<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
HS RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
HS RESOURCES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 2000
To the Stockholders:
We will hold the Annual Meeting of Stockholders of HS Resources, Inc.
("HSR" or the "Company"), a Delaware corporation, on May 16, 2000, at 9:00 a.m.,
local time, at the Mandarin Oriental, 222 Sansome Street, San Francisco,
California 94106. The purpose of the Annual Meeting is:
1. To elect two directors to serve until their successors are elected
and qualified.
2. To approve the HS Resources, Inc. 2000 Performance and Equity
Incentive Plan.
3. To transact such other items of business as may properly come
before the meeting.
The Proxy Statement accompanying this Notice describes these items of
business.
If you were a stockholder of record at the close of business on March 22,
2000, you are entitled to notice of and to vote at the Annual Meeting. We will
not close the Company's stock transfer books for the Annual Meeting. You may
examine a complete list of the stockholders entitled to vote at the Annual
Meeting, for any purpose germane to the Annual Meeting, during ordinary business
hours between May 6, 2000 and May 16, 2000 at our offices at One Maritime Plaza,
15th Floor, San Francisco, California 94111. In addition, the complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.
We cordially invite you to attend the meeting in person. However, to ensure
your representation at the meeting, we encourage you to mark, sign, date and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. If you attend the Annual Meeting you may vote in
person even if you have returned a proxy card.
Sincerely,
JAMES M. PICCONE
Secretary
San Francisco, California
April 17, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE ASK YOU TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED.
<PAGE> 3
HS RESOURCES, INC.
PROXY STATEMENT FOR THE 2000 ANNUAL MEETING
OF STOCKHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
We will hold the Annual Meeting of Stockholders of HS Resources, Inc. (the
"Annual Meeting") on Tuesday, May 16, 2000, at 9:00 a.m., local time. The
location of the Annual Meeting is the Mandarin Oriental, 222 Sansome Street, San
Francisco, California 94106. This Proxy Statement and the accompanying Notice of
Annual Meeting of Stockholders discuss the business purpose of the Annual
Meeting. Our principal executive offices are located at One Maritime Plaza, 15th
Floor, San Francisco, California 94111. Our telephone number is (415) 433-5795.
We mailed these proxy solicitation materials on or about April 17, 2000, to
all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND PRINCIPAL STOCKHOLDERS
If you owned shares of common stock of HS Resources on March 22, 2000, you
are entitled to notice of and to vote at the Annual Meeting. As of March 22,
2000, 19,301,701 shares of our Common Stock were issued and outstanding. The
section of this Proxy Statement entitled "Security Ownership of Principal
Stockholders and Management" lists holders of 5% or more of our Common Stock.
VOTING AND SOLICITATION
Our bylaws require that a quorum of our stockholders be present at the
Annual Meeting in order for the business conducted at the meeting to be validly
approved. The presence, in person or by proxy, of the holders of at least a
majority of the outstanding shares of Common Stock constitutes a quorum. You are
entitled to one vote for each share of Common Stock you own. Election of
directors requires the affirmative vote of the holders of a plurality of the
shares of Common Stock represented at the Annual Meeting and entitled to vote on
any matter. Abstentions are counted in tabulations of votes cast at the meeting
and have the same effect as voting against. Broker non-votes are treated as
present for purposes of establishing a quorum, but are not counted either way
for purposes of determining a vote and will not be counted in determining the
number of affirmative votes required for approval.
We will bear all costs of this solicitation of your vote by proxy. In
addition, we may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
material to such beneficial owners. Certain of our directors, officers and
regular employees, personally or by telephone or telegram, without additional
compensation, may also solicit proxies. We have retained Corporate Investor
Communications for a fee of approximately $6,500 to solicit proxies on our
behalf.
REVOCABILITY OF PROXIES
At any time before a vote is taken at the Annual Meeting, you may revoke
any proxy you give pursuant to this Proxy Statement. Your proxy may be revoked
by:
(i) delivering to the Secretary of the Company either a written notice
of revocation or a duly executed proxy bearing a later date; or
(ii) attending the Annual Meeting and voting in person.
<PAGE> 4
PROPOSAL NO. 1
ELECTION OF DIRECTORS
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Currently, we have six directors serving on our Board of Directors. 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. Two directors are to be elected at this Annual Meeting to serve
until the 2003 Annual Meeting of Stockholders. Our nominees are Nicholas J.
Sutton, who is currently Chairman of the Board and the Chief Executive Officer
of the Company, and Barry Reder, who has been a director since December 1999,
and who is not an employee of the Company. A vote on your proxy card in favor of
the recommendation of HS Resources is a yes vote for electing these two
directors. If either Mr. Sutton or Mr. Reder 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. Sutton or Mr. Reder will be
unable or will decline to serve as a director.
Information about Mr. Sutton and Mr. Reder is set forth below:
<TABLE>
<CAPTION>
CAPACITIES IN WHICH SERVED DIRECTOR
NAME AGE WITH THE COMPANY SINCE
- ---- --- -------------------------- --------
<S> <C> <C> <C>
Nicholas J. Sutton.................... 55 Director, Chief Executive Officer 1987
Barry Reder........................... 55 Director 1999
</TABLE>
There are currently no vacancies on the Board.
Nicholas J. Sutton is a founder of the Company and has been employed
exclusively in activities relating to the Company and its predecessor 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 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.
Barry Reder was appointed as a director in December 1999 to fill the
vacancy created by the resignation of Kenneth A. Hersh. Mr. Reder has practiced
law with the firm of Coblentz, Patch, Duffy & Bass of San Francisco, California
since 1993. He has practiced law in the San Francisco area since 1969 when he
graduated from Cornell Law School. Mr. Reder obtained his Bachelor's Degree from
Wesleyan University in 1966. Mr. Reder is a member of the State Bar of
California and the Bar Association of San Francisco and has served on the board
of Real Goods Trading Corporation since 1996.
Specific information about the other Board members and the Company's
officers is set forth below:
<TABLE>
<CAPTION>
CURRENT
CAPACITIES IN WHICH SERVED DIRECTOR TERM
NAME AGE WITH THE COMPANY SINCE EXPIRES
- ---- --- -------------------------- -------- -------
<S> <C> <C> <C> <C>
P. Michael Highum................. 49 Director, President 1987 2002
James E. Duffy.................... 49 Director, Vice 1990 2001
President -- Finance and Chief
Financial Officer
Michael J. Savage................. 65 Director 1996 2002
Robert G. Vanneman................ 58 Director 2000 2001
Dale E. Cantwell.................. 44 Vice President -- D-J Basin N/A N/A
District Manager
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
CURRENT
CAPACITIES IN WHICH SERVED DIRECTOR TERM
NAME AGE WITH THE COMPANY SINCE EXPIRES
- ---- --- -------------------------- -------- -------
<S> <C> <C> <C> <C>
Tony W. Church.................... 43 Vice President -- Exploration N/A N/A
Theodore Gazulis.................. 45 Vice President -- Capital Markets N/A N/A
and Investor Relations and
Assistant Secretary
Annette Montoya................... 43 Vice President -- Accounting and N/A N/A
Administration
Rick L. Parks..................... 47 Vice President -- Operations N/A N/A
Janet W. Pasque................... 42 Vice President -- Land N/A N/A
James M. Piccone.................. 49 Vice President -- General Counsel N/A N/A
and Secretary
Wayne D. Williams................. 50 Vice President -- Geophysics N/A N/A
Philip S. Winner.................. 44 Vice President -- Northern Rockies N/A N/A
District Manager
</TABLE>
P. Michael Highum is a founder of the Company and for the past 22 years has
been employed exclusively in activities relating to the Company and its
predecessor oil and gas business. Mr. Highum has a law degree 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 President of the Colorado Oil
and Gas Association.
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.
Michael J. Savage has been a Director of the Company since January 1996.
Mr. Savage was the Managing Director of the San Francisco Opera from 1994
through 1999. 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
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.
Robert G. Vanneman, who has over 25 years experience in finance, was
appointed a Director of the Company in February 2000 to fill the vacancy created
by the resignation of Philip B. Smith. Mr. Vanneman joined Bessemer Trust in
1998 and is the Senior Resident Officer for Northern California and responsible
for San Francisco office operations. Prior to joining Bessemer, Mr. Vanneman
headed West Coast Private Banking for Union Bank of Switzerland. He was also an
Executive Director for Merrill Lynch in its Private Capital business. As a
senior officer at the Bank of California, Mr. Vanneman headed Private Banking,
and also supervised various trust, corporate and real estate activities. For
several years, he was a principal in a private investment firm that he
co-founded. Mr. Vanneman is a graduate of the U.S. Military Academy at West
Point and the Harvard Business School.
Dale E. Cantwell has been an employee and member of the Company's
management team since joining the Company in 1993. From 1993 to April 1997, his
primary duties were managing the Company's oil and gas marketing department. In
April 1997, Mr. Cantwell was promoted to Vice President in charge of the D-J
Basin
3
<PAGE> 6
District. From 1979 until joining the Company, Mr. Cantwell worked for Amoco
Production Company in various engineering capacities. Mr. Cantwell 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
Exploration Manager. Mr. Church has primary responsibility for oversight and
supervision of the corporate exploration program. Mr. Church has over 20 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
Division of Professional Affairs Certified Geologist and a Registered Geologist
in the State of Wyoming.
Theodore Gazulis has served as an officer of the Company since its
incorporation in 1987, and has served in his current capacity since July 1998.
Mr. Gazulis has primary responsibility for capital formation, the treasury
functions and investor relations. Prior to that, Mr. Gazulis was in charge of
the Company's economic analysis and planning 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.
Mr. Gazulis is a member of the American Association of Petroleum Geologists.
Annette Montoya is Vice President of the Company's accounting, human
resources and administrative departments and has served in her current capacity
since July 1997. She has been an officer of the Company since 1991. Ms. Montoya
joined the Company in 1987 to manage 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. Ms. Montoya earned her
undergraduate degree from Regis College and is a member of the Council of
Petroleum Accountants Societies.
Rick L. Parks has been an employee of the Company since 1986 and was
appointed Vice President in April of 1997. Currently, Mr. Parks is overseeing
all operations in the Gulf Coast District including drilling, completion,
production, and pipeline construction. While with the Company, he has served as
Mid-Continent District Manager, Operations Manager, D-J District Manager, and
Field Superintendent. Prior to 1986, Mr. Parks was President and owner of
Rainbow Exploration, Inc., a privately-owned oil and gas exploration and
production company. He also worked for both Energy Minerals Corporation and
Amoco Production Company. Mr. Parks is 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 l993 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
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
4
<PAGE> 7
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.
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, from 1977 to 1992, and 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 Manager 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 18
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 an 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 HSR.
(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 our directors
and executive officers, and persons who own more than ten percent (10%) of HSR
Common Stock, to file with the Securities and Exchange Commission and any
exchange on which our stock is traded, reports of ownership and changes in
ownership of HSR Common Stock.
Based solely on our review of Forms 3, 4 and 5 received by us and written
representations from officers and directors that no filings were required for
them, we believe that, during 1999, all SEC filings of our officers, directors
and 10% stockholders complied with the requirements of Section 16 of the
Securities Exchange Act.
BOARD MEETINGS AND COMMITTEES
The Board held five meetings during 1999. All board members attended all
meetings of the Board and all meetings of committees, if any, on which they
served, except Mr. Savage who waived notice of one special meeting held on short
notice when he was unavailable. Mr. Savage subsequently reviewed and ratified
the action which was taken by the Board at that meeting. The Board also took
action by unanimous written consent on five 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 hiring of an independent
public auditing firm to review our books and records. In addition, the Audit
Committee reviews the fees of and the services provided by the audit firm,
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
5
<PAGE> 8
Committee reviews our financial statements and related information, and monitors
our 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 the first half of
1999 the Audit Committee consisted of Mr. Hersh and Mr. Savage. Mr. Smith was
appointed to the Audit Committee in February 1999 and served until he resigned
from the Board in January 2000. Mr. Hersh resigned from the Board and the Audit
Committee in May, 1999. Mr. Reder was appointed to the Audit Committee in
December 1999, and Mr. Vanneman was appointed to the Committee and selected as
Chairman of the Committee in February 2000. The Audit Committee held one formal
meeting in 1999, and conducted its formal review of 1999 audit matters at a
meeting with our auditors held in February 2000.
The Compensation Committee has oversight responsibility for our significant
compensation policies and practices, including the scope and design of our
compensation and benefit plans. The Compensation Committee determines the nature
and amount of compensation of our executive officers 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 2000
Performance and Equity Incentive Plan. Members of the Compensation Committee are
not eligible to participate in any of the plans or programs they administer.
During the first half of 1999 the Compensation Committee consisted of Mr. Hersh
and Mr. Savage, with Mr. Smith joining the Committee in February of 1999 and
serving until he resigned from the Board in January 2000. The Compensation
Committee held one meeting in 1999, and took action by unanimous written consent
on one occasion. Mr. Hersh resigned from the Board and the Compensation
Committee in May 1999. Mr. Reder was appointed to the Compensation Committee in
December 1999 and Mr. Vanneman was appointed in February 2000. The Compensation
Committee has had two meetings since Messrs. Reder and Vanneman were appointed.
COMPENSATION OF BOARD MEMBERS
During 1999, each non-employee director was 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, we implemented the 1992 Directors' Stock Option Plan (the "1992
Directors' Plan"). Under the 1992 Directors' Plan each non-employee director
receives an option to purchase 7,500 shares of our Common Stock upon the
commencement of his or her tenure on the Board. The option to purchase 1,500
shares is immediately exercisable. The remaining 6,000 shares are available for
purchase over the next four years, 1,500 shares each year. In addition, under
the 1992 Directors' Plan each director receives a fully exercisable annual
option grant to purchase an additional 750 shares of HSR Common Stock. 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 HSR, 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 April 2000, the Board terminated the 1993 Directors' Stock Option Plan.
This plan had been created in 1993 to allow for the issuance of transferable
options to Mr. Hersh, who resigned from the Board in May of 1999.
6
<PAGE> 9
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the fiscal years of 1997, 1998 and 1999,
the cash, bonus and other annual compensation received by our Chief Executive
Officer and the other four most highly paid executive officers during the 1999
fiscal year (each, a "Named Executive Officer").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
------------------- ------------------------
NUMBER OF
SECURITIES LTIP ALL OTHER
BONUS RESTRICTED UNDERLYING PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) STOCK($) OPTIONS(2) ($)(3) ($)(4)
- --------------------------- ---- --------- ------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Nicholas J. Sutton......... 1999 320,000 250,000 69,863(5) 60,000 37,003 29,030
Chairman of the Board and 1998 320,000 135,000 53,280(6) 50,000 -- 26,018
Chief Executive Officer 1997 300,000 187,500 65,716(7) -- -- 25,611
P. Michael Highum.......... 1999 320,000 250,000 69,863(5) 60,000 37,003 32,912
President 1998 320,000 135,000 53,280(6) 50,000 -- 27,203
1997 300,000 187,500 65,716(7) -- -- 25,907
James E. Duffy............. 1999 215,000 125,000 46,575(5) 26,500 33,300 13,300
Vice President -- 1998 215,000 75,000 29,304(6) 26,000 -- 13,300
Finance and 1997 200,000 82,500 28,928(7) -- -- 12,800
Chief Financial Officer
James M. Piccone........... 1999 215,000 112,500 46,575(5) 10,250 24,420 13,958
Vice President -- General 1998 215,000 70,000 29,304(6) 7,500 -- 11,920
Counsel and Secretary 1997 200,000 75,000 26,298(7) -- -- 11,200
Tony W. Church............. 1999 144,500 60,000 23,288(5) 16,250 16,428 10,180
Vice President -- 1998 144,500 37,500 11,100(6) 10,750 -- 10,180
Exploration 1997 135,000 41,600 10,939(7) 18,000 -- 9,680
</TABLE>
- ---------------
(1) The amounts shown were accrued during the year indicated and paid the
following year.
(2) Does not include awards of options granted in April 2000, as follows:
Nicholas J. Sutton, 50,000; P. Michael Highum, 50,000; James E. Duffy,
25,000; James M. Piccone, 12,500; and Tony W. Church, 13,750.
(3) Value of performance shares vested on April 9, 1999, the date the
Compensation Committee determined that the performance goals associated with
the shares had been satisfied ($8.88 per share).
(4) Includes the auto lease and related expenses, payments for premiums on a
group term life insurance policy, the amount of the Company's contribution
pursuant to the Company's 401(k) and Profit Sharing Plan, and amounts paid
for memberships.
<TABLE>
<CAPTION>
AUTO LEASE
AND RELATED LIFE 401(K)
NAME YEAR EXPENSES($) INSURANCE($) CONTRIBUTION($) MEMBERSHIPS($)
- ---- ---- ----------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Nicholas J. Sutton......... 1999 16,990 180 10,000 1,860
1998 13,978 180 10,000 1,860
1997 14,071 180 9,500 1,860
P. Michael Highum.......... 1999 17,332 180 10,000 5,400
1998 15,163 180 10,000 1,860
1997 14,367 180 9,500 1,860
James E. Duffy............. 1999 3,120 180 10,000 --
1998 3,120 180 10,000 --
1997 3,120 180 9,500 --
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
AUTO LEASE
AND RELATED LIFE 401(K)
NAME YEAR EXPENSES($) INSURANCE($) CONTRIBUTION($) MEMBERSHIPS($)
- ---- ---- ----------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
James M. Piccone........... 1999 1,920 180 10,000 1,858
1998 1,740 180 10,000 --
1997 1,520 180 9,500 --
Tony W. Church............. 1999 -- 180 10,000 --
1998 -- 180 10,000 --
1997 -- 180 9,500 --
</TABLE>
(5) The Named Executive Officers were granted shares of restricted stock vesting
one-fourth on each of April 11, 2001, 2002, 2003 and 2004. No dividends are
paid on this restricted stock. The value shown in the table is the value on
the date of grant, April 11, 2000, utilizing the closing price per share on
that day of $18.63. These grants are considered 1999 compensation.
(6) The Named Executive Officers were granted shares of restricted stock vesting
one-fourth on each of April 9, 2000, 2001, 2002 and 2003. No dividends are
paid on this restricted stock. The value shown in the table above is the
value on date of grant, April 9, 1999, utilizing the price per share on that
day of $8.88. The following table shows the value of these shares to the
extent held as restricted stock by the Named Executive Officer on December
31, 1999, utilizing the closing price per share on that day of $17.25.
<TABLE>
<CAPTION>
NUMBER OF VALUE ON
NAME UNVESTED SHARES DECEMBER 31, 1999 ($)
- ---- --------------- ---------------------
<S> <C> <C>
Nicholas J. Sutton.................................. 6,000 103,500
P. Michael Highum................................... 6,000 103,500
James E. Duffy...................................... 3,300 56,925
James M. Piccone.................................... 3,300 56,925
Tony W. Church...................................... 1,250 21,563
</TABLE>
(7) The Named Executive Officers were granted shares of restricted stock vesting
one-fourth on each of January 31, 1999, 2000, 2001 and 2002. No dividends
are paid on this restricted stock. The value shown in the table above is the
value on date of grant, January 31, 1998, utilizing the price per share on
that day of $14.06. The following table shows the value of these shares to
the extent held as restricted stock by the Named Executive Officer on
December 31, 1999, utilizing the closing price per share on that day of
$17.25.
<TABLE>
<CAPTION>
NUMBER OF VALUE ON
NAME UNVESTED SHARES DECEMBER 31, 1999 ($)
- ---- --------------- ---------------------
<S> <C> <C>
Nicholas J. Sutton.................................. 3,505 60,461
P. Michael Highum................................... 3,505 60,461
James E. Duffy...................................... 1,543 26,617
James M. Piccone.................................... 1,403 24,202
Tony W. Church...................................... 584 10,074
</TABLE>
8
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
There was one grant of stock options to the Named Executive Officers in
1999. The named officers received no long-term compensation awards in the form
of SARs pursuant to any long-term incentive plan during fiscal 1999. See "Report
of the Compensation Committee -- Components of Executive Compensation --
Incentive Plans."
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED GRANT DATE
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION PRESENT VALUE
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE($/SH) DATE ($)(1)
- ---- --------------- --------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Nicholas J. Sutton...................... 60,000 11.9844 8.88 4/9/2006 295,830
P. Michael Highum....................... 60,000 11.9844 8.88 4/9/2006 295,830
James E. Duffy.......................... 26,500 5.2931 8.88 4/9/2006 130,658
James M. Piccone........................ 10,250 2.0473 8.88 4/9/2006 50,538
Tony W. Church.......................... 16,250 3.2458 8.88 4/9/2006 80,121
</TABLE>
- ---------------
(1) We calculated the grant date present value using the "Black Scholes" model,
a widely accepted method of valuing options. This valuation model is
hypothetical; the actual value, if any, depends on the excess of the market
price of the shares over the exercise price on the date the option is
exercised. If the market price does not increase above the exercise price,
compensation to the grantee will be zero. The Black Scholes option pricing
model is a mathematical formula used for estimating option values that
incorporates various assumptions. The "Grant Date Present Value" set out in
the above table is based on the following assumptions: (a) an average 7 year
option term; (b) 46% expected future annual stock volatility for the
options; (c) a risk-free rate of return of 5.46% for the options granted;
and (d) no expected dividend yield. The above model does not include any
reduction in value for non-transferability of the options.
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, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas J. Sutton....... -- -- 50,000 85,000 96,750 598,950
P. Michael Highum........ -- -- 50,000 85,000 96,750 598,950
James E. Duffy........... -- -- 89,500(2) 39,500 667,455 272,115
James M. Piccone......... 20,000 122,400 13,750 34,000 85,713 242,705
Tony W. Church........... -- -- 24,376 27,624 58,555 174,810
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common Stock at the close of
business on December 31, 1999 ($17.25 per share) minus the exercise price of
the options (or warrant).
(2) Includes an exercisable warrant to purchase 1,500 shares of Common Stock
with an exercise price of $6.67, expiring on July 12, 2000.
9
<PAGE> 12
LONG-TERM INCENTIVE PLANS --
AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE AGGREGATE PAYOUTS
UNDER NON-STOCK PRICE BASED PLANS
PERFORMANCE OR ------------------------------------------------------------
OTHER PERIOD SATISFACTION OF SATISFACTION OF SATISFACTION OF
NUMBER OF UNTIL MATURATION ONE MEASURE TWO MEASURES THREE MEASURES
NAME SHARES(1) OF PAYOUT (NUMBER OF SHARES) (NUMBER OF SHARES) (NUMBER OF SHARES)
- ---- --------- ------------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Nicholas J. Sutton.............. 31,000 7,750 15,500 31,000
P. Michael Highum............... 31,000 7,750 15,500 31,000
James E. Duffy.................. 20,000 over four to 5,000 10,000 20,000
James M. Piccone................ 12,500 nine years(2) 3,125 6,250 12,500
Tony W. Church.................. 5,000 1,250 2,500 5,000
</TABLE>
- ---------------
(1) Does not include awards of performance shares granted in April 2000, as
follows: Nicholas J. Sutton, 20,000; P. Michael Highum, 20,000; James E.
Duffy, 15,000; James M. Piccone, 12,500; and Tony W. Church, 5,000.
(2) These performance shares vest no earlier than ratably over a period of four
years from date of grant and, until the end of the ninth year, each tranche
subject to vesting will vest only upon the attainment as of the date of
vesting of the value measures set forth below, as determined by the
Compensation Committee.
(i) At least a 15% compounded annual growth in operating 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
and calculated using EBITDAX (earnings before interest, taxes,
depreciation, depletion and amortization, exploratory and abandonment and
geological and geophysical costs) over the weighted average outstanding
book capital measured on a fiscal year basis; and
(iii) At least a 15% compounded annual growth in underlying net asset
value on a per-share basis measured over a period of time determined by the
Committee, using the pre-tax discounted present value at 10% of the
Company's proved reserves plus the estimated market value of all other
assets, less outstanding debt, excluding deferred taxes.
Any performance shares that have not vested as of the end of the ninth year
will vest at that time subject only to the time in service requirement. The
Compensation Committee determines the interpretation, calculation, balance and
satisfaction of such measures. To date, the Committee has made awards such that
at each potential vesting date, one-fourth of the performance shares subject to
potential vesting in that year are vested if one of the performance goals had
been achieved; one-half of the performance shares subject to potential vesting
in that year are vested if two of the performance goals have been achieved; and
all of the performance shares subject to potential vesting in that year are
vested if all three performance goals have been achieved. With respect to all
performance share awards made to date under the 1997 Plan and the 2000 Plan, the
Committee has established 1997 as the base year against which the 15% goals in
measures (i) and (iii) are measured. At the Committee's discretion the base year
could be changed for future award determinations. Goal (ii) is measured on an
individual calendar/fiscal year basis. Additionally, in determining whether
performance goals have been achieved, the Committee has neutralized short-term
commodity price swings for gas and oil. These pricing assumptions could be
adjusted by the Committee in future years.
We have no defined benefit or actuarial plan under which benefits are
determined by final compensation and years of service. We have not, during
fiscal 1999 (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. We have not awarded any SARs.
10
<PAGE> 13
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 our relative performance on the underlying determinants of
stockholder value. We believe that we have demonstrated strong performance on
financial and operational measures contributing to stockholder value.
Stockholders should read our Annual Report to Stockholders, mailed to
Stockholders, for complete information on our financial and operational
performance.
COMPARISON OF 5 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
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
JOHN S. HEROLD, JOHN S. HEROLD,
INC. LARGE INC. MID-SIZE
HS RESOURCES, DOMESTIC E&P DOMESTIC E&P PEER
INC. PEER GROUP GROUP S & P 500
------------- --------------- --------------- ---------
<S> <C> <C> <C> <C>
12/94 100.00 100.00 100.00 100.00
12/95 73.05 122.42 125.36 137.58
12/96 93.62 156.71 197.10 169.17
12/97 78.37 142.65 161.56 225.61
12/98 42.91 97.55 91.37 290.09
12/99 97.87 120.41 107.48 351.13
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HS Resources, Inc. 100.00 73.05 93.62 78.37 42.91 97.87
- ----------------------------------------------------------------------------------------------------------------
John S. Herold, Inc. Large Domestic E&P Peer Group 100.00 122.42 156.71 142.65 97.55 120.41
- ----------------------------------------------------------------------------------------------------------------
John S. Herold, Inc. Mid-Size Domestic E&P
Peer Group 100.00 125.36 197.10 161.56 91.37 107.48
- ----------------------------------------------------------------------------------------------------------------
S&P 500 100.00 137.58 169.17 225.61 290.09 351.13
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* $100 Invested on 12/31/94 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
The Securities and Exchange Commission regulations require that we provide
a line graph comparing our cumulative total stockholder return with a
performance indicator of the overall or broad stock market and a comparison to
our peers. Our stock is listed and began trading on the New York Stock Exchange
under the symbol "HSE" in 1994. Accordingly, we have 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 HSR
Common Stock, peer group stock, or the index on December 31, 1994, and includes
reinvestment of dividends.
11
<PAGE> 14
The peer group indices are made up of the companies for which public data
is available and 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." John S. Herold, Inc. is an independent research
firm specializing in oil and gas company research. We present the foregoing data
with respect to both peer groups since we have been categorized in each group at
one or more times over the last several years. The companies included in the
Mid-Size Domestic E&P peer group are: Belco Oil & Gas Corporation, Berry
Petroleum Co., Chesapeake Energy Corp., EEX Corp., Evergreen Resources Inc.,
Forest Oil Corp., Helmerich & Payne Inc., Houston Exploration Corp., Howell
Corp., Newfield Exploration Co., Patina Oil & Gas Corp., Santa Fe Snyder, Stone
Energy Corp., Swift Energy Co., Titan Exploration Inc., Tom Brown Inc., and
Wiser Oil Co. The companies included in the Large Domestic E&P peer group are:
Anadarko Petroleum Corporation, Apache Corporation, Barrett Resources
Corporation, Cabot Oil & Gas Corporation, Devon Energy Corporation, EOG
Resources, HS Resources, Inc., Louis Dreyfus Natural Gas, Mitchell Energy &
Development, Noble Affiliates Inc., Nuevo Energy Company, Ocean Energy, Pioneer
Natural Resources Co., Plains Resources, Inc., Pogo Producing Co., Range
Resources Corp., Union Pacific Resources, Unocal Corp., Vastar Resources, Inc.,
and Vintage Petroleum, Inc.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Kenneth A. Hersh, Philip B. Smith and Michael J. Savage, all non-employee
directors, constituted the Compensation Committee ("Committee") of the Board
during 1999 until May of 1999 when Mr. Hersh left the Board. Barry Reder was
elected to replace Mr. Hersh on both the Board and the Committee in December
1999. Mr. Smith resigned from the Board in January 2000. Robert G. Vanneman was
elected in February 2000 to replace Mr. Smith on both the Board and the
Committee. None of these individuals was in 1999 or has been in prior years an
officer or employee of the Company or any of its subsidiaries. During 1999,
these directors had no interlocking relationships as defined by the Securities
and Exchange Commission. However, Mr. Hersh was previously a director of Tide
West Oil Company until its merger with a wholly-owned subsidiary of HSR in June
of 1996. Also, Mr. Hersh is a Managing Director of NGP which received a
financial services fee from Tide West Oil Company upon consummation of the
merger.
12
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
BACKGROUND
The report of the Compensation Committee describes the policies and
rationale with respect to compensation paid to executive officers and other
employees for the year ended December 31, 1999. 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 the information be incorporated by
reference into any 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. Mr. Michael J. Savage was a member of the Committee for the entire
year. Mr. Kenneth A. Hersh was a member of the Committee until May 1999. Mr.
Philip B. Smith was a member of the Committee from February 1999 until January
2000. Mr. Barry Reder and Mr. Robert G. Vanneman were appointed to the Committee
in February of 2000, and participated, along with Mr. Savage, in the decisions
regarding 1999 compensation. 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 Company's employee incentive compensation plans.
GENERAL APPROACH FOR 1999
One year ago the Committee was faced with determining the appropriate
incentive compensation in light of difficult times in the oil and gas industry
balanced against the superior corporate performance achieved despite that
difficult industry environment. We could not ignore the prospect of recurring
low product prices or the decline in the Company's stock price, yet we
recognized the fact that the Company's stock price out-performed its peer group
over the prior year. We also believed it was important to maintain some measure
of consistency in the application of our philosophy of compensation. The result
of this balancing was to award aggregate cash incentive compensation somewhat
below prior years but consistent with the approach established in prior years.
This year we approached our task under an entirely different set of
circumstances. Both oil and natural gas prices have shown exceptional strength
recently. Because our managers focused on the fundamentals during the prior
down-cycle, our Company ended the year setting new highs in key measures
described below. Furthermore, our stock price was a strong performer -- up 119%
for the year, and 214% from the low experienced during February 1999. In light
of the Company's performance and the industry outlook, we believed that it was
only fair to offset last year's reduced awards with an appropriate upward
adjustment this year.
Our compensation philosophy, the components of compensation, the
performance of management in 1999, and CEO and President compensation are
detailed below.
COMPENSATION PHILOSOPHY
Our compensation policies are intended to align compensation with business
strategy, to create value for the Company, and to support a performance-based
culture throughout the organization. Consistent with the foregoing principles,
our compensation policies with respect to executive compensation are to:
- Tie total compensation to the Company's performance, particularly as
compared to our 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 the
Company's 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;
13
<PAGE> 16
- 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 our
stockholders through the use of stock options, restricted stock and
performance-based awards;
- Develop plans and attitudes intended to deliver regular and consistent
improvements in operating and financial measures, mitigating to the
extent reasonably possible the volatility historically associated with
the oil and gas business; and
- Provide a competitive total compensation package that enables us to
attract and retain key executives who are capable of leading the Company
in achieving our business objectives.
COMPONENTS OF EXECUTIVE COMPENSATION
One of our highest priorities is to attract and retain the most skilled and
experienced employees in key positions. Compensation is important in this
regard, and the Company's incentive compensation plan is designed to allow us to
be competitive in the market for key personnel while at the same time aligning
the employee's interest with corporate value creation. The incentive
compensation plan has a number of very important features that are discussed
below. As in the past, we believe that the cash and other types of 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.
There are three major components of our executive compensation program:
base salary, annual incentive bonus (which includes a component of restricted
stock), and long-term incentives through stock options and performance shares.
Executives, like all qualified employees, are eligible to participate in our
401(k) and Profit Sharing Plan as well as in certain other benefit plans, such
as health and life insurance plans.
Base Salary. We believe it is essential to pay a competitive salary in
order to attract and retain 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, we evaluate
data as to wages paid by comparable companies to executives having substantially
similar responsibilities and skill levels, and we establish a base salary range
utilizing the comparative data. Because compensation survey data generally is
imprecise as to responsibilities, and transparent as to talent and experience,
we may adjust the range after subjectively considering the impact of these
factors. We may also consider Company and industry performance, internal parity
and disparities related to geographic location and living cost. Of critical
importance to the setting of salary are 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. An
additional factor that we considered in establishing executive salaries for 2000
was that, primarily in recognition of industry conditions during the prior year,
no executive salaries were increased for 1999.
Incentive Bonus. The purpose of the incentive bonus is to link annual
executive compensation to overall Company and individual performance. If these
are in line with the performance goals, the incentive bonus should 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.
Last year the aggregate cash component of the bonus to the executive group
was reduced to approximately 80% of the cash bonuses awarded during the prior
year, with a greater percentage reduction in the cash component of the bonuses
paid to the CEO and the President. These reductions were due to industry
conditions rather than corporate or individual performance. This reduction was
taken into consideration when we established bonus compensation for the current
year.
14
<PAGE> 17
Restricted Stock. For executives, managers and certain skilled
professionals, 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 our common stock at the time of grant.
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 our employ in order to
retain the stock. The restricted stock vests over a four-year period. The
restricted stock component of annual incentive bonuses is important because it
encourages employees to remain with the Company and to continue to build
stockholder value. Restricted stock awards made as part of 1999 annual bonus
compensation to the executive group comprised from 10% to 25% of the total
annual bonus amount awarded to the affected executives.
Options. A component of long-term incentive compensation is the award of
stock options. Options normally vest over a four-year period, and terminate in
seven years. We granted awards of options this year on substantially the same
basis as was established last year.
Performance Shares. Another component of long-term incentive compensation
is the award of performance shares. These are stock awards made to those
executives who are in a position to significantly enhance stockholder value. The
awards are subject to achievement of specific performance goals that directly
measure such value, and will normally vest over four years if these goals are
achieved. Generally, the criteria require the achievement of no less than a 15%
compounded annual growth in per share operating cash flow and net asset value on
a per share basis, and an EBITDAX to Book Capital ratio of no less than 15%. The
specific value measures are discussed in more detail elsewhere in this Proxy
Statement. See "Long-Term Incentive Plans -- Awards in Last Fiscal Year". We
determined that in 1999 all three value measures applicable to the awards made
in prior years had been fully met, and therefore 100% of the performance shares
which were subject to potential vesting this year have vested. As a result, one
fourth of the performance shares awarded in 1998 and 1999 vested in year 2000.
Additionally, as part of this year's incentive compensation package, we have
awarded additional performance shares subject to similar conditions and vesting
as the awards made last year.
401(k) and Profit Sharing Plan. The Company has a qualified defined
contribution plan combining both a 401(k) plan and a profit sharing plan. All
full-time employees are eligible to participate in the plan. Under the 401(k)
plan, participants may make regular pretax contributions of up to 15% of their
compensation but, under IRS rules, this may not exceed $10,000. The Company may
make matching contributions in an amount determined by the Compensation
Committee, but is not obligated to do so. All contributions to the 401(k)
portion of the plan are vested. Contributions to the profit sharing portion of
the plan are vested based on the employee's years of service. As a component of
1999 compensation, we decided to match 100% of the pre-tax contributions of
employees to the 401(k) plan up to the first 10% of compensation deferred by the
employee. This was funded by treasury shares of Company Common Stock valued on
the date of contribution. We will make no contribution to the Profit Sharing
Plan for 1999.
MANAGEMENT'S PERFORMANCE IN 1999
We want to take special note of management's excellent performance in 1999
despite the extremely difficult industry environment that existed early in the
year. Because of these achievements, the Company is stronger, more profitable
and better strategically situated than it was in 1998, notwithstanding the low
commodity prices that existed for much of 1999. Some of the most important
achievements were:
- Production reached an all time high despite the September 1998 sale of
the Mid-Continent properties;
- Cash flow per share reached $4.90, almost a full dollar above the prior
high;
- Debt measures continued to improve and the stage is set for significant
further improvement;
- The D-J Basin team continued with its aggressive exploitation program,
continuing to exhibit innovation and creativity while posting excellent
financial results;
- The Gulf Coast district increased production by more than 566% and again
achieved excellent drilling success rates and finding costs;
15
<PAGE> 18
- All three financial performance measures underlying the performance
shares were achieved;
- Through aggressive management of costs and operating efficiencies, the
combined rate for lease operating expense and general and administrative
expense was reduced to $2.77 per barrel of oil equivalent, a decrease of
13% from the $3.17 per barrel of oil equivalent in 1998;
- Further rationalization of the D-J Basin properties was accomplished
through various sales and property trades; and
- The acquisition of the Wattenberg Gathering System from Kinder Morgan,
Inc. in December 1999, which is expected to deliver financially
compelling results in addition to bringing in-house the control over
gathering of a significant portion of the Company's production.
COMPENSATION AWARDS TO CEO AND PRESIDENT
The compensation of our Chief Executive Officer, Mr. Sutton, is determined
in the same manner as the compensation for our other executive officers as
described above. As a result, the compensation of the Chief Executive Officer is
largely dependent upon our overall performance as well as the compensation being
paid by other oil and gas companies to their chief executive officers. The
compensation of Mr. Highum, our President, a Director and co-founder with Mr.
Sutton, is determined in the same manner as, and is generally equivalent to, the
compensation of Mr. Sutton.
Based on the reasoning discussed above, the Compensation Committee
increased Mr. Sutton's and Mr. Highum's base salary for calendar year 2000 to
$375,000 each. The Compensation Committee also awarded to each of them a cash
bonus of $250,000 and 3,750 shares of restricted stock vesting over four years,
50,000 options at an exercise price equal to the fair market value on the date
of grant, and 20,000 performance shares, vesting over four years upon the
attainment of performance goals as described elsewhere in this Proxy Statement.
See "Long-Term Incentive Plans -- Awards in Last Fiscal Year". As a result of
these awards, the incentive compensation to Messrs. Sutton and Highum is
substantially contingent in nature and tied to the stockholders' interests,
requiring an enhancement of per share value and continued service to the
Company.
THE COMPENSATION COMMITTEE
Barry Reder
Michael J. Savage
Robert G. Vanneman
16
<PAGE> 19
CERTAIN TRANSACTIONS
BARRY REDER
Mr. Reder is a member of the law firm of Coblentz, Patch, Duffy & Bass,
LLP. During 1999, prior to Mr. Reder being appointed to the Company's Board of
Directors, Mr. Reder through his firm performed legal services for the Company.
Mr. Reder has advised the Company that he will not act as counsel to the Company
while he is a member of the Board. The Company generally does not utilize other
members of Mr. Reder's firm as counsel and has no plans to do so.
KEY EMPLOYEE SEVERANCE AGREEMENTS
We have 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 officers, and one times annual salary
and bonus for certain key managers. We have no employment agreements with the
Named Executive Officers.
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with each of our directors
and officers, including the Named Executive Officers. Those agreements require
us 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. We expect to enter into similar
agreements with persons selected to be directors and officers in the future.
INDEBTEDNESS OF MANAGEMENT
In June of 1998, the Compensation Committee, which administers the 1987
Stock Incentive Plan, accepted full recourse promissory notes from four
executive officers for the payment of the exercise price for certain options
exercised at that time, less the par value of the shares, which was paid in
cash. Three of these notes remain outstanding. Each note matures two years from
the date of issuance, June 5, 1998, and bears interest at the annual rate of
prime plus 0.25%. Payment of the notes may be accelerated under certain
circumstances. The executives and certain information regarding amounts due
under each of their notes are set forth in the following table.
<TABLE>
<CAPTION>
LARGEST AMOUNT AMOUNT OUTSTANDING
NAME OUTSTANDING DURING 1999 ON APRIL 1, 2000
- ---- ----------------------- ------------------
<S> <C> <C>
Nicholas J. Sutton............. $750,262 $ --
P. Michael Highum.............. $750,262 $750,262
Theodore Gazulis............... $391,037 $391,037
Annette Montoya................ $250,087 $250,087
</TABLE>
In March of 1999, the Compensation Committee, which administers the
Company's 1999 Non-Compensatory Stock Purchase Plan, permitted Mr. Sutton and
Mr. Duffy to purchase shares of stock pursuant to that plan on a partially
financed basis. The plan is designed to facilitate the purchase of Company stock
by executive officers, but is not intended to be compensatory and requires the
purchasing officer to pay fair market value for and assume the full risk with
respect to the value of any shares acquired under the plan. The terms of the
financing required the purchasing officer to pay 15% of the purchase price for
the stock in cash, and the remainder in the form of a full recourse promissory
note maturing two years from the date of issuance,
17
<PAGE> 20
March 4, 1999. The notes bear interest at the annual rate of 8.5%. Payment of
the notes may be accelerated under certain circumstances. Other pertinent
information with respect to this indebtedness is as follows:
<TABLE>
<CAPTION>
NUMBER OF CASH LARGEST AMOUNT
FINANCED FAIR MARKET CONSIDERATION OUTSTANDING AMOUNT OUTSTANDING
NAME SHARES VALUE($/SH) ($)(15%) DURING 1999($) ON APRIL 1, 2000($)
- ---- --------- ----------- ------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Nicholas J. Sutton........ 100,000 5.625 84,375 478,125 478,125
James E. Duffy............ 58,820 5.625 49,613 281,250 281,250
</TABLE>
FUTURE TRANSACTIONS
Any future transactions (including loans) between HSR 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 us and our stockholders and that the terms of such
transaction are no less favorable to us than could be obtained from unaffiliated
parties.
18
<PAGE> 21
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of our Common Stock as of March 22, 2000, by (i) each person who is
known by us to own beneficially 5% or more of the Common Stock, (ii) each
director of HSR, (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.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
T. Rowe Price Associates, Inc. and(2)(3).................... 2,057,900 10.6618%
T. Rowe Price Small Cap Value Fund, Inc.
100 E. Pratt Street
Baltimore, MD 21202
Dimensional Fund Advisors Inc.(3)........................... 1,266,274 6.5604%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
BP Amoco p.l.c.(3).......................................... 1,200,000 6.2171%
Brittanic House
1 Finsbury Circus
London EC2M 7BA England
Neuberger Berman, LLC(3).................................... 1,099,450 5.6961%
605 Third Avenue
New York, NY 10158-3698
The TCW Group, Inc.(3)...................................... 1,096,206 5.6793%
865 South Figueroa Street
Los Angeles, CA 90017
Nicholas J. Sutton(4)....................................... 849,101 4.3991%
P. Michael Highum(5)........................................ 618,855 3.2062%
James E. Duffy(6)........................................... 254,395 1.3180%
Barry Reder(7).............................................. 21,135 *
Michael J. Savage(8)........................................ 10,500 *
Robert J. Vanneman(9)....................................... 3,730 *
James M. Piccone(10)........................................ 49,834 *
Tony W. Church(11).......................................... 38,794 *
All directors as a group (6 persons)(12).................... 1,757,716 9.1065%
All directors and executive officers as a group (15
persons)(13).............................................. 2,197,803 11.3866%
</TABLE>
- ---------------
* Less than one percent of stock.
(1) Assumes exercise of all options and warrants exercisable within 60 days of
March 22, 2000, for the purchase of Common Stock with respect to such
owners. Includes performance shares that the Compensation Committee
determined on April 11, 2000 had vested for the attainment of 1999
performance goals.
(2) 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 5.18% of the shares outstanding as of March
22, 2000), 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 expressly disclaims
that it is, in fact, the beneficial owner of such securities.
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<PAGE> 22
(3) This information is based solely on information contained in a Form 13F or
13G filed by the stockholder with the Securities and Exchange Commission
and delivered to the Company.
(4) Includes 25,000 shares purchasable within 60 days after March 22, 2000,
upon the exercise of stock options granted under the HS Resources, Inc.
1987 Stock Incentive Plan (the "1987 Plan") and 40,000 shares purchasable
within 60 days after March 22, 2000, upon the exercise of stock options
granted under the 1997 Performance and Equity Incentive Plan (the "1997
Plan"). Includes 12,249 shares held by trusts for the benefit of children
of Mr. Sutton of which a third party is trustee and of which Mr. Sutton
disclaims beneficial ownership. Includes 11,917 performance shares that the
Compensation Committee determined on April 11, 2000 had vested as a result
of the attainment of 1999 performance goals.
(5) Includes 25,000 shares purchasable under the 1987 Plan and 40,000 shares
purchasable under the 1997 Plan within 60 days after March 22, 2000, upon
the exercise of stock options under the Plans. Also includes 3,200 shares
held by Mr. Highum's wife and 13,600 shares held in trust for his children.
Includes 11,917 performance shares that the Compensation Committee
determined on April 11, 2000 had vested as a result of the attainment of
1999 performance goals.
(6) Includes 1,500 shares subject to issuance upon the exercise of a currently
exercisable warrant and 75,000 shares purchasable under the 1987 Plan and
19,625 shares purchasable under the 1997 Plan upon the exercise of stock
options granted under the Plans. Includes 8,750 performance shares that the
Compensation Committee determined on April 11, 2000 had vested as a result
of the attainment of 1999 performance goals.
(7) Includes 1,500 shares purchasable within 60 days after March 22, 2000, upon
the exercise of stock options granted under the 1992 Directors' Plan.
(8) Includes 10,500 shares purchasable within 60 days after March 22, 2000,
upon the exercise of stock options granted under the 1992 Directors' Plan.
(9) Includes 1,500 shares purchasable within 60 days after March 22, 2000, upon
the exercise of stock options granted under the 1992 Directors' Plan.
(10) Includes 20,000 shares purchasable under the 1987 Plan and 6,313 shares
purchasable under the 1997 Plan within 60 days after March 22, 2000, upon
the exercise of stock options granted under the Plans. Includes 5,875
performance shares that the Compensation Committee determined on April 11,
2000 had vested as a result of the attainment of 1999 performance goals.
(11) Includes 18,000 shares purchasable under the 1987 Plan and 9,439 shares
purchasable under the 1997 Plan within 60 days after March 22, 2000, upon
the exercise of stock options granted under the Plans. Includes 3,100
performance shares that the Compensation Committee determined on April 11,
2000 had vested as a result of the attainment of 1999 performance goals.
(12) Includes Footnotes 4, 5, 6, 7, 8 and 9.
(13) Includes Footnotes 4, 5, 6, 7, 8, 9, 10 and 11. Also includes 101,500
shares purchasable under the 1987 Plan and 47,660 shares purchasable under
the 1997 Plan within 60 days after March 22, 2000 upon the exercise of
stock options granted under the Plans to executive officers who are not
Named Executive Officers. Includes 15,500 performance shares that the
Compensation Committee determined on April 11, 2000 had vested as a result
of attainment of 1999 performance goals.
20
<PAGE> 23
PROPOSAL NO. 2
APPROVAL OF THE COMPANY'S
2000 PERFORMANCE AND EQUITY INCENTIVE PLAN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE PLAN.
The Board of Directors of the Company has adopted, and submits for
stockholder approval, the HS Resources, Inc. 2000 Performance and Equity
Incentive Plan (the "2000 Plan"). Proxies will be voted in favor of the proposal
unless stockholders specify otherwise in their proxies. Approval by a majority
of shares represented in person or by proxy that are entitled to be voted on the
proposal 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 voting against. 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 and will not be counted in determining the number of affirmative votes
required for approval. A copy of the 2000 Plan is attached as Exhibit A to this
Proxy Statement. The summary of the 2000 Plan that appears below is qualified by
reference to the full text of the 2000 Plan.
In 1997, we adopted the 1997 Performance and Equity Incentive Plan in order
to enhance the profitability and value of the Company for the benefit of its
stockholders by providing equity ownership opportunities and performance based
incentives to better align the interests of key employees with those of
stockholders. The 1997 Plan was amended in 1998 and 1999. We believe that the
1997 Plan has been instrumental in helping us to achieve an extraordinary
increase in key stockholder value measures over the last three years.
Prior to this year's compensation awards for 1999, there remained for grant
only approximately 155,000 shares under the 1997 Plan. Therefore, the Board of
Directors approved the 2000 Plan, which authorizes 1,250,000 shares for grant on
terms substantially identical to those in the amended 1997 Plan. The 2000 Plan
became effective on April 11, 2000, the date of its approval by the Board. The
Board believed that increasing the number of shares available for grant was
necessary to allow the Company to make awards in 2000 and over the next several
years in the manner and approximate amounts it has done over the last three
years. Effective April 11, 2000, the Compensation Committee approved, and we
have made, year 2000 compensation awards under the 2000 Plan. These are
described below. These grants will remain effective regardless of whether
stockholders approve the 2000 Plan.
The consequences to the Company if stockholders do not approve the 2000
Plan are as follows:
(i) stock options granted under the 2000 Plan will not qualify for
treatment as incentive stock options, but will be required to be treated
for tax purposes as non-qualified stock options;
(ii) the Company will not be eligible for exemption from the
provisions of Section 162(m) of the Internal Revenue Code for awards made
under the 2000 Plan, as a result of which Company deductions for 2000 Plan
Benefits may be limited to $1 million per year per employee for the Named
Executive Officers; and
(iii) awards under the 2000 Plan will be required to be made in
accordance with certain New York Stock Exchange rules which equalize awards
between officers and non-officers.
The Company's incentive compensation program as continued by the 2000 Plan
provides equity-based incentives and performance-based awards to its
professional, technical and executive employees who can significantly impact
stockholder value. The Company believes that this group includes its executive
officers as well as its key managers and supervisors. As was true in the 1997
Plan, the 2000 Plan contains provisions that limit the dilutive effect of the
grant of equity-based awards, and that tie the award of these incentives to the
direct enhancement of stockholder value.
21
<PAGE> 24
The significant provisions of the 2000 Plan are discussed below.
KEY PROVISIONS OF THE 2000 PLAN
Administration. The 2000 Plan is administered by a committee consisting of
at least two members of the Board. Generally, it is anticipated that such
members shall be "non-employee directors", as defined in Rule 16b-3 of the
Securities Exchange Act of 1934 ("Exchange Act") and "outside directors" as
defined in Treasury Regulations issued under Section 162(m) of the Code. 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 comprised of at
least one member of the Board, the limited authority to grant Benefits to
persons other than officers and directors and establish the terms of the Benefit
at the time of grant. The 2000 Plan is currently being administered by the
Compensation Committee of the Company ("Committee").
Benefits Generally. The 2000 Plan provides for the award of benefits
(collectively, "Benefits") of various types, including stock options, stock
appreciation rights ("SARs"), restricted shares of Company stock, performance
shares, performance based cash awards and other performance based stock-based
awards.
Types of Benefits/Exercise Price/No Repricing. Options may be either
incentive stock options ("ISOs") or non-qualified stock options ("NSOs"). For
both ISOs and NSOs, the option price will be no less than the fair market value
of the shares of Company stock at the time the option is granted. Options may
not be repriced or cancelled and regranted to reprice. The other terms of the
options will be determined by the Committee, and, in the case of options
intended to qualify as ISOs, will meet all the requirements of Section 422 of
the Code.
SARs are the right to receive an amount equal to the appreciation in value
of one share of Company stock from the time the SAR is awarded until the time
the grantee elects to receive payment. Participants who elect to receive payment
of a SAR will receive an amount in cash, Company stock or any combination of
cash or Company stock, as determined by the Committee. SARs may not be issued
with an exercise price less than fair market value on the date of grant.
Restricted stock is subject to forfeiture until certain conditions have
been fulfilled and/or a period of time has elapsed. Grants of restricted stock
shall be made at such cost as the Committee shall determine and are typically
issued for no monetary consideration, subject to applicable state law. The
grantee is entitled to voting rights with respect to the restricted stock from
the date of grant.
Performance shares are the right to receive Company stock or cash equal to
the fair market value of the Company stock at a future date. Generally, such
right will be based upon the attainment of one or more targeted performance
goals. The Committee may also grant other stock-based awards which may be valued
in whole or in part by reference to, or otherwise based on, Company stock.
Awards may be granted by the Committee in tandem. However, no Benefit
except a SAR may be granted in tandem with an ISO.
Vesting and Term. The 2000 Plan provides that the maximum term of options
and stock appreciation rights is seven years, and establishes a minimum vesting
period of four years for all equity-based awards. (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.) We believe that these
requirements are appropriate, and have utilized these vesting and term
limitations with respect to all of the recent awards under the 2000 Plan.
Participants. Benefits may be awarded only to salaried employees and
directors of the Company and its affiliates. At April 1, 2000, the Company and
its affiliates had approximately 147 salaried employees. Under the 2000 Plan,
the Committee may grant Benefits at such times, in such amounts, and to such
recipients as the Committee may determine in its discretion subject to the
specific limitations set forth in the 2000 Plan.
Shares Authorized under the 2000 Plan. The 2000 Plan authorizes 1,250,000
shares of Common Stock for issuance under the Plan. This amount was designed to
provide an adequate number of shares for benefits for the next several years.
22
<PAGE> 25
Annual Limitation on Benefits to Individual Participants. In any given
fiscal year, no person eligible under the Plan for grants may receive Benefits
covering more than 200,000 shares of the Company's stock. Additionally, not more
than $500,000 in value of restricted stock, performance shares or other
stock-based awards (other than options and SARs) may be granted to any
participant in any fiscal year. Cash awards in any fiscal year to any
participant shall not exceed $500,000. These limitations, however, do not limit
the Company's right to make awards outside of the 2000 Plan.
Restricted Stock. The 2000 Plan limits to 100,000 the number of shares that
can be granted as restricted stock for less than fair market value. The
incentive compensation program utilizes restricted stock in a unique way that
grants restricted stock in lieu of a portion of the annual cash bonus for
certain employees whose performance can impact stockholder value. For these
employees, we establish an appropriate annual cash bonus component of total
compensation based on external market, internal comparability, employee
performance and other factors, and then award a percentage of that cash amount
as restricted stock in lieu of cash, valued at the fair market value of the
stock on the date of the bonus. Use of restricted stock in this fashion benefits
stockholders by reducing our cash expenses for compensation while at the same
time incentivizing employees to remain with us and to enhance per-share
enterprise value. All restricted stock issued will have a minimum four-year
vesting period from the date of grant.
Performance Shares. The 2000 Plan limits to 300,000 the number of shares
that can be awarded as performance shares. This maximum could be increased by
the number of shares authorized for issuance as, but not used for, restricted
stock.
These awards will be directly tied to successful attainment of growth and
value measures that directly translate into increased stockholder value. These
performance shares will vest no earlier than over a period of four years and
will be tied to attainment of an appropriately balanced combination of the
following value measures:
(i) At least a 15% compounded annual growth in operating 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 EBITDAX (earnings before interest, taxes, depreciation,
depletion and amortization, exploratory and abandonment, and geological and
geophysical costs) over the weighted average outstanding book capital
measured on a fiscal year basis; and
(iii) At least a 15% compounded annual growth in underlying net asset
value on a per-share basis measured over a period of time determined by the
Committee, using the pre-tax discounted present value at 10% of the
Company's proved reserves plus the estimated market value of all other
assets, less outstanding debt, excluding deferred taxes.
The Committee determines the interpretation, calculation, balance and
satisfaction of such measures. To date, the Committee has made awards such that
at each potential vesting date, one-fourth of the performance shares subject to
potential vesting in that year are vested if one of the performance goals has
been achieved; one-half of the performance shares subject to potential vesting
in that year are vested if two of the performance goals have been achieved; and
all of the performance shares subject to potential vesting in that year are
vested if all three performance goals have been achieved. With respect to all
performance share awards made to date under the 1997 Plan and the 2000 Plan, the
Committee has established 1997 as the base year against which the 15% goals in
measures (i) and (iii) are measured. The base year could be changed for future
awards. Goal (ii) is measured on an individual year basis. Additionally, for all
performance shares with respect to which the Committee has determined that
performance goals have been achieved, the Committee has neutralized short-term
commodity price swings. These pricing assumptions could be adjusted by the
Committee in future years.
If performance shares are not paid by reason of satisfaction of performance
criteria during the applicable performance period (i.e., in any of the nine
years after the award is made), they will be paid nine years from the effective
date of the award to participants employed at that date.
23
<PAGE> 26
Performance shares are not expected to have a dilutive effect on
stockholder value given the specific growth criteria that will be required prior
to issuance of the shares.
Amendment of Plan. The Committee may amend the 2000 Plan at any time.
However, the Committee may not amend the 2000 Plan without stockholder approval
if such amendment would (i) increase the numerical limitations on number of
shares issued under the Plan, number of shares issued to individuals or the
number of shares of restricted stock or performance shares that may be issued,
(ii) increase the limit on cash awards to individuals or (iii) change the
designation or class of persons eligible to receive Benefits under the Plan. The
amendment or termination of the 2000 Plan will not adversely affect any Benefit
granted prior to such amendment or termination. However, any Benefit may be
modified or canceled by the Committee if and to the extent permitted by the 2000
Plan or applicable agreement or with the consent of the participant to whom the
Benefit was granted.
Term. No Benefit may be granted under the 2000 Plan on or after the tenth
anniversary of the Effective Date of the 2000 Plan, but Benefits granted prior
to such tenth anniversary may extend beyond that date.
Unused Shares. If an option or SAR expires or is terminated, surrendered,
or canceled without having been fully exercised, if restricted stock or
performance shares are forfeited, or if any other conditions result in any
Company stock not being issued, the unused shares of Company stock covered by
any such Benefit shall again be available for grant under the 2000 Plan.
Adjustments. If there is any change in Company stock by reason of any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
reincorporation, other change in the corporate structure of the Company, or any
other similar transaction, appropriate proportionate adjustments or new or
substitute Benefits in a new enterprise shall be made by the Committee in the
aggregate number of shares of Company stock subject to the 2000 Plan, the price,
fair market value and number of shares subject to outstanding Benefits in order
to preserve, but not to increase, the Benefits to a 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.
Exercise. Upon the exercise of an option or in the case of any other
Benefit that requires a payment to the Company, payment may be made either (i)
in cash, or (ii) with the consent of the Committee, (a) by the tender to the
Company of Company stock owned by the participant 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 stock subject to
the exercise or the proceeds 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 in (a) through (c) above.
Transferability. ISOs will not be transferable other than by beneficiary
designation, will, or pursuant to the laws of descent and distribution, and may
not be pledged. With the written consent of the Committee, an NSO or other
Benefit may be assigned to one or more members of the participant's family, or
to a trust established for one or more such family members or pursuant to a
qualified domestic relations order. A participant's rights in restricted stock
are non-transferable except by the laws of descent and distribution until the
restrictions lapse.
Change in Control. Upon the occurrence of a Change in Control, all
contingencies with respect to outstanding options, SARs and restricted stock
automatically accelerate, so that each option or SAR becomes fully exercisable,
restrictions on restricted stock lapse so that such unrestricted stock is no
longer subject to forfeiture, and any performance standards related to
performance shares or any incentive award shall be deemed achieved and
restrictions otherwise applicable lapse. See Section 2.7 of the full text of the
2000 Plan for a definition of Change in Control.
Termination of Service. In the event that a participant's employment with
the Company terminates by reason of death, disability or retirement (as defined
in the Company's 401(k) Plan), all options and SARs become immediately
exercisable, all restrictions applicable to restricted stock, performance
shares, or other Benefits lapse, and awards become nonforfeitable. Upon
termination for death, disability or retirement, options and SARs are generally
exercisable for twelve months following termination, except ISOs that become
exercisable upon
24
<PAGE> 27
retirement are exercisable for three months. In the event of termination for
other reasons (other than termination for cause), options and SARs, to the
extent then exercisable, are exercisable for three months following termination.
Unfunded Obligation. The incentive awards to be paid to participants
pursuant to the 2000 Plan are an unfunded obligation of the Company. The
Committee, in its sole discretion, may direct the Company to share with its
subsidiaries the costs of a portion of the incentive awards paid to participants
who are executives of those companies. The Company is not required to segregate
any monies from its general funds, to create any trusts, or to make any special
deposits with respect to this obligation. Title to and beneficial ownership of
any investments which the Company may make to fulfill this obligation shall at
all times remain in the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of principal United States federal income
tax consequences related to grants or awards under the 2000 Plan. The discussion
is based upon interpretations of the Internal Revenue Code in effect as of
January 1, 2000, regulations promulgated thereunder as of such date, and other
administrative guidance. The summary is not intended to be comprehensive and
does not describe state, local, or foreign tax consequences. Moreover, statutory
provisions are subject to change, as are their interpretations, and their
application may vary in individual circumstances.
Non-Statutory Stock Options. For federal income tax purposes, the grant of
a non-statutory option will not generate federal income to a participant or a
deduction to the Company. Upon exercise (or up to 6 months later if the
participant is subject to Section 16(b) of the Exchange Act) of a non-statutory
option, the participant will normally be deemed to have received ordinary income
in an amount equal to the difference between the exercise price for the option
and the fair market value of the Company's common stock on the exercise date (or
up to 6 months later if the participant is subject to Section 16(b) of the
Exchange Act). The Company will be entitled to a tax deduction in the same
amount as is recognized by the participant at the same time, provided the
Company includes and reports such amounts on a timely filed Form W-2 or Form
1099-Misc (or similar such IRS form filing). Upon a disposition of shares
acquired upon exercise of a non-statutory option, any amount received in excess
of the market value of the shares at the time of exercise of the option
generally will be treated as long-term or short-term capital gain, depending on
the holding period of the shares. The Company will not be entitled to any tax
deduction upon such subsequent disposition.
Incentive Stock Options. In the case of incentive options, the participant
recognizes no ordinary income on the date of grant or exercise. If the
participant holds the stock acquired through exercise of an incentive option for
one year from the date of exercise and two years from the date of grant, the
participant will thereafter recognize long-term capital gain or loss upon a
subsequent sale of the stock, based on the difference between the incentive
option's exercise price and the sale price. If the stock is sold before the
requisite holding period, the participant will recognize ordinary income based
upon the difference between the exercise price and the lesser of the sales price
or the fair market value upon the date of exercise. The Company generally will
be allowed a business expense deduction only if, and to the extent, the
participant recognizes ordinary income.
The exercise of an incentive option may result in tax liability to the
participant under the alternative minimum tax (AMT). The AMT provides for
additional tax equal to the excess, if any of (a) 26% or 28% of "alternative
minimum taxable income" in excess of a certain exemption amount, over (b)
regular tax for the taxable year. Alternative minimum taxable income includes
the excess, if any, of the fair market value of the shares acquired under an
incentive option at the time of the exercise (or up to 6 months later if the
participant is subject to Section 16(b) of the Exchange Act) over the exercise
price for the optioned shares.
In order to receive incentive stock option treatment, the plan must specify
the number of incentive stock option shares to be issued and the participants
who are eligible to receive them. The plan must be approved by the stockholders
of the Company within 12 months before or after the date the plan is adopted. If
the plan is not approved, the stock options will be treated as non-statutory
stock options. Only $100,000 of incentive stock options (based on the fair
market value of the underlying stock) that are exercisable for the first time in
a calendar year can receive incentive stock option treatment. For purposes of
the $100,000 limitation, the fair market value
25
<PAGE> 28
of the underlying stock is measured as of the date the option was granted. The
excess options would be treated as non-statutory stock options.
Stock Appreciation Rights. No taxable income is recognized by a participant
upon the grant or award of a SAR under the 2000 Plan. The participant must
include in ordinary income the amount of cash received and the fair market value
on the exercise date of any shares received upon the exercise of a SAR. The
Company will be entitled to a deduction, subject to the deduction limit under
Section 162(m) of the Code, equal to the amount included in such participant's
income by reason of the exercise of any SAR. Shares of Company stock received on
the exercise of a SAR will be eligible for capital gain treatment, with the
capital gain holding period commencing on the date of exercise of the SAR.
Restricted Stock. Awards of restricted stock will not result in taxable
income to the participant or a tax deduction to the Company for federal income
tax purposes at the time of grant. A participant receiving restricted stock
generally will be subject to tax at ordinary income rates on the fair market
value of the Company stock at the time the restricted stock is no longer subject
to forfeiture. However, a participant who so elects under Section 83(b) of the
Code within 30 days of the date of the grant will have ordinary taxable income
on the date of the grant equal to the fair market value of the restricted stock
as if such shares were unrestricted and could be sold immediately. If the
restricted stock subject to such election is forfeited, the participant will be
unable to claim a deduction, refund or loss with respect to the forfeited
shares. If a Section 83(b) election is not made, the holding period will begin
when the restriction period expires. Upon sale of the restricted stock, all gain
will be either short-term or long-term capital gain and the tax basis will be
equal to the fair market value of the shares on the date the restriction period
expires. If the participant did make an effective Section 83(b) election, the
holding period commences on the date of the grant and the tax basis will be
equal to the fair market value of the restricted shares on the date of the grant
as if such shares were then unrestricted and could be sold immediately. The
award of shares of restricted stock which are subject to the achievement of
performance goals will not result in taxable income to the participant or a tax
deduction to the Company for federal income tax purposes at the time of grant. A
participant receiving such an award generally will be subject to tax at the same
time and in the same manner as applicable to participants receiving restricted
shares as described above. The Company is entitled to a deduction (subject to
the provisions of Section 162(m) of the Code) for compensation paid to a
participant at the same time and in the same amount as the participant is
considered to have realized compensation by reason of the lapse of restrictions
on an award of restricted stock or due to a valid election under Section 83(b)
of the Code.
Performance Shares. Generally, a participant will not recognize any taxable
income and the Company will not be entitled to a deduction upon the award of
performance shares (or up to 6 months later if the participant is subject to
Section 16(b) of the Exchange Act), unless a valid Section 83(b) election was
made to accelerate the income. At the time the participant receives performance
shares, the fair market value of any shares, or the amount of any cash received
in payment for such performance shares generally is taxable to the participant
as ordinary income and the Company will be entitled to a tax deduction at such
time, subject to the deduction limitation under Section 162(m) of the Code.
Limits on Deductions. Under Section 162(m) of the Code, the deductible
amount of compensation paid to the chief executive officer and the four other
most highly paid executive officers employed by the Company in the year for
which a deduction is claimed by the Company (including its subsidiaries) is
limited to $1,000,000 per person, except that under certain circumstances,
compensation that is performance-based will be excluded for purposes of
calculating the amount of compensation subject to this $1,000,000 limitation.
The ability of the Company to claim a deduction for compensation paid to any
other executive officer or employee of the Company (including its subsidiaries)
is not affected by this provision. Except with respect to certain change in
control payments, retirement, disability or death payments, the 2000 Plan is
generally intended to conform with the performance-based compensation exception
to Section 162(m) of the Code.
Cash Awards Dividends, and Dividend Equivalents. Cash awards, dividends and
dividend equivalent payments are taxable as ordinary income when paid. The
Company is entitled to deduct the amount of a cash award, dividends on
restricted stock and dividend equivalent payments when such amounts are taxable
to the recipient.
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<PAGE> 29
Section 280G of the Code. Under certain circumstances, the accelerated
vesting or exercise of options or SARs, or the accelerated lapse of restrictions
with respect to other awards, in connection with a change in control of the
Company might be deemed an "excess parachute payment" for purposes of the golden
parachute tax provisions of Section 280G of the Code. To the extent it is so
considered, the participant may be subject to a 20% excise tax and Company may
be denied a tax deduction.
OUTSTANDING AWARDS AND SHARES AVAILABLE FOR AWARD
There are 1,251,959 outstanding options under all of the Company equity
incentive plans other than the 2000 Plan, 485,202 of which are currently
exercisable. These outstanding options have an average remaining life of 4.79
years, and an average exercise price of $12.37. There are also 49,014 shares of
restricted stock at zero cost outstanding with average years to vesting of 1.57
and 145,866 performance shares at zero cost outstanding with a range of average
years to vesting of 2.5 to 7.5. There were granted in April of 2000, 330,125
options under the 2000 Plan with a remaining life of seven years, and an
exercise price of $18.63. These will vest over four years. There were also
granted under the 2000 Plan, 22,500 shares of restricted stock at zero cost with
a four year vesting schedule, and 100,500 performance shares at zero cost with
earliest vesting over four years and ultimate vesting in nine years. The only
shares available for grant are those authorized shares under the 2000 Plan
remaining after these grants, and 39,750 shares under the 1992 Directors' Plan.
NEW PLAN BENEFITS -- 2000 PLAN
The following table shows the awards that have been made under the 2000
Plan:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
NUMBER OF RESTRICTED PERFORMANCE
NAME AND POSITION OPTIONS(1) STOCK(2) SHARES(3)
- ----------------- ---------- ---------- -----------
<S> <C> <C> <C>
Nicholas J. Sutton
Chief Executive Officer........................... 50,000 3,750 20,000
P. Michael Highum
President......................................... 50,000 3,750 20,000
James E. Duffy
Vice President -- Finance and Chief Financial
Officer........................................... 25,000 2,500 15,000
James M. Piccone
Vice President -- General Counsel and Secretary... 12,500 2,500 12,500
Tony W. Church
Vice President -- Exploration..................... 13,750 1,250 5,000
Executive Group (12 officers)....................... 210,125 20,000 100,500
Non-Executive Directors (3 persons)................. -- -- --
Non-Executive Officer Employee Group................ 120,000 2,500 --
</TABLE>
- ---------------
(1) Options granted at $18.63, fair market value on the date of grant, April 11,
2000, with seven year term and four year vesting.
(2) Restricted Stock at zero cost, granted on April 11, 2000, with four year
vesting.
(3) Performance Shares at zero cost, granted April 11, 2000, with four to nine
year vesting.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
If you have a proposal that you would like to present at next year's Annual
Meeting please submit the proposal in writing to us before December 15, 2000.
Proposals submitted by that date will be reviewed in accordance with the Rules
and Regulations of the Securities and Exchange Commission for possible inclusion
in next year's proxy statement for action at next year's annual meeting.
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<PAGE> 30
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, 2000. 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, if you
return the enclosed Proxy card your vote will be voted as the Board may
recommend.
FORM 10-K
You may obtain a copy of the Company's Annual Report by writing to us at
Investor Relations, HS Resources, Inc., One Maritime Plaza, 15th Floor, San
Francisco, California 94111. The Annual Report was filed with the SEC on March
24, 2000.
By signing and returning the enclosed Proxy, you will be assured of
representation at the Annual Meeting in connection with approval of the matters
discussed at the Meeting. You should review, complete, execute, date and return
the enclosed Proxy to the Company in the envelope provided as promptly as
possible. The Board appreciates your cooperation.
Dated: April 17, 2000.
28
<PAGE> 31
HS RESOURCES, INC.
2000 PERFORMANCE AND EQUITY INCENTIVE PLAN
ADOPTED AND EFFECTIVE APRIL 11, 2000
<PAGE> 32
EFFECTIVE APRIL 11, 2000
CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
- -------- ----
<S> <C> <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............................................ 6
10. Performance Shares.......................................... 7
11. Cash Performance Awards..................................... 8
12. Other Stock-Based Performance Awards........................ 8
13. Transferability............................................. 8
14. Termination of Service...................................... 9
15. Change in Control........................................... 9
16. Term, Amendment, Suspension or Termination of the Plan...... 10
17. Investment Purpose.......................................... 10
18. Miscellaneous............................................... 10
</TABLE>
i
<PAGE> 33
HS RESOURCES, INC.
2000 PERFORMANCE AND EQUITY INCENTIVE PLAN
1. NAME AND PURPOSE.
1.1. This plan is the HS RESOURCES, INC. 2000 PERFORMANCE AND EQUITY
INCENTIVE PLAN, adopted and effective as of April 11, 2000 (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 stockholders by providing equity
ownership opportunities and performance-based incentives to better align the
interests of officers and key employees with those of stockholders; (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. "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.
2.2. "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.
2.3. "Benefit" means any benefit granted to a Participant under the Plan.
2.4. "Board" means the Board of Directors of the Company.
2.5. "Cash Award" means a Benefit payable in the form of cash.
2.6. "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.
2.7. 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;
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<PAGE> 34
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.
2.8. "Code" means the Internal Revenue Code of 1986, as amended.
2.9. "Committee" means the committee appointed by the Board pursuant to
Section 3 hereof to administer the Plan.
2.10. "Company" means HS Resources, Inc., a Delaware corporation and its
Affiliates, if any.
2.11. "Effective Date" means April 11, 2000.
2.12. "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.
2.13. "Fiscal Year" means the taxable year of the Company which is the
calendar year.
2.14. "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.
2.15. "Incentive Stock Option" or "ISO" means an Option designated as an
Incentive Stock Option and satisfying the requirements of Section 422 of the
Code.
2.16. "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).
2.17. "Non-Statutory Stock Option" or "NSO" means an Option other than an
ISO.
2.18. "Option" means an option to purchase one or more Shares pursuant to
this Plan.
2.19. "Optionee" means a Participant who receives an Option.
2.20. "Option Price" means the purchase price for each Share subject to an
Option.
2.21. "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.
2.22. "Participant" means any person who receives a Benefit under this
Plan.
2.23. "Performance Share" means a Share awarded to a Participant under
Article 10 of the Plan.
2.24. "Plan" means this HS Resources, Inc. 2000 Performance and Equity
Incentive Plan and all amendments and supplements thereto.
2
<PAGE> 35
2.25. "Plan Year" means each 12-month period during the term of the Plan
commencing the Effective Date or an anniversary thereof.
2.26. "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.
2.27. "Rule 16b-3" means the rule promulgated by the SEC, as amended, or
any successor rule in effect from time to time.
2.28. "SEC" means the Securities and Exchange Commission.
2.29. "Share" means a share of Common Stock of the Company.
2.30. "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.
2.31. "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, no such action shall change the exercise
price of any Benefit that has been previously granted and cancellation and
regrant shall not be used as a method to reprice options. 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 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
3
<PAGE> 36
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, however, reprice options
(or cancel and regrant options in order to reprice) and, except as otherwise
provided herein, 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.
4. SHARES SUBJECT TO THE PLAN.
4.1. Number of Shares. A combined total of 1,250,000 shares and SARs for
this purpose are authorized for issuance under the Plan 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.
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 100,000 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
4
<PAGE> 37
300,000 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 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.
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<PAGE> 38
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 a 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.
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
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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. The Participant is
entitled to voting 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. The Company shall not be required to issue a certificate
for Restricted Stock prior to the expiration of any restrictions on the stock,
provided the shares of restricted stock are shown as issued restricted stock in
the Company's (or its transfer agent's) share transfer records. If a certificate
representing Restricted Stock is issued, it 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:
a. At least a 15% compounded annual growth in operating cash flow on a
per-share basis measured over a period of time determined by the Committee;
b. At least a 15% annual rate of return on outstanding book capital
calculated using EBITDAX (earnings before interest, taxes, depreciation,
depletion and amortization, exploratory and abandonment, and geological and
geophysical costs) over the weighted average outstanding book capital,
measured on a fiscal year basis; and
c. At least a 15% compounded annual growth in underlying net asset
value on a per-share basis measured over a period of time determined by the
Committee, using the pre-tax discounted present value at 10% of the
Company's proved reserves plus the estimated market value of all other
assets, less outstanding debt, excluding deferred taxes.
The Committee shall have broad discretion to determine the interpretation,
calculation, balance and satisfaction of such measures. Performance Shares that
are not paid on account of satisfaction of the applicable Performance
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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.
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
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<PAGE> 41
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 2.6(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.
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.
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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
stockholder approval of the Plan during the first year and again 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.
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.
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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 stockholder
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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PROXY PROXY
HS RESOURCES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
THIS PROXY IS SOLICITED ON BEHALF OF HS RESOURCES, INC.'S BOARD OF DIRECTORS
The undersigned hereby appoints P. Michael Highum, Nicholas J. Sutton and
James M. Piccone, and each of them, proxies for the undersigned, with full 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 Tuesday, May 16, 2000, at 9:00 A.M., or at any adjournment
thereof, upon the matter 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'
recommendation, please sign the reverse side; no boxes need to be checked.
<TABLE>
<S> <C>
Comments/Address Change
----------------------------- COMMENTS/ADDRESS CHANGE: PLEASE MARK
COMMENT/ADDRESS BOX ON REVERSE SIDE
-----------------------------
(Continued and to be signed on the other side)
-----------------------------
</TABLE>
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5223 -- HS RESOURCES, INC.
<PAGE> 45
HS RESOURCES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
1. ELECTION OF DIRECTORS --
Nominees: 01-Nicholas J. Sutton For Withhold For All
02-Barry Reder All All Except
/ / / / / /
------------------------------------
(Nominee Exception)
For Against Abstain
2. Approval of the HS Resources, Inc. 2000 / / / / / /
Performance and Equity Incentive Plan.
I PLAN TO ATTEND MEETING / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 & 2.
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: ,
--------------------------------------------
Signature(s)
------------------------------------------------------------------
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NOTE: Please sign as name appears herein. Joint owners should each sign. When
signing attorney, executor, administrator, trustee or guardian, please give full
title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
5223 -- HS RESOURCES, INC.
