SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11-(c) or 240.14a-12
BERRY PETROLEUM COMPANY
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(Name of Registrant as Specified In Its Charter)
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(2) Aggregate number of securities to which transaction applies:
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1
BERRY PETROLEUM COMPANY
28700 Hovey Hills Road
P.O. Bin X
Taft, California 93268
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 21, 1999
To the Shareholders of Berry Petroleum Company:
The Annual Meeting of Shareholders of Berry Petroleum Company
(the "Company"), will be held at the Company's corporate headquarters at
28700 Hovey Hills Road, Taft, California on May 21, 1999 at 10:00 a.m. for
the following purposes:
1. To elect a board of nine directors to serve until the next Annual Meeting
of Shareholders and until their successors are elected and qualified; and
2. To transact such other business as may be properly brought before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 15, 1999 as
the record date for determination of shareholders entitled to notice of and
to vote at the Annual Meeting or any adjournment thereof.
YOU ARE INVITED TO ATTEND THIS MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING. THEREFORE, YOU ARE URGED TO PROMPTLY SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED WITHIN THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AT
ANY TIME PRIOR TO ITS EXERCISE BY GIVING WRITTEN NOTICE TO THE SECRETARY OF
THE COMPANY. IF YOU RETURN AN EXECUTED PROXY AND THEN ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON. ATTENDANCE AT THE
MEETING WILL NOT BY ITSELF REVOKE A PROXY.
By Order of the Board of Directors
/s/ Kenneth A. Olson
Kenneth A. Olson
Corporate Secretary/Treasurer
April 5, 1999
Taft, California
2
BERRY PETROLEUM COMPANY
28700 Hovey Hills Road
P.O. Bin X
Taft, California 93268
PROXY STATEMENT
April 5, 1999
This Proxy Statement is furnished by the Board of Directors of Berry Petroleum
Company (respectively the "Board" and the "Company" or "Berry") in connection
with the solicitation of proxies for use at the Annual Meeting of Shareholders
to be held on May 21, 1999, or at any adjournment thereof (the "Annual Meeting"
or "Meeting") pursuant to the Notice of said Meeting. This Proxy Statement and
the proxies solicited hereby are being first mailed to shareholders of the
Company on or about April 5, 1999.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING, TO COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. You may revoke your proxy at any time prior
to its exercise by giving written notice to the Secretary of the Company. If
you return an executed proxy and then attend the Annual Meeting, you may revoke
your Proxy and vote in person. Attendance at the Annual Meeting will not by
itself revoke a proxy.
Unless otherwise directed in the accompanying Proxy, persons named therein will
vote FOR the election of the nine director nominees listed below. As to any
other business that may properly come before the Meeting, the proxy holders
will vote in accordance with the recommendation of the Board of Directors.
VOTING SECURITIES
March 15, 1999 has been fixed as the record date for determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. As of February 19, 1999 there were 21,109,717 and
898,892 shares, respectively, of Class A Common Stock ("Common Stock") and
Class B Stock ("Class B Stock"), par value $.01 per share, issued and
outstanding, referred to collectively as the "Capital Stock".
Berry's Certificate of Incorporation provides that, except for proposed
amendments to Berry's Certificate of Incorporation adversely affecting the
rights of a particular class (which must be approved by the affected class
voting separately), the Common Stock and the Class B Stock will vote as a
single class on all matters upon which the Capital Stock is entitled to vote.
Each share of Common Stock is entitled to one vote and each share of Class B
Stock is entitled to 95% of one vote. The Certificate of Incorporation also
provides for certain adjustments to the Capital Stock in the event a separate
class vote is imposed by applicable law. Holders of the Capital Stock are
entitled to cumulative voting rights for election of directors. Cumulative
voting rights entitle a shareholder to cast as many votes as is equal to the
number of directors to be elected multiplied by the number of shares owned by
such shareholder. A shareholder may cast all of such shareholder's votes as
calculated above for one candidate or may distribute the votes among two or
more candidates. Unless otherwise instructed, the shares represented by
proxies will be voted in the discretion of the proxy holders so as to elect
the maximum number of management nominees which may be elected by cumulative
voting.
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OWNERSHIP BY DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Berry's Capital Stock as of March 15, 1999 by (i) each of its
directors who own Berry Capital Stock, and (ii) all directors and officers as a
group.
Amount and Nature
of
Beneficial
Name and Address Ownership (1) (2)
of Beneficial Owner* Position Shares Percent
- ------------------ ------------------------------ ---------- --------
Jerry V. Hoffman Chairman of the Board, President 135,605(3) **
and Chief Executive Officer
William F. Berry Director 1,714,123(4) 7.8%
Ralph B. Busch, III Director 342,573(5) 1.6%
William E. Bush, Jr. Director 542,895(6) 2.5%
J. Herbert Gaul, Jr. Director - **
John A. Hagg Director 29,000(7) **
Thomas J. Jamieson Director 29,100(8) **
Roger G. Martin Director 22,000(9) **
Martin H. Young, Jr. Director 39,400(10) **
All Directors and
Officers as a group
(15 persons) 3,060,261(11) 13.9%
- -----------------------
* All directors and beneficial owners listed above can be contacted at Berry
Petroleum Company, P.O. Bin X, Taft, CA 93268.
** Represents beneficial ownership of less than 1% of the Company's
outstanding Capital Stock.
(1) Unless otherwise indicated, shares shown as beneficially owned are those as
to which the named person possesses sole voting and investment power.
(2) All shares indicated are Common Stock and percent calculations are based on
total shares of Capital Stock outstanding, including the 898,892 shares of
Class B Stock outstanding which can be converted, at the request of the
shareholder, to Class A Common Stock.
(3) Includes 38,105 shares held directly and 97,500 shares which Mr. Hoffman
has the right to acquire under the Company's 1994 Stock Option Plan.
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4
(4) Includes 1,660,401 shares held directly and 34,722 shares held in the
Berry Children's Trust as to which Mr. Berry has voting and investment
power and 19,000 shares which Mr. Berry has the right to acquire under
the Company's 1994 Stock Option Plan.
(5) Includes 95,568 shares held directly, 76,505 shares held in the B Group
Trust at Union Bank which Mr. Busch votes and 157,500 shares held in a
family trust for which Mr. Busch shares voting and investment power as
co-trustee. Also includes 13,000 shares which Mr. Busch has the right to
acquire under the Company's 1994 Stock Option Plan.
(6) Includes 199,895 shares held directly and 330,000 shares held in the
William E. Bush Trust as to which Mr. Bush shares voting power with other
trustees and 13,000 shares which Mr. Bush has the right to acquire under
the Company's 1994 Stock Option Plan.
(7) Includes 10,000 shares held directly and 19,000 shares which Mr. Hagg has
the right to acquire under the Company's 1994 Stock Option Plan.
(8) Includes 10,100 shares held indirectly by Mr. Jamieson through Jaco Oil
Company, a corporation and 19,000 shares which Mr. Jamieson has the right
to acquire under the Company's 1994 Stock Option Plan.
(9) Includes 3,000 shares held directly and 19,000 shares which Mr. Martin has
the right to acquire under the Company's 1994 Stock Option Plan.
(10)Includes 10,000 shares held directly and 29,400 shares held in the
investment portfolio of the Texas Workers' Compensation Insurance Fund for
which Mr. Young serves as Chairman of the Board. Mr. Young disclaims
beneficial ownership of the shares held by the Texas Workers' Compensation
Insurance Fund.
(11)Includes 29,556 shares held directly, 3,945 shares held indirectly by the
Company's 401(k) Thrift Plan and 172,064 shares which the Company's
Officers have the right to acquire upon the exercise of options granted
under the Company's 1994 Stock Option Plan.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of December 31, 1998, information regarding
the voting securities of the Company owned "beneficially," within the meaning
of the rules of the Securities and Exchange Commission, by persons known by the
Company to own beneficially more than 5% of the indicated class:
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner of Beneficial Ownership of Class
- -------------- --------------------- ------------------------ --------
Class A Common Boston Partners Asset 1,089,700 (1) 5.2%
Stock Management, L.P.
28 State Street, 20th Floor
Boston, MA 02109
Class A Common C. J. Bennett 1,231,973 (2) 5.8%
Stock c/o Berry Petroleum Company
P. O. Bin X
Taft, CA 93268
3
5
Class A Common Union Bank of California 1,868,347 (3) 8.8%
Stock 445 South Figueroa St.,
Third Floor
Los Angeles, CA 90017
Class A Common Winberta Holdings, Ltd. 1,088,220 (4) 5.2%
Stock c/o Berry Petroleum Company
P. O. Bin X
Taft, CA 93268
Class B Stock Winberta Holdings, Ltd. 898,892 (4) 100%
c/o Berry Petroleum Company
P. O. Bin X
Taft, CA 93268
(1) As reflected in the Schedule 13G dated February 12, 1999, and filed with
the Securities and Exchange Commission jointly by Boston Partners Asset
Management L.P. ("BPAM"), Boston Partners Inc. and Desmond John Heathwood
("Mr. Heathwood"). According to the Schedule 13G, BPAM, Boston Partners
Inc. and Mr. Heathwood have shared dispositive and voting power over the
shares indicated.
(2) As reflected in the Schedule 13G dated January 15, 1999, and filed with
the Securities and Exchange Commission. According to the Schedule 13G,
Mr. Bennett has sole dispositive and voting power on 992,092 shares and
shared dispositive and voting power on 239,881 of the shares indicated.
(3) As reflected in the Schedule 13G dated February 6, 1999, and filed with
the Securities and Exchange Commission by UnionBanCal Corporation
("Union Bank"). According to the Schedule 13G, Union Bank is the
trustee of certain trusts to which the trustors retain voting and
investment power and Union Bank has shared dispositive power on the
shares indicated.
(4) As reflected in the Schedule 13G dated January 20, 1999, and filed with
the Securities and Exchange Commission. According to the Schedule 13G,
Winberta Holdings, Ltd. has sole dispositive and voting power on all of
the shares indicated. The shares of Class B Stock are convertible into
Class A Common Stock at the request of Winberta Holdings, Ltd. The
Class A Common Stock and Class B Stock are voted as a single class, as
noted on Page 1 of this Proxy Statement. Winberta Holdings' Ltd.
combined shares comprise 9% of the total Capital Stock outstanding for
the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and related Securities and
Exchange Commission rules require that directors, executive officers and
beneficial owners of 10% or more of any class of equity securities report to
the Securities and Exchange Commission changes in their beneficial ownership of
Berry stock, and that any late filings be disclosed. Based solely on a review
of the copies of such forms furnished to the Company, or written representations
that no Form 5 was required, the Company believes there has been compliance with
all Section 16(a) filing requirements.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Nominees for Election
The Company's directors are elected at each Annual Meeting of Shareholders.
At the Annual Meeting, nine directors, constituting the authorized number of
directors, will be elected to serve until the next Annual Meeting of
Shareholders and until their successors are elected and qualified. After the
resignation of Mr. James A. Middleton, the Board of Directors reduced the
number of authorized directors from ten to nine, as permitted by the
Company's Bylaws. The nominees receiving the greatest numbers of votes at
the Annual Meeting up to the number of authorized directors will be elected.
The nominees for election as directors at the Annual Meeting set forth in the
table below are all incumbent directors who were elected at the May 1998 Annual
Meeting of Shareholders, except for Mr. Gaul and Mr. Young who were appointed
to the Board on March 12, 1999. Each of the nominees has consented to serve
as a director if elected. Unless authority to vote for any director is
withheld in a proxy, it is intended that each proxy will be voted FOR such
nominees. In the event that any of the nominees for director should before
the Meeting become unable to serve, it is intended that shares represented by
proxies which are executed and returned will be voted for such substitute
nominees as may be recommended by the Company's existing Board of Directors,
unless other directions are given in the proxies. To the best of the
Company's knowledge, all the nominees will be available to serve.
Director
Nominee Age Position Since
---------------- ---- ----------------- --------
Jerry V. Hoffman 49 Chairman of the Board, President 1992
and Chief Executive Officer
William F. Berry 58 Director 1985
Ralph B. Busch, III 39 Director 1996
William E. Bush, Jr. 52 Director 1986
J. Herbert Gaul, Jr. 54 Director 1999
John A. Hagg 51 Director 1994
Thomas J. Jamieson 56 Director 1993
Roger G. Martin 61 Director 1985
Martin H. Young, Jr. 46 Director 1999
Set forth below is information concerning each of the nominee Directors of
Berry.
Mr. Hoffman has been the Chairman of the Board of Directors since March 1997
and has been the President and Chief Executive Officer since May 1994.
Mr. Hoffman was President and Chief Operating Officer from March 1992 to
May 1994 and was the Senior Vice President and Chief Financial Officer of the
Company from 1985 until March 1992. Mr. Hoffman is a member of the Nominating
and Corporate Governance Committee.
Mr. Berry is a member of the Nominating and Corporate Governance Committee.
Mr. Berry is currently a private investor and was involved in investment
banking for a major California bank for over 20 years. Mr. Berry is a cousin
to William E. Bush, Jr., and Ralph B. Busch, III.
Mr. Ralph B. Busch, III is a member of the Nominating and Corporate Governance
Committee. Mr. Busch is currently Executive Vice President and Chief Operating
Officer for Aon Risk Services of Central California. Prior to his position
with Aon Risk Services, Mr. Busch was President of Central Coast Financial
from 1986 to 1993. Mr. Busch was a Director of Eagle Creek Mining & Drilling
Company from 1985 to 1996. Mr. Busch is a cousin to William F. Berry and
William E. Bush, Jr.
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7
Mr. Bush is Chairman of the Compensation Committee. Mr. Bush is the General
Manager of Acala Seeds Ltd. Prior to May 1987, Mr. Bush was the Area
Manager/Technical Representative of Gustafson, Inc. (a division of Uniroyal)
for Arizona and California for nine years. Mr. Bush was a Director of Eagle
Creek Mining & Drilling from 1985 to 1998. Mr. Bush is a cousin to William F.
Berry and Ralph B. Busch, III.
Mr. Gaul is currently a private investor. Mr. Gaul's previous experience
includes; Chief Financial Officer for Gentek Building Products from 1995 to
1997, 4 years as the Treasurer for Natomas Company, 11 years of experience in
senior treasury or finance positions with various companies and 10 years of
experience with Morgan Guaranty Trust Company with responsibility for financial
consulting for the energy industry.
Mr. Hagg is Chairman of the Nominating and Corporate Governance Committee. Mr.
Hagg is currently the Chairman of the Board for Northstar Energy Corporation
("Northstar"). Northstar is a Canadian oil and gas producer, based in Calgary,
Alberta which effective December 11, 1998 became a subsidiary of Devon Energy
Corp., an Oklahoma based company listed on the AMEX. Mr. Hagg also became a
director for Devon Energy Corp. in December 1998.
Mr. Jamieson is a member of the Compensation Committee. Mr. Jamieson is the
Chief Executive Officer, President and founder of Jaco Oil Company and the
majority owner and founder of Wholesale Fuels, Inc. which was started in 1983.
Founded in 1970, Jaco Oil Company, based in Bakersfield, California, has become
one of the largest independent gasoline marketers in the western United States.
Mr. Jamieson is a Director of Superior National Insurance Company and is also
involved in real estate, oil and gas properties and insurance.
Mr. Martin is a member of the Audit and Compensation Committees. Mr. Martin is
an independent oil and gas consultant. Mr. Martin retired in 1996 as the
Manager of Special Projects at the Wilmington Field for the city of Long Beach,
California. From 1975 to 1981, Mr. Martin was the officer in charge of the Elk
Hills Naval Petroleum Reserve.
Mr. Young has been the Senior Vice President and Chief Financial Officer of
Falcon Seaboard Holdings, L.P. and its predecessor Falcon Seaboard Resources,
Inc. ("Falcon") since 1992. Falcon is a private energy company involved in
power production, power demand management, natural gas exploration and
production, real estate and private investments. Mr. Young is also the
Chairman of the Board of the Texas Workers' Compensation Insurance Fund,
the largest provider of workers' compensation insurance in the State of Texas.
Mr. Young has 13 years of banking experience, the last 10 working for a major
California bank as the Vice President/Area Manager for the corporate banking
group from 1981 to 1991.
Retirement
Mr. Gerry A. Biller and Mr. Richard F. Downs announced their retirement from
the Board of Directors effective after the March 12, 1999 Board meeting.
Mr. Biller and Mr. Downs were appointed to the Board of Directors in 1989 and
1985, respectively. We wish to thank Mr. Biller and Mr. Downs for their
leadership and years of service to the shareholders and management of Berry
Petroleum Company and wish them well in the future.
Resignation
Mr. James A. Middleton resigned from the Board of Directors on February 9, 1999
for personal reasons. Mr. Middleton was appointed to the Board of Directors in
1997.
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Committees and Meetings
The Board of Directors has an Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee.
The Audit Committee of the Board of Directors consisted of Messrs. Biller,
Downs and Martin. Effective March 12, 1999, Mr. Biller and Mr. Downs retired
from the Board of Directors and the Audit Committee, leaving Mr. Martin as
the only current Committee member. At the meeting in May 1999, the Board of
Directors will appoint the directors who will serve on the Audit Committee
for the following year. The Audit Committee reviews, acts on and reports to
the Board of Directors with respect to auditing performance and practices, risk
management, financial and credit risks and accounting and tax matters. The
Committee reviews the selection of the Company's independent accountants, the
scope of the annual audit, the nature of non-audit services, the fees to be
paid to the independent accountants, the performance of the Company's
independent accountants and the accounting practices of the Company.
The Compensation Committee of the Board of Directors currently consists of
Messrs. Bush, Jamieson and Martin. The Compensation Committee is responsible
for recommending total compensation for executive officers and board members of
Berry to the Board of Directors, for reviewing general plans of compensation
for employees and for reviewing and approving awards under Berry's Bonus Plan.
In addition, the Committee is charged with the full responsibility of
administering the Company's 1994 Stock Option Plan.
The Nominating and Corporate Governance Committee of the Board of Directors
currently consists of Messrs. Berry, Busch, Hoffman and Hagg. The Nominating
and Corporate Governance Committee was formulated in 1996 to develop governance
guidelines and practices for the effective operation of the Board in fulfilling
its responsibilities; review and assess the performance of the Board; and
nominate prospective directors for the Company's Board of Directors and Board
committee membership. The Committee will consider nominees recommended by
shareholders. If a shareholder wishes to recommend a nominee for the Board of
Directors, the shareholder should write to the Corporate Secretary of the
Company specifying the name of the nominee and the qualifications of such
nominee for membership on the Board of Directors. All such recommendations
will be brought to the attention of the Nominating and Corporate Governance
Committee.
During 1998, the Board of Directors met four times, the Audit Committee met
twice, the Compensation Committee met twice and the Nominating and Corporate
Governance Committee met once. All of the nominees holding office attended at
least 75% of the board meetings and meetings of committees of which they were
members.
Effective January 1, 1998, non-employee directors were to be paid a quarterly
fee of $4,250, plus $500 for each board meeting and $500 for each committee
meeting attended which is not held on the same day as the board meeting. Due
to the extremely low crude price environment, the Board of Directors reduced
the quarterly fee back to the previous level of $3,750 and the meeting fees
back to $400, effective March 20, 1998.
The Company's 1994 Stock Option Plan provides for a "formula" grant of 5,000
options annually to each non-employee director holding office on December 2nd
of each year. 5,000 options were issued on December 2, 1998 at $12.625, 5,000
options were issued effective December 2, 1997 at $18.9375 (3,000 on December
2, 1997 and 2,000 on May 15, 1998) and 3,000 options were issued on December 2,
1996 at $13.75 to each of the non-employee directors holding office on those
dates. The exercise price of the options is the closing price of Berry
Petroleum Company Class A Common Stock as reported by the New York Stock
Exchange for the date of grant. The maximum option exercise period is ten
years from the date of the grant. The options issued to the directors vest
immediately.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation for the three fiscal years ended
December 31, 1998 received by the Company's Chairman, President and Chief
Executive Officer and the Company's executive officers who received in
excess of $100,000 in compensation in 1998.
Long-Term
Compensation
Name and Annual No. of Shares All Other
Principal Compensation (1,2) Underlying Options Compensation
Position Year Salary($) Bonus($) Granted ($)(3)
------------ ---- ------- ------- ---------- ----------
Jerry V. Hoffman 1998 242,400 - 80,000 10,668
Chairman, President 1997 285,400 45,000 50,000 10,576
and Chief Executive 1996 245,850 30,000 20,000 10,896
Officer
Ralph J. Goehring 1998 144,500 - 60,000 9,076
Senior Vice 1997 160,500 35,000 35,000 11,240
President and 1996 123,750 20,000 80,000 10,465
Chief Financial
Officer
Brian L. Rehkopf 1998 115,000 - 40,000 7,135
Manager of 1997 67,083 - 60,000 833
Engineering 1996 - - - -
Michael R. Starzer 1998 120,000 - 60,000 7,340
Vice President of 1997 126,000 30,000 35,000 8,749
Corporate 1996 104,850 12,000 80,000 8,835
Development
- -----------------
(1) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not
exceed the lesser of $50,000 or 10 percent of the total amount of annual
salary and bonus for any named individual.
(2) As a cost cutting measure, the Company's employees took an across-the-board
10% salary reduction in March 1998 with certain members of Management
taking a larger reduction.
(3) Includes Company contributions under the 401(k) Thrift Plan of $10,152,
$10,080 and $10,400 for Mr. Hoffman, $8,896, $11,063, and $10,300 for Mr.
Goehring, $6,818, $833 and $0 for Mr. Rehkopf and $7,200, $8,650 and
$8,700 for Mr. Starzer, respectively, for 1998, 1997 and 1996. Also
includes split dollar life insurance compensation of $516, $496 and
$496 for Mr. Hoffman, $180, $177 and $165 for Mr. Goehring, $317, $0 and
$0 for Mr. Rehkopf and $140, $99 and $135 for Mr. Starzer, respectively
for 1998, 1997 and 1996.
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10
OPTION GRANTS IN 1998
Percent
of
Number Total
Of Options
Securities Granted Potential Realizable
Underlying to Exercise Value At
Options Employees Price Assumed Annual Rates Of
Granted In ($/Share) Expiration Stock Price Appreciation
Name (1) 1998 (2) Date For Option Term(1)
------ ------- ------ ------- ----------- ----------------------
5% 10%
---------- -----------
Mr. Hoffman 80,000 18% $12.50 Dec. 4, 2008 $ 628,895 $ 1,593,742
Mr. Goehring 60,000 14% $12.50 Dec. 4, 2008 $ 471,671 $ 1,195,307
Mr. Rehkopf 40,000 9% $12.50 Dec. 4, 2008 $ 314,447 $ 796,871
Mr. Starzer 60,000 14% $12.50 Dec. 4, 1008 $ 471,671 $ 1,195,307
Assumed Price Appreciation
5% 10%
------------- -------------
Assumed price per share on Dec. 4, 2008 $ 20.36 $ 32.42
Gain on one share valued at $12.50 on
Dec. 4, 1998 $ 7.86 $ 19.92
Gain on all shares (based on 22,008,621 shares
outstanding at Dec. 31, 1998 $ 173,013,795 $ 438,450,922
Gain for all 1998 optionees (based on
434,000 options) $ 3,411,753 $ 8,646,053
Optionee gain as a percentage of total
shareholder gain 1.97% 1.97%
(1) Option holders vest in the granted options at the rate of 25% per year,
commencing on the first anniversary of the grant date.
(2) All options were granted at the Company's Class A Common Stock market value
on the date of grant.
(3) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's Common Stock appreciates at a five
and ten percent compound annual rate over the ten year term of the options.
The five and ten percent rates of stock price appreciation are presented
as examples pursuant to the Securities and Exchange Commission Rules and
do not necessarily reflect management's assessment of the Company's future
stock price performance. The potential realizable values presented are
NOT intended to indicate the value of the options.
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11
AGGREGATED OPTION EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION VALUES
Shares Value of
Acquired Number of Securities Unexercised In-the
On Value Underlying Unexercised Money Options at
Exercise Realized Options at 12-31-98 12-31-98(A)(Dollars)
Name (Number) (Dollars) Exercisable Unexercisable Exercisable Unexercisable
------ -------- --------- --------- --------- --------- ---------
Mr. Hoffman 5,475 $150,000 97,500 177,500 $ 97,188 $ 146,250
Mr. Goehring - $ - 61,287 126,250 $ 50,596 $ 108,750
Mr. Rehkopf - $ - 15,000 85,000 $ - $ 67,500
Mr. Starzer - $ - 38,750 116,250 $ 5,625 $ 106,875
(A) The price of $14.1875, the closing price of Berry Class A Common Stock as
reported in the New York Stock Exchange quotations on December 31, 1998,
was used to value options.
Board Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report shall not be incorporated by reference
into any such filings.
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. During 1998 the Committee
was composed of three nonemployee Directors. The Committee is committed to a
strong, positive link between business performance, strategic goals, and
compensation and benefit programs.
Report of Compensation Committee on Executive Compensation Policy
The Company's compensation policy is designed to support the overall objective
of enhancing value for our shareholders by:
- Attracting, developing, rewarding, and retaining highly qualified and
productive individuals.
- Directly relating compensation to both Company and individual
performance.
- Ensuring compensation levels that are externally competitive and
internally equitable.
- Encouraging executive stock ownership to enhance a mutuality of interest
with other shareholders.
The following is a description of the elements of executive compensation and
how each relates to the objectives and policy outlined above.
Base Salary
The Committee reviews each executive officer and certain other management
employees' salaries annually. In determining appropriate salary levels, we
consider the level and scope of responsibility, experience, Company and
individual performance, internal equity, as well as pay practices of other
companies relating to executives of similar responsibility. By design, we
strive to set executives' salaries at competitive market levels. Due to the
extremely low oil prices, the Company instituted an across-the-board 10%
reduction in pay for all employees in March 1998 with certain members of
Management taking a larger reduction.
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We believe maximum performance can be encouraged through the use of appropriate
incentive programs. Incentive programs for executives are as follows:
Annual Incentives
Annual incentive awards are made to executives to recognize and reward
corporate and individual performance. The plan in effect provides an
incentive fund of up to 3% of the Company's net income for executives and
other employees involved in decision making roles which effect the Company's
growth and profitability goals. A portion of the available bonus is reserved
for discretionary performance awards by the Chief Executive Officer for other
employees whose efforts and performance are judged to be exceptional. Due to
extremely low crude oil prices during 1998 and continuing into 1999, it is
highly unlikely that any cash bonuses will be paid in 1999 for 1998 results.
Likewise, even though the Company experienced record production levels,
operating cash flow and operating income in 1997, due to the rapidly declining
crude price experienced in early 1998, no cash bonuses were paid in 1998 for
1997 performance. The cash bonuses paid in 1997, based on 1996 results were
$330,000.
The amount individual executives may earn is directly dependent upon the
individual's position, responsibility, and ability to impact the Company's
financial success. External market data is reviewed periodically to determine
the competitiveness of the Company's incentive opportunities for individual
executives.
Long-Term Incentive Plans Compensation
Non-Statutory Stock Option Plan ("Stock Option Plan")
The purpose of this plan is to provide additional incentives to employees to
stay focused on the long term goal of maximizing shareholder value. The Stock
Option Plan generally utilizes vesting periods to encourage key employees to
continue in the employ of the Company. The Compensation Committee is charged
with responsibility for administering and granting non-statutory stock options.
At December 31, 1998, an aggregate of 1,227,630 options are available for
issuance from the 1994 Stock Option Plan.
Chief Executive Officer
The Committee believes Mr. Hoffman has done a good job of managing the Company
during a very difficult period for the oil industry. Mr. Hoffman has also been
effective in redirecting the Company's resources to higher profitability
projects and growth opportunities as Chief Executive Officer of Berry Petroleum
Company. Mr. Hoffman's compensation incentives are primarily derived from the
bonus plan and the Stock Option Plan. The value of the Options are directly
related to the Company's stock performance.
Compensation Committee of the Board of Directors
March 12, 1999 William E. Bush Thomas J. Jamieson Roger G. Martin
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Severance Agreements
The Company has entered into salary continuation agreements with Mr. Hoffman,
Mr. Goehring and Mr. Starzer which guarantees their salary, as defined, plus an
amount equal to the average cash bonus received by the employee for the prior
two years, will be paid in one lump sum for two years for Mr. Hoffman and one
year for Mr. Goehring and Mr. Starzer, following a sale of all or substantially
all of the oil producing properties of Berry or a merger or other
reorganization between Berry and a non-affiliate which results in a change of
ownership or operating control (a "Change of Control"). Salary continuation
agreements for certain other executives, including Mr. Rehkopf, provide for
the payment of six months' salary, upon a termination of employment in
connection with a Change of Control.
Life Insurance Coverage
The Company provides certain individuals who are officers or other high-level
executives with life insurance coverage in addition to that available to
employees under the Company's group-term life insurance plan. The amount of
this life insurance coverage is $500,000 for Mr. Hoffman, $410,000 for Mr.
Goehring, $330,000 for Mr. Starzer and $312,500 for Mr. Rehkopf. Depending on
certain variables, an executive or beneficiary may be entitled to insurance
benefits exceeding the amount of term insurance that could otherwise have been
purchased with the portion of the premium payments that are imputed to the
executive as taxable income.
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PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this proxy statement
into any filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
Total returns assume $100 invested on December 31, 1993 in shares of Berry
Petroleum Company, the Standard & Poors ("S&P") 500 Index and the Dow Jones
Secondary Oil Company Index (which includes 12 companies) assuming reinvestment
of dividends for each measurement period. During 1998, the Company
outperformed the peer group by 11% and underperformed the S&P 500 by 45%.
The information shown is historical and is not necessarily indicative of
future performance.
TOTAL RETURN ANALYSIS
MEASUREMENT PERIOD BERRY PETROLEUM DOW JONES
(FISCAL YEAR COVERED) COMPANY SECONDARY OIL COS. S&P 500 INDEX
12/31/93 100 100 100
12/31/94 100 97 101
12/31/95 111 112 139
12/31/96 164 138 171
12/31/97 203 147 228
12/31/98 170 107 294
Source: Carl Thompson Associates, www.ctaonline.com, Louisville, CO
(303) 665-4200
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* Data provided by Bloomberg Financial Markets
(1) Berry Petroleum Company
(2) Dow Jones Secondary Oil Cos.
(3) S&P 500 Index
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Eagle Creek Mining & Drilling, Inc.
Eagle Creek Mining & Drilling, Inc. ("Eagle Creek"), a California corporation,
was a wholly-owned subsidiary of the Company's predecessor until it was spun
off to the majority shareholders of the predecessor. On November 30, 1989,
Eagle Creek purchased the assets of S&D Supply Company, a California
partnership. S&D Supply Company, a retail distributor of oilfield parts and
supplies ("S&D"), is now a division of Eagle Creek. The Company renewed its
five year contract in 1994 with S&D, whereby the Company will purchase
oilfield parts and supplies from S&D at competitive prices through
November 30, 1999. The amounts paid to S&D under this contract in 1998, 1997
and 1996 were $502,000, $825,000 and $398,000, respectively. Also,
Mr. Ralph B. Busch, III and his immediate family are significant beneficial
owners of the stock of Eagle Creek.
Victory Settlement Trust
In connection with the reorganization of the Company in 1985, a shareholder of
Berry Holding Company ("BHC"), Victory Oil Company, a California partnership
("Victory"), brought suit against Berry Holding Company (one of Berry's
predecessor companies prior to the reorganization in 1985) and all of its
directors and officers and certain significant shareholders seeking to enjoin
the reorganization. As a result of the reorganization, Victory's shares of BHC
stock were converted into shares of Berry Common Stock representing
approximately 9.7% of the shares of Berry Common Stock outstanding immediately
subsequent to the reorganization. In 1986, Berry and Victory, together with
certain of its affiliates, entered into the Instrument for Settlement of Claims
and Mutual Release (the "Settlement Agreement").
The Settlement Agreement provided for the exchange (and retirement) of all
shares of Common Stock of Berry held by Victory and certain of its affiliates
for certain assets (the "Settlement Assets") conveyed by Berry to Victory. The
Settlement Assets consisted of (i) a 5% overriding royalty interest in the
production removed or sold from certain real property situated in the Midway-
Sunset field which is referred to as the Maxwell property ("Maxwell Royalty")
and (ii) a parcel of real property in Napa, California.
The shares of BHC originally acquired by Victory and the shares of Berry Stock
issued to Victory in exchange for the BHC Stock in the reorganization (the
"Victory Shares") were acquired subject to a legend provision designed to carry
out certain provisions of the Will of Clarence J. Berry, the founder of Berry's
predecessor companies. The legend enforces an Equitable Charge (the "Equitable
Charge") which requires that 37.5% of the dividends declared and paid on such
shares from time to time be distributed to a group of lifetime income
beneficiaries (the "B" Group).
As a result of the Settlement Agreement, the "B" Group was deprived of the
dividend income they would have received on the Victory Shares under the
Equitable Charge. In order to adequately protect the interests of the "B"
Group, Berry executed a Declaration of Trust (the "Victory Settlement Trust").
In recognition of the obligations of Berry and Victory with respect to the
Equitable Charge, Victory agreed in the Settlement Agreement to pay to Berry in
its capacity as trustee under the Victory Settlement Trust, 20% of the 5%
Maxwell Royalty ("Maxwell "B" Group Payments"). The Maxwell "B" Group Payments
will continue until the death of the last surviving member of the "B" Group, at
which time the payments will cease and the Victory Settlement Trust will
terminate. There is one surviving member of the "B" Group.
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Under the Settlement Agreement, Berry agreed to guarantee that the "B" Group
will receive the same income under the Equitable Charge that they would have
received had the Victory shares remained as issued and outstanding shares.
Accordingly, when Berry declares and pays dividends on its capital stock, it is
obligated to calculate separately the amount of dividends that would have been
paid to the "B" Group had the Victory Shares not been retired (the "Trust
Payment"). Berry will make payments from the Victory Settlement Trust to the
surviving member of the "B" Group which may constitute all or a part of the
Trust Payment in March and September of each year. Such payments will be made
to the surviving member of the "B" Group for the remainder of his life.
Typically, the Maxwell "B" Group Payments have contributed to a portion or all
of the payment of the Trust Payments. Pursuant to the Settlement Agreement,
Berry agreed to make up any deficiency in such Trust Payments. The Company paid
$125,925 in 1998 to meet its obligations under the Settlement Agreement to the
"B" Group survivor. The "B" Group survivor is a significant shareholder of
Berry.
SHAREHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the next Annual
Meeting of Shareholders, expected to be held on May 20, 2000, must be received
at the office of the Secretary of the Company by December 3, 1999, if such
proposal is to be considered for inclusion in the Company's proxy statement and
form of proxy relating to that meeting.
ANNUAL REPORT
The Company's 1998 Annual Report to Shareholders has been mailed to
shareholders concurrently herewith, but such report is not incorporated in
this Proxy Statement and is not deemed to be a part of this proxy
solicitation material.
On March 15, 1999, the Company filed with the Securities and Exchange
Commission its Annual Report on Form 10-K. This Report contains detailed
information concerning the Company and its operations and supplementary
financial information which, except for exhibits, are included in the Annual
Report to Shareholders. A COPY OF THE EXHIBITS WILL BE FURNISHED TO
SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS,
BERRY PETROLEUM COMPANY, 28700 HOVEY HILLS ROAD, P.O. BIN X, TAFT, CA 93268.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In addition
to use of the mails, certain officers, directors and regular employees of the
Company, without receiving additional compensation, may solicit proxies
personally by telephone or facsimile. The Company may reimburse persons
holding shares in their own names or in the names of their nominees for
expenses they incur in obtaining instructions from beneficial owners of such
shares.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent accountants are PricewaterhouseCoopers LLP.
PricewaterhouseCoopers LLP or its predecessors have audited the Company's books
since 1991, and is expected to have a representative at the Annual Meeting who
will have the opportunity to make a statement if they desire to do so and be
available at that time to respond to appropriate questions. The Company has
not yet formally engaged an accountant to audit the Company's financial
statements for the year ending December 31, 1999.
OTHER MATTERS
Management knows of no other business to be presented at the Meeting, but if
other matters do properly come before the Meeting, it is intended that the
persons named in the proxy will vote on said matters in accordance with
their best judgment.
The above Notice, Proxy Statement and Form of Proxy are sent by Order of the
Board of Directors.
/s/ KENNETH A. OLSON
Corporate Secretary
April 5, 1999
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