<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 4a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
HS RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
HS RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of HS
Resources, Inc. ("HSR" or the "Company"), a Delaware corporation, will be held
on May 20, 1998, at 9:00 a.m., local time, at the Hyatt Hotel, 1750 Welton
Street, Denver, Colorado 80202, for the following purposes:
1. To elect two directors to serve until their successors are elected and
qualified.
2. To adopt an amendment to Article 4 of the Company's Certificate of
Incorporation to increase the number of authorized shares of the
Company's Common Stock, par value $.001 per share, from 30,000,000 to
50,000,000.
3. To adopt an amendment to Article 16 of the Company's Certificate of
Incorporation to change the vote required to amend Article 4 thereof
from an affirmative vote of the holders of two-thirds of the
outstanding shares of stock who are entitled to vote upon the election
of directors to an affirmative vote of the holders of a majority of
such shares.
4. To approve certain amendments to the HS Resources, Inc. 1997
Performance and Equity Incentive Plan.
5. To transact such other items of business as may properly come before
the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 30, 1998, are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. The Company's stock transfer books will not be closed. A complete list
of the stockholders entitled to vote at the Annual Meeting will be open to the
examination of any stockholder, for any purpose germane to the Annual Meeting,
during ordinary business hours for a period of ten days prior to the date of the
Annual Meeting at the offices of the Company at One Maritime Plaza, 15th floor,
San Francisco, California 94111, and at the time and place of the Annual
Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
enclosed postage-prepaid envelope. Any stockholder attending the Annual Meeting
may vote in person even if he or she has returned a proxy.
Sincerely,
JAMES M. PICCONE
Secretary
San Francisco, California
April 27, 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED.
<PAGE> 3
HS RESOURCES, INC.
PROXY STATEMENT FOR THE 1998 ANNUAL MEETING
OF STOCKHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of HS Resources, Inc. ("HSR" or
the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Wednesday, May 20, 1998, at 9:00 a.m., local time, or at
any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the Hyatt Hotel, 1750 Welton Street, Denver, Colorado 80202. The
Company's principal executive offices are located at One Maritime Plaza, 15th
Floor, San Francisco, California 94111. Its telephone number is (415) 433-5795.
These proxy solicitation materials were first mailed on or about April 27,
1998, to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND PRINCIPAL STOCKHOLDERS
Stockholders of record at the close of business on March 30, 1998, are
entitled to notice of and to vote at the Annual Meeting. At the record date,
18,638,861 shares of the Company's Common Stock were issued and outstanding. For
information with respect to the holders of 5% or more of the Company's Common
Stock, see "Security Ownership of Principal Stockholders and Management."
REVOCABILITY OF PROXIES
At any time before its use, any proxy given pursuant to this solicitation
may be revoked by the person giving it by (i) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or (ii) attending the Annual Meeting and voting in person.
VOTING AND SOLICITATION
The presence, in person or by proxy, of the holders of at least a majority
of the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. Each outstanding share of Common Stock entitles its holder
to one vote with respect to the matters set forth herein. The affirmative vote
of the holders of a plurality of the shares of Common Stock represented at the
Annual Meeting is required for the election of directors. The affirmative vote
of the holders of two-thirds of the shares of Common Stock outstanding is
required to amend the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"). The affirmative vote of the
majority of the shares of Common Stock represented at the Annual Meeting and
entitled to vote is required to approve amendments to the Company's equity
incentive plan. Abstentions are counted in tabulations of votes cast at the
meeting and have the same effect as a vote against each proposal. Broker
non-votes are treated as present for purposes of establishing a quorum, but are
not counted either way for purposes of determining the vote.
The solicitation of proxies is made by the Company and all related costs
will be borne by the Company. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Proxies
also may be solicited by certain of the Company's directors, officers and
regular employees, without additional compensation, personally or by telephone
or telegram. The Company has retained Corporate Investor Communications, Inc.
for a fee of approximately $8,000 to solicit proxies on behalf of the Company.
<PAGE> 4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS. DUFFY
AND SMITH AS DIRECTORS OF THE COMPANY.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's Certificate of Incorporation provides for a Board of
Directors (the "Board"), the members of which serve staggered terms. Pursuant
thereto, the terms of Board members constituting approximately one-third of the
total Board generally expire every year, and each director in a "class" of
directors serves for a term of three years, or until his or her successor has
been duly elected and qualified. The Board consists of six members. Two
directors are to be elected at the Annual Meeting to serve until the 2001 Annual
Meeting of Stockholders. Unless otherwise instructed, the proxyholders will vote
the proxies received by them for the Company's nominees, James E. Duffy, who is
currently a Director and the Chief Financial Officer of the Company, and Philip
B. Smith, who has been a director since 1996, and who is not an employee of the
Company. In the event that either Mr. Duffy or Mr. Smith should be unable or
decline to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the Chairman of the
Board to fill the vacancy. The Company does not expect that either Mr. Duffy or
Mr. Smith will be unable or will decline to serve as a director.
Information about Mr. Duffy and Mr. Smith is set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE CAPACITIES IN WHICH SERVED WITH THE COMPANY SINCE
---- --- ------------------------------------------- --------
<S> <C> <C> <C>
James E. Duffy.......... 47 Director, Vice President -- Finance and 1990
Chief Financial Officer
Philip B. Smith......... 46 Director 1996
</TABLE>
James E. Duffy has been a Director since 1990 and has been Vice
President -- Finance and Chief Financial Officer since April 1991. From 1985 to
1990, Mr. Duffy was a general partner of J.L. Feshbach & Co., an investment
banking firm specializing in the oil and gas business, and was responsible for
acquisitions and special investments for an affiliate of that firm. Prior to
that time, he was the Chief Financial Officer of Hilliard Oil and Gas and was a
director and co-founder of several affiliated companies. Previously, he was a
manager with Arthur Young & Co. Mr. Duffy earned his undergraduate degree from
San Jose State University.
Philip B. Smith has been a Director of the Company since June 1996 and also
serves on the board of Pioneer Natural Resources Company. Currently, Mr. Smith
serves as President of Sunterra Petroleum, L.L.C. Mr. Smith served as President,
Chief Executive Officer and director of Tide West Oil Company from November 1992
until the time of the merger of Tide West into a subsidiary of the Company (the
"Merger"). He was President and director of Draco Petroleum, Inc., a
wholly-owned subsidiary of Tide West from April 1992 until the time of the
Merger, and of Tide West Trading & Transport Company, formerly Draco Production
Company, a wholly-owned subsidiary of Tide West, from July 1989 until the time
of the Merger. From May 1986 until April 1991, Mr. Smith was a Senior Vice
President of Mega Natural Gas Company, a natural gas gathering company and the
former parent company of Tide West Trading & Transport Company and its
predecessor companies. Prior to that time, he held various technical and
management positions at other independent and major oil and natural gas
companies.
There are currently no vacancies on the Company's Board.
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<PAGE> 5
Specific information about the other Board members and the Company's
officers is set forth below:
<TABLE>
<CAPTION>
CURRENT
DIRECTOR TERM
NAME AGE CAPACITIES IN WHICH SERVED WITH THE COMPANY SINCE EXPIRES
---- --- ------------------------------------------- -------- -------
<S> <C> <C> <C> <C>
Nicholas J. Sutton...... 53 Chairman of the Board and Chief Executive 1987 2000
Officer
P. Michael Highum....... 47 Director, President 1987 1999
Kenneth A. Hersh........ 35 Director 1990 2000
Michael J. Savage....... 63 Director 1996 1999
Dale E. Cantwell........ 42 Vice President -- D-J Basin District Manager N/A N/A
Tony W. Church.......... 41 Vice President -- Exploration N/A N/A
Theodore Gazulis........ 43 Vice President -- Treasury, Capital Markets and N/A N/A
Investor Relations and Assistant Secretary
Annette Montoya......... 41 Vice President -- Accounting, Human Resources N/A N/A
and Administration
Rick L. Parks........... 45 Vice President -- Mid-Continent District N/A N/A
Manager
Janet W. Pasque......... 40 Vice President -- Land N/A N/A
James M. Piccone........ 47 Vice President -- General Counsel and Secretary N/A N/A
George H. Solich........ 36 Vice President -- Acquisitions and Divestitures N/A N/A
Wayne D. Williams....... 48 Vice President -- Geophysical Manager N/A N/A
Philip S. Winner........ 42 Vice President -- Northern Rockies District N/A N/A
Manager
</TABLE>
Nicholas J. Sutton is a founder of the Company and has been employed
exclusively in activities relating to the Company and its oil and gas business
since 1978. Mr. Sutton is an attorney and practiced with the San Francisco law
firm of Pillsbury, Madison & Sutro before founding the Company. Prior to that
time, he served as a law clerk to the Chief Justice of the California Supreme
Court. He earned his law degree from the University of California-Hastings
College of Law, and his engineering undergraduate degree from Iowa State
University. Mr. Sutton is a graduate of the Harvard Business School's Executive
Education OPM Program, and is a member of the Society of Petroleum Engineers. He
has served as Chairman of the Board and as Chief Executive Officer of the
Company since its inception.
P. Michael Highum is a founder of the Company and for the past eighteen
years has been employed exclusively in activities relating to the Company and
its oil and gas business. Mr. Highum is an attorney and, prior to founding the
Company, practiced with the San Francisco law firm of Pillsbury, Madison &
Sutro. He earned his undergraduate degree from the University of California at
Berkeley and his law degree from the University of California-Hastings College
of Law. He has served as a Director and as President of the Company since its
inception in 1987 and is a Director of the Colorado Oil and Gas Association.
Kenneth A. Hersh has been a Director of the Company since 1990. Mr. Hersh
has been a Managing Partner of Natural Gas Partners ("NGP") since 1989. NGP is a
family of investment funds organized to make equity investments in oil and gas
companies. Previously, he was employed by the investment banking division of
Morgan Stanley & Co. Incorporated where he was a member of the firm's energy
group specializing in oil and gas financing and acquisition transactions. From
1992 to June of 1996, Mr. Hersh was a director of Tide West Oil Company, which
was merged into a wholly-owned subsidiary of the Company in June of 1996. Mr.
Hersh also serves as a director of Titan Exploration, Inc., Petroglyph Energy,
Inc. and Pioneer Natural Resources Company. Mr. Hersh earned his MBA from the
Stanford University Graduate School of Business and his undergraduate degree
from Princeton University.
Michael J. Savage has been a Director of the Company since January 1996.
Mr. Savage has been the Managing Director of the San Francisco Opera since 1994.
He was the founder of Savage Petroleum Company and served as its President from
1988 to 1995. From 1983 to 1988, Mr. Savage served as President
3
<PAGE> 6
of Merlin Petroleum, of which he was also the founder. From 1978 to 1982, he
served as President of Sohio Petroleum Company. Prior to 1978, he served as
President of BP Alaska, and in 1982 he was Director for Africa of BP in London,
and also served as personnel director for the BP Group. He received his
undergraduate degree in Business Management from the Manchester Business School
in Manchester, England, and his master's degree in Law and Economics from
Cambridge University. Mr. Savage serves on the Boards of Directors of the San
Francisco Opera and the San Francisco Conservatory of Music.
Dale E. Cantwell has been an employee and member of the Company's
management team since joining the Company in 1993, where his primary duties were
managing the Company's oil and gas marketing department. In April 1997, Mr.
Cantwell was promoted to serve as Vice President in charge of the D-J Basin
District. From 1979 until joining the Company, Mr. Cantwell worked for Amoco
Production Company in various engineering capacities. He received his bachelor's
degree in Chemical Engineering from the University of Colorado. Mr. Cantwell is
a member of the Rocky Mountain Natural Gas Association, the Society of Petroleum
Engineers, and the Colorado Oil and Gas Association.
Tony W. Church has been an employee of the Company since 1994 and prior to
appointment as Vice President -- Exploration in April 1997 he served as Southern
Region Exploration Manager. Mr. Church has primary responsibility for oversight
and supervision of the corporate exploration program. Mr. Church has 19 years of
industry experience. Prior to joining HS Resources, he was Vice
President -- Exploration for Gerrity Oil and Gas. From 1984 to 1992, Mr. Church
was an explorationist and supervisor for Chevron USA. From 1978 to 1984, he was
an explorationist for Gulf Oil Corporation and Kerr McGee Corporation. Mr.
Church earned his undergraduate degree in Geology from Yale University and his
master's degree in Mineral Economics from Colorado School of Mines. He is a
member of the American Association of Petroleum Geologists, the Rocky Mountain
Association of Geologists, and the Houston Geological Society. Mr. Church is a
DPA Certified Geologist and a Registered Geologist in the State of Wyoming.
Theodore Gazulis has served as an officer of the Company since its
incorporation, and was appointed Vice-President -- Treasury, Capital Markets and
Investor Relations in July 1997. Mr. Gazulis has primary responsibility for
capital formation and liquidity and he serves as the Company's primary point of
contact for investors and analysts. In addition he is the officer responsible
for oversight of the Company's information systems function. Prior to joining
the Company in 1984, Mr. Gazulis was an exploration economist for Sohio
Petroleum Company where he evaluated exploration plays, prospects and
acquisitions and implemented computer financial and economic models to
facilitate such economic analysis. From 1978 to 1981, he served in a similar
capacity for Amoco Production Company. Mr. Gazulis received an MBA from the
University of California at Los Angeles and his undergraduate degree from
Stanford University. He is a member of the American Association of Petroleum
Geologists.
Annette Montoya heads the Company's accounting, human resources and
administrative departments and has served in her current capacity since July
1997. From 1991 to her appointment in her present position, she served as the
head of the Company's accounting department. Prior to joining the Company in
1987, Ms. Montoya was the accounting manager for MidCon Central Exploration
Company. Prior to her employment with MidCon Central, Ms. Montoya was an auditor
with Price Waterhouse & Co. She earned her undergraduate degree from Regis
College and is a member of the Council of Petroleum Accountants Society.
Rick L. Parks has been an employee of the Company since 1986, serving as
the Mid-Continent District Manager since the merger of Tide West in June 1996
and was appointed Vice President -- Mid-Continent District Manager in April
1997. He has also served as Operations Manager, District Manager and Field
Superintendent during his tenure with the Company. Prior to 1986, Mr. Parks was
President and owner of Rainbow Exploration, Inc. He also worked for Energy
Minerals Corporation and Amoco Production Company. Mr. Parks is a past President
of the North Central Chapter of the Colorado Oil and Gas Association and has
served as a Director of that organization.
Janet W. Pasque has been an employee of the Company since 1993 and has
served as Corporate Land Manager since 1994. She was appointed Vice
President -- Land in April 1997. Prior to joining HSR, Ms. Pasque was a landman
for Methane Resources Group and served as a consultant in the acquisition and
4
<PAGE> 7
divestiture of oil and gas properties. From 1982 to 1989, she was a landman for
Union Pacific Resources Company responsible for land operations in the Rocky
Mountains, Alaska and California. From 1980 to 1982, Ms. Pasque was a land
representative for Texaco Inc. She earned her undergraduate degree from Colorado
State University, and is a member of the American Association of Professional
Landmen, Denver Association of Petroleum Landmen and the Louisiana Association
of Petroleum Landmen.
James M. Piccone has served as the Company's Vice President -- General
Counsel and Secretary since he joined the Company in May of 1995. From 1984 to
May of 1995, Mr. Piccone was a partner at the law firm of Davis, Graham & Stubbs
where he served in various capacities including the head of the firm's
Transactions Department, Practice Group Leader of the firm's Energy Group and
member of the firm's management committee. From 1980 through 1983 he was an
associate at the firm, and from 1978 to 1980 he was an associate at the law firm
of Kutak, Rock & Huie. Mr. Piccone earned his law degree from the University of
Colorado School of Law and his B.A. in Economics from the University of
Colorado.
George H. Solich has served the Company as Vice President -- Acquisitions
and Divestitures since he joined the Company in December 1996. From 1983 to
November 1996, Mr. Solich served in various capacities for Apache Corporation,
most recently as Director, Business Development where he was responsible for the
Company's acquisition and divestiture of producing oil and gas properties. Prior
to his employment with Apache Corporation, Mr. Solich worked for Belco Petroleum
Corporation. Mr. Solich earned his undergraduate degree from the University of
Colorado at Boulder and his graduate degree in Marketing and Finance from the
University of Colorado at Denver.
Wayne D. Williams has been an employee of the Company since May of 1995. He
has served in the capacity of Geophysical Manager since May of 1996 and was
appointed Vice President -- Geophysics in April 1997. His primary responsibility
is the supervision and oversight of the geophysical effort for the Company.
Prior to joining the Company, Mr. Williams was Geophysical Advisor for Union
Pacific Resources, and from 1977 to 1992, held several management positions,
including Seismic Data Processing Manager and Rocky Mountain Geophysical
Manager. From 1972 to 1977, he was contracted to Mobil Oil Corp, as Data
Processing Manger for the Prudhoe Bay, Beaufort Sea, and offshore California
areas. Mr. Williams earned his undergraduate degree in Geology/Geophysics from
Virginia Polytechnic Institute and State University. He is a member of the
Society of Exploration Geophysicists and the American Association of Petroleum
Geologists.
Philip S. Winner serves as Vice President -- Northern Rockies District and
is responsible for development and implementation of E&P growth strategies in
that region. Prior to that he functioned as Director of Investor Relations for
the Company, where he served as a primary investor contact. Mr. Winner has 17
years of energy industry experience in both geotechnical and financial
positions. Prior to HS Resources, Mr. Winner worked for 11 years with Mobil Oil
Corporation where, as Senior Staff Geologist, he was involved with both
geological analysis and strategic planning of domestic exploration and
development projects. He also worked as an energy research analyst for Hanifen,
Imhoff, a Denver-based investment bank. Mr. Winner has earned two advanced
degrees, an MBA (University of Denver) and a MS in Geology (University of
Vermont), as well as a BS in Geology (Southern Oregon State College). He is a
member of Beta Gamma Sigma's business honors society, the American Association
of Petroleum Geologists, the Rocky Mountain Association of Geologists, and the
National Investor Relations Institute.
There is no family relationship between any director or executive officer
of the Company.
(References to certain officers' tenure and periods of service include
service with the Company's predecessor entities.)
REPORTS REQUIRED BY SECTION 16(A)
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of the Company's Common Stock, to file with the Securities and Exchange
Commission and any exchange on which the Company's stock is traded, reports of
ownership and changes in ownership of the Company's Common Stock.
5
<PAGE> 8
Based solely on its review of Forms 3, 4 and 5 received by the Company and
written representations from certain reporting persons that no filings were
required for such persons, the Company believes that, during the fiscal year
ended December 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and 10% shareholders were complied with.
BOARD MEETINGS AND COMMITTEES
The Board held three meetings during 1997, and each director attended all
meetings of the Board and all meetings of committees, if any, upon which such
director served. The Board also took action by unanimous written consent on
eleven occasions.
The Board has two standing committees, an Audit Committee and a
Compensation Committee. It does not have a nominating committee.
The Audit Committee recommends to the Board the engagement of an
independent public auditing firm, reviews the fees and the services provided,
including the scope of the audit coverage, and reviews the auditor's
independence from management. The Audit Committee confers with the independent
auditors and reviews the results of their audit. The Audit Committee reviews the
financial statements of the Company and related information, and monitors the
Company's internal accounting, auditing and financial reporting practices,
procedures and controls as it deems appropriate. The Audit Committee provides
assistance to the Board with respect to the corporate accounting and reporting
practices, and reports to the Board on Audit Committee activities. During 1997
the Audit Committee consisted of Mr. Hersh and Mr. Savage and held one meeting.
The Compensation Committee has oversight responsibility for the Company's
significant compensation policies and practices, including the scope and design
of the Company's compensation and benefit plans. The Compensation Committee
determines the nature and amount of compensation of executive officers of the
Company who also are directors, and approves compensation of the other executive
officers based on recommendations of, and discussions with, management. The
Compensation Committee also is responsible for administering certain employee
benefit plans, including the amount and terms of stock options granted to
employees under the 1997 Performance and Equity Incentive Plan (the "1997
Plan"). Members of the Compensation Committee are not eligible to participate in
any of the plans or programs they administer. During 1997 the Compensation
Committee consisted of Mr. Hersh and Mr. Savage, held one meeting, and took
action by unanimous written consent on two occasions.
COMPENSATION OF BOARD MEMBERS
During 1997, the Company's non-employee directors were paid an annual
retainer of $24,000 in monthly installments. They also were reimbursed for
out-of-pocket expenses incurred in connection with service on the Board.
In 1992, the Company implemented the 1992 Directors' Stock Option Plan (the
"1992 Directors' Plan"). The 1992 Directors' Plan provides that each
non-employee director shall receive an initial option to purchase 7,500 shares
of the Company's Common Stock upon the commencement of his or her tenure on the
Board, of which options to purchase 1,500 shares are immediately exercisable and
the remainder of which vest ratably on each of the four succeeding anniversaries
of the date of grant. In addition, the 1992 Directors' Plan provides that each
director shall receive an annual option grant to purchase 750 shares of the
Company's Common Stock on the date of the Board meeting closest in time to the
anniversary date of the director's commencement of services to the Board. The
annual option grants are exercisable in full immediately as of the date of their
grant. Options granted under the 1992 Directors' Plan generally have a term of
10 years; however, the term of any option granted under the 1992 Directors' Plan
terminates (i) 30 days following the termination of the director's status as a
director of the Company, or (ii) one year after the date of death or disability
of the director while he is serving as a director. Options granted under the
1992 Directors' Plan may not be assigned.
In October 1993, the Company's Board approved the 1993 Directors' Stock
Option Plan (the "1993 Directors' Plan"). The terms of the 1993 Directors' Plan
are substantially similar to the terms of the 1992 Directors' Plan except that
(i) the 1993 Directors' Plan permits the optionee-director to assign his or her
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<PAGE> 9
rights to receive options under the Plan and (ii) option grants following the
initial grant are in the amount of 1,500 shares and are granted biannually. This
Plan was adopted by the Board in consideration of those directors who are
subject to employment conditions and other policies which prohibit their
personal retention of options granted in connection with the services rendered
to the Board. A director may participate in the 1993 Directors' Plan only upon
waiver of his or her right to participate in the 1992 Directors' Plan. To date,
Mr. Hersh is the only participant under the 1993 Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for each of the three years ended December
31, 1997, the cash, bonus and other annual compensation received by the
Company's Chief Executive Officer and the other four most highly paid executive
officers during the 1997 fiscal year (each, a "Named Executive Officer"). The
named officers received no long-term compensation awards in the form of SARs or
payouts pursuant to any long-term incentive plan during fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- ---------------------------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/SARS COMPENSATION($)
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) AWARD(S)($) (#) (2)
- --------------------------- ---- --------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Sutton.............. 1997 300,000 187,500 65,702(3) 0 9,500
Chairman of the Board and 1996 225,000 200,000 0 0 9,500
Chief Executive Officer 1995 225,000 0 0 0 4,620
P. Michael Highum............... 1997 300,000 187,500 65,702(3) 0 9,500
President 1996 225,000 200,000 0 0 9,500
1995 225,000 0 0 0 4,620
James E. Duffy.................. 1997 200,000 82,500 28,921(4) 0 9,500
Chief Financial Officer 1996 175,000 140,000 0 0 9,500
1995 175,000 0 0 0 4,620
James M. Piccone................ 1997 200,000 75,000 26,292(5) 0 9,500
Vice President, General 1996 175,000 112,000 0 50,000 9,500
Counsel & Secretary 1995 104,327 0 0 0 0
George H. Solich................ 1997 140,000 65,000 10,517(7) 0 83,314(8)
Vice President -- Acquisitions 1996 5,384(6) 0 171,300(7) 20,000 0
& Divestitures 1995 N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Includes certain amounts accrued during the year indicated and paid the
following year.
(2) Includes the amount of the Company's contribution pursuant to the Company's
401(k) and Profit Sharing Plans.
(3) Each of Messrs. Sutton and Highum was granted 4,673 shares of restricted
stock in lieu of a portion of his cash bonus vesting one-fourth on each of
January 31, 1999, 2000, 2001 and 2002. The fair market value of these
restricted shares at December 31, 1997 was $13.81 per share, or $64,534. The
fair market value amount shown in the table calculates the value of the
restricted stock on the date of grant. No dividends are paid on HSR
restricted stock.
(4) Mr. Duffy was granted 2,057 shares of restricted stock in lieu of a portion
of his cash bonus vesting one-fourth on each of January 31, 1999, 2000, 2001
and 2002. The fair market value of these restricted shares at December 31,
1997 was $13.81 per share, or $28,407. The fair market value amount shown in
the table calculates the value of the restricted stock on the date of grant.
No dividends are paid on HSR restricted stock.
7
<PAGE> 10
(5) Mr. Piccone was granted 1,870 shares of restricted stock in lieu of a
portion of his cash bonus vesting one-fourth on each of January 31, 1999,
2000, 2001 and 2002. The fair market value of these restricted shares at
December 31, 1997 was $13.81 per share, or $25,825. The fair market value
amount shown in the table calculates the value of the restricted stock on
the date of grant. No dividends are paid on HSR restricted stock.
(6) Mr. Solich began employment with the Company on December 2, 1996.
(7) Mr. Solich was granted 10,000 shares of restricted stock vesting one-third
on each of January 1, 1998, 1999 and 2000. The fair market value of these
restricted shares at December 31, 1997 was $13.81 per share or $138,100. Mr.
Solich was granted 748 shares of restricted stock in lieu of a portion of
his cash bonus vesting one-fourth on each of January 31, 1999, 2000, 2001
and 2002. The fair market value of these restricted shares at December 31,
1997 was $13.81 per share, or $10,330. The fair market value amount shown in
the table calculates the value of the restricted stock on the date of grant.
No dividends are paid on HSR restricted stock.
(8) Consists of relocation expenses and tax gross-up for such reimbursements.
OPTION GRANTS IN LAST FISCAL YEAR
There was no grant of stock options to the Named Executive Officers in
1997. See "Report of the Compensation Committee -- Components of Executive
Compensation -- Incentive Plans."
The following table provides information on the exercisability of options
held by the Named Executive Officers and the value of such officers' unexercised
options at December 31, 1997. There were no SAR exercises during the 1997 fiscal
year by the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/WARRANTS AT FISCAL OPTIONS/WARRANTS AT FISCAL
SHARES YEAR-END YEAR-END ($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Sutton...... 0 $ 0 132,500 5,000 $803,250 $ 0
P. Michael Highum....... 0 $ 0 132,500 5,000 $803,250 $ 0
James E. Duffy.......... 4,000 $19,240 76,500(2) 0 $353,985(2) $ 0
James M. Piccone........ 0 $ 0 10,000 40,000 $ 36,800 $147,200
George H. Solich........ 0 $ 0 5,000 15,000 $ 0 $ 0
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common Stock at the close of
business on December 31, 1997 ($13.81 per share) minus the exercise price of
the options (or warrant).
(2) Includes an exercisable warrant to purchase 1,500 shares of Common Stock.
The Company has no defined benefit or actuarial plan under which benefits
are determined by final compensation and years of service. The Company has not,
during fiscal 1997 (or at any other time), adjusted or amended the exercise
price of stock options previously awarded to any of the Named Executive Officers
identified on the foregoing tables. The Company has not awarded any SARs.
8
<PAGE> 11
PERFORMANCE GRAPH
NOTE: The following graph is based solely on stock price performance on the
dates shown, and is neither an indication of future performance nor necessarily
representative of the average return to investors over time. Furthermore, the
graph does not show the Company's relative performance on the underlying
determinants of shareholder value. The Company believes that it has demonstrated
strong performance on financial and operational measures contributing to
shareholder value. Shareholders are referred to the Company's Annual Report to
Shareholders, mailed to Shareholders earlier in April, for more complete
information on the financial and operational performance of the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
Among HS Resources, Inc., the S&P 500 Index,
the John S. Herold, Inc. Large Domestic E&P Peer Group
and the John S. Herold, Inc. Mid-Size Domestic E&P Peer Group
<TABLE>
<CAPTION>
John S. Herold, Inc. John S. Herold, Inc.
HS Resources, Large Domestic Mid-Size Domestic
Inc. E&P Peer Group E&P Peer Group S&P 500
------------- -------------------- -------------------- -------
<S> <C> <C> <C> <C>
Dec-92 100 100 100 100
Dec-93 146 119 126 110
Dec-94 123 108 117 112
Dec-95 90 129 152 153
Dec-96 115 167 297 189
Dec-97 96 156 259 252
</TABLE>
* Shows total return on $100 invested on 12/31/92 in stock or index including
reinvestment of dividends for fiscal years ending December 31, 1993 through
1997.
The Securities and Exchange Commission regulations require that the Company
provide a line graph comparing its cumulative total shareholder return with a
performance indicator of the overall or broad stock market and a comparison to
the Company's peers. The Company's stock is listed and began trading on the New
York Stock Exchange under the symbol "HSE" in 1994. Accordingly, the Company has
chosen to use the S&P 500 as the broad stock market indicator of stocks traded
on the same exchange. This comparison of cumulative total return assumes that
$100 was invested in Company Common Stock, peer group stock, or the index on
December 31, 1992, and includes reinvestment of dividends.
The peer group indices are made up of the companies for which public data
is available which comprise the John S. Herold, Inc. "Mid-Size Domestic E&P"
peer group, and the "Large Domestic E&P" peer group as published in "Herold's
Comparative Appraisal Reports," dated June 19, 1997. John S. Herold, Inc. is an
independent research firm specializing in oil and gas company research. In its
Proxy Statement for the 1997
9
<PAGE> 12
Annual Meeting and previous periods, the Company utilized the John S. Herold,
Inc. Mid-Size Domestic E&P Peer Group as its peer group index. However, John S.
Herold, Inc. has moved the Company into the Large Domestic E&P Peer Group, and
therefore, the Company presents the foregoing data with respect to both peer
groups. The companies included in the Mid-Size Domestic E&P Peer Group are:
Belco Oil & Gas Corporation, Berry Petroleum Co., Chesapeake Energy Corp., Coho
Energy, Cross Timbers Oil Co., Forcenergy Inc., Forest Oil Corp., Helmerich &
Payne Inc., Houston Exploration Co., KCS Energy, Inc., Kelley Oil & Gas Corp.,
Lomak Petroleum Inc., Mitchell Energy & Dev. Corp., Newfield Exploration, Ocean
Energy Inc., Patina Oil & Gas, Plains Resources, Inc., Pogo Producing Co., Titan
Exploration Inc., Tom Brown Inc., United Meridian Corp., and Wiser Oil Co. The
companies included in the Large Domestic E&P Peer Group are: Anadarko Petroleum
Corporation, Apache Corporation, Barrett Resources Corporation, Burlington
Resources, Inc., Cabot Oil & Gas Corporation, Devon Energy Corporation, Enron
Oil & Gas Company, HS Resources, Inc., Louis Dreyfus Natural Gas Corporation,
Noble Affiliates Inc., Nuevo Energy Company, Oryx Energy Company, Santa Fe
Energy Resources, inc., Seagull Energy Corporation, Snyder Oil Corporation,
Transtexas Gas Corporation, Union Pacific Resources Group, Inc., Unocal
Corporation, Vastar Resources, Inc., Vintage Petroleum, Inc. and Pioneer Natural
Resources Company.
COMPENSATION COMMITTEE; INTERLOCKS AND INSIDER PARTICIPATION
Kenneth A. Hersh and Michael J. Savage, both non-employee directors,
constitute the Compensation Committee of the Board. During 1997 neither of these
individuals was an officer or employee of the Company or any of its
subsidiaries, or formerly an officer of the Company or any of its subsidiaries.
During 1997, these directors had no interlocking relationships as defined by the
Securities and Exchange Commission. However, Mr. Hersh is a Managing Partner of
NGP. NGP previously acted as a subordinated lender to the Company. In
consideration of such financing, NGP acquired two warrants to purchase an
aggregate of 740,262 shares of Common Stock. These warrants were exercised on
September 30, 1997, at an exercise price of $10.00 per share. NGP sold a
majority of the shares issued following such exercise on behalf of an investor
in NGP; it retained the shares beneficially owned by NGP.
On February 25, 1996, the Company entered into the Merger Agreement with
Tide West Oil Company ("Tide West"). Pursuant to the Merger Agreement, Tide West
was merged into a wholly-owned subsidiary of the Company (the "Merger"). The
Merger was consummated in June of 1996 following special shareholder meetings of
the shareholders of the Company and Tide West. NGP was Tide West's largest
stockholder, owning approximately 4,550,000 shares, or 46.49% of the outstanding
common stock of Tide West. Three representatives of NGP including Mr. Hersh were
members of Tide West's Board of Directors at the time of the Merger. The Company
and NGP entered into a voting agreement whereby NGP agreed to vote its shares in
Tide West in favor of approval of the Merger Agreement. In consideration of this
agreement, HSR agreed to take such action as is required to appoint one NGP
designee to the Company's Board following consummation of the Merger. Mr. Hersh,
already then a member of the HSR Board, was not considered to be the NGP
designee. Following the consummation of the Merger, the Board took appropriate
action to increase the number of authorized directors to six, and appointed Mr.
Philip B. Smith as the nominee of NGP to fill the vacancy so created. Pursuant
to an agreement entered into between NGP and Tide West in 1995, NGP received a
fee in 1996 for financial services in the amount of $150,000 upon consummation
of the Merger.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
directors and officers, including the Named Executive Officers. Those agreements
require the Company to indemnify the directors and officers to the fullest
extent permitted by the Delaware General Corporation Law and to advance expenses
in connection with certain claims against directors and officers. The Company
expects to enter into similar agreements with persons selected to be directors
and officers in the future.
10
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
The following is the Report of the Compensation Committee of the Company
describing the compensation policies and rationale with respect to compensation
paid to executive officers for the year ended December 31, 1997. The information
contained in the report shall not be deemed to be "soliciting material" or to be
"filed" with the Securities and Exchange Commission nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates it by reference into such
filing.
The Compensation Committee of the Board is comprised entirely of outside
directors. Through 1997, Mr. Hersh and Mr. Savage were the members of the
Compensation Committee. The Compensation Committee is responsible for guiding
and overseeing policies concerning compensation and employee benefit matters,
determining the nature and amount of compensation for executive officers who
also are directors, approving the compensation of other executive officers, and
administering the 1987 Stock Incentive Plan (now terminated) and the 1997 Plan.
COMPENSATION PHILOSOPHY
The Company's compensation policies are intended to align compensation with
business strategy, to create value for the stockholders, and to support a
performance-based culture throughout the Company. Consistent with the foregoing
principles, the Committee's compensation policies with respect to executive
compensation are to:
- Tie total compensation to the performance of the Company, particularly as
compared to its peers and when viewed in light of available opportunities
and resources. Total executive compensation should be directly linked to
improvements in corporate performance and increases in the primary
determinants of stockholder value.
- Inspire executive officers to work together as a team to pursue Company
goals.
- Establish a general corporate atmosphere that promotes an entrepreneurial
style of leadership.
- Have a significant portion of the executive officers' total compensation
"at risk" in the form of incentive compensation.
- Recognize individual initiative and achievement.
- Ensure compensation levels that are externally competitive and internally
equitable.
- Align the long-term interests of the executive officers with those of the
Company's stockholders through the use of stock options, restricted stock
and performance-based awards such as those provided in the 1997 Plan as
proposed to be amended.
- Provide a competitive total compensation package that enables the Company
to attract and retain key executives who are capable of leading the
Company in achieving its business objectives.
COMPONENTS OF EXECUTIVE COMPENSATION
One of the Company's highest priorities is to hire and retain the most
skilled and experienced employees in key positions. Over the last several years,
the oil and gas industry has experienced a critical shortage of experienced
professional and technical personnel. Therefore, in 1997 and early 1998, the
Company, in conjunction with the Compensation Committee, developed an incentive
compensation program that is designed to allow the Company to be extremely
competitive in the market for key personnel while at the same time assuring
growth in value for its shareholders. The new incentive compensation program
builds on the Company's previous compensation concepts but has a number of very
important new features that are discussed below. As in the past, the Committee
believes that the cash and other compensation of executive officers and other
key employees, while being competitive with other companies, should also be fair
and discriminating within the Company on the basis of personal performance.
11
<PAGE> 14
As in the past, there continue to be three major components of the
Company's executive compensation program: base salary, annual incentive bonuses
(which now includes a component of restricted stock), and long-term incentives
through stock options and, under the new plan, performance shares. Executives,
like all qualified employees, are eligible to participate in the Company's
401(k) Plan and Profit Sharing Plan as well as in certain other benefit plans,
such as the Company's health and life insurance plans.
Base Salary. The Company believes it is essential to pay a competitive
salary in order to attract qualified individuals and to support the continuity
of management, consistent with the long-term nature of the oil and gas industry.
In assessing the appropriate salary level to be paid an executive, the Committee
evaluates data as to wages paid by comparable companies to executives having
substantially similar responsibilities and skill levels, and establishes a base
salary range based on the comparative data. Because compensation survey data
generally is imprecise as to responsibilities, and transparent as to talent and
experience, the Committee may adjust the range after subjectively considering
the impact of such factors. Consideration also may be given to Company and
industry performance, to internal parity and to disparities related to
geographic location and living cost. Of critical importance to the setting of
salary is the particular individual's skill level and performance, and the value
of his or her skills to the Company. These factors are subjective, and no
predetermined weighting of factors is applied.
Annual Incentive Bonus. The purpose of the annual incentive bonus is to
link annual executive compensation to the overall performance of the Company and
the individual. The policy is that if the performance of an individual and the
Company are in line with performance criteria, the bonus should be sufficiently
meaningful to increase the executive's total cash compensation to the upper end
of the range of total cash compensation paid to executives in the survey groups
described above. The individual's performance is evaluated relative to the prior
year and to various objectives set forth in the annual business plan, such as
production levels, cash flow targets and successful completion of major
projects. These objectives are not specifically weighted in evaluating whether
to award an annual incentive bonus to an executive officer because specific
circumstances and the relative importance of any such objectives may change with
time, and the relative responsibilities of each executive officer in the
achievement of each objective may differ.
Under the Company's new incentive compensation program, a portion of the
annual incentive bonus is awarded in the form of restricted stock instead of
cash. The value of the restricted stock is determined by the fair market value
of the Company's Common Stock. Although the award of stock has a face value
equal to the portion of cash bonus that it replaces, the employee is required to
continue in employment with the Company in order to obtain the shares. In
accordance with the proposed amendments to the 1997 Plan, the restricted stock
vests over a four-year period. Awards of restricted stock are distributed to
those employees in key positions who have the ability to impact the value of the
Company. The Company and the Committee believe that the restricted stock
component of annual incentive bonuses is important because it incentivizes
employees to remain with the Company and to continue to build shareholder value.
Incentive Plans. The Company believes that each employee, particularly
those in management positions, should have interests aligned with those of the
stockholders. The Company has awarded options, restricted stock, and subject to
shareholder approval of the amendments to the 1997 Plan, intends to award
performance shares. These awards and the amendments to the 1997 Plan are
discussed in more detail in the section of this prospectus entitled "Proposal
No. 4-Amendment to the Company's 1997 Performance and Equity Incentive Plan."
The Compensation Committee believes that the amendments to the 1997 Plan are
necessary and will both enable the Company to attract and retain skilled and
experienced personnel, and also enable incentives to be established to increase
the enterprise value of the Company, and thus enhance shareholder value.
401(k) and Profit Sharing Plans. Effective June 30, 1989, the Company
adopted two qualified defined contribution plans: the HS Resources, Inc.
Employee Investment 401(k) Plan (the "401(k) Plan") and the HS Resources, Inc.
Profit Sharing Plan (the "Profit Sharing Plan"). All full-time employees are
eligible to participate in both plans after one year of continuous service.
Under the 401(k) Plan, participants may make regular pretax contributions of up
to 10% of their compensation. The Company may, but is not obligated to make
matching contributions in an amount determined by the Board. All contributions
to the 401(k) Plan are vested 100%. Contributions to the Profit Sharing Plan are
made only by the Company in its sole discretion as
12
<PAGE> 15
may be determined by the Board. Contributions to the Profit Sharing Plan are
vested over five years to all eligible employees. During 1997, the Company
contributed $548,989 to the 401(k) Plan funded by 39,046 treasury shares of the
Company's Common Stock. The Company made no contribution to the Profit Sharing
Plan in 1997.
Chief Executive Officer Compensation. The compensation of the Company's
Chief Executive Officer, Mr. Sutton, is determined in the same manner as the
compensation for other executive officers of the Company as described above. As
a result, the compensation of the Company's Chief Executive Officer is largely
dependent upon the overall performance of the Company as well as the
compensation being paid by other oil and gas companies to their chief executive
officers. The compensation of Mr. Highum, the Company's President, a Director
and co-founder of the Company with Mr. Sutton, is determined in the same manner
as, and is generally equivalent to, the compensation of Mr. Sutton.
Mr. Sutton's and Mr. Highum's base salary was $300,000 for 1997. In light
of the Company's performance in 1997 in particular, the closing of the
acquisition of all of the producing and non-producing oil and gas assets of
Amoco Production Company in the Denver-Julesburg Basin and significant
improvements in the Company's reserves, production and cash flow, both on an
aggregate and per-share basis, the Compensation Committee awarded each of Mr.
Sutton and Mr. Highum a bonus in the amount of $250,000. Twenty-five percent of
this bonus in each case was awarded in the form of 4,673 shares of restricted
stock (valued at December 30, 1997) vesting over four years. In 1998, Messrs.
Sutton and Highum were also awarded an annual grant of options in the amount of
50,000 options each at a strike price on the date of grant of $13.38. The
Committee has also approved for grant to each of Messrs. Sutton and Highum
16,667 performance shares vesting in nine years, with potential early vesting
over four years dependent upon the attainment of performance goals as described
in the proposed amendments to the 1997 Plan. The awards of performance shares
are contingent upon shareholders approving the amendments to the 1997 Plan.
THE COMPENSATION COMMITTEE
Kenneth A. Hersh
Michael J. Savage
CERTAIN TRANSACTIONS
EMPLOYMENT CONTRACTS
Mr. Piccone has a three-year employment contract with the Company
commencing May 15, 1995. The contract provides for base salary of $175,000 per
year, plus an additional annual payment sufficient to bring total annual cash
compensation to $220,000.
Mr. Solich has a two-year employment contract with the Company commencing
December 2, 1996, providing for a base salary of $140,000, and incentive
compensation in accordance with the Company's incentive compensation program.
The Company has also recently entered into key employee severance
agreements with the Named Executive Officers and other officers and key managers
providing for severance upon termination following a change in control. The
severance payment is 2.99 times annual salary and bonus for Messrs. Sutton,
Highum, Duffy and Piccone, two times annual salary and bonus for other executive
officers, and one times annual salary and bonus for certain key managers.
OTHER TRANSACTIONS WITH SECURITY HOLDERS
Philip B. Smith. Prior to the Merger, Philip B. Smith was a director,
president and chief executive officer of Tide West Oil Company. Pursuant to the
Merger, Tide West Oil Company was merged into a wholly-owned subsidiary of HSR.
Mr. Smith received compensation as an employee of Tide West Oil Company prior to
the Merger, but resigned all of his positions with respect to Tide West Oil
Company at the time of the Merger.
13
<PAGE> 16
NGP. See "Compensation Committee; Interlocks and Insider Participation."
FUTURE TRANSACTIONS
Any future transactions (including loans) between the Company and an
officer, director, principal stockholder or affiliate of the Company will be
approved by a majority of the directors disinterested in such transactions and
by a majority of the independent outside directors, each of which shall have
determined that the transaction is fair to the Company and its stockholders and
that the terms of such transaction are no less favorable to the Company than
could be obtained from unaffiliated parties.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 30, 1998, by (i) each person
who is known by the Company to own beneficially 5% or more of the Common Stock,
(ii) each director of the Company, (iii) each Named Executive Officer, and (iv)
all directors and officers as a group. Unless otherwise indicated, all persons
listed below have sole voting power and investment power with respect to such
shares.
AMOUNT OF BENEFICIAL OWNERSHIP(1)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS
------------------------------------ --------- ----------
<S> <C> <C>
Nicholas J. Sutton(2)....................................... 793,112 4.2552%
P. Michael Highum(3)........................................ 545,531 2.9268%
T. Rowe Price Associates, Inc. and(4)(5).................... 2,041,400 10.9524%
T. Rowe Price Small Cap Value Fund, Inc.
100 E. Pratt, 9th Floor
Baltimore, MD 21202
Newberger & Berman, LLC(5).................................. 1,551,400 8.3235%
605 Third Avenue
New York, NY 10158-3698
Amoco Production Company(5)................................. 1,200,000 6.4382%
200 E. Randolph Drive
Chicago, IL 60601-7125
Martin Currie Investment Management Limited(5).............. 978,000 5.2471%
20 Castle Terrace
Saltire Court
Edinburgh, Scotland
James E. Duffy(6)........................................... 80,795 *
Kenneth A. Hersh(7)......................................... 15,716 *
Michael J. Savage(8)........................................ 6,000 *
Philip B. Smith(9).......................................... 251,302 1.3483%
James M. Piccone(10)........................................ 21,499 *
George H. Solich(11)........................................ 13,443 *
All directors as a group (6 persons)(12).................... 1,692,456 9.0803%
All directors and executive officers as a group (16
persons)(13).............................................. 1,943,119 10.4251%
</TABLE>
- ---------------
* Less than one percent of stock.
(1) Assumes exercise of all options and warrants exercisable within 60 days of
March 30, 1998, for the purchase of Common Stock with respect to such
owners.
(2) Includes 132,500 shares purchasable within 60 days after March 30, 1998,
upon the exercise of stock options granted under the HS Resources, Inc.
1987 Stock Incentive Plan (the "1987 Plan"). Includes
14
<PAGE> 17
8,795 shares held by trusts for the benefit of children of Mr. Sutton and
his wife of which a third party is trustee and of which Mr. Sutton
disclaims beneficial ownership.
(3) Includes 132,500 shares purchasable within 60 days after March 30, 1998,
upon the exercise of stock options granted under the 1987 Plan. Also
includes 2,200 shares held by his wife and 5,600 shares held in trust for
his children.
(4) These securities are owned by various individual and institutional
investors including T. Rowe Price Small Cap Value Fund, Inc. (which owns
1,000,000 shares, representing 5.37% of the shares outstanding as of March
30, 1998), of which T. Rowe Price Associates, Inc. (Price Associates)
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(5) This information is based solely on information contained in a Form 13(f)
or 13(g) filed by the stockholder with the Securities and Exchange
Commission and delivered to the Company.
(6) Includes 1,500 shares subject to issuance upon the exercise of a currently
exercisable warrant and 75,000 shares subject to issuance upon the exercise
of currently exercisable stock options granted under the 1987 Plan.
(7) Includes 1,500 shares purchasable within 60 days after March 30, 1998, upon
the exercise of currently exercisable stock options granted under the 1993
Directors' Plan.
(8) Includes 6,000 shares purchasable within 60 days after March 30, 1998, upon
the exercise of currently exercisable stock options granted under the 1992
Directors' Plan.
(9) Includes 3,750 shares purchasable within 60 days after March 30, 1998, upon
the exercise of currently exercisable stock options granted under the 1992
Directors' Plan.
(10) Includes 20,000 shares purchasable within 60 days after March 30, 1998,
upon the exercise of currently exercisable stock options granted under the
1987 Plan.
(11) Includes 10,000 shares purchasable within 60 days after March 30, 1998,
upon the exercise of currently exercisable stock options granted under the
1987 Plan.
(12) Includes Footnotes 2, 3, 6, 7, 8 and 9.
(13) Includes Footnotes 2, 3, 6, 7, 8, 9, 10 and 11.
15
<PAGE> 18
PROPOSAL NO. 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED
NUMBER OF SHARES OF COMMON STOCK.
PROPOSED AMENDMENT
On March 5, 1998, the Board of Directors adopted a resolution proposing
that Article 4 of the Company's Certificate of Incorporation, which article sets
forth the Company's authorized capitalization, be amended to increase the total
number of shares of Common Stock that the Company is authorized to issue from
30,000,000 shares to 50,000,000 shares (the "Capitalization Amendment").
The Common Stock of the Company is currently listed on the New York Stock
Exchange ("NYSE"). On April 23, 1998, the reported closing price of the Common
Stock on the NYSE was $16.06. As of March 30, 1998, of the 30,000,000 shares of
Common Stock authorized to be issued under the Certificate of Incorporation,
18,670,091 shares of common stock (including restricted stock) were issued and
outstanding, 1,442,658 options for common stock and shares were outstanding and
approximately 405,630 shares of Common Stock were reserved for issuance under
the Company's employee and director stock option plans (the "Option Plans").
PURPOSES AND EFFECTS OF CAPITALIZATION AMENDMENT
Under the current authorized capitalization of 30,000,000 shares and absent
approval of this Proposal No. 2, the Board of Directors believes that the number
of shares available for issuance is insufficient to ensure that the Company will
continue to have additional shares available for future issuance from time to
time as approved by the Board of Directors in response to business needs and
opportunities that may arise.
The Company is a growth and value oriented independent oil and gas company.
As is the case with the Company's historical growth, a portion of future growth
could be financed through the issuance of additional equity securities of the
Company. The Board of Directors believes that the proposed increase in
authorized shares is desirable because it will provide the Company with
additional flexibility to issue shares of its Common Stock as the need may arise
without the expense and delay of a special meeting of stockholders, unless
stockholder action is required by applicable law or under the rules of the NYSE
or any exchange on which the Company's Common Stock may then be listed. Such
shares could be issued by the Board of Directors for proper corporate purposes,
including, in connection with possible future stock dividends or stock splits,
equity financings in the form of public or private offerings of shares of Common
Stock or of securities convertible into shares of Common Stock, strategic
investments, mergers or acquisitions, and grants of additional options or other
equity incentives to the Company's employees and other persons. The issuance of
any additional shares will be on terms deemed by the Board of Directors to be in
the best interests of the Company and its stockholders and consistent with the
Board's fiduciary duties. Except for issuances under the existing Option Plans,
the Board of Directors has no present plans or commitments with respect to the
issuance of the proposed additional authorized shares of Common Stock.
Each additional share of Common Stock authorized by the proposed Amendment
will have the same rights and privileges as each share of Common Stock currently
authorized of the same class including rights to purchase Series A Junior
Preferred Stock under the Company's rights plan. Stockholders will have no
statutory preemptive rights to receive or purchase any of the Common Stock
authorized by the proposed Amendment. The increase in authorized Common Stock
will not have any immediate effect on the rights of existing stockholders. To
the extent that the additional authorized shares are issued in the future, they
will decrease the existing stockholders' percentage equity ownership and,
depending on the price at which they are issued, could be dilutive to the
existing stockholders.
16
<PAGE> 19
The increase in the authorized shares of Common Stock could have an
anti-takeover effect. Shares of authorized and unissued Common Stock could
(within the limits imposed by applicable law) be issued in one or more
transactions that would make a takeover of the Company more difficult, and
therefore less likely. Any such issuance of additional stock could have the
effect of diluting the earnings per share and book value per share of
outstanding shares of Common Stock, and such additional shares could be used to
dilute the stock ownership or voting rights of persons seeking to obtain control
of the Company. While the Amendment may be deemed to have a potential
anti-takeover effect, this proposal is not prompted by any specific effort or
takeover threat currently perceived by management.
STOCKHOLDER APPROVAL OF CAPITALIZATION AMENDMENT AND IMPLEMENTATION
The affirmative vote of the holders of two-thirds of the outstanding shares
of Common Stock is required for approval of the proposed Capitalization
Amendment. If the Capitalization Amendment is adopted by the required vote of
the Company's stockholders, it will become effective when the Certificate of
Amendment to the Certificate of Incorporation is filed with the Secretary of
State of the State of Delaware. The Company currently anticipates that this
filing will be made on May 20, 1998.
Because several months will have elapsed between the time the Board of
Directors approved the Capitalization Amendment and the date of the Annual
Meeting, the Board of Directors may determine that proceeding with the amendment
to the Certificate of Incorporation to increase the number of authorized shares
of Common Stock would not be advisable under circumstances existing at the time.
The Board of Directors does not presently anticipate that any such circumstances
will arise, but believes it prudent to retain the flexibility to evaluate
conditions at the time of the Annual Meeting. Accordingly, at any time prior to
the Effective Date, notwithstanding approval of the Capitalization Amendment by
the stockholders, the Company may abandon the amendment without further action
by the stockholders.
PROPOSAL NO. 3
AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO REDUCE THE VOTE REQUIRED FOR
FUTURE AMENDMENTS OF ARTICLE 4 FROM TWO-THIRDS TO A
MAJORITY OF OUTSTANDING SHARES ENTITLED TO VOTE FOR THE ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO REDUCE THE VOTE REQUIRED FOR FUTURE
AMENDMENTS OF ARTICLE 4 FROM TWO-THIRDS TO A MAJORITY OF OUTSTANDING SHARES
ENTITLED TO VOTE FOR THE ELECTION OF DIRECTORS.
PROPOSED AMENDMENT
Article 16 of the Certificate of Incorporation currently requires any
amendments to the Certificate of Incorporation to be approved by the affirmative
vote of holders of not less than two-thirds of the outstanding shares of stock
entitled to vote for the election of directors. On April 10, 1998, the Board of
Directors adopted a resolution proposing that Article 16 of the Certificate of
Incorporation be amended to allow subsequent amendments to Article 4 of the
Certificate of Incorporation to be effected upon approval by the affirmative
vote of holders of not less than a majority of the outstanding shares of stock
entitled to vote for the election of directors, but leaving intact the
requirement that amendments to all other portions of the Certificate of
Incorporation be approved by the affirmative vote of two-thirds of the
outstanding shares entitled to vote for the election of directors (the "Article
16 Amendment").
PURPOSES AND EFFECTS OF ARTICLE 16 AMENDMENT
The Board of Directors believes that it is extremely difficult to effect
changes in the authorized capitalization of the Company under the current
stockholder voting requirements imposed by the Certificate
17
<PAGE> 20
of Incorporation. The Board of Directors believes that it is in the best
interests of the Company to reduce the voting requirement for such amendments to
a majority stockholder vote in order to provide the Company with additional
flexibility to make necessary amendments to Article 4 of the Certificate of
Incorporation as business needs may arise. The Company believes that few public
companies require a two-thirds vote for charter amendments of this kind due to
the fact that such a requirement allows a relatively small percentage of a
company's stockholders, either by opposition or by unresponsiveness, to prevent
amendments that would be beneficial to the Company and the vast majority of its
stockholders.
STOCKHOLDER APPROVAL OF ARTICLE 16 AMENDMENT AND IMPLEMENTATION
The affirmative vote of the holders of two-thirds of the outstanding shares
of Common Stock is required for approval of the proposed Article 16 Amendment.
If the Article 16 Amendment is adopted by the required vote of the Company's
stockholders, it will become effective when the Certificate of Amendment to the
Certificate of Incorporation is filed with the Secretary of State of the State
of Delaware. The Company currently anticipates that this filing will be made on
May 20, 1998.
PROPOSAL NO. 4
AMENDMENT TO THE COMPANY'S
1997 PERFORMANCE AND EQUITY INCENTIVE PLAN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE AMENDMENTS TO THE 1997 PLAN.
The Board of Directors of the Company has adopted, and submits for
shareholder approval, amendments of the HS Resources, Inc. 1997 Performance and
Equity Incentive Plan (the "1997 Plan"). Proxies will be so voted unless
shareholders specify otherwise in their proxies. A majority of shares
represented in person or by proxy that are entitled to be voted at the Annual
Meeting is required for adoption of this proposal. Proxies marked "abstain" will
be counted as voting in respect of the matter and will have the same effect as a
vote against the proposal. Broker non-votes will be counted for purposes of
establishing a quorum, but will not be counted either way for purposes of
determining the vote. A copy of the Amended and Restated 1997 Performance and
Equity Incentive Plan showing all of the proposed amendments is attached as
Exhibit A to this Proxy Statement. A summary of the amendments to the 1997 Plan
that appears below is qualified by reference to the full text of the 1997 Plan,
as amended.
In 1997, the Company adopted the 1997 Plan in order to enhance the
profitability and value of the Company for the benefit of its shareholders by
providing equity ownership opportunities and performance-based incentives to
better align the interests of key employees with those of shareholders. Since
the 1997 Plan was adopted, the Company has instituted a new incentive
compensation program that it believes will better enable it to attract and
retain the most qualified professionals and to create incentives that will bring
value directly to the shareholders. Qualified and experienced oil and gas
professionals have become scarce. The Company's new incentive compensation
program and the proposed amendments to the 1997 Plan are designed to enable the
Company to better compete for and retain this expertise and to better utilize
that expertise to enhance shareholder value.
The Company's new incentive compensation program provides equity-based
incentives and performance-based awards to its professional, technical and
executive employees who can significantly impact value. The Company believes
that this group includes its executive officers as well as its key managers and
supervisors. The distribution of equity-based compensation to this broader group
requires an increase in the number of shares available under the 1997 Plan and
amendment of certain other limitations that had previously been placed in the
1997 Plan. However, the Company is also committing to certain provisions that
limit the dilutive effect of the grant of equity-based awards, and that more
directly tie the award of these incentives to the direct enhancement of
shareholder value. The Company has worked extensively with consultants in
designing the following amendments to the 1997 Plan to stay within
well-recognized and accepted guidelines for the number
18
<PAGE> 21
and types of benefits being proposed. The amendments are intended to allow for
implementation of the new incentive compensation program while encouraging the
ultimate goal of enhancing shareholder value.
Each of the significant amendments is discussed below. Certain technical
and clarifying changes are not discussed.
AMENDMENTS TO THE 1997 PLAN
Vesting and Term. The amendments to the 1997 Plan would reduce the maximum
term of options and stock appreciation rights (SARs) from ten to seven years,
and would establish minimum vesting at a rate no earlier than ratably over four
years for all equity-based awards.(1) The Company believes that these
requirements are appropriate, and has utilized these vesting and term
limitations with respect to all of the recent option awards under the 1997 Plan.
Shares Authorized under the 1997 Plan. The amendments to the 1997 Plan
would increase the number of shares of Common Stock authorized for issuance
under the 1997 Plan from 1,000,000 to 1,475,000 (an increase of 475,000 shares).
This increase is necessary in order to provide an adequate number of shares
available for benefits for the next year or longer, depending on company growth,
performance and other factors. To date, the Company has awarded a total of
694,120 equity-based benefits under the 1997 Plan, comprised 671,223 options and
22,897 shares of restricted stock in lieu of cash bonus (described below). Under
the 1997 Plan, therefore, there are currently available for issue as seven-year
options 305,880 shares. No performance shares have yet been awarded. Subject to
shareholder approval; however, the Company presently intends to issue 106,250
aggregate performance shares to its executive officers in 1998.
77,684 of the options issued under the 1997 Plan were awarded in connection
with hiring new professional and technical personnel, and 320,265 options were
awarded to other personnel already employed by the Company in order to equalize
the treatment of existing personnel and newly hired personnel and to establish
an appropriate base of equity-linked awards for employees who can impact value.
In addition, the Company granted 273,274 options in 1998 as an annual grant to
employees. Under the 1997 Plan, option grants have been made to 75 employees
ranging in amounts from 228 to 50,000 options. Grants in each case were
determined by categorizing employees in various tiers related to a number of
factors that indicated the employee's ability to impact shareholder value. The
number of options granted under the 1997 Plan to date is not expected to be
indicative of grants in the future, inasmuch as the hiring incentive and base
grants were a one-time occurrence for the affected employees. Future option
grants will be comprised of grants to new employees as a hiring incentive, and
annual grants to existing employees. Additionally, employees who receive a grant
of options either through the hiring process or from base awards, will have
annual grants for each of the four following years reduced by 25% of the number
of options granted in the hiring or base award.
The Company currently also has outstanding under its 1987 Plan, which
terminated in April 1997, 745,185 options, of which 504,354 are exercisable at
prices of $16.00 or less. 321,135 of these options expire in 1998, 48,250 expire
in 1999, 104,500 expire in 2000, and the remainder expire thereafter. There are
also outstanding 8,333 shares of restricted stock under the 1987 Plan. The
Company also has a combined total of 26,250 options outstanding under the 1992
Directors' Plan and 1993 Directors' Plan. A combined total of 99,750 additional
shares are reserved for issuance as ten-year options under the 1992 Directors'
Plan and 1993 Directors' Plan. The combined number of all outstanding options
and shares of restricted stock under all of the Company's equity award plans is
1,473,888. The weighted average exercise price of all options and restricted
stock outstanding under the Company's various equity award plans is $12.03, and
the combined weighted average life of all options and restricted stock under
these plans is 4.36 years.
- ---------------
(1) Under the 1997 Plan, and the Company's predecessor 1987 Plan, vesting is
accelerated upon a change in control, as defined. This acceleration
provision would not be changed. Vesting of restricted stock, performance
shares and other stock-based awards also occurs upon death, disability or
retirement (as defined in the Company's 401(k) Plan). Also, vesting of
performance share awards is effective as of the beginning of a fiscal year
if awarded prior to the end of the second quarter of the fiscal year.
19
<PAGE> 22
Restricted Stock. The amendments to the 1997 Plan would increase the number
of shares that could be granted as restricted stock or other stock-based awards
for less than fair market value from 25,000 per fiscal year (combined limit with
performance shares) and 150,000 in the aggregate (combined limit with
performance shares) to 72,897 in the aggregate (of which 22,897 have been
issued). The original maximum amounts were set prior to the Company instituting
its new incentive compensation program. The new incentive compensation program
utilizes restricted stock in lieu of a portion of the annual cash bonus for
certain employees whose performance can enhance shareholder value. For these
employees, the Company establishes an appropriate annual cash bonus component of
total compensation based on the external market, internal comparability,
employee performance and other factors, and then awards a percentage of that
cash amount as restricted stock in lieu of cash. Restricted stock awards made as
part of 1997 annual bonus compensation totaled 22,897 shares in lieu of cash in
the aggregate amount of $306,362. Restricted stock awards were made to 53
employees, ranging in amount from 57 shares to 4,673 shares, and representing
10% to 25% percent of the annual bonus amount awarded to the affected employees.
Use of restricted stock in this fashion benefits shareholders by reducing the
Company's cash expenses for compensation (and therefore is non-dilutive as
compared to making cash awards) while at the same time incentivizing employees
to remain with the Company and enhance per-share enterprise value. All
restricted stock issued will have a minimum vesting no earlier than ratably over
four years from the date of grant and will be forfeited unless the recipient
remains in the employ of the Company through the vesting date.(1)
Performance Shares. The amendments to the 1997 Plan also increase the
maximum number of performance shares from 25,000 per fiscal year (combined limit
with restricted stock) and 150,000 in the aggregate (combined limit with
restricted stock) to 250,000 in the aggregate plus any shares that are
authorized to be issued as restricted stock but that are not used for such
awards (this could be up to an additional 50,000 shares).
The prior limit on performance shares was established before the Company
instituted its new incentive compensation program, which utilizes performance
shares for the first time. These awards will be tied to successful attainment of
growth and value measures that directly translate into increased shareholder
value. These performance shares will vest no earlier than ratably over a period
of four years and, until the ultimate vesting date (discussed below), will be
issued only upon attainment of an appropriately balanced combination of the
following value measures:(1)
(i) At least a 15% compounded annual growth in cash flow on a
per-share basis measured over a period of time determined by the Committee;
(ii) At least a 15% annual rate of return on outstanding book capital
calculated using EBITDA (earnings before interest, taxes, depreciation and
amortization) over the weighted average outstanding book capital, measured
over a period of time determined by the Committee; and
(iii) At least a 15% compounded annual growth in underlying net asset
value on a per-share basis, using the pre-tax discounted present value at
10% of the Company's proved reserves (valued using estimated future product
prices and costs) plus the estimated market value of all other assets, less
outstanding debt, excluding deferred taxes.
The Committee shall determine the interpretation, calculation, balance and
satisfaction of such measures.
If the performance shares do not vest earlier by satisfaction of the
Performance Goals, they vest on the ultimate vesting date, provided the
recipient continues in employment with the Company through such date.
- ---------------
(1) Under the 1997 Plan, and the Company's predecessor 1987 Plan, vesting is
accelerated upon a change in control, as defined. This acceleration
provision would not be changed. Vesting of restricted stock, performance
shares and other stock-based awards also occurs upon death, disability or
retirement (as defined in the Company's 401(k) Plan). Also, vesting of
performance share awards is effective as of the beginning of a fiscal year
if awarded prior to the end of the second quarter of the fiscal year.
20
<PAGE> 23
The ultimate vesting date occurs nine years from the effective date of the award
of performance shares. By virtue of the ultimate vesting date feature of
performance share awards, the 1997 Plan qualifies under generally accepted
accounting principles as a "time accelerated performance stock award plan" using
fixed plan accounting treatment.
Subject expressly to shareholder approval, the Company intends to award
106,250 performance shares to its 13 executive officers with the awards ranging
in amount from 4,000 to 16,667 shares. The Company would anticipate making
awards on an annual basis in approximately the same amounts as are expected to
be made in 1998, but requests the increase in authorized performance share
awards in order to accommodate variations in incentive compensation from year to
year and to accommodate performance shares being granted to newly hired
employees in the future.
Limitation on Individual Benefits. The amendments to the 1997 Plan increase
the dollar value of restricted stock, performance shares or other stock-based
awards (not including options and stock appreciation rights) that may be granted
to any participant in any fiscal year from $200,000 to $500,000. The Company
believes this amendment is appropriate in order to provide flexibility to make
combined awards of restricted stock and performance shares to certain of its
senior executives, which value, depending on share price at the time of grant,
may exceed $200,000. Under the new incentive compensation program, grants of
restricted stock will generally be made in lieu of cash bonus awards, and will
always be tied to a minimum four-year continued employment of the recipient.
NEW PLAN BENEFITS
The following table presents certain information with respect to grants of
performance shares under the 1997 Plan expected during 1998 to Named Executive
Officers, all executive officers as a group, all directors who are not executive
officers as a group, and all employees who are not executive officers as a
group.
NEW PLAN BENEFITS
1997 PLAN
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF SHARES(1)
----------------- -------------------
<S> <C>
Nicholas J. Sutton 16,667
Chairman of the Board and Chief Executive Officer
P. Michael Highum 16,667
President
James E. Duffy 15,000
Chief Financial Officer
James M. Piccone 11,000
Vice President, General Counsel and Secretary
George H. Solich 5,000
Vice President -- Acquisitions & Divestitures
Executive Group 106,250
Non-Executive Director Group 0
Non-Executive Officer Employee Group (all other employees) 0
</TABLE>
- ---------------
(1) Dollar value is not determinable until the date of grant.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals that stockholders of the Company would like to present at next
year's Annual Meeting must be received by the Company no later than December 27,
1998, in order that they may be included in the proxy statement and form of
proxy related to that meeting.
21
<PAGE> 24
INDEPENDENT AUDITORS
The Audit Committee has recommended to the Board the continuation of the
engagement of Arthur Andersen LLP as the independent public auditing firm to
audit the Company for the year ending December 31, 1998. A representative of
Arthur Andersen LLP will be present at the Annual Meeting and will be afforded
the opportunity to make a statement if he decides to do so. Such representative
will also be available to respond to appropriate questions from stockholders at
the Annual Meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board may recommend.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 31, 1998, is available without
charge upon written request to Investor Relations, HS Resources, Inc., One
Maritime Plaza, 15th Floor, San Francisco, California 94111.
By signing and returning the enclosed Proxy, stockholders will be assured
of representation at the Annual Meeting in connection with approval of the
matters discussed herein. Each stockholder should review, complete, execute,
date and return the enclosed Proxy to the Company in the envelope provided as
promptly as possible. The Board appreciates the cooperation of the stockholders.
Dated: April 27, 1998
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<PAGE> 25
EXHIBIT A
HS RESOURCES, INC.
AMENDED AND RESTATED
1997 PERFORMANCE AND EQUITY INCENTIVE PLAN
EFFECTIVE MAY 22, 1997
AMENDED AND RESTATED WITH EFFECT AS OF [MAY , 1998]
<PAGE> 26
CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
-------- ----
<S> <C>
1. NAME AND PURPOSE........................................ 1
2. DEFINITIONS............................................. 1
3. ADMINISTRATION OF THE PLAN.............................. 3
4. SHARES SUBJECT TO THE PLAN.............................. 4
5. ELIGIBILITY............................................. 5
6. ELECTIONS, PAYMENTS, DIVIDENDS, WITHHOLDING, AND
BONUSES................................................. 5
7. OPTIONS................................................. 6
8. STOCK APPRECIATION RIGHTS............................... 6
9. RESTRICTED STOCK........................................ 7
10. PERFORMANCE SHARES...................................... 7
11. CASH PERFORMANCE AWARDS................................. 8
12. OTHER STOCK-BASED PERFORMANCE AWARDS.................... 8
13. TRANSFERABILITY......................................... 9
14. TERMINATION OF SERVICE.................................. 9
15. CHANGE IN CONTROL....................................... 10
16. TERM, AMENDMENT, SUSPENSION OR TERMINATION OF THE
PLAN.................................................... 10
17. INVESTMENT PURPOSE...................................... 10
18. MISCELLANEOUS........................................... 10
</TABLE>
i
<PAGE> 27
HS RESOURCES, INC.
AMENDED AND RESTATED
1997 PERFORMANCE AND EQUITY INCENTIVE PLAN
AMENDED AND RESTATED AS OF MAY , 1998
1. NAME AND PURPOSE
1.1 This plan is the HS RESOURCES, INC. AMENDED AND RESTATED 1997
PERFORMANCE AND EQUITY INCENTIVE PLAN, amended and restated as of May , 1998
(the "Plan").
1.2 The purposes of the Plan are (i) to enhance the profitability and value
of the Company for the benefit of its shareholders by providing equity ownership
opportunities and performance-based incentives to better align the interests of
officers and key employees with those of shareholders; (ii) to attract and
retain the best possible personnel for positions of substantial responsibility
with the Company; and (iii) to provide additional incentive to Participants to
promote the success of the Company. The Plan provides employees, officers and
directors of the Company an opportunity to acquire Shares of the Stock of the
Company pursuant to Incentive Stock Options and Non-Statutory Stock Options, and
to receive Restricted Stock, Stock Appreciation Rights, Performance Shares,
other Stock-Based Awards and Benefits, and to receive Cash Awards.
2. DEFINITIONS.
For purposes of interpreting the Plan and related documents and Agreements
(as defined), the following definitions shall apply:
2.1 "1987 Plan" means the HS Resources, Inc. 1987 Stock Incentive Plan
adopted April 29, 1987, as amended and restated November 6, 1992, and December
2, 1996.
2.2 "Affiliates" means any corporation or other entity which is affiliated
with the Company through stock ownership or otherwise and is treated as a common
employer under the provisions of Section 1114(b) and (c) of the Code.
2.3 "Agreement" means the document which evidences the grant of any Benefit
under the Plan and which sets forth the Benefit and the terms, conditions and
provisions of, and restrictions relating to, such Benefit.
2.4 "Benefit" means any benefit granted to a Participant under the Plan.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cash Award" means a Benefit payable in the form of cash.
2.7 "Cause" means any of the following, as determined by the Company:
(a) Willful dishonesty towards the Company, fraud upon the Company or
deliberate injury or intended injury to the Company;
(b) Conviction of a felony;
(c) Willful participation in activities which constitute unlawful
activities, such as gender-based harassment;
(d) Conviction of a misdemeanor involving moral turpitude;
(e) Gross negligence or willful misconduct in the performance of
duties;
(f) Continued abuse of alcohol or drugs on the job or otherwise
materially affecting job performance; or
(g) Failure to perform duties substantially in accordance with
instructions of relevant superiors and Company policies and procedures.
1
<PAGE> 28
2.8 A "Change in Control" shall be deemed to have taken place if:
(a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the 1934 Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of more than 33 1/3% of the then outstanding voting stock of
the Company;
(b) at any time during any period of three consecutive years (not
including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board (and any new director whose
election by the Board or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 60% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation, or the stockholders approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
2.9 "Code" means the Internal Revenue Code of 1986, as amended.
2.10 "Committee" means the committee appointed by the Board pursuant to
Section 3 hereof to administer the Plan.
2.11 "Company" means HS Resources, Inc., a Delaware corporation and its
Affiliates, if any.
2.12 "Effective Date" means May 22, 1997, the date the Plan was first
approved by the Shareholders of the Company.
2.13 "Fair Market Value" shall mean, with respect to Shares, the last
reported trade of such Shares on the New York Stock Exchange for the date in
question. If Fair Market Value is in reference to property other than Shares,
the Fair Market Value of such other property shall be determined by such methods
or procedures as shall be established from time to time by the Committee.
2.14 "Fiscal Year" means the taxable year of the Company which is the
calendar year.
2.15 "Grant Date" means the date on which the Committee takes valid action
to grant a Benefit hereunder; provided, however, that the Committee may
expressly provide for a Grant Date other than the date on which the Committee
takes action, and further provided that the Grant Date of an Option intended to
qualify as an Incentive Stock Option shall be not earlier than the first date
such grant may be given effect under the Code. The Grant Date of Restricted
Stock shall be the date determined under Section 9.1 below.
2.16 "Incentive Stock Option" or "ISO" means an Option designated as an
Incentive Stock Option and satisfying the requirements of Section 422 of the
Code.
2.17 "Non-Employee Director" means a director of the Company who meets the
definition of a "non-employee director" set forth in SEC Rule 16b-3, as amended,
or any successor rule and the definition of outside director set forth in Treas.
Reg. sec. 1.162-27(e)(3).
2.18 "Non-Statutory Stock Option" or "NSO" means an Option other than an
ISO.
2.19 "Option" means an option to purchase one or more Shares pursuant to
this Plan.
2.20 "Optionee" means a Participant who receives an Option.
2.21 "Option Price" means the purchase price for each Share subject to an
Option.
2
<PAGE> 29
2.22 "Other Stock-Based Award" means an award under Article 12 that is
valued in whole or in part by reference to, or is otherwise based on, Shares.
2.23 "Participant" means any person who receives a Benefit under this Plan.
2.24 "Performance Share" means a Share awarded to a Participant under
Article 10 of the Plan.
2.25 "Plan" means this HS Resources, Inc. Amended and Restated 1997
Performance and Equity Incentive Plan and all amendments and supplements
thereto.
2.26 "Plan Year" means each 12-month period during the term of the Plan
commencing the Effective Date or an anniversary thereof.
2.27 "Restricted Stock" means a Share which, at the time it is granted or
sold by the Company, is not transferable and is subject to a substantial risk of
forfeiture, within the meaning of Section 83 of the Code.
2.28 "Rule 16b-3" means the rule promulgated by the SEC, as amended, or any
successor rule in effect from time to time.
2.29 "SEC" means the Securities and Exchange Commission.
2.30 "Share" means a share of Common Stock of the Company.
2.31 "SAR" means a Stock Appreciation Right, which is the right to receive
an amount equal to the appreciation, if any, in the Fair Market Value of a Share
from the date of the grant of the right to the date of its payment.
2.32 "Ultimate Vesting Date" shall mean with respect to Performance Shares
the date nine years from the effective date of grant of a Performance Share
award.
3. ADMINISTRATION OF THE PLAN.
3.1 Committee. The Plan shall be administered by the Committee. The
Committee shall consist of not fewer than two members of the Board to be
appointed by the Board. The Board may from time to time remove members or add
members to the Committee. Vacancies on the Committee, howsoever caused, shall be
filled by the Board. Any power, authority, or decision-making granted to the
Committee under this Plan may also be exercised by the Board. The Committee
shall hold meetings at such times and places as it shall determine. Two members
of the Committee shall constitute a quorum and acts of the Committee at a
meeting at which a quorum is present, or acts approved in writing by all the
members of the Committee shall be the valid acts of the Committee.
3.2 Participants. The Committee may from time to time determine which
salaried employees or directors of the Company shall be granted Benefits under
the Plan, the terms and conditions thereof, including without limitation the
purchase price, if any, of Restricted Stock and the exercise price of Options,
and the number of Shares which shall be granted. The Committee shall report to
the Board the names of Participants, the number of Shares and the terms and
conditions of Benefits granted under this Plan.
3.3 Rules and Regulations. The Committee is authorized to establish such
rules and regulations consistent with provisions of the Plan as it may deem
appropriate for the proper administration of the Plan, and to make such
interpretations of and determinations under the Plan, and to take such steps in
connection with the Plan or the Benefits granted thereunder as it may deem
necessary or advisable. Except as may be provided in an Agreement, any Benefit
granted may be converted, modified, forfeited or canceled, prospectively or
retroactively, in whole or in part, by the Committee in its sole discretion,
but, subject to Section 14.1, no such action may impair the rights of any
Participant without his or her consent, and no such action shall change the
exercise price of any Benefit that has been previously granted. The Committee
may, in its sole discretion, but subject to the minimum restrictions, conditions
and vesting periods set forth herein, waive, in whole or in part, any
restrictions or conditions applicable to, or accelerate the vesting of, any
Benefit. No member of the Committee shall be liable for any action or
determination made in good faith, and all members of the Committee shall, in
addition to their rights as directors, be fully protected by the Company with
respect to any such action, determination or interpretation. The determination,
interpretations and other actions of the
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<PAGE> 30
Committee pursuant to the provisions of the Plan shall be final, binding and
conclusive for all purposes and on all persons.
3.4 Rule 16b-3 Grants. For Committee approval of any grant of a Benefit to
an officer or director of the Company, as defined in Rule 16b-3 or any successor
rule, the Committee shall be composed entirely of two or more Non-Employee
Directors (or such composition as is required by any successor rule); provided,
however, that if the Committee is not composed as such, the Board shall have the
right to take such action with respect to any Benefit granted to an officer or
director as it deems necessary or advisable to comply with Rule 16b-3 and any
related rules, including but not limited to seeking shareholder ratification of
such Benefit or imposing a six-month period prior to sale of the Award or any
Shares underlying the Benefit.
3.5 Delegation. Except with respect to awards intended to qualify for
exemption under Section 162(m) of the Code, the Committee may delegate to a
separate committee composed of at least one member of the Board the limited
authority to grant Benefits to persons other than officers or directors and
establish the terms of such Benefits at the time of the grant.
3.6 Grant Evidenced by Agreement. The grant of any Benefit under the Plan
shall be evidenced by an Agreement which shall describe the specific Benefit
granted and the terms and conditions of the Benefit. The granting of any Benefit
shall be subject to, and conditioned upon, the recipient's execution of any
Agreement required by the Committee. Except as otherwise provided in an
Agreement, all capitalized terms used in the Agreement shall have the same
meaning as in the Plan, and the Agreement shall be subject to all of the terms
of the Plan.
3.7 Provisions of Agreement. Each Agreement shall contain such provisions
as the Committee shall determine in its sole discretion to be necessary,
desirable and appropriate for the Benefit granted which may include, but not
necessarily be limited to, the following: description of the type of Benefit;
the Benefit's duration; its transferability; if an Option, the Option Price, and
the person or persons who may exercise the Option; the effect upon such Benefit
of the Participant's death, disability, retirement, change of duties or
termination of employment; the Benefit's conditions; subject to the provisions
of Section 14.1, when, if, and how any Benefit may be forfeited, converted into
another Benefit, modified, exchanged for another Benefit, or replaced; and the
restrictions on any Shares purchased or granted under the Plan.
3.8 Amendments to Benefits. The Committee may, subject to the minimum
restrictions, conditions and vesting periods set forth herein, waive any
conditions of or rights of the Company under any outstanding Benefit,
prospectively or retroactively. The Committee may not amend, alter, suspend,
discontinue or terminate any outstanding Benefit, prospectively or
retroactively, without the consent of the Participant or holder or beneficiary
thereof, except as otherwise herein provided.
4. SHARES SUBJECT TO THE PLAN.
4.1 Number of Shares. A combined total of 1,475,000 Shares and SARs for
this purpose are authorized for issuance under the Plan (provided that SARs and
Options issued in tandem shall be counted as one) in accordance with the
provisions of the Plan and subject to such restrictions or other provisions as
the Compensation Committee may from time to time deem necessary. The Shares may
be divided among the various Plan components as the Compensation Committee shall
determine. Shares which may be issued upon the exercise of Options shall be
applied to reduce the maximum number of Shares remaining available for use under
the Plan. The Company shall at all times during the term of the Plan and while
any Options are outstanding retain as authorized and unissued Shares, or as
treasury Shares, at least the number of Shares from time to time required under
the provisions of the Plan, or otherwise assure itself of its ability to perform
its obligations hereunder.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Award
under this Plan which are not used because the terms and conditions of the Award
are not met, including any Shares that are subject to an Option which expires or
is terminated for any reason, shall become automatically available for use under
the Plan.
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4.3 Limit on an Individual's Benefits. In any given Fiscal Year, no person
eligible under the Plan for Grants may receive Benefits covering or measured by
more than 200,000 Shares (such number of Shares to be adjusted in accordance
with Section 4.5). No more than $500,000 of Restricted Stock, Performance Shares
or Other Stock-Based Awards (excluding Options and SARs), valued at Fair Market
Value on the date of grant and not taking into account the risk of forfeiture,
may be granted to any Participant in any Fiscal Year.
4.4 Limit on Certain Awards. Subject to adjustment pursuant to Section 4.5,
the number of Shares of Restricted Stock or Other Stock-Based Awards that may be
granted pursuant to this Plan for a purchase price of less than Fair Market
Value shall not exceed 72,897 in the aggregate; and the number of Performance
Shares that may be granted pursuant to this Plan for a purchase price of less
than Fair Market Value shall not exceed 250,000 in the aggregate, plus the
number of shares of Restricted Stock authorized to be issued hereunder that are
not used for such Restricted Stock awards.
4.5 Adjustments. If there is any change in the Shares subject to the Plan
or the Shares subject to any Benefit through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend,
or other change in the corporate structure of the Company, appropriate
proportionate adjustments or new or substitute Benefits in a new enterprise
shall be made by the Committee in the aggregate number of Shares subject to the
Plan, the price, Fair Market Value and number of Shares subject to outstanding
Benefits in order to preserve, but not to increase, the Benefits of the
Participant; provided that the number of Shares eligible for issuance as ISOs
may be increased only to reflect a change in capitalization such as a stock
dividend or stock split.
5. ELIGIBILITY.
Persons eligible under the Plan for grant of Benefits are all salaried
employees and directors of the Company. Members of the Board who are not
employed as regular salaried officers or employees of the Company may not
receive Incentive Stock Options.
6. ELECTIONS, PAYMENTS, DIVIDENDS, WITHHOLDING, AND BONUSES.
6.1 Notices. An Option or SAR that is exercisable hereunder may be
exercised by delivering to the Secretary of the Company on any business day a
written notice of exercise, which notice shall specify the number of Shares with
respect to which the Option or SAR is being exercised, and shall, in the case of
Options, be accompanied by payment in full of the Option Price of the Shares for
which the Option is being exercised.
6.2 Payments. For any Benefit that requires a payment by a Participant to
the Company, the amount due the Company is to be paid in cash, or, with the
consent of the Committee:
(a) by the tender to the Company of Shares owned by the Participant
and registered in his or her name having a Fair Market Value equal to the
amount due to the Company;
(b) by delivery to the Company of irrevocable instructions to a broker
to deliver to the Company promptly the amount of the proceeds of the sale
of all or a portion of the Shares or of a loan from the broker to the
Option Holder necessary to pay the exercise price;
(c) in other property, rights and credits deemed acceptable by the
Committee; or
(d) by any combination of the payment methods specified above.
6.3 Dividend Equivalents. Grants of Benefits in Shares or Share equivalents
may include dividend or dividend equivalent payments or dividend credit rights.
6.4 Code Section 162(m). The Committee, in its sole discretion, may require
that one or more Agreements contain provisions which provide that, in the event
Section 162(m) of the Code, or any successor provision relating to excessive
employee remuneration, would operate to disallow a deduction by the Company for
all or part of any Benefit under the Plan, a Participant's receipt of the
portion of such Benefit that would
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<PAGE> 32
not be deductible by the Company shall be deferred until the next succeeding
year or years in which the Participant's remuneration does not exceed the limit
set forth in such provision of the Code.
6.5 Withholding. The Company may, at the time any distribution is made
under the Plan, whether in cash or in Shares, or at the time any Option is
exercised, withhold from such distribution or Shares issuable upon the exercise
of an Option, any amount necessary to satisfy federal, state and local
withholding requirements with respect to such distribution or exercise of such
Option. Such withholding may be satisfied, at the Company's option, either by
cash or the Company's withholding of Shares.
6.6 Cash Bonuses. The Committee, in its discretion, shall have the
authority to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to)
Benefits. The Committee shall have full authority in its discretion to determine
the amount of any such bonus.
7. OPTIONS.
7.1 Price. The Option Price of the Shares covered by each Option shall not
be less than the Fair Market Value of such Shares on the Grant Date; provided,
however, that in the event the Participant would otherwise be ineligible to
receive an ISO by reason of the provisions of Sections 422(b)(6) and 424(d) of
the Code (relating to stock ownership of more than 10 percent), the Option Price
of an Option that is intended to be an ISO shall be not less than 110 percent of
the Fair Market Value of a Share at the time such Option is granted. Such prices
shall be subject to adjustment as provided in Section 4.5 hereof.
7.2 Term. The term of each Option shall be for no more than seven years;
provided, however, that in the event the Participant would otherwise be
ineligible to receive an ISO by reason of the provisions of Section 422(b)(6)
and 424(d) of the Code (relating to stock ownership of more than 10 percent), an
Option granted to such Participant that is intended to be an ISO shall in no
event be exercisable after the expiration of five years from the date it is
granted.
7.3 Vesting. Subject to Sections 14.2 and 15, Options shall vest no more
rapidly than ratably over a period of four years from the date of grant.
7.4 Limits on ISOs. An Option intended to constitute an ISO (and so
designated at the time of grant) shall qualify as an ISO only to the extent that
the aggregate Fair Market Value (determined at the time the Option is granted)
of the Shares with respect to which ISOs are exercisable for the first time by
the Participant during any calendar year (under the Plan and all other plans of
the Participant's employer and its parent and subsidiary corporations within the
meaning of Section 422(d) of the Code) does not exceed $100,000, except as such
restriction may be amended under the Code. This limitation shall be applied by
taking Options into account in the order in which they were granted.
7.5 Agreement. The Stock Option Agreement may contain such other terms,
provisions, and conditions as may be determined by the Committee (not
inconsistent with this Plan) including, without limitation, provisions relating
to Stock Appreciation Rights with respect to Options granted hereunder. If an
Option, or any part thereof, is intended by the Committee to qualify as an ISO,
the Stock Option Agreement shall contain those terms and conditions necessary to
so qualify said Option or such part thereof.
8. STOCK APPRECIATION RIGHTS.
8.1 Grant and Payment. The Committee may grant SARs. Upon electing to
receive payment of an SAR, a Participant shall receive payment in cash.
8.2 Grant of Tandem Award. SARs may be granted in tandem with Options at
any time prior to exercise of the Option. If SARs are granted in tandem with an
Option, the exercise of the Option shall cause a proportional reduction in SARs
standing to a Participant's credit which were granted in tandem with the Option;
and the payment of SARs shall cause a proportional reduction of the Shares under
such Option. If SARs are granted in tandem with an ISO, the SARs shall have such
terms and conditions as shall be required for the ISO to qualify as an ISO.
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8.3 Payment of Benefit. SARs shall be paid by the Company to a Participant,
to the extent payment is elected by the Participant (and is otherwise due and
payable), as soon as practicable after the date on which such election is made.
8.4 Term. SARs shall be subject to the same term provisions as Options.
8.5 Vesting. Subject to Sections 14.2 and 15, SARs shall vest no more
rapidly than ratably over a period of four years from the date of grant.
9. RESTRICTED STOCK.
9.1 Grant. The Committee may approve the grant or sale of Restricted Stock
to any eligible person, as specified in Section 5. A grant or sale of Restricted
Stock shall be evidenced by a Restricted Stock Agreement in such form as the
Committee shall approve. The Grant Date of Restricted Stock shall be (i) for
purposes of corporate law and establishing Fair Market Value, the date on which
the Committee acts to authorize the sale; and (ii) for purposes of any election
under Section 83(b) of the Code, the date on which the Participant receives a
beneficial ownership interest in such Restricted Stock.
9.2 Price. The Committee shall determine the purchase price per Share with
respect to any sale of Restricted Stock, provided that the Committee may grant
or award Shares of Restricted Stock to a Participant without requiring payment
of cash consideration by the Participant.
9.3 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 9.1 shall be subject to such restrictions, as may
be established by the Committee with respect to such award, but must include at
least the continuous employment by the recipient through the period of vesting.
The Committee may in its sole discretion require different periods of employment
or different performance goals and objectives with respect to different
Participants, to different Restricted Stock Awards or to separate, designated
portions of the Shares constituting a Restricted Stock Award. At the discretion
of the Committee, the Participant may or may not be entitled to voting and
dividend rights with respect to Restricted Stock.
9.4 Vesting. Subject to Sections 14.2 and 15, the restrictions to which a
Restricted Stock award are subject shall terminate no sooner than ratably over a
period of four years from the date of grant.
9.5 Certificates. Each certificate representing Restricted Stock shall bear
one or more legends making appropriate reference to the restrictions imposed on
such stock.
10. PERFORMANCE SHARES.
10.1 Grant. The Committee may grant awards of Performance Shares.
10.2 Description. Performance Shares represent the right of a Participant
to receive Shares or cash equal to the Fair Market Value of such Shares at a
future date in accordance with the terms and conditions of a grant.
10.3 Award Period and Performance Goals. The Committee shall determine and
include in a Performance Share award grant the period of time for which a
Performance Share award is made ("Award Period"); provided that subject to
Sections 14.2 and 15, awards made at any time shall not vest more rapidly than
ratably over a four-year period provided further, however, that an award issued
at any time prior to the end of the second quarter of a Fiscal Year shall be
deemed outstanding for the entire Fiscal Year for purposes of determining
vesting. The Committee shall also establish performance objectives ("Performance
Goals") to be met by the Company during the Award Period as a condition to
payment of the Performance Share award prior to the Ultimate Vesting Date, such
Performance Goals to be set forth in the grant of any Performance Share award.
The Performance Goals shall be designed to reward the attainment of an
appropriately balanced combination of the following value measures:
(i) At least a 15% compounded annual growth in cash flow on a
per-share basis measured over a period of time determined by the Committee;
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(ii) At least a 15% annual rate of return on outstanding book capital
calculated using EBITDA (earnings before interest, taxes, depreciation and
amortization) over the weighted average outstanding book capital, measured
over a period of time determined by the Committee; and
(iii) At least a 15% compounded annual growth in underlying net asset
value on a per-share basis, using the pre-tax discounted present value at
10% of the Company's proved reserves (valued using estimated future product
prices and costs) plus the estimated market value of all other assets, less
outstanding debt, excluding deferred taxes.
The Committee shall determine the interpretation, calculation, balance and
satisfaction of such measures. Performance Shares that are not paid on account
of satisfaction of the applicable Performance Goals shall, subject to the time
in service requirement in Section 10.5, be paid following the Ultimate Vesting
Date.
10.4 Payment of Performance Share Awards. The Committee shall establish the
method of calculating the amount of payment to be made under a Performance Share
award if the Performance Goals are met. The Performance Share award shall be
expressed in terms of Shares and shall be referred to as "Performance Shares."
After the completion of an Award Period, the performance of the Company shall be
measured against the Performance Goals, and the Committee shall determine
whether all, none or any portion of a Performance Share award shall be paid. The
Committee, in its discretion, may elect to make payment in Shares, cash or a
combination of Shares and cash. Any cash payment shall be based on the Fair
Market Value of Performance Shares on, or as soon as practicable prior to, the
date of payment.
10.5 Requirement of Employment. A grantee of a Performance Share award must
remain in the employment of the Company until the completion of the Award Period
in order to be entitled to payment under the Performance Share award prior to
the Ultimate Vesting Date, provided that the Committee may, in its sole
discretion, provide for a partial payment where such an exception is deemed
equitable. Subject to Sections 14.2 and 15, a grantee of a Performance Share
award must remain in the employment of the Company until the Ultimate Vesting
Date in order to be entitled to payment under a Performance Share award that has
not vested earlier through satisfaction of the Performance Goals.
10.6 Certification. The Committee shall certify in writing prior to payment
of the compensation that the Performance Goals and any other material terms were
satisfied. For this purpose, approved minutes of the Committee meeting in which
the certification is made shall be treated as written certification.
11. CASH PERFORMANCE AWARDS.
11.1 Grant. The Committee may grant Cash Awards. Such awards shall be based
on achievement of Performance Goals in the same manner as Performance Shares as
provided in Sections 10.3 through 10.6.
11.2 Limitation. The amount of any Cash Award paid in any Fiscal Year to
any Participant shall not exceed $500,000 paid in such Fiscal Year.
12. OTHER STOCK-BASED PERFORMANCE AWARDS.
12.1 Other Stock-Based Awards. The Committee shall have the right to grant
Other Stock-Based Awards. Such awards shall be based on achievement of
Performance Goals in the same manner as Performance Shares as provided in
Sections 10.3 through 10.6 and subject to Sections 14.2 and 15, shall vest no
sooner than ratably over four years.
12.2 Other Benefits. The Committee shall have the right to grant other
types of Benefits under the Plan in addition to those specifically listed, if
the Committee believes that such Benefits would further the purposes for which
the Plan has been established.
12.3 Tandem Awards. Benefits may be granted by the Committee in its sole
discretion individually or in tandem; provided, however, that no Benefit except
SARs may be granted in tandem with an ISO.
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13. TRANSFERABILITY
Each ISO granted pursuant to this Plan shall, during Participant's
lifetime, be exercisable only by the Participant, and neither the ISO nor any
right thereunder (including any SAR) shall be transferable by Participant by
operation of law or otherwise other than by beneficiary designation, will or the
laws of descent and distribution, and shall not be pledged or hypothecated (by
operation of law or otherwise) or subject to execution, attachment or similar
processes. Upon the prior written consent of the Committee in its sole,
unfettered discretion and subject to any conditions associated with such
consent, an NSO or any other Benefit hereunder (including any SAR) may be
assigned in whole or in part during the Participant's lifetime to one or more
members of the Participants' immediate family, to a trust established
exclusively for one or more such family members or pursuant to a qualified
domestic relation order as defined by Title I of the Employee Retirement Income
Security Act. The terms applicable to the assigned portion shall be the same as
those in effect immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Committee may deem appropriate. A
Participant's rights in Restricted Stock are nontransferable except by the laws
of descent and distribution until the restriction lapses as it applies to the
Restricted Stock held by the Participant.
14. TERMINATION OF SERVICE
14.1 Options and SARs. The following provisions shall govern the exercise
of any Options or SARs held by any employee of the Company whose employment is
terminated:
(a) If the Employee's employment with the Company is terminated for
Cause, the Options or SARs held by the Employee shall be exercisable, to
the extent that such Options or SARs were exercisable on the date the
Employee's employment terminated, for a period of thirty (30) days
following such termination of employment; provided, however, if the
termination includes any matter described in Section 2.7(a) of the
definition of Cause herein, at the option of the Committee (in the case of
Options or SARs held by an officer or director) or the Chief Executive
Officer (in any other case) the Options or SARs held by the Employee may
terminate immediately upon the termination of the Employee's employment
with the Company or at any subsequent time.
(b) If the Employee's employment with the Company is terminated for
any reason other than Cause or such Employee's death, disability, or (in
the case of Benefits other than ISOs) retirement, all Options or SARs held
by the Employee shall be exercisable, to the extent that such Options were
exercisable on the date the Employee's employment terminated, for a period
of three (3) months following such termination of employment, or in the
case of SARs or Options other than ISOs, such longer period as the
Committee may determine in its sole discretion.
(c) If the Employee's employment with the Company is terminated
because of such Employee's death or disability within the meaning of
Section 22(e)(3) of the Code or, in the case of Benefits other than ISOs,
retirement as defined in the Company's 401(k) Retirement Plan (or successor
plan), all Options or SARs held by the Employee shall become immediately
exercisable and shall be exercisable for a period of twelve (12) months
following such termination of employment.
(d) In no event may any Option or SAR remain exercisable after the
expiration of the term of the Option or SAR. Upon the expiration of any
thirty (30) day or three (3) or twelve (12) month exercise period, as
applicable, or, if earlier, upon the expiration of the term of the Option,
the Option shall terminate and shall cease to be outstanding for any Shares
for which the Option has not been exercised.
14.2 Restricted Stock; Performance Shares. In the event of the death or
disability (within the meaning of Section 22(e) of the Code) of a Participant,
or the retirement of the Participant as defined in the Company's 401(k) Plan (or
successor plan) all employment periods and other restrictions applicable to
Restricted Stock, Performance Shares or other Benefits then held by such
Participant shall lapse, and such awards shall become fully nonforfeitable. In
the event of a Participant's termination of employment for any other reason, any
Restricted Stock, Performance Shares or other Benefits as to which the
employment period or other restrictions have not been satisfied shall be
forfeited.
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15. CHANGE IN CONTROL.
In the event of a Change in Control of the Company, the contingencies with
respect to Options, SARs and Restricted Stock all outstanding under the Plan as
of the day before the consummation of such Change in Control shall automatically
accelerate for all purposes under this Plan so that each Option or SAR shall
become fully exercisable with respect to the total number of Shares subject to
such Option or SAR as of such date, without regard to the conditions expressed
in the agreements relating to such Option or SAR, and the restrictions on each
Share of Restricted Stock shall lapse and such Shares of Restricted Stock shall
no longer be subject to forfeiture. Performance Goals or other contingencies
with respect to other Benefits shall similarly lapse or be deemed satisfied in
the event of a Change in Control of the Company.
16. TERM, AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
16.1 Term. The Plan shall commence on the Effective Date, and remain in
effect for ten years from such date. The Committee may deem it advisable to seek
shareholder approval of the Plan prior to the end of the fifth year following
the Effective Date in order to comply with certain provisions of Treasury
Regulations issued under Section 162(m) of the Code.
16.2 Supervision, etc. The Board may at any time suspend or terminate the
Plan, and may amend it from time to time in such respects as the Board may deem
advisable; provided, however, except as provided in Section 3.2 hereof, the
Board shall not amend the Plan in the following respects without the consent of
stockholders then sufficient to approve the Plan in the first instance:
(a) To increase the numerical limitations on number of Shares issued
under the Plan, number of Shares issued to individuals, number of Shares of
issued Restricted Stock or Performance Stock that may be issued, or to
increase the limit on Cash Awards to individuals;
(b) To change the designation or class of persons eligible to receive
Benefits under the Plan.
16.3 Suspension or Termination of Plan. No Benefit may be granted during
any suspension or after the termination of the Plan, and no amendment,
suspension or termination of the Plan shall, without the Participant's consent,
impair any Participant's rights or obligations under any Benefit granted under
the Plan; provided, however, that all Participants shall receive the benefits of
any amendments which are made to the Plan.
17. INVESTMENT PURPOSE.
At the time of delivery of any Shares, the Committee may, if it shall deem
it necessary or desirable for any reason connected with any securities law or
regulation, require, as a condition to the issuance of any Shares to
Participant, that Participant represent in writing to the Company that it is
Participant's intention to acquire the Shares for investment and not with a view
to the distribution thereof or that the Participant agree to any other
appropriate restriction on transfer of the Shares. In the event such a
representation is required and made, no Shares shall be issued unless and until
the Company is satisfied with the correctness of such representation and, in
such event, the Committee may require that a legend be placed on the
certificates evidencing any Shares to be issued which legend shall disclose the
existence of an investment representation and such further restrictions on
transfer as may be imposed to comply with applicable laws as the Committee may
deem appropriate to protect the interest of the Company.
18. MISCELLANEOUS.
18.1 Unfunded Status of the Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments or deliveries of Shares not yet made to a Participant by the Company,
nothing contained herein shall give any rights that are greater than those of a
general creditor of the Company. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Shares or payments hereunder consistent with the foregoing.
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18.2 Rule 16b-3. With respect to Participants subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable provisions of Rule 16b-3 or its successors under the Exchange Act. To
the extent any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Committee.
18.3 Number and Gender. The masculine, feminine and neuter, wherever used
in the Plan or in any Agreement, shall refer to either the masculine, feminine
or neuter; and, unless the context otherwise requires, the singular shall
include the plural and the plural the singular.
18.4 No Effect on Other Benefits. The receipt of Benefits under the Plan
shall have no effect on any benefits to which a Participant may be entitled from
the Employer, under another plan or otherwise, or preclude a Participant from
receiving or the Company from granting any such benefits.
18.5 Governing Law. The validity, interpretation and effect of this Plan,
and the rights of all persons hereunder, shall be governed by and determined in
accordance with the laws of the state of Delaware.
18.6 No Employment Right. The grant of any Benefit to any Participant under
this Plan shall not give such Participant any right to be retained in the employ
or service of the Company, and the right and power of the Company to discharge
any such person shall not be affected by such grant.
18.7 No Shareholder Rights. No Participant nor any person entitled to
exercise an Option under this Plan shall have any of the rights of a shareholder
with respect to the Shares subject to an Option except to the extent Stock
Certificates have been issued.
18.8 No Rights to Ungranted Benefits. No person shall have any right or
claim whatever, directly, indirectly, or by implication, to receive a Benefit,
nor any expectancy thereof, unless and until the same shall have been granted to
such person by the Committee as provided herein. The grant of a Benefit shall
not create any right or implication that any other or further Benefit may or
shall be granted at another time. Each Benefit hereunder shall be separate and
distinct from every other grant of a Benefit, and shall not be considered part
of any continuing series of such grants. Grants may be made inconsistently or
not at all among eligible Participants.
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HS RESOURCES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
Item 1 - ELECTION OF DIRECTORS
NOMINEES: James E. Duffy For Withheld For All
Philip B. Smith Except
[ ] [ ] [ ]
-----------------------------
Nominee Exception
Item 2 - To adopt an amendment to Article 4 For Against Abstain
of the Company's Certificate of [ ] [ ] [ ]
Incorporation to increase the
number of authorized shares of the
Company's Common Stock, par value
$.001 per share, from 30,000,000
to 50,000,000
Item 3 - To adopt an amendment to Article 16 For Against Abstain
of the Company's Certificate of [ ] [ ] [ ]
Incorporation to change the vote
required to amend Article 4 thereof
from an affirmative vote of
the holders of two-thirds of the
outstanding shares of stock who are
entitled to vote upon the election of
directors to an affirmative vote of
the holders of a majority of such
shares.
Item 4 - To approve certain amendments to For Against Abstain
the HS Resources, Inc. 1997 [ ] [ ] [ ]
Performance and Equity Incentive
Plan
I PLAN TO ATTEND MEETING [ ]
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written
comments/address change on the
reverse side. [ ]
Receipt is hereby acknowledged of the HS Resources, Inc. Notice of Annual
Meeting and Proxy Statement.
Dated: , 1998
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Signature(s)
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NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
HS RESOURCES, INC.
P PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
R MAY 20, 1998
O THIS PROXY IS SOLICITED ON BEHALF OF HS RESOURCES, INC.'S BOARD OF DIRECTORS
X The undersigned hereby appoints P. Michael Highum, Nicholas J. Sutton and
James M. Piccone, and each of them, proxies for the undersigned, with full
Y power of substitution to vote all shares of HS Resources, Inc. Common Stock
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of HS Resources, Inc., on Wednesday, May 20, 1998, at 9:00 A.M.,
or at any adjournment thereof, upon the matters set forth on the reverse side
and described in the accompanying Proxy Statement and upon such other
business as may properly come before the meeting or any adjournment thereof.
Please mark this Proxy as indicated on the reverse side to vote on any
item. If you wish to vote in accordance with the Board of Directors'
recommendations, please sign the reverse side; no boxes need to be checked.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side.)
