PETROLEUM DEVELOPMENT CORPORATION
103 East Main Street
Bridgeport, West Virginia 26330
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 15, 1997
To the Stockholders of
PETROLEUM DEVELOPMENT CORPORATION:
Notice is hereby given that the Annual Meeting of Stockholders of
Petroleum Development Corporation (the "Company") will be held at the office
of the Company at 103 East Main Street, Bridgeport, West Virginia 26330, on
July 15, 1997 at 10:00 A.M., West Virginia time, for the following purposes,
all as more fully described in the accompanying Proxy Statement:
(1) To elect two directors to serve a term of three years or until their
successors shall be elected and shall qualify;
(2) To ratify and approve the Company's 1997 Incentive Stock Option Plan.
(3) To ratify and approve the 1995 issuance of 90,000 shares of
restricted common stock.
(4) To ratify and approve the selection of independent public accountants
for the Company for the fiscal year ending December 31, 1997.
The Board of Directors has fixed the close of business on May 15, 1997 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. The presence in person or by proxy of the
holders of a majority of the outstanding shares of the Company's Common
Stock is required to constitute a quorum.
EACH STOCKHOLDER IS CORDIALLY INVITED TO BE PRESENT AND TO VOTE AT THIS
MEETING IN PERSON. STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND ARE
REQUESTED TO SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN
IT PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE.
By Order of the Board of Directors,
James N. Ryan
Chairman
Bridgeport, West Virginia
May 20, 1997
<PAGE>
PETROLEUM DEVELOPMENT CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
July 15, 1997
INTRODUCTORY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of proxies for use at the Annual Meeting of
Stockholders of Petroleum Development Corporation (the "Company") to be held
on July 15, 1997, notice of which is attached, and at any adjournment thereof.
Any stockholder giving the accompanying proxy has the power to revoke
it prior to its exercise by filing with the Secretary of the Company a written
notice of revocation or a duly executed proxy bearing a later date. Giving
the accompanying proxy will not affect your right to vote in person should
you find it convenient to attend the Annual Meeting. Shares represented
by proxy will be voted by the proxy holders in accordance with your
instructions unless you revoke your proxy or attend the meeting and elect to
vote in person. This Proxy Statement and the proxy were first mailed to
stockholders on May 20, 1997. The mailing address of the principal executive
offices of the Company is Petroleum Development Corporation, P.O. Box 26,
Bridgeport, West Virginia 26330.
The Annual Report to Stockholders for 1996, containing certified
financial and other information about the Company, accompanies this Proxy
Statement.
VOTING SECURITIES
The outstanding voting securities of the Company as of May 15, 1997,
consisted of 10,485,753 shares of $0.01 par value common stock ("Common
Stock"). Stockholders of record as of the close of business on May 15, 1997
are entitled to vote. Each stockholder is entitled to one vote for each
share of Common Stock held of record on this date. Accept for the election of
directors, the proposals submitted for vote at the Annual Meeting require a
majority of the shares represented at the meeting, in person or by proxy, and
entitled to vote. A plurality of the votes cast at the meeting is required
for the election of directors. Abstentions and broker non-votes will
not be considered as votes cast with respect to a particular matter, but will
be counted in the number of shares present in person or represented by proxy
for purposes of determining whether a quorum is present.
PROPOSAL #1
ELECTION OF DIRECTORS
The Board of Directors, consisting of six directors is divided into
three classes, each of which is composed of two directors. At each Annual
Meeting of Stockholders, one class of directors is elected for a three-year
term and until their respective successors are duly elected and qualified.
Votes pursuant to the enclosed proxy will be cast, unless authority is
withheld, for the election of the two persons named under "Nominees for Terms
Expiring 2000" below, both of whom are members of the present Board and both
of whom are expected to be able to serve on the Board to be elected at this
meeting. If any of such persons is unwilling or unable to act in such
capacity, an event which is not now anticipated, the enclosed proxy will be
voted for such person or persons as the Board of Directors may designate.
During 1996, the Board of Directors held six meetings. No director attended
fewer than 75% of the aggregate of all meetings of the Board and the
committees, if any, upon which such director served.
<PAGE>
DIRECTORS OF THE COMPANY
NOMINEES FOR TERMS EXPIRING 2000
The following persons both of whom are currently serving as
directors, have been nominated to serve as directors:
<TABLE>
<S> <S> <S>
Name and Principal Year
First
Occupation Past Five Years Elected
and Other Directorships Age Director
STEVEN R. WILLIAMS, President of the Company since March, 1983. Prior to
joining the Company, Mr. Williams was employed by Exxon and Texas Oil
& Gas Company. 46 1983
ROGER J. MORGAN, a member of the law firm of Young, Morgan & Cann,
Clarksburg, West Virginia, for more than the past five years. Mr. Morgan
is not active in the day-to-day business of the Company, but his law
firm provides legal services to the Company. 70 1969
CONTINUING DIRECTORS
TERMS EXPIRING IN 1998
JAMES N. RYAN, Chairman and Chief Executive Officer of the Company since
March, 1983. Mr. Ryan previously served as President of the
Company since 1969. 65 1969
VINCENT F. D'ANNUNZIO has for the past five years served as president of
Beverage Distributors, Inc., located in Clarksburg, West Virginia. 44 1989
TERMS EXPIRING IN 1999
DALE G. RETTINGER, Executive Vice President and Treasurer of the Company
since 1980. Prior to 1980, he was a partner with Main Hurdman,
Certified Public Accountants, having served in that capacity since 1976. 52 1985
JEFFREY C. SWOVELAND, has been with Equitable Resources since September, 1994
and presently serves as Treasurer. Prior thereto he was a lending
officer with Mellon Bank N.A. since July, 1989. 42 1991
</TABLE>
<PAGE>
Committees of the Board
The Company has three standing committees of the Board of Directors:
the Audit Committee; the Executive Committee; and the Stock Option and
Executive Compensation Committee. The Audit Committee is comprised of
Messrs. D'Annunzio, Ryan, and Swoveland. The Executive Committee is
comprised of Messrs. Ryan, Williams, and Rettinger. The Stock Option and
Executive Compensation Committee is comprised of Messrs. D'Annunzio, Swoveland
and Morgan. The Company does not have a formal Nominating Committee, as the
full board handles these responsibilities. Directors of the Company receive
an annual fee of $6,400 and $600 per board meeting as compensation for
serving in that capacity.
The Executive Committee held six meetings during 1996. The functions
performed by the Executive Committee include handling important Board matters
that arise between Board meetings, serving as a liaison between the Board and
senior management on important matters requiring Board attention, and
recommending to the Board nominations for election of new and existing Board
members.
The Audit Committee met twice during 1996. The Audit Committee is
comprised of a majority of outside Directors of the Company. The functions
performed by the Audit Committee include recommending the selection of
independent accountants, reviewing with the Company's independent accountants
the results of audits performed by them, and overseeing and reviewing
monthly and quarterly unaudited financial statements. These reviews include
the adequacy of cash flow and the status of credit arrangements of the Company.
The Stock Option and Executive Compensation Committee held two
meetings in 1996. The Committee is comprised of a majority of outside
Directors of the Company. The functions performed by this committee include
recommending to the Board compensation levels of senior management and
directing and recommending levels of corporate stock options and other benefit
plans of the Company. In this regard, the committee monitors trends to
insure the Company's compensation levels are competitive in the oil and gas
industry.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation
received during each of the Company's last three fiscal years by the Chief
Executive Officer and by the other executive officers of the Company whose
salary and bonus exceeded $100,000 in 1996.
Summary Compensation Table
<TABLE>
<S> <S> <S> <S> <S> <S> <S>
Annual Compensation
Name and Other Annual Long term All Other
Principal Position Year Salary($)(1) Bonus ($) Compensation($)(2) Awards(#) Compensation($)
James N. Ryan 1996 164,295 73,383 10,000 90,897(4)(5)
Chairman and Chief 1995 159,330 70,000 10,000 100,000(3) 34,111(4)(5)
Executive Officer 1994 154,078 77,500 10,000 34,086(4)(5)
Steven R. Williams 1996 125,895 93,383 10,000 70,862(4)(5)
President 1995 120,930 70,000 10,000 100,000(3) 34,125(4)(5)
and Director 1994 115,678 77,500 10,000 34,017(4)(5)
Dale G. Rettinger 1996 125,895 93,383 10,000 70,862(4)(5)
Executive Vice President, 1995 120,930 70,000 10,000 100,000(3) 34,125(4)(5)
Treasurer, and Director 1994 115,678 77,500 10,000 34,017(4)(5)
</TABLE>
(1) The Company is party to employment agreements with Messrs. Ryan,
Williams, and Rettinger dated March 1, 1991 and terminating December 31,
2000. The employment agreements provide for a base salary as indicated
in the table above as well as an annual merit bonus based upon Company
profitability and cash flow performance levels.
(2) The respective individuals receive fees as directors of the Company
$6,400 annually plus $600 per board meeting attended.
(3) In 1995, the options were granted at market price of $1.125 per share to
purchase 70,000 shares of common stock and issued 30,000 shares of
restricted stock available upon retirement.
(4) This amount includes contributions made by the Company under the
Petroleum Development Corporation Employee Profit Sharing and 401-K
retirement plans. In 1996 and 1995 the Company contributed $50,000 and
$28,500 to the Employee Profit Sharing Plan. Of these contributions,
each of the three officers were credited $3,071 in 1996 and $1,815 in
1995. The Company provides a matching of 401-K contributions at varying
rates of the employee contribution. Of the total Company match of
$139,800, $70,800 and $68,700 in 1996, 1995 and 1994 the three
respective officers were credited with matching contributions of $7,826,
$7,791, and $7,791 in 1996; $4,111, $4,125 and $4,125 in 1995; and
$4,086, $4,017 and $4,017 in 1994.
(5) During 1994 the Board of Directors approved a deferred compensation
arrangement for three executive officers of the Company. Under the
arrangement, each executive may choose to defer any portion of their
bonus compensation until retirement or separation from the Company. The
respective officers voluntarily deferred $80,000, $60,000 and $60,000 in
1996; $30,000 each in 1995 and $30,000 each in 1994.
<PAGE>
Compensation Committee Report
The Compensation Committee is composed of two outside directors and the
Secretary of the Company. The committee's responsibility is to develop the
Company's compensation policy to enable the Company to hire, retain and
motivate high performing employees. The committee also administers the
Company's Savings and Protection Plan (the "401(K) Plan"), various Employee
Stock Option Plans, and the Company's Profit Sharing Plan. The committee
reviews the performance and compensation of the Chief Executive Officer, and
the two executive officers of the Company. Final approval of all contracts
with company executives is reserved to the full Board of Directors.
Compensation paid to the CEO, Mr. Ryan, and to the executive officers of
the Company is based on several factors, including the terms of their
employment contracts, the earnings of the Company, the evaluation of the
Board of the performance of the employees, as well as compensation paid to
similarly situated employees with other similar firms.
As CEO, Mr. Ryan received a salary of $164,295 in 1996, which reflected
cost of living increases from his salary in 1995. Also during 1996 Mr. Ryan
earned a cash bonus of $73,383 based on Company earnings. Both the salary
increase and the bonus were based on provisions in Mr. Ryan's employment
contract.
The Company also contributed $7,826 to Mr. Ryan's 401(K) account in
accordance with the plan's matching provisions to all participating employees.
The compensation of the two executive officers of the Company is also
comprised of a salary and a performance based bonus. Salaries of both were
increased by a cost of living adjustment and bonuses were paid based on the
Company's earnings, both as provided in the executive's employment
agreements. Both executives also received a share of Company matching
contributions to the Company 401(K) plan.
During 1996 the Company reviewed the employment contracts of the CEO and
the executive officers of the Company, and determined that no changes were
required. The Compensation Committee believes the Company has made
substantial progress over the past several years despite adverse industry and
economic conditions, and that the progress is attributable in large measure
to the efforts of the CEO and the executive officers.
Compensation Committee
Roger J. Morgan, Chair
Vincent F. D'Annunzio
Jeffrey C. Swoveland
<PAGE>
Transactions with Management
The Company is party to a stock redemption agreement with the Chairman,
President and Executive Vice President of the Company. The agreement, as
amended, requires the Company to maintain life insurance on each of them in
the amount of $1,000,000. The agreement provides that, at the election of
the executive's estate or heirs, the Company shall utilize the proceeds from
such insurance to purchase from his estate or heirs all or a portion of his
shares of the Company's stock. The purchase price for the outstanding Common
Stock is to be based upon the average closing asked price for the Company's
stock as quoted by NASDAQ during a specified period. The Company is not
required to purchase any shares in excess of the amount provided therefore
by such insurance.
Compensation Committee Interlocks and Insider Participation
Roger J. Morgan, Secretary and Director, is a member of the Stock Option
and Executive Compensation Committee. The Company has retained Young, Morgan
& Cann to provide various legal services for the Company, Mr. Morgan, is a
senior partner of this law firm. For the year ended December 31, 1996, the
Company paid Young, Morgan & Cann a total of $35,400 for legal services
rendered on behalf of the Company.
Information with Respect to Stock Options, Warrants and Rights
OPTION EXERCISES AND YEAR-END VALUE TABLE
The Company has granted options to purchase shares of common stock to
officers, directors, and other key employees under its Employee Stock Option
Plans.
The following table provides certain information with respect to options
exercised during 1996 by the persons named under the Company's various Stock
Option Plans. The table also represents information as to the number of
options outstanding as of December 31, 1996, with respect to options granted
pursuant to the Company's Employee Stock Option Plans. No options were
granted in 1996.
<TABLE>
<S> <S> <S> <S> <S>
Value of unexercised
Number of Value Number of Unexercised in-the-money options
Shares Exercised Realized ($) Options at year-end at year-end (1)($)
James N. Ryan - - 401,000 1,290,125
Steven R. Williams - - 391,000 1,257,625
Dale G. Rettinger - - 391,000 1,257,625
</TABLE>
(1) For all unexercised options held as of December 31, 1996, the aggregate
dollar value of excess of the market value of the stock underlying those
options over the exercise price of those unexercised options. On
December 31, 1996, the closing sales price of the Common Stock was
$4.1875 per share. These values are shown separately for those options
that were exercisable and those options that were not yet exercisable on
December 31, 1996.
<PAGE>
Employee 401K and Profit Sharing Plan
In 1987, the Company established a retirement plan qualified under
Section 401(K) of the Internal Revenue Code. The plan is funded by employee
contributions and a company matching contribution. Administrative costs of
the plan are borne by the Company. The employees choose from four investment
programs and, therefore, the amount of an individual's plan assets depends
on the amount of their contributions and the performance by their chosen
investments.
In 1992, the Company began a Profit Sharing Retirement plan to
supplement the 401K Plan. Contributions are dependent on corporate
profitability and are at the discretion of the Board of Directors of the
Company. The Company filed and qualified the plan with the Internal Revenue
Service.
Stockholder Performance Graph
The following graph illustrates the performance of Petroleum Development
Corporation common stock over a five year period compared to the performance
of the NASDAQ Index and a peer group index. The peer group index consists of
186 Crude Petroleum and Natural Gas Companies. The table includes the
cumulative shareholder return assuming the reinvestment of dividends.
<TABLE>
<S> <S> <S> <S> <S> <S> <S>
Petroleum Development Corporation
Stock Performance Graph
600.0
500.0
400.0
300.0
200.0
100.0
0.0
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
Petroleum
Development
Corporation 100.0 156.5 234.8 165.2 226.1 582.6
NASDAQ
Market Index 100.0 94.9 113.1 118.6 130.4 173.4
Peer Group
Index 100.0 101.0 121.1 127.2 165.0 205.0
</TABLE>
<PAGE>
PROPOSAL #2
1997 INCENTIVE STOCK OPTION PLAN
The Board of Directors is submitting to the stockholders for their
approval and adoption the 1997 Incentive Stock Option Plan (the "1997 Plan").
The 1997 Plan authorizes stock options for key individuals associated with
the Company for the purpose of adding to the ability of the Company to
attract, retain and further motivate highly qualified employees.
The Board of Directors approved, subject to the approval of the
stockholders, the 1997 Plan. The 1997 Plan provides for granting of options
to purchase up to 500,000 shares of the Company's Common Stock.
The 1997 Plan specifically provides for the grant of stock options which
qualify as incentive stock options ("Incentive Stock Options") under the
provisions of section 422A of the Internal Revenue Code of 1954, as amended
(the "Internal Revenue Code"). The federal income tax treatment of Incentive
Stock Options is generally more favorable to optionees than the treatment
accorded other options; it is also less favorable to the Company because the
Company will generally not receive a tax deduction with respect to Incentive
Stock Options. (See "Federal Income Tax Treatment" below).
The following summary provides a description of the significant
provisions of the 1997 Plan. A copy of the 1997 Plan is attached to this
proxy statement as Appendix A.
Stock Options
Under the 1997 Plan, the Company may grant options to purchase Common
Stock to key employees and directors of the Company. Such options will be
in the form of Incentive Stock Options. The 1997 Plan provides that the
exercise price of each option will be not less than 100% of the fair market
value of the shares of Common Stock of the Company on the date of granting
of the option. During such time as such stock is listed upon an established
stock exchange the fair market value per share shall be the mean closing
price of the Common Stock in the New York over-the-counter market on the day
the option is granted, as reported by the National Association of
Securities Dealers, Inc. discounted for permanent restrictions on such stock
as determined by investment and/or banking institutions.
The 1997 Plan provides that the term of options granted under the 1997
Plan will be 10 years, that, generally speaking, one half of the options will
not be exercisable before at least 12 months and one half before 24 months of
continuous employment after the date it is granted, and that the option will
not be transferable except as specifically provided in the Plan.
Options granted under the 1997 Plan may be exercised upon payment to the
Company of the exercise price of the option in cash or, at the sole option of
the Company, by tendering to the Company shares of the Common Stock equal in
fair market value to the exercise price of that option.
Under present accounting rules, neither the grant nor the exercise of
options would result in a charge against earnings.
Incentive Stock Options are also subject to the following limitations:
(i) Incentive Stock Options may not be granted at less than 100% of fair
market value at the time of grant; and (ii) The aggregate fair market value
of stock for which an individual may be granted Incentive Stock Option in any
calendar year may not exceed $100,000 plus any unused limited carryover (as
determined pursuant to Section 422A of the Internal Revenue Code).
Limitations on Number of Shares
The total number of shares that may be issued pursuant to the stock
options under the 1997 Plan cannot exceed 500,000 shares of Common Stock.
Shares not issued pursuant to stock options because of their lapse,
termination, cancellation, forfeiture, or for other reasons, will again be
available for use under the 1997 Plan.
Other Material Facts and Provisions
It is contemplated that authorized but unissued shares will be used
under the 1997 Plan, but the 1997 Plan also permits the use of treasury
shares, including any shares reacquired by the Company for the purpose of
the 1997 Plan. The Board of Directors may delegate any or all of
its powers under the 1997 Plan to the Committee appointed by the Board.
<PAGE>
The 1997 Plan is not intended to be a substitute for any other plan,
practice or arrangement for payment of compensation or fringe benefits,
including any insurance, death benefit, stock purchase, incentive
compensation or bonus plan, and such plans, practices or arrangements may
be continued or adopted, and payments made thereunder, independently of the
1997 Plan.
It is not possible at this time to state to whom stock incentives will be
granted under the 1997 Plan or the value or number of shares subject to any
particular stock incentive, since these matters have not yet been determined
and cannot be determined at the present time. Among those who may qualify as
recipients will be officers of the Company and other key employees in the
executive, administrative, professional and technical positions. The Board
will grant stock incentives on the basis of the individuals' responsibilities
and present and potential contributions to the success of the Company. The
Company anticipates that approximately 20 officers and key employees may be
eligible for the stock option plan.
The Board of Directors of the Company may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the 1997 Plan or revise or amend it in any
respect whatsoever except that, without approval of the stockholders,
no such revision or amendment shall change the number of shares subject to
the 1997 Plan, change the designation of the class of employees eligible to
receive options, decrease the price at which options may be granted, or
remove the administration of the 1997 Plan from the Committee.
The Company's Common Stock is traded on the National Market System of
NASDAQ. On April, 21, 1997, the closing price for the Company's Common Stock
as reported on NASDAQ was $3 3/8.
Federal Income Tax Treatment
The Company believes that under present law, the federal income tax
treatment of incentive stock options under the 1997 Plan should be generally
as follows:
An employee who is granted an Incentive Stock Option under the 1997 Plan
should not be subject to federal income tax upon the grant of the option.
In the event of a sale of the shares received upon exercise of a stock
option, any appreciation of the shares received above the exercise price
should qualify as ordinary income for the taxable year in which the sale
occurs. The Company would not be entitled to a tax deduction with respect to
the grant or exercise of a stock option nor with respect to any disposition
of such shares. Income will be realized only to the extent the amount
received upon sale exceeds the employee's adjusted basis for the stock. The
Company will be entitled to a tax deduction in the amount of the ordinary
income realized by the employee (assuming any federal income withholding
requirements are satisfied).
PROPOSAL #3
DEFERRED 1995 RESTRICTED STOCK GRANT
The shareholders are being requested to approve the Board of Director's
1995 grant of 30,000 shares of restricted common stock to each of the three
executive officers of the Company, Messrs. Ryan, Williams, and Rettinger. On
the date of grant, the fair market value of a share of Company Common Stock
was $1 1/8. Such shares vest with the executive upon retirement from the
Company or in the case of change of control, death or disability of the
executive. The Board of Directors granted such shares as an incentive to
retain the executives in the employ of the Company and to better align the
interests of the executives with the shareholders of the Company. The share
certificates are currently being held in escrow by an independent party.
If the grant of restricted stock is approved by the shareholders, the share
certificates will be released to the executive officers. If the shareholders
do not approve the proposal, the grant of shares of restricted stock will be
revoked and the share certificates will be voided.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND DIRECTORS AND OFFICERS
Security Ownership
The following table sets forth information as of March 31, 1997, with
respect to the common stock of PDC owned by each person who owns beneficially
5% or more of the outstanding voting common stock, by all directors and
nominees individually and by all directors and officers as a group.
<TABLE>
<S> <S> <S>
Amount Percent
Name and Address Beneficially Owned (1) of Class
James N. Ryan* 1,061,176 (2) 9.7
Fidelity Management** 995,000 9.5
Steven R. Williams* 679,000 (3) 6.2
Dale G. Rettinger* 647,834 (3) 6.0
Roger J. Morgan 132,504 (4) 1.2
Vincent F. D'Annunzio 53,600 (5) .5
Jeffrey C. Swoveland 23,550 (6) .2
All Directors and Officers as a Group (10 persons) 2,938,758 (7) 24.7
</TABLE>
(1) The nature of the beneficial ownership for all the shares is sole voting
and investment power.
(2) Includes options to purchase 401,000 shares exercisable within 60 days.
(3) Includes options to purchase 391,000 shares exercisable within 60 days.
(4) Includes options to purchase 77,500 shares exercisable with 60 days.
(5) Includes options to purchase 43,600 shares exercisable within 60 days.
(6) Includes options to purchase 23,550 shares exercisable within 60 days.
(7) Includes options to purchase 1,432,650 shares exercisable within 60
days. Until exercised, these options cannot be voted. All directors
and officers as a group own in the aggregate a total of 1,506,108
shares or approximately 14.4% of the total of 10,485,753 shares of
common stock issued and outstanding.
No director or officer is the beneficial owner of any securities of
any of the Company's subsidiaries.
* The business address is 103 East Main Street, Bridgeport, WV 26630.
** The business address is 82 Devonshire Street, Boston, MA 02109.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and holders of more
than 10% of the Common Stock are required by regulations promulgated by the
Commission pursuant to the Exchange Act to furnish the Company with copies of
all Section 16(a) forms they file. The Company assists officers and
directors, and will assist beneficial owners, if any, of more than 10% of the
Common Stock, in complying with the reporting requirements of Section 16(a)
of the Exchange Act.
Based solely on its review of the copies of such forms received by it,
the Company believes that since January 1, 1996, all Section 16(a) filing
requirements applicable to its directors, officers and greater than 10%
beneficial owners were met.
PROPOSAL #4
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
At the Meeting, the Stockholders of the Company will be asked to ratify
the Board of Directors' selection of KPMG Peat Marwick as the Company's
certified public accountants for the fiscal year ended December 31, 1997.
KPMG Peat Marwick conducted the audit for the fiscal year ended December 31,
1996. A representative of KPMG Peat Marwick will be present at the Meeting,
will have an opportunity to make statements if he so desires, and will be
available to respond to appropriate questions.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company is not
aware of any matters to be brought before the Annual Meeting other than the
matters set forth in this Proxy Statement. However, if other matters
properly come before the meeting, it is the intention of the proxy holders
named in the enclosed form of proxy to vote in accordance with their
discretion on such matters pursuant to such proxy.
General
The enclosed Proxy is solicited by the Company's Board of Directors.
The Company expects to solicit proxies primarily by mail, but solicitation
may also be made personally, by telephone or by telegraph, by regularly
employed officers and employees of the Company who will receive no extra
compensation for doing so.
The Company will request brokers and other custodians, nominees and
fiduciaries to forward proxy soliciting material to, and obtain instructions
from, the beneficial owners of shares held by record by such persons and will
reimburse reasonable out-of-pocket expenses. The Company will bear all costs
of proxy solicitation.
Stockholder Proposals for 1998 Annual Meeting
Stockholder proposals must be received by the Company at its principal
executive office on or prior to March 1, 1998 in order to be included in the
Company's proxy statement for the 1998 annual meeting of stockholders.
By Order Of The Board of Directors
James N. Ryan
Chairman
Dated: May 20, 1997<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY PERSON WHO IS A
RECORD OR BENEFICIAL HOLDER OF COMMON STOCK OF THE COMPANY, ON
WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE
COMPANY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. COPIES
MAY BE OBTAINED BY WRITING TO CORPORATE COMMUNICATIONS DEPARTMENT,
PETROLEUM DEVELOPMENT CORPORATION, P.O. BOX 26, BRIDGEPORT, WEST
VIRGINIA 26330.<PAGE>
APPENDIX A
PETROLEUM DEVELOPMENT CORPORATION
Employee Incentive Stock Option Plan
1997
1. PURPOSE
This Employee Incentive Stock Option Plan (the "PLAN") is intended as an
incentive and to encourage ownership by certain officers and key executive
employees of Petroleum Development Corporation (the "CORPORATION") or of its
subsidiary corporations as that term is defined in Article 3, below (the
"SUBSIDIARIES") so that they may acquire or increase their proprietary
interest in the success of the Corporation and Subsidiaries, and to encourage
them to remain in the employ of the Corporation or of the Subsidiaries. It
is further intended that options issued pursuant to this Plan shall
constitute incentive stock options within the meaning of the Economic
Recovery Tax Act of 1981.
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation ("the "Committee"). The Committee shall consist
of not less than three members of the Corporation's Board of Directors. The
Board of Directors may from time to time remove members from, or add members
to, the Committee. Vacancies on the Committee, howsoever caused, shall be
filled by the Board of Directors. The Committee shall select one of its
members as Chairman, and shall hold meetings at such times and places as it
may determine. The majority of the Committee at which a quorum is present,
or acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee. The Committee shall from
time to time at its discretion make recommendations to the Board of Directors
with respect to the key executive employees who shall be granted options and
the amount of stock to be optioned to each.
The interpretation and construction by the Committee of any provisions
of the Plan or of any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be such key
executive employees (including officers, whether or not they are directors)
or the Corporation or its Subsidiaries (as such term is defined in Section
425 of the Internal Revenue Code of 1954) existing from time to time as the
Board of Directors shall select from time to time from among those nominated
by the Committee. An optionee may hold more than one option, but only on the
terms and subject to the restrictions hereafter set forth. No person shall
be eligible to receive an option for a larger number of shares than is
recommended for him by the Committee.
4. STOCK
"The stock subject to the options shall be shares of the Corporation's
authorized but unissued or re-acquired $.01 par value common stock hereafter
sometimes called Capital Stock. The aggregate number of shares which may be
issued under options shall not exceed 500,000 shares of Capital Stock. The
number of shares with respect to which option rights may be granted to any
individual under any and all options which are issued to him by the
Corporation as Incentive Stock Options shall not exceed the lesser of 200,000
shares or, in any one year, $100,000 or stock at its fair market value
determined at the time of grant of the option plus a carry-over amount as
defined by the Internal Revenue Code. The carry-over amount is one-half of
the amount by which $100,000 exceeds the value at time of grant of the stock
for which ISO's were issued in the preceding three years but not before 1981.
The limitations established by each of the preceding sentences shall be
subject to adjustment as provided in Article 5 (i) of the Plan."
In the event that any outstanding option under the Plan for any reason
expires or is terminated, the shares of Capital Stock allocable to the
unexercised portion of such option may again be subjected to an option under
the Plan.
<PAGE>
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted pursuant to the Plan shall be authorized by the
Board of Directors and shall be evidenced by agreements in such form as the
Committee shall from time to time recommend and the Board of Directors shall
from time to time approve, which agreements shall comply with and be subject
to the following terms and conditions.
(a) Optionee's Agreement.
Each optionee shall agree to remain in the employ of and to render
to the Corporation or Subsidiaries his services for a period of
(one year from the date of the option to earn the right to exercise
one-half and two years from the date of the option to earn the right
to exercise the second one-half of the options granted), but such
agreement shall not impose upon the Corporation or Subsidiaries
any obligation to retain the optionee in their employ for any period.
(b) Number of Shares.
Each option shall state the number of shares to which it pertains.
(c) Option Price.
Each option shall state the option price, which shall be not less
than 100% of the fair market value of the shares of Capital Stock
of the Corporation on the date of the granting of the option.
During such time as such stock is listed upon an established
stock exchange the fair market value per share shall be the closing
price of the Capital Stock in the New York over-the-counter market
on the day the option is granted, as reported by the National
Association of Securities Dealers, Inc., discounted for restrictions
on such stock as determined by investment and/or banking
institutions. Such restrictions subject to a discount factor on the
marketability limitations on unregistered securities. The discount
factor will not be applicable to options to purchase stock
previously registered with the Securities and Exchange Commission.
If the stock is listed upon an established stock exchange or exchanges
such fair market value shall be deemed to the highest closing price
of the Capital Stock on such stock exchange or exchanges on the day
the option is granted or if no sale of the Corporation's Capital
Stock shall have been made on any stock exchange on that day
on the next preceding day on which there was a sale of such stock.
Subject to the foregoing the Board of Directors and the Committee
in fixing the option price shall have full authority and discretion
and be fully protected in doing so.
(d) Medium and Time of Payment.
The option price shall be payable in United States dollars upon the
exercise of the option and may be paid in cash or the same class of
stock of the Corporation.
(e) Term and Exercise of Options.
No option shall be exercisable either in whole or in part prior to
one year from the date it is granted. Options are exercisable
one-half after one year and one-half after two years from date of
grant. No option shall be exercisable after the expiration of ten
years from the date it is granted. Not less than one hundred
shares may be purchased at any one time unless he number purchased
is the total number at the time purchasable under the option.
During the lifetime of the optionee, the option shall be exercisable
only by him and shall not be assignable or transferable by him and
no other person shall acquire any rights therein. To the extent
not exercised, installments shall accumulate and be exercisable, in
whole or in part, in any subsequent period but not later than ten
years from the date the option is granted.
(f) Termination of Employment Except Death.
In the event that an optionee shall cease to be employed by the
Corporation or Subsidiary for any reason other than his death and
shall be no longer in the employ of any of them, subject to the
condition that no option shall be exercisable after the expiration
of ten years from the date it is granted, such optionee shall have
the right to exercise the option at any time within three months
after such termination of employment to the extent his right to
exercise such option had accrued pursuant to Article 5 (e) of the
Plan and had not previously been exercised at the date of such
termination. Options not accruing pursuant to Article 5 (e) of the
Plan expire upon such termination. Whether authorized leave of
absence or absence for military or governmental service shall
constitute termination of employment, for the purposes of the Plan,
shall be determined by the Committee, which determination, unless
overruled by the Board of Directors, shall be final and conclusive.
<PAGE>
(g) Death of Optionee and Transfer of Option.
If the optionee shall die while in the employ of the Corporation or
a Subsidiary or within a period of three months after the
termination of his employment with the Corporation and all
Subsidiaries and shall not have fully exercised the option, an option
may be exercised, subject to the condition that no option shall be
exercisable after the expiration of ten years from the date it is
granted, to the extent that the optionee's right to exercise such
option had accrued pursuant to Article 5 (e) of the Plan at the
time of his death and had not previously been exercised, at any
time within one year after the optionee's death by the executors
or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by
bequest or inheritance.
No option shall be transferable by the optionee otherwise than by
will or the laws of descent and distribution.
(h) Recapitalization.
Subject to any required action by the stockholders, and number of
shares of Capital Stock covered by each outstanding option, and
the price per share thereof in each such option, shall be
proportionately adjusted for any increase or decrease in the number
of issued shares of Capital Stock of the Corporation resulting from
the subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Capital Stock) or any other
increase or decrease in the number of such shares effected without
receipt of consideration by the Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation,
each outstanding option shall pertain to and apply to the
securities to which a holder of the number of shares of Capital Stock
subject to the option would have been entitled. A dissolution or
liquidation of the Corporation or a merger or consolidation in
which the Corporation is not he surviving corporation, shall cause
each outstanding option to terminate, provided that each optionee
shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the
Corporation is not the surviving corporation, to exercise his
option in whole or in part without regard to the installment
provisions of Article 5 (e) of the Plan.
In the event of a change in the Capital Stock of the Corporation as
presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares
with a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Capital Stock within
the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by
the Committee, whose determination in that respect shall be final,
binding and conclusive, provided that each option granted pursuant
to this Plan shall not be adjusted in a manner that causes the
option to fail to continue to qualify as an incentive stock option
within the meaning of the Economic Recovery Tax Act of 1981.
Except as hereinbefore expressly provided in this Article 5 (i), the
optionee shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number
of shares of stock of any class or by reason of any dissolution,
liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation, and any issue by the Corporation
of shares of stock of any class, or securities convertible into
shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price
of shares of Capital Stock subject to the option.
The grant of an option pursuant to the Plan shall not affect in any
way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all of any part of its business or
assets.
(i) Rights as a Stockholder.
An optionee or a transferee of an option shall have no rights as a
stockholder with respect to any shares covered by his option until
the date of the issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in
Article 5 (i) hereof.
<PAGE>
(j) Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of
the Plan, the Board of Directors may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender
of outstanding options (to the extent not heretofore exercised) and
authorize the granting of new options in substitution therefor (to
the extent not theretofore exercised). The Board of Directors
shall not, however, modify any outstanding options so as to specify
a lower price or accept the surrender of outstanding options and
authorize the granting of new options in substitution therefore
specifying a lower price.
(k) Investment Purpose.
Each option under the Plan shall be granted to the condition that
the purchases of stock thereunder shall be for investment purposes,
and not with a view to resale or distribution except that in the
event the stock subject to such option is registered under the
Securities Act of 1933, as amended, or in the event a resale of
such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the option of
counsel for the Corporation such condition is not required under the
Securities Act of 1933 or any other applicable law, regulation, or
rule of any governmental agency.
(l) Other Provisions.
The option agreements authorized under the Plan shall contain such
other provisions, including, without limitation, restrictions upon
the exercise of the option, as the Committee and the Board of
Directors of the Corporation shall deem advisable. Any such option
agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary in order that such
option will be an "incentive stock option" as defined in the Economic
Recovery Tax Act of 1981 or to conform to any change in the law.
6. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted, or the date the Plan
is approved by the Stockholders, whichever is earlier.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall
be indemnified by the Corporation against the reasonable expenses, including
attorney's fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any option
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Corporation) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his
duties; provided that within 60 days after institution of any such action,
suit or proceeding a Committee member shall in writing offer the Corporation
the opportunity, at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Corporation may, insofar as permitted by
law, from time to time, with respect to any shares at the time not subject
to options, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever except that, without approval of the stockholders,
no such revision or amendment shall change the number of shares subject to
the Plan, change the designation of the class of employees eligible to
receive options, decrease the price at which options may be granted, or
remove the administration of the Plan from the Committee.
9. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Capital Stock
pursuant to options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
<PAGE>
11. APPROVAL OF STOCKHOLDERS
The Plan shall not take effect until approved by the holders of a
majority of the outstanding shares of Capital Stock of the Corporation,
which approval must occur within the period beginning twelve months before
and ending twelve months after the date the Plan is adopted by the Board
of Directors.
Date Plan adopted by Board of Directors - April 21, 1997
Date Plan approved by Stockholders -
<PAGE>
Petroleum Development Corporation
Proxy Solicited by the Board of Directors For
Annual Meeting of Stockholders
The undersigned hereby appoints JAMES N. RYAN and DALE G. RETTINGER
or either of them, proxies, each with full power to act without the
other and with full power of substitution for and in the name of the
undersigned at the Annual Meeting of Stockholders of Petroleum
Development Corporation (the "Company") to be held on July 25, 1997
at 10:00 A.M. and at any adjournment thereof to vote all shares of
the Common Stock of the Company, held by the undersigned with
respect to the following questions and on such other matters as may
properly come before the meeting.
(1) ELECTION OF DIRECTORS
FOR all nominees listed below (except as marked to the
contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below
Steven R. Williams, Roger J. Morgan
(INSTRUCTION: To withhold authority to vote for any nominee, circle
that nominee's name above.
(2) To ratify and approve the Company's 1997 Incentive Stock Option
Plan.
FOR AGAINST ABSTAIN
(3) To ratify and approve the 1995 issuance of 90,000 shares of
restricted common stock.
FOR AGAINST ABSTAIN
(4) To ratify and approve the selection of independent public
accountants for the Company for the fiscal year ending December
31, 1997.
FOR AGAINST ABSTAIN
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement for such meeting dated
July 25, 1997 and a copy of the Company's 1996 Annual Report.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY
BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY, WHEN PROPERLY
EXECUTED AND RETURNED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS INDICATED, IT WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4.
, 1997
(Please sign EXACTLY as your name appears hereon)
when signing as a representative capacity, please
give full title.
IMPORTANT INFORMATION IS CONTAINED ON OTHER SIDE OF THIS CARD,
PLEASE READ BOTH SIDES OF THIS CARD, SIGN, DATE AND RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
