BERRY PETROLEUM COMPANY
28700 Hovey Hills Road
P.O. Box 925
Taft, California 93268
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 17, 2001
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 Thursday May 17, 2001 at 3:00 p.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 12, 2001
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 9, 2001
Taft, California
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BERRY PETROLEUM COMPANY
28700 Hovey Hills Road
P.O. Box 925
Taft, California 93268
PROXY STATEMENT
April 9, 2001
_________________
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 17, 2001, 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 9, 2001.
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 12, 2001 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 16, 2001 there were 21,134,667 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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SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Berry's Capital Stock as of February 16, 2001
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 Ownership (1) (2)
Address of
Beneficial Owner Position Shares Percent
Jerry V. Hoffman Chairman of the Board, 260,605(3) 1.2%
President and Chief
Executive Officer
William F. Berry Director 1,693,623(4) 7.7%
Ralph B. Busch, III Director 320,629(5) 1.5%
William E. Bush, Jr. Director 519,700(6) 2.4%
J. Herbert Gaul, Jr. Director 10,000(7) **
John A. Hagg Director 43,000(8) **
Thomas J. Jamieson Director 39,100(9) **
Roger G. Martin Director 32,000(10) **
Martin H. Young, Jr. Director 20,000(11) **
All Directors and
Officers as a group
(15 persons) 3,365,198(12) 14.9%
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* All directors and beneficial owners listed above can be contacted at
Berry Petroleum Company, P.O. Box 925, 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 222,500 shares which Mr. Hoffman
has the right to acquire under the Company's 1994 Stock Option Plan.
(4) Includes 1,629,901 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 29,000 shares which Mr. Berry has the right to acquire under
the Company's 1994 Stock Option Plan.
(5) Includes 76,324 shares held directly, 75,805 shares held in the B Group
Trust at Union Bank of California which Mr. Busch votes and 150,500
shares held in a family trust for which Mr. Busch shares voting and
investment power as co-trustee. Also includes 18,000 shares which
Mr. Busch has the right to acquire under the Company's 1994 Stock Option
Plan.
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(6) Includes 179,700 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 10,000 shares which Mr. Bush has the right to
acquire under the Company's 1994 Stock Option Plan.
(7) Consists of 10,000 shares which Mr. Gaul has the right to acquire under
the Company's 1994 Stock Option Plan.
(8) Includes 14,000 shares held directly and 29,000 shares which Mr. Hagg
has the right to acquire under the Company's 1994 Stock Option Plan.
(9) Includes 10,100 shares held indirectly by Mr. Jamieson through Jaco Oil
Company, a corporation, and 29,000 shares which Mr. Jamieson has the
right to acquire under the Company's 1994 Stock Option Plan.
(10) Includes 3,000 shares held directly and 29,000 shares which Mr. Martin
has the right to acquire under the Company's 1994 Stock Option Plan.
(11) Includes 10,000 shares held directly and 10,000 shares which Mr. Young
has the right to acquire under the Company's 1994 Stock Option Plan.
(12) Includes 30,414 shares held directly, 7,040 shares held indirectly by
the Officers in the Company's 401(k) Thrift Plan and 389,087 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, 2000, information
regarding the voting securities of the Company owned "beneficially," within
the meaning of the rules of the Securities and Exchange Commission, by
persons, other than directors or officers, known by the Company to own
beneficially more than 5% of the indicated class:
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial of Class
Ownership
Class A Common Stock Union BanCal Corporation 1,772,404 (1) 8.4%
445 South Figueroa St.,
Third Floor
Los Angeles, CA 90017
Class A Common Stock Kennedy Capital
Management, Inc. 1,657,450 (2) 7.8%
10829 Olive Blvd.
St. Louis, MO 63141
Class A Common Stock Goldman Sachs Asset
Management 1,248,700 (3) 5.9%
A Division of Goldman,
Sachs & Co.
1 New York Plaza
New York, NY 10004
Class A Common Stock Winberta Holdings, Ltd. 1,088,220 (4) 5.2%
c/o Berry Petroleum Company
P. O. Box 925
Taft, CA 93268
Class B Stock Winberta Holdings, Ltd. 898,892 (4) 100%
c/o Berry Petroleum Company
P. O. Box 925
Taft, CA 93268
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(1) As reflected in Schedule 13G, dated January 25, 2001, 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. In addition, Union Bank holds 34,000 shares
included above for which it has sole voting and dispositive power.
(2) As reflected in Schedule 13G, dated February 14, 2001, and filed with
the Securities and Exchange Commission. According to the Schedule 13G,
Kennedy Capital Management, Inc. has sole voting power on 1,657,450
shares and sole dispositive power on 1,562,700 shares.
(3) As reflected in Schedule 13G, dated February 14, 2001, and filed with
the Securities and Exchange Commission. According to the Schedule 13G,
Goldman Sachs Asset Management has sole voting and dispositive power
on 1,248,700 shares.
(4) As reflected in Schedule 13G, dated January 30, 2001, and filed with the
Securities and Exchange Commission. According to the Schedule 13G,
Winberta Holdings, Ltd. has sole voting and dispositive power on all
of the shares indicated. The Class B Stock shares 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 the Company's Capital 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, except that two reports were filed late by Mr. Berry and one
report was filed late by Mr. Starzer during 2000.
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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. The
nominees receiving the greatest number 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 2000
Annual Meeting of Shareholders. 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 51 Chairman of the 1992
Board, President and
Chief Executive Officer
William F. Berry 60 Director 1985
Ralph B. Busch, III 41 Director 1996
William E. Bush, Jr. 54 Director 1986
J. Herbert Gaul, Jr. 57 Director 1999
John A. Hagg 53 Director 1994
Thomas J. Jamieson 58 Director 1993
Roger G. Martin 63 Director 1985
Martin H. Young, Jr. 48 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. Busch 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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Mr. Bush is Chairman of the Compensation Committee. Mr. Bush is an
independent marketing and seed treatment consultant. Mr. Bush was formerly
the Plant Manager of California Planting Cotton Seed Distributors from 1987
to 2000. Prior to 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 a member of the Audit Committee. 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 to
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 has been a director of the Canadian Venture Exchange (CDNX)
since November 1999 and was a director for Devon Energy Corp. from December
1998 to September 2000.
Mr. Jamieson is the Chairman of the Audit Committee and a member of the
Compensation Committee. Mr. Jamieson is the Chief Executive Officer,
President and founder, in 1970, of Jaco Oil Company and the majority owner
and founder, in 1983, of Wholesale Fuels, Inc. Jaco Oil Company, based in
Bakersfield, California, is one of the largest independent gasoline marketers
in the western United States. Mr. Jamieson is also involved in real estate
and oil and gas properties.
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, Kern County,
California.
Mr. Young is a member of the Nominating and Corporate Governance
Committee. 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.
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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 consists of Messrs. Jamieson,
Gaul and Martin. 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, accounting policies, tax matters,
financial reporting and financial disclosure practices of the Company. 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 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
("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
consists of Messrs. Berry, Busch, Hagg, Hoffman and Young. The Nominating and
Corporate Governance Committee is responsible for the development of governance
guidelines and practices for the effective operation of the Board in
fulfilling its responsibilities; the review and assessment of the performance
of the Board; and to 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 2000, the Board of Directors met six times, the Audit Committee met
twice, the Compensation Committee met four times 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 December 1, 2000, non-employee directors are paid a quarterly
fee of $4,625, plus $1,000 for each board meeting and $1,000 for each
committee meeting attended which is not held on the same day as the board
meeting. From August 1999 to December 2000, the quarterly fees were $4,375
and meeting fees were $500. From March 1998 to August 1999, due to the
extremely low crude oil price environment in early 1998, the Board of Directors
reduced the quarterly fee to $3,750 and the meeting fees to $400.
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, 2000 at
$15.6875, 5,000 options were issued on December 2, 1999 at $14.0625 and 5,000
options were issued effective December 2, 1998 at $12.625 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, 2000 received by the Company's Chairman, President and
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers:
Long-Term
Compensation
Annual # of Shares All Other
Name and Compensation (1) (2) Underlying Compensation
Principal Year Salary Bonus Options (3)
Position Granted
----------------- ----- --------- --------- --------- ---------
Jerry V. Hoffman 2000 $ 303,636 $ 150,000 75,000 $ 15,756
Chairman, President 1999 $ 292,400 $ 75,000 - $ 10,143
and Chief Executive 1998 $ 242,400 $ - 80,000 $ 10,668
Officer
Ralph J. Goehring 2000 $ 175,513 $ 75,000 35,000 $ 14,498
Senior Vice 1999 $ 167,666 $ 55,000 - $ 10,868
President and 1998 $ 144,500 $ - 60,000 $ 9,076
Chief Financial
Officer
Michael R. Starzer 2000 $ 145,619 $ 60,000 20,000 $ 13,311
Vice President of 1999 $ 136,333 $ 55,000 - $ 9,277
Corporate 1998 $ 120,000 $ - 60,000 $ 7,340
Development
Brian L. Rehkopf 2000 $ 143,287 $ 60,000 20,000 $ 13,325
Vice President 1999 $ 128,333 $ 35,000 - $ 8,941
of Engineering 1998 $ 115,000 $ - 40,000 $ 7,135
George T. Crawford 2000 $ 111,906 $ 50,000 20,000 $ 9,820
Vice President of 1999 $ 106,666 $ 15,000 30,000 $ 4,108
Production 1998 $ - $ - - $ -
(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 in dealing with historically low oil prices,
the Company's employees took an across-the-board 10% salary reduction
in March 1998 with certain members of Management taking a larger
reduction. These reductions were restored in January 1999.
(3) Includes Company contributions under the 401(k) Thrift Plan of $15,300,
$9,600 and $10,152 for Mr. Hoffman, $14,210, $10,614 and $8,896 for
Mr. Goehring, $13,125, $9,147 and $7,200 for Mr. Starzer, $12,937, $8,600
and $6,818 for Mr. Rehkopf and $9,675, $3,983 and $0 for Mr. Crawford,
respectively, for 2000, 1999 and 1998. Also includes split dollar life
insurance compensation of $456, $543 and $516 for Mr. Hoffman, $288, $254
and $180 for Mr. Goehring, $186, $130 and $140 for Mr. Starzer, $388,
$341 and $317 for Mr. Rehkopf and $145, $125 and $0 for Mr. Crawford,
respectively for 2000, 1999 and 1998.
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OPTION GRANTS IN 2000
Number Percent Potential Realizable Value
of of Total At Assumed Annual Rates
Securities Options Of Stock Price Appreciation
Underlying Granted Exercise For Option Term (1)
Options to Price Dollars (3)
Name Granted(1) Employees per Expiration
In 2000 Share(2) Date (3) 5% 10%
Mr. Hoffman 75,000 29% $15.6875 Dec. 2, 2010 $ 739,934 $ 1,875,138
Mr. Goehring 35,000 13% $15.6875 Dec. 2, 2010 $ 345,302 $ 875,064
Mr. Starzer 20,00 8% $15.6875 Dec. 2, 2010 $ 197,316 $ 500,037
Mr. Rehkopf 20,000 8% $15.6875 Dec. 2, 2010 $ 197,316 $ 500,037
Mr. Crawford 20,000 8% $15.6875 Dec. 2, 2010 $ 197,316 $ 500,037
Assumed Price Appreciation
5% 10%
Assumed price per share on Dec. 2, 2010 $ 25.55 $ 40.69
Gain on one share valued at $15.6875
on Dec 2, 2000 $ 9.87 $ 25.00
Gain on all shares (based on 22,033,559 shares
outstanding at Dec. 31, 2000) $217,378,345 $550,879,403
Gain for all 2000 optionees (based on 262,000
options) $ 2,584,836 $ 6,550,481
Optionee gain as a percentage of total
shareholder gain 1.19% 1.19%
(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.
AGGREGATED OPTION EXERCISES IN 2000
AND DECEMBER 31, 2000 OPTION VALUES
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money
on Value Options at Options at
Name Exercise Realized 12-31-2000 12-31-2000 (A)
Exercisable Unexercisable Exercisable Unexercisable
Mr. Hoffman - $ - 222,500 127,500 $100,625 $ 35,000
Mr. Goehring 1,500 $ 44,962 143,337 73,750 $ 44,853 $ 26,250
Mr. Starzer 8,283 $280,312 61,250 58,750 $ 13,125 $ 26,250
Mr. Rehkopf - $ - 65,000 55,000 $ 17,500 $ 35,000
Mr. Crawford - $ - 15,000 35,000 $ 13,125 $ 13,125
(A) The December 29, 2000 New York Stock Exchange closing price of $13.375,
the last trading day of the year, was used to value options.
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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 of the Audit Committee,
the report of the Compensation Committee and the performance graph shall not
be incorporated by reference into any such filings.
Audit Committee Report
To the Board of Directors
The Audit Committee consists of the following members of the Board of
Directors: Thomas J. Jamieson (Chairman), J. Herbert Gaul, Jr. and
Roger G. Martin. Each of the members is independent as defined under the
rules of the New York Stock Exchange.
We have reviewed and discussed with management the Company's audited
financial statements as of and for the year ended December 31, 2000.
We have discussed with the independent auditors, PricewaterhouseCoopers LLP
(PWC), the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as amended, by the Auditing
Standards Board of the American Institute of Certified Public Accountants.
We have received and reviewed the written disclosures and the letter from
PWC required by Independence Standard No. 1, Independence Discussions with
Audit Committees, as amended, by the Independence Standards Board, and have
discussed with the auditors the auditors' independence. All fees billed by
PWC for non-audit services are compatible with maintaining the principal
accountant's independence.
Based on the reviews and discussions referred to above, we recommend to
the Board of Directors that the financial statements referred to above be
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
Audit Committee of the Board of Directors
March 23, 2001 Thomas J. Jamieson (Chairman) J.Herbert Gaul, Jr.
Roger G. Martin
Auditor Independence Report
In conjunction with recent SEC releases on auditor independence, the
following items are disclosed herein:
Audit Fees
For the year ended December 31, 2000, the Company was billed $175,971 by
PWC, its independent accountant, for the audit and quarterly reviews completed.
Financial Information Systems Design and Implementation Fees
No fees were billed for Financial Information Systems Design and
Implementation.
All Other Fees
The Company was billed $19,222 for all other non-audit services provided
by PWC, its principal accountant.
PWC has represented to the Company that none of the work performed for
the Company was by persons other than PWC's full-time permanent employees.
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Board Compensation Committee Report on Executive Compensation
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. During 2000 the Committee
was composed of three non-employee 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 maximizing the return to our shareholders by:
Attracting, developing, rewarding, and retaining highly qualified and
productive individuals.
Directly aligning 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 the Company's 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.
Short-Term Incentive Plan Compensation
The Short-Term Incentive Plan (Bonus Plan) awards cash bonuses to
management and professional personnel to recognize and reward corporate and
individual performance. The Bonus Plan has been restructured in early 2001
to focus on four specific targets for the Company's employees to strive for,
these being: production targets, reserve replacement targets, operating costs
targets and average net income. Bonuses may also be awarded for discretionary
performance by the Chief Executive Officer for other employees whose efforts
and performance are judged to be exceptional. Even though the Company
experienced record net income, cash flow and production in 1997, no cash
bonuses were made in 1998 due to the collapse of oil prices in early 1998.
Upon the rapid rise in oil prices beginning in the second quarter of 1999 and
due to the belief such prices were sustainable, the Company awarded $465,000
in cash bonuses in September 1999 under the Bonus Plan, primarily for 1997
and 1998 performance. Cash bonuses were awarded in December of 2000 based on
the record performance achieved in 2000. The Company anticipates that
future annual bonuses, if any, will be awarded in December of each year.
Cash bonuses paid in 2000, 1999 and 1998 were $1,033,000, $465,000 and $0,
respectively.
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 programs for individual
executives.
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Long-Term Incentive Plan 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 and to
encourage management to own and hold the Company's stock and tie their
long-term economic interests directly to those of the Company's shareholders.
The Stock Option Plan was restructured in early 2001 to link the quantity
of options allowable for grant with the Company's stock performance measured
in comparison to a select peer group of other U.S. based exploration and
production companies. The Stock Option Plan generally utilizes vesting periods
to encourage key employees to continue in the employ of the Company and grants
options which have an exercise price at market value on the date of grant.
The Compensation Committee is charged with responsibility for administering
and granting non-statutory stock options. At December 31, 2000, an aggregate
of 384,800 options are available for issuance from the 1994 Stock Option Plan.
Options granted in 2000, 1999 and 1998 to employees were 262,000, 0 and
464,000, respectively.
Chief Executive Officer
The Committee believes Mr. Hoffman has done an excellent job of leading
and managing the Company during a volatile and rapidly-changing period for
the energy industry and has positioned the Company favorably for continued
growth. Mr. Hoffman, as Chief Executive Officer, has also demonstrated a
keen ability in redirecting the Company's resources to higher profitability
projects and growth opportunities. 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 23, 2001 William E. Bush (Chairman) Thomas J. Jamieson
Roger G. Martin
Severance Agreements
The Company has entered into salary continuation agreements with
Mr. Hoffman, Mr. Goehring, Mr. Starzer, Mr. Rehkopf and Mr. Crawford 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,
Mr. Starzer, Mr. Rehkopf and Mr. Crawford 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 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,
$451,000 for Mr. Goehring, $362,500 for Mr. Starzer, $362,500 for Mr. Rehkopf
and $277,000 for Mr. Crawford. 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, 1995 in shares of Berry
Petroleum Company, the Dow Jones Secondary Oil Companies Index, the Russell
2000 and the Standard & Poors 500 Index ("S&P 500") assuming reinvestment of
dividends for each measurement period. The Company added the Russell 2000 in
1999 and believes it is a good comparison index for the Company's proxy graph
based on the smaller market capitalization and broader base of companies in
the Russell 2000. The Dow Jones Oil Companies - Secondary Index was revised
by Dow Jones for 2000 reports and now includes 92 companies, up from
12 companies in 1999. The information shown is historical and is not
necessarily indicative of future performance.
Total Return
Analysis 12/29/95 12/31/96 12/31/97 12/31/98 12/31/99 12/29/00
Berry Petroleum Company $ 100.00 $ 146.92 $ 182.27 $ 152.67 $ 167.73 $ 152.01 $
Dow Jones Secondary
Oil Co. $ 100.00 $ 126.68 $ 126.30 $ 86.65 $ 100.00 $ 159.71
Russell 2000 $ 100.00 $ 114.76 $ 138.31 $ 133.54 $ 159.74 $ 153.03
S&P 500 $ 100.00 $ 122.95 $ 163.95 $ 210.80 $ 255.16 $ 231.92
Source: Carl Thompson Associates, www.ctaonline.com, (800) 959-9677.
Data from BRIDGE Information Systems, Inc. and Dow Jones Total Return Indexes.
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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,
Berry Holding Company, 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 ("S&D"), a California partnership. S&D, a retail
distributor of oilfield parts and supplies, is now a division of Eagle Creek.
The five-year contract whereby the Company purchased oilfield parts and
supplies from S&D at competitive prices expired November 30, 1999 and was not
renewed. Even though the contract expired, based on competitive pricing, the
Company continues to purchase oilfield parts and supplies from S&D. The
amounts paid to S&D in 2000, 1999 and 1998 were $713,000, $785,000 and
$502,000, respectively. 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 ("Victory"),
a California partnership, 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
distributions related to the stock that 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.
Under the Settlement Agreement, Berry agreed to guarantee that the
"B" Group will receive the same distributions 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 applicable
distribution (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. The "B" Group survivor is a significant shareholder
of Berry. Typically, the Maxwell "B" Group Payments have contributed to a
portion or all of the Trust Payment. Pursuant to the Settlement Agreement,
Berry paid $ 15,650 to the Victory Settlement Trust in 2000.
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B-40 Purchase
During 2000, the Company purchased the 50% working interest in the
Company's 40 acre B-40 lease it didn't already own, from 13 individuals and
trusts, for total consideration of $145,000 which was fair market value as
determined by the Company. Mr. Ralph B. Busch, III and his immediate family
were owners of approximately 29% of that interest.
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 16, 2002, must be received
at the office of the Secretary of the Company by December 10, 2001, 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 2000 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 20, 2001, the Company filed its Annual Report on Form 10-K with
the Securities and Exchange Commission. 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. BOX 925, 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, e-mail 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.
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 anticipates that it will use PricewaterhouseCoopers LLP to audit
the Company's financial statements for the year ending December 31, 2001 but
has not yet executed the engagement letter.
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 on the Form of Proxy will vote on said matters in accordance
with the recommendations of the Board of Directors.
The above Notice, Proxy Statement and Form of Proxy are sent by Order of
the Board of Directors.
KENNETH A. OLSON
Corporate Secretary
April 9, 2001
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