------------------
Print Name of Human Resources Person Date Prepared
Who Prepared This Worksheet
File Instructions: Attach original to Release form, keep a xerox copy in
employee's personnel file. Copy may be provided to the employee if requested.
12/21/93 revision
<PAGE>
EXHIBIT 10.7(b)
AMENDMENT NO. 1
TO
VASTAR RESOURCES, INC.
SPECIAL TERMINATION ALLOWANCE PLAN
-------------------------
Pursuant to the power of amendment reserved therein, the Vastar Resources, Inc.
Special Termination Allowance Plan (the "Plan") is hereby amended effective as
of May 1, 1998.
Attachment 1 to the Plan is amended to read as attached.
Executed this 21st day of May, 1998.
ATTEST VASTAR RESOURCES, INC.
BY: /s/ Jon Edelfelt BY: /s/ Jeffrey M. Bender
------------------------------- --------------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
<PAGE>
ATTACHMENT 1
SPECIAL TERMINATION ALLOWANCE
COMPANY SERVICE VS. WEEKS OF PAY
<TABLE>
<CAPTION>
COMPLETED PLUS COMPLETED DAYS OF SERVICE SINCE PRIOR ANNIVERSARY DATE
YEAR OF SERVICE 0-30 31-61 62-91 91-121 122-152 153-182 183-212 213-243 244-273 274-303 304-334 335-364
- --------------- ---- ----- ----- ------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 04.00 04.00 04.00 04.00 04.00 04.00 04.00 04.00 04.00 04.00 04.00 04.00
1 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
2 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
3 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00
4 12.00 12.25 12.50 12.75 13.00 13.25 13.50 13.75 14.00 14.25 14.50 14.75
5 15.00 15.25 15.50 15.75 16.00 16.25 16.50 16.75 17.00 17.25 17.50 17.75
6 18.00 18.25 18.50 18.75 19.00 19.25 19.50 19.75 20.00 20.25 20.50 20.75
7 21.00 21.25 21.50 21.75 22.00 22.25 22.50 22.75 23.00 23.25 23.50 23.75
8 24.00 24.25 24.50 24.75 25.00 25.25 25.50 25.75 26.00 26.25 26.50 26.75
9 27.00 27.25 27.50 27.75 28.00 28.25 28.50 28.75 29.00 29.25 29.50 29.75
10 30.00 30.25 30.50 30.75 31.00 31.25 31.50 31.75 32.00 32.25 32.50 32.75
11 33.00 33.25 33.50 33.75 34.00 34.25 34.50 34.75 35.00 35.25 35.50 35.75
12 36.00 36.25 36.50 36.75 37.00 37.25 37.50 37.75 38.00 38.25 38.50 38.75
13 39.00 39.25 39.50 39.75 40.00 40.25 40.50 40.75 41.00 41.25 41.50 41.75
14 42.00 42.25 42.50 42.75 43.00 43.25 43.50 43.75 44.00 44.25 44.50 44.75
15 45.00 45.25 45.50 45.75 46.00 46.25 46.50 46.75 47.00 47.25 47.50 47.75
16 48.00 48.25 48.50 48.75 49.00 49.25 49.50 49.75 50.00 50.25 50.50 50.75
17 51.00 51.25 51.50 51.75 52.00 52.25 52.50 52.75 53.00 53.25 53.50 53.75
18 54.00 54.25 54.50 54.75 55.00 55.25 55.50 55.75 56.00 56.25 56.50 56.75
19 57.00 57.25 57.50 57.75 58.00 58.25 58.50 58.75 59.00 59.25 59.50 59.75
20 60.00 60.25 60.50 60.75 61.00 61.25 61.50 61.75 62.00 62.25 62.50 62.75
21 63.00 63.25 63.50 63.75 64.00 64.25 64.50 64.75 65.00 65.25 65.50 65.75
22 66.00 66.25 66.50 66.75 67.00 67.25 67.50 67.75 68.00 68.25 68.50 68.75
23 69.00 69.25 69.50 69.75 70.00 70.25 70.50 70.75 71.00 71.25 71.50 71.75
24 & Over 72.00
</TABLE>
<PAGE>
EXHIBIT 10.7(c)
AMENDMENT NO. 2
TO
VASTAR RESOURCES, INC.
SPECIAL TERMINATION ALLOWANCE PLAN
-----------------------------
The Vastar Resources, Inc. Special Termination Allowance Plan (the "Plan") is
hereby amended effective as of March 10, 1999.
1. Paragraph 3.1 of the Plan is amended to read as follows:
"3.1 "Administrator" means (i) prior to the earlier to occur of a Change
of Control or an Anticipatory Change of Control, Vastar Resources,
Inc., and (ii) on and after the earlier to occur of a Change of
Control or an Anticipatory Change of Control, the Special Plan
Administrator, which shall also assume all delegations of the
Administrator described in Paragraph 7.1 of the Plan. Upon a written
determination by the Chief Financial Officer and the General Counsel
of the Company, approved by either the Board of Directors of the
Company (the "Board"), the Outside Directors or the Executive
Committee of the Board, that an Anticipatory Change of Control has
ended without concluding in a Change of Control (an "Anticipatory
Change Termination"), Vastar Resources, Inc. will again become the
Administrator. For purposes of this definition, a Change of Control
shall not include an ARCO Acquisition as defined in Section 6.4."
2. New Paragraphs 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19, 3.20, 3.21, 3.22,
3.23, 3.24, 3.25, 3.26, 3.27 and 3.28 are added to Paragraph 3 of the Plan
to read as follows:
"3.13 "AIP Award" means the award paid to the Participant for a Plan Year
under the Vastar Resources, Inc. Annual Incentive Plan.
<PAGE>
3.14 The term "Anticipatory Change of Control" shall be ascribed the
meaning set forth for such term on Annex A attached hereto.
3.15 The term "ARCO" means Atlantic Richfield Company and its subsidiaries
and affiliates.
3.16 "Base Pay" means the greater of the Employee's annualized rate of Pay
on (i) the date of the Change of Control or (ii) the date immediately
before the date the Employee became a Terminated Employee (as defined
in Paragraph 6.1).
3.17 "Basic STAP" for this purpose means the cash benefit payment
(including the cash payment payable under the Special Termination
Allowance Policy in lieu of allowing the Employee to work during the
60-day notice period described therein) which would otherwise be
payable to the Employee under this Plan upon termination of
employment, had no Change of Control occurred.
3.18 "Benefit Trigger Window" means the 24-month period commencing on the
date that a Change of Control occurs.
3.19 "Cause" shall mean (i) the conviction of the Employee for any felony
involving dishonesty, fraud or breach of trust or (ii) the willful
engagement by the Employee in gross misconduct in the performance of
his or her duties that materially injures the Surviving Entity.
3.20 The term "Change of Control" shall be ascribed the meaning set forth
for such term on Annex A attached hereto.
3.21 "Change of Control Trust" means the trust established by the Company
to provide for the payment of any benefits, in whatever form is
required, under the Plan on and after a Change of Control.
2
<PAGE>
3.22 "Covered Amount" is equal to the sum of (i) the Participant's Base
Pay and (ii) the greater of (A) the average of the total AIP Awards
paid to the Participant with respect to the three Plan Years ended
prior to the Change of Control (or if less, the number of years in
which the employee has received AIP Awards, if the Participant has
not participated in the Plan during each of such three years) or (B)
the Participant's Final Target AIP Award.
3.23 "Final Target AIP Award" means the target award determined by the
Committee under the Vastar Resources, Inc. Annual Incentive Plan for
the Plan Year beginning immediately prior to the Change of Control,
or if none was determined for that Plan Year, the most recent target
award determined.
3.24 The term "Outside Director" shall be ascribed the meaning set forth
for such term on Annex A attached hereto.
3.25 "Qualifying Pay" means the Employee's annualized rate of regular
wages or salary, excluding all extra pay such as overtime, premiums,
bonuses, living or other allowances, determined as of the relevant
date.
3.26 The term "Special Plan Administrator" shall be ascribed the meaning
set forth for such term on Annex A attached hereto.
3.27 "Surviving Entity" means the Company, or any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the
Company after a Change of Control, and its affiliates.
3.28 "Target Award" means the annual target performance bonus award
applicable to the Employee for the relevant period."
3. Paragraphs 5.1, 5.2 and 5.3 of the Plan are amended to read as follows:
3
<PAGE>
"5.1 (a) For a Regular Full-Time Employee, the payments made to a
Participant under this subparagraph shall be computed by
reference to the Attachment 1 matrix, provided, however, that
upon a Change of Control, notwithstanding anything to the
contrary on Attachment 1, Terminated Employees with less than one
year of service shall be entitled to a minimum cash payment equal
to 12.00 weeks of Pay.
(b) For a Regular Part-Time Employee, payments made to a Participant
under this subparagraph shall be computed by reference to the
Attachment 3 worksheet.
(c) Attachment 2 is hereby deleted from the Plan.
5.2 The Company reserves the right to offset the allowance described in
Paragraph 5.1, above, by any monies the Employee owes the Company and
by the amount of any statutory benefits attributable to termination of
employment or disability, provided, however, that the Company shall
not have such offset right after a Change of Control.
5.3 Notwithstanding anything in this Plan to the contrary, the total
allowance paid under this Plan shall not exceed the equivalent of
twice the Employee's annual compensation as defined in ERISA
Regulation (S) 2510.3.2(b)(a)(i) during the year immediately preceding
the Employee's termination of employment, provided, however, this
limitation shall not apply to Tier 1 and 2 Employees and any other
person who is a member of a select group of management or highly
compensated employees as such terms are used in Section 201(a) of
ERISA.
4. Sections 6, 7 and 8 of the Plan are renumbered as Sections 7, 8 and 9 and a
new Section 6 is added to the Plan to read as follows:
4
<PAGE>
"SECTION 6
ALLOWANCES PAYABLE FOLLOWING A CHANGE OF CONTROL
6.1 Notwithstanding any other provision of the Plan, if an Employee
terminates employment during the Benefit Trigger Window under the
circumstances described in Paragraph 6.2 (a "Terminated Employee"),
the Terminated Employee will be paid a single cash allowance as
described in Paragraph 6.3 and, if applicable, Paragraph 6.6, within
60 days following such termination in lieu of any other benefit to
which the Employee is entitled under this Plan.
6.2 For the purposes of Paragraph 6.1 above, termination of employment
shall mean:
(a) a termination of employment during the Benefit Trigger Window by
the Surviving Entity, other than for Cause, or
(b) the Employee's voluntary termination within the Benefit Trigger
Window as a result of the Surviving Entity's implementation of:
(i) a ten percent or more reduction of such Employee's
Qualifying Pay from the Qualifying Pay determined as of the
date immediately prior to the date of the Change of Control
or a ten percent or more reduction (based on dollar value)
in the Employee's aggregate Qualifying Pay plus Target Award
("Total Pay") from the Employee's Total Pay determined as of
the date immediately prior to the date of the Change of
Control; or
(ii) a required relocation of the Employee's principal place of
work to a location which would satisfy the conditions
specified in (S) 217(c)(1) of the Internal Revenue Code of
1986, as amended (the "Code"), for
5
<PAGE>
a deduction by such Employee of moving expenses under (S)
217 of the Code.
(c) No Employee shall be deemed to have a termination of employment
solely due to a transfer of employment directly between the
Company, a Surviving Entity or any of their affiliates.
6.3 Following termination of employment of an Employee, as defined in
Paragraph 6.2, a cash payment shall be made to the Terminated Employee
as prescribed under the following payment schedule, in lieu of any
other benefit to which the Employee is entitled under this Plan
(except for the benefit described in Section 6.6 hereof):
EMPLOYEE
LEVEL CASH PAYMENTS
------------------------------------------------------
Tier 1 3 times the Covered Amount
------------------------------------------------------
Tier 2 2 times the Covered Amount
------------------------------------------------------
Tier 3 The greater of 1 times the
Covered Amount or Basic STAP
------------------------------------------------------
All others Basic STAP
======================================================
6.4 Notwithstanding anything to the contrary in this Plan, if a Change of
Control as described under paragraph (3) of the definition of such term
on Annex A attached hereto (an "ARCO Acquisition") occurs, no person
shall be entitled to benefits under Paragraphs 6.3 or 6.6 of this Plan
as a result of such a Change of Control, but shall instead receive the
benefits to which the person may otherwise be entitled, whether under
this Plan or any other employee welfare benefit plan, as determined in
the sole discretion of Atlantic Richfield Company; provided that
benefits accrued under this
6
<PAGE>
Plan due to a termination of employment prior to a Change of Control,
but not yet paid, shall be paid in accordance with the terms of this
Plan in existence immediately prior to the Change of Control.
6.5 Upon the earlier to occur of an Anticipatory Change of Control or a
Change of Control (excluding an ARCO Acquisition), the Company or any
successor to the obligations of the Company shall fund the Change of
Control Trust in accordance with its terms.
7
<PAGE>
6.6 Special Tax Allowance and Tax Mitigation.
(a) If a Participant in Tier 1 (or who was in Tier 1 immediately
prior to an ARCO Acquisition) is liable for the payment of any
excise tax (the "Basic Excise Tax") because of Section 4999 of
the Code, or any successor or similar provision relating to a
Change of Control, with respect to any payments or benefits
received or to be received from the Company or its affiliates, or
any successor to the Company or its affiliates, whether provided
under this Plan or otherwise, the Company or any successor to the
obligations of the Company will pay the Participant an amount
(the "Special Reimbursement") which, after payment by such
Participant (or on the Participant's behalf) of any federal,
state and local taxes applicable thereto, including, without
limitation, any further excise tax under such Section 4999 of the
Code, on, with respect to or resulting from the Special
Reimbursement, equals the net amount of the Basic Excise Tax.
The Special Reimbursement will be paid upon receipt by the
Participant of any payment or benefit that will result in the
Basic Excise Tax.
(b) Notwithstanding anything in this Plan to the contrary, if any
amounts due to a Participant other than a Tier 1 Participant
under this Plan and any other plan or program of the Company or
its affiliates constitute a "parachute payment," as such term is
defined in Section 280G(b)(2) of the Code, and the amount of the
parachute payment, reduced by all federal, state and local taxes
applicable thereto, including the excise tax imposed pursuant to
Section 4999 of the Code, is less than the amount the Employee
would receive if he were
8
<PAGE>
paid three times his "base amount," as defined in Section
280G(b)(3) of the Code, less one dollar, reduced by all federal,
state and local taxes applicable thereto, then the aggregate of
the amounts constituting the parachute payment shall be reduced
to an amount that will equal three times his base amount less one
dollar.
(c) The determinations to be made with respect to this Paragraph 6.6
will be made by the Special Plan Administrator."
5. Paragraphs 8.2 and 8.3 of the Plan are amended to read as follows:
"8.2 The cost of this Plan shall be paid by the Company out of its general
assets provided that any benefits due from the Company under Section 6
of the Plan shall be paid from the Change of Control Trust, and if not
paid from the Change of Control Trust shall be paid by the Company or
any successor to the obligations of the Company.
8.3 This Plan is intended to be an employee welfare benefit plan, as
defined in (S) 3(1), Subtitle A of Title I of Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), except that
payments to any Employee who is a member of a select group of
management or is highly compensated shall be deemed to be made under a
plan which is unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of management or
highly compensated employees within the meaning of (S) 201(2) of
ERISA."
5. Section 8 of the Plan is amended by adding the following Paragraph 8.4
thereto to read as follows:
"8.4 Any action required to be taken under this Plan by the Chief
Financial Officer and the General Counsel of the Company may be taken
by either individual if the other
9
<PAGE>
position is then vacant, and if both positions are vacant, such action
may be taken by any other officer of the Company with a position of
vice president or above. Any action required to be taken by the Vice
President, Human Resources of the Company may, if such position is
vacant, be taken by any other officer of the Company with a position
of vice president or above."
6. Section 9 of the Plan is amended to read as follows:
"SECTION 9
AMENDMENT AND TERMINATION
9.1 Amendment or Termination Generally. Except as provided in Paragraphs
9.2 and 9.3, the Plan may be amended for any reason and at any time by
the Vice President, Human Resources of the Company. Except as
provided in Paragraphs 9.2 and 9.3, the Plan and payments thereunder
may be terminated at any time by the Vice President, Human Resources
of the Company; provided, however, that no amendment may deprive a
Participant of benefits that have previously accrued.
9.2 Amendment or Termination during Anticipatory Change of Control. The
Plan may not be terminated or amended during the period after the
occurrence of an Anticipatory Change of Control and prior to a Change
of Control or an Anticipatory Change Termination (as defined in
Section 3.1), except that the Board of Directors of the Company may
amend the Plan during such a period as it may deem reasonably
necessary, provided that, if any such amendment reduces, or could
reduce, the value of any benefit of a Participant, as determined in
the sole discretion of the Special Plan Administrator, the Company or
any successor to the obligations of the Company shall, prior to, and
as a condition precedent to, such amendment going into effect,
10
<PAGE>
provide substantially equivalent value in replacement thereof to the
Participant in the reasonable determination of the Special Plan
Administrator.
9.3 Amendment or Termination On or After a Change of Control. The Plan
may not be terminated or amended on or after a Change of Control in
any manner that would negatively affect Employee's rights arising as a
result of the Change of Control under Section 6 without the consent of
all of the Participants or, in the alternative, the Participants whose
Plan benefits are affected by such termination or amendment. The Plan
will terminate at the expiration of the Benefit Trigger Window,
provided, however, that such termination shall not affect any right of
a Participant which shall have accrued prior to such termination.
9.4 Acquisition by ARCO. An ARCO Acquisition shall not be treated as a
Change of Control for purposes of this Section 9."
Executed as of the 10th day of March, 1999.
ATTEST VASTAR RESOURCES, INC.
By: /s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
--------------------------- ----------------------------
JONATHAN D. EDELFELT JEFFREY M. BENDER
Associate Secretary Vice President
Human Resources
11
<PAGE>
EXHIBIT 10.8
AMENDMENT NO. 5
TO
VASTAR RESOURCES, INC. CAPITAL ACCUMULATION PLAN
__________________________
Pursuant to the power of amendment reserved therein, the Vastar Resources, Inc.
Capital Accumulation Plan (the "Plan") is hereby amended effective as of
December 1, 1998.
"14.1. Transfers from Other Qualified Plans
An Employee who has had distributed to the Employee all or a portion of his
or her taxable interest in a plan meeting the requirements of (S)401(a) of
the Code, including Company qualified retirement plans, (the "Other
Plans"), may, in accordance with procedures approved by the Capital
Accumulation Plan Administrative Committee, transfer in cash all or a
portion of the taxable distribution received from the Other Plans to the
Plan, provided the following conditions are met:
(a) The transfer occurs on or before the 60th day after the member
receives the distribution from the Other Plans;
(b) The distribution from the Other Plans qualifies as an eligible
rollover distribution within the meaning of (S)402(c)(4) of the Code;
and
(c) The amount transferred does not exceed the maximum amount which may be
rolled over in accordance with (S)402(c)(2) of the Code."
Executed this 12th day of March, 1999
ATTEST: VASTAR RESOURCES, INC.
/s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
- --------------------------- ------------------------
Jonathan D. Edelfelt Jeffrey M. Bender
Associate Secretary Vice President
Human Resources
<PAGE>
EXHIBIT 10.9
AMENDMENT NO. 5
TO
VASTAR RESOURCES, INC. CAPITAL ACCUMULATION PLAN II
__________________________
Pursuant to the power of amendment reserved therein, the Vastar Resources, Inc.
Capital Accumulation Plan II (the "Plan") is hereby amended effective as of
December 1, 1998.
"14.1. Transfers from Other Qualified Plans
An Employee who has had distributed to the Employee all or a portion of his
or her taxable interest in a plan meeting the requirements of (S)401(a) of
the Code, including Company qualified retirement plan, (the "Other Plan"),
may, in accordance with procedures approved by the Capital Accumulation
Plan Administrative Committee, transfer in cash all or a portion of the
taxable distribution received from the Other Plans to the Plan, provided
the following conditions are met:
(a) The transfer occurs on or before the 60th day after the member
receives the distribution from the Other Plans;
(b) The distribution from the Other Plans qualifies as an eligible
rollover distribution within the meaning of (S)402(c)(4) of the Code;
and
(c) The amount transferred does not exceed the maximum amount which may be
rolled over in accordance with (S)402(c)(2) of the Code."
Executed this 12th day of March, 1999
ATTEST: VASTAR RESOURCES, INC.
/s/ Jonathan D. Edelfelt By: /s/ Jeffrey M. Bender
- ----------------------------- ---------------------------
Jonathan D. Edelfelt Jeffrey M. Bender
Associate Secretary Vice President
Human Resources
<PAGE>
EXHIBIT 12
VASTAR RESOURCES, INC.
STATEMENT SETTING FORTH DETAIL OF COMPUTATION OF
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
For the three
months ended
March 31,
-------------
1999 1998
----- ------
(Millions of dollars,
except per share amounts)
Income from continuing operations
before income taxes, minority
interest and cumulative effect of
change in accounting principle(1)....... $(5.4) $32.6
Fixed Charges:
Interest expense charged to income,
and portion of rentals
representative of interest(2)........... 21.6 12.6
Capitalized Interest.................... 0.0 0.0
----- -----
Total fixed charges..................... 21.6 12.6
----- -----
Earnings (1) + (2) $16.2 $45.2
===== =====
Ratio of earnings to fixed charges 0.8 3.6
===== =====
The Company has no issuances of preferred stock.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
VASTAR RESOURCES, INC: FINANCIAL DATA SCHEDULE AS OF THE THREE MONTHS ENDING
MARCH 31, 1999. THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED BALANCE SHEET AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 11,000
<SECURITIES> 0
<RECEIVABLES> 182,600
<ALLOWANCES> 0
<INVENTORY> 9,400
<CURRENT-ASSETS> 226,900
<PP&E> 6,300,900
<DEPRECIATION> 4,064,300
<TOTAL-ASSETS> 2,532,700
<CURRENT-LIABILITIES> 225,500
<BONDS> 1,276,100
0
0
<COMMON> 1,000
<OTHER-SE> 626,200
<TOTAL-LIABILITY-AND-EQUITY> 2,532,700
<SALES> 221,200
<TOTAL-REVENUES> 239,400
<CGS> 172,600<F1>
<TOTAL-COSTS> 211,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,500
<INCOME-PRETAX> (5,400)
<INCOME-TAX> (24,400)
<INCOME-CONTINUING> 19,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,000
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
<FN>
<F1>Rule 5-03-04 specifically does not address SG&A costs as a requirement in
the FDS.
</FN>
</TABLE>
