AMENDMENT TO PRELIMINARY PROXY
DATED AND AS FILED WITH THE SEC ON
NOVEMBER 24, 1998
PROXY STATEMENT
OF
DELTA PETROLEUM CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON , , 1998
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors (the "Board of Directors")
of Delta Petroleum Corporation ("Delta" or the "Company") of
proxies to be voted at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on , , 1998
at the Company's corporate offices, 555 17th Street, Suite
3310, Denver, Colorado 80202, at , M.S.T., and at any
adjournment thereof. Each shareholder of record at the close of
business on , 1998 of shares of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), will be
entitled to one vote for each share so held. As of September 23,
1998 there were 5,513,858 shares of Common Stock issued and
outstanding.
Shares represented by properly executed proxy cards received
by the Company at or prior to the Annual Meeting will be voted
according to the instructions indicated on the proxy card.
Unless contrary instructions are given, the persons named on the
proxy card intend to vote the shares so represented FOR (i) the
election of the nominees for directors, (ii) the ratification of
an amendment to the Company's 1993 Incentive Plan, as amended,
revising the compensation formula for Nonemployee Directors; and
(iii) the ratification of the appointment of KPMG Peat Marwick LLP
as the Company's independent auditors for the fiscal year
ending June 30, 1999.
As to any other business which may properly come before the
meeting, the persons named on the proxy card will vote according
to their judgement. The enclosed proxy may be revoked prior to
the meeting by written notice to the Secretary of the Company at
555 17th Street, Suite 3310, Denver, Colorado 80202, or by
written or oral notice to the Secretary at the Annual Meeting
prior to being voted. This Proxy Statement and the Proxy Card
enclosed herewith are expected to be first sent to shareholders
of the Company on or about , 1998.
If a quorum is not present at the meeting, a vote for
adjournment will be taken among the shareholders present or
represented by proxy. If a majority of the shareholders present
or represented by proxy vote for adjournment, it is the Company's
intention to adjourn the meeting until a later date and to vote
proxies received at such adjourned meeting(s).
ELECTION OF DIRECTORS
(Proposal 1 of the Proxy)
Directors of the Company are elected annually by the
shareholders to serve until the next Annual Meeting of
Shareholders and until their respective successors are duly
elected. The Bylaws of the Company provide that the number of
directors comprising the whole Board shall from time to time be
fixed and determined by resolution adopted by the Board of
Directors. The Board of Directors has established the size of
the Board for the ensuing year at four directors. Accordingly,
the Board of Directors is recommending that the four current
directors of the Company be re-elected. If any nominee becomes
unavailable for any reason, a substitute nominee may be proposed
by the Board of Directors and the shares represented by proxy
will be voted for any substitute nominee, unless the Board
reduces the number of directors. The Board of Directors has no
reason to expect that any nominee will become unavailable.
Assuming the presence of a quorum, the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock
represented in person or by proxy at the Annual Meeting is
required for the election of directors.
At the Annual Meeting, the shares of Common Stock
represented by proxies will be voted in favor of the election of
the nominees named below unless otherwise directed.
The Board of Directors recommends a vote for these nominees.
NOMINEES FOR ELECTION AS DIRECTORS TO SERVE
UNTIL NEXT ANNUAL MEETING
The following information with respect to Directors and
Executive Officers is furnished pursuant to Item 401(a) of
Regulation S-B.
Name Age Positions Period
of Service
Aleron H. Larson, Jr. 53 Chairman of the Board, May 1987
Chief Executive Officer, to Present
Secretary, Treasurer,
and a Director
Roger A. Parker 36 President and May 1987
a Director to Present
Terry D. Enright 49 Director November 1987
to Present
Jerrie F. Eckelberger 54 Director September 1996
to Present
The following is biographical information as to the business
experience of each current officer and director of the Company.
Aleron H. Larson, Jr., age 53, has operated as an independent
in the oil and gas industry individually and through public and
private ventures since 1978. From July of 1990 through March 31,
1993, Mr. Larson served as the Chairman, Secretary, CEO and a
Director of Underwriters Financial Group, Inc. ("UFG") (formerly
Chippewa Resources Corporation), a public company then listed on
the American Stock Exchange which presently owns approximately
16.67% of the outstanding equity securities of Delta. Subsequent
to a change of control, Mr. Larson resigned from all positions
with UFG effective March 31, 1993. Mr. Larson serves as
Chairman, CEO, Secretary, Treasurer and Director of Amber
Resources Company ("Amber"), a public oil and gas company which
is a majority-owned subsidiary of Delta. He has also served,
since 1983, as the President and Board Chairman of Western
Petroleum Corporation, a public Colorado oil and gas company
which is now inactive. Mr. Larson practiced law in Breckenridge,
Colorado from 1971 until 1974. During this time he was a member
of a law firm, Larson & Batchellor, engaged primarily in real
estate law, land use litigation, land planning and municipal law.
In 1974, he formed Larson & Larson, P.C., and was engaged
primarily in areas of law relating to securities, real estate,
and oil and gas until 1978. Mr. Larson received a Bachelor of
Arts degree in Business Administration from the University of
Texas at El Paso in 1967 and a Juris Doctor degree from the
University of Colorado in 1970.
Roger A. Parker, age 36, served as the President, a Director
and Chief Operating Officer of Underwriters Financial Group from
July of 1990 through March 31, 1993. Mr. Parker resigned from
all positions with UFG effective March 31, 1993. Mr. Parker also
serves as President, Chief Operating Officer and Director of
Amber. He also serves as a Director and Executive Vice President
of P & G Exploration, Inc., a private oil and gas company
(formerly Texco Exploration, Inc.). Mr. Parker has also been the
President, a Director and sole shareholder of Apex Operating
Company, Inc. since its inception in 1987. He has operated as an
independent in the oil and gas industry individually and through
public and private ventures since 1982. He was at various times,
from 1982 to 1989, a Director, Executive Vice President,
President and shareholder of Ampet, Inc. He received a Bachelor
of Science in Mineral Land Management from the University of
Colorado in 1983. He is a member of the Rocky Mountain Oil and
Gas Association and the Independent Producers Association of the
Mountain States (IPAMS).
Terry D. Enright, age 49, has been in the oil and gas
business since 1980. Mr. Enright was a reservoir engineer until
1981 when he became Operations Engineer and Manager for Tri-Ex
Oil & Gas. In 1983, Mr. Enright founded and is President and a
Director of Terrol Energy, a private, independent oil company
with wells and operations primarily in the Central Kansas Uplift
and D-J Basin. In 1989, he formed and became President and a
Director of a related company, Enright Gas & Oil, Inc. Since
then, he has been involved in the drilling of prospects for
Terrol Energy, Enright Gas & Oil, Inc., and for others in
Colorado, Montana and Kansas. He has also participated in
brokering and buying of oil and gas leases and has
been retained by others for engineering, operations, and general
oil and gas consulting work. Mr. Enright received a B.S. in
Mechanical Engineering with a minor in Business Administration
from Kansas State University in Manhattan, Kansas in 1972, and
did graduate work toward an MBA at Wichita State University in
1973. He is a member of the Society of Petroleum Engineers and a
past member of the American Petroleum Institute and the American
Society of Mechanical Engineers.
Jerrie F. Eckelberger, age 54, is an investor, real estate
developer and attorney who has practiced law in the State of
Colorado for 26 years. He graduated from Northwestern University
with a Bachelor of Arts degree in 1966 and received his Juris
Doctor degree in 1971 from the University of Colorado School of
Law. From 1972 to 1975, Mr. Eckelberger was a staff attorney
with the eighteenth Judicial District Attorney's Office in
Colorado. After spending two years in the litigation department
of a Denver law firm, he founded Eckelberger & Associates, of
which he is still the principal member. From 1982 to 1992 Mr.
Eckelberger was the senior partner of Eckelberger & Feldman, a
law firm with offices in Englewood, Colorado. In 1992, Mr. Eckelberger
founded Eckelberger & Associates of which he is still the principal
member. Mr. Eckelberger previously served as an officer, director
and corporate counsel for Roxborough Development Corporation.
Since March, 1996, Mr. Eckelberger has acted as the
President and Chief Executive Officer of 1998, Ltd., a Colorado
corporation actively engaged in the development of real estate in
Colorado. He is the Managing Member of The Francis Companies,
LLC, a Colorado limited liability company, which actively
invests in real estate and has been since June, 1996.
Additionally, since November 1997, Mr. Eckelberger has served as
managing Member of the Woods at Pole Creek, a Colorado
limited liability company specializing in real estate
development.
There is no family relationship among or between any of the
Directors.
Messrs. Enright and Eckelberger serve as the audit committee
and as the compensation committee. Messrs. Enright and
Eckelberger also constitute the Incentive Plan Committee for the
Delta 1993 Incentive Plan for the Company.
All directors will hold office until the next annual meeting
of shareholders. There are no arrangements or understandings
among or between any director of the Company and any other person
or persons pursuant to which such director was or is to be
selected as a director.
All officers of the Company will hold office until the next
annual directors' meeting of the Company. There is no
arrangement or understanding among or between any such officer or
any person pursuant to which such officer is to be selected as an
officer of the Company.
There is no employee who is not a designated officer or
director who is expected to make any significant contribution to
the business of the Company.
BOARD OF DIRECTORS AND COMMITTEES
During fiscal year 1998 the Board of Directors met on six
occasions either in person or by phone or in lieu thereof acted
by consent. The Board of Directors has appointed three
committees: the Audit, Compensation, and Incentive Plan
Committees. The non-employee directors, Messrs. Eckelberger and
Enright, currently serve on all three committees and both are
necessary to constitute a quorum. During fiscal year 1998 the
Compensation Committee met on one occasion, the Audit Committee
on one occasion, and the Incentive Plan Committee on three
occasions, either in person or by phone or, in lieu thereof,
acted by consent.
The Compensation Committee makes recommendations to the Board
of Directors in the area of executive compensation. The Audit
Committee is appointed for the purpose of overseeing and
monitoring the Company's independent audit process. It is also
charged with the responsibility for reviewing all related party
transactions for potential conflicts of interest. The Incentive
Plan Committee is charged with the responsibility for selecting
individual employees to be issued options and other grants under
Delta's 1993 Incentive Plan, as amended. Members of the
Incentive Plan Committee, as non-employee directors, are
automatically awarded options on an annual
basis under a fixed formula under the 1993 Incentive Plan, as
amended. (See "Compensation of Directors").
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
SHAREHOLDERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
The following table presents information concerning
persons known by management to own beneficially 5% or more of the
issued and outstanding voting securities of the Company at
September 23, 1998.
Name and Address Amount and Nature
Title of Beneficial of Beneficial Percent
of Class (1) Owner Ownership of Class (2)
Common Stock Aleron H. Larson, Jr. 1,497,480 shares(3) 25.07%
555 17th St., #3310
Denver, CO 80202
Common Stock Roger A. Parker 1,389,794 shares(4) 23.82%
555 17th St., #3310
Denver, CO 80202
Common Stock Aleron H. Larson, Jr. 1,968,294 shares(5) 31.27%
& Roger A. Parker
(as a group)
555 17th St., #3310
Denver, CO 80202
Common Stock Underwriters Financial 918,980 shares(6) 16.67%
Group, Inc.
80 Maiden Lane
New York, NY 10038
Common Stock Burdette A. Ogle 761,891 shares(7) 13.82%
1224 Coast Village Rd, #24
Santa Barbara, CA 93108
(1) Delta has an authorized capital of 300,000,000 shares of
$.01 par value Common Stock of which 5,513,858 shares
were issued and outstanding as of September 23, 1998.
Delta also has an authorized capital of 3,000,000 shares
of $.10 par value preferred stock of which no shares
were outstanding at September 23, 1998. As of September
23, 1998, Delta had outstanding warrants and options to
purchase 889,500 shares of Common Stock at prices
ranging from $1.25 per share to $8.50 per share.
Additionally, Delta had outstanding options which were
granted to officers and employees to purchase up to
1,162,977 shares of Common Stock at prices ranging from
$1.125 to $9.75 per share.
(2) The percentage set forth after the shares listed for
each beneficial owner is based upon total shares
outstanding of 5,513,858. The percentage set forth
after each beneficial owner is calculated as if any
warrants and/or options owned had been exercised by such
beneficial owner and as if no other warrants and/or
options owned by any other beneficial owner had been
exercised. Warrants and options are aggregated without
regard to the class of warrant or option.
(3) Includes 111,000 shares owned by Mr. Larson's wife and
2,000 shares owned by each of his four children (119,000
in aggregate) and 459,500 options to purchase 459,500
shares of Common Stock at $1.125 per share until
September 1, 2008. Also includes 918,980 shares owned by
Underwriters Financial Group, Inc. for which Mr. Larson
has shared voting power with Mr. Parker but for which he
has no investment power. The duration of the voting
agreement affecting the aforementioned shares voted by
Messrs. Larson and Parker (unless the shares are sold to
non-affiliates) is until December 31, 2002.
(4) Includes 149,837 shares owned by Mr. Parker directly and
320,977 options to purchase 320,977 shares of Common
Stock at $1.125 per share until September 1, 2008. Also
includes 918,980 shares owned by Underwriters Financial
Group, Inc. for which Mr. Parker has shared voting power
with Mr. Larson but for which he has no investment
power. The duration of the voting agreement affecting the
aforementioned shares voted by Messrs. Larson and Parker
(unless the shares are sold to non-affiliates) is until
December 31, 2002.
(5) Includes all warrants, options and shares referenced in
footnotes (3) and (4) above as if all warrants and
options were exercised and as if all resulting shares,
including shares covered by the above referenced voting
agreements, were voted as a group.
(6) These shares are subject to a voting agreement
referenced in footnotes (3) and (4) above.
(7) Includes 635,264 shares owned by Mr. Ogle directly,
26,627 shares owned beneficially by Sunnyside Production
Company, and warrants to purchase 100,000 shares of
Common Stock at $8.00 per share until August 31, 1999,
with a call provision whereby the Company may repurchase
any unexercised warrants for an aggregate sum of $1,000
after the Company stock has traded for $10.00 per share
or greater for 30 consecutive trading days.
(b) Security Ownership of Management:
Amount and Nature
Title of Name of Beneficial of Beneficial Percent
Class (1) Owner Ownership of Class(2)
Common Stock Aleron H. Larson, Jr. 1,497,480 shares(3) 25.07%
Common Stock Roger A. Parker 1,389,794 shares(4) 23.82%
Common Stock Terry D. Enright 37,500 shares(5) 00.68%
Common Stock Jerrie F. Eckelberger 9,375 shares(6) 00.17%
Common Stock Officers and Directors 2,015,169 shares(7) 31.78%
as a Group (4 persons)
(1) See Note (1) to preceding table
(2) See Note (2) to preceding table
(3) See Note (3) to preceding table
(4) See Note (4) to preceding table
(5) Includes 5,000 Class D Warrants to purchase shares of
Common Stock at $1.25 per share until 30 days after the
underlying shares are registered; 10,000 Class I
warrants to purchase stock at $3.50 per share until June
9, 2003; 7,500 options to purchase shares of Common
Stock at $3.30 per share until November 11, 2006; 7,500
options to purchase shares of Common Stock at $3.15 per
share until December 31, 2006, and 7,500 options to
purchase shares at $1.88 per share until December 31,
2007.
(6) Includes 1,875 options to purchase shares of Common
Stock at $2.98 per share until December 31, 2006 and
7,500 options to purchase shares at $1.88 per share
until December 31, 2007.
(7) Includes 918,980 shares owned by UFG as of September 23,
1998 which are voted by Messrs. Larson and Parker under
voting agreements described in footnotes (3) and (4)
above and includes all warrants and options referenced
in footnotes (3), (4), (5) and (6) above.
(c) Change in Control. Not applicable.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
ANNUAL COMPENSATION
NAME AND
PRINCIPAL POSITION PERIOD SALARY BONUS
Aleron H. Larson, Jr. Year Ended
Chairman, CEO, 6/30/98 $198,000 $ -0-
Secretary, Treasurer,
and a Director Year Ended
6/30/97 198,000 55,000
Year Ended
6/30/96 189,000 55,000
LONG TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION PERIOD SARS COMPENSATION
Aleron H. Larson, Jr. Year Ended
Chairman, CEO, 6/30/98 275,000(3) -0-
Secretary, Treasurer,
and a Director Year Ended
6/30/97 100,000(2)(3) -0-
Year Ended
6/30/96 75,000(3)(4) -0-
ANNUAL COMPENSATION
NAME AND
PRINCIPAL POSITION PERIOD SALARY BONUS
Roger A. Parker Year Ended
President, Chief 6/30/98 $198,000 $ -0-
Operating Officer,
and a Director Year Ended
6/30/97 198,000 55,000
Year Ended
6/30/96 189,000 55,000
LONG TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION PERIOD SARS COMPENSATION
Roger A. Parker Year Ended
President, Chief 6/30/98 253,427(3) -0-
Operating Officer,
and a Director Year Ended
6/30/97 100,000(2)(3) -0-
Year Ended
6/30/96 75,000(3)(4) -0-
(1) Includes reimbursement of certain expenses.
(2) Options to purchase 100,000 shares of Common Stock at $3.25
per share until August 30, 2006 under the Delta 1993 Incentive
Plan. (See Note 3 below)
(3) Previously granted options: exercise prices repriced from
$3.25 to $1.66 and expiration dates extended until December 8,
2007 during fiscal year 1998.
(4) Options to purchase 75,000 shares of Common Stock at $3.25
per share until August 30, 2005 under the Delta 1993 Incentive
Plan. The exercise price of these options was repriced from
$5.375 to $3.25 per share during fiscal year 1997 and again in
fiscal year 1998 as indicated in Note 3 above.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER of % of TOTAL
SECURITIES OPTIONS/SAR's
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SAR's EMPLOYEES OR BASE EXPIRATION
NAME GRANTED IN FISCAL YEAR PRICE ($/sh) DATE
Aleron H.
Larson, Jr. 275,000(1) 39.40% $1.66 12/08/07
Roger A.
Parker 253,427(1) 36.30% $1.66 12/08/07
(1) Previously granted options: exercise price repriced from
$3.25 to $1.66 and expiration date extended until
December 8, 2007 during fiscal year 1998.
AGGREGATED OPTIONS/EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT AT
SHARES JUNE 30,1998(#) JUNE 30,1998($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) $ UNEXERCISABLE UNEXERCISABLE
Aleron H.
Larson, Jr. -0- -0- 459,500 (1)/0 $912,375/0
CEO
Roger A.
Parker 32,000(2) $84,000(2) 320,977 (1)/0 $609,543/0
President
(1) Includes as of June 30, 1998, 177,500 options for Mr. Larson
and 60,550 options for Mr. Parker to purchase Common Stock
exercisable at $1.25 per share until September 21, 2004; 7,000
options to purchase Common Stock exercisable at $2.50 per share
until August 8, 1995; 275,000 options for Mr. Larson and 253,427
options for Mr. Parker to purchase Common Stock exercisable at
$1.66 per share until December 8, 2007. On September 1, 1998,
the exercise prices of all of these options were reduced to
$1.125 per share and their expiration dates were extended
to September 1, 2008.
(2) Mr. Parker acquired 32,000 shares through the exercise of
options to purchase shares at $1.25 per share. Mr. Parker has
not sold any of these shares. Payment for the shares purchased
upon exercise of the option was made in shares of the Company's
common stock previously owned by Mr. Parker, valued at the market
price on the date of exercise as provided for under the Company's
1993 Incentive Plan, as amended.
Compensation of Directors.
Effective November 1, 1996, the Board of Directors of the
Company amended its Incentive Plan to include nonemployee
directors. Currently, under a formula contained in the
Company's 1993 Incentive Plan ("Plan"), as amended, the Company
grants on an annual basis to each nonemployee director options to
purchase, on a pro rata basis, 7,500 shares of the
Company's Common Stock for services performed during the previous
12 months at 50% of the average market price for the year or
lesser portion of the year served.
During the fiscal year 1998, the Company granted options
under the above referenced formula as contained in the Plan to
purchase the Company's Common Stock to nonemployee
directors as follows:
Number of Exercise Expiration
Options Price Date
Terry Enright 7,500 $ 1.88 per share 12/31/07
Jerrie F.
Eckelberger 7,500 1.88 per share 12/31/07
In addition, the outside nonemployee directors are each paid
$500 per month. Jerrie F. Eckelberger and Terry D. Enright were
each paid $6,000 during the year ended June 30, 1998.
Nonemployee Director Amendment
(Proposal 2 of the Proxy)
General
The Board proposes that the Company's 1993 Incentive Plan, as
amended (the "Plan"), be further amended to revise the formula
contained in the Plan for the compensation of
nonemployee directors. Currently, the Company has two
nonemployee directors. The amendment would provide for the annual
grant to each nonemployee director of either 5,000 shares of
restricted Common Stock or an option to purchase 10,000 shares of
Common Stock at a price equal to 50% of the average market price
of the Common Stock during the pervious year. Each
director could elect to receive the grant of either the Common
Stock or options under the formula contained in this proposed
amendment to the Plan.
Had the revised formula been applicable for the last fiscal
year and the nonemployee directors elected to receive the shares
of Common Stock, the grants would have been as follows:
1993 Incentive Plan
Name Dollar Number of
and Position Value ($)(1) Shares
Terry Enright $ 10,000 5,000
Nonemployee Director
Jerrie F. Eckelberger $ 10,000 5,000
Nonemployee Director
Non-Executive Director $ 20,000 10,000
Group
(1) Based upon a price of $2.00 per share as of the date of
issuance. As the stock to be issued under the Plan is restricted
stock, this price has been set by the Board of Directors and is
not the market price of the Common Stock as of the same date.
Had the revised formula been applicable for the last fiscal
year and the nonemployee directors elected to receive the options
to purchase shares of Common Stock, the grants would
have been as follows:
1993 Incentive Plan
Number
Name Exercise of Expiration
and Position Price Options Date
Terry Enright $1.88 10,000 12/31/07
Nonemployee Director
Jerrie F. Eckelberger $1.88 10,000 12/31/07
Nonemployee Director
Non-Executive Director $1.88 20,000 12/31/07
Group
No other provisions of the Plan will be affected by the
proposed amendment.
Interest of Certain Persons in the Nonemployee Director
Amendment.
Each of the two nonemployee directors named in this Proxy
Statement, as potential participants in the Nonemployee Directors
Amendment, could be deemed to have an interest in
its approval.
Vote Required for Approval
The Nonemployee Director Amendment will be approved if a
quorum is present at the meeting and the number of votes cast for
the amendment is greater that the number of votes cast
against the amendment. Abstentions and broker non-votes will
have no effect on the vote to approve the amendment.
Employment Contracts and Termination of Employment and
Change-in-Control Agreement.
On April 10, 1998, the Company's Compensation Committee
authorized the Company to enter into employment agreements with
the Company's Chairman and President which
employment agreements replaced and superseded the prior
employment agreements with such persons. Under the employment
agreements the Chairman and President each receive a salary
of $198,000 per year. The employment agreements have five year
terms and include provisions for cars, parking and health
insurance. Terms of the employment agreements also provide that
the employees may be terminated for cause but that in the event
of termination without cause or in the event of a change in
control of the Company, as defined in Delta's 1993 Incentive
Plan, then the employees will continue to receive the
compensation provided for in the employment agreements for the
remaining terms of the employment agreements. Also in the
event of a change of control and irrespective of any resulting
termination, the Company will immediately cause all of each
employee's then outstanding unexercised options to be exercised
by the Company on behalf of the employee with the Company paying
the employee's federal, state and local taxes applicable to the
exercise of the options and warrants.
Report on Repricing of Options.
The Compensation Committee/Incentive Plan Committee reported
that options to purchase shares which were previously awarded
under the Company's Incentive Plan were repriced as
indicated in the accompanying tables and footnotes thereto in
this section. Options for other employees were also repriced
coincident with the repricing of options for the named executive
officers. New prices for all options were set at or above the
market price for the underlying Common Stock. Options were
repriced to provide additional incentive to officers and
employees to continue to improve Company performance and value
and as a reward for past employee contributions.
Retirement Savings Plan.
During 1997 the Company began sponsoring a qualified tax
deferred savings plan in the form of a Savings Incentive Match
Plan for Employees ("SIMPLE") IRA plan available to
companies with fewer than 100 employees. Under the SIMPLE IRA
plan, the Company employees may make annual salary reduction
contributions of up to three percent (3%) of an
employee's base salary up to a maximum of $6,000 (adjusted for
inflation) on a pre-tax basis. The Company will make matching
contributions on behalf of employees who meet certain
eligibility requirements. During the fiscal year ended June 30,
1998, the Company contributed $22,304 under the Plan.
REPORT OF THE COMPENSATION AND INCENTIVE PLAN COMMITTEES
REGARDING COMPENSATION ISSUES
The objective of the Compensation Committee is to design the
Company's executive compensation program to enable the Company to
attract, retain and motivate executive personnel
deemed necessary to maximize return to shareholders. The
fundamental concept of the program is to align the amount of an
executive's total compensation with his contribution to the
success of the Company in creating shareholder value.
In furtherance of this objective, the Compensation Committee
has determined that the program should have the following
components:
Base Salaries: The Committee believes that the Company should
offer competitive base salaries to enable it to attract, motivate
and retain capable executives. The Committee has in
the past determined levels of the base compensation using
published compensation surveys and other information for energy
and similar sized companies. The Committee may or may not use
such surveys or other information to determine levels of base
compensation in the future.
Long-Term Incentives: The Committee believes that long-term
compensation should comprise a substantial portion of each
executive officer's total compensation. Long-term
compensation provides incentives that encourage the executive
officers to own and hold Company stock and tie their long-term
economic interests directly to those of the Company's
shareholders. Long-term compensation can be provided in the form
of restricted stock or stock options or other grants under the
Company's 1993 Incentive Plan, as amended.
With specific reference to the Chairman/Chief Executive
Officer and the President, the Committee attempts to exercise
great latitude in setting salary and bonus levels and granting
stock options. Philosophically, the Committee attempts to relate
executive compensation to those variables over which the
individual executive generally has control. These officers have
the primary responsibility for improving shareholder value for
the whole Company.
The Committee believes that its objectives of linking
executive compensation to corporate performance results in
alignment of compensation with corporate goals and shareholder
interest. When performance goals are met or exceeded,
shareholder value is increased and executives are
rewarded commensurately. Corporate performance includes
circumstances that will result in long-term increases in
shareholder value notwithstanding that such circumstances may not
be reflected in the immediate increase in Company profits or
share price. It is the Committee's objective to emphasize and
promote long-term growth of shareholder value over short-term,
quarter to quarter performance whenever these two concepts are in
conflict. The Committee believes that compensation levels during
1998 adequately reflect the Company's compensation
goals and policies.
In 1993, the Internal Revenue Code was amended to add section
162(m), which generally disallows a tax deduction for
compensation paid to a Company's senior executive officers in
excess of $1 million per person in any year. Excluded from the
$1 million limitation is compensation which meets pre-established
performance criteria or results from the exercise of
stock options which meet certain criteria. While the Company
generally intends to qualify payment of compensation under
section 162(m), the Company reserves the right to pay
compensation to its executives from time to time that may not be
tax deductible.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE
ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's executive officers, directors and
persons who beneficially own more than ten percent
(10%) of a registered class of the Company's equity securities,
to file initial reports of securities ownership of the Company
and reports of changes in ownership of equity securities of the
Company with the Securities and Exchange Commission ("SEC").
Such persons also are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, during the fiscal year ended June
30, 1998, the Company's officers and directors complied with all
applicable Section 16(a) filing requirements. These
statements are based solely on a review of the copies of such
reports furnished to the Company by its officers and directors
and their written representations that such reports accurately
reflect all reportable transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Prior to fiscal 1997, Delta had recorded a note payable
(Note) to Snyder Oil Corporation (SOCO) by Underwriters Financial
Group, Inc. (UFG), the Company's former parent. The Company
recorded a liability for the Note upon the transfer by UFG
(subject to the Note) of the common stock of Amber Resources
Company, a subsidiary of Delta ("Amber"), to the Company in 1992.
Although the Note was an obligation of UFG, the Company recorded a
liability for the Note since a portion of the common shares of Amber
owned by the Company were pledged to secure the Note and because
of the uncertainties regarding UFG's ability to fulfill its
obligations under the Note.
On May 23, 1997 Delta, UFG and SOCO entered into a settlement
agreement under which SOCO released its lien on the Amber shares.
In connection with the agreement, Delta reissued 92,117 shares of
common stock to UFG. These shares had originally been returned
to Delta and cancelled pursuant to an agreement dated February
22, 1995. This agreement was rescinded in connection with the
settlement agreement.
As a result of the settlement agreement, the liability for
the Note was eliminated with a corresponding increase in Delta's
stockholders' equity. The fair value of the common shares
issued to UFG of $322,410 was recorded as an increase in
stockholders' equity, for the value of shares issued, and as a
reduction of the adjustment recorded to stockholders' equity for
the elimination of the liability for the Note.
(b) Effective October 28, 1992, the Company entered into a
five year consulting agreement with Burdette A. Ogle and Ronald
Heck which provides for an aggregate fee to the two of them of
$10,000 per month. The Company agreed to extend this agreement
for one year during the 1998 fiscal year and, subsequent to June
30, 1998, agreed to extend it for yet another year. Messrs. Ogle
and Heck own beneficially 13.82% and 4.53%,
respectively, of the Company's outstanding Common Stock. To the
Company's best knowledge and belief, the
consulting fee paid to Messrs. Ogle and Heck is comparable to
those fees charged by Messrs. Ogle and Heck to other companies
owning interests in properties offshore California for
consulting services rendered to those other companies with
respect to their own offshore California interests. It is the
Company's understanding that, in the aggregate, Mr. Ogle
represents, as a consultant, a significant percentage of all of
the ownership interests in the various properties that are
located in the same general vicinity of the Company's offshore
California properties. Mr. Ogle also consults and advises the
Company relative to properties in areas other than offshore
California, relative to potential property acquisitions and with
respect to the Company's general oil and gas business. It is the
Company's opinion that the fees paid to Messrs. Ogle and Heck for
the services rendered are comparable to fees that would be
charged by similarly qualified non-affiliated persons for similar
services.
(c) Effective February 24, 1994, Burdette A. Ogle ("Ogle"),
at the time a 21.44% shareholder of Delta, granted Delta an
option ("Option") to acquire working interests in three
proved undeveloped offshore Santa Barbara, California federal oil
and gas units ("Interests"). On August 31, 1994, in an addendum
to the February 25, 1994 Agreement granting the Option,
Ogle agreed to extend the period during which the Option could be
exercised until January 3, 1995 in consideration of the issuance
by Delta to Ogle of warrants to purchase 100,000 shares
of Common Stock at a price of $8.00 per share until August 31,
1999 with a call provision whereby Delta may repurchase any
unexercised warrants for an aggregate sum of $1,000 after
the stock has traded at $10.00 per share or greater for thirty
consecutive trading days. On January 3, 1995, the Company
exercised its option to acquire these properties from Ogle.
Under the Purchase and Sale Agreement and related assignment and
conveyance of the Interests, Ogle immediately assigned and
conveyed the Interests to Delta. The purchase price of
$8,000,000 is represented by a production payment reserved in the
documents of Assignment and Conveyance and is payable out of
three percent (3%) of the oil and gas production from the
working interests with a requirement for minimum annual payment.
Delta paid Ogle $350,000 in 1998 and 1997 and is to pay a minimum
of $350,000 annually thereafter until the earlier of:
1) when the production payments accumulate to the $8,000,000
purchase price; 2) when 80% of the ultimate reserves of any lease
has been produced; or 3) 30 years from the date of the
conveyance. As of June 30, 1998, the Company has paid a total of
$1,200,000 in minimum royalty payments. Delta already owned
other interests in these same federal units.
The terms of the transaction with Mr. Ogle were arrived
at through arms-length negotiations initiated by management of
the Company. The Company is of the opinion that the
transaction is on terms no less favorable to the Company than
those which could have been obtained from non-affiliated parties.
No independent determination of the fairness and
reasonableness of the terms of the transaction was made by any
outside person. Management believes the terms are comparable to
terms that would have been negotiated in a transaction with
non-affiliates.
(d) On February 12, 1996, the Board of Directors granted
Aleron H. Larson, Jr. and Roger A. Parker, the Company's Chairman
and President, respectively, the right to participate
on a non-promoted basis in up to a five percent (5%) working
interest in any Delta well drilled, re-entered, completed or
recompleted by Delta on its acreage (provided that any well
to be re-entered or recompleted is not then producing economic
quantities of hydrocarbons). Prior to commencement of the work
on any such well, Messrs. Larson and Parker shall pay to the
Company the unpromoted cost thereof as
estimated by the Company's consulting engineers.
(e) On April 10, 1998, the Company's Compensation Committee
authorized the Company to enter into employment agreements with
the Company's Chairman and President, which employment agreements
replaced and superseded the prior employment agreements with
such persons. The employment agreements have five year terms and
include provisions for cars, parking and health insurance. Terms
of the employment agreements also provide that the
employees may be terminated for cause but that in the event of
termination without cause or in the event of a change in control
of the Company, as defined in Delta's 1993 Incentive Plan, as
amended, then the employees will continue to receive the
compensation provided for in the employment agreements for the
remaining terms of the employment agreements. Also in the
event of a change of control and irrespective of any resulting
termination, the Company will immediately cause all of each
employee's then outstanding unexercised options to be exercised
by the Company on behalf of the employee with the Company paying
the employee's federal, state and local taxes applicable to the
exercise of the options and warrants.
(f) During the fiscal years ended June 30, 1997 and 1998,
the Company made loans to Roger A. Parker, its President, each
loan bearing interest at 6%. As of June 30, 1998, the
Company was owed $22,306 by Mr. Parker. During a portion of the
years ended June 30, 1998 and 1997, Mr. Parker was indebted to
the Company in a maximum amount of $63,350 and
$167,500, respectively, plus applicable interest as a result of
borrowing from the Company.
(g) On January 7, 1997, Mr. Parker returned 21,573 options to
purchase shares of Common Stock at $3.75 to the Company. At that
time the market price of the Company's Common Stock was $6.50 per
share. On the same date, the Company wrote off a receivable
in the amount of $59,326 from Apex Operating Company, Inc., a
company affiliated with Mr. Parker by reason of his position as
its President and his ownership of 100% of its Common
Stock. Mr. Parker's return of the 21,573 options was voluntary
and was done as an attempt to restore an approximately equivalent
value to the Company.
(h) During the fiscal year ended June 30, 1997, Mr. Parker
exercised options to purchase 14,450 shares of the Company's
common stock. The exercise price for the options was $1.25 and the
then current market price of the Company's common stock ws $4.4375.
Payment for the shares of common stock purchased upon exercise of
the option was made in shares of the Company's common stock previously
owned by Mr. Parker, valued at the market price of the stock on the date of
exercise. The Company recorded the 4,070 shares of the Company's
common stock reacquired at cost, which shares were subsequently
retired.
(i) During the fiscal year ended June 30, 1998, Mr. Parker
exercised options to purchase 32,000 shares of the Company's
Common Stock. The exercise price for the options was $1.25
and the then current market price of the Compan's common stock
was $3.875. Payment for these shares of
Common Stock purchased upon the exercise of an option was made in
shares of the Company's Common Stock previously owned by Mr.
Parker pursuant to the Company's 1993 Incentive
Plan, as amended. As a result of this transaction, the Company
recorded the 10,323 shares of the Company's common stock
reacquired at cost, which shares were subsequently retired.
APPOINTMENT OF INDEPENDENT AUDITORS
(Proposal 3 of the Proxy)
Subject to ratification by the shareholders of the Company,
the Board has designated the firm of KPMG Peat Marwick LLP, Suite
2300, 707 17th Street, Denver, Colorado 80202, as
independent auditors to examine and audit the Company's financial
statements for the fiscal year 1999. This firm has audited the
Company's financial statements for four years and is considered
to be well qualified. The designation of such firm as auditors
is being submitted for ratification or rejection at the Annual
Meeting. Action by shareholders is not required under the law
for the appointment of independent auditors, but the ratification
of their appointment is submitted by the Board in order to give
the shareholders of the Company the final choice in the
designation of auditors. The Board will be governed by the
decision of a majority of the votes entitled to
be cast. A majority of the votes represented at the Annual
Meeting by shares of Common Stock entitled to vote is required to
ratify the appointment of KPMG Peat Marwick LLP.
A representative of KPMG Peat Marwick LLP will be present at
the Annual Meeting with the opportunity to make a statement if he
desires to do so and will also be available to respond
to appropriate questions.
The Board of Directors recommends a vote FOR this proposal.
SHAREHOLDER PROPOSALS
Any shareholder proposals to be included in the Board of
Directors' solicitation of proxies for the 1999 Annual Meeting of
Shareholders must be received by Aleron H. Larson, Jr.,
Secretary, at 555 17th Street, Suite 3310, Denver, Colorado
80202, no later than September 1, 1999.
GENERAL AND OTHER MATTERS
The Board of Directors knows of no matter, other than those
referred to in this Proxy Statement, which will be represented at
the Annual Meeting. However, if any other matters are
properly brought before the meeting or any of its adjournments,
the person or persons voting the proxies will vote them in
accordance with their judgement on such matters.
The cost of preparing, assembling, and mailing this Proxy
Statement, the enclosed proxy card and the Notice of the Annual
Meeting will be paid by the Company. Additional solicitation
by mail, telephone, telegraph or personal solicitation may be
done by directors, officers, and regular employees of the
Company. Such persons will receive no additional compensation
for such services. Brokerage houses, banks and other nominees,
fiduciaries and custodians nominally holding shares of Common
Stock of record will be requested to forward proxy
soliciting material to the beneficial owners of such shares, and
will be reimbursed by the Company for their reasonable expenses.
Available Information. Upon request of any shareholder, the
Company's Annual Report for the year ended June 30, 1998 filed
with the SEC on Form 10-KSB, including financial
statements, will be sent to the shareholder without charge by
first class mail within one business day of receipt of such
request. All requests should be addressed to the Secretary of
the Company at 555 17th Street, Suite 3310, Denver, Colorado
80202 or by telephone (303) 293-9133.
You are urged to complete, sign, date and return your proxy
promptly. You may revoke your proxy at any time before it is
voted. If you attend the Annual Meeting, as we hope you
will, you may vote your shares in person.
By order of the Board of Directors
Aleron H. Larson, Jr.
Chairman/CEO
, 1998
Text of Proposed Amendment to the
Delta Petroleum Corporation
1993 Incentive Plan, as amended
25. Participation in the Plan by Nonemployee Directors
(a) The Plan will be administered as to Nonemployee
Directors by the Board of Directors.
(b) All Nonemployee Directors shall participate in the Plan,
subject to the conditions and limitations of the Plan, so long as
they remain eligible to participate in the Plan.
(c) No Nonemployee Director shall be eligible for an
Incentive Award if, at the time said Incentive Award would
otherwise be granted, such Nonemployee Director (i) is
directly or indirectly the beneficial owner of five percent or
more of any class of equity security of the Company which is
registered pursuant to Section 12 of the Exchange Act
or of any security convertible into or exercisable for such class
of equity security (excluding shares covered by the Plan); or
(ii) is an officer, director, 10% or greater shareholder,
employee or agent of a person or entity which is directly or
indirectly the beneficial owner of more than five percent of any
class of equity security of the Company which is registered
pursuant to Section 12 of the Exchange Act or of any security
convertible into or exercisable for such class of equity security
(excluding shares covered by the Plan). Incentive Award grants,
if any, to any such non-eligible Nonemployee Directors shall be
determined by the Board.
(d) Unless the Board of Directors shall otherwise direct,
Options or Restricted Common Stock shall automatically be granted
to Nonemployee Directors according to the following formula:
(i) Stock and Options shall be determined for all
eligible Nonemployee Directors of the Company in each calendar
year during the term of the Plan as of December 31. No Stock or
Option may be changed after it has been so determined, except
pursuant to the Plan. No Nonemployee Director shall be
entitled to receive more than one grant of Stock or Options per
year pursuant to the Plan even if such Nonemployee Director
serves as a director for more than one Participating Company.
The Stock or Options shall be granted to each Participant by the
Company or, if the Participant is not a Nonemployee Director
of the Company, by the Participating Company for which a
Nonemployee Director serves as a director.
(ii) Stock or Options shall be granted pursuant to the
Plan to eligible Participants as follows:
Annually each Participant shall be granted either:
1) an option for 10,000 shares of common stock, or,
if a director for less than the prior 12 months, a
pro rata portion of 10,000 shares of common stock
based upon the number of months
such Participant was a Nonemployee Director of the
Company; or 2) at the election of the participating
Nonemployee Director, shall be granted, in lieu of
an option, 5,000 shares of Restricted Common Stock.
The exercise price of the Stock Options to be granted to
Nonemployee Directors pursuant to the Plan shall be 50% of the
Market Price as determined at the date of grant. The "Market
Price" of a share of common stock under the Plan shall be the
average of the "Fair Market Value" of the common stock for all
trading days during the twelve months preceding the date on which
the stock option is determined. The "Fair Market Value" of a
share of common stock with respect to any day shall be (i) the
closing sales price of a share of common stock as reported on the
principal securities exchange on which shares of common stock are
then listed or admitted to trading; or (ii) if not so reported,
the last sale price as reported by the NASDAQ Stock Market; or
(iii) if not so reported, the average of the closing bid and ask
prices as reported on the NASDAQ Stock Market; or (iv) if not so
reported, as furnished by any member of the National Association
of Securities Dealers, Inc. selected by the Committee. Each
Stock Option shall be exercisable for a ten year period
commencing on the date of grant and shall expire ten years
after the date of grant. Certificates evidencing the Stock Options shall
be registered in the respective names of the Participants and
shall be issued to each Participant as soon as practicable
following the date of grant.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
, 1998
TO THE SHAREHOLDERS OF DELTA PETROLEUM CORPORATION:
As a shareholder of Delta Petroleum Corporation, a Colorado
corporation (the Company"), you are invited to be present in person
or to be represented by proxy at the Annual Meeting of Shareholders,
to be held at the Company's corporate offices, 555 17th Street,
Suite 3310, Denver, Colorado 80202, on
, , 1998 at (local time)
for the following purposes:
1) To elect four directors;
2) To consider and vote upon the ratification of an
amendment to the Company s 1993 Incentive Plan, as
amended, revising the compensation formula for
Nonemployee Directors;
3) To consider and vote upon the ratification of the
appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending June
30, 1999; and
4) To transact such other business as may be properly
brought before the meeting and any adjournments thereof.
Shareholders of the Company of record at the close of business
on , 1998, are entitled to vote at the meeting
and all adjournments thereof.
A majority of the outstanding shares of Common Stock of the
Company must be represented at the meeting to constitute a quorum.
Therefore, all shareholders are urged either to attend the meeting
or to be represented by proxy. If a quorum is not present at the
meeting, a vote for adjournment will be taken among the
shareholders present or represented by proxy. If a majority of the
shareholders present or represented by proxy vote for adjournment,
it is the Company's intention to adjourn the meeting until a later
date and to vote proxies received at such adjourned meeting(s).
If you do not expect to attend the meeting in person, please
complete, sign, date and return the accompanying proxy card in the
enclosed business reply envelope. If you later find that you can
be present or for any other reason desire to revoke your proxy, you
may do so at any time before the voting.
By order of the Board of Directors
Aleron H. Larson, Jr.
Chairman\Secretary
, 1998
DELTA PETROLEUM CORPORATION
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Aleron H. Larson,
Jr. and Roger A. Parker, or each of them, lawful attorneys and proxies
of the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to attend the Annual Meeting
of Shareholders of Delta Petroleum Corporation, to be held in the
corporate offices of the Company at 555 17th Street, Suite 3310, Denver,
Colorado 80202 on , , 1998, at 10:00 a.m. (local
time), and any adjournment(s) thereof, with all powers the undersigned
would possess if personally present and to vote thereat, as provided
below, the number of shares the undersigned would be entitled to vote if
personally present.
(Check One)
For Against Abstain
Proposal 1: To approve the four nominees to the
Board of Directors:
Aleron H. Larson, Jr [ ] [ ] [ ]
Roger A. Parker [ ] [ ] [ ]
Terry D. Enright [ ] [ ] [ ]
Jerrie F. Eckelberger [ ] [ ] [ ]
Proposal 2: To consider the ratification of an [ ] [ ] [ ]
amendment to the Company's 1993
Incentive Plan, as amended, revising
the compensation formula for
Nonemployee Directors.
Proposal 3: To ratify the appointment of
KPMG Peat Marwick LLP
as independent auditors [ ] [ ] [ ]
In accordance with their discretion, said attorneys and proxies are
authorized to vote upon such other business as may properly come before
the meeting or any adjournment(s) thereof. Every properly signed proxy
will be voted in accordance with the specifications made thereon. IF
NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND
3. All prior proxies are revoked. This Proxy will also be voted in
accordance with the discretion of the proxies or proxy on any other
business. Receipt is hereby acknowledged of the Notice of Annual
Meeting and Proxy Statement.
Signature Signature (if jointly held)
Print Name Print Name
Dated Dated
(Please sign exactly as name appears hereon. When signing as
attorney, executor, administrator, trustee, guardian, etc., give full
title as such. For joint accounts, each joint owner should sign.)
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.